<PAGE>
As filed with the Securities and Exchange Commission on
March 26, 1998
1933 Act Registration No. 2-80543
1940 Act Registration No. 811-3605
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933 ( )
Post-Effective Amendment No. 38 ( X )
and/or
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 39 ( X )
(Check appropriate box or boxes)
____________________
THE BENCHMARK FUNDS
(Exact name of registrant as specified in charter)
4900 Sears Tower
Chicago, Illinois 60606
(Address of principal executive offices)
(Registrant's Telephone Number, including Area Code)
800-621-2550
____________________
Michael J. Richman, Secretary with a copy to:
Goldman Sachs Asset Management W. Bruce McConnel, III
85 Broad Street Drinker Biddle & Reath LLP
New York, NY 10004 Suite 1100
1345 Chestnut Street
Philadelphia, PA
19107-3496
(name and address of agent for service)
It is proposed that this filing will become effective
(check appropriate box)
( ) immediately upon filing pursuant to paragraph (b)
(X) on (April 1) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date) pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2) of Rule 485
( ) On (date) pursuant to paragraph (a)(2) of Rule 485
=================================================================
Title of Securities Being Registered: Shares of beneficial interest.
This Post-Effective Amendment No. 38 has been filed by The Benchmark Funds, a
Delaware business trust (the "Delaware Trust"), for the purpose of adopting
under the Securities Act of 1933 and the Investment Company Act of 1940 the
Registration Statement on Form N-1A of The Benchmark Funds, a Massachusetts
business trust (the "Massachusetts Trust"), pursuant to the provisions of Rule
414 under the Securities Act of 1933. In accordance with the provisions of
paragraph (d) of Rule 414, this Registration Statement also revises and sets
forth additional information arising in connection with Registrant's change of
domicile. Upon the effectiveness of the Post-Effective Amendment, the Delaware
Trust hereby affirmatively adopts the Registration Statement (File Nos. 2-80543
and 811-3605) of the Massachusetts Trust.
<PAGE>
THE BENCHMARK FUNDS
Fixed Income and Equity Portfolios
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
Part A Caption
- ------ -------
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Summary of Expenses; Investment
of Registrant Information; Organization
5. Management of the Fund Trust Information
6. Capital Stock and Trust Information; Investing;
Other Securities Net Asset Value; Organization
7. Purchase of Securities Trust Information;
Being Offered Investing; Net Asset Value
8. Redemption or Repurchase Investing
9. Pending Legal Proceedings Not Applicable
Part B Caption
- ------ -------
10. Cover Page Cover Page
11. Table of Contents Index
12. General Information Description of Shares; Other Information
and History
13. Investment Objectives Investment Objectives and Policies;
Investment Restrictions
14. Management of the Fund Additional Trust Information--Investment
Adviser, Transfer Agent and Custodian;
--Administrator and Distributor
15. Control Persons and Additional Trust Information--
Principal Holders Description of Shares
<PAGE>
16. Investment Advisory Additional Trust Information--
and Other Services Investment Advisers, Transfer Agent
and Custodian; Portfolio Transactions
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of Shares
Other Securities
19. Purchase, Redemption and Description of Shares;
Pricing of Securities Additional Trust Information--
Being Offered In-Kind Purchases
20. Tax Status Taxes
21. Underwriters Additional Trust Information--
Administrator and Distributor
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>
THE BENCHMARK FUNDS
Money Market Portfolios
Shares
CROSS REFERENCE SHEET
(as required by Rule 485)
Part A Caption
- ------ -------
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Summary of Expenses; Investment
of Registrant Information; Organization
5. Management of the Fund Trust Information
6. Capital Stock and Trust Information; Investing;
Other Securities Net Asset Value; Organization
7. Purchase of Securities Trust Information; Investing;
Being Offered Net Asset Value
8. Redemption or Repurchase Investing
9. Pending Legal Proceedings Not Applicable
Part B Caption
- ------ -------
10. Cover Page Cover Page
11. Table of Contents Index
12. General Information Description of Service Shares and
and History Premier Shares; Other Information
13. Investment Objectives Investment Objectives and Policies;
Investment Restrictions
14. Management of the Fund Additional Trust Information--Investment
Adviser, Transfer Agent and Custodian;--
Administrator and Distributor
15. Control Persons and Additional Trust Information--
Principal Holders Description of Shares
<PAGE>
16. Investment Advisory Additional Trust Information--
and Other Services Investment Adviser, Transfer Agent and
Custodian; Portfolio Transactions
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of Shares
Other Securities
19. Purchase, Redemption and Description of Shares;
Pricing of Securities Additional Trust Information--
Being Offered In-Kind Purchases
20. Tax Status Taxes
21. Underwriters Additional Trust Information--
Administrator and Distributor
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>
THE BENCHMARK FUNDS
Money Market Portfolios
Service Shares
Premier Shares
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
Part A Caption
- ------ -------
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Not Applicable
Information
4. General Description Summary of Expenses; Investment
of Registrant Information; Organization
5. Management of the Fund Trust Information
6. Capital Stock and Trust Information; Investing;
Other Securities Net Asset Value; Organization
7. Purchase of Securities Trust Information;
Being Offered Investing; Net Asset Value
8. Redemption or Repurchase Investing
9. Pending Legal Proceedings Not Applicable
Part B Caption
- ------ -------
10. Cover Page Cover Page
11. Table of Contents Index
12. General Information Description of Service Shares and Premier
and History Shares; Other Information
13. Investment Objectives Investment Objectives and Policies;
Investment Restrictions
14. Management of the Fund Additional Trust Information--Investment
Adviser, Transfer Agent and Custodian;
--Administrator and Distributor
15. Control Persons and Additional Trust Information--
Principal Holders Description of Service Shares and Premier
Shares
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
16. Investment Advisory Additional Trust Information--
and Other Services Investment Adviser, Transfer Agent and
Custodian; Portfolio Transactions;
Service Plan
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of Service Shares and
Other Securities Premier Shares
19. Purchase, Redemption and Description of Service Shares and
Pricing of Securities Premier Shares; Additional
Being Offered Trust Information--In-Kind Purchases
20. Tax Status Taxes
21. Underwriters Additional Trust Information--
Administrator and Distributor
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>
The
Benchmark
Funds
Money
Market
Portfolios
Shares
PROSPECTUS
APRIL 1, 1998
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian:
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor:
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
<PAGE>
THE BENCHMARK FUNDS
(Advised by The Northern Trust Company)
THE NORTHERN TRUST COMPANY INVESTMENT ADVISER, TRANSFER
50 S. LaSalle Street AGENT AND CUSTODIAN
Chicago, Illinois 60675
312-630-6000 --------------------
This Prospectus describes a class of shares ("shares") of four short-term money
market portfolios (the "Portfolios") offered by The Benchmark Funds (the
"Trust") to institutional investors. Each Portfolio, other than the Tax-Exempt
Portfolio, seeks to maximize current income to the extent consistent with the
preservation of capital and maintenance of liquidity. The Tax-Exempt Portfolio
seeks to provide, to the extent consistent with the preservation of capital and
prescribed portfolio standards, a high level of income exempt from regular
Federal income tax.
The GOVERNMENT SELECT PORTFOLIO invests in selected short-term obligations
of the U.S. Government, its agencies and instrumentalities the interest on
which is generally exempt from state income taxation.
The GOVERNMENT PORTFOLIO invests in short-term obligations of the U.S.
Government, its agencies and instrumentalities and related repurchase
agreements.
The DIVERSIFIED ASSETS PORTFOLIO invests in money market instruments of
both U.S. and foreign issuers, including certificates of deposit, bankers'
acceptances, commercial paper and repurchase agreements.
The TAX-EXEMPT PORTFOLIO invests primarily in short-term municipal
instruments the interest on which is exempt from regular Federal income
tax.
Each Portfolio is advised by The Northern Trust Company ("Northern"). Shares
are sold and redeemed without any purchase or redemption charge imposed by the
Trust, although Northern and other institutions may charge their customers for
services provided in connection with their investments.
This Prospectus provides information about the Portfolios that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated April 1, 1998 is available upon request
without charge by writing to the Trust's distributor, Goldman, Sachs & Co.
("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or by calling 1-
800-621-2550.
SHARES 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 SHARE.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 1, 1998.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS 3
- ----------
Description of Trust 3
Summary of Expenses 3
FINANCIAL HIGHLIGHTS 5
- --------------------
INVESTMENT INFORMATION 10
- ----------------------
Government Select Portfolio 10
Government Portfolio 11
Diversified Assets Portfolio 11
Tax-Exempt Portfolio 11
Description of Securities and Com-
mon Investment Techniques 12
Investment Restrictions 18
TRUST INFORMATION 18
- -----------------
Board of Trustees 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Adviser, Transfer Agent
and Custodian 19
Year 2000 19
Administrator and Distributor 20
Expenses 20
INVESTING 21
---------
Purchase of Shares 21
Redemption of Shares 23
Distributions 26
Taxes 26
NET ASSET VALUE 28
---------------
PERFORMANCE INFORMATION 28
-----------------------
ORGANIZATION 29
------------
MISCELLANEOUS 30
-------------
</TABLE>
2
<PAGE>
HIGHLIGHTS
DESCRIPTION OF TRUST
The Trust is an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment policies, as described below
under "Investment Information." All of the Portfolios are classified as
diversified companies. Northern serves as investment adviser, transfer agent
and custodian. Goldman Sachs serves as distributor and administrator.
Shares of the Portfolios are offered exclusively to institutional investors.
See "Investing--Purchase of Shares" and "Investing--Redemption of Shares" for
information on how to place purchase and redemption orders.
Each Portfolio seeks to maintain a net asset value of $1.00 per share. The
assets of each Portfolio will be invested in dollar-denominated debt securities
with remaining maturities of thirteen months or less as defined by the
Securities and Exchange Commission (the "SEC"), and each Portfolio's dollar-
weighted average portfolio maturity will not exceed 90 days. All securities
acquired by the Portfolios will be determined by Northern, under guidelines
established by the Trust's Board of Trustees, to present minimal credit risks,
and will be "Eligible Securities" as defined by the SEC. There can be no
assurance that the Portfolios will be able to achieve a stable net asset value
on a continuous basis, or that they will achieve their investment objectives.
Investors should note that one or more of the Portfolios may purchase variable
and floating rate instruments, enter into repurchase agreements, reverse
repurchase agreements and securities loans, acquire U.S. dollar-denominated
instruments of foreign issuers and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. None of the
Portfolios will invest in instruments denominated in a foreign currency.
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the annualized
operating expenses of the shares of the Portfolios incurred during the Trust's
last fiscal year. Hypothetical examples based on the table are also shown.
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases....................... None None None None
Sales Charge Imposed on Rein-
vested Distributions............ None None None None
Deferred Sales Load Imposed on
Redemptions..................... None None None None
Redemption Fees.................. None None None None
Exchange Fees.................... None None None None
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Annual Operating Expenses After
Expense Reimbursements and Fee
Reductions (as a percentage of
average daily net assets)
Management Fees After Fee Reduc-
tions.......................... .10% .25% .25% .25%
12b-1 Fees...................... None None None None
Other Expenses After Expense Re-
imbursements and Fee Reduc-
tions.......................... .10% .10% .10% .10%
---- ---- ---- ----
Total Operating Expenses.......... .20% .35% .35% .35%
==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES. Based on the foregoing table, you would pay the following
expenses on a hypothetical $1,000 investment in shares, assuming a 5% annual
return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Select Portfolio..................... $2 $ 6 $11 $26
Government Portfolio............................ $4 $11 $20 $44
Diversified Assets Portfolio.................... $4 $11 $20 $44
Tax-Exempt Portfolio............................ $4 $11 $20 $44
</TABLE>
The costs and expenses included in the table and hypothetical example above are
based on actual amounts incurred for the fiscal year ended November 30, 1997.
During the Trust's last fiscal year, Northern voluntarily reduced its advisory
fee for the Government Select Portfolio (payable at the annual rate of .25% of
the Portfolio's average daily net assets) to .10% per annum. For the fiscal
period December 1, 1996 through April 30, 1997, Goldman Sachs charged an
administration fee with respect to each Portfolio during such period at the
annual rate of .25% of the first $100 million, .15% of the next $200 million,
.075% of the next $450 million and .05% of any excess over $750 million of the
Portfolio's average daily net assets. For the period May 1, 1997 through
November 30, 1997, Goldman Sachs was entitled to an administration fee equal to
.10% of the average daily net assets of each Portfolio. In addition, during the
fiscal year, Goldman Sachs reimbursed each Portfolio's expenses (including the
fees payable to Goldman Sachs as administrator, but excluding the fees payable
to Northern for its duties as adviser and certain extraordinary expenses) which
exceeded on an annualized basis .10% of the Portfolio's average daily net
assets for such fiscal year. The expense information in the table has,
accordingly, been presented to reflect these fee reductions and reimbursements.
Without the undertakings of Northern and Goldman Sachs, for the fiscal year
ended November 30, 1997, "Other Expenses" of the Government Select, Government,
Diversified Assets and Tax-Exempt Portfolios would have been .14%, .12%, .11%
and .14%, respectively; and "Total Operating Expenses" of the Government
Select, Government, Diversified Assets and Tax-Exempt Portfolios would have
been .39%, .37%, .36% and .39%, respectively. On April 1, 1998 upon the
offering of the Portfolios' Service Shares and Premier Shares, Goldman Sachs
will reimburse each Portfolio's expenses (including fees payable to Goldman
Sachs as administrator, but excluding the fees payable to Northern for its
duties as adviser and transfer agent, payments under the service plan for the
Portfolios' Service Shares and Premier Shares and certain extraordinary
expenses) which exceed on an annualized basis .10% of the Portfolio's average
daily
4
<PAGE>
net assets. For a more complete description of the Portfolios' expenses, see
"Financial Highlights" and "Trust Information" in this Prospectus and the
financial statements and related notes incorporated by reference into the
Additional Statement.
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS SHAREHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
SHAREHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF SHARES." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following information has been audited by Ernst & Young LLP, independent
auditors, as indicated in their report incorporated by reference into the
Additional Statement from the annual report to shareholders for the fiscal year
ended November 30, 1997 (the "Annual Report"), and should be read in
conjunction with the financial statements and related notes incorporated by
reference and attached to the Additional Statement. The Annual Report also
contains additional performance information and is available upon request and
without charge by calling the telephone number or writing to the address on the
first page of this Prospectus.
5
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
GOVERNMENT SELECT PORTFOLIO
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (0.05) (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 $1.00
- ------------------------------------------------------------------------------------------------------------
Total return (b) 5.41% 5.31% 5.82%(c) 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net
assets of (d):
Expenses, net of
waivers and
reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before
waivers and
reimbursements 0.39% 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and
reimbursements 5.30% 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and
reimbursements 5.11% 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $1,239,393 $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period November 7, 1990 (commencement of operations) through
November 30, 1990.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at net asset value at the end of the year.
Total return is not annualized for periods less than one year.
(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 one year.
6
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment
operations 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment
income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.31% 5.20% 5.64%(b) 3.78% 2.91% 3.91% 6.18% 7.89% 8.63%
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37% 0.50%
Expenses, before
waivers and
reimbursements 0.37% 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46% 0.50%
Net investment
income, net of
waivers and
reimbursements 5.18% 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88% 8.63%
Net investment
income, before
waivers and
reimbursements 5.16% 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79% 8.63%
Net assets at end of
year (in thousands) $1,051,401 $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.07
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment
operations 0.07
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment
income (0.07)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders (0.07)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 6.83%
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements 0.54%
Expenses, before
waivers and
reimbursements 0.55%
Net investment
income, net of
waivers and
reimbursements 6.83%
Net investment
income, before
waivers and
reimbursements 6.82%
Net assets at end of
year (in thousands) $335,301
- --------------------------------------------------------------------------------------------------------------------------
</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.
7
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
DIVERSIFIED ASSETS PORTFOLIO
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment
operations 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
FROM:
Net investment
income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.42% 5.30% 5.78%(b) 3.92% 3.00% 3.80% 6.19% 8.01% 8.98%
Ratio to average
net assets of:
Expenses, net of
waivers and
reimbursements 0.35% 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35% 0.37%
Expenses, before
waivers and
reimbursements 0.36% 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36% 0.37%
Net investment
income, net of
waivers and
reimbursements 5.30% 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01% 8.98%
Net investment
income, before
waivers and
reimbursements 5.29% 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00% 8.98%
Net assets at end
of year (in
thousands) $3,941,586 $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756 $1,871,713
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment
operations 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
FROM:
Net investment
income (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 7.15%
Ratio to average
net assets of:
Expenses, net of
waivers and
reimbursements 0.39%
Expenses, before
waivers and
reimbursements 0.39%
Net investment
income, net of
waivers and
reimbursements 7.15%
Net investment
income, before
waivers and
reimbursements 7.15%
Net assets at end
of year (in
thousands) $1,528,203
- ---------------------------------------------------------------------------------------------------------------------------------
</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 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.
8
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
TAX-EXEMPT PORTFOLIO
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05
- --------------------------------------------------------------------------------------------------------------------------------
Total income from
investment operations 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05)
- --------------------------------------------------------------------------------------------------------------------------------
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) 3.44% 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04% 4.92%
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48%
Expenses, before
waivers and
reimbursements 0.39% 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49% 0.48%
Net investment income,
net of waivers and
reimbursements 3.38% 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92%
Net investment income,
before waivers and
reimbursements 3.34% 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03% 4.92%
Net assets at end of
year (in thousands) $585,159 $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680
- --------------------------------------------------------------------------------------------------------------------------------
</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 net asset value at the end of the year.
9
<PAGE>
INVESTMENT INFORMATION
The investment objective of each Portfolio, other than the Tax-Exempt
Portfolio, is to seek to maximize current income to the extent consistent with
the preservation of capital and maintenance of liquidity by investing
exclusively in high quality money market instruments. The Tax-Exempt Portfolio
seeks to provide its shareholders, to the extent consistent with the
preservation of capital and prescribed portfolio standards, with a high level
of income exempt from Federal income tax by investing primarily in municipal
instruments. The investment objective of a Portfolio may not be changed without
the vote of the majority of the outstanding shares of the particular Portfolio
(as defined below under "Organization"). Except as expressly noted below,
however, a Portfolio's investment policies may be changed without a vote of
shareholders.
All securities acquired by the Portfolios will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks and will be "Eligible Securities" as defined by the SEC. Eligible
Securities include, generally, (i) securities that either (a) have short-term
debt ratings at the time of purchase in the two highest rating categories by at
least two unaffiliated nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (b)
are issued or guaranteed by a person with such ratings, and (ii) securities
that are unrated (including securities of issuers that have long-term but not
short-term ratings) but are determined to be of comparable quality. Securities
that are in the highest short-term rating category as described above (and
unrated securities determined to be of comparable quality) are designated
"First Tier Securities." Under normal circumstances, the Government Select,
Government and Diversified Assets Portfolios intend to limit purchases of
securities to First Tier Securities. The Additional Statement includes a
description of applicable NRSRO ratings.
Each Portfolio is managed so that the average maturity of all instruments in
the Portfolio (on a dollar-weighted basis) will not exceed 90 days. In no event
will the Portfolios purchase any securities which mature more than 13 months
from the date of purchase (except for certain variable and floating rate
instruments and securities collateralizing repurchase agreements). Securities
in which the Portfolios invest may not earn as high a level of income as long-
term or lower quality securities, which generally have greater market risk and
more fluctuation in market value.
GOVERNMENT SELECT PORTFOLIO
The Government Select Portfolio seeks to achieve its investment objective by
investing exclusively in securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. In making
investments, Northern will seek to acquire, under normal market conditions,
only those U.S. Government securities the interest on which is generally exempt
from state income taxation. Securities generally eligible for this exemption
include those issued by the U.S. Treasury and certain U.S. Government agencies
and instrumentalities, including the Federal Home Loan Bank and the Federal
Farm Credit Banks Funding Corp. The Portfolio intends to limit investments to
exempt U.S. Government securities. However, under extraordinary circumstances,
such as when appropriate exempt securities are unavailable, the Portfolio may
make investments in non-exempt U.S. Government securities and cash equivalents,
and may hold uninvested cash. See "Investing--Taxes" below for certain tax
considerations.
10
<PAGE>
GOVERNMENT PORTFOLIO
The Government Portfolio seeks to achieve its investment objective by investing
exclusively in:
(A) Marketable securities issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities and
custodial receipts with respect thereto; and
(B) Repurchase agreements relating to the above instruments.
DIVERSIFIED ASSETS PORTFOLIO
In pursuing its investment objective, the Diversified Assets Portfolio may
invest in a broad range of government, bank and commercial obligations that are
available in the money markets. In particular, the Portfolio may invest in:
(A) U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
(B) U.S. dollar-denominated obligations of foreign commercial banks where
such banks have total assets in excess of $5 billion;
(C) High quality commercial paper and other obligations issued or
guaranteed by U.S. and foreign corporations and other issuers rated (at the
time of purchase) A-2 or higher by Standard & Poor's Ratings Group ("S&P"),
Prime-2 or higher by Moody's Investors Service, Inc. ("Moody's"), Duff 2 or
higher by Duff & Phelps Credit Rating Co. ("D&P"), F-2 or higher by Fitch
IBCA, Inc. ("Fitch") or TBW-2 or higher by Thomson BankWatch, Inc. ("TBW");
(D) Rated and unrated corporate bonds, notes, paper and other instruments
that are of comparable quality to the commercial paper permitted to be
purchased by the Portfolio;
(E) Asset-backed securities (including interests in pools of assets such as
mortgages, installment purchase obligations and credit card receivables);
(F) Securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and custodial
receipts with respect thereto;
(G) U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities thereof;
(H) Repurchase agreements relating to the above instruments; and
(I) Securities issued or guaranteed by state or local governmental bodies.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio invests primarily in high quality short-term
instruments, the interest on which is, in the opinion of bond counsel for the
issuers, exempt from regular Federal income tax ("Municipal
11
<PAGE>
Instruments"). Such opinions may contain various assumptions, qualifications or
exceptions that are reasonably acceptable to Northern. In particular, the
Portfolio may invest in:
(A) Fixed and variable rate notes and similar debt instruments rated MIG-2,
VMIG-2 or Prime-2 or higher by Moody's, SP-2 or A-2 or higher by S&P, AA or
higher by D&P or F-2 or higher by Fitch;
(B) Tax-exempt commercial paper and similar debt instruments rated Prime-2
or higher by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2
or higher by Fitch;
(C) Rated and unrated municipal bonds, notes, paper or other instruments
that are of comparable quality to the tax-exempt commercial paper permitted
to be purchased by the Portfolio; and
(D) Municipal bonds and notes which are guaranteed as to principal and
interest by the U.S. Government or an agency or instrumentality thereof or
which otherwise depend directly or indirectly on the credit of the United
States.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding shares of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from Municipal
Instruments except under extraordinary circumstances, such as when Northern
believes that market conditions indicate that the Portfolio should adopt a
temporary defensive posture by holding uninvested cash or investing in taxable
short-term securities ("Taxable Investments"). Taxable Investments will consist
exclusively of instruments that may be purchased by the Diversified Assets
Portfolio.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
BANK OBLIGATIONS. Domestic and foreign bank obligations in which the
Diversified Assets Portfolio may invest include certificates of deposit, bank
and deposit notes, bankers' acceptances and fixed time deposits. Such
obligations may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Total assets of a bank are determined on the basis of
the bank's most recent annual financial statements.
FOREIGN OBLIGATIONS. In addition to the obligations of foreign commercial banks
and foreign branches of U.S. banks, the Diversified Assets Portfolio may
acquire commercial obligations issued by Canadian corporations and Canadian
counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Diversified Assets
Portfolio may also invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations may include debt obligations of
supranational entities, including international organizations (such as the
European Coal and Steel Community and the International Bank for Reconstruction
and Development (also known as the World Bank)) designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Investments
by the Diversified Assets Portfolio in foreign issuer obligations will not
exceed 50% of the Portfolio's total assets measured at the time of purchase.
Obligations of foreign issuers acquired by the Diversified Assets Portfolio may
involve risks that are different than those of obligations of domestic issuers.
These risks include unfavorable political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other
12
<PAGE>
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. In addition, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks and, generally, there may be less publicly available information
regarding such issuers. The Trust could also encounter difficulties in
obtaining or enforcing a judgment against a foreign issuer (including a foreign
branch of a U.S. bank).
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolios may purchase rated and
unrated variable and floating rate instruments, which may have stated
maturities in excess of the Portfolios' maturity limitations subject to
applicable SEC regulations. In the case of the Diversified Assets Portfolio,
such instruments may include variable amount master demand notes that permit
the indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by Northern to be of comparable quality at the
time of the purchase to rated instruments purchasable by the Portfolios. The
absence of an active secondary market with respect to particular variable and
floating rate instruments could, however, make it difficult for a Portfolio to
dispose of the instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss with
respect to such instruments. Variable and floating rate instruments held by a
Portfolio will be subject to the Portfolio's 10% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days and a reliable trading market is absent.
UNITED STATES GOVERNMENT OBLIGATIONS. Each Portfolio may invest in a variety of
U.S. Treasury obligations, consisting of bills, notes and bonds, which
principally differ only in their interest rates, maturities and time of
issuance. These obligations include "stripped" securities issued by the U.S.
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
The Portfolios may also invest in other securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities. Obligations of certain
agencies and instrumentalities, such as the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others are supported only by the credit of the
instrumentalities. No assurance can be given that the U.S. Government would
provide financial support to its agencies or instrumentalities if it is not
obligated to do so by law. There is no assurance that these commitments will be
undertaken or complied with in the future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations may therefore be regarded as
illiquid.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolios (other than the
Government Select Portfolio) may also purchase participations in trusts that
hold U.S. Treasury securities (such as TIGRs and CATS) where the trust
participations evidence ownership in either the future interest payments or the
future principal
13
<PAGE>
payments on the U.S. Treasury obligations. These participations are normally
issued at a discount to their "face value," and may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Investments by the Government
Portfolio in such custodial receipts will not exceed 35% of the value of that
Portfolio's total assets.
REPURCHASE AGREEMENTS. Each Portfolio may, in accordance with its investment
objective, policies and guidelines established by the Trust's Board of
Trustees, agree to purchase portfolio securities from financial institutions
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price ("repurchase agreements"). Although the securities subject to a
repurchase agreement may bear maturities exceeding 13 months, settlement for
the repurchase agreement will never be more than one year after a Portfolio's
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements are held either by the
Trust's custodian or subcustodian (if any), or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose a Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
REVERSE REPURCHASE AGREEMENTS. The Government Select, Government and
Diversified Assets Portfolios may enter into reverse repurchase agreements
which involve the sale of money market securities held by a Portfolio, with an
agreement to repurchase the securities at an agreed upon price (including
interest) and date. A Portfolio will use the proceeds of reverse repurchase
agreements to purchase other money market securities either maturing, or under
an agreement to resell, at a date simultaneous with or prior to the expiration
of the reverse repurchase agreement. A Portfolio will utilize reverse
repurchase agreements, which may be viewed as borrowings (or leverage) by the
Portfolio, when it is anticipated that the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. During the time a reverse
repurchase agreement is outstanding, the Portfolio will segregate liquid assets
having a value at least equal to the repurchase price. A Portfolio may enter
into reverse repurchase agreements with banks, brokers and dealers, and has the
authority to enter into reverse repurchase agreements in amounts not exceeding
in the aggregate one-third of the Portfolio's total assets. See "Additional
Investment Information--Investment Restrictions" in the Additional Statement.
SECURITIES LENDING. The Portfolios may seek additional income from time to time
by lending their portfolio securities on a short-term basis to banks, brokers
and dealers under agreements requiring that the loans be secured by collateral
in the form of cash, cash equivalents or U.S. Government securities or
irrevocable bank letters of credit maintained on a current basis equal in value
to at least the market value of the securities loaned. A Portfolio may not make
such loans in excess of 33 1/3% of the value of the Portfolio's total assets
(including the loan collateral). Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities loaned, or
possibly loss of rights in the collateral should the borrower of the securities
become insolvent.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Portfolio may purchase
when-issued securities and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased on a when-issued or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, or if the value of the security to be sold increases prior to the
settlement date. Conversely, securities sold on a delayed-delivery or forward
14
<PAGE>
commitment basis involve the risk that the value of the security to be sold may
increase prior to the settlement date. A Portfolio is required to segregate
liquid assets until three days prior to the settlement date, having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments, or to otherwise cover its position. Although a Portfolio would
generally purchase securities on a when-issued or forward commitment basis with
the intention of acquiring securities, the Portfolio may dispose of a when-
issued security or forward commitment prior to settlement if Northern deems it
appropriate to do so.
INVESTMENT COMPANIES. In connection with the management of their daily cash
positions, the Portfolios may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or penny-
rounding method of valuation ("money market funds"), and may invest in
securities issued by other investment companies consistent with their
investment objectives and policies. Investments by a Portfolio in other money
market funds and investment companies will be subject to the limitations of the
1940 Act as described in more detail in the Additional Statement. Although the
Portfolios do not expect to do so in the foreseeable future, each Portfolio is
authorized to invest substantially all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objective, policies and fundamental restrictions as the Portfolio. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory fees and other expenses the Portfolio bears directly in connection
with its own operations. The Trust has been advised by its counsel that exempt-
interest dividends received by the Tax-Exempt Portfolio as a shareholder of a
regulated investment company paying such dividends will receive the same
Federal tax treatment as interest received by the Portfolio on Municipal
Instruments held by it.
MUNICIPAL AND RELATED INSTRUMENTS. Municipal Instruments in which the Tax-
Exempt Portfolio may invest include debt obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities.
Municipal Instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Portfolio may purchase short-term Tax Anticipation
Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
Municipal Instruments include both "general" and "revenue" obligations. General
obligations are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue obligations are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source such as lease payments from the user of the facility
being financed. Industrial development bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of an industrial revenue bond is usually
directly related to the credit standing of the private user of the facility
involved.
The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a moral
obligation bond is unable to meet its debt service
15
<PAGE>
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
Municipal bonds with a series of maturity dates are called Serial Bonds. The
Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds") where the Portfolio obtains
at the time of purchase the right to put the bond back to the issuer or a third
party at par at least every thirteen months. Put Bonds with conditional puts
(that is, puts which cannot be exercised if the issuer defaults on its payment
obligations) will present risks that are different than those of other
Municipal Instruments because of the possibility that the Portfolio might hold
a long-term Put Bond on which a default occurs following its acquisition by the
Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations
are held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of
floating or variable rate obligation that represents interests in a pool of
municipal obligations held by a bank.
The Tax-Exempt Portfolio may acquire "standby commitments" with respect to the
Municipal Instruments it holds. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option specified Municipal Instruments at a
specified price. The acquisition of a standby commitment may increase the cost,
and thereby reduce the yield, of the Municipal Instruments to which the
commitment relates. The Portfolio will acquire standby commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Municipal Instruments purchased by the Tax-Exempt Portfolio may be backed by
letters of credit or other forms of credit enhancement issued by foreign (as
well as domestic) banks and other financial institutions. The credit quality of
these banks and financial institutions could, therefore, cause loss to a
Portfolio that invests in Municipal Instruments. Letters of credit and other
obligations of foreign financial institutions may involve certain risks in
addition to those of domestic obligations. (See "Foreign Obligations" above.)
As stated, the Tax-Exempt Portfolio expects to invest primarily in Municipal
Instruments. However, the Portfolio may from time to time hold uninvested cash
or invest a portion of its assets in Taxable Investments. The Portfolio does
not intend to invest more than 25% of the value of its total assets in
industrial development bonds or similar obligations where the non-governmental
entities supplying the revenues from which such bonds or obligations are to be
paid are in the same industry. The Portfolio may, however, invest 25% or more
of its total assets in (a) Municipal Instruments the interest upon which is
paid solely from revenues of similar projects, and (b) industrial development
obligations. In addition, although the Tax-Exempt Portfolio does not expect to
do so during normal market conditions, it may invest more than 25% of the value
of its total assets in Municipal Instruments whose issuers are in the same
state. When a substantial percentage of the Portfolio's assets is invested in
instruments which are used to finance facilities involving a particular
industry, whose issuers are in the same state or which are otherwise related,
there is a possibility that an
16
<PAGE>
economic, business or political development affecting one such instrument would
likewise affect the other related instruments.
So long as other suitable Municipal Instruments are available for investment,
the Tax-Exempt Portfolio does not intend to invest in "private activity bonds"
the interest from which may be treated as an item of tax preference to
shareholders under the Federal alternative minimum tax.
The Diversified Assets Portfolio may also invest up to 5% of its net assets
from time to time in municipal instruments or other securities issued by state
and local governmental bodies when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of other permitted short-term taxable investments.
Dividends paid on such investments will be taxable to shareholders.
ISSUER DIVERSIFICATION. In accordance with current SEC regulations, each
Portfolio intends to limit investments in the securities of any single issuer
(excluding cash, cash items, certain repurchase agreements, U.S. Government
securities or securities of other investment companies) to not more than 5% of
the value of its total assets at the time of purchase, except that (a) 25% of
the value of the total assets of each Portfolio may be invested in the
securities of any one issuer for a period of up to three Business Days; and (b)
securities subject to certain unconditional guarantees are subject to different
diversification requirements as described in the Additional Statement. In
addition, the Portfolios will limit their investments in securities that are
not First Tier Securities as prescribed by SEC regulations.
DERIVATIVE INSTRUMENTS. Each Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest rates or indices, and include
(but are not limited to) various structured debt obligations (including certain
variable and floating rate instruments). Derivative instruments present, to
varying degrees, market risk that the performance of the underlying assets,
interest rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
risk that, if interest rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument will not correlate
exactly to the value of the underlying assets, rates or indices on which it is
based; and operations risk that loss will occur as a result of inadequate
systems and controls, human error or otherwise. Some derivative instruments are
more complex than others, and for those instruments that have been developed
recently, information is lacking regarding their actual performance over
complete market cycles. Northern will evaluate the risks presented by the
derivative instruments purchased by the Portfolios, and will determine, in
connection with its day-to-day management of the Portfolios, how they will be
used in furtherance of the Portfolios' investment objectives. It is possible,
however, that Northern's evaluations will prove to be inaccurate or incomplete
and, even when accurate and complete, it is possible that the Portfolios will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
ILLIQUID OR RESTRICTED SECURITIES. A Portfolio will not invest more than 10% of
its net assets in securities which are illiquid, including repurchase
agreements and time deposits that do not provide for payment to the Trust
within seven days after notice and certificates of participation for which
there is no readily available secondary
17
<PAGE>
market and certain securities which are subject to trading restrictions because
they are not registered under the Securities Act of 1933 (the "1933 Act").
If otherwise consistent with their investment objectives and policies, the
Portfolios may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and securities that are not registered under the 1933 Act but can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as Northern
determines, under guidelines approved by the Trust's Board of Trustees, that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
MISCELLANEOUS. Although the Portfolios will generally not seek profits through
short-term trading, each Portfolio may dispose of any portfolio security prior
to its maturity if, on the basis of a revised credit evaluation of the issuer
or other considerations, Northern believes such disposition is advisable.
Subsequent to its purchase, a portfolio security may be assigned a lower rating
or cease to be rated. Such an event would not necessarily require the
disposition of the security, if the continued holding of the security is
determined to be in the best interest of the Portfolio and its shareholders.
In determining the creditworthiness of the issuers of portfolio securities that
may be purchased and held by the Portfolios, Northern gathers and reviews
historical financial data and, through the use of a proprietary software
computer program, analyzes and attempts to assess the fundamental strengths and
weaknesses of individual issuers, industries and market sectors. Exposure
limits are established by Northern for each security in conformance with the
objectives and policies stated in this Prospectus, and are thereafter adjusted
periodically in response to changes in relevant credit factors.
Pursuant to an SEC order, each Portfolio may engage in principal transactions
effected in the ordinary course of business with Goldman Sachs.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
shares of a Portfolio. Each Portfolio will limit its investments so that less
than 25% of the Portfolio's total assets will be invested in the securities of
issuers in any one industry (with certain limited exceptions). Each Portfolio
may borrow money from banks for temporary or emergency purposes or to meet
redemption requests, provided that the Portfolio maintains asset coverage of at
least 300% for all such borrowings.
TRUST INFORMATION
BOARD OF TRUSTEES
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
18
<PAGE>
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for each Portfolio.
As transfer agent, Northern performs various shareholder servicing functions,
and any shareholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of December 31, 1997, Northern Trust
Corporation and its subsidiaries had approximately $25.3 billion in assets,
$16.4 billion in deposits and employed over 7,553 persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $1 trillion of
assets as of December 31, 1997, including approximately $196.5 billion of
assets for which Northern and its affiliates had investment management
responsibility.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolios and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an annual
rate of .25% of the average daily net assets of each Portfolio.
For serving as investment adviser during the fiscal year ended November 30,
1997, Northern earned fees paid by the Government Portfolio, the Diversified
Assets Portfolio and the Tax-Exempt Portfolio at the rate of .25% (per annum)
of each Portfolio's average daily net assets. For serving as investment adviser
during the fiscal year ended November 30, 1997, Northern earned fees (after
waivers) paid by the Government Select Portfolio at the rate of .10% (per
annum) of its average daily net assets.
Northern also receives compensation as the Trust's custodian and transfer agent
under separate agreements. The fees payable by the Portfolios for these
services are described in the Additional Statement. Different transfer agency
fees are payable with respect to the Portfolios' different share classes.
YEAR 2000
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000"
issues, which stem from using two digits to reflect the year in computer
programs and data. Computer programmers and other designers of equipment that
use microprocessors have long abbreviated dates by eliminating the first two
digits of the year under the assumption that those two digits will always be
19. As the Year 2000 approaches, many systems may be unable to accurately
process certain date-based information, which could cause a variety of
operational problems for businesses.
Northern Trust's data processing software and hardware provide essential
support to virtually all of its business units, including the units that
provide services to the Trust, so successfully addressing Year 2000 issues is
of the highest importance. Failure to complete renovation of the critical
systems used by Northern
19
<PAGE>
on a timely basis could have a materially adverse effect on its ability to
provide such services -- as could Year 2000 problems experienced by others.
Although the nature of the problem is such that there can be no complete
assurance it will be successfully resolved, Northern Trust has indicated that a
renovation and risk mitigation program is well under way and that it has a
dedicated Year 2000 Project Team whose members have significant systems
development and maintenance experience. Northern Trust's Year 2000 Project
includes a comprehensive testing plan. Northern Trust has advised the Trust
that it expects to complete work on its critical systems by December 31, 1998,
so that testing with outside parties may be conducted during 1999.
Northern Trust also will have a program to monitor and assess the efforts of
other parties. However, it cannot control the success of those efforts.
Contingency plans are being established where appropriate to provide Northern
Trust with alternatives in case these entities experience significant Year 2000
difficulties which impact Northern Trust.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as administrator
and distributor for the Portfolios. Subject to the limitations described below,
as compensation for its administrative services (which include supervision with
respect to the Trust's non-investment advisory operations) and the assumption
of related expenses, Goldman Sachs is entitled to a fee from each Portfolio,
computed daily and payable monthly, at an annual rate of .10% of the average
daily net assets of each Portfolio. No compensation is payable by the Trust to
Goldman Sachs for its distribution services.
In addition, Goldman Sachs has agreed that it will reimburse each Portfolio for
its expenses (including the fees payable to Goldman Sachs as administrator, but
excluding the fees payable to Northern for its duties as investment adviser and
transfer agent, payments under the service plan for the Portfolios' Service
Share and Premier Share classes and extraordinary expenses such as interest,
taxes and indemnification expenses) which exceed on an annualized basis .10% of
such Portfolio's average daily net assets for any fiscal year. In addition, as
of the date of this Prospectus, Northern will continue to voluntarily reduce
its advisory fee for the Government Select Portfolio. The result of these
reimbursements and fee reductions will be to increase the yields of the
Portfolios during the periods for which the reimbursements and reductions are
made.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," each Portfolio is responsible for the payment of its
expenses. Such expenses include without limitation, the fees and expenses
payable to Northern and Goldman Sachs, fees for the registration or
qualification of Portfolio shares 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, 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
shareholders 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.
20
<PAGE>
INVESTING
PURCHASE OF SHARES
Shares are offered to Northern, its affiliates and other institutions and
organizations, including certain defined contribution plans having at least $30
million in assets or annual contributions of at least $5 million (the
"Institutions"), acting on behalf of their customers, clients, employees,
participants and others (the "Customers") and for their own account. Shares of
the Portfolios are sold on a continuous basis by the Trust's distributor,
Goldman Sachs, to Institutions that either maintain certain institutional
accounts with Northern or its affiliates or invest an aggregate of at least $5
million in one or more Portfolios of the Trust. Goldman Sachs has established
procedures for purchasing shares in order to accommodate different types of
Institutions.
PURCHASE OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Any Institution maintaining
an institutional account at Northern or an affiliate may make purchases through
such institutional account either by directing automatic investment of cash
balances in excess of certain agreed upon amounts or by directing investments
from time to time on a non-automatic basis. The nature of an Institution's
relationship with Northern or an affiliate will determine whether the
Institution maintains an institutional account as well as the procedures
available for purchases. Institutions should contact Northern or an affiliate
for further information in this regard. There is no minimum initial investment
for Institutions that maintain institutional accounts with Northern or its
affiliates.
PURCHASE OF SHARES DIRECTLY FROM THE TRUST. An Institution that purchases
shares directly may do so by means of one of the following procedures, provided
it makes an aggregate minimum initial investment of $5 million in one or more
Portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase shares of a Portfolio
by mail should mail a check or Federal Reserve draft payable to the
specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company, P.O.
Box 75943, Chicago, Illinois 60675-5943. An application will be incomplete
if it does not include a corporate resolution with the corporate seal and
secretary's certification, or other acceptable evidence of authority. If an
Institution desires to purchase the shares of more than one Portfolio, the
Institution should send a separate check for each Portfolio. All checks
must be payable in U.S. dollars and drawn on a bank located in the United
States. A $20 charge will be imposed if a check does not clear. The
proceeds of redemptions of shares purchased by check may be delayed up to
15 days to allow the Trust to determine that the check has cleared and been
paid. Cash and third party checks are not acceptable for the purchase of
Trust shares.
PURCHASE BY TELEPHONE. An Institution desiring to purchase shares of a
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to identify
the name of the Portfolio with respect to which shares are to be purchased
and the manner of payment. Please indicate whether a new account is being
established or an additional payment is being made to an existing account.
If an additional payment is being made to an existing account, please
provide the Institution's name and Portfolio Account Number. Purchase
orders are effected upon
21
<PAGE>
receipt by the Transfer Agent of Federal funds or other immediately
available funds in accordance with the terms set forth below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase
shares of a Portfolio by wire or ACH Transfer should call the Transfer
Agent at 1-800-637-1380 for instructions if it is not making an additional
payment to an existing account. An Institution that wishes to add to an
existing account should wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Shareholder's Name)
For other information concerning requirements for the purchase of shares,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. Except as provided below under "Miscellaneous," a
purchase order for shares placed with the Transfer Agent by 1:00 p.m., Chicago
time, on a Business Day (as defined under "Miscellaneous") will be effected on
that Business Day at the net asset value next determined on that day with
respect to a Portfolio, provided that the Transfer Agent receives the purchase
price in Federal funds or other immediately available funds prior to 1:00 p.m.,
Chicago time, on the same Business Day such order is received. Orders received
after 1:00 p.m. on a Business Day will be effected at the net asset value next
determined on the following Business Day, provided that payment is received as
provided herein. Purchase orders received on a non-Business Day will not be
executed until the following Business Day in accordance with the foregoing
procedures. An order generated pursuant to an automatic investment direction of
an Institution that has an institutional account with Northern or its
affiliates will normally be placed either on the Business Day that funds are
available in such account or on the first Business Day thereafter, depending
upon the terms of the Institution's automatic investment arrangements. Shares
of a Portfolio are entitled to the dividends declared by the Portfolio
beginning on the Business Day the purchase order is executed.
MISCELLANEOUS PURCHASE INFORMATION. Shares are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more investment portfolios of the
Trust. The Trust reserves the right to waive this minimum and to determine the
manner in which the minimum investment is satisfied. There is no minimum for
subsequent investments.
Institutions intending to place a purchase order of $5 million or more directly
with the Trust through the Transfer Agent are requested to give advance notice
to the Transfer Agent no later than 11:00 a.m. Chicago Time on a Business Day
in order to assist in the processing of the order.
See "Miscellaneous" below for information on when the Trust may advance the
time by which purchase requests must be received.
Institutions may impose minimum investment and other requirements on Customers
purchasing shares through them. Depending on the terms governing the particular
account, Institutions may impose account
22
<PAGE>
charges such as asset allocation fees, account maintenance fees, compensating
balance requirements or other charges based upon account transactions, assets
or income, which will have the effect of reducing the net return on an
investment in a Portfolio. The exercise of voting rights and the delivery to
Customers of shareholder communications from the Trust will be governed by the
Customers' account agreements with the Institutions. Customers should read this
Prospectus in connection with any relevant agreement describing the services
provided by an Institution and any related requirements and charges, or contact
the Institution at which the Customer maintains its account for further
information.
Institutions that purchase shares on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
Federal funds on a timely basis. An Institution will be responsible for all
losses and expenses of a Portfolio as a result of a check that does not clear,
an ACH transfer that is rejected, or any other failure to make payment in the
time and manner described above, and Northern may redeem shares from an account
it maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. In those cases in which an
Institution pays for shares by check, Federal funds will generally become
available two Business Days after a purchase order is received. Federal
regulations require that the Transfer Agent be furnished with a taxpayer
identification number upon opening or reopening an account. Purchase orders
without such a number or an indication that a number has been applied for will
not be accepted. If a number has been applied for, the number must be provided
and certified within sixty days of the date of the order.
Payment for shares of the Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing shares
of the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such institutions may be
required to register as dealers pursuant to state law.
Northern may, at its own expense, provide compensation to certain dealers and
other financial intermediaries who provide services to their Customers who
invest in the Trust or whose Customers purchase significant amounts of shares
of a Portfolio. The amount of such compensation may be made on a one-time
and/or periodic basis, and may represent all or a portion of the annual fees
that are earned by Northern as investment adviser to such Portfolio (after
adjustments) and are attributable to shares held by such Customers. Such
compensation will not represent an additional expense to the Trust or its
shareholders, since it will be paid from assets of Northern or its affiliates.
REDEMPTION OF SHARES
Institutions may redeem shares of a Portfolio through procedures established by
Northern and its affiliates in connection with the requirements of their
institutional accounts or through procedures set forth herein with respect to
Institutions that invest directly.
23
<PAGE>
REDEMPTION OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Institutions may redeem
shares in their institutional accounts at Northern or its affiliates. For
Institutions that participate in an automatic investment service described
above under "Purchase of Shares," Northern or its affiliates will calculate on
each Business Day the number of shares that need to be redeemed in order to
bring the Institution's account up to any agreed upon minimum amount.
Redemption requests on behalf of an Institution will normally be placed either
on the Business Day the redemption amount is calculated or on the first
Business Day thereafter, depending upon the terms of the Institution's
automatic investment arrangements. In the latter case, however, Northern or its
affiliates normally will provide funds by provisionally crediting the
institutional account of the Institution on the Business Day on which the
calculation is made. The nature of an Institution's relationship with Northern
or an affiliate will determine whether the Institution maintains an
"institutional account" as well as the procedures available for redemptions.
Institutions should contact Northern or an affiliate for further information in
this regard.
REDEMPTION OF SHARES DIRECTLY. Institutions that purchase shares directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
shares in accordance with the procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem shares by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of shares or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem shares by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange shares by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the shareholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instruments.
All checks will be made payable to the shareholder of record and mailed
only to the shareholder's address of record. See "Other Requirements."
24
<PAGE>
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape recordings for six months, and will
request a form of identification if such identification has been furnished
to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification), (ii) a signature guarantee by a financial
institution that is a participant in the Stock Transfer Agency Medallion
Program ("STAMP") in accordance with rules promulgated by the SEC (a
signature notarized by a notary public is not acceptable) or (iii) such
other means or evidence of authority as may be acceptable to the Transfer
Agent. A redemption request by mail will not be effective unless signed by
a person authorized by the corporate resolution or other acceptable
evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
shares of a Portfolio having a value of at least $1,000 for shares of certain
other portfolios of the Trust as to which the Institution or Customer maintains
an existing account with an identical title.
Exchanges will be effected by a redemption of shares of the Portfolio held and
the purchase of shares of the portfolio acquired. Customers of Institutions
should contact their Institutions for further information regarding the Trust's
exchange privilege and Institutions should contact the Transfer Agent as
appropriate. Customers and Institutions exercising the exchange privilege
should read the relevant prospectus prior to making an exchange. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to shareholders of record and to reject any
exchange request. Exchanges are only available in states where an exchange can
legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
shares are effected at the net asset value per share next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or shares); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Shares--Other Requirements." Exchange orders are
effected at the net asset value per share next determined after receipt in good
order by the Transfer Agent. Payment for redeemed shares for which a redemption
order is received by Northern with respect to an institutional account it
maintains or the Transfer Agent as of 1:00 p.m., Chicago time, on a Business
Day normally will be made in Federal funds or other immediately available funds
wired or sent by check to the redeeming shareholder or, if selected, the
shareholder's institutional account with Northern on that Business Day.
Redemption orders received after 1:00 p.m. will be effected the next Business
Day. Proceeds for redemption orders received on a non-Business Day will
normally be sent on the next Business Day after receipt in good order.
MISCELLANEOUS REDEMPTION AND EXCHANGE INFORMATION. All redemption proceeds will
be sent by check unless Northern or the Transfer Agent is directed otherwise.
The ACH system may be utilized for payment of redemption proceeds. Redemption
of shares may not be effected if a shareholder has failed to submit a completed
and properly executed (with corporate resolution or other acceptable evidence
of authority) new
25
<PAGE>
account application. Institutions intending to place exchange and redemption
orders for same day proceeds of $5 million or more directly with the Trust
through the Transfer Agent are requested to give advance notice to the Transfer
Agent no later than 11:00 a.m. Chicago Time on a Business Day. The proceeds of
redemptions of shares purchased by check may be delayed up to 15 days to allow
the Trust to determine that the check has cleared and been paid. The Trust
reserves the right to defer crediting, sending or wiring redemption proceeds
for up to seven days after receiving a redemption order if, in its judgment, an
earlier payment could adversely affect a Portfolio.
See "Miscellaneous" below for information on when the Trust may advance the
time by which redemption and exchange requests must be received.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized. Dividends on shares are earned through and
including the day prior to the day on which they are redeemed.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his shares to
the extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Shareholders of each Portfolio are entitled to dividends and distributions
arising from the net income and capital gains, if any, earned on investments
held by the particular Portfolio. Dividends from each Portfolio's net income
are declared daily as a dividend to shareholders of record at the close of
business on the days the dividends are declared (or 3:00 p.m., Chicago time, on
non-Business Days).
Net income of each Portfolio includes interest accrued on the assets of such
Portfolio less the estimated expenses charged to such Portfolio. Net realized
short-term capital gains of each Portfolio will be distributed at least
annually. The Portfolios do not expect to realize net long-term capital gains.
Dividends declared during a calendar month will be paid as soon as practicable
following the end of the month, except that such dividends will be paid
promptly upon a total redemption of shares in any account not subject to a
standing order for the purchase of additional shares. All distributions are
paid by each Portfolio in cash or are automatically reinvested (without any
sales charge) in additional shares of the same Portfolio. Arrangements may be
made for the crediting of such distributions to a shareholder's account with
Northern, its affiliates or its correspondent banks.
TAXES
Management of the Trust intends that each Portfolio will qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best interest of
the Portfolio's shareholders. Such qualification generally relieves each
Portfolio of liability for Federal income taxes to the extent its earnings are
distributed in accordance with the Code, but shareholders,
26
<PAGE>
unless otherwise exempt, will pay income taxes on amounts so distributed
(except distributions that constitute "exempt-interest dividends" or that are
treated as a return of capital). Dividends paid from net short-term capital
gains are treated as ordinary income dividends. None of the Portfolios'
distributions will be eligible for the corporate dividends received deduction.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Investors in the Portfolio should note, however,
that taxpayers are required to report the receipt of tax-exempt interest and
"exempt-interest dividends" on their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
taxable to persons subject to alternative minimum taxes. First, tax-exempt
interest and "exempt-interest dividends" derived from certain private activity
bonds issued after August 7, 1986 generally will constitute an item of tax
preference for corporate and noncorporate taxpayers in determining alternative
minimum tax liability. Second, all tax-exempt interest and "exempt-interest
dividends" must be taken into account by corporate taxpayers in determining
certain adjustments for alternative minimum tax purposes. Shareholders who are
recipients of Social Security Act or Railroad Retirement Act benefits should
note that tax-exempt interest and "exempt-interest dividends" will be taken
into account in determining the taxability of their benefit payments. To the
extent, if any, that dividends paid by the Tax-Exempt Portfolio to its
shareholders are derived from taxable interest or from capital gains, such
dividends will be subject to Federal income tax, whether received in cash or
reinvested in additional shares.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable and will apply such percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages
for any particular day.
The Trust will send written notices to shareholders annually regarding the tax
status of distributions made by each Portfolio. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in those months will be deemed for Federal tax purposes to have
been paid by a Portfolio and to have been received by the shareholders on
December 31 of that year, if the dividends are actually paid during the
following January.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, investors
should consult their tax advisers with specific reference to their own Federal,
state and local tax situation. In particular, although the Government Select
Portfolio intends to invest primarily in U.S. Government securities the
interest on which is generally exempt from state income taxation, an investor
should consult his or her own tax adviser to determine whether distributions
from the Portfolio are exempt from state income taxation in the investor's own
situation. Similarly, dividends paid by the Portfolios may be taxable to
investors under state or local law as dividend income even though all or a
portion of such dividends may be derived from interest on obligations which, if
realized directly, would be exempt from such income taxes. Future legislative
or administrative changes or court decisions may materially affect the tax
consequences of investing in one or more of the Portfolios.
27
<PAGE>
NET ASSET VALUE
The net asset value per share of each Portfolio for purposes of purchases and
redemptions is calculated by Northern as of 3:00 p.m., Chicago time,
immediately after the declaration of net income earned by shareholders of
record, on each Business Day (as defined below under "Miscellaneous"), except
for days during which no shares are tendered to the Portfolio for redemption
and no orders to purchase or sell shares are received by the Portfolio and
except for days on which there is an insufficient degree of trading in the
Portfolio's securities for changes in the value of such securities to
materially affect the net asset value per share. The time at which the net
asset value per share of a Portfolio is calculated may be advanced on days on
which Northern or the securities markets close early. See "Miscellaneous"
below. Currently, each Portfolio offers three separate classes of shares. Net
asset value per share of each class of each Portfolio is calculated by adding
the value of all securities and other assets belonging to the Portfolio that
are allocated to such class, subtracting the liabilities charged to that class
and dividing by the number of outstanding shares of that class.
In seeking to maintain a net asset value of $1.00 per share with respect to
each Portfolio for purposes of purchases and redemptions, the Trust values the
portfolio securities held by a Portfolio pursuant to the amortized cost
method. Under this method, investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period of maturity. See "Amortized Cost
Valuation" in the Additional Statement. There can be no assurance that a
Portfolio will be able at all times to maintain a net asset value per share of
$1.00.
PERFORMANCE INFORMATION
From time to time the Portfolios may advertise their "yields" and "effective
yields" and the Government Select Portfolio and Tax-Exempt Portfolio may
advertise their "tax-equivalent yields." These yield figures will fluctuate,
are based on historical earnings and are not intended to indicate future
performance. "Yield" refers to the net investment income generated by an
investment in the Portfolio over a seven-day period identified in the
advertisement. This net investment income is then "annualized." That is, the
amount of net investment income generated by the investment during that week
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. "Effective yield" is calculated similarly but,
when annualized, the net investment income earned by an investment in the
Portfolio is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment. The "tax-equivalent yield" demonstrates the level of taxable
yield necessary to produce an after-tax yield equivalent to a Portfolio's tax-
free yield. It is calculated by taking that portion of the seven-day "yield"
which is tax-exempt and adjusting it to reflect the tax savings associated
with a stated tax rate. The "tax-equivalent yield" will always be higher than
the Portfolio's yield.
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Yield will be affected by portfolio quality, composition, maturity,
market conditions and the level of the Portfolio's operating expenses.
Each Portfolio may also quote from time to time its total return in accordance
with SEC regulations.
28
<PAGE>
ORGANIZATION
Each Portfolio is a series of The Benchmark Funds, which was formed as a
Delaware business trust on July 1, 1997 under an Agreement and Declaration of
Trust. The Portfolios were formerly series of The Benchmark Funds, a
Massachusetts business trust, and were reorganized into the Trust on March 31,
1998. As of the date of this Prospectus, the Trust has created eighteen
separate series of shares of beneficial interest representing interests in
eighteen investment portfolios, four of which are described in this Prospectus;
the other series of shares are described in a separate prospectus. The business
and affairs of the Trust are managed by or under the direction of its Board of
Trustees. The Declaration of Trust of the Trust authorizes the Board of
Trustees to classify or reclassify any unissued shares into additional series
or classes within a series. Pursuant to such authority, the Board of Trustees
has classified three classes of shares in each Portfolio: Service Shares,
Premier Shares and the shares described in this Prospectus. Service Shares and
Premier Shares are described in separate Prospectuses.
Each share of a Portfolio is without par value, represents an equal
proportionate interest in that Portfolio with each other share of its class in
that Portfolio and is entitled to such dividends and distributions earned on
such Portfolio's assets as are declared in the discretion of the Board of
Trustees. Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except amounts payable under the service plan
that has been adopted for the Portfolios' Service and Premier Share classes and
transfer agency fees. Because of these class-specific expenses, the performance
of the shares of a Portfolio described in this Prospectus is expected to be
higher than the performance of both the Service and Premier Share classes of
the same Portfolio, and the performance of a Portfolio's Service Share class is
expected to be higher than the performance of the same Portfolio's Premier
Share class. For further information regarding the Trust's other share classes,
contact Goldman Sachs at 1-800-621-2550.
The Trust's shareholders are entitled at the discretion of the Board of
Trustees to vote either on the basis of the number of shares held or the
aggregate net asset value represented by such shares. Each series entitled to
vote on a matter will vote thereon in the aggregate and not by series, except
as otherwise required by law or when the matter to be voted on affects only the
interests of shareholders of a particular series. The Additional Statement
gives examples of situations in which the law requires voting by series. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate voting power of the Trust may elect all of the Trustees irrespective
of the vote of the other shareholders. In addition, holders of all shares
(regardless of class) representing interests in the same Portfolio have equal
voting rights except that only shares of a particular class within the
Portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to class-specific expenses that are payable by
that class of shares.
As of February 28, 1998, Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding shares of the Trust.
The Trust does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Trustees will
promptly call a meeting of shareholders to vote upon the removal of any Trustee
when so requested in writing by the record holders of 10% or more of the
outstanding shares. To the extent required by law, the Trust will assist in
shareholder communications in connection with such a meeting.
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
29
<PAGE>
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is 1-800-621-2550.
When a shareholder moves, the shareholder is responsible for sending written
notice to the Trust of any new mailing address. The Trust and its transfer
agent may charge a shareholder their reasonable costs in locating a
shareholder's current address in accordance with SEC regulations.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, which is Monday through
Friday, except for holidays observed by Northern and/or the Exchange other than
Good Friday. For 1998, the holidays of Northern and/or the Exchange are: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and
Christmas Day. On those days when Northern or the Exchange closes early as a
result of unusual weather or other circumstances, the Portfolios reserve the
right to advance the time on that day by which purchase, redemption and
exchange requests must be received. In addition, on any Business Day when The
Bond Market Association recommends that the securities markets close or close
early, the Portfolios reserve the right to cease or to advance the deadline for
accepting purchase, redemption and exchange orders for same Business Day
credit. Purchase, redemption and exchange requests received after the advanced
closing time will be effected on the next Business Day. Each Portfolio
reserves, however, the right to reject any purchase order and also to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment would
adversely affect such Portfolio. See "Investing--Purchase of Shares" and
"Investing--Redemption of Shares" above for more information.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
30
<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, 1998 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the Shares of the Government Select,
Government, Diversified Assets and Tax-Exempt Portfolios (the "Portfolios") of
The Benchmark Funds (the "Prospectus") dated April 1, 1998. 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. Each Portfolio also offers two additional
share classes, Service Shares and Premier Shares, which are described in a
separate statement of additional information.
------------------
<TABLE>
<CAPTION>
INDEX
Page
----
<S> <C>
ADDITIONAL INVESTMENT INFORMATION B-3
Investment Objectives and Policies B-3
Investment Restrictions B-10
ADDITIONAL TRUST INFORMATION B-13
Trustees and Officers B-13
Investment Adviser, Transfer Agent and Custodian B-20
Administrator and Distributor B-26
Counsel and Auditors B-28
In-Kind Purchases B-28
PERFORMANCE INFORMATION B-29
AMORTIZED COST VALUATION B-30
DESCRIPTION OF SHARES B-32
ADDITIONAL INFORMATION CONCERNING TAXES B-35
General B-35
Special Tax Considerations Pertaining to the
Tax-Exempt Portfolio B-37
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Foreign Investors B-38
Conclusion B-38
OTHER INFORMATION B-38
FINANCIAL STATEMENTS B-39
APPENDIX A (Description of Securities Ratings) 1-A
</TABLE>
----------------
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the related
Prospectus in connection with the offering of Shares 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.
SHARES 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 SHARE.
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, 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.
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, as calculated under applicable SEC regulations,
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, 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
B-4
<PAGE>
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.
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 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
B-5
<PAGE>
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 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
With respect to the investments of the Portfolios in the securities of other
investment companies, such investments will be limited so that, as determined
after a purchase is made, either (a) not more that 3% of the total outstanding
stock of such investment company will be owned by a Portfolio, the Trust as a
whole and their affiliated persons (as defined in the 1940 Act); or (b)(i) not
more that 5% of the value of the total assets of a Portfolio will be invested in
the securities of any one investment company, (ii) not more that 10% of the
value of its total assets will be invested in the aggregate in securities of
investment companies as a group, and (iii) not more that 3% of the outstanding
voting stock of any one investment company will be owned by the Portfolio.
Unaffiliated money market funds whose securities are purchased by the Portfolios
may not be obligated to redeem such securities in an amount exceeding 1% of
their total outstanding securities during any period of less than 30 days.
Therefore, such securities that exceed this amount may be illiquid.
If 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.
A Portfolio may invest all or substantially all of its assets in a single open-
end investment company or series thereof with substantially the same investment
objective, policies and restrictions as the Portfolio. However, each Portfolio
currently intends to limit its investments in securities issued by other
investment companies to the extent described above. 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.
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
B-6
<PAGE>
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 segregated
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
B-7
<PAGE>
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 will separate 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 portfolio
will separate the portfolio securities themselves. 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
B-8
<PAGE>
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 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
B-9
<PAGE>
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.
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 shares.
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.
B-10
<PAGE>
(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) Make any investment inconsistent with the Portfolio's classification
as a diversified investment company under the 1940 Act.
(8) 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.
(9) 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
B-11
<PAGE>
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.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may (a) purchase securities of other investment companies to the full
extent permitted under Section 12 of the 1940 Act (or any successor
provision thereto) or under any regulation or order of the Securities and
Exchange Commission; and (b) invest all or substantially all of its assets
in a single open-end investment company or series thereof with
substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
The freedom of action reserved in Restriction No. 98 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. Obligations of U.S.
branches of foreign banks may include certificates of deposit, bank and deposit
notes, bankers' acceptances and fixed time deposits any may be signed
obligations of the parent bank or may be limited to the issuing branches. Such
obligations will meet the criteria for "Eligible Securities" as described in the
Prospectus.
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 No. 8, 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.
B-12
<PAGE>
In applying Restriction No. 8 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.
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.
The Portfolios intend, as a non-fundamental policy, to diversify their
investments in accordance with current SEC regulations. Investments in the
securities of any single issuer (excluding cash, cash items, certain repurchase
agreements, U.S. Government securities and securities of other investment
companies) will be limited to not more than 5% of the value of a Portfolio's
total assets at the time of purchase, except that 25% of the value of the total
assets of each Portfolio may be invested in the securities of any one issuer for
a period of up to three Business Days. A security that has an unconditional
guarantee meeting special SEC requirements (a "Guarantee") does not need to
satisfy the foregoing issuer diversification requirements that would otherwise
apply, but the Guarantee is instead subject to the following diversification
requirements: Immediately after the acquisition of the security, a Portfolio may
not have invested more that 10% of its total assets in securities issued by or
subject to Guarantees from the same person, except that a Fund my , subject to
certain conditions, invest up to 25% of its total assets in securities issued or
subject to Guarantees of the same person. This percentage is 100% if the
Guarantee is issued by the U.S. Government or an agency thereof. In additional,
the Tax-Exempt Portfolio will limit its investments in certain conduit
securities that are not rated in the highest short-term rating category as
determined by two NRSROs (or one NRSRO if the security is rated by only one
NRSRO) or, if unrated, are not of comparable quality ("Second Tier Securities"),
to 5% of its total assets, with investments in any one such issuer being limited
to no more that 1% of the Portfolio's total assets or $1 million, whichever is
greater, measured at the time of purchase. Conduit securities subject to this
limitation are Municipal Instruments that are not subject to a Guarantee and
involve an arrangement whereunder a person, other that a municipal issuer,
provides for or secures repayment of the security and are not: (i) fully and
unconditionally guaranteed by a municipal issuer; or (ii) payable from the
general revenues of the municipal issuer or other municipal issuers; or (iii)
related to a project owned and operated by a municipal issuer; or (iv) related
to a facility leased to and under the control of an industrial or commercial
enterprise that is part of a public project which, as a whole, is owned and
B-13
<PAGE>
under the control of a municipal issuer. The Diversified Assets Portfolios will
limit its investments in all Second Tier Securities (that are not subject to a
Guarantee) in accordance with the foregoing percentage limitations.
In addition to the foregoing, each Portfolio is subject to additional
diversification requirements imposed by SEC regulations on the acquisition of
securities subject to other types of demand features and puts whereunder a
Portfolio has the right to sell the securities to third parties.
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, 68 Chairman Vice Chairman of Ameritech (a
701 Morningside Drive and telecommunications holding company), from
Lake Forest, IL 60045 Trustee 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-
diversified management investment company)
from April 1992 to present; Trustee,
Goldman Sachs Trust from 1989 to present.
Richard Gordon Cline, 62 Trustee Chairman, Hussman
4200 Commerce Court International Inc.
Suite 300 (commericial refrigeration
Lisle, IL 60532 company) since January 1998;
and Chairman, Hawthorne Inc. (a management
advisory services and private investment
company) since January 1996; Chairman and
CEO of NICOR Inc. (a diversified public
utility holding company) from 1986 to 1995,
and President, 1992-1993; Director: Whitman
Corporation (a diversified holding
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
company); Kmart Corporation (a retailing
company); Ryerson Tull, Inc. (a metals
distribution company); and University of
Illinois Foundation.
Edward J. Condon, Jr.,57 Trustee Chairman of The Paradigm Group, Ltd. (a
Sears Tower, Suite 9650 financial advisor) since July 1993; Vice
233 S. Wacker Dr. President and Treasurer of Sears, Roebuck
Chicago, IL 60606 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; Member of the Board of
Managers of The Liberty Hampshire Company,
LLC; Vice Chairman and Director of
Energenics LLC; Director of University
Eldercare, Inc.; Director of the Girl Scouts
of Chicago; and Trustee of Dominican
University.
</TABLE>
John W. English, 64 Trustee Private Investor; Vice President and Chief
50-H New England Avenue Investment Officer of The Ford Foundation (a
P.O. Box 640 charitable trust) from 1981 until 1993;
Summit, NJ 07902-0640 Trustee: The China Fund, Inc.; 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.
B-15
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Sandra Polk Guthman, 53 Trustee President and CEO of Polk
420 N. Wabash Avenue Bros. Foundation(an Illinois not-for-profit
Suite 204 corporation) from 1993 to present; Director
Chicago, IL 60611 of Business Transformation from 1992-1993,
and Midwestern Director of Marketing from
1988-1992, IBM Corporation; Director:MBIA
Insurance Corporation of Illinois (bank
holding company) since 1994 and Avondale
Financial Corporation (a stock savings and
loan holding company) since 1995.
Frederick T. Kelsey, 70 Trustee Consultant to Goldman Sachs from December
4010 Arbor Lane #102 1985 through February 1988; Director of
Northfield, IL 60093 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 and other investment
companies affiliated with Goldman Sachs
through August 1985; President from 1983 to
1985, and Trustee from 1983 to 1994, The
Centerland Funds and its successor, The
Pilot Funds; Trustee, various management
investment companies affiliated with Zurich
Kemper Investments.
Richard P. Strubel, 58 Trustee Managing Director, Tandem Partners, Inc. (a
70 West Madison St privately held management services firm)
Suite 1400 since 1990; President and CEO, Microdot,
Chicago, IL 60602 Inc. (a privately held manufacturing firm)
from 1984 to 1994; Trustee, Goldman Sachs
Trust from 1987 to present; Director of
Kaynar Technologies Inc. (a leading
manufacturer of aircraft fasteners); Trustee
of the University of Chicago;
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Director of Children's Memorial Medical
Center.
Frank E. Polefrone, 41 President Director of Financial Institutions Sales
4900 Sears Tower and Marketing of Goldman Sachs Asset
Chicago, IL 60606 Management ("GSAM") since March 1997;
Marketing/Product Development of Federated
Investors from August 1982 through December
1996.
James A. Fitzpatrick, 38 Vice Vice President, GSAM (since April 1997);
4900 Sears Tower President Vice President and General Manager, First
Chicago, IL 60606 Data Corporation-Investors Services Group
prior thereto.
John W. Mosior, 58 Vice Vice President, Goldman Sachs; Manager of
4900 Sears Tower President Shareholder Servicing of GSAM
Chicago, IL 60606 (since November 1989).
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President (since April 1985); Manager, Shareholder
Chicago, IL 60606 Servicing of GSAM (since November 1989).
Scott M. Gilman, 37 Treasurer Director, Mutual Fund Administration, GSAM
One New York Plaza (since April 1994); Assistant Treasurer of
New York, NY 10004 Goldman Sachs Funds Management, Inc.
(since March 1993); Vice President, Goldman
Sachs (since March 1990).
John Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer (since July 1995); Director, Investors
New York, NY 10004 Bank and Trust Company (November 1993 to
July 1995); Audit Manager of Arthur
Andersen, LLP (prior thereto).
Michael J. Richman, 36 Secretary Associate General Counsel, GSAM (since
85 Broad Street February 1994); Vice President and Assistant
New York, NY 10004 General Counsel of Goldman Sachs (since June
1992); Counsel to the Funds Group of GSAM
(since June 1992);
</TABLE>
B-17
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Partner of Hale and Dorr (September 1991 to
June 1992).
Deborah A. Farrell, 26 Assistant Legal Assistant, Goldman Sachs Secretary
85 Broad Street (since January 1994;) Formerly at Cleary,
New York, NY 10004 Gottlieb, Steen & Hamilton.
Steven E. Hartstein, 33 Assistant Legal Products Analyst, Goldman Sachs (since
85 Broad Street Secretary June 1993); Funds Compliance Officer,
New York, NY 10004 Citibank Global Asset Management (August
1991 to June 1993).
Howard B. Surloff, 32 Assistant Vice President and Assistant General
85 Broad Street Secretary Counsel, Goldman Sachs (since November 1993
New York, NY 10004 and May 1994, respectively); Counsel to the
Funds Group, GSAM (since November 1993);
Associate of Shereff, Friedman, Hoffman &
Goodman, LLP (prior thereto).
Valerie A. Zondorak, 32 Assistant Vice President, Goldman Sachs (since March
85 Broad Street Secretary 1997); Counsel to the Funds Group, GSAM
New York, NY 10004 (since March 1997); Associate, Shereff,
Friedman, Hoffman & Goodman, LLP (prior
thereto).
</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,
Mosior, Gilman, Richman, Surloff and Hartstein and Mmes. Farrell, Mucker and
Zondorak 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
B-18
<PAGE>
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.
Each Trustee will hold office for an indefinite term until the earliest of (1)
the next meeting of shareholders if any, called for the purpose of considering
the election or re-election of such Trustee and until the election and
qualification of his or her successor, if any, elected at such meeting; (2) the
date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
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, 1997:
<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 $43,500 $0 $43,500
Richard G. Cline *** $0
Edward J. Condon, Jr. $31,000 $0 $31,000
John W. English $31,000 $0 $31,000
James J. Gavin* $34,000 $0 $34,000
Sandra Polk Guthman *** $0
Frederick T. Kelsey $35,000 $2,863** $37,863
Richard P. Strubel $39,000 $0 $39,000
</TABLE>
* Retired as of November 30, 1997.
** Interest from deferred compensation.
*** Mr. Cline and Ms. Guthman were elected as Trustees of the Trust in
September 1997.
B-20
<PAGE>
Investment Adviser, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. As of December 31, 1997, Northern and its
affiliates had over $196 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. To the extent the
execution and price available from more than one broker, dealer or other such
persons are believed to be comparable, Northern may, at its discretion but
suject to applicable law, select the executing broker, dealer or such other
persons on the basis of Northern's opinion of the reliability and quality of
such broker, dealer or such other persons.
For the fiscal years ended November 30, 1997, 1996 and 1995, 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
B-21
<PAGE>
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 information) 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 shares of the Portfolios, and the disbursement of the proceeds of
redemptions, (3) establish and maintain separate omnibus accounts with respect
to shareholders 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 shareholders,
(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
B-22
<PAGE>
prospectuses and statements of additional information, 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 with respect to the Shares described in this Additional Statement 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 such shares of the Portfolios. This fee which is borne
solely by the Shares described in this Additional Statement and not by the
Portfolios' other share classes, 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 Shares of
the Portfolios.
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, subject to certain monitoring responsibilities, 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. Northern may also appoint agents to carry out such of
the provisions of the
B-23
<PAGE>
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.
Northern's fees under the Custodian Agreement are subject to reduction based on
the Portfolios' daily uninvested cash balances.
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, 1999, 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 shares 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 shareholder 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 (after fee waivers) incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $1,018,467 $ 772,113 $ 569,065
Government Portfolio $3,243,435 $2,617,746 $1,938,878
Diversified Assets Portfolio $8,947,074 $7,832,358 $7,080,710
Tax-Emempt Portfolio $1,731,836 $1,885,156 $1,687,136
</TABLE>
In addition, for the fiscal periods ended November 30 as indicated, Northern
waived additional advisory fees with respect
B-24
<PAGE>
to the Government Select Portfolio in the amounts of $1,527,701, $1,157,788, and
$853,605.
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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 30,361 $ 22,274 $ 25,000
Government Portfolio 35,042 31,048 32,000
Diversified Assets Portfolio 127,270 64,579 110,000
Tax-Exempt Portfolio 11,028 14,883 32,000
</TABLE>
For the fiscal periods ended November 30 as indicated, the amount of the
Custodian Fees incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 97,683 $ 96,787 $ 75,122
Government Portfolio 140,110 131,957 101,086
Diversified Assets Portfolio 412,075 360,387 317,635
Tax-Exempt Portfolio 100,513 105,936 97,551
</TABLE>
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 arrange ments 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 share of any Portfolio or result
in a financial loss to any shareholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing shares of an
B-25
<PAGE>
open-end investment company were relaxed, the Trust expects that Northern and
its affiliates 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 as its affiliates 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.)
Portfolio Transactions
During the fiscal year ended November 30, 1997, 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.,
Lehman Brothers, Inc., Nomura Securities, and SBC Warburg Inc.,] each a regular
broker/dealer. At November 30, 1997, 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: [Donaldson, Lufkin & Jenrette
Securities, Inc., with an approximate aggregate market value of $200,000,000].
During the fiscal year ended November 30, 1997, the Government Portfolio
acquired and sold securities of [Bear Stearns & Co., J.P. Morgan Securities,
Inc., Nomura Securities UBS Securities, Donaldson, Lufkin & Jenrette Securities,
Inc., HSBC Securities, Inc., Lehman Brothers, Inc., SBC Warburg Inc., Prudential
Securities Incorporated and Merrill Lynch & Co., Inc., ] each a regular
broker/dealer.
B-26
<PAGE>
At November 30,1997 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: [Donaldson, Lufkin & Jenrette, with an approximate
aggregate market value of $100,000,000, HSBC Inc., with an approximate aggregate
market value of $2,000,000, SBC Warburg Inc., with an approximate aggregate
market value of $100,000,000 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 the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to shareholders,
periodic updating of the prospectuses 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 shares), 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>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Government Select Portfolio $1,048,482 $ 897,049 $ 751,804
Government Portfolio 1,208,401 1,036,172 895,112
Diversified Assets Portfolio 3,082,370 2,079,083 1,928,672
Tax-Exempt Portfolio 749,232 885,446 828,163
</TABLE>
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs 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
shareholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
B-27
<PAGE>
Goldman Sachs has agreed for the current fiscal year to reimburse each Portfolio
for the sum of the Portfolio expenses (including fees payable to Goldman Sachs
as administrator, but excluding the fees payable to Northern for its duties as
investment adviser and transfer agent, payments under the service plans for the
Portfolios' Service and ________ share charges, and extraordinary expenses)
which exceed on an annualized basis .10% of each Portfolio's average daily net
assets. Prior to May 1, 1997, this undertaking was voluntary with respect to the
Portfolios. As of May 1, 1997, this undertaking is contractual with respect to
all Portfolios.
Effective April 1, 1998, (upon the offering of the Service and Premier Shares),
Goldman Sachs will reimburse "other expenses" of each Portfolio (including fees
payable to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as adviser and transfer agent, payments under the
service plans for Services and Premier Shares and certain extraordinary
expenses) exceeds on an annualized basis .10% of each Portfolio's average daily
net assets.
For the fiscal periods ended November 30 as indicated, and prior to May 1, 1997,
[Goldman Sachs 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 other expenses by the following amounts:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Government Select Portfolio $360,250 $364,826 $346,936
Government Portfolio 262,895 305,696 369,546
Diversified Assets Portfolio 477,791 0 0
Tax-Exempt Portfolio 305,530 382,218 389,481
</TABLE>
Effective April 1, 1998, (or commencement of the Service and or premier shares),
Goldman Sachs will reimburse "other expenses" of each Portfolio (including fees
payable to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as advisor, transfer agent and certain extraordinary
expenses) exceeds on an annualized basis .10% of each Portfolio's average net
assets.
Unless sooner terminated, the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 1999, 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 shares of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
B-28
<PAGE>
penalty by the Trust (upon specified Trustee or shareholder 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
shareholders 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 LLP, 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, 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 shares 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.
B-29
<PAGE>
PERFORMANCE INFORMATION
From time to time the Trust may advertise quotations of "yields" and "effective
yields" with respect to each Portfolio's Shares, and "tax-equivalent yields"
with respect to Shares 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 Share at the beginning of the period (such net change being inclusive of the
value of any additional Shares issued in connection with distributions of net
investment income as well as net investment income accrued on both the original
Share and any such additional Shares, 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 Shares 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. 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 Shares of the Portfolios are not reflected in the
calculation of yields for the Portfolios.
The annualized yield of each Portfolio with respect to Shares for the seven-day
period ended November 30, 1997 was as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Government Select
Portfolio 5.39% 5.53% N/A
Government Portfolio 5.29 5.43 N/A
Diversified Assets
Portfolio 5.41 5.56 N/A
Tax-Exempt Portfolio 3.57 3.63 5.91%
</TABLE>
B-30
<PAGE>
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 Shares 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 5.20% 5.33% N/A
Government Portfolio 5.27 5.41 N/A
Diversified Assets
Portfolio 5.40 5.55 N/A
Tax-Exempt Portfolio 3.53 3.59 5.84%
</TABLE>
Each Portfolio's yields fluctuate, 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 indicative 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.
The yields and total return returns of the Portfolios Service Shares and Premier
Shares are calculated separately from the calculations of the yield and total
return of the Shares described in this Additional Statement.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset value
of $1.00 per share 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 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
B-31
<PAGE>
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 share. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per share and the net asset value
per share 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
shareholders, 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 shareholder income accruals,
redeeming shares in kind, or utilizing a net asset value per share 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 shareholders
which might arise from Market Value Differences. In particular, if losses were
sustained by a Portfolio, the number of outstanding shares might be reduced in
order to maintain a net asset value per share of $1.00. Such reduction would be
effected by having each shareholder proportionately contribute to the
Portfolio's capital the necessary shares to restore such net asset value per
share. Each
B-32
<PAGE>
shareholder 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 share 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
reason ably practicable.
DESCRIPTION OF SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional shares 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
eighteen series which represent interests in the eighteen respective portfolios.
The Trust Agreement also permits the Board of Trustees to classify or reclassify
any unissued shares into additional series or subseries within a series.
Pursuant to such authority, the Trustees have authorized the issuance of an
unlimited number of shares of beneficial interest in three separate classes of
shares in each of the Portfolios: Shares, Service Shares and Premier Shares.
This Additional Statement ((and the ----- Paragraphs) relate only to the class
of shares of the four Portfolios discussed herein. For information on the other
share classes in the Portfolios and 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 share of each Portfolio is without par value, represents
an equal proportionate interest in the particular Portfolio with each other
share 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, shareholders of each class of
a Portfolio are entitled to share pro rata in the net assets belonging to that
class available for distribution. Shares do not have any preemptive or
conversion rights. The right of redemption is described under "Investing-
Redemption of Shares" 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 shareholder to redeem shares and the date of payment by a
Portfolio may be suspended for more than
B-33
<PAGE>
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 shareholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.
In addition, shares 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 shareholders of the
Portfolio. Shares 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 shares,
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 shares 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 shares 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 are exempt from the separate voting
requirements stated above. In addition, shareholders of each of the classes in a
particular investment portfolio have equal voting rights except that only shares
of a particular class of an investment portfolio will be entitled to vote on
matters submitted to a vote of shareholders (if any) relating to
B-34
<PAGE>
shareholder servicing expenses and transfer agency fees that are payable by that
class.
The Trust is not required to hold annual meetings of Shareholders and does
not intend to hold such meetings. In the event that a meeting of Shareholders is
held, each share of the Trust will entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
to one vote for each dollar of net asset value represented by such Shares on all
matters presented to Shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees.
Meetings of Shareholders of the 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 Shares entitled to vote at such meeting. The Shareholders
of the Trust will have voting rights only with respect to the limited number of
matters specified in the Trust Agent and such other matters as the Trustees may
determine or may be required by law.
The Trust authorizes the Trustees, without approval (except as stated in
the next paragraph), to cause the 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
Trust, or any series thereof. In addition, the Trustees, without the Trust, or
any series thereof. In addition, the Trustees, without shareholder approval, may
adopt a "master-feeder" structure by investing substantially all of the assets
of a series of the Trust in the securities of another open-end investment
company or pooled portfolio.
The Trust Agent 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 Shareholders of any class into one or more
separate groups and to provide for the different treatment of Shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of Shareholders that are so
classified.
The Trust Agent permits the Trustees to amend the Trust Agent without a
Shareholder vote. However, Shareholders of the Trust have the right to vote on
any amendment (i) that would adversely affect the voting rights of Shareholders;
(ii) that is required by law to be approved by Shareholders; (iii) that would
amend the voting provisions of the Trust Agent; or (iv) that the Trustees
determine to submit to Shareholders.
B-35
<PAGE>
The Trust Agent permits the termination of the Trust or of any series or
class of the Trust (i) by a majority of the affected Shareholders at a meeting
of Shareholders of the Trust, series or class; or (ii) by a majority of the
Trustees without Shareholder approval if the Trustees determine that such action
is in the best interest of the Trust or its Shareholders. The factors and events
that the Trustees may take into account in making such determination include (i)
the inability of the Trust or any series or class to maintain its assets at an
appropriate size; (ii) changes in laws or regulations governing the Trust or any
series or class thereof, or affecting assets of the type in which it invests; or
(iii) economic developments or trends having a significant adverse impact on
their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders are not
personally liable for obligations of the Trust. The Delaware Act entitles a
shareholder of the Trust to the same limitation of liability as is available to
shareholders of private for-profit corporations. However, no similar statutory
or other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Trust or a shareholder is
subject to the jurisdiction of courts in such other states, those courts may not
apply Delaware law and may subject the shareholders to liability. To offset this
risk, the Trust Agreement (i) contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into or
executed by the Trust or its Trustees and (ii) provides for indemnification out
of the property of the applicable series of the Trust of any shareholder held
personally liable for the obligations of the Trust solely by reason of being or
having been a shareholder and not because of the shareholder's acts or omissions
or for some other reason. Thus, the risk of a shareholder incurring financial
loss beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the liability arises under tort law or, if
not, no contractual limitation of liability is in effect; and (3) the applicable
series of the Trust is unable to meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any person
other than the Trust or a shareholder and that a Trustee will not be liable for
any act as a Trustee. However, nothing in the Trust Agreement 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
B-36
<PAGE>
reckless disregard of the duties involved in the conduct of such person's
office.
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agent provides that a
Shareholder of the Trust may bring a derivative action on behalf of the Trust
only if the following conditions are met: (a) Shareholders eligible to bring
such derivative action under Delaware law who hold at least 10% of the
outstanding Shares of the Trust, or 10% of the outstanding Shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such Shareholder request and to investigate the basis
of such claim. The Trust Agent also provides that no person, other than the
Trustees, who is not a Shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to retain
counsel or other advisers in considering the merits of the request any may
require an undertaking by the Shareholders making such request to reimburse the
Trust for the expense of any such advisers to reimburse the Trust for the
expense of any such advisers in the event that the Trustees determine not to
bring such action.
The Trustees may appoint separate Trustees with respect to one or more series or
classes of the Trust's Shares (the "Series Trustees"). To the extent provided by
the Trustees in the appointment of Series Trustees, Series Trustees (a) may, but
are not required to, serve as Trustees of the Trust or any other series or class
of the Trust; (b) may have, to the exclusion of any other Trustee of the Trust,
all the powers and authorities of Trustees under the Trust Instrument with
respect to such series or class; and/or (c) may have no power or authority with
respect to any other series or class. The Trustees are not currently considering
the appointment of Series Trustees for the Dalaware Trust.
Shares 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 11, 1998, the trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares 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 percent or more of the outstanding shares of
the Portfolios as of March 11, 1998:
B-37
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Shares Shares
------ ------
<S> <C> <C>
GOVERNMENT SELECT PORTFOLIO
Cape Cod Bank & Trust 70,714,501 5.16%
Arcadia Trust, N.A. 73,222,900 5.35%
TAX-EXEMPT PORTFOLIO
HCI Incorporated 60,284,233 9.10%
</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 shareholders. 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
shareholders, 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 shareholders.
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 shareholders 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"). 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
B-38
<PAGE>
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 shareholders 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. Under
the Taxpayer Relief Act of 1997, for capital gains on securities recognized
after July 28, 1997, the maximum tax rate for individuals is 20% if the property
was held more than 18 months; for property held for more than 12 months, but not
longer than 18 months, the maximum tax rate on capital gains continues to be
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 (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
shareholder (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
B-39
<PAGE>
irrespective of fluctuations in principal. Shares 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 shareholders not later than 60
days after the close of the 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 shareholders
receiving dividends from the Portfolio with respect to such year.
Interest on indebtedness incurred by a shareholder to purchase or carry
Portfolio shares generally is not deductible for Federal income tax purposes if
the Portfolio's distributions are not subject to Federal income tax.
Foreign Investors
Foreign shareholders 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
B-40
<PAGE>
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign shareholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign shareholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of shares or in respect of capital gain dividends, provided such
shareholder submits a statement, signed under penalties of perjury, attesting to
such shareholder's exempt status. Different tax consequences apply to a foreign
shareholder engaged in a U.S. trade or business. Foreign shareholders 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
shareholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Shareholders 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 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, payments under the ----- plan for the Portfolios Service Shares
and Premium Shares, brokerage fees and commissions, any portfolio losses, fees
for the registration or qualification of Portfolio shares 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 services and auditing fees and expenses,
B-41
<PAGE>
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 shareholders 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.
The term "majority of the outstanding shares" 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 shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% or the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares 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 the Portfolios'
shareholders for the fiscal year ended November 30, 1997 (the "Annual Report")
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, IL 60606, or by calling Goldman, Sachs toll-free at 800-621-
2550.
B-42
<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 IBCA, 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 that the obligor's capacity to meet its financial
commitment or the obligation is an extremely strong capacity to pay interest and
repay principal. Bonds rated AA by S&P demonstrate that the obligor's capacity
to meet its financial commitment or the obligation is strong, 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
1-A
<PAGE>
to be negligible, being only slightly more than for risk-free U.S. Treasury
debt. Securities rated AA are of high credit quality. 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 capacity for
timely payment of financial commitments, which is unlikely to be affected by
reasonably foreseeable events. AA bonds are considered to be investment grade
and of very high credit quality. These ratings denote a very low expectation of
investment risk and indicate very strong capacity for timely payment of
financial commitments. 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: Strong capacity to
pay principal and interest. Those issues determined to possess very strong
characteristics will be given a plus (+) designation." Municipal notes rated
SP-2 are deemed to have satisfactory capacity to pay principal and interest.
2-A
<PAGE>
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.
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 F1+, F1 and F2. F1+ securities
possess exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment. F1
securities possess very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree than issues
rated F1+. F2 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 F1+ and F1 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 senior debt obligations not having an original maturity in excess of
one year. 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 obligor's capacity to meet its financial
commitment is strong. Those issues for which the obligor's capacity to meet its
financial commitment is extremely strong will be denoted with a plus (+) sign
designation. The A-2 designation indicates that the obligor's capacity to meet
its financial commitment 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 D-1 and D-2. D&P employs
three designations, D-1 plus, D-1 and D-1 minus, within the highest rating
category. D-1 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
3-A
<PAGE>
obligations. D-1 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. D-1 minus 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.
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 institutions. 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
<PAGE>
The
Benchmark Funds
Money
Market
Portfolios
Annual Report
November 30, 1997
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion of Portfolio Performance........................... 2
Voting Results of Special Meeting of Unitholders........................... 3
Statements of Investments
Investment Abbreviations and Notes....................................... 4
Diversified Assets Portfolio............................................. 5
Government Portfolio..................................................... 9
Government Select Portfolio.............................................. 10
Tax-Exempt Portfolio..................................................... 11
Statements of Assets and Liabilities....................................... 16
Statements of Operations................................................... 17
Statements of Changes in Net Assets........................................ 18
Financial Highlights....................................................... 19
Notes to the Financial Statements.......................................... 23
Report of Independent Auditors............................................. 25
</TABLE>
- --------------------------------------------------------------------------------
1
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
BENCHMARK DIVERSIFIED ASSETS PORTFOLIO
BENCHMARK GOVERNMENT PORTFOLIO
BENCHMARK GOVERNMENT SELECT PORTFOLIO
With respect to interest rate changes, the Federal Reserve was fairly quiet
during the fiscal year. The only change came on March 25, 1997, when the Fed
implemented a quarter-point interest rate increase. What had a greater impact
on interest rates was the Asian market crisis, which resulted in economic
instability and the devaluation of currencies throughout the region.
Consequently, there was a flight to quality in the U.S. market, where interest
rates fell consistently and dramatically despite a robust economy. Yield
curves flattened, and in some sectors they inverted.
During the first half of the fiscal year, the government portfolios
maintained average maturities that were short of their peer groups. We shifted
our strategy in the second half, as we extended the portfolios' average
maturities relative to their peer groups. We also implemented a barbell
strategy during the year, whereby shorter-term securities were purchased for
liquidity and longer-term securities were added for their yield advantages.
This strategy also provided a hedge against deflation. We will continue with
this strategy as long as the Federal Reserve maintains a tightening bias.
We did not make many changes in the investment composition of the
Diversified Assets Portfolio during the fiscal year. The heaviest
concentration of securities continues to be in tier one commercial paper,
where there is the greatest yield advantage. At the end of the fiscal year,
the Portfolio's average maturity was 45 days, which remains consistent with
other money market funds with the same investment structure. Providing
liquidity, maintaining a high credit quality and offering an attractive yield
remain the primary goals for the Portfolio.
MARY ANN FLYNN
VALERIE LOKHORST
Portfolio Managers
BENCHMARK TAX-EXEMPT MONEY MARKET PORTFOLIO
The Portfolio continued to benefit from a barbell maturity strategy during
fiscal 1997. Due to our belief that the Federal Reserve would hold interest
rates relatively stable during 1997, we "barbelled" the Portfolio with very
short-term and one-year securities. This enabled us to extend the Portfolio's
average maturity longer than that of its peer group and still keep it
responsive to any change in short-term interest rates. The yield curve in the
short-term tax-exempt market was flat, especially inside of six months. As a
result, the one-year paper added increased yield to the Portfolio.
The short-term, tax-exempt market is a technically driven, cyclical market.
There are certain times of the year (such as tax time, calendar year-end, and
the end of June and the first part of July) when our market has wide swings in
both assets and yields. We have to anticipate these cycles and be able to
manage the volatile swings in assets and yields.
We have shortened the Portfolio's average maturity to a level that is about
equal to that of the Portfolio's peer group. We did this because we believe
that recent economic data point to an increased likelihood of the Federal
Reserve raising interest rates in early 1998. Our current maturity structure
should allow the Portfolio to better respond to any increase in interest
rates.
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. 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.
2
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
VOTING RESULTS OF SPECIAL MEETING OF UNITHOLDERS
At a Special Meeting of Unitholders of the Trust (the "Meeting") called on
September 2, 1997 the following actions were taken:
(1) The following individuals were elected to serve on the Board of Trustees
by the unitholders of all Portfolios of the Trust voting together in the
aggregate:
<TABLE>
<CAPTION>
Number of
Number of Votes
Name of Trustee Votes For Withheld
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Richard G. Cline 4,342,632,239 76,704,013
Edward J. Condon 4,342,191,351 77,144,902
John W. English 4,342,191,351 77,144,902
James J. Gavin, Jr. 4,328,946,859 90,389,394
Sandra P. Guthman 4,342,187,348 77,148,905
Frederick T. Kelsey 4,333,070,647 86,265,606
William H. Springer 4,342,190,200 77,146,053
Richard P. Strubel 4,342,191,351 77,144,902
- ---------------------------------------------------------------------------------------------
</TABLE>
(2) The approval of the selection of Ernst & Young LLP as the Trust's
independent auditors for the fiscal year ending November 30, 1997 was ratified
by all the unitholders of all Portfolios of the Trust voting together in the
aggregate as follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
4,355,519,334 26,510 63,790,409
- ---------------------------------------------------------------------------------------------------
</TABLE>
(3) An Agreement and Plan of Reorganization pursuant to which each Portfolio
will be reorganized as a series of a Delaware business trust also named The
Benchmark Funds was approved by all Portfolios (voting separately on a
Portfolio-by-Portfolio basis) as follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- -------------------------------------------------------
<S> <C> <C> <C>
Diversified Assets 2,169,328,872 18,710,077 66,235,452
Government 771,222,693 2,446,373 14,450,129
Government Select 752,884,534 27,326,299 3,860,430
Tax-Exempt 457,004,195 52,066,122 1,850,666
- -------------------------------------------------------
</TABLE>
(4)(a) A new fundamental investment policy regarding investments in other
investment company securities was approved by each of the Portfolios (voting
separately on a Portfolio-by-Portfolio basis) as follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- -------------------------------------------------------
<S> <C> <C> <C>
Diversified Assets 2,123,578,581 64,486,878 66,208,941
Government 746,076,038 27,593,028 14,450,129
Government Select 709,474,162 66,009,547 8,587,554
Tax-Exempt 494,813,160 14,257,157 1,850,666
- -------------------------------------------------------
</TABLE>
(4)(b) A related amendment to the Trust's Declaration of Trust was approved
by all the unitholders of all Portfolios of the Trust voting together in the
aggregate as follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
4,221,718,223 101,504,918 96,113,107
- -------------------------------------------------------------------------------------------------
</TABLE>
(5) A new fundamental investment restriction for each diversified Portfolio
concerning issuer diversification was approved by each of the Portfolios
(voting separately on a Portfolio-by-Portfolio basis) as follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- -------------------------------------------------------
<S> <C> <C> <C>
Diversified Assets 2,119,251,232 65,501,623 69,521,546
Government 765,905,734 7,763,331 14,450,129
Government Select 777,184,660 3,097,875 3,788,729
Tax-Exempt 458,948,766 51,876,581 95,635
- -------------------------------------------------------
</TABLE>
3
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
INVESTMENT ABBREVIATIONS AND NOTES:
ADP --Automatic Data Processing
AMBAC--American Municipal Bond Assurance Corp.
AMT --Alternative Minimum Tax
BAN --Bond Anticipation Note
BTP --Bankers Trust Partnership
Colld.--Collateralized
CP --Commercial Paper
COP --Certificate of Participation
FGIC --Financial Guaranty Insurance Corp.
FHLB --Federal Home Loan Bank
FNMA --Federal National Mortgage Association
FRN --Floating Rate Note
FSA --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
NA --National Association
P-Floats--Puttable Floating Rate Security
PCR --Pollution Control Revenue
RAN --Revenue Anticipation Note
Soc Gen--Societe Generale
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 or the next
interest reset date for floating rate securities.
. 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.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO
<C> <C> <S> <C>
BANK NOTES--3.9%
Bayerische
Landesbank
$28,000 6.150% 08/14/98 $ 28,058
First National
Bank of Boston
15,000 5.690 04/09/98 15,000
First Wachovia
Bank, North
Carolina
30,000 6.100 04/06/98 29,990
Huntington
National Bank,
Columbus
23,000 5.800 09/22/98 22,985
Key Bank
9,000 5.580 12/15/97 8,981
Morgan Guaranty
Trust Co.
30,000 5.965 06/22/98 29,994
Sun Trust Bank
20,000 5.830 07/14/98 19,993
- ------------------------------------------------------
TOTAL BANK NOTES $ 155,001
- ------------------------------------------------------
CERTIFICATES OF DEPOSIT--11.3%
DOMESTIC DEPOSITORY INSTITUTIONS--3.2%
Bankers Trust New
York Corp.
$50,000 5.880% 07/14/98 $ 49,991
First Tennessee
Bank
38,000 5.550 12/05/97 38,000
24,000 5.580 12/23/97 24,000
Huntington
National Bank,
Columbus
16,000 5.890 09/18/98 15,996
----------
127,987
----------
FOREIGN DEPOSITORY INSTITUTIONS--8.1%
Bank of Tokyo-
Mitsubishi, London
23,000 5.600 12/29/97 23,000
10,000 5.770 12/29/97 9,999
10,000 5.950 02/17/98 10,000
Barclays Bank, New
York
25,000 5.940 06/25/98 24,992
Canadian Imperial
Bank of Commerce,
New York
25,000 5.625 04/07/98 25,000
25,000 5.650 04/07/98 25,000
24,000 5.940 10/21/98 23,989
National
Westminster Bank,
New York
15,000 5.940 06/26/98 14,995
Norinchukin Bank,
New York
40,000 5.570 12/10/97 40,000
Societe Generale,
New York
20,000 5.800 01/13/98 19,998
14,000 5.870 03/03/98 13,999
45,000 5.890 07/17/98 45,004
Sumitomo Bank
Ltd., New York
16,000 5.580 12/09/97 16,000
26,000 5.660 12/15/97 26,000
----------
317,976
- ------------------------------------------------------
TOTAL CERTIFICATES OF DE-
POSIT $ 445,963
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
COMMERCIAL PAPER--52.5%
ASSET-BACKED SECURITIES--24.3%
ABC Funding
$15,000 5.680% 06/01/98 $ 14,569
AESOP Funding
2,800 5.750 01/15/98 2,780
Ascot Capital
Corp.
8,000 5.650 12/22/97 7,974
3,250 5.560 01/15/98 3,227
Amsterdam Funding
18,000 5.540 12/19/97 17,950
Barton Capital
Corp.
9,300 5.600 12/22/97 9,270
20,000 5.750 01/16/98 19,853
15,000 5.750 01/23/98 14,873
Centric Funding
23,000 5.650 12/05/97 22,986
15,000 5.650 12/09/97 14,981
38,420 5.650 12/10/97 38,366
Cooperative
Association of
Tractor Dealers,
Series: A
13,900 5.750 02/19/98 13,722
Corporate
Receivables Corp.
60,000 5.650 12/01/97 60,000
CPI Funding
46,558 5.670 05/26/98 45,267
CXC, Inc.
13,088 5.750 01/16/98 12,992
12,500 5.600 01/27/98 12,389
Galleon Capital
Corp.
7,500 5.570 12/03/97 7,498
8,488 5.670 12/12/97 8,473
Gotham Funding
Corp.
25,000 5.550 12/03/97 24,992
15,914 5.550 12/05/97 15,904
Eureka
Securitization,
Inc.
10,000 5.550 12/18/97 9,974
Lexington Parker
Capital Company
LLC
35,000 5.540 12/01/97 35,000
26,000 5.650 12/16/97 25,939
7,000 5.570 01/30/98 6,935
Pooled Account
Receivable Corp.
7,032 5.670 12/15/97 7,016
25,974 5.620 12/18/97 25,905
Ranger Funding
Corp.
5,500 5.540 12/19/97 5,485
15,000 5.740 02/10/98 14,830
R.O.S.E., Inc.
15,000 5.650 02/05/98 14,845
26,000 5.730 02/27/98 25,636
R.O.S.E., Inc. #2
22,999 5.690 02/04/98 22,763
SALTS (II) Cayman
Islands Corp.
24,000 5.769 12/18/97 24,000
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
<C> <C> <S> <C>
ASSET-BACKED SECURITIES--CONTINUED
SALTS (III) Cayman
Islands Corp.
$ 25,000 6.065% 12/18/97 $ 25,000
70,000 5.944 01/23/98 70,000
Thames Assets
Global
Securitization
23,000 5.800 01/20/98 22,815
20,000 5.750 02/17/98 19,751
30,000 5.780 02/23/98 29,595
9,000 5.750 02/25/98 8,876
Trident Capital
Finance, Inc.
30,000 5.600 01/21/98 29,762
Variable Funding
Capital
7,557 5.700 12/05/97 7,552
15,125 5.650 12/22/97 15,075
70,000 5.750 01/20/98 69,441
16,500 5.730 02/26/98 16,272
WCP Funding, Inc.
10,000 5.750 01/16/98 9,927
Windmill Funding
Corp.
10,000 5.750 01/30/98 9,904
Wood Street
Funding Corp.
5,315 5.550 12/16/97 5,303
20,000 5.600 01/21/98 19,841
14,000 5.600 01/26/98 13,878
----------
959,386
----------
BUSINESS SERVICES--2.2%
Sanwa Business
Credit Corp.
20,000 5.560 12/18/97 19,948
65,000 5.560 12/19/97 64,820
----------
84,768
----------
COMMUNICATIONS--1.7%
MCI Communications
Corp.
7,500 5.600 12/12/97 7,487
23,000 5.650 12/16/97 22,946
22,700 5.610 12/22/97 22,626
12,500 5.820 01/23/98 12,393
----------
65,452
----------
ELECTRIC SERVICES--0.5%
CSW Credit, Inc.
6,003 5.800 01/13/98 5,961
Edison
International
15,000 5.670 12/08/97 14,983
----------
20,944
----------
ELECTRONIC AND OTHER
ELECTRICAL COMPONENTS--0.6%
General Electric
Capital Corp.
24,000 5.700 12/01/97 24,000
----------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------
<C> <C> <S> <C>
FOOD AND KINDRED PRODUCTS--
1.2%
Bass Finance
(C.I.) Ltd.
$ 1,411 5.670% 12/18/97 $ 1,407
Cofco Capital
Corp. (Credit
Suisse LOC)
15,000 5.550 12/03/97 14,995
15,000 5.600 12/19/97 14,958
15,000 5.740 01/28/98 14,861
----------
46,221
----------
FOREIGN DEPOSITORY
INSTITUTIONS--0.8%
Banco Real S.A.,
Grand Cayman
Islands
15,000 5.650 04/16/98 14,680
Nacional
Financiera,
S.N.C.,
Grand Cayman
Islands
15,000 5.700 05/13/98 14,613
----------
29,293
----------
GENERAL MERCHANDISE STORES--0.6%
Sears Roebuck
Acceptance Corp.
25,000 5.550 03/13/98 24,607
----------
INSURANCE CARRIERS--1.7%
AON Corp.
9,000 5.670 12/01/97 9,000
Equitable of Iowa
Cos.
10,000 5.750 01/13/98 9,931
Lincoln National
Corp.
3,250 5.550 01/15/98 3,227
Special Purpose
Accounts
Receivable
30,000 5.750 02/26/98 29,583
Torchmark, Inc.
16,000 5.650 12/08/97 15,982
----------
67,723
----------
MEASURING, ANALYZING AND
CONTROL INSTRUMENTS--2.2%
Xerox Overseas
Holdings
88,000 5.650 12/01/97 88,000
----------
MISCELLANEOUS RETAIL--0.1%
Mont Blanc Capital
3,450 5.700 12/04/97 3,448
----------
NONDEPOSITORY BUSINESS
CREDIT INSTITUTIONS--2.2%
FBA Properties,
Inc. (NationsBank
Georgia LOC)
4,300 5.650 12/10/97 4,294
Finova Capital
Corp.
25,000 5.630 02/18/98 24,691
10,000 5.700 03/12/98 9,840
15,000 5.700 03/16/98 14,751
Heller Financial
34,000 5.650 12/16/97 33,920
----------
87,496
----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
NONDEPOSITORY PERSONAL
CREDIT INSTITUTIONS--2.6%
American General
Finance Corp.
$ 54,500 5.730% 12/01/97 $ 54,500
Countrywide Home
Loans
27,750 5.650 12/05/97 27,733
Green Tree
Financial Corp.
20,000 5.910 01/23/98 19,826
----------
102,059
----------
TRANSPORTATION--10.2%
BMW US Capital
Corp.
15,000 5.550 12/15/97 14,968
Chrysler Financial
Corp.
100,000 5.600 12/22/97 99,673
25,000 5.600 12/23/97 24,914
Ford Credit
Canada, Ltd.
12,000 5.750 02/23/98 11,839
25,000 5.750 02/26/98 24,653
10,000 5.760 03/03/98 9,853
Ford Motor Credit
Corp.
20,000 5.700 12/01/97 20,000
General Motors
Acceptance Corp.
10,000 5.550 12/04/97 9,995
15,000 5.540 12/11/97 14,977
20,000 5.690 02/10/98 19,776
50,000 5.780 02/19/98 49,358
15,000 5.650 03/05/98 14,779
10,000 5.590 03/12/98 9,843
25,000 5.580 03/31/98 24,535
10,000 5.660 04/15/98 9,788
15,000 5.740 04/15/98 14,677
6,000 5.670 04/16/98 5,871
Mitsubishi Motors
Credit of America,
Inc.
21,000 5.750 12/18/97 20,943
----------
400,442
----------
WATER SERVICES--0.2%
Browning Ferris
Industries
10,000 5.600 12/18/97 9,974
----------
WHOLESALE TRADE-DURABLE
GOODS--1.4%
Newell Co.
31,000 5.600 12/05/97 30,981
Sinochem American
Holdings, Inc.
25,000 5.750 12/05/97 24,984
----------
55,965
- -----------------------------------------
TOTAL COMMERCIAL PAPER $2,069,778
- -----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------
<C> <C> <S> <C>
CORPORATE NOTES--6.2%
Associates Corp.
NA
$ 50,000 5.600% 03/02/98 $ 49,991
Beta Finance
10,000 6.000 10/27/98 10,000
CIT Group Holdings
20,000 6.750 04/30/98 20,065
Crozer Keystone
Health System
7,600 5.730 12/03/97 7,600
General Electric
Engine Receivables
1995-1 Trust FRN
17,374 5.600 12/01/97 17,374
General Electric
Engine Receivables
1996-1 Trust
34,732 5.678 12/01/97 34,732
Key Bank NA
25,000 6.190 04/13/98 24,995
Key Bank NA FRN
51,000 5.515 03/19/98 51,000
Morgan Stanley
Trust Certificates
1996-2
27,904 5.725 12/23/97 27,905
- -----------------------------------------
TOTAL CORPORATE NOTES $ 243,662
- -----------------------------------------
EURODOLLAR TIME DEPOSITS--
9.4%
Banque Brussels
Lambert, Grand
Cayman Islands
$ 50,000 5.750% 12/01/97 $ 50,000
Banque Paribas,
Grand Cayman
Islands
70,000 5.688 12/01/97 70,000
Bayerische
Landesbank
Girozentrale,
London
2,000 5.750 12/29/97 2,000
Berliner Handels
Und Frankfurter,
Grand Cayman
Islands
50,000 5.688 12/01/97 50,000
Den Danske Bank,
Grand Cayman
Islands
75,000 5.563 12/01/97 75,000
Kredietbank, Grand
Cayman Islands
125,000 5.688 12/01/97 125,000
- -----------------------------------------
TOTAL EURODOLLAR TIME DEPOS-
ITS $ 372,000
- -----------------------------------------
GUARANTEED INVESTMENT CON-
TRACTS--3.2%
General American
Life Insurance Co.
FRN
$ 75,000 5.850% 12/23/97 $ 75,000
Integrity Life
Insurance Co. FRN
15,000 5.950 01/01/98 15,000
Transamerica Life
Insurance and
Annuity Co. FRN
35,000 5.641 12/01/97 35,000
- -----------------------------------------
TOTAL GUARANTEED INVESTMENT
CONTRACTS $ 125,000
- -----------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
<C> <C> <S> <C>
MUNICIPAL INVESTMENTS--5.2%
City of
Minneapolis-St.
Paul (Minnesota)
Metro Airport GO
Bond
$ 28,930 5.756% 12/01/97 $ 28,930
City of Seattle
(Washington) Ltd.
GO Bond, Series C
46,525 5.667 12/03/97 46,525
County of Kern
(California)
Pension Obligation
18,000 5.828 12/01/97 18,000
County of Los
Angeles
(California)
Pension Obligation
40,000 5.880 12/04/97 40,000
County of Sonoma
(California)
Pension Obligation
22,800 5.980 12/01/97 22,800
Health Insurance
Plan of Greater
New York
23,500 5.650 12/03/97 23,500
State of New
Jersey Economic
Development
Authority
25,000 5.728 12/03/97 25,000
- -----------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $ 204,755
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCY--0.9%
FHLB DISCOUNT NOTE
$ 35,194 5.600% 12/01/97 $ 35,194
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY $ 35,194
- -----------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--
0.3%
U.S. TREASURY BILL
$ 10,000 5.135% 09/17/98 $ 9,586
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATION $ 9,586
- -----------------------------------------------------------
REPURCHASE AGREEMENTS--8.9%
REPURCHASE AGREEMENTS--7.6%
HSBC Securities,
Inc., Dated
11/28/97,
Repurchase Price
$100,048
(U.S. Government
Securities Colld.)
$100,000 5.720% 12/01/97 $ 100,000
Merrill Lynch
Government
Securities, Inc.,
Dated 11/28/97,
Repurchase Price
$200,093 (U.S.
Government
Securities Colld.)
200,000 5.600 12/01/97 200,000
----------
300,000
----------
JOINT REPURCHASE AGREEMENT--1.3%
UBS Securities,
Inc., Dated
08/29/97
(U.S. Government
Securities Colld.)
Accrued Interest
$146
50,000 5.690 12/01/97 50,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 350,000
- -----------------------------------------------------------
TOTAL INVESTMENTS--101.8% $4,010,939
- -----------------------------------------------------------
Liabilities, less other
assets--(1.8)% (69,353)
- -----------------------------------------------------------
NET ASSETS--100.0% $3,941,586
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- --------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------
GOVERNMENT PORTFOLIO
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--57.2%
FHLB DISCOUNT NOTES--30.5%
$ 95,895 5.332% 12/01/97 $ 95,895
50,000 5.352 12/01/97 50,000
75,000 5.402 12/01/97 75,000
100,000 5.553 12/01/97 100,000
----------
320,895
----------
FHLB MEDIUM TERM NOTES--18.5%
67,000 5.720 07/07/98 66,979
82,000 5.715 07/21/98 81,986
17,500 5.710 10/01/98 17,502
7,765 5.690 10/02/98 7,760
10,230 5.792 10/23/98 10,234
10,000 5.775 10/30/98 9,999
----------
194,460
----------
FANNIE MAE MEDIUM TERM NOTE--0.5%
5,000 5.630 08/14/98 4,992
----------
OVERSEAS PRIVATE INVESTMENT CORP. FRN--
4.3%
45,800 5.660 12/03/97 45,800
----------
SLM HOLDING CORP. MEDIUM TERM NOTES--3.4%
12,000 5.630 08/06/98 11,992
6,000 5.600 08/11/98 5,990
4,475 5.790 09/16/98 4,478
13,000 5.720 11/20/98 12,993
----------
35,453
- --------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $ 601,600
- --------------------------------------------------
U.S. GOVERNMENT OBLIGATION--1.0%
U.S. TREASURY NOTE--1.0%
$ 10,000 7.250% 02/15/98 $ 10,033
- --------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATION $ 10,033
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS--42.8%
REPURCHASE AGREEMENTS--38.0%
Donaldson, Lufkin,
& Jenrette
Securities, Inc.,
Dated 11/28/97,
Repurchase Price
$100,047 (U.S.
Government
Securities Colld.)
$100,000 5.625% 12/01/97 $ 100,000
HSBC Securities,
Inc., Dated
11/28/97,
Repurchase Price
$200,095 (U.S.
Government
Securities Colld.)
200,000 5.720 12/01/97 200,000
SBC Capital
Markets, Dated
11/28/97,
Repurchase Price
$100,047 (U.S.
Government
Securities Colld.)
100,000 5.680 12/01/97 100,000
----------
400,000
----------
JOINT REPURCHASE AGREEMENT--4.8%
UBS Securities,
Inc., Dated
08/29/97,
(U.S. Government
Securities Colld.)
Accrued Interest
$134
50,000 5.690 12/01/97 50,000
- ------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 450,000
- ------------------------------------------
TOTAL INVESTMENTS--101.0% $1,061,633
- ------------------------------------------
Liabilities, less other
assets--(1.0)% (10,232)
- ------------------------------------------
NET ASSETS--100.0% $1,051,401
- ------------------------------------------
- ------------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------
GOVERNMENT SELECT PORTFOLIO
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES--100.3%
FEDERAL FARM CREDIT BANK--0.6%
$ 7,000 5.750% 07/01/98 $ 6,994
----------
FEDERAL FARM CREDIT BANK DISCOUNT
NOTES--6.5%
28,000 5.463 12/15/97 27,941
53,000 5.457 12/17/97 52,872
----------
80,813
----------
FHLB--14.9%
64,000 5.720 07/07/98 63,980
54,000 5.715 07/21/98 53,992
11,150 5.710 10/01/98 11,151
8,340 5.690 10/02/98 8,334
22,875 5.700 10/23/98 22,862
24,000 5.775 10/30/98 23,998
----------
184,317
----------
FHLB DISCOUNT NOTES--60.5%
4,105 5.332 12/01/97 4,105
193,798 5.603 12/01/97 193,798
39,000 5.442 12/10/97 38,947
58,050 5.452 12/10/97 57,971
144,500 5.461 12/12/97 144,260
50,000 5.463 12/12/97 49,917
141,750 5.493 12/17/97 141,406
38,000 5.503 12/01/97 37,908
23,184 5.474 12/18/97 23,124
54,000 5.492 12/19/97 53,852
4,500 5.502 02/02/98 4,459
----------
749,747
----------
SLM HOLDING CORP.--4.8%
10,000 5.535 02/25/98 9,999
17,000 6.080 08/11/98 16,970
17,000 5.820 09/16/98 17,008
15,500 5.720 11/20/98 15,492
----------
59,469
----------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------
Principal
Amount/ Maturity Amortized
Shares Rate Date Cost
- -------------------------------------------------------------------
<C> <S> <C> <C>
SLM HOLDING CORP. DISCOUNT NOTES--13.0%
$46,600 5.444% 12/17/97 $ 46,488
77,000 5.455 12/18/97 76,803
38,000 5.468 12/22/97 37,879
----------
161,170
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $1,242,510
- -------------------------------------------------------------------
OTHER INVESTMENT--0.0%
Dreyfus Treasury Prime Cash Management,
Class A
594 -- -- $ 594
- -------------------------------------------------------------------
TOTAL OTHER INVESTMENT $ 594
- -------------------------------------------------------------------
TOTAL INVESTMENTS--100.3% $1,243,104
- -------------------------------------------------------------------
Liabilities, less other assets--(0.3)% (3,711)
- -------------------------------------------------------------------
NET ASSETS--100.0% $1,239,393
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
MUNICIPAL INVESTMENTS--93.4%
ALABAMA--0.2%
City of Greenville IDR VRDN,
Series 1992, Allied-Signal
Project (FMC Corp. Gtd.)
<S> <C> <C> <C>
$ 1,350 4.000% 12/07/97 $ 1,350
--------
ALASKA--0.7%
Alaska Housing Finance Corp.
VRDN, Series 1994, Merrill P-
Floats, PT-37 (FNMA Securities
Colld.)
3,900 3.950 12/01/97 3,900
--------
ARKANSAS--0.1%
County of Jefferson PCR Bond,
Arkansas Electric Coop. Corp.
Project D (National Rural
Utility Coop. Finance Co. Gtd.)
560 3.850 03/01/98 560
--------
CALIFORNIA--8.5%
City of Freemont Unified School
District TRAN, Series 1997
4,600 4.250 06/30/98 4,609
City of San Marcos Public
Facilities Authority, Series
BTP-188, Civic Center Project
(U.S. Government Securities
Colld.)
7,961 3.950 03/30/98 7,961
County of Irvine Ranch Water
District, Series 1993 B,
Districts 2, 102, 103, & 206
(Morgan Guaranty Trust Co. LOC)
6,000 3.600 12/01/97 6,000
County of Los Angeles TRAN,
Series A
5,000 4.500 06/30/98 5,018
County of Riverside TRAN, Series
A
5,000 4.500 06/30/98 5,015
County of Sacramento Multifamily
Housing Revenue VRDN, Series
1985 C (Dai-Ichi Kangyo Bank
LOC)
200 3.900 12/07/97 200
State of California RAN, Series
1997 B
21,000 4.150 12/01/97 21,000
--------
49,803
--------
DISTRICT OF COLUMBIA--0.4%
District of Columbia VRDN,
Series A, Columbia Hospital for
Women Project (Bank of Tokyo-
Mitsubishi LOC)
2,800 4.250 12/07/97 2,800
--------
FLORIDA--7.9%
County of Alachua Health
Facilities Authority, Academic
Research Building Project
(Barnett Bank LOC)
2,550 3.900 02/09/98 2,550
County of Broward Housing
Finance Authority Revenue VRDN
Sanctuary Park Apts Multifamily
Project (PNC LOC)
1,660 3.900 12/01/97 1,660
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
County of Dade School District
GO VRDN, Series 1994 BTP-66
(MBIA Insured)
<S> <C> <C> <C>
$ 5,535 4.050% 12/07/97 $ 5,535
County of Dade Solid Waste
System Revenue Bond BAN
5,000 4.750 09/01/98 5,019
County of Orange Health
Facilities Authority VRDN,
Mayflower Retirement Community
Project (Rabobank Group LOC)
2,000 4.000 12/07/97 2,000
County of Orange Housing Finance
Authority VRDN, Citicorp Eagle
Trust Series 1987-A
(GNMA Securities Colld.)
5,000 3.990 12/07/97 5,000
Florida State Board of Education
Capital Outlay Board VRDN,
Series B, BTP-52 ADP
5,000 4.050 12/07/97 5,000
Florida State Board of Education
VRDN, Series 1994 E, Eagle
Trust No. 940901
15,500 4.040 12/07/97 15,500
Florida State Board of Education
VRDN, Series 1991 B, BTP 233
(U.S. Govt Secs. Colld.)
4,000 3.800 12/08/97 4,000
--------
46,264
--------
GEORGIA--5.8%
County of Appling Development
Authority PCR VRDN, Georgia
Power Co. Plant Hatch Project
1997 (Georgia Power Gtd.)
1,500 3.850 12/01/97 1,500
County of DeKalb Development
Authority PCR VRDN, Series
1987, General Motors Project
(General Motors Corp. Gtd.)
2,000 3.950 12/07/97 2,000
County of Elbvert Development
Authority IDR VRDN, Series
1992, Allied-Signal Project
(FMC Corp. Gtd.)
2,430 4.000 12/07/97 2,430
County of Fulton Development
Authority IDR VRDN, General
Motors Project (General Motors
Corp. Gtd.)
2,100 3.950 12/07/97 2,100
County of Fulton Resident
Elderly Authority VRDN, St.
Anne's Terrace Project
(NationsBank South LOC)
2,600 4.050 12/07/97 2,600
County of Heard Development
Authority PCR VRDN, Georgia
Power Co. Plant Wansley Project
1997 (Georgia Power Co. Gtd.)
1,200 3.850 12/01/97 1,200
Metro Atlanta Rapid Transit
Authority Revenue VRDN, Series
A, BTP-58 (AMBAC Insured)
5,965 4.050 12/07/97 5,965
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
GEORGIA--Continued
State of Georgia GO VRDN,
Series 1993 F, BTP-82A
<S> <C> <C> <C>
$ 9,900 3.800% 01/14/98 $ 9,900
State of Georgia GO VRDN,
Series 1994 D, BTP-100
6,035 3.800 01/14/98 6,035
--------
33,730
--------
ILLINOIS--7.8%
City of Arlington Heights
Multifamily Housing VRDN,
Series 1997, Dunton Tower
Apartments Project (Heller
Financial LOC)
2,820 4.500 12/07/97 2,820
City of Chicago Board of
Education VRDN, BTP-239,
(AMBAC Insured)
9,320 4.150 04/08/98 9,320
City of Naperville IDR VRDN,
General Motors Project
(General Motors Corp. Gtd.)
1,480 3.950 12/07/97 1,480
City of Peoria IDR VRDN, Series
1997, Peoria Production Shop
Project (Bank One LOC)
3,000 4.050 12/07/97 3,000
Illinois Educational Facilities
Authority VRDN, Series 1995 A,
Lifelink Corp. Obligated Group
(American National Bank &
Trust LOC)
2,900 3.950 12/07/97 2,900
Illinois Educational Facilities
Authority VRDN, Series 1996,
The Art Institute of Chicago
Project
1,300 3.900 12/07/97 1,300
Illinois HDA TOB, Series 1987
B, Residential Mortgage
Program
1,520 3.750 02/01/98 1,520
Illinois HDA TOB, Series 1987
C, Residential Mortgage
Program
2,945 3.750 02/01/98 2,945
Illinois Health Facilities
Authority VRDN, Series 1995,
Healthcor Project (Fuji Bank
LOC)
5,950 4.450 12/07/97 5,950
Illinois Health Facilities
Authority CP, Series 1991,
Victory Health System Project
(FNB Chicago LOC)
4,400 3.750 01/30/98 4,400
Illinois Metropolitan Pier and
Exposition Authority Dedicated
Sales Tax Revenue, BTP-230 A
(U.S. Government Securities
Colld.)
10,000 3.820 01/28/98 10,000
--------
45,635
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
INDIANA--1.3%
City of Hammond Local Public
Improvement Bond, Series A-2
Advanced Funding Program
<S> <C> <C> <C>
$ 5,000 4.200% 01/08/98 $ 5,003
Indiana Health Facilities
Financial Authority Hospital
Revenue, Series E, Charity
Obligated Group
2,500 3.800 12/07/97 2,500
--------
7,503
--------
KANSAS--1.0%
City of LaCygne Environmental
Revenue VRDN, Series 1994 A
Kansas City Power & Light
Project (Kansas City Power &
Light Gtd.)
2,082 3.950 12/07/97 2,082
City of Topeka Temporary Notes,
Series A
3,800 4.000 07/15/98 3,802
--------
5,884
--------
KENTUCKY--2.5%
City of Danville Lease Revenue
CP, Municipal Pooled Lease
Program (PNC Bank LOC)
3,000 3.900 02/10/98 3,000
City of Mayfield Lease Revenue
VRDN, Series 1996, Kentucky
League of Cities Pooled
Project (PNC Bank LOC)
1,700 4.150 12/07/97 1,700
Kentucky Interlocal School
Transportation Association
TRAN
10,000 4.090 06/30/98 10,002
--------
14,702
--------
LOUISIANA--2.3%
Louisiana Public Facilities
Authority PCR VRDN, Series
1992 Allied-Signal Project
(FMC Corp. Gtd.)
7,915 4.000 12/07/97 7,915
Parish of Caddo IDR VRDN,
General Motors Project
(General Motors Corp. Gtd.)
3,800 3.950 12/07/97 3,800
Parish of West Baton Rouge
District #3 PCR CP, Dow
Chemical Project (Dow Chemical
Gtd.)
1,900 3.750 12/10/97 1,900
--------
13,615
--------
MARYLAND--2.6%
City of Baltimore IDA VRDN,
Series 1986, Capital
Acquisition Program (Dai-Ichi
Kangyo Bank LOC)
7,300 4.250 12/07/97 7,300
Maryland State Community
Development Administration,
Series 1993, PT-12, Merrill P-
Floats (Maryland Community
Development Authority)
3,899 3.950 12/01/97 3,899
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
Maryland State Economic
Development Authority VRDN,
Series 1995 (NationsBank LOC)
<S> <C> <C> <C>
$ 2,400 4.050% 12/07/97 $ 2,400
Maryland State Health & Higher
Education Facilities Authority
VRDN, Series A, Helix Health,
Inc. (NationsBank LOC)
1,660 4.050 12/07/97 1,660
--------
15,259
--------
MASSACHUSETTS--1.0%
Massachusetts Municipal
Electric Co. VRDN,
Series 1994 B, BTP-67 (MBIA
Insured)
5,760 4.050 12/07/97 5,760
--------
MICHIGAN--1.5%
City of Detroit School District
State School Aid Notes, Series
1997 (Detroit School District
Gtd.)
3,000 4.500 05/01/98 3,007
Michigan State Strategic Fund
IDR VRDN, Allied-Signal
Project (FMC Corp. Gtd.)
2,500 3.950 12/07/97 2,500
State of Michigan TRAN, Series
1997 B
3,000 4.500 07/02/98 3,011
--------
8,518
--------
MINNESOTA--0.4%
City of St. Paul HDA VRDN,
Series A, Science Museum of
Minnesota Project (US Bank NA
LOC)
2,300 3.850 12/07/97 2,300
--------
MISSISSIPPI--0.3%
County of Perry PCR VRDN,
Series 1992, Leaf River Forest
Project (Wachovia Bank LOC)
1,800 3.900 12/01/97 1,800
--------
MISSOURI--2.3%
City of St. Louis TRAN, Series
1997
5,400 4.500 06/30/98 5,420
County of St. Louis IDA VRDN,
Friendship Village West
Community Project (LaSalle
National Bank LOC)
2,600 4.000 12/07/97 2,600
County of St. Louis IDA VRDN,
Merrill P-Floats, Series PA-
120, South Point Apartments
Project (Rabobank Group LOC)
2,975 4.100 12/07/97 2,975
Missouri Higher Education Loan
Authority VRDN, Series 1990 A
(National Westminster Bank
LOC)
2,800 4.000 12/07/97 2,800
--------
13,795
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
NEVADA--1.5%
County of Clark School District
GO VRDN, Citicorp Eagle Trust
No. 962804 (FGIC Insured)
<S> <C> <C> <C>
$ 2,900 3.990% 12/07/97 $ 2,900
State of Nevada GO VRDN, Series
1997 SGB31 (FGIC Insured)
5,800 4.000 12/07/97 5,800
--------
8,700
--------
NEW YORK--5.1%
City of New York GO, Series
1992 A, Citicorp TOB CR-16
(FSA Insured)
10,100 3.800 02/15/98 10,100
City of New York RAN, Series 26
LB Trust Receipts (Societe
Generale LOC)
7,100 4.150 12/01/97 7,100
City of New York Municipal
Water Finance Authority VRDN
(MBIA Insured)
3,800 3.940 12/07/97 3,800
Marine Midland Premium Loan
Trust VRDN COP, Series 1991 B
(Hong Kong & Shanghai Banking
Corp. LOC)
1,381 4.050 12/07/97 1,381
New York State Environment
Facilities Corp. PCR VRDN,
Eagle Trust No. 943204 (FSA
Insured)
5,800 3.990 12/07/97 5,800
Pooled VRDN P-Floats, Series
PPT2
1,515 4.000 12/01/97 1,515
--------
29,696
--------
NORTH CAROLINA--0.8%
County of Buncombe PCR IDR
VRDN, Series 1996, Cooper
Industries, Inc. Project
(Cooper Industries Gtd.)
3,200 4.050 12/07/97 3,200
County of Wake Industrial
Pollution Finance Authority
PCR VRDN, Series 1985 C,
Carolina Power & Light Project
(Sumitomo Bank Ltd. LOC)
1,400 4.350 12/07/97 1,400
--------
4,600
--------
OHIO--5.3%
County of Cuyahoga Hospital
VRDN, Series C, The Cleveland
Clinic Project (Bank of
America LOC)
1,000 3.850 12/07/97 1,000
Red Roof Inns Mortgage Bond
Trust VRDN (National City Bank
LOC)
3,339 3.900 12/15/97 3,339
State of Ohio Air Quality
Development Authority CP,
Series A, Pollution Control-
Duquesne Electric Project
(Union Bank of Switzerland
LOC)
4,000 3.950 07/10/98 4,000
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
OHIO--Continued
State of Ohio Environmental
Improvement Authority PCR VRDN
Series 1986, USX Corp. Project
(Sanwa Bank LOC)
<S> <C> <C> <C>
$ 6,000 4.200% 12/07/97 $ 6,000
State of Ohio Higher Education
Capital Facilities VRDN,
Series 1990 A, BTP-29 (MBIA
Insured)
3,000 4.000 12/07/97 3,000
State of Ohio Higher Education
Capital Facilities VRDN,
Series 1994 A, BTP-69 (AMBAC
Insured)
8,545 4.050 12/07/97 8,545
State of Ohio Water Development
Authority PCR VRDN, Phillip
Morris Cos. Project (Phillip
Morris Companies, Inc. LOC)
5,000 4.000 12/07/97 5,000
--------
30,884
--------
OKLAHOMA--3.0%
City of Tulsa Airports
Improvement VRDN, Series B-2
(MBIA Insured)
9,390 3.990 12/07/97 9,390
State of Oklahoma Water
Resources Board, Series 1994
A, State Loan Program
8,000 3.750 03/02/98 8,000
--------
17,390
--------
OREGON--0.9%
City of Portland Sewer System,
Series A (FGIC Insured)
5,400 4.000 12/07/97 5,400
--------
PENNSYLVANIA--4.6%
City of Philadelphia Authority
IDR, Series 1988, Franklin
Institute Project (PNC Bank
LOC)
2,800 4.000 12/07/97 2,800
City of Philadelphia School
District TRAN
(Commerzbank LOC)
10,000 4.500 06/30/98 10,031
County of Allegheny Hospital
Development Authority VRDN,
Series B-2, Presbyterian
University Hospital Project
(PNC Bank LOC)
1,000 3.850 12/01/97 1,000
County of Allegheny IDA VRDN,
Series A, Sewickley Academy
Project (PNC Bank LOC)
3,000 4.050 12/07/97 3,000
County of Luzerne TRAN, Series
1997
4,500 3.840 12/31/97 4,500
County of Warren Hospital
Authority VRDN, Series 1994 B
(PNC Bank LOC)
1,000 4.000 12/07/97 1,000
County of Washington Hospital
Authority VRDN,
Series B1-D, Eye and Ear
Hospital (PNC Bank LOC)
1,025 3.850 12/01/97 1,025
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
County of Washington Hospital
Authority VRDN,
Series B1-E, Eye & Ear
Hospital (PNC Bank LOC)
<S> <C> <C> <C>
$ 850 3.850% 12/01/97 $ 850
State of Pennsylvania Higher
Education Facilities Authority
Series I (AMBAC Insured)
3,000 4.500 11/01/98 3,017
--------
27,223
--------
SOUTH CAROLINA--0.9%
County of Lexington IDR VRDN,
Series 1992, Allied-Signal
Project (FMC Corp. Gtd.)
800 4.000 12/07/97 800
County of Lexington IDR VRDN,
Series 1992 A,
Allied-Signal Project (FMC
Corp. Gtd.)
1,880 4.000 12/07/97 1,880
University of South Carolina
Athletics Facility Revenue BAN
2,550 4.000 02/26/98 2,552
--------
5,232
--------
TENNESSEE--2.4%
City of Memphis GO VRDN, Series
1996 Soc Gen
Series SGB-23
5,000 4.000 12/07/97 5,000
County of Montgomery Public
Building Authority Adjustable
Loan Pool, Series 1996
(NationsBank LOC)
4,960 4.050 12/07/97 4,960
County of Shelby GO, Series B,
BTP-216
4,000 3.900 01/15/98 4,000
--------
13,960
--------
TEXAS--10.1%
City of Austin School District
Building and Refunding VRDN,
Series ML SG, Series SG-68
(Permanent School Fund of
Texas Gtd.)
4,900 4.050 12/07/97 4,900
City of Bastrop Independent
School District GO VRDN,
Series 1997, Series SGB 37
(Permanent School Fund of
Texas Gtd.)
6,500 4.000 12/07/97 6,500
City of Dallas-Ft Worth Airport
Revenue Refunding VRDN, Series
1995 SG, Series SGB-5 (FGIC
Insured)
6,600 4.000 12/07/97 6,600
City of Denton Independent
School District GO, Series B
(Permanent School Fund of
Texas Gtd.)
6,000 3.900 08/15/98 6,000
City of North Harris Montgomery
Community College GO, Series
1997 (FGIC Insured)
5,000 3.890 01/15/98 5,001
City of San Antonio Electric
and Gas System Revenue,
Series ML SG, Series SG-105
10,000 4.050 12/07/97 10,000
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------------------------------------------------
Principal Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
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 4.000% 12/07/97 $ 2,600
County of Harris Toll Road
Unlimited Tax Revenue VRDN,
Series 1994 A, Citicorp Eagle
Trust No. 954302
5,500 4.040 12/07/97 5,500
Port Development Corp. Marine
Terminal IDR CP, Series 1985
A, Mitsui & Co. Project
(Industrial Bank of Japan LOC)
7,250 3.800 12/08/97 7,250
State of Texas TRAN, Series
1997 A
5,000 4.750 08/31/98 5,033
--------
59,384
--------
VIRGINIA--6.4%
City of Norfolk GO VRDN, Eagle
Trust No. 944601
14,800 4.040 12/07/97 14,800
City of Richmond Redevelopment
and Housing Authority VRDN,
Series 1995 A, Old Manchester
Project (Wachovia Bank of
North Carolina LOC)
2,000 4.050 12/07/97 2,000
State of Virginia GO VRDN,
Series 1994, Citicorp Eagle
Trust No. 954601
7,000 4.040 12/07/97 7,000
State of Virginia Public School
Authority Revenue Bond
7,565 4.100 04/01/98 7,571
Town of Louisa IDA VRDN, Series
1995 (NationsBank LOC)
1,400 4.050 12/07/97 1,400
Town of Louisa PCR CP, Series
1987 (Virginia Electric Power
Co. Gtd.)
4,700 3.900 02/10/98 4,700
--------
37,471
--------
WASHINGTON--3.5%
City of Kent Economic
Development Corp. IDR VRDN,
Associated Grocers Project
(Bank of America LOC)
3,800 4.776 12/07/97 3,800
Port of Anacortes IDA IDR CP,
Texaco Project (Texaco, Inc.
Gtd.)
9,500 3.750 12/03/97 9,500
Washington State GO VRDN,
Smith-Barney Soc Gen, Series
1993 B, SGB-13
6,950 4.000 12/07/97 6,950
--------
20,250
--------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------------------------------------------------
Principal
Amount/ Maturity Amortized
Shares Rate Date Cost/Value
- -------------------------------------------------------------------------------------------------
WISCONSIN--1.9%
City of Delavan Darien School
District BAN
<S> <C> <C> <C>
$ 3,595 4.150% 04/15/98 $ 3,598
City of Madison GO, Series A
2,200 5.000 05/01/98 2,209
City of Milwaukee RAN, Series A
5,600 4.250 02/19/98 5,607
--------
11,414
--------
WYOMING--0.4%
City of Green River PCR VRDN
Allied-Signal Project (FMC
Corp. Gtd.)
2,225 4.000 12/07/97 2,225
- -------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $547,007
- -------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--0.9%
AIM Tax Free Money Market Fund
105 -- -- $ 105
Dreyfus Tax Exempt Cash
Management Fund
400 -- -- 400
Federated Tax-Free Trust Money
Market Fund #15
3,312 -- -- 3,312
Federated Tax-Free Trust Money
Market Fund #73
819 -- -- 819
Provident Municipal Fund
437 -- -- 437
</TABLE>
- --------------------------------------------------------------------------------
TOTAL OTHER INVESTMENTS $ 5,073
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS--94.3% $552,080
- --------------------------------------------------------------------------------
Other assets, less liabilities--5.7% 33,079
- --------------------------------------------------------------------------------
NET ASSETS--100.0% $585,159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1997
(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 $3,660,939 $ 611,633 $1,243,104 $552,080
Repurchase agreements, at cost 350,000 450,000 -- --
Cash 1 -- -- --
Receivables:
Interest 18,948 4,933 3,865 6,550
Fund units sold 298,254 23,280 9,016 24,442
Investment securities sold -- -- -- 11,025
Administrator 107 24 90 23
Other assets 49 31 15 14
- -------------------------------------------------------------------------------
TOTAL ASSETS 4,328,298 1,089,901 1,256,090 594,134
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 368,806 33,418 10,893 6,948
Distributions to unitholders 16,646 4,734 5,495 1,795
Accrued expenses:
Advisory fees 771 224 102 127
Administration fees 308 89 102 51
Custodian fees 35 11 12 7
Transfer agent fees 3 1 -- 1
Other liabilities 143 23 93 46
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 386,712 38,500 16,697 8,975
- -------------------------------------------------------------------------------
NET ASSETS $3,941,586 $1,051,401 $1,239,393 $585,159
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $3,942,953 $1,051,494 $1,239,391 $584,991
Accumulated net realized gains
(losses) on investment transac-
tions (1,367) (93) 2 168
- -------------------------------------------------------------------------------
NET ASSETS $3,941,586 $1,051,401 $1,239,393 $585,159
- -------------------------------------------------------------------------------
Total units outstanding (no par
value), unlimited units autho-
rized 3,942,953 1,051,494 1,239,391 584,991
- -------------------------------------------------------------------------------
Net asset value, offering and
redemption price per unit $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, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $202,224 $71,708 $56,010 $25,872
- ------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 8,945 3,243 2,546 1,731
Administration fees 3,082 1,208 1,048 749
Custodian fees 412 140 98 101
Professional fees 136 46 38 47
Transfer agent fees 127 35 30 22
Registration fees 103 50 101 26
Trustee fees and expenses 80 30 23 22
Other 141 59 47 37
- ------------------------------------------------------------------------------
TOTAL EXPENSES 13,026 4,811 3,931 2,735
Less: Voluntary waivers of in-
vestment advisory fees -- -- (1,528) --
Less: Expenses reimbursable by
Administrator (478) (263) (360) (306)
- ------------------------------------------------------------------------------
Net expenses 12,548 4,548 2,043 2,429
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 189,676 67,160 53,967 23,443
Net realized gains on investment
transactions 207 212 78 27
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RE-
SULTING FROM OPERATIONS $189,883 $67,372 $54,045 $23,470
- ------------------------------------------------------------------------------
</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, 1997 and 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Assets
Portfolio Government Portfolio
------------------------ ------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $189,676 $162,308 $67,160 $53,208
Net realized gains on
investment transactions 207 327 212 133
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 189,883 162,635 67,372 53,341
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS:
Net investment income (189,676) (162,308) (67,160) (53,208)
- -------------------------------------------------------------------------------
Total distributions to
unitholders (189,676) (162,308) (67,160) (53,208)
- -------------------------------------------------------------------------------
UNIT TRANSACTIONS (AT
$1.00 PER UNIT):
Proceeds from the sale of
units 49,976,344 42,285,142 16,517,258 12,329,359
Reinvested distributions 2,169 860 580 --
Cost of units redeemed (49,216,663) (41,717,147) (16,735,164) (11,911,641)
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
unit transactions 761,850 568,855 (217,326) 417,718
- -------------------------------------------------------------------------------
Net increase (decrease) 762,057 569,182 (217,114) 417,851
Net assets--beginning of
year 3,179,529 2,610,347 1,268,515 850,664
- -------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $3,941,586 $3,179,529 $1,051,401 $1,268,515
- -------------------------------------------------------------------------------
<CAPTION>
Government Select
Portfolio Tax-Exempt Portfolio
------------------------ ------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $53,967 $40,087 $23,443 $25,061
Net realized gains on
investment transactions 78 97 27 102
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 54,045 40,184 23,470 25,163
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS:
Net investment income (53,967) (40,087) (23,443) (25,061)
- -------------------------------------------------------------------------------
Total distributions to
unitholders (53,967) (40,087) (23,443) (25,061)
- -------------------------------------------------------------------------------
UNIT TRANSACTIONS (AT
$1.00 PER UNIT):
Proceeds from the sale of
units 6,143,005 4,712,236 5,626,217 5,526,968
Reinvested distributions 4,952 963 172 126
Cost of units redeemed (5,744,991) (4,562,089) (5,679,764) (5,692,419)
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
unit transactions 402,966 151,110 (53,375) (165,325)
- -------------------------------------------------------------------------------
Net increase (decrease) 403,044 151,207 (53,348) (165,223)
Net assets--beginning of
year 836,349 685,142 638,507 803,730
- -------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $1,239,393 $836,349 $585,159 $638,507
- -------------------------------------------------------------------------------
</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>
1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM IN-
VESTMENT OPERA-
TIONS:
Net investment
income 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment
income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.42% 5.30% 5.78%(b) 3.92% 3.00% 3.80% 6.19% 8.01% 8.98%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.35% 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35% 0.37%
Expenses, before
waivers and re-
imbursements 0.36% 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36% 0.37%
Net investment
income, net of
waivers and
reimbursements 5.30% 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01% 8.98%
Net investment
income, before
waivers and
reimbursements 5.29% 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00% 8.98%
Net assets at end
of year (in thou-
sands) $3,941,586 $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756 $1,871,713
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00
INCOME FROM IN-
VESTMENT OPERA-
TIONS:
Net investment
income 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment
income (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 7.15%
Ratio to average
net assets of:
Expenses, net of
waivers and re-
imbursements 0.39%
Expenses, before
waivers and re-
imbursements 0.39%
Net investment
income, net of
waivers and
reimbursements 7.15%
Net investment
income, before
waivers and
reimbursements 7.15%
Net assets at end
of year (in thou-
sands) $1,528,203
- ---------------------------------------------------------------------------------------------------------------------------------
</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 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>
1997 1996 1995 1994 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <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
INCOME FROM INVEST-
MENT OPERATIONS:
Net investment in-
come 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment in-
come (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions
to unitholders (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 5.31% 5.20% 5.64%(b) 3.78% 2.91% 3.91% 6.18% 7.89% 8.63%
Ratio to average net
assets of:
Expenses, net of
waivers and reim-
bursements 0.35% 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37% 0.50%
Expenses, before
waivers and reim-
bursements 0.37% 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46% 0.50%
Net investment in-
come, net of waiv-
ers and reimburse-
ments 5.18% 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88% 8.63%
Net investment in-
come, before waiv-
ers and reimburse-
ments 5.16% 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79% 8.63%
Net assets at end of
year (in thousands) $1,051,401 $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BE-
GINNING OF YEAR $1.00
INCOME FROM INVEST-
MENT OPERATIONS:
Net investment in-
come 0.07
- --------------------------------------------------------------------------------------------------------------------------
Total income from
investment opera-
tions 0.07
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment in-
come (0.07)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions
to unitholders (0.07)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (a) 6.83%
Ratio to average net
assets of:
Expenses, net of
waivers and reim-
bursements 0.54%
Expenses, before
waivers and reim-
bursements 0.55%
Net investment in-
come, net of waiv-
ers and reimburse-
ments 6.83%
Net investment in-
come, before waiv-
ers and reimburse-
ments 6.82%
Net assets at end of
year (in thousands) $335,301
- --------------------------------------------------------------------------------------------------------------------------
</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>
1997 1996 1995 1994 1993 1992 1991 1990(a)
- ------------------------------------------------------------------------------------------------------------
<S> <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
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (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 $1.00
- ------------------------------------------------------------------------------------------------------------
Total return (b) 5.41% 5.31% 5.82%(c) 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% 0.20%
Expenses, before waiv-
ers and reimbursements 0.39% 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and
reimbursements 5.30% 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and
reimbursements 5.11% 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $1,239,393 $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period November 7, 1990 (commencement of operations) through
November 30, 1990.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at net asset value at the end of the year.
Total return is not annualized for periods less than one year.
(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 one 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>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<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 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05
- --------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.03 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05)
- --------------------------------------------------------------------------------------------------------------------------------
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) 3.44% 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04% 4.92%
Ratio to average net
assets of:
Expenses, net of waiv-
ers and reimbursements 0.35% 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48%
Expenses, before waiv-
ers and reimbursements 0.39% 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49% 0.48%
Net investment income,
net of waivers and
reimbursements 3.38% 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92%
Net investment income,
before waivers and
reimbursements 3.34% 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03% 4.92%
Net assets at end of
year (in thousands) $585,159 $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680
- --------------------------------------------------------------------------------------------------------------------------------
</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 net asset value 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, 1997
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 seventeen 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
Assets Portfolio, Government Portfolio, Government Select Portfolio and Tax-
Exempt Portfolio (the "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.
(a) Investment Valuation
Investments are valued at amortized cost, which approximates market value.
Under 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 agreements as of November 30, 1997, 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, 1997, there were capital loss carryforwards for U.S. federal
tax purposes of approximately $1,367,000 and $93,000 for the Diversified
Assets and Government Portfolios, respectively. These amounts are available to
be carried forward to offset future capital gains to the extent permitted by
applicable laws or regulations. These capital loss carryforwards expire in
2002.
(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
(including 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.
23
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
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
advisory 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, 1997 was to reduce advisory fees as shown on the accompanying Statements
of Operations.
As compensation for the services rendered as custodian and transfer agent,
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 (as amended May 1, 1997) with
Goldman Sachs whereby each Portfolio pays the Administrator a fee, computed
daily and payable monthly, at an annual rate of .10% of each Portfolio's daily
net assets.
In addition, if in any fiscal year the sum of a Portfolio's expenses,
including the administration fee, but excluding the investment advisory fee
and transfer agency fee payable to Northern pursuant to its agreements with
the Trust, servicing fees, and extraordinary expenses (such as taxes, interest
and indemnification expenses), exceeds on an annualized basis .10% of a
Portfolio's average net assets, Goldman Sachs will reimburse each Portfolio
for the amount of the excess pursuant to the terms of the administration
agreement.
Prior to May 1, 1997 each Portfolio paid the Administrator a fee, computed
daily and payable monthly, based on the average net assets of each Portfolio
at the rates set forth below:
<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>
Prior to May 1, 1997, Goldman Sachs voluntarily 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, 1997. Furthermore, Goldman
Sachs voluntarily agreed to reimburse 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.
Expenses reimbursed during the year ended November 30, 1997 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
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
There were no borrowings under this agreement during the year ended November
30, 1997.
24
<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, 1997, 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 verification of the
investments owned at November 30, 1997 by physical examination of the
securities held by the custodian and by correspondence with central
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,
1997, 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 16, 1998
25
<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
Richard Gordon Cline
Edward J. Condon, Jr.
John W. English
Sandra Polk Guthman
Frederick T. Kelsey
Richard P. Strubel
Officers
Frank Polefrone, President
James Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Deborah Farrell, Assistant Secretary
Steven Hartstein, Assistant Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath LLP
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.
<PAGE>
THE BENCHMARK FUNDS
Investment Advisers:
The Northern Trust Company 50 S. LaSalle Street Chicago, IL 60675
Northern Trust Quantitative Advisors, Inc.
50 S. LaSalle Street
Chicago, IL 60675
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
The
Benchmark
Funds
Fixed
Income and Equity
Portfolios
PROSPECTUS
APRIL 1, 1998
<PAGE>
THE BENCHMARK FUNDS
(Advised by The Northern Trust Company and Northern Trust Quantitative
Advisors, Inc.)
This Prospectus describes six fixed income, one balanced, one global asset and
six equity portfolios (the "Portfolios") offered by The Benchmark Funds (the
"Trust") to institutional investors.
The U.S. GOVERNMENT SECURITIES PORTFOLIO seeks to maximize total return with
reasonable risk by investing in a broad range of U.S. Government securities
and maintaining a dollar-weighted average maturity of between 1 and 5 years.
The SHORT-INTERMEDIATE BOND PORTFOLIO seeks to maximize total return
consistent with reasonable risk by investing in a broad range of bonds and
other fixed income securities and maintaining a dollar-weighted average
maturity of between 2 and 5 years.
The U.S. TREASURY INDEX PORTFOLIO seeks to provide investment results
approximating the performance of the Lehman Brothers Treasury Bond Index (the
"Lehman Index") by investing primarily in securities represented in the
Lehman Index.
The BOND PORTFOLIO seeks to maximize total return consistent with reasonable
risk by investing in a broad range of bonds and other fixed income securities
and maintaining a dollar-weighted average maturity of between 5 and 15 years.
The INTERMEDIATE BOND PORTFOLIO seeks to maximize total return consistent
with reasonable risk by investing in a broad range of bonds and other fixed
income securities and maintaining a dollar-weighted average maturity of
between 3 and 10 years.
The INTERNATIONAL BOND PORTFOLIO seeks to maximize total return consistent
with reasonable risk by investing primarily in a broad range of bonds and
other fixed income securities of foreign issuers while maintaining a dollar-
weighted average maturity of between 3 and 11 years.
The BALANCED PORTFOLIO seeks to provide long-term capital appreciation and
current income by investing in stocks, bonds and cash equivalents.
The GLOBAL ASSET PORTFOLIO seeks to provide long-term capital appreciation
and current income by allocating its assets for investment among four market
segments: domestic equity, domestic fixed-income, foreign equity and foreign
fixed-income securities. The Portfolio will pursue its objective by investing
a substantial portion of its assets in shares of the Trust's other investment
portfolios and unaffiliated investment companies.
The EQUITY INDEX PORTFOLIO seeks to provide investment results approximating
the aggregate price and dividend performance of the securities included in
the Standard & Poor's 500 Composite Stock Price Index (the "S&P Index") by
investing substantially all of its assets in securities comprising the S&P
Index.
The DIVERSIFIED GROWTH PORTFOLIO seeks to provide long-term capital
appreciation with income a secondary consideration by investing principally
in common and preferred stocks and securities convertible into common stock
of growth companies.
The FOCUSED GROWTH PORTFOLIO seeks to provide long-term capital appreciation
by investing primarily in common stocks of growth companies. Any income
received is incidental to the objective of capital appreciation.
The SMALL COMPANY INDEX PORTFOLIO seeks to provide investment results
approximating the aggregate price and dividend performance of the securities
included in the Russell 2000 Small Stock Index (the "Russell Index") by
investing substantially all of its assets in securities represented in the
Russell Index.
The INTERNATIONAL EQUITY INDEX PORTFOLIO seeks to provide investment results
approximating the aggregate price and dividend performance of the securities
in the Morgan Stanley Capital International (MSCI) Europe, Australia and Far
East Index (the "EAFE Index").
The INTERNATIONAL GROWTH PORTFOLIO seeks to provide long-term capital
appreciation by investing principally in common and preferred stocks and
securities convertible into common stock of foreign issuers. Any income
received is incidental to the objective of capital appreciation.
This Prospectus provides information about the Portfolios that you should
know before investing. It should be read and retained for future reference.
If you would like more detailed information, a Statement of Additional
Information (the "Additional Statement") dated April 1, 1998 is available
upon request without charge by writing to the Trust's distributor, Goldman,
Sachs & Co. ("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or
by calling 1-800-621-2550.
SHARES 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 1, 1998.
<PAGE>
Investment Advisers
THE NORTHERN TRUST COMPANY NORTHERN TRUST QUANTITATIVE ADVISORS,
50 S. LaSalle Street INC.
Chicago, Illinois 60675
50 S. LaSalle Street
312-630-6000
Chicago, Illinois 60675
312-661-5866
Each Portfolio other than the U.S. Treasury Index, the Equity Index, the Small
Company Index and the International Equity Index Portfolios, is advised by The
Northern Trust Company ("Northern"), a wholly-owned subsidiary of Northern
Trust Corporation. The U.S. Treasury Index, Equity Index, Small Company Index
and International Equity Index Portfolios are advised by Northern Trust
Quantitative Advisors, Inc., a wholly-owned subsidiary of Northern Trust
Corporation ("NTQA", and, collectively with Northern, the "Investment
Advisers"). Shares of all Portfolios other than the Small Company Index and
International Equity Index Portfolios are sold and redeemed without any
purchase or redemption charge imposed by the Trust, although Northern and
other institutions may charge their customers for services provided in
connection with their investments. The Small Company Index and International
Equity Index Portfolios require the payment of an additional transaction fee
with respect to purchase transactions equal to 0.50% and 1.00%, respectively,
of the amount invested.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF EXPENSES 3
- -------------------
FINANCIAL HIGHLIGHTS 10
- --------------------
INVESTMENT INFORMATION 32
- ----------------------
Introduction 32
U.S. Government Securities Portfo-
lio 32
Short-Intermediate Bond Portfolio 32
U.S. Treasury Index Portfolio 33
Bond Portfolio 33
Intermediate Bond Portfolio 34
International Bond Portfolio 34
Balanced Portfolio 35
Global Asset Portfolio 36
Equity Index Portfolio 38
Diversified Growth Portfolio 39
Focused Growth Portfolio 39
Small Company Index Portfolio 39
International Equity Index Portfo-
lio 41
International Growth Portfolio 42
Special Risks and Other Considera-
tions 42
Description of Securities and
Common Investment Techniques 46
Investment Restrictions 59
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TRUST INFORMATION 59
- -----------------
Board of Trustees 59
Investment Advisers, Transfer Agent
and Custodian 59
Portfolio Managers 61
Year 2000 62
Administrator and Distributor 63
Shareholder Servicing Plan 63
Service Information 64
Expenses 64
INVESTING 65
- ---------
Purchase of Shares 65
Redemption of Shares 68
Distributions 70
Taxes 71
NET ASSET VALUE 73
- ---------------
PERFORMANCE INFORMATION 73
- -----------------------
ORGANIZATION 75
- ------------
MISCELLANEOUS 76
- -------------
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the shareholder
transaction expenses imposed by the Trust and the annualized operating
expenses of the Portfolios (except the Intermediate Bond, Global Asset and
International Equity Index Portfolios) incurred during the Trust's last fiscal
year, and the estimated annualized operating expenses that the Intermediate
Bond, Global Asset and International Equity Index Portfolios expect to incur
during the current fiscal year. Hypothetical examples based on the table are
also shown. Investors should note that shares of each Portfolio have been
classified into four separate classes, Class A, B, C and D Shares. Each class
is distinguished by the level of administrative support and transfer agency
services provided. Class A, B, C and D Shares represent pro rata interests in
a Portfolio except that different shareholder servicing fees and transfer
agency fees are payable by Class A, B, C and D Shares. See "Trust
Information--Shareholder Servicing Plan."
The Global Asset Portfolio may invest up to 100% of its assets in shares of
other investment companies. Accordingly, an investor in the Global Asset
Portfolio will bear a proportionate share of the expenses of such underlying
funds in addition to the expenses of the Portfolio. The information on
shareholder transaction expenses and estimated annual operating expenses in
the table below relates solely to the Global Asset Portfolio and does not
include the expenses associated with the Portfolio's investments in other
investment companies.
<TABLE>
<CAPTION>
U.S. Government Securities Short-Intermediate Bond
------------------------------- --------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount invested)... None None None None None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and Fee
Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .25% .25% .25% .25% .25% .25% .25% .25%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee Reductions(3,4).. .10% .10% .10% .10% .10% .10% .10% .10%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Operating
Expenses(3,4)........ .11% .25% .35% .50% .11% .25% .35% .50%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating
Expenses(1,2,3,4)..... .36% .50% .60% .75% .36% .50% .60% .75%
==== ==== ==== ==== ==== ==== ==== ====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period:
One Year............... $4 $5 $6 $8 $4 $5 $6 $8
Three Years............ $12 $16 $19 $24 $12 $16 $19 $24
Five Years............. $20 $28 $33 $42 $20 $28 $33 $42
Ten Years.............. $46 $63 $75 $93 $46 $63 $75 $93
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
U.S. Treasury Index Bond
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount invested)... None None None None None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and Fee
Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .15% .15% .15% .15% .25% .25% .25% .25%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee Reductions(3,4).. .10% .10% .10% .10% .10% .10% .10% .10%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Operating
Expenses(3,4)........ .11% .25% .35% .50% .11% .25% .35% .50%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating
Expenses(1,2,3,4)..... .26% .40% .50% .65% .36% .50% .60% .75%
==== ==== ==== ==== ==== ==== ==== ====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period:
One Year............... $3 $4 $5 $7 $4 $5 $6 $8
Three Years............ $8 $13 $16 $21 $12 $16 $19 $24
Five Years............. $15 $22 $28 $36 $20 $28 $33 $42
Ten Years.............. $33 $51 $63 $81 $46 $63 $75 $93
</TABLE>
<TABLE>
<CAPTION>
Intermediate Bond(7)
-------------------------------
Class A Class B Class C Class D
Shares Shares Shares Shares
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases.... None None None None
Additional Transaction Fee (as a percentage
of the amount invested)..................... None None None None
Deferred Sales Charge Imposed on Reinvested
Distributions............................... None None None None
Deferred Sales Charge Imposed on Redemptions. None None None None
Redemption Fees.............................. None None None None
Exchange Fees................................ None None None None
Annual Operating Expenses After Expense
Reimbursements and
Fee Reductions (as a percentage of average
daily net assets).
Management Fees After Fee Reductions(1)...... .25% .25% .25% .25%
12b-1 Fees................................... None None None None
Other Operating Expenses
Servicing Fees(2)........................... None .10% .15% .25%
Transfer Agency Fees(2)..................... .01% .05% .10% .15%
Other Expenses (After Expense Reimbursements
and
Fee Reductions(3,4)........................ .10% .10% .10% .10%
---- ---- ---- ----
Total Other Operating Expenses(3,4)......... .11% .25% .35% .50%
---- ---- ---- ----
Total Operating Expenses(1,2,3,4)............ .36% .50% .60% .75%
==== ==== ==== ====
Example of Expenses. Based on the foregoing
table, you would pay the following expenses
on a hypothetical $1,000 investment, assuming
a 5% annual return and redemption at the end
of each time period:
One Year..................................... $4 $5 $6 $8
Three Years.................................. $12 $16 $19 $24
Five Years................................... $20 $28 $33 $42
Ten Years.................................... $46 $63 $75 $93
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
International Bond Balanced
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount invested)... None None None None None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and Fee
Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .70% .70% .70% .70% .50% .50% .50% .50%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee Reductions(3,4).. .25% .25% .25% .25% .10% .10% .10% .10%
---- ----- ----- ----- ---- ---- ---- -----
Total Other Operating
Expenses(3,4)........ .26% .40% .50% .65% .11% .25% .35% .50%
---- ----- ----- ----- ---- ---- ---- -----
Total Operating
Expenses(1,2,3,4)..... .96% 1.10% 1.20% 1.35% .61% .75% .85% 1.00%
==== ===== ===== ===== ==== ==== ==== =====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period:
One Year............... $10 $11 $12 $14 $6 $8 $9 $10
Three Years............ $31 $35 $38 $43 $20 $24 $27 $32
Five Years............. $53 $61 $66 $74 $34 $42 $47 $55
Ten Years.............. $118 $134 $145 $162 $76 $93 $105 $122
<CAPTION>
Equity Index Diversified Growth
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount invested)... None None None None None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and Fee
Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .10% .10% .10% .10% .55% .55% .55% .55%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee
Reductions(3,4,5).... .11% .11% .11% .11% .11% .11% .11% .11%
---- ----- ----- ----- ---- ---- ---- -----
Total Other Operating
Expenses(3,4,5)...... .12% .26% .36% .51% .12% .26% .36% .51%
---- ----- ----- ----- ---- ---- ---- -----
Total Operating
Expenses(1,2,3,4,5)... .22% .36% .46% .61% .67% .81% .91% 1.06%
==== ===== ===== ===== ==== ==== ==== =====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period:
One Year............... $2 $4 $5 $6 $7 $8 $9 $11
Three Years............ $7 $12 $15 $20 $21 $26 $29 $34
Five Years............. $12 $20 $26 $34 $37 $45 $50 $58
Ten Years.............. $28 $46 $58 $76 $83 $100 $112 $129
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Focused Growth Small Company Index
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount
invested)(6).......... None None None None .50% .50% .50% .50%
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and
Fee Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .80% .80% .80% .80% .20% .20% .20% .20%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee
Reductions(3,4,5).... .11% .11% .11% .11% .11% .11% .11% .11%
----- ----- ----- ----- ----- ----- ----- -----
Total Other Operating
Expenses(3,4,5)...... .12% .26% .36% .51% .12% .26% .36% .51%
----- ----- ----- ----- ----- ----- ----- -----
Total Operating
Expenses(1,2,3,4,5)... .92% 1.06% 1.16% 1.31% .31% .46% .56% .71%
===== ===== ===== ===== ===== ===== ===== =====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period*:
One Year............... $9 $11 $12 $13 $8 $10 $11 $12
Three Years............ $29 $34 $37 $42 $15 $20 $23 $28
Five Years............. $51 $58 $64 $72 $23 $31 $36 $44
Ten Years.............. $113 $129 $141 $158 $45 $63 $75 $93
<CAPTION>
International Equity Index(7) International Growth
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None None
Additional Transaction
Fee (as a percentage
of amount
invested)(6).......... 1.00% 1.00% 1.00% 1.00% None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None None
Redemption Fees........ None None None None None None None None
Exchange Fees.......... None None None None None None None None
Annual Operating
Expenses After Expense
Reimbursements and
Fee Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .25% .25% .25% .25% .80% .80% .80% .80%
12b-1 Fees............. None None None None None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25% None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15% .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee Reductions(3,4).. .25% .25% .25% .25% .25% .25% .25% .25%
----- ----- ----- ----- ----- ----- ----- -----
Total Other Operating
Expenses(3,4)........ .26% .40% .50% .65% .26% .40% .50% .65%
----- ----- ----- ----- ----- ----- ----- -----
Total Operating
Expenses(1,2,3,4)..... .51% .65% .75% .90% 1.06% 1.20% 1.30% 1.45%
===== ===== ===== ===== ===== ===== ===== =====
Example of Expenses.
Based on the foregoing
table, you would pay
the following expenses
on a hypothetical
$1,000 investment,
assuming a 5% annual
return and redemption
at the end of each time
period*:
One Year............... $15 $17 $18 $19 $11 $12 $13 $15
Three Years............ $26 $31 $34 $38 $34 $38 $41 $46
Five Years............. $38 $46 $51 $59 $58 $66 $71 $79
Ten Years.............. $73 $90 $102 $120 $129 $145 $157 $174
</TABLE>
- -------
* Total expenses include a .50% and 1.00% transaction fee on purchases of the
shares of Small Company Index and International Equity Index Portfolios,
respectively.
6
<PAGE>
<TABLE>
<CAPTION>
Global Asset(7)
-------------------------------
Class A Class B Class C Class D
Shares Shares Shares Shares
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None
Additional Transaction
Fee (as a percentage
of amount
invested)(6).......... None None None None
Deferred Sales Charge
Imposed on Reinvested
Distributions......... None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None
Redemption Fees........ None None None None
Exchange Fees.......... None None None None
Annual Operating
Expenses After Expense
Reimbursements and Fee
Reductions (as a
percentage of average
daily net assets).
Management Fees After
Fee Reductions(1)..... .35% .35% .35% .35%
12b-1 Fees............. None None None None
Other Operating Ex-
penses
Servicing Fees(2)..... None .10% .15% .25%
Transfer Agency
Fees(2).............. .01% .05% .10% .15%
Other Expenses After
Expense
Reimbursements and
Fee Reductions(3,4).. .10% .10% .10% .10%
---- ---- ---- ----
Total Other Operating
Expenses(3,4)........ .11% .25% .35% .50%
---- ---- ---- ----
Total Operating
Expenses(1,2,3,4)..... .46% .60% .70% .85%
==== ==== ==== ====
</TABLE>
The Global Asset Portfolio will invest a substantial portion of its assets in
Class A Shares of other investment portfolios of the Trust (collectively, the
"Benchmark Portfolios"), including the Trust's money market portfolios, the
Government Select Portfolio, Government Portfolio, Diversified Assets
Portfolio, and Tax-Exempt Portfolio which are offered under a separate
prospectus. The total expense ratios of Class A Shares of the equity and fixed
income Benchmark Portfolios are set forth above. Based on a hypothetical mix
of Benchmark Portfolio shares that the Global Asset Portfolio may hold under
current market conditions, the weighted average expense ratio associated with
the Portfolio's investment in Class A Shares of the Benchmark Portfolios would
be 0.34%, and excludes the effect of any transaction fee associated with
investment in a Benchmark Portfolio. The actual allocation of the Global Asset
Portfolio's assets among the Benchmark Portfolios will vary with changing
market conditions. In addition, the weighted average expense ratio of the
Portfolio's investments in the Benchmark Portfolios does not reflect the
expenses associated with the Portfolio's investments in unaffiliated
investment companies, which could increase or decrease this weighted average
expense ratio. Based on the foregoing, the estimated cumulative total expense
ratio of Class A, B, C and D Shares of the Global Asset Portfolio, including
both the expenses associated with the Portfolio and the expenses relating to
its investments in other Benchmark Portfolios, would be .80%, .94%, 1.04% and
1.19%, respectively.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Example of Expenses.
Based on the cumulative
total expense ratios
set forth in the
preceding paragraph,
you would pay the
following expenses on a
hypothetical $1,000
investment in the
Global Asset Portfolio,
assuming a 5% annual
total return and
redemption at the end
of each time period:
One Year............... $8 $10 $11 $12
Three Years............ $26 $30 $33 $38
Five Years............. N/A N/A N/A N/A
Ten Years.............. N/A N/A N/A N/A
</TABLE>
- ----------
(1) For the fiscal year ending November 30, 1997, Northern voluntarily reduced
its advisory fee for the U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond, Intermediate Bond, International Bond,
Balanced, Equity Index, Diversified Growth, Focused Growth, Small Company
Index, International Equity Index, and International Growth Portfolios.
Advisory fees are otherwise payable at the annual rate of .60%, .60%,
.40%, .60%, .60%, .90%, .80%, .30%, .80%, 1.10%, .40%, .50% and 1.00%,
respectively, of the Portfolios' respective average daily net assets. In
addition, Northern has voluntarily agreed to reduce its advisory fee for
the Global Asset Portfolio to .35% of the Portfolio's average daily net
assets for the current fiscal year (advisory fees are otherwise payable at
the annual rate of .60% of the Global Asset Portfolio's average daily net
assets).
(2) The Trust has adopted a Shareholder Servicing Plan pursuant to which the
Trust may enter into agreements with Institutions or other financial
intermediaries under which they render (or arrange to have rendered)
certain shareholder administrative support services for
7
<PAGE>
their Customers or other Investors who beneficially own Class B, C and D
Shares in return for a fee ("Servicing Fee") of up to .10%, .15%, and .25%,
respectively, per annum of the value of each Portfolio's outstanding Class
B, C and D Shares, respectively. The Trust also allocates transfer agency
fees, which are attributable to the Class A, B, C and D Shares in a
Portfolio, separately to such Shares, as reflected in the table. For further
information, see "Investment Adviser, Transfer Agent and Custodian" and
"Shareholder Servicing Plan" under the heading "Trust Information" in this
Prospectus.
(3) For the fiscal period December 1, 1996 through April 30, 1997, Goldman
Sachs reduced its administration fee (otherwise payable with respect to
each Portfolio during such period at the annual rate of .25% of the first
$100 million, .15% of the next $200 million, .075% of the next $450
million and .05% of any excess over $750 million of the Portfolio's
average daily net assets) to .10% of each Portfolio's average daily net
assets. For the fiscal period May 1, 1997 through November 30, 1997,
Goldman Sachs was entitled to an administration fee from each Portfolio at
an annual rate of .15% of the average daily net assets of each of the
International Bond, International Equity Index and International Growth
Portfolios and .10% of the average daily net assets of each other
Portfolio. In addition, during the fiscal year ended November 30, 1997
Goldman Sachs reimbursed each Portfolio's expenses (including the fees
payable to Goldman Sachs as administrator, but excluding the fees payable
to Northern for its duties as adviser and transfer agent, servicing fees
and certain extraordinary expenses) which exceeded on an annualized basis
.25% of the International Bond, International Equity Index and
International Growth Portfolios' average daily net assets and .10% of each
other Portfolio's average daily net assets for such period. The expense
information in the table has, accordingly, been presented to reflect these
fee reductions and expense reimbursements (estimated in the case of the
Intermediate Bond, Global Asset and International Equity Index
Portfolios).
(4) Without the undertakings of Northern and Goldman Sachs, and had all
classes of shares been outstanding during the year ending November 30,
1997, "Other Expenses" in the foregoing table would have been as follows:
U.S. Government Securities Portfolio--.24%; Short-Intermediate Bond
Portfolio--.20%; U.S. Treasury Index Portfolio--.41%; Bond Portfolio--
.16%; International Bond Portfolio--.61%; Balanced Portfolio--.30%; Equity
Index Portfolio--.15%; Diversified Growth Portfolio--.22%; Focused Growth
Portfolio--.23%; Small Company Index Portfolio--.27%; and International
Growth Portfolio--.36%; and the total annual operating expenses would have
been as follows for Class A, B, C and D Shares, respectively: U.S.
Government Securities Portfolio--.85%, .99%, 1.09% and 1.24%; Short-
Intermediate Bond Portfolio--.81%, .95%, 1.05% and 1.20%; U.S. Treasury
Index Portfolio--.82%, .96%, 1.06% and 1.21%; Bond Portfolio--.77%, .91%,
1.01% and 1.16%; International Bond Portfolio--1.52%, 1.66%, 1.76% and
1.91%; Balanced Portfolio--1.11%, 1.25%, 1.35% and 1.50%; Equity Index
Portfolio--.46%, .60%, .70% and .85%; Diversified Growth Portfolio--1.03%,
1.17%, 1.27% and 1.42%; Focused Growth Portfolio--1.34%, 1.48%, 1.58% and
1.73%; Small Company Index Portfolio--.68%, .82%, .92% and 1.07%; and
International Growth Portfolio--1.37%, 1.51%, 1.61% and 1.76%, based on
actual expenses incurred during the fiscal year ended November 30, 1997.
Without the undertakings of Northern and Goldman Sachs, it is estimated
that "Other Expenses" would be .57% for the Intermediate Bond Portfolio,
.43% for the Global Asset Portfolio and .39% for the International Equity
Index Portfolio, and total annual operating expenses for each of the
Intermediate Bond, Global Asset and International Equity Index Portfolio's
Class A, B, C and D Shares would be 1.18%, 1.32%, 1.42% and 1.57%; 1.04%,
1.18%, 1.28% and 1.43%; and .90%, 1.04%, 1.14% and 1.29%, respectively,
for the current fiscal year. See note (7) below. For a more complete
description of the Portfolios' expenses, see "Trust Information" in this
Prospectus.
(5) The actual expense ratios reflected in the above table for each class of
the Equity Index, Diversified Growth, Focused Growth and Small Company
Index Portfolios include interest expense of .01%, associated with
temporary borrowings. Interest expense is not subject to voluntary expense
limitations. Had the Portfolios not experienced such temporary borrowings,
the total annual operating expense ratios would have been as follows:
Equity Index Class A, B, C and D Shares--.21%, .35%, .45% and .60%,
respectively; Diversified Growth Class A, B, C and D Shares--.66%, .80%,
.90% and 1.05%, respectively; Focused Growth Class A, B, C and D Shares--
.91%, 1.05%, 1.15% and 1.30%, respectively; and Small Company Index Class
A, B, C and D Shares--.31%, .45%, .55% and .70%, respectively. Whether
such borrowings will occur in any given year and the actual amount of such
borrowings is difficult to predict.
(6) To prevent the Small Company Index Portfolio and International Equity
Index Portfolio from being adversely affected by the transaction costs
associated with share purchases, the Portfolios will sell shares at a
price equal to the net asset value of the shares plus an additional
transaction fee equal to .50% and 1.00%, respectively, of such value. Such
amounts are not sales charges, but are retained by the Portfolios for the
benefit of all shareholders (see "Investment Information--Small Company
Index Portfolio," "Investment Information--International Equity Index
Portfolio," "Investing--Purchase of Shares" and "Investing--Redemption of
Shares"). The Global Asset Portfolio may invest in these Portfolios and
will be subject to the respective transaction fees.
(7) The costs and expenses included in the table and hypothetical example
above are based on estimated fees and expenses for the current fiscal year
and should not be considered as representative of past or future expenses.
Actual fees and expenses may be greater or less than those indicated.
8
<PAGE>
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS SHAREHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
SHAREHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF SHARES." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
9
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Ernst & Young LLP, independent
auditors, as indicated in their report incorporated by reference into the
Additional Statement from the annual report to shareholders for the fiscal
year ended November 30, 1997 (the "Annual Report"), and should be read in
conjunction with the financial statements and related notes incorporated by
reference and attached to the Additional Statement. No information is
presented with respect to Class C Shares of the Short-Intermediate Bond, U.S.
Treasury Index, Intermediate Bond, International Bond, Diversified Growth,
Small Company Index, International Growth and International Equity Index
Portfolios, Class D Shares of the Intermediate Bond and International Equity
Index Portfolios, and Class B Shares of the Portfolios because no such shares
were outstanding during the periods presented. In addition, as of the date of
this Prospectus, the Global Asset Portfolio had not commenced investment
operations. The Annual Report also contains additional performance information
and is available upon request and without charge by calling the telephone
number or writing to the address on the first page of this Prospectus.
10
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 20.07 $ 20.08 $ 19.05 $ 20.07 $ 20.00
Income (loss) from invest-
ment operations:
Net investment income 1.21 1.02 1.05 0.91 0.55
Net realized and
unrealized gain (loss) (0.07) (0.01) 1.02 (1.02) 0.05
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.14 1.01 2.07 (0.11) 0.60
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (1.22) (1.02) (1.04) (0.91) (0.53)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.22) (1.02) (1.04) (0.91) (0.53)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.08) (0.01) 1.03 (1.02) 0.07
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 19.99 $ 20.07 $ 20.08 $ 19.05 $ 20.07
- --------------------------------------------------------------------------------
Total return (b) 5.93% 5.15% 11.18% (0.57)% 3.00%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.43%
Expenses, before waivers
and reimbursements 0.85% 0.94% 1.09% 1.12% 1.18%
Net investment income, net
of waivers and reimburse-
ments 5.86% 5.22% 5.43% 4.62% 4.18%
Net investment income, be-
fore waivers and reim-
bursements 5.37% 4.64% 4.70% 3.86% 3.43%
Portfolio turnover rate 95.73% 119.75% 141.14% 45.55% 20.59%
Net assets at end of year
(in thousands) $43,073 $92,351 $56,329 $25,293 $32,479
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period April 5, 1993 (commencement of operations) through November
30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
11
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Class C Class D
---------------- -------------------------------
1997 1996 (A) 1997 1996 1995 1994 (B)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $20.06 $20.13 $20.03 $20.04 $19.05 $19.43
Income (loss) from invest-
ment operations:
Net investment income 1.14 0.91 1.16 0.96 0.96 0.22
Net realized and unrealized
gain (loss) (0.04) (0.12) (0.10) (0.03) 1.00 (0.38)
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 1.10 0.79 1.06 0.93 1.96 (0.16)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (1.18) (0.86) (1.15) (0.94) (0.97) (0.22)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.18) (0.86) (1.15) (0.94) (0.97) (0.22)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.08) (0.07) (0.09) (0.01) 0.99 (0.38)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $19.98 $20.06 $19.94 $20.03 $20.04 $19.05
- --------------------------------------------------------------------------------
Total return (c) 5.67% 4.05% 5.52% 4.77% 10.66% (0.90)%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.60% 0.60% 0.75% 0.75% 0.75% 0.75%
Expenses, before waivers
and reimbursements 1.09% 1.18% 1.24% 1.33% 1.48% 1.51%
Net investment income, net
of waivers and reimburse-
ments 5.63% 4.97% 5.50% 4.83% 5.08% 4.65%
Net investment income, be-
fore waivers and reim-
bursements 5.14% 4.39% 5.01% 4.25% 4.35% 3.89%
Portfolio turnover rate 95.73% 119.75% 95.73% 119.75% 141.14% 45.55%
Net assets at end of year
(in thousands) $3,118 $3,535 $ 312 $ 225 $ 67 $ 13
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C Shares issue date) through
November 30, 1996.
(b) For the period September 15, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) 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. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
12
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
SHORT-INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
----------------------------------------------- -------------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 1995 1994 (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.70 $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.66 $20.71 $19.53 $19.82
Income (loss) from in-
vestment
operations:
Net investment income 1.46 1.14 1.02 0.97 0.85 1.43 1.07 0.94 0.23
Net realized and
unrealized gain (loss) (0.29) (0.01) 1.19 (0.80) 0.31 (0.34) (0.02) 1.18 (0.29)
- -----------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.17 1.13 2.21 0.17 1.16 1.09 1.05 2.12 (0.06)
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income (1.46) (1.16) (1.01) (0.97) (0.83) (1.39) (1.10) (0.94) (0.23)
Net realized gain (0.05) -- -- -- -- (0.05) -- -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.51) (1.16) (1.01) (0.97) (0.83) (1.44) (1.10) (0.94) (0.23)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.34) (0.03) 1.20 (0.80) 0.33 (0.35) (0.05) (1.18) (0.29)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.36 $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.31 $20.66 $20.71 $19.53
- -----------------------------------------------------------------------------------------------------------
Total return (c) 5.95% 5.68% 11.58% 0.84% 5.90% 5.54% 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% 0.36% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and
reimbursements 0.81% 0.88% 0.91% 0.95% 1.00% 1.20% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and re-
imbursements 7.68% 5.83% 5.14% 4.84% 4.79% 7.48% 4.96% 4.85% 4.42%
Net investment income,
before waivers and re-
imbursements 7.23% 5.31% 4.59% 4.25% 4.15% 7.03% 4.44% 4.30% 3.83%
Portfolio turnover rate 48.49% 47.68% 54.68% 48.67% 19.48% 48.49% 47.68% 54.68% 48.67%
Net assets at end of
year (in
thousands) $201,457 $153,675 $158,678 $96,209 $107,550 $ 891 $ 343 $ 13 $ 1
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) 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. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
13
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
U.S. TREASURY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
--------------------------------------------- --------------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 1995 1994 (b)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.60 $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.57 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.26 1.19 1.11 1.15 0.95 1.20 1.17 1.00 0.09
Net realized and
unrealized gain (loss) 0.20 (0.18) 2.01 (1.93) 1.02 0.18 (0.24) 2.03 (0.03)
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.46 1.01 3.12 (0.78) 1.97 1.38 0.93 3.03 0.06
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income (1.25) (1.19) (1.11) (1.14) (0.92) (1.18) (1.11) (1.05) (0.09)
Net realized gain -- -- -- (0.36) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (1.25) (1.19) (1.11) (1.50) (0.92) (1.18) (1.11) (1.05) (0.09)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.21 (0.18) 2.01 (2.28) 1.05 0.20 (0.18) 1.98 (0.03)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.81 $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.77 $20.57 $20.75 $18.77
- ---------------------------------------------------------------------------------------------------------
Total return (c) 7.44% 5.10% 16.95% (3.80)% 9.94% 7.03% 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% 0.26% 0.65% 0.65% 0.65% 0.65%
Expenses, before waiv-
ers and reimbursements 0.82% 1.04% 0.89% 0.79% 0.83% 1.21% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and
reimbursements 6.36% 5.93% 5.09% 5.60% 5.11% 6.07% 5.57% 5.41% 6.05%
Net investment income,
before waivers and
reimbursements 5.80% 5.15% 4.46% 5.07% 4.54% 5.51% 4.79% 4.78% 5.52%
Portfolio turnover rate 72.61% 42.49% 80.36% 52.80% 77.75% 72.61% 42.49% 80.36% 52.80%
Net assets at end of
year (in thousands) $33,839 $26,273 $17,674 $37,305 $71,456 $1,707 $ 848 $ 286 $ --
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period November 16, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) 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 net asset value at the end of the year. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
14
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 20.77 $ 20.96 $ 18.29 $ 20.70 $ 20.00
Income (loss) from invest-
ment operations:
Net investment income 1.34 1.29 1.17 1.42 1.42
Net realized and unrealized
gain (loss) 0.29 (0.19) 2.66 (2.21) 0.66
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 1.63 1.10 3.83 (0.79) 2.08
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (1.32) (1.26) (1.14) (1.46) (1.38)
Net realized gain -- -- -- (0.15) --
Return of capital -- (0.03) (0.02) (0.01) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.32) (1.29) (1.16) (1.62) (1.38)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.31 (0.19) 2.67 (2.41) 0.70
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 21.08 $ 20.77 $ 20.96 $ 18.29 $ 20.70
- --------------------------------------------------------------------------------
Total return (b) 8.17% 5.57% 21.55% (4.04)% 10.60%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.77% 0.84% 0.84% 0.87% 0.92%
Net investment income, net
of waivers and reimburse-
ments 6.66% 6.39% 5.94% 7.31% 7.84%
Net investment income, be-
fore waivers and reim-
bursements 6.25% 5.91% 5.46% 6.80% 7.28%
Portfolio turnover rate 76.30% 101.38% 74.19% 103.09% 89.06%
Net assets at end of year
(in thousands) $460,514 $366,850 $286,301 $257,391 $245,112
- --------------------------------------------------------------------------------
</TABLE>
(a)For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b)Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c)Annualized for periods less than a full year.
15
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BOND PORTFOLIO
<TABLE>
<CAPTION>
Class C Class D
------------------------- -------------------------------
1997 1996 1995 (a) 1997 1996 1995 1994 (b)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.78 $ 20.96 $ 20.21 $20.76 $20.94 $18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.29 1.25 0.47 1.24 1.22 1.08 0.28
Net realized and
unrealized gain (loss) 0.28 (0.18) 0.74 0.30 (0.18) 2.66 (0.45)
- -------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.57 1.07 1.21 1.54 1.04 3.74 (0.17)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income (1.28) (1.22) (0.45) (1.25) (1.19) (1.09) (0.28)
Return of capital -- (0.03) (0.01) -- (0.03) - -
- -------------------------------------------------------------------------------------
Total distributions to
shareholders (1.28) (1.25) (0.46) (1.25) (1.22) (1.09) (0.28)
- -------------------------------------------------------------------------------------
Net increase (decrease) 0.29 (0.18) 0.75 0.29 (0.18) 2.65 (0.45)
- -------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 21.07 $ 20.78 $ 20.96 $21.05 $20.76 $20.94 $18.29
- -------------------------------------------------------------------------------------
Total return (c) 7.88% 5.33% 6.08% 7.74% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 1.01% 1.08% 1.08% 1.16% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and re-
imbursements 6.39% 6.09% 5.59% 6.27% 5.99% 5.48% 6.31%
Net investment income,
before waivers and re-
imbursements 5.98% 5.61% 5.11% 5.86% 5.51% 5.00% 5.80%
Portfolio turnover rate 76.30% 101.38% 74.19% 76.30% 101.38% 74.19% 103.09%
Net assets at end of
year (in thousands) $50,554 $ 7,342 $ 3,704 $ 601 $ 220 $ 120 $ 15
- -------------------------------------------------------------------------------------
</TABLE>
(a)For the period July 3, 1995 (Class C Shares issue date) through November
30, 1995.
(b)For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(c)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. Total
return is not annualized for periods less than one year.
(d)Annualized for periods less than a full year.
16
<PAGE>
FINANCIAL HIGHLIGHTS
For the Year Ended November 30,
INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------
1997 (a)
- ------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 20.00
Income (loss) from investment operations:
Net investment income 0.38
Net realized and unrealized loss (0.15)
- ------------------------------------------------------------------
Total income from investment operations 0.23
- ------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.34)
- ------------------------------------------------------------------
Total distributions to shareholders (0.34)
- ------------------------------------------------------------------
Net decrease (0.11)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 19.89
- ------------------------------------------------------------------
Total return (b) 1.17%
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements 0.36%
Expenses, before waivers and reimbursements 2.28%
Net investment income, net of waivers and reimbursements 5.87%
Net investment income, before waivers and reimbursements 3.95%
Portfolio turnover rate 56.99%
Net assets at end of year (in thousands) $11,997
- ------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized.
17
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
INTERNATIONAL BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
----------------------------------- -----------------------
1997 1996 1995 1994(a) 1997 1996 1995(b)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 22.16 $ 21.74 $ 19.93 $ 20.00 $22.14 $21.74 $22.17
Income (loss) from in-
vestment operations:
Net investment income 1.02 1.54 1.26 0.79 0.97 1.37 0.02
Net realized and
unrealized gain (loss) (1.70) 0.43 2.28 0.01 (1.72) 0.51 (0.08)
- ---------------------------------------------------------------------------------------
Total income (loss) from
investment operations (0.68) 1.97 3.54 0.80 (0.75) 1.88 (0.06)
- ---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income
(c) (1.01) (1.55) (1.73) (0.87) (0.99) (1.48) (0.37)
Net realized gain (0.34) -- -- -- (0.34) -- --
- ---------------------------------------------------------------------------------------
Total distributions to
shareholders (1.35) (1.55) (1.73) (0.87) (1.33) (1.48) (0.37)
- ---------------------------------------------------------------------------------------
Net increase (decrease) (2.03) 0.42 1.81 (0.07) (2.08) 0.40 (0.43)
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.13 $ 22.16 $ 21.74 $ 19.93 $20.06 $22.14 $21.74
- ---------------------------------------------------------------------------------------
Total return (d) (3.02)% 9.47% 18.20% 4.03% (3.38)% 9.04% (0.30)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.96% 0.96% 0.96% 0.96% 1.35% 1.35% 1.35%
Expenses, before waiv-
ers and reimbursements 1.52% 1.58% 1.47% 1.49% 1.91% 1.97% 1.86%
Net investment income,
net of waivers and re-
imbursements 5.61% 5.91% 5.92% 5.93% 5.36% 5.67% 3.26%
Net investment income,
before waivers and re-
imbursements 5.05% 5.29% 5.41% 5.40% 4.80% 5.05% 2.75%
Portfolio turnover rate 29.29% 33.89% 54.46% 88.65% 29.29% 33.89% 54.46%
Net assets at end of
year (in thousands) $26,383 $34,183 $32,673 $26,947 $ 91 $ 52 $ 9
- ---------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through November
30, 1994.
(b) For the period November 20, 1995 (Class D Shares issue date) through
November 30, 1995.
(c) Distributions to shareholders from net investment income include amounts
relating to foreign currency transactions which are treated as ordinary
income for Federal income tax purposes.
(d) 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. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
18
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 12.24 $ 11.05 $ 9.50 $ 10.22 $ 10.00
Income (loss) from investment op-
erations:
Net investment income 0.38 0.34 0.34 0.24 0.09
Net realized and unrealized gain
(loss) 1.66 1.19 1.55 (0.72) 0.22
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.04 1.53 1.89 (0.48) 0.31
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.38) (0.34) (0.34) (0.22) (0.09)
Net realized gain (0.31) -- -- (0.02) --
- --------------------------------------------------------------------------------
Total distributions to sharehold-
ers (0.69) (0.34) (0.34) (0.24) (0.09)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.35 1.19 1.55 (0.72) 0.22
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 13.59 $ 12.24 $ 11.05 $ 9.50 $ 10.22
- --------------------------------------------------------------------------------
Total return (b) 17.29% 14.07% 20.22% (4.76)% 3.12%
Ratio to average net assets of
(c):
Expenses, net of waivers and re-
imbursements 0.61% 0.61% 0.61% 0.61% 0.61%
Expenses, before waivers and re-
imbursements 1.11% 1.20% 1.28% 1.50% 1.62%
Net investment income, net of
waivers and reimbursements 2.99% 3.03% 3.36% 2.56% 2.20%
Net investment income, before
waivers and reimbursements 2.49% 2.44% 2.69% 1.68% 1.19%
Portfolio turnover rate 59.06% 104.76% 93.39% 75.69% 35.03%
Average commission rate per share $0.0652 $0.0718 NA NA NA
Net assets at end of year (in
thousands) $51,475 $45,157 $38,897 $31,462 $15,928
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period July 1, 1993 (commencement of operations) through November
30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
19
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Class C Class D
---------------- ----------------
1997 1996 (a) 1997 1996 (b)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 12.24 $ 11.12 $ 12.23 $ 11.34
Income from investment operations:
Net investment income 0.36 0.29 0.34 0.22
Net realized and unrealized gain 1.64 1.12 1.64 0.96
- ------------------------------------------------------------------------------
Total income from investment operations 2.00 1.41 1.98 1.18
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.37) (0.29) (0.36) (0.29)
Net realized gain (0.31) -- (0.31) --
- ------------------------------------------------------------------------------
Total distributions to shareholders (0.68) (0.29) (0.67) (0.29)
- ------------------------------------------------------------------------------
Net increase 1.32 1.12 1.31 0.89
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 13.56 $ 12.24 $ 13.54 $ 12.23
- ------------------------------------------------------------------------------
Total return (c) 17.00% 12.72% 16.82% 10.55%
Ratio to average net assets of (d):
Expenses, net of waivers and reimburse-
ments 0.85% 0.85% 1.00% 1.00%
Expenses, before waivers and reimburse-
ments 1.35% 1.44% 1.50% 1.59%
Net investment income, net of waivers and
reimbursements 2.75% 2.80% 2.60% 2.78%
Net investment income, before waivers and
reimbursements 2.25% 2.21% 2.10% 2.19%
Portfolio turnover rate 59.06% 104.76% 59.06% 104.76%
Average commission rate per share $0.0652 $0.0718 $0.0652 $0.0718
Net assets at end of year (in thousands) $ 4,587 $ 5,997 $ 322 $ 232
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period December 29, 1995 (Class C Shares issue date) through
November 30, 1996.
(b) For the period February 20, 1996 (Class D Shares issue date) through
November 30, 1996.
(c) 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. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
20
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
1997 1996 1995 1994 1993 (a)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 16.79 $ 13.86 $ 10.60 $ 10.78 $ 10.00
Income (loss) from in-
vestment operations:
Net investment income 0.30 0.31 0.30 0.27 0.22
Net realized and
unrealized gain (loss) 4.13 3.36 3.47 (0.18) 0.78
- ---------------------------------------------------------------------------------
Total income from in-
vestment operations 4.43 3.67 3.77 0.09 1.00
- ---------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income (0.30) (0.31) (0.30) (0.27) (0.22)
Net realized gain (0.83) (0.43) (0.21) -- --
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (1.13) (0.74) (0.51) (0.27) (0.22)
- ---------------------------------------------------------------------------------
Net increase (decrease) 3.30 2.93 3.26 (0.18) 0.78
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.09 $ 16.79 $ 13.86 $ 10.60 $ 10.78
- ---------------------------------------------------------------------------------
Total return (b) 27.93% 27.53% 36.60% 0.87% 10.08%
Ratio to average net as-
sets of (c):
Expenses, net of waiv-
ers and reimbursements 0.22% 0.22% 0.22% 0.23% 0.21%
Expenses, before waiv-
ers and reimbursements 0.46% 0.50% 0.54% 0.59% 0.66%
Net investment income,
net of waivers and re-
imbursements 1.66% 2.12% 2.54% 2.62% 2.62%
Net investment income,
before waivers and re-
imbursements 1.42% 1.84% 2.22% 2.25% 2.17%
Portfolio turnover rate 18.96% 18.02% 15.27% 71.98% 2.06%
Average commission rate
per share $ 0.0264 $ 0.0228 NA NA NA
Net assets at end of
year (in thousands) $844,065 $675,804 $479,763 $281,817 $219,282
- ---------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
21
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class C Class D
-------------------------- ---------------------------------
1997 1996 1995 (a) 1997 1996 1995 1994 (b)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 16.79 $ 13.86 $ 13.43 $ 16.77 $ 13.83 $10.60 $10.96
Income (loss) from in-
vestment operations:
Net investment income 0.26 0.28 0.05 0.26 0.27 0.25 0.02
Net realized and
unrealized gain (loss) 4.11 3.35 0.45 4.07 3.36 3.47 (0.31)
- ----------------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.37 3.63 0.50 4.33 3.63 3.72 (0.29)
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income (0.28) (0.27) (0.07) (0.27) (0.26) (0.28) (0.07)
Net realized gain (0.83) (0.43) -- (0.83) (0.43) (0.21) --
- ----------------------------------------------------------------------------------------
Total distributions to
shareholders (1.11) (0.70) (0.07) (1.10) (0.69) (0.49) (0.07)
- ----------------------------------------------------------------------------------------
Net increase (decrease) 3.26 2.93 0.43 3.23 2.94 3.23 (0.36)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.05 $ 16.79 $ 13.86 $ 20.00 $ 16.77 $13.83 $10.60
- ----------------------------------------------------------------------------------------
Total return (c) 27.64% 27.24% 3.94% 27.45% 27.20% 36.20% (2.68)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.46% 0.46% 0.46% 0.61% 0.61% 0.61% 0.60%
Expenses, before waiv-
ers and reimbursements 0.70% 0.74% 0.78% 0.85% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and re-
imbursements 1.42% 1.89% 2.29% 1.27% 1.78% 2.07% 2.67%
Net investment income,
before waivers and re-
imbursements 1.18% 1.61% 1.97% 1.03% 1.50% 1.75% 2.31%
Portfolio turnover rate 18.96% 18.02% 15.27% 18.96% 18.02% 15.27% 71.98%
Average commission rate
per share $0.0264 $0.0228 NA $0.0264 $0.0228 NA NA
Net assets at end of
year (in thousands) $82,982 $53,929 $18,390 $30,650 $ 8,005 $ 810 $ 3
- ----------------------------------------------------------------------------------------
</TABLE>
(a) For the period September 28, 1995 (Class C Shares issue date) through
November 30, 1995.
(b) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(c) 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. 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 these periods.
22
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
DIVERSIFIED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.36 $ 12.20 $ 9.88 $ 10.65 $ 10.00
Income (loss) from invest-
ment operations:
Net investment income 0.11 0.14 0.15 0.09 0.09
Net realized and unrealized
gain (loss) 3.33 2.33 2.26 (0.83) 0.65
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 3.44 2.47 2.41 (0.74) 0.74
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (0.14) (0.15) (0.09) (0.01) (0.09)
Net realized gain (1.46) (0.16) -- (0.02) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.60) (0.31) (0.09) (0.03) (0.09)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.84 2.16 2.32 (0.77) 0.65
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.20 $ 14.36 $ 12.20 $ 9.88 $ 10.65
- --------------------------------------------------------------------------------
Total return (b) 27.06% 20.83% 24.55% (6.98)% 7.38%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.67% 0.66% 0.69% 0.67% 0.71%
Expenses, before waivers
and reimbursements 1.03% 1.10% 1.12% 1.08% 1.13%
Net investment income, net
of waivers and reimburse-
ments 0.76% 0.98% 1.16% 0.77% 1.04%
Net investment income, be-
fore waivers and reim-
bursements 0.40% 0.54% 0.73% 0.35% 0.62%
Portfolio turnover rate 45.53% 59.99% 81.65% 78.94% 140.88%
Average commission rate per
share $ 0.0669 $ 0.0655 NA NA NA
Net assets at end of year
(in thousands) $158,383 $142,055 $146,731 $164,963 $199,053
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
23
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
DIVERSIFIED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class D
----------------------------------
1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 14.26 $ 12.16 $ 9.88 $10.41
Income (loss) from investment operations:
Net investment income 0.09 0.11 0.11 0.01
Net realized and unrealized gain (loss) 3.27 2.29 2.25 (0.54)
- -------------------------------------------------------------------------------
Total income (loss) from investment opera-
tions 3.36 2.40 2.36 (0.53)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.13) (0.14) (0.08) --
Net realized gain (1.46) (0.16) -- --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.59) (0.30) (0.08) --
- -------------------------------------------------------------------------------
Net increase (decrease) 1.77 2.10 2.28 (0.53)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.03 $ 14.26 $12.16 $ 9.88
- -------------------------------------------------------------------------------
Total return (b) 26.60% 20.39% 24.19% (5.14)%
Ratio to average net assets of (c):
Expenses, net of waivers and reimburse-
ments 1.06% 1.05% 1.08% 1.05%
Expenses, before waivers and reimburse-
ments 1.42% 1.49% 1.51% 1.46%
Net investment income, net of waivers and
reimbursements 0.37% 0.59% 0.73% 0.94%
Net investment income, before waivers and
reimbursements 0.01% 0.15% 0.30% 0.53%
Portfolio turnover rate 45.53% 59.99% 81.65% 78.94%
Average commission rate per share $0.0669 $0.0655 NA NA
Net assets at end of year (in thousands) $ 696 $ 433 $ 221 $ 40
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period September 14, 1994 (Class D Shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
24
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
FOCUSED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.48 $ 12.53 $ 9.79 $ 10.43 $ 10.00
Income (loss) from invest-
ment operations:
Net investment income 0.05 0.02 0.05 0.02 0.01
Net realized and
unrealized gain (loss) 3.37 2.17 2.71 (0.66) 0.43
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.42 2.19 2.76 (0.64) 0.44
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (0.02) (0.05) (0.02) -- (0.01)
Net realized gain (1.68) (0.19) -- -- --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.70) (0.24) (0.02) -- (0.01)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.72 1.95 2.74 (0.64) 0.43
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 16.20 $ 14.48 $ 12.53 $ 9.79 $ 10.43
- --------------------------------------------------------------------------------
Total return (b) 27.05% 17.82% 28.38% (6.15)% 4.33%
Ratio to average net assets
of (c):
Expenses, net of waivers
and reimbursements 0.92% 0.91% 0.91% 0.91% 0.91%
Expenses, before waivers
and reimbursements 1.34% 1.43% 1.47% 1.55% 1.88%
Net investment income, net
of waivers and reimburse-
ments 0.30% 0.12% 0.46% 0.24% 0.14%
Net investment loss, be-
fore waivers and reim-
bursements (0.12)% (0.40)% (0.10)% (0.39)% (0.83)%
Portfolio turnover rate 108.29% 116.78% 85.93% 74.28% 27.48%
Average commission rate per
share $ 0.0681 $ 0.0730 NA NA NA
Net assets at end of year
(in thousands) $115,802 $106,250 $86,099 $57,801 $32,099
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period July 1, 1993 (commencement of operations) through November
30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
25
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
FOCUSED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class C Class D
------------------
-----------------
1997 1996 (a) 1997 1996 1995 (b)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.47 $ 13.46 $ 14.37 $ 12.48 $ 9.55
Income (loss) from invest-
ment operations:
Net investment income
(loss) 0.01 (0.01) 0.03 (0.03) 0.02
Net realized and unrealized
gain 3.37 1.02 3.30 2.15 2.93
- --------------------------------------------------------------------------------
Total income from investment
operations 3.38 1.01 3.33 2.12 2.95
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income (0.01) -- (0.01) (0.04) (0.02)
Net realized gain (1.68) -- (1.68) (0.19) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (1.69) -- (1.69) (0.23) (0.02)
- --------------------------------------------------------------------------------
Net increase 1.69 1.01 1.64 1.89 2.93
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.16 $ 14.47 $ 16.01 $ 14.37 $12.48
- --------------------------------------------------------------------------------
Total return (c) 26.75% 7.51% 26.52% 17.42% 30.97%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 1.16% 1.15% 1.31% 1.30% 1.30%
Expenses, before waivers
and reimbursements 1.58% 1.67% 1.73% 1.82% 1.86%
Net investment income
(loss), net of waivers and
reimbursements 0.06% (0.12)% (0.09)% (0.28)% (0.11)%
Net investment loss, before
waivers and reimbursements (0.36)% (0.64)% (0.51)% (0.80)% (0.67)%
Portfolio turnover rate 108.29% 116.78% 108.29% 116.78% 85.93%
Average commission rate per
share $0.0681 $0.0730 $0.0681 $0.0730 NA
Net assets at end of year
(in thousands) $ 8,325 $ 6,993 $ 1,206 $ 656 $ 489
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period June 14, 1996 (Class C Shares issue date) through November
30, 1996.
(b) For the period December 8, 1994 (Class D Shares issue date) through
November 30, 1995.
(c) 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. 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 these periods.
26
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
SMALL COMPANY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 13.97 $ 12.98 $ 10.86 $ 11.29 $ 10.00
Income (loss) from investment
operations:
Net investment income 0.15 0.19 0.16 0.14 0.11
Net realized and unrealized
gain (loss) 2.69 1.75 2.67 (0.30) 1.29
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 2.84 1.94 2.83 (0.16) 1.40
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.17) (0.14) (0.15) (0.02) (0.11)
Net realized gain (1.59) (0.81) (0.56) (0.25) --
- --------------------------------------------------------------------------------
Total distributions to share-
holders (1.76) (0.95) (0.71) (0.27) (0.11)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.08 0.99 2.12 (0.43) 1.29
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 15.05 $ 13.97 $ 12.98 $ 10.86 $ 11.29
- --------------------------------------------------------------------------------
Total return (b) 23.06% 15.96% 27.76% (1.54)% 14.09%
Ratio to average net assets of
(c):
Expenses, net of waivers and
reimbursements 0.32% 0.32% 0.32% 0.33% 0.31%
Expenses, before waivers and
reimbursements 0.68% 0.79% 0.81% 0.86% 1.02%
Net investment income, net of
waivers and reimbursements 1.22% 1.36% 1.31% 1.27% 1.25%
Net investment income, before
waivers and reimbursements 0.86% 0.89% 0.82% 0.74% 0.54%
Portfolio turnover rate 42.66% 46.26% 38.46% 98.43% 26.31%
Average commission rate per
share $ 0.0319 $ 0.0257 NA NA NA
Net assets at end of year (in
thousands) $147,887 $112,856 $94,899 $ 77,120 $54,763
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year and does not
reflect the .75% additional transaction fee that was in effect prior to
April 1, 1998 which would reduce total return. Effective April 1, 1998,
the additional transaction fee has been reduced to .50%.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
27
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
SMALL COMPANY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class D
-------------------------
1997 1996 1995 (a)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.96 $ 12.95 $10.51
Income from investment operations:
Net investment income 0.17 0.13 0.18
Net realized and unrealized gain 2.62 1.83 2.96
- ---------------------------------------------------------------------------
Total income from investment operations 2.79 1.96 3.14
- ---------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.15) (0.14) (0.14)
Net realized gain (1.59) (0.81) (0.56)
- ---------------------------------------------------------------------------
Total distributions to shareholders (1.74) (0.95) (0.70)
- ---------------------------------------------------------------------------
Net increase 1.05 1.01 2.44
- ---------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 15.01 $ 13.96 $12.95
- ---------------------------------------------------------------------------
Total return (b) 22.68% 16.20% 31.62%
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements 0.71% 0.71% 0.71%
Expenses, before waivers and reimbursements 1.07% 1.18% 1.20%
Net investment income, net of waivers and reim-
bursements 0.76% 1.02% 0.90%
Net investment income, before waivers and reim-
bursements 0.40% 0.55% 0.41%
Portfolio turnover rate 42.66% 46.26% 38.46%
Average commission rate per share $0.0319 $0.0257 NA
Net assets at end of year (in thousands) $ 690 $ 269 $ 44
- ---------------------------------------------------------------------------
</TABLE>
(a) For the period December 8, 1994 (Class D Shares issue date) through
November 30, 1995.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year and does not
reflect the .75% additional transaction fee that was in effect prior to
April 1, 1998 which would reduce total return. Effective April 1, 1998,
the additional transaction fee has been reduced to .50%.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
28
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
INTERNATIONAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
----------------------------------------
1997 1996 1995 1994 (a)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.63 $ 9.88 $ 10.21 $ 10.00
Income (loss) from investment opera-
tions:
Net investment income 0.11 0.10 0.12 0.05
Net realized and unrealized gain
(loss) 0.31 0.87 (0.36) 0.16
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations 0.42 0.97 (0.24) 0.21
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.08) (0.22) (0.05) --
Net realized gain (0.45) -- (0.04) --
- -------------------------------------------------------------------------------
Total distributions to shareholders (0.53) (0.22) (0.09) --
- -------------------------------------------------------------------------------
Net increase (decrease) (0.11) 0.75 (0.33) 0.21
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.52 $ 10.63 $ 9.88 $ 10.21
- -------------------------------------------------------------------------------
Total return (b) 4.21% 9.96% (2.32)% 2.11%
Ratio to average net assets of (c):
Expenses, net of waivers and reim-
bursements 1.06% 1.06% 1.06% 1.04%
Expenses, before waivers and reim-
bursements 1.37% 1.43% 1.38% 1.47%
Net investment income, net of waiv-
ers and reimbursements 0.97% 0.73% 1.22% 0.76%
Net investment income, before waiv-
ers and reimbursements 0.66% 0.36% 0.90% 0.33%
Portfolio turnover rate 154.62% 202.47% 215.31% 77.79%
Average commission rate per share $ 0.0265 $ 0.0292 NA NA
Net assets at end of year (in thou-
sands) $106,774 $138,182 $148,704 $133,212
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through November
30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
29
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
INTERNATIONAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class D
-----------------------------------
1997 1996 1995 1994 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.54 $ 9.83 $10.21 $10.47
Income (loss) from investment operations:
Net investment income 0.09 0.01 0.19 --
Net realized and unrealized gain (loss) 0.29 0.92 (0.48) (0.26)
- --------------------------------------------------------------------------------
Total income (loss) from investment opera-
tions 0.38 0.93 (0.29) (0.26)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.08) (0.22) (0.05) --
Net realized gain (0.45) -- (0.04) --
- --------------------------------------------------------------------------------
Total distributions to shareholders (0.53) (0.22) (0.09) --
- --------------------------------------------------------------------------------
Net increase (decrease) (0.15) 0.71 (0.38) (0.26)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.39 $ 10.54 $ 9.83 $10.21
- --------------------------------------------------------------------------------
Total return (b) 3.79% 9.59% (2.78)% (2.56)%
Ratio to average net assets of (c):
Expenses, net of waivers and reimburse-
ments 1.45% 1.45% 1.45% 1.35%
Expenses, before waivers and reimburse-
ments 1.76% 1.82% 1.77% 1.78%
Net investment income, net of waivers and
reimbursements 0.58% 0.44% 2.01% --
Net investment income (loss), before
waivers and reimbursements 0.27% 0.07% 1.69% (0.43)%
Portfolio turnover rate 154.62% 202.47% 215.31% 77.79%
Average commission rate per share $0.0265 $0.0292 NA NA
Net assets at end of year (in thousands) $ 234 $ 94 $ 20 --
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period November 16, 1994 (Class D Shares issue date) through
November 30, 1994.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
30
<PAGE>
FINANCIAL HIGHLIGHTS
For the Year Ended November 30,
INTERNATIONAL EQUITY INDEX
<TABLE>
<CAPTION>
Class A
--------
1997 (a)
- ------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.00
Income from investment operations:
Net investment income 0.10
Net realized and unrealized gain 0.45
- ------------------------------------------------------------------
Total income from investment operations 0.55
- ------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gain --
- ------------------------------------------------------------------
Total distributions to shareholders --
- ------------------------------------------------------------------
Net increase 0.55
- ------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.55
- ------------------------------------------------------------------
Total return (b) 5.45%
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements 0.51%
Expenses, before waivers and reimbursements 1.08%
Net investment income, net of waivers and reimbursements 1.75%
Net investment income, before waivers and reimbursements 1.18%
Portfolio turnover rate 8.16%
Average commission rate per share $0.0207
Net assets at end of year (in thousands) $34,244
- ------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year and does not
reflect the 1.00% additional transaction fee which would reduce total
return.
(c) Annualized.
31
<PAGE>
INVESTMENT INFORMATION
INTRODUCTION
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment objectives and policies, as
described below. Each Portfolio, other than the International Bond Portfolio,
is classified as a diversified investment company. The International Bond
Portfolio is classified as a non-diversified investment company. Shares of
each Portfolio have been classified into four classes--Class A Shares, Class B
Shares, Class C Shares and Class D Shares. Northern serves as investment
adviser to all Portfolios other than the U.S. Treasury Index, Equity Index,
Small Company Index and International Equity Index Portfolios, which are
advised by NTQA. Northern serves as the transfer agent and custodian for all
Portfolios. Goldman Sachs serves as distributor and administrator. With the
exception of the Intermediate Bond Portfolio and the Global Asset Portfolio,
the investment objective of a Portfolio may not be changed without the vote of
the majority of the outstanding shares of the particular Portfolio. Except as
expressly noted below, however, each Portfolio's investment policies may be
changed without a vote of shareholders. The U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, Intermediate Bond and
International Bond Portfolios may collectively be referred to as the "Fixed
Income Portfolios," and the Balanced, Global Asset, Equity Index, Diversified
Growth, Focused Growth, Small Company Index, International Equity Index and
International Growth Portfolios may collectively be referred to as the "Equity
Portfolios."
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Portfolio's investment objective is to seek to maximize
total return with minimal reasonable risk. In pursuing its investment
objective, the U.S. Government Securities Portfolio will, under normal market
conditions, invest at least 65% of its total assets in a broad range of
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and repurchase agreements relating to such securities,
including mortgage-related securities issued by agencies of the U.S.
Government. The Portfolio's dollar-weighted average maturity will be between
one and five years.
The Portfolio may enter into interest rate swaps and may invest in options and
futures contracts and related options. The Portfolio may also invest in
certain short-term fixed income securities as cash reserves. See "Description
of Securities and Common Investment Techniques" below for more information.
SHORT-INTERMEDIATE BOND PORTFOLIO
The investment objective of the Short-Intermediate Bond Portfolio is to seek
to maximize total return consistent with reasonable risk. In pursuing its
investment objective, the Short-Intermediate Bond Portfolio invests in a broad
range of bonds and other fixed income securities. The Portfolio's dollar-
weighted average maturity will be between two and five years. The Portfolio
will invest primarily in fixed income securities of all types and in any
proportion that generally are investment grade at the time of purchase, and
may include obligations of the U.S. Government, its agencies or
instrumentalities, obligations of foreign governments, obligations of U.S. and
foreign corporations and obligations of U.S. and foreign banks. The
obligations of a foreign issuer will not be purchased by the Short-
Intermediate Bond Portfolio if, as a result of the purchase, more than 20% of
the total assets of the Portfolio will be invested in the obligations of
issuers within a single foreign country. The Portfolio
32
<PAGE>
may also invest up to 10% of its total assets in non-investment grade
securities. Under normal market conditions, at least 65% of the Portfolio's
total assets will be invested in bonds, debentures, mortgage and other asset-
related securities, zero coupon bonds and convertible debentures. The
Portfolio may also invest in short-term notes, bills, commercial paper and
certificates of deposit.
The Portfolio may enter into forward currency contracts and interest rate
swaps and may invest in options and futures contracts and related options. The
Portfolio may also invest in certain short-term fixed income securities as
cash reserves. See "Description of Securities and Common Investment
Techniques" below for more information.
U.S. TREASURY INDEX PORTFOLIO
The investment objective of the U.S. Treasury Index Portfolio is to seek to
provide investment results approximating the performance of the Lehman Index.
In pursuing its investment objective, the U.S. Treasury Index Portfolio under
normal conditions will invest directly or indirectly at least 80% of its total
assets in a representative sample of the U.S. Treasury obligations included in
the Lehman Index. The Lehman Index is comprised of all public obligations of
the U.S. Treasury, excluding flower bonds and foreign-targeted issues. The
Investment Adviser will select securities for the Portfolio based on their
expected contribution to its overall duration, quality and total return as
compared to the Lehman Index and comparable investment characteristics. Lehman
Brothers ("Lehman") makes no representation or warranty, implied or express,
to purchasers of Portfolio units or any member of the public regarding the
advisability of investing in the Portfolio or the ability of the Lehman Index
to track general bond market performance.
The Portfolio is managed through the use of a "passive" or "indexing"
investment approach, which attempts to duplicate the investment composition
and performance of the Lehman Index through statistical procedures. As a
result, the Investment Adviser does not employ traditional methods of fund
investment management, such as selecting securities on the basis of economic,
financial and market analysis.
The Portfolio may invest in options and futures contracts and related options.
The Portfolio may also invest in certain short-term fixed income securities as
cash reserves. See "Description of Securities and Common Investment
Techniques" and "Special Risks and Other Considerations" below for more
information.
BOND PORTFOLIO
The investment objective of the Bond Portfolio is to seek to maximize total
return consistent with reasonable risk. In pursuing its investment objective,
the Bond Portfolio invests in a broad range of bonds and other fixed income
securities. The Portfolio's dollar-weighted average maturity will range
between five and fifteen years.
The Portfolio will invest primarily in fixed income securities of all types
and in any proportion that generally are investment grade at the time of
purchase, and may include obligations of the U.S. Government, its agencies or
instrumentalities, obligations of foreign, state and local governments,
obligations of U.S. and foreign corporations and obligations of U.S. and
foreign banks. The obligations of a foreign issuer will not be purchased by
the Bond Portfolio if, as a result of the purchase, more than 20% of the total
assets of the Portfolio will be invested in the obligations of issuers within
a single foreign country. The Portfolio may also invest up to 10% of its total
assets in non-investment grade securities. Under normal market conditions, at
least 65% of the Portfolio's
33
<PAGE>
total assets will be invested in bonds, debentures, mortgage and other asset-
related securities, zero coupon bonds and convertible debentures. The
Portfolio may also invest in short-term notes, bills, commercial paper and
certificates of deposits.
The Portfolio may enter into forward currency contracts and interest rate
swaps and may invest in options and futures contracts and related options. The
Portfolio may also invest in certain short-term fixed income securities as
cash reserves. See "Description of Securities and Common Investment
Techniques" below for more information.
INTERMEDIATE BOND PORTFOLIO
The investment objective of the Intermediate Bond Portfolio is to seek to
maximize total return consistent with reasonable risk. In pursuing its
investment objective, the Intermediate Bond Portfolio invests in a broad range
of bonds and other fixed income securities. The Portfolio's dollar-weighted
average maturity will range between three and ten years. The Portfolio will
invest primarily in fixed income securities of all types and in any proportion
that generally are investment grade at the time of purchase, and may include
obligations of the U.S. Government, its agencies or instrumentalities,
obligations of foreign, state and local governments, obligations of U.S. and
foreign corporations and obligations of U.S. and foreign banks. The Portfolio
may invest up to 25% of its total assets in foreign securities, including up
to 15% of its total assets in securities of issuers in countries with emerging
economies or securities markets. The obligations of a foreign issuer will not
be purchased by the Portfolio if, as a result of the purchase, more than 20%
of the total assets of the Portfolio will be invested in the obligations of
issuers within a single foreign country. The Portfolio may also invest up to
10% of its total assets in non-investment grade securities. Under normal
market conditions, at least 65% of the Portfolio's total assets will be
invested in bonds, debentures, mortgage and other asset-related securities,
zero coupon bonds and convertible debentures. The Portfolio may also invest in
short-term notes, bills, commercial paper and certificates of deposits.
The Portfolio may enter into forward currency contracts and interest rate
swaps and may invest in options and futures contracts and related options. The
Portfolio may also invest in certain short-term fixed income securities as
cash reserves. See "Description of Securities and Common Investment
Techniques" below for more information.
INTERNATIONAL BOND PORTFOLIO
The investment objective of the International Bond Portfolio is to seek to
maximize total return consistent with reasonable risk. In pursuing its
investment objective, the International Bond Portfolio invests primarily (at
least 65% of its total assets under normal market conditions) in a broad range
of bonds and other fixed income securities of foreign issuers. The Portfolio's
dollar-weighted average maturity will range between three and eleven years.
The Portfolio will be invested at all times in the securities of issuers
located in at least three different foreign countries. These countries may
include, but are not limited to: Argentina, Australia, Austria, Belgium,
Brazil, Canada, Chile, Colombia, Denmark, Finland, France, Germany, Greece,
Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg,
Malaysia, Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines,
Poland, Portugal, Singapore, South Africa, South Korea, Spain, Sweden,
Switzerland, Taiwan,
34
<PAGE>
Thailand, Turkey, the United Kingdom and Venezuela. Criteria for determining
the appropriate distribution of investments among various countries and
regions include prospects for relative economic growth, expected levels of
inflation, government policies influencing business conditions, the outlook
for currency relationships, and the range of investment opportunities
available to international investors.
The Portfolio will invest primarily in fixed income securities of all types as
set forth below and in any proportion that generally are investment grade at
the time of purchase, although a portion of its assets may be invested in non-
investment grade securities. These securities may include obligations of
foreign governments, their agencies, instrumentalities and political
subdivisions; supranational organizations (e.g., European Investment Bank,
Inter-American Development Bank and the World Bank); and foreign corporations
and banks. These obligations may consist of bonds, debentures, mortgage and
other asset-related securities, zero coupon bonds and convertible debentures.
The Portfolio may also invest in obligations of the U.S. Government, its
agencies and instrumentalities (including repurchase agreements collateralized
by such obligations) and of U.S. corporations and banks as well as short-term
notes, bills, commercial paper and certificates of deposit. It is expected
that during the current fiscal year a substantial portion of the Portfolio's
assets will be invested in foreign governmental obligations.
The International Bond Portfolio is classified as a non-diversified portfolio
under the 1940 Act. Investment return on a non-diversified portfolio typically
is dependent upon the performance of the securities of a smaller number of
issuers relative to the number held in a diversified portfolio. Consequently,
the change in value of any one security may affect the overall value of a non-
diversified portfolio more than it would a diversified portfolio.
The Portfolio may enter into forward currency exchange contracts and currency
and interest rate swaps and utilize options and futures contracts. Pending
investment, as a temporary defensive measure and to meet anticipated
redemption requests, the Portfolio may invest, in accordance with its
investment policies, in various short-term obligations, such as U.S.
Government obligations, high quality money market investments and repurchase
agreements. See "Description of Securities and Common Investment Techniques"
and "Special Risks and Other Considerations" below for more information.
BALANCED PORTFOLIO
The investment objective of the Balanced Portfolio is to seek to provide long-
term capital appreciation and current income. The Portfolio will invest at
least 25% of the value of its total assets in fixed income senior securities
and no more than 75% in equity securities under normal market conditions. The
actual percentage of assets invested in equity and fixed income securities
will vary from time to time, depending upon Northern's judgment as to general
market and economic conditions, trends and yields, interest rates and changes
in fiscal and monetary policies. The Portfolio reserves the right to hold as a
temporary defensive measure up to 100% of its total assets in cash and short-
term obligations (having remaining maturities of 18 months or less) at such
times and in such proportions as, in the opinion of Northern, is warranted.
For purposes of determining the percentages of the Portfolio's assets that are
invested in equity and fixed income securities, respectively, only that
portion of the value of convertible securities attributable to their fixed
income characteristics will be deemed to be a fixed income investment.
The Portfolio may invest in common and preferred stocks, securities
convertible into common stock and other types of equity or equity-related
securities ("equity securities"). The Portfolio selects equity securities
based on such factors as growth of sales, return on equity, growth and
consistency of earnings, financial condition, market
35
<PAGE>
share, product leadership and other investment criteria. The Portfolio will
normally limit its equity investments to the securities of companies which
together with their predecessors have been in continuous operation for at
least five years and have stock market capitalization in excess of $200
million. The Portfolio may also purchase warrants and rights which entitle the
holder to buy equity securities at a specified price for a specified period of
time.
The Portfolio will invest in fixed income securities of all types as set forth
below and in any proportions that generally are investment-grade at the time
of purchase. These securities may include bonds, debentures, mortgage and
other asset-related securities, zero coupon bonds, convertible debentures, and
other obligations issued by the U.S. Government, its agencies or
instrumentalities, foreign governments, U.S. and foreign corporations and U.S.
and foreign banks. The Portfolio may also purchase bonds that are issued in
tandem with warrants which entitle the holder to purchase certain common stock
at a specified price during a specified period of time. The Portfolio may also
invest in short-term notes, bills, commercial paper and certificates of
deposit. The dollar-weighted average maturity of the fixed income portion of
the Portfolio will, under normal market conditions, range between two and ten
years.
The Portfolio may also enter into forward currency contracts and utilize
options and futures contracts and related options. Pending investment, as a
temporary defensive measure and to meet anticipated redemption requests, the
Portfolio may also invest in various short-term obligations. See "Description
of Securities and Common Investment Techniques" and "Special Risks and Other
Considerations" below for more information.
GLOBAL ASSET PORTFOLIO
The investment objective of the Global Asset Portfolio is to seek to provide
long-term capital appreciation and current income. In pursuing its investment
objective, the Portfolio allocates its assets for investment among four market
segments: domestic equity securities, domestic fixed-income securities,
foreign equity securities and foreign fixed-income securities. To achieve this
allocation, the Portfolio will generally invest a substantial portion (up to
100%) of its assets in shares of one or more other investment portfolios of
the Trust ("Benchmark Portfolios") which invest in such segments. By investing
in shares of the Benchmark Portfolios, the Global Asset Portfolio expects to
be able to achieve greater diversification within these market segments than
through direct investments in individual securities. The Portfolio may also
make direct investments in domestic and foreign equity or fixed-income
securities or purchase shares of unaffiliated investment companies, including
World Equity Benchmark SharesSM issued by The Foreign Fund, Inc. ("WEBS")
whenever it is deemed advisable to do so in order to achieve the desired
exposure to any of the four market segments and to achieve the Portfolio's
investment objective. See "International Equity Index Portfolio" below for
more information on WEBS. The Portfolio's investments in unaffiliated
investment companies will be limited in accordance with the provisions of the
1940 Act.
Northern will allocate the assets of the Portfolio among the market segments
identified above, and, within each segment, among the various Benchmark
Portfolios, unaffiliated investment companies and individual securities.
Under normal market conditions, it is anticipated that the Portfolio will
invest at least 20% of its assets directly or indirectly in fixed income
senior securities, and at least 65% of its total assets directly or indirectly
in securities of issuers in at least three different countries.
36
<PAGE>
Subject to the foregoing, the Portfolio may allocate 0%-100% of its assets to
any market segment. The table below identifies the Benchmark Portfolios
represented in each market segment:
<TABLE>
<CAPTION>
CORRESPONDING
BENCHMARK
MARKET SEGMENT PORTFOLIO
--------------------- ------------------------------------
<S> <C>
Domestic Equity Balanced Portfolio
Equity Index Portfolio
Diversified Growth Portfolio
Focused Growth Portfolio
Small Company Index Portfolio
Domestic Fixed Income Government Select Portfolio
Government Portfolio
Diversified Assets Portfolio
Tax-Exempt Portfolio
U.S. Government Securities Portfolio
Short-Intermediate Bond Portfolio
U.S. Treasury Index Portfolio
Bond Portfolio
Intermediate Bond Portfolio
Foreign Equity International Equity Index Portfolio
International Growth Portfolio
Foreign Fixed Income International Bond Portfolio
</TABLE>
In making decisions regarding the appropriate exposure to each segment,
Northern will consider general market and economic conditions and factors such
as the relative market capitalization weightings of these segments, stock and
bond index price changes, fluctuations in interest and currency exchange
rates, and political events which may impact market performance for specific
countries or regions, as well as the liquidity needs of the Portfolio. By
allocating its investments in this manner, Northern believes that the
Portfolio will not be exposed to the same degree of market risk as a portfolio
which, for example, invests in only one market segment.
In allocating the Portfolio's assets among the Benchmark Portfolios and
unaffiliated investment companies, Northern will consider their investment
objectives and policies, expenses, performance history and other factors it
deems relevant. The allocation of the Portfolio's assets among investment
companies may be changed from time to time without the approval of the
Portfolio's shareholders. Although the Portfolio may invest in each Benchmark
Portfolio, it is expected that the Portfolio will normally be invested in only
some of the Benchmark Portfolios at any particular time and will most
typically select from among the Equity Index, Diversified Growth, Focused
Growth, Small Company Index, Bond, Short-Intermediate Bond, Intermediate Bond,
International Equity Index, International Growth and International Bond
Portfolios. The Portfolio's investment in any particular Benchmark Portfolio
may exceed 25% of the Portfolio's assets and it is expected that such a
concentration may most typically occur with respect to investments in the
Equity Index, Diversified Growth, Focused Growth and Bond Portfolios.
In addition to its investments in other investment companies, the Portfolio
may make direct investments in equity securities based on such factors as
growth of sales, return on equity, growth and consistency of earnings,
financial
37
<PAGE>
condition, market share, product leadership and other investment criteria. In
addition, the Portfolio may purchase warrants and rights which entitle the
holder to buy equity securities at a specified price for a specified period of
time. The Portfolio may also invest directly in fixed income securities of all
types as set forth below and in any proportions that generally are investment
grade at the time of purchase, and may purchase bonds that are issued in
tandem with warrants which entitle the holder to purchase certain common
stocks at a specified price during a specified period of time. The Portfolio
may also invest in short-term notes, bills, commercial paper and certificates
of deposit.
The Portfolio may enter into forward currency contracts and utilize options
and future contracts and related options. Pending investment, as a temporary
defensive measure and to meet anticipated redemption requests, the Portfolio
may also invest in shares of money market funds or directly in other short-
term obligations. See "Description of Securities and Common Investment
Techniques" and "Special Risks and Other Considerations" below for more
information.
Prospective investors should note that the Trust has filed an application with
the Securities and Exchange Commission (the "SEC") requesting an exemption
from certain provisions of the 1940 Act to allow the Portfolio to conduct its
investment operations as described in this Prospectus. As of the date of this
Prospectus, the requested exemption had not been granted, and there is no
assurance that it will be. No shares of the Portfolio will be sold unless and
until the requested exemption is granted.
EQUITY INDEX PORTFOLIO
The investment objective of the Equity Index Portfolio is to seek to provide
investment results approximating the aggregate price and dividend performance
of the securities included in the S&P Index. Under normal market conditions
the Portfolio will invest directly or indirectly at least 80% of the
Portfolio's total assets in the common stocks of the companies that constitute
the S&P Index, in approximately the same proportions as they are represented
in the S&P Index. The S&P Index is a market value-weighted index consisting of
500 common stocks which are traded on the New York Stock Exchange, American
Stock Exchange and the NASDAQ National Market System and selected by Standard
& Poor's Corporation ("S&P") through a detailed screening process starting on
a macro-economic level and working toward a micro-economic level dealing with
company-specific information such as market value, industry group
classification, capitalization and trading activity. S&P's primary objective
for the S&P Index is to be the performance benchmark for the U.S. equity
markets. The companies chosen for inclusion in the S&P Index tend to be
leaders in important industries within the U.S. economy. However, companies
are not selected by S&P for inclusion because they are expected to have
superior stock price performance relative to the market in general or other
stocks in particular. S&P makes no representation or warranty, implied or
express, to purchasers of Portfolio shares or any member of the public
regarding the advisability of investing in the Portfolio or the ability of the
S&P Index to track general stock market performance.
The Equity Index Portfolio is managed through the use of a "passive" or
"indexing" investment approach, which attempts to duplicate the investment
composition and performance of the S&P Index through statistical procedures.
As a result, the Investment Adviser does not employ traditional methods of
fund investment management for this Portfolio, such as selecting securities on
the basis of economic, financial and market analysis.
The Portfolio may invest in options and futures contracts and related options.
The Portfolio may also invest in certain short-term fixed income securities as
cash reserves. However, it is not anticipated that the Portfolio will
38
<PAGE>
invest in cash reserves, options or futures contracts and related options as
part of a temporary defensive strategy such as lowering its investment in
common stocks to protect against potential stock market declines. See
"Description of Securities and Common Investment Techniques" and "Special
Risks and Other Considerations" below for more information.
DIVERSIFIED GROWTH PORTFOLIO
The investment objective of the Diversified Growth Portfolio is to seek to
provide long-term capital appreciation with income a secondary consideration.
The Portfolio invests principally in common and preferred stocks and
securities convertible into common stock. The Portfolio will, under normal
market conditions, invest at least 65% of its assets in equity securities of
domestic and foreign issuers. The Portfolio selects investments based on such
factors as growth of sales, return on equity, growth and consistency of
earnings, financial condition, market share, product leadership and other
investment criteria. The Portfolio may also purchase warrants and rights which
entitle the holder to buy equity securities at a specific price for a specific
period of time.
The Portfolio may also enter into forward currency contracts and utilize
options and futures contracts and related options. Pending investment, as a
temporary defensive measure and to meet anticipated redemption requests, the
Portfolio may also invest in various short-term obligations. See "Description
of Securities and Common Investment Techniques" below for more information.
FOCUSED GROWTH PORTFOLIO
The investment objective of the Focused Growth Portfolio is to seek to provide
long-term capital appreciation. Any income received is incidental to the
objective of capital appreciation. The Portfolio invests in common and
preferred stocks and securities convertible into common stock of companies
believed by Northern to have superior quality and growth characteristics.
Under normal market conditions at least 65% of the Portfolio's total assets
will be invested in equity securities of domestic and foreign issuers. The
Portfolio selects equity securities based on such factors as growth of sales,
return on equity, growth and consistency of earnings, financial condition,
market share, product leadership and other investment criteria. In attempting
to achieve the Portfolio's investment objective, Northern may, from time to
time, emphasize particular companies or market segments, subject to the
Portfolio's policies on security and industry diversification as described
under "Investment Restrictions." Companies in which the Portfolio invests
often retain their earnings to finance current and future growth and generally
pay little or no dividends. The Portfolio may also purchase warrants and
rights which entitle the holder to buy equity securities at a specific price
for a specific period of time. The Portfolio intends to invest in the
securities of companies which together with their predecessors have been in
continuous operation for at least five years and have stock market
capitalization in excess of $200 million.
The Portfolio may also enter into forward currency contracts and utilize
options and futures contracts and related options. Pending investment, as a
temporary defensive measure and to meet anticipated redemption requests, the
Portfolio may also invest in various short-term obligations. See "Description
of Securities and Common Investment Techniques" below for more information.
SMALL COMPANY INDEX PORTFOLIO
The investment objective of the Small Company Index Portfolio is to seek to
provide investment results approximating the aggregate price and dividend
performance of the securities included in the Russell Index.
39
<PAGE>
Under normal market conditions, the Portfolio will invest directly or
indirectly at least 80% of its total assets in the stocks included in the
Russell Index. The Russell Index is a market value-weighted index comprised of
the stocks of the smallest 2,000 companies in the Russell 3000 Index which is
comprised of the stocks of the 3,000 largest U.S. domiciled companies (based
on market capitalization) that represent approximately 83% of the investable
U.S. equity markets. Because of its emphasis on the smallest 2,000 companies,
the Russell Index represents approximately 10% of the total market
capitalization of the Russell 3000 Index. As of January 31, 1998, the average
market capitalization of the companies included in the Russell Index, adjusted
for cross-holdings, was approximately $570 million. The Russell Index is
reconstituted annually to reflect changes in market capitalization. The
primary criteria used by Frank Russell & Company ("Russell") to determine the
initial list of securities eligible for inclusion in the Russell 3000 Index
(and, accordingly, the Russell Index) is total market capitalization adjusted
for large private holdings and cross-ownership. However, companies are not
selected by Russell for inclusion in the Russell Index because they are
expected to have superior stock price performance relative to the stock market
in general or other stocks in particular. Russell makes no representation or
warranty, implied or express, to purchasers of Portfolio shares or any member
of the public regarding the advisability of investing in the Portfolio or the
ability of the Russell Index to track general market performance of small
capitalization stocks.
The Portfolio will be constructed to have aggregate investment characteristics
similar to those of the Russell Index as a whole. The Portfolio will invest in
securities which will be selected on the basis of such factors as
market capitalization, beta, industry sectors and economic factors. The number
of issues included will be a function of the Portfolio's liquidity and size.
The Portfolio will be restructured annually when the Russell Index is
reconstituted.
It should be noted that small companies in which the Portfolio may invest may
have limited product lines, markets, or financial resources, or may be
dependent upon a small management group, and their securities may be subject
to more abrupt or erratic market movements than larger, more established
companies, both because their securities typically are traded in lower volume
and because the issuers typically are subject to a greater degree of changes
in their earnings and prospects.
The Small Company Index Portfolio is managed through the use of a "passive" or
"indexing" investment approach, which attempts to duplicate the investment
composition and performance of the Russell Index through statistical
procedures. As a result, the Investment Adviser does not employ traditional
methods of fund investment management, such as selecting securities on the
basis of economic, financial and market analysis.
The Portfolio may invest in options and futures contracts and related options.
The Portfolio may also invest in certain short-term fixed income securities as
cash reserves. However, it is not anticipated that the Portfolio will invest
in cash reserves, options or futures contracts and related options as part of
a temporary defensive strategy such as lowering its investment in common
stocks to protect against potential stock market declines. See "Description of
Securities and Common Investment Techniques" and "Special Risks and Other
Considerations" below for more information.
The Portfolio requires the payment of an additional transaction fee on the
purchase of shares equal to 0.50% of the dollar amount invested. See
"Investing--Purchase of Shares" and "Investing--Redemption of Shares" below
for more information.
40
<PAGE>
INTERNATIONAL EQUITY INDEX PORTFOLIO
The investment objective of the International Equity Index Portfolio is to
seek to provide investment results approximating the aggregate price and
dividend performance of the securities in the EAFE Index. The EAFE Index is a
broad-based market capitalization weighted index currently composed of more
than 1,100 securities in twenty countries. Fourteen European countries
(Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom)
constitute approximately 55% of the EAFE Index. Six Asian/Pacific countries
(Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore) account for
the remaining 45%. Under normal market conditions, the Portfolio will invest,
directly or indirectly, at least 65% of its total assets in the securities
that constitute the EAFE Index.
The International Equity Index Portfolio is managed through the use of a
"passive" or "indexing" investment approach, which attempts to duplicate the
investment composition and performance of the EAFE Index through statistical
procedures. As a result, the Investment Adviser does not employ traditional
methods of fund investment management for this Portfolio, such as selecting
securities on the basis of economic, financial and market analysis. The
Portfolio will be constructed to have aggregate investment characteristics
similar to those of the EAFE Index as a whole. The proportion of assets
invested in each country will approximate the weight of each country in the
EAFE Index, and the Portfolio will invest in securities selected on the basis
of such factors as country exposure, market capitalization, beta, industry
sectors and economic factors. The number of issuers included will be a
function of the Portfolio's liquidity and size.
Because the Portfolio will invest in countries according to their weights in
the EAFE Index, more than 25% of the Portfolio's assets may be invested in a
single country. In particular, Japan currently constitutes approximately one-
third of the EAFE Index and would comprise a similar percentage of the
Portfolio's assets, making the Portfolio's performance more dependent upon the
political and economic circumstances in Japan than a portfolio that is more
widely diversified among the issuers in different countries.
It is anticipated that, in seeking to achieve its investment objective, the
Portfolio may invest a significant portion (i.e., more than 10%) of its assets
in instruments such as World Equity Benchmark Shares SM issued by The Foreign
Fund, Inc. ("WEBS") and similar securities of other issuers. Absent unusual
circumstances, these investments are not expected to exceed 35% of the
Portfolio's assets during the current fiscal year. WEBS are shares of an
investment company that invests substantially all of its assets in securities
included in the MSCI indices for specific countries. Because the expense
associated with an investment in WEBS can be substantially lower than the
expense of small investments directly in the securities comprising the indices
they seek to track, the Investment Adviser believes that investments in WEBS
of countries that are included in the EAFE Index can provide a cost-effective
means of diversifying the Portfolio's assets across a broad range of equity
securities. See the Additional Statement for further information about WEBS.
The Portfolio may invest in convertible securities and may enter into forward
currency contracts and utilize options, futures contracts and related options
and currency swaps. The Portfolio may also purchase warrants and rights which
entitle the holder to buy equity securities at a specific price for a specific
period of time. In addition, the Portfolio may also invest in certain short-
term fixed income securities as cash reserves. However, it is not anticipated
that the Portfolio will invest in cash reserves, options or futures contracts
and related options as part of a temporary defensive strategy such as lowering
its investment in equity securities to protect against potential market
declines. See "Description of Securities and Common Investment Techniques" and
"Special Risks and Other Considerations" for more information.
41
<PAGE>
The Portfolio requires the payment of an additional transaction fee on the
purchase of shares equal to 1.00% of the dollar amount invested. See
"Investing--Purchase of Shares" and "Investing--Redemption of Shares" below
for more information.
INTERNATIONAL GROWTH PORTFOLIO
The investment objective of the International Growth Portfolio is to seek to
provide long-term capital appreciation. Any income received is incidental to
the objective of capital appreciation. The Portfolio invests principally in
common and preferred stocks and securities convertible into common stock of
foreign issuers. The Portfolio will, under normal market conditions, invest
directly or indirectly at least 65% of its total assets in equity securities
of foreign issuers. The Portfolio selects investments based on such factors as
growth of sales, return on equity, growth and consistency of earnings,
financial condition, market share, product leadership and other investment
criteria. The Portfolio will normally limit its equity investments to the
securities of companies which together with their predecessors have been in
continuous operation for at least five years and have stock market
capitalizations in excess of $200 million. The Portfolio invests in securities
listed on foreign and domestic securities exchanges and securities traded in
foreign and domestic over-the-counter markets, and may invest in unlisted
securities. Securities issued in certain countries are currently accessible to
the Portfolio only through investment in other investment companies that are
specifically authorized to invest in such securities.
The Portfolio will be invested at all times in the securities of issuers
located in at least three different foreign countries. These countries may
include, but are not limited to: Argentina, Australia, Austria, Belgium,
Brazil, Canada, Chile, Colombia, Czech Republic, Denmark, Finland, France,
Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Israel, Italy, Japan,
Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Peru, the
Philippines, Poland, Portugal, Singapore, South Africa, South Korea, Spain,
Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Kingdom and
Venezuela. Criteria for determining the appropriate distribution of
investments among various countries and regions include prospects for relative
economic growth, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Portfolio may also enter into forward currency contracts, purchase
convertible bonds, and utilize options, futures contracts and currency swaps.
In addition, the Portfolio may purchase warrants and rights which entitle the
holder to buy equity securities at a specific price for a specific period of
time. Pending investment, as a temporary defensive measure and to meet
anticipated redemption requests, the Portfolio may invest, in accordance with
its investment policies, in various short-term obligations, such as U.S.
Government obligations, high quality money market instruments and repurchase
agreements. See "Description of Securities and Common Investment Techniques"
and "Special Risks and Other Considerations" below for more information.
SPECIAL RISKS AND OTHER CONSIDERATIONS
FOREIGN SECURITIES. The Short-Intermediate Bond, Bond, Intermediate Bond,
Balanced, Diversified Growth and Focused Growth Portfolios may invest up to
25% of their total assets, and the Global Asset, International Bond,
International Equity Index and International Growth Portfolios will invest a
substantial portion of their total assets as described above, directly or
indirectly in the securities of foreign issuers, whether or not U.S. dollar-
denominated. In addition, each such Portfolio may acquire the obligations of
foreign banks and foreign branches of U.S. banks as stated below under
"Description of Securities and Common Investment Techniques--Short-Term
Obligations." There are certain risks and costs involved in investing in
securities of companies and
42
<PAGE>
governments of foreign nations, which are in addition to the usual risks
inherent in U.S. investments. Foreign securities, and in particular foreign
debt securities, are sensitive to changes in interest rates and the interest
rate environment. In addition, investment in foreign debt, or the securities
of foreign governments, will subject a Portfolio to risks, including the risk
that foreign governments may default on their obligations, may not respect the
integrity of such debt, may attempt to renegotiate the debt at a lower rate,
and may not honor investments by United States entities or citizens. The
performance of investments in securities denominated in a foreign currency
will also depend, in part, on the strength of the foreign currency against the
U.S. dollar and the interest rate environment in the country issuing the
currency. Absent other events which could otherwise affect the value of a
foreign security (such as a change in the political climate or an issuer's
credit quality), appreciation in the value of the foreign currency generally
can be expected to increase the value of a foreign currency-denominated
security in terms of U.S. dollars. A rise in foreign interest rates or decline
in the value of the foreign currency relative to the U.S. dollar generally can
be expected to depress the value of a foreign currency-denominated security.
Investment in foreign securities also involves higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity, more
market volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls or freezes on the convertibility of
currency, or the adoption of other governmental restrictions might adversely
affect an investment in foreign securities. Additionally, foreign banks and
foreign branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements.
In addition, there are other risks of investing in countries with emerging
economies or securities markets. These countries are located in the
Asia/Pacific region, Eastern Europe, Latin and South America and Africa.
Political and economic structures in many such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Some of these countries may have in the past failed to recognize
private property rights and may have at times nationalized or expropriated the
assets of private companies. In general, the securities markets of these
countries are less liquid, are subject to greater price volatility, have
smaller market capitalizations and have problems with securities registration
and custody. As a result, the risks presented by investments in these
countries are heightened.
While the Portfolios' investments may, if permitted, be denominated in foreign
currencies, the portfolio securities and other assets held by the Portfolios
are valued in U.S. dollars. Currency exchange rates may fluctuate
significantly over short periods of time causing, together with other factors,
a Portfolio's net asset value to fluctuate as well. Currency exchange rates
can be affected unpredictably by the intervention or the failure to intervene
by U.S. or foreign governments or central banks, or by currency controls or
political developments in the U.S. or abroad. A Portfolio's net long and short
foreign currency exposure will not exceed its total asset value. To the extent
that a Portfolio is invested in foreign securities while also maintaining
currency positions, it may be exposed to greater combined risk. The
Portfolios' respective net currency positions may expose them to risks
independent of their securities positions.
43
<PAGE>
Because the securities markets in the following countries are highly
developed, liquid and subject to extensive regulation, the International
Growth Portfolio and International Bond Portfolio may invest more than 25% of
their total assets in the securities of issuers located in Japan, the United
Kingdom, France, Germany or Switzerland. Because the International Equity
Index Portfolio invests in countries according to their weightings in the EAFE
Index, more than 25% of such Portfolio's assets may also be invested in the
securities of issuers in a single country. Investment in a particular country
of 25% or more of the Portfolio's total assets will make the Portfolio's
performance more dependent upon the political and economic circumstances of a
particular country than a mutual fund that is more widely diversified among
issuers in different countries. Although the five foreign countries listed
above have developed economies, they are not immune from these risks. For
example, the expected introduction of a single currency, the euro, on January
1, 1999 for participating nations in the European Economic and Monetary Union
presents unique risks and uncertainties, including: whether the payment and
operational systems of banks and other financial institutions will be ready by
the scheduled launch date; the treatment of outstanding financial contracts
after January 1, 1999 that refer to existing currencies rather than the euro;
the establishment of exchange rates for existing currencies and the euro; and
the creation of suitable clearing and settlement payment systems for the new
currency. These or other factors, including political risks, could cause
market disruptions before or after the introduction of the euro, and could
adversely affect the value of securities held by the Portfolios. Moreover, the
end of the Cold War, the reunification of Germany, the accession of new
Western European members to the European Union and the aspirations of Eastern
European states to join and other political and social events in Europe have
caused considerable economic, social and political dislocation. In addition,
events in the Japanese economy, as well as political and social developments
there have affected Japanese securities and currency markets, and the
relationship of the Japanese yen with other currencies and with the U.S.
dollar. Future political, economic and social developments in Japan and in the
Asia/Pacific regional context can be expected to produce continuing effects on
securities and currency markets.
DERIVATIVE INSTRUMENTS. Each Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest or currency exchange rates, or
indices, and include interest rate and currency swaps, futures contracts,
options, forward currency contracts and structured debt obligations (including
collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments,
including "inverse floaters"). Derivative instruments present, to varying
degrees, market risk that the performance of the underlying assets, exchange
rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
and leveraging risk that, if interest or exchange rates change adversely, the
value of the derivative instrument will decline more than the assets, rates or
indices on which it is based; liquidity risk that a Portfolio will be unable
to sell a derivative instrument when it wants because of lack of market depth
or market disruption; pricing risk that the value of a derivative instrument
(such as an option) will not correlate exactly to the value of the underlying
assets, rates or indices on which it is based; and operations risk that loss
will occur as a result of inadequate systems and controls, human error or
otherwise. Some derivative instruments are more complex than others, and for
those instruments that have been developed recently, data is lacking regarding
their actual performance over complete market cycles. The Investment Advisers
will evaluate the risks presented by the derivative instruments purchased by
the Portfolios, and will determine, in connection with their day-to-day
management of the Portfolios, how they will be used in furtherance of the
Portfolios' investment objectives. It is possible, however, that the
Investment Advisers' evaluations will prove to be inaccurate or incomplete
and, even when accurate and complete, it is possible that the Portfolios will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
44
<PAGE>
AVERAGE MATURITIES. The Fixed Income Portfolios will normally maintain the
dollar-weighted average maturities of their portfolios within the specified
ranges previously described. The maturities of certain instruments, however,
such as variable and floating rate instruments as well as instruments subject
to prepayment or redemption by the issuers, are subject to estimation. There
can be no assurance that the estimates used by the Fixed Income Portfolios for
such instruments will, in fact, be accurate or that, if inaccurate, a Fixed
Income Portfolio's dollar-weighted average maturity will remain within the
specified limits.
TRACKING VARIANCE. The Investment Adviser believes that under normal market
conditions, the quarterly performance of the Equity Index, Small Company Index,
International Equity Index and U.S. Treasury Index Portfolios, before Portfolio
expenses, will be within a .95 correlation with the S&P Index, Russell Index,
EAFE Index and Lehman Index, respectively. However, there is no assurance that
a Portfolio will be able to do so on a consistent basis. Deviations from the
performance of its designated Index ("tracking variance") may result from
purchases and redemptions of shares of a Portfolio that occur daily, as well as
from the expenses borne by a Portfolio. Such purchases and redemptions may
necessitate the purchase and sale of securities by the Portfolio and the
resulting transaction costs which may be substantial because of the number and
the characteristics of the securities held. In addition, transaction costs are
incurred because sales of securities received in connection with spin-offs and
other corporate reorganizations are made to conform the Portfolio's holdings
with its investment objective. Tracking variance may also occur due to factors
such as the size of a Portfolio, the maintenance of a cash reserve pending
investment or to meet expected redemptions, changes made in the Portfolio's
designated Index or the manner in which the Index is calculated or because the
indexing and investment approach of the Investment Adviser does not produce the
intended goal of the Portfolio. In the event the performance of a Portfolio is
not comparable to the performance of its designated Index, the Board of
Trustees will evaluate the reasons for the deviation and the availability of
corrective measures. If substantial deviation in a Portfolio's performance were
to continue for extended periods, it is expected that the Board of Trustees
would consider recommending to shareholders possible changes to the Portfolio's
investment objective.
SPECIAL RISKS AND OTHER CONSIDERATIONS RELATING TO THE GLOBAL ASSET PORTFOLIO.
Because the Global Asset Portfolio may invest up to 100% of its assets in
shares of other investment companies, the expenses associated with investing in
the Portfolio may be higher than those associated with a portfolio that invests
primarily in the securities of issuers that are not themselves investment
companies. An investor in the Global Asset Portfolio will incur not only a
proportionate share of the expenses of the Portfolio, but also a proportionate
share of expenses of the other Benchmark Portfolios and unaffiliated investment
companies in which the Portfolio invests (collectively, the "underlying
funds"). Investors in the Global Asset Portfolio should realize that they can
invest directly in the underlying funds. However, investors who purchase shares
of these underlying funds directly would not benefit from the asset allocation
services provided by Northern in managing the Global Asset Portfolio, nor from
the Portfolio's direct investments in individual securities. While the Global
Asset Portfolio offers a greater level of diversification than many other types
of mutual funds, the Portfolio should not be considered a complete investment
program for an investor.
The Global Asset Portfolio will seek to avoid duplicative fees and the layering
of expenses to a meaningful extent. The Portfolio will only invest in the class
of shares of each Benchmark Portfolio which is currently offered with no sales
or redemption charges, distribution fees or shareholder servicing fees. The
advisory fees payable to Northern under the Portfolio's advisory contract are
for services that are in addition to, rather than duplicative of, services
provided under the advisory contract for any other Benchmark Portfolio or
unaffiliated
45
<PAGE>
investment company in which the Portfolio invests, including but not limited to
asset allocation and portfolio selection. The administration, custody and
transfer agency fees borne by the Portfolio are also for services that are in
addition to, and not duplicative of, services provided to the underlying funds.
Although the Benchmark Portfolios will not impose sales loads or distribution
fees on investments by the Global Asset Portfolio, it is possible that the
Global Asset Portfolio may pay distribution fees in connection with its
investments in unaffiliated investment companies. These would be indirectly
borne by the Portfolio's investors. In addition, the Global Asset Portfolio
will bear the additional transaction fees payable in connection with
investments in the Small Company Index and International Equity Index
Portfolios.
As a fund that may invest a substantial portion of its assets in other
investment companies, the Global Asset Portfolio will be subject to certain
investment risks. The Global Asset Portfolio's performance is directly related
to the performance of the investment companies in which it invests.
Accordingly, the ability of the Portfolio to meet its investment objective is
directly related to the ability of the underlying funds to meet their
objectives, as well as the allocation among those funds by Northern. There can
be no assurance that the investment objective of any underlying fund will be
achieved. To the extent that one or more underlying funds invest more than 25%
of their total assets in one industry, the Portfolio may, through its
investments in such funds, invest more than 25% of its total assets in such
industry. This indirect concentration may subject the Portfolio to more
volatile price movements than would be the case in the absence of such
concentration. In addition, the structure of the Portfolio may give rise to
"wash" transactions which occur when one underlying fund purchases the same
securities that another underlying fund is selling. These transactions would
cause the Global Asset Portfolio to indirectly incur transaction costs with no
corresponding investment benefit. Because the Portfolio will pursue its global
strategy by investing in underlying funds that invest in different types of
securities, Northern believes that the risk associated with wash transactions
is minimal.
From time to time, the underlying Benchmark Portfolios may experience
relatively large purchases or redemptions due to asset allocation decisions
made by Northern in managing the Global Asset Portfolio. While it is impossible
to predict the overall impact of these transactions over time, there could be
adverse effects on the Benchmark Portfolios to the extent that they may be
required to sell securities at times when they would not otherwise do so or
receive cash that cannot be invested in an expeditious manner. There may be tax
consequences associated with purchases and sales of securities, and such sales
may also increase transaction costs. Northern is committed to minimizing the
impact of these transactions on the underlying Benchmark Portfolios to the
extent it is consistent with pursuing the Global Asset Portfolio's investment
objective and will monitor the impact of the Global Asset Portfolio's asset
allocation decisions on the underlying Benchmark Portfolios. Northern will
nevertheless face conflicts in fulfilling its responsibilities because of the
possible differences between the interests of the Global Asset Portfolio and
the interests of the underlying Benchmark Portfolios. In addition, Northern is
subject to conflicts of interest in allocating Global Asset Portfolio assets
among the various Benchmark Portfolios because the fees payable to it or NTQA
by some Benchmark Portfolios are higher than the fees payable by other
Benchmark Portfolios.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
UNITED STATES GOVERNMENT OBLIGATIONS. Each Portfolio may invest, to the extent
consistent with its investment policies, in a variety of U.S. Treasury
obligations consisting of bills, notes and bonds, which principally differ only
in their interest rates, maturities and time of issuance. Each Portfolio (other
than the U.S. Treasury Index
46
<PAGE>
Portfolio) may also invest in other securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities consisting of bills, notes and
bonds, which principally differ only in their interest rates, maturities and
time of issuance. Obligations of certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others are supported only by the credit of the instrumentalities. No assurance
can be given that the U.S. Government would provide financial support to its
agencies or instrumentalities if it is not obligated to do so by law. There is
no assurance that these commitments will be undertaken or complied with in the
future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations will therefore be regarded as
illiquid.
CONVERTIBLE SECURITIES. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond, Balanced, Global Asset, Diversified Growth, Focused Growth,
International Growth and International Equity Index Portfolios may each acquire
convertible securities. A convertible security is a security that may be
converted either at a stated price or rate within a specified period of time
into a specified number of shares of common stock. By investing in convertible
securities, a Portfolio seeks the opportunity, through the conversion feature,
to participate in the capital appreciation of the common stock into which the
securities are convertible, while earning higher current income than is
available from the common stock. Convertible securities acquired by the
Portfolios will be subject to the same rating requirements as a Portfolio's
investments in its fixed income securities, or if unrated, will be of
comparable quality as determined by the Investment Advisers in accordance with
guidelines approved by the Board of Trustees, except that a Portfolio may
acquire convertible securities rated below investment grade so long as a
Portfolio's investments in all non-investment grade securities does not exceed
the limitations set forth below under "Non-Investment Grade Securities." The
Fixed Income Portfolios will ordinarily sell units of common stock received
upon conversion.
CORPORATE OBLIGATIONS. A Portfolio (other than the U.S. Government Securities
and U.S. Treasury Index Portfolios) may purchase debt obligations of domestic
or foreign corporations subject to the Portfolio's minimum rating requirements
for purchases of debt securities. See discussion of "Investment Grade
Securities" and "Non-Investment Grade Securities" below.
INVESTMENT GRADE SECURITIES. The Fixed Income, Balanced and Global Asset
Portfolios may invest in fixed income securities of all types, and the Short-
Intermediate Bond, Bond, Intermediate Bond, International Bond, Balanced,
Global Asset, Diversified Growth, Focused Growth, International Growth and
International Equity Index Portfolios may invest a portion of their assets in
convertible securities. Such securities will generally be investment grade.
Investment grade securities include those securities which are rated BBB or
higher by Standard and Poor's Ratings Group ("S&P"), Baa or higher by Moody's
Investors Service, Inc. ("Moody's"), BBB or higher by Duff & Phelps Credit
Rating Co. ("Duff") or BBB or higher by Fitch IBCA Inc. ("Fitch") at the time
of purchase, or if unrated, are of comparable quality as determined by the
Investment Advisers. A security will be considered investment grade if it
receives a rating as described above from either S&P, Moody's, Duff or
47
<PAGE>
Fitch, even though it has received a lower rating from other rating
organizations. Securities rated BBB by S&P, Duff or Fitch, or Baa by Moody's
have certain speculative characteristics and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher rated securities.
Commercial paper and other short-term obligations acquired by a Portfolio will
be rated A-2 or higher by S&P, P-2 or higher by Moody's, D-2 or higher by Duff,
or F-2 or higher by Fitch at the time of purchase or, if unrated, determined to
be of comparable quality by the Investment Advisers. Subsequent to its purchase
by a Portfolio, a rated security may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Portfolio. The
Investment Adviser will consider such an event in determining whether the
Portfolio should continue to hold such security. In addition, certain
Portfolios may acquire fixed income securities rated below investment grade
when the Investment Adviser believes that the investment characteristics of
such securities make them desirable acquisitions. In either case, a Portfolio's
total investment in non-investment grade securities will not exceed the
limitations set forth below under "Non-Investment Grade Securities."
NON-INVESTMENT GRADE SECURITIES. Although the fixed income securities in which
the Fixed Income, Balanced and Global Asset Portfolios may invest and the
convertible securities in which the Short-Intermediate Bond, Bond, Intermediate
Bond, International Bond, Balanced, Global Asset, Diversified Growth, Focused
Growth, International Growth and International Equity Index Portfolios may
invest will normally be rated investment grade at the time of purchase, the
Portfolios (other than the U.S. Government Securities and U.S. Treasury Index
Portfolios) may invest in non-investment grade or convertible securities when
the Investment Advisers believe that the investment characteristics of such
securities make them desirable in light of the Portfolios' investment
objectives and current portfolio mix, so long as under normal market and
economic conditions, (i) no more than 5% of the respective total assets of the
International Bond, International Growth and International Equity Index
Portfolios and no more than 10% of the respective total assets of the Short-
Intermediate Bond, Bond, Intermediate Bond, Balanced, Global Asset, Diversified
Growth and Focused Growth Portfolios are invested in non-investment grade
securities and (ii) such securities are rated "B" or higher at the time of
purchase by at least one major rating agency, or if unrated will be of
comparable quality as determined by the Investment Advisers. Non-investment
grade securities (those that are rated "Ba" or lower by Moody's or "BB" or
lower by S&P, Duff or Fitch) are commonly referred to as "junk bonds." To the
extent that securities, including convertible securities, acquired by a
Portfolio are not rated investment grade, there is a greater risk as to the
timely repayment of the principal on, and timely payment of interest or
dividends with respect to, such securities. Particular risks associated with
lower-rated securities are (a) the relative youth and growth of the market for
such securities, (b) the sensitivity of such securities to interest rate and
economic changes, (c) the lower degree of protection of principal and interest
payments, (d) the relatively low trading market liquidity for the securities,
(e) the impact that legislation may have on the high yield bond market (and, in
turn, on a Portfolio's net asset value and investment practices), and (f) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. An economic downturn could
also disrupt the market for lower-rated securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest. If the issuer of a security held by a Portfolio
defaulted, the Portfolio could incur additional expenses to seek recovery.
FORWARD CURRENCY EXCHANGE CONTRACTS. The Short-Intermediate Bond, Bond,
Intermediate Bond, International Bond, Balanced, Global Asset, Diversified
Growth, Focused Growth, International Growth and International
48
<PAGE>
Equity Index Portfolios may enter into forward currency exchange contracts for
hedging purposes and in an effort to reduce the level of volatility caused by
changes in foreign currency exchange rates or where such transactions are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Portfolios. The Global Asset, International Bond and
International Growth Portfolios may also enter into forward currency exchange
contracts for speculative purposes (to seek to increase total return). In
addition, the Global Asset, International Growth and International Bond
Portfolios may engage in cross-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated
in a different currency if Northern believes that there is a pattern of
correlation between the two currencies.
A forward currency exchange contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of contract. Although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such
currency increase. Consequently, a Portfolio may choose to refrain from
entering into such contracts. In connection with forward currency exchange
contracts, the Portfolios will segregate liquid assets in accordance with
applicable requirements of the SEC or will otherwise cover their positions.
The International Bond Portfolio may also invest in debt securities denominated
in the European Currency Unit ("ECU"), which is a "basket" consisting of
specified amounts in the currencies of certain of the twelve member states of
the European Community. The specific amounts of currencies comprising the ECU
may be adjusted by the Council of Ministries of the European Community from
time to time to reflect changes in relative values of the underlying
currencies. In addition, the Portfolio may invest in securities denominated in
other currency "baskets."
OPTIONS. Each Portfolio may write covered call options, buy put options, buy
call options and write secured put options for hedging (or cross-hedging)
purposes or for the purpose of earning additional income. Such options may
relate to particular securities, foreign or domestic securities indices,
financial instruments or foreign currencies and may or may not be listed on a
foreign or domestic securities exchange and issued by the Options Clearing
Corporation. The Portfolios will not purchase put and call options in an amount
that exceeds 5% of their respective net assets at the time of purchase. The
aggregate value of a Portfolio's assets that will be subject to options written
by the Portfolio will not exceed 25% of its net assets at the time the option
is written.
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 custodian. Put options written by a Portfolio are "secured" if
the Portfolio maintains liquid assets in a segregated account with its
custodian in an amount not less than the exercise price of the option at all
times during the option period.
49
<PAGE>
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security or currency
gives the purchaser of the option the right to buy, and a writer the obligation
to sell, the underlying security or currency at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security or currency. The premium paid to the writer is in consideration
for undertaking the obligation under the option contract. A put option for a
particular security or currency gives the purchaser the right to sell the
security or currency at the stated exercise price to the expiration date of the
option, regardless of the market price of the security or currency. In contrast
to an option on a particular security, an option on an index provides the
holder with the right to make or receive a cash settlement upon exercise of the
option. The amount of this settlement will be equal to the difference between
the closing price of the index at the time of exercise and the exercise price
of the option expressed in dollars, times a specified multiple.
Each Portfolio will invest and trade in unlisted over-the-counter options only
with firms deemed creditworthy by the Investment Advisers. However, unlisted
options are not subject to the protections afforded purchasers of listed
options by the Options Clearing Corporation, which performs the obligations of
its members which fail to perform them in connection with the purchase or sale
of options.
FUTURES CONTRACTS AND RELATED OPTIONS. Each Portfolio may invest in futures
contracts and options on futures contracts for hedging purposes, to increase
total return (i.e., for speculative purposes) or to maintain liquidity to meet
potential shareholder redemptions, invest cash balances or dividends or
minimize trading costs. The value of a Portfolio's contracts may equal up to
100% of its total assets, although a Portfolio will not purchase or sell a
futures contract unless immediately after any such transaction the sum of the
aggregate amount of margin deposits on its existing futures positions and the
amount of premiums paid for related options entered into for other than bona
fide hedging purposes is 5% or less of its total assets.
Futures contracts obligate a Portfolio, at maturity, to take or make delivery
of certain domestic or foreign securities, the cash value of a securities index
or, in the case of the International Bond, International Growth, International
Equity Index and Global Asset Portfolios, a stated quantity of a foreign
currency. When used as a hedge, a Portfolio may sell a futures contract in
order to offset a decrease in the market value of its portfolio securities that
might otherwise result from a market decline or currency exchange fluctuations.
A Portfolio may do so either to hedge the value of its portfolio of securities
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 a futures contract as a hedge in anticipation of purchases of
securities. In addition, a Portfolio may utilize futures contracts in
anticipation of changes in the composition of its portfolio holdings.
The Portfolios may purchase and sell call and put options on futures contracts
traded on a domestic or foreign exchange or board of trade. When a Portfolio
purchases an option on a futures contract, it has the right to assume a
position as a purchaser or seller of a futures contract at a specified exercise
price during the option period. When a Portfolio sells an option on a futures
contract, it becomes obligated to purchase or sell a futures contract if the
option is exercised. In connection with a Portfolio's position in a futures
contract or option thereon, the Portfolio will segregate liquid assets in
accordance with applicable requirements of the SEC or otherwise cover its
position.
The primary risks associated with the use of futures contracts and options are:
(i) imperfect correlation between the change in market value of the securities
held by a Portfolio and the price of futures contracts and options; (ii) the
possible inability to close a futures contract when desired; (iii) losses due
to unanticipated market movements which are potentially unlimited; and (iv) the
Investment Adviser's ability to predict correctly the
50
<PAGE>
direction of securities prices, interest rates, currency exchange rates and
other economic factors. For a further discussion see "Additional Investment
Information--Futures Contracts and Related Options" and Appendix B in the
Additional Statement.
The Portfolios intend to comply with the regulations of the Commodity Futures
Trading Commission exempting the Portfolios from registration as a "commodity
pool operator."
INTEREST RATE SWAPS, FLOORS AND CAPS AND CURRENCY SWAPS. Each Fixed Income
Portfolio (other than the U.S. Treasury Index Portfolio) and each of the Global
Asset and Balanced Portfolios may, in order to protect its value from interest
rate fluctuations and to hedge against fluctuations in the floating rate
market, enter into interest rate swaps or purchase interest rate floors or
caps. The Portfolios expect to enter into these hedging transactions primarily
to preserve a return or spread of a particular investment or portion of its
holdings and to protect against an increase in the price of securities the
Portfolios anticipate purchasing at a later date. Interest rate swaps involve
the exchange by a Portfolio with another party of their respective commitments
to pay or receive interest (e.g., an exchange of floating rate payments for
fixed rate payments). The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. In order to
protect against currency fluctuations, the International Bond, International
Growth, International Equity Index and Global Asset Portfolios may enter into
currency swaps. Currency swaps involve the exchange of the rights of a
Portfolio and another party to make or receive payments in specified
currencies.
The net amount of the excess, if any, of a Portfolio's obligations over its
entitlements with respect to each interest rate or currency swap will be
accrued on a daily basis and the Portfolio will segregate an amount of liquid
assets having an aggregate net asset value at least equal to such accrued
excess. If the other party to an interest rate swap defaults, a Portfolio's
risk of loss consists of the net amount of interest payments that the Portfolio
is contractually entitled to receive. In contrast, currency swaps usually
involve the delivery of the entire principal value of one designated currency
in exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. A Portfolio will not
enter into any interest rate swap, floor or cap transaction or any currency
swap unless the unsecured commercial paper, senior debt, or claims paying
ability of the other party 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.
SECURITIES LENDING. The Portfolios may seek additional income from time to time
by lending their respective portfolio securities on a short-term basis to
banks, brokers and dealers under agreements requiring that the loans be secured
by collateral in the form of cash, cash equivalents, U.S. Government securities
or irrevocable bank letters of credit maintained on a current basis equal in
value to at least the market value of the securities loaned. A Portfolio may
not make such loans in excess of 33 1/3% of the value of the Portfolio's total
assets (including the loan collateral). Loans of securities involve risks of
delay in receiving additional collateral or in recovering the securities
loaned, or possible loss of rights in the collateral should the borrower of the
securities become insolvent. The proceeds received by a Portfolio in connection
with loans of portfolio securities may be invested in U.S. Government
securities and other liquid high grade debt obligations.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS.
The Portfolios may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell
51
<PAGE>
securities for a fixed price at a future date beyond customary settlement time.
Securities purchased on a when-issued, delayed-delivery or forward commitment
basis involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. Conversely, securities sold on a
delayed-delivery or forward commitment basis involve the risk that the value of
the security to be sold may increase prior to the settlement date. Securities
purchased on a forward commitment basis also involve the risk that the seller
may fail to deliver the security on the agreed upon future date. A Portfolio is
required to segregate liquid assets until three days prior to the settlement
date having a value (determined daily) at least equal to the amount of the
Portfolio's purchase commitments, or to otherwise cover its position. Although
the Portfolios would generally purchase securities on a when-issued, delayed-
delivery or a forward commitment basis with the intention of acquiring the
securities, the Portfolios may dispose of such securities prior to settlement
if the Investment Advisers deem it appropriate to do so.
BORROWINGS. The Portfolios are authorized to make limited borrowings for
temporary purposes to the extent described below under "Investment
Restrictions." If the securities held by the Portfolios should decline in value
while borrowings are outstanding, the net asset value of the Portfolios'
outstanding shares will decline in value by proportionately more than the
decline in value suffered by the Portfolios' securities. Borrowings may be
effected through reverse repurchase agreements under which the Portfolios would
sell portfolio securities to financial institutions such as banks and broker-
dealers and agree to repurchase them at a particular date and price. The Fixed
Income, Balanced and Global Asset Portfolios may utilize reverse repurchase
agreements when it is anticipated that the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. See "Description of Securities
and Common Investment Techniques--Reverse Repurchase Agreements" below for
additional information concerning reverse repurchase agreements. For additional
information on borrowings, see "Additional Investment Information--Investment
Restrictions" in the Additional Statement.
SHORT-TERM OBLIGATIONS. Subject to each Portfolio's investment objective and
policies, a Portfolio may also invest in short-term U.S. government
obligations, high quality money market instruments and repurchase agreements,
pending investment, to meet anticipated redemption requests, or as a temporary
defensive measure. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. See "Special Risks and Other
Considerations--Foreign Securities" above.
REPURCHASE AGREEMENTS. The Portfolios may agree to purchase portfolio
securities from financial institutions such as banks and broker/dealers which
are deemed to be creditworthy by the Investment Advisers under guidelines
approved by the Board of Trustees subject to the seller's agreement to
repurchase them at a mutually agreed upon date and price ("repurchase
agreements"). Although the securities subject to a repurchase agreement may
bear maturities exceeding one year, settlement for the repurchase agreement
will never be more than one year after a Portfolio's acquisition of the
securities and normally will be within a shorter period of time. Securities
subject to repurchase agreements are held either by the Trust's custodian or
subcustodian (if any), or in the Federal Reserve/Treasury Book-Entry System.
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by a Portfolio in
an amount that exceeds the agreed upon repurchase price (including accrued
interest). Default by or bankruptcy of the seller would, however, expose a
Portfolio to possible loss because of adverse market action or delays in
connection with the disposition of the underlying obligations.
52
<PAGE>
REVERSE REPURCHASE AGREEMENTS. The Portfolios may enter into reverse repurchase
agreements which involve the sale of securities held by them, with an agreement
to repurchase the securities at an agreed upon price (including interest) and
date. The Portfolios will use the proceeds of reverse repurchase agreements to
purchase other securities either maturing, or under an agreement to resell, at
a date simultaneous with or prior to the expiration of the reverse repurchase
agreement. The Portfolios will utilize reverse repurchase agreements, which may
be viewed as borrowings (or leverage), when it is anticipated that the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the reverse repurchase transaction.
Reverse repurchase agreements involve the risks that the interest income earned
from the investment of the proceeds of the transaction will be less than the
interest expense of the reverse repurchase agreement, that the market value of
the securities sold by the Portfolio may decline below the price of the
securities the Portfolio is obligated to repurchase and that the securities may
not be returned to the Portfolio. During the time a reverse repurchase
agreement is outstanding, a Portfolio will segregate liquid assets having a
value at least equal to the repurchase price. A Portfolio may enter into
reverse repurchase agreements with banks, brokers and dealers, and has the
authority to enter into reverse repurchase agreements in amounts not exceeding
in the aggregate one-third of the Portfolio's total assets. See "Additional
Investment Information--Investment Restrictions" in the Additional Statement.
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolios may purchase rated and
unrated variable and floating rate instruments. These instruments may include
variable amount master demand notes that permit the indebtedness thereunder to
vary in addition to providing for periodic adjustments in the interest rate.
The Portfolios may also invest in leveraged inverse floating rate debt
instruments ("inverse floaters"). The interest rate on an inverse floater
resets in the opposite direction from the market rate of interest to which the
inverse floater is indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate varies by a magnitude that
exceeds the magnitude of the change in the index rate of interest. The higher
degree of leverage inherent in inverse floaters is associated with greater
volatility in their market values. Accordingly, the duration of an inverse
floater may exceed its stated final maturity. The Portfolios may deem the
maturity of variable and floating rate instruments to be less than their stated
maturities based on their variable and floating rate features and/or their put
features subject to applicable SEC regulations. Unrated variable and floating
rate instruments will be determined by the Investment Advisers to be of
comparable quality at the time of the purchase to rated instruments which may
be purchased by the Portfolios.
The absence of an active secondary market with respect to particular variable
and floating rate instruments could make it difficult for the Portfolios to
dispose of the instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolios are not entitled to exercise their demand
rights, and the Portfolios could, for these or other reasons, suffer a loss
with respect to such instruments. Variable and floating rate instruments
including inverse floaters held by a Portfolio will be subject to the
Portfolio's 15% limitation on illiquid investments when the Portfolio may not
demand payment of the principal amount within seven days absent a reliable
trading market.
INVESTMENT COMPANIES. In connection with the management of their daily cash
positions, the Portfolios may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or penny-
rounding method of valuation. The U.S. Treasury Index, Equity Index, Small
Company Index and International Equity Index Portfolios may also invest in
shares of other investment companies that are structured to seek a similar
correlation to the performance of the Lehman Index, S&P Index, Russell Index or
EAFE Index, respectively. The International Bond, International Growth,
International Equity Index and Global Asset Portfolios may also
53
<PAGE>
purchase shares of investment companies investing primarily in foreign
securities, including "country funds." Country funds have portfolios consisting
primarily of securities of issuers located in one foreign country or region. As
stated above, the International Equity Index and Global Asset Portfolios may
invest in WEBS and similar securities of investment companies that invest in
securities included in foreign securities indices. In addition, the Portfolios
may invest in securities issued by other investment companies if otherwise
consistent with their respective investment objectives and policies. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses including advisory fees. These expenses would be in addition to the
advisory fees and other expenses the Portfolio bears directly in connection
with its own operations.
Investments by a Portfolio in other investment companies will be subject to the
limitations of the 1940 Act or, in the case of the Global Asset Portfolio, any
exemptive order that may be granted by the SEC to the Trust. These limitations
are discussed in the Additional Statement. Although the Portfolios do not
expect to do so in the foreseeable future, a Portfolio is authorized to invest
substantially all of its assets in a single open-end investment company or
series thereof with substantially the same investment objective, policies and
fundamental restrictions as the Portfolio.
MONEY MARKET BENCHMARK PORTFOLIOS. The Global Asset Portfolio may also invest
in shares of the money market investment portfolios offered by the Trust and
advised by Northern. Each of the Government Select, Government and Diversified
Assets Portfolios seek to maximize current income to the extent consistent with
the preservation of capital and maintenance of liquidity. The Tax-Exempt
Portfolio seeks to provide, to the extent consistent with the preservation of
capital and prescribed portfolio standards, a high level of income exempt from
regular Federal income tax. The Government Select Portfolio invests in selected
short-term obligations of the U.S. Government, its agencies and
instrumentalities the interest on which is generally exempt from state income
taxation. The Government Portfolio invests in short-term obligations of the
U.S. Government, its agencies and instrumentalities and related repurchase
agreements. The Diversified Assets Portfolio invests in money market
instruments of both U.S. and foreign issuers, including certificates of
deposit, bankers' acceptances, commercial paper and repurchase agreements. The
Tax-Exempt Portfolio invests primarily in short-term municipal instruments the
interest on which is exempt from regular Federal income tax.
The money market Benchmark Portfolios attempt to maintain a stable net asset
value of $1.00 per share and value their assets using the amortized cost method
in accordance with SEC regulations. There is no assurance, however, that the
money market Benchmark Portfolios will be successful in maintaining their per
share value at $1.00 on a continuous basis.
ILLIQUID OR RESTRICTED SECURITIES. Each Portfolio may invest up to 15% of its
net assets in securities which are illiquid. Illiquid securities would
generally include repurchase agreements and time deposits with
notice/termination dates in excess of seven days, certain unlisted over-the-
counter options, certain guaranteed investment contracts ("GICs") and other
securities that are traded in the United States but are subject to trading
restrictions because they are not registered under the Securities Act of 1933
(the "1933 Act").
If otherwise consistent with their respective investment objectives and
policies, the Portfolios may purchase domestically-traded securities which are
not registered under the 1933 Act but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act. Any such
security will not be considered illiquid so long as it is determined by the
Investment Advisers, under guidelines approved by the Trust's Board
54
<PAGE>
of Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of
illiquidity in a Portfolio during any period that qualified institutional
buyers become uninterested in purchasing these restricted securities.
STRIPPED OBLIGATIONS. To the extent consistent with their investment
objectives, the Fixed Income, Balanced and Global Asset Portfolios may
purchase Treasury receipts and other "stripped" securities that evidence
ownership in either the future interest payments or the future principal
payments on U.S. Government and other domestic and foreign obligations. These
participations, which may be issued by the U.S. Government (or a U.S.
Government agency or instrumentality), foreign governments or by private
issuers such as banks and other financial institutions, are issued at a
discount to their "face value," and may include stripped mortgage-backed
securities ("SMBS"), which are derivative multi-class mortgage securities.
Stripped securities, particularly SMBS, may exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal
and interest are returned to investors.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. Each Fixed Income Portfolio (other
than the U.S. Treasury Index and International Bond Portfolios), the Balanced
Portfolio and the Global Asset Portfolio may also purchase participations in
trusts that hold U.S. Treasury securities (such as TIGRs and CATS) where the
trust participations evidence ownership in either the future interest payments
or the future principal payments on the U.S. Treasury obligations. Like other
stripped securities, these participations are also normally issued at a
discount to their "face value," and may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. Investments by a Portfolio in such
receipts will not exceed 5% of the value of the Portfolio's total assets.
BANK OBLIGATIONS. The Portfolios may invest in domestic and foreign bank
obligations, including certificates of deposit, bank and deposit notes,
bankers' acceptances and fixed time deposits. Such obligations may be general
obligations of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligation or by government
regulation.
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. The Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond, Balanced and Global Asset Portfolios may purchase asset-
backed securities that are secured or backed by mortgages or other assets
(e.g., automobile loans, credit card receivables and other financial assets)
and are issued by entities such as GNMA, FNMA, FHLMC, commercial banks,
financial companies, finance subsidiaries of industrial companies, savings and
loan associations, mortgage banks, investment banks and certain special
purpose entities. Asset-backed securities acquired by such Portfolios will be
rated BBB or better by S&P, Duff or Fitch, or Baa or better by Moody's at the
time of purchase or, if not rated, will be determined by Northern to be of
comparable quality. The Portfolios will not purchase non-mortgage asset-backed
securities that are not rated by S&P, Duff, Fitch or Moody's.
Presently there are several types of mortgage-backed securities that may be
acquired by the Short-Intermediate Bond, Bond, Intermediate Bond,
International Bond, Balanced and Global Asset Portfolios, including guaranteed
mortgage pass-through certificates, which provide the holder with a pro rata
interest in the underlying mortgages, and collateralized mortgage obligations
("CMOs"), which provide the holder with a specified interest in the cash flow
of a pool of underlying mortgages or other mortgage-backed securities. Issuers
of CMOs ordinarily elect to be taxed as pass-through entities known as real
estate mortgage investment conduits ("REMICs"). CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate and a final
distribution date. The
55
<PAGE>
relative payment rights of the various CMO classes may be structured in a
variety of ways. The Portfolios will not purchase "residual" CMO interests,
which normally exhibit greater price volatility.
The yield characteristics of asset-backed securities differ from traditional
debt securities. A major difference is that the principal amount of the
obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster
than expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity. In calculating the average
weighted maturity of the U.S. Government Securities, Short-Intermediate Bond,
Bond, Intermediate Bond and International Bond Portfolios or the fixed income
portion of the Balanced Portfolio, the maturity of asset-backed securities
will be based on estimates of average life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore,
prepayment rates are influenced by a variety of economic and social factors.
In general, the collateral supporting non-mortgage asset-backed securities is
of shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Like other fixed income securities, when interest
rates rise the value of an asset-backed security generally will decline;
however, when interest rates decline, the value of an asset-backed security
with prepayment features may not increase as much as that of other fixed
income securities.
The value of asset-backed securities may change because of actual or perceived
changes in the creditworthiness of the originator, servicing agent, or the
financial institution providing credit support. In addition, non-mortgage
asset-backed securities involve certain risks 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 give 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 payment on these
securities.
EXCHANGE RATE-RELATED SECURITIES. The Short-Intermediate Bond, Bond,
Intermediate Bond, International Bond, Balanced, and Global Asset Portfolios
may invest in securities for which the principal repayment at maturity, while
paid in U.S. dollars, is determined by reference to the exchange rate between
the U.S. dollar and the currency of one or more foreign countries ("Exchange
Rate-Related Securities"). The interest payable on these securities is
denominated in U.S. dollars and is not subject to foreign currency risk and,
in most cases, is paid at rates higher than most other similarly rated
securities in recognition of the foreign currency risk component of Exchange
Rate-Related Securities. Investments in Exchange Rate-Related Securities
entail certain risks. There is the possibility of significant changes in rates
of exchange between the U.S. dollar and any foreign currency to which an
Exchange Rate-Related Security is linked. In addition, potential illiquidity
in the forward foreign
56
<PAGE>
exchange market and the high volatility of the foreign exchange market may
from time to time combine to make it difficult to sell an Exchange Rate-
Related Security prior to maturity without incurring a significant price loss.
GUARANTEED INVESTMENT CONTRACTS. The Short-Intermediate Bond, Bond,
Intermediate Bond, Balanced and Global Asset Portfolios may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S.
insurance companies. Pursuant to such contracts, a Portfolio makes cash
contributions to a deposit fund of the insurance company's general account.
The insurance company then credits to the Portfolio on a monthly basis
interest which is based on an index (in most cases this index is expected to
be the Salomon Brothers CD Index), but is guaranteed not to be less than a
certain minimum rate. A GIC is normally a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a
GIC becomes part of the general assets of the insurance company, and the
contract is paid from the company's general assets. A Portfolio will only
purchase GICs from insurance companies which, at the time of purchase, have
assets of $1 billion or more and meet quality and credit standards established
by Northern. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market
in GICs does not currently exist. Therefore, GICs will be subject to a
Portfolio's limitation on investments in illiquid securities when a Portfolio
may not demand payment of the principal amount within seven days and a
reliable trading market is absent.
WARRANTS. The Balanced, Global Asset, Diversified Growth, Focused Growth,
International Growth, Small Company Index and International Equity Index
Portfolios may invest up to 5% of their respective assets at the time of
purchase in warrants and similar rights (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specific price valid for a specific period of
time. The Balanced, Global Asset, Diversified Growth, Focused Growth and
International Growth Portfolios may also purchase bonds that are issued in
tandem with warrants. The prices of warrants do not necessarily correlate with
the prices of the underlying securities.
AMERICAN, EUROPEAN AND GLOBAL DEPOSITORY RECEIPTS. The Balanced, Global Asset,
Diversified Growth, Focused Growth, International Growth and International
Equity Index Portfolios may invest in securities of foreign issuers in the
form of American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") and Global Depository Receipts ("GDRs") or similar securities
representing securities of foreign issuers. These securities may not be
denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities and are denominated in U.S.
dollars. EDRs and GDRs are receipts issued by a non-U.S. financial institution
evidencing ownership of the underlying foreign or U.S. securities and are
generally denominated in foreign currencies. ADRs may be listed on a national
securities exchange or may be traded in the over-the-counter market. EDRs and
GDRs are generally designed for use in a foreign securities exchange and over-
the-counter markets. Investments in ADRs, EDRs and GDRs involve risks similar
to those accompanying direct investments in foreign securities. See "Special
Risks and Other Considerations--Foreign Securities" above.
Certain such institutions issuing ADRs, EDRs and GDRs may not be sponsored by
the issuer. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangement with the issuer. The Balanced, Diversified Growth and
Focused Growth Portfolios will limit investments in ADRs to 20% of their
respective assets and will limit investments in EDRs and GDRs to 5% of their
respective assets.
57
<PAGE>
FIXED INCOME INVESTMENTS. Even though interest-bearing securities are
investments which often offer a stable stream of income, the prices of fixed
income securities will vary inversely with changes in the prevailing level of
interest rates. These securities experience appreciation when interest rates
decline and depreciation when interest rates rise. An investment portfolio
consisting of fixed income securities will react in a similar manner.
Generally, the longer the maturity of a fixed income security, the higher its
yield and the greater its price volatility. Conversely, the shorter the
maturity, the lower the yield but the greater the price stability. The values
of fixed income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. A security's rating
normally depends on the likelihood that the borrower will meet each interest
and principal installment on a timely basis. As a result, lower-rated bonds
typically yield more than higher-rated bonds of the same maturity. Credit
ratings evaluate the safety of principal and interest payments, not market
risk, and rating agencies may or may not make timely changes in a rating to
reflect economic or company conditions that affect a security's market value.
As a result, the ratings of rating services are used by the Investment
Advisers only as indicators of investment quality. For a more complete
discussion of ratings, see Appendix A to the Additional Statement.
In addition, fixed income securities may be subject to both call risk and
extension risk. Call risk (i.e., where the issuer exercises its right to pay
principal on an obligation earlier than scheduled) causes cash flow to be
returned earlier than expected. This typically results when interest rates
have declined, and a Portfolio may be unable to recoup all of its initial
investment and will also suffer from having to reinvest in lower yielding
securities. Extension risk (i.e., where the issuer exercises its right to pay
principal on an obligation later than scheduled) causes cash flows to be
returned later than expected. This typically results when interest rates have
increased and a Portfolio will suffer from the inability to invest in higher
yielding securities.
PORTFOLIO TURNOVER. The portfolio turnover rate of the Global Asset,
International Bond, International Growth and International Equity Index
Portfolios will be affected by changes in country and currency weightings, as
well as changes in the holdings of specific issuers and investments in issuers
in smaller or emerging markets. In addition, the portfolio turnover rate of
the Global Asset Portfolio will be affected by Northern's decisions to
reallocate the Portfolio's assets from time to time among and within the
market segments discussed above in response to economic and market conditions.
The Trust cannot accurately predict the turnover rate for any Portfolio, which
may vary from year to year. The portfolio turnover rate of each Portfolio for
the last fiscal year or fiscal period, as the case may be, except the Global
Asset Portfolio, which had not commenced operations during the periods
reported, is stated above under "Financial Highlights." It is expected that
the portfolio turnover rate for the Global Asset Portfolio will not exceed
200% during the current fiscal year. High portfolio turnover (in excess of
100%) may result in the realization of short-term capital gains which are
taxable to unitholders as ordinary income (see "Taxes"). In addition, high
portfolio turnover rates may result in corresponding increases in brokerage
commissions and other transaction costs. The Portfolios will not consider
portfolio turnover rate a limiting factor in making investment decisions
consistent with their respective objectives and policies.
MISCELLANEOUS. The Equity Index, Small Company Index and International Equity
Index Portfolios may experience higher custody costs than other stock funds
because they maintain large portfolios of securities consistent with their
respective investment objectives.
Each Portfolio may also purchase other types of financial instruments, however
designated, whose investment and credit quality characteristics are determined
by the Investment Advisers to be substantially similar to those of any other
investment otherwise permitted by the investment policies described above.
58
<PAGE>
Pursuant to an SEC order, each Portfolio may engage in principal transactions
effected in the ordinary course of business with Goldman Sachs.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
shares of a Portfolio. These fundamental policies relate, among other things,
to the classification of each Portfolio (except the International Bond
Portfolio) as a diversified investment company under the 1940 Act, and to the
policy of each Portfolio not to invest more than 25% of its total assets in
securities of issuers in any one industry (with certain limited exceptions).
In addition, each Portfolio may borrow money from banks for temporary or
emergency purposes or to meet redemption requests, provided that the Portfolio
maintains asset coverage of at least 300% for all such borrowings.
As a non-fundamental investment restriction that can be changed without
shareholder 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 one issuer
(except U.S. Government securities).
TRUST INFORMATION
BOARD OF TRUSTEES
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
INVESTMENT ADVISERS, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser for all Portfolios except the U.S. Treasury
Index, Equity Index, Small Company Index and International Equity Index
Portfolios. Northern Trust Quantitative Advisors, Inc. ("NTQA"), an affiliate
of Northern which also has offices at 50 S. LaSalle Street, Chicago, IL 60675,
acts as investment adviser to the U.S. Treasury Index, Equity Index, Small
Company Index and International Equity Index Portfolios. Northern also serves
as transfer agent and custodian for each Portfolio. As transfer agent,
Northern performs various administrative servicing functions, and any
shareholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. NTQA is an Illinois state-chartered trust
company formed in 1988. On December 31, 1997, NTQA became a wholly-owned
subsidiary of Northern Trust Corporation. NTQA serves as investment adviser
principally to defined benefit and defined contribution plans and manages over
60 equity and bond commingled and common trust funds. As of December 31, 1997,
Northern Trust Corporation and its subsidiaries had approximately $25.3
billion in assets, $16.4 billion in deposits and employed over 7,553 persons.
59
<PAGE>
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $1 trillion of
assets as of December 31, 1997, including approximately $196.5 billion of
assets for which Northern and its affiliates had investment management
responsibility.
Under its Advisory Agreement with the Trust, each Investment Adviser, subject
to the general supervision of the Trust's Board of Trustees, is responsible
for making investment decisions for the Portfolios for which it serves as
adviser and for placing purchase and sale orders for portfolio securities.
Each Investment Adviser is also responsible for monitoring and preserving the
records required to be maintained under the regulations of the SEC (with
certain exceptions unrelated to its activities for the Trust). As compensation
for its advisory services and its assumption of related expenses, each
Investment Adviser is entitled to a fee from the Portfolios for which it
serves as adviser, computed daily and payable monthly, at annual rates set
forth in the table below (expressed as a percentage of the Portfolio's
respective average daily net assets). The table also reflects the advisory
fees (after voluntary fee waivers) paid by the Portfolios for the fiscal year
ended November 30, 1997.
<TABLE>
<CAPTION>
MAXIMUM
ANNUAL ADVISORY FEE PAID
ADVISORY FOR FISCAL YEAR
FEE* ENDED 11/30/97
-------- -----------------
<S> <C> <C>
U.S. Government Securities Portfolio.............. .60% .25%
Short-Intermediate Bond Portfolio................. .60% .25%
U.S. Treasury Index Portfolio..................... .40% .15%
Bond Portfolio.................................... .60% .25%
Intermediate Bond Portfolio....................... .60% .25%
International Bond Portfolio...................... .90% .70%
Balanced Portfolio................................ .80% .50%
Global Asset Portfolio............................ .60% N/A
Equity Index Portfolio............................ .30% .10%
Diversified Growth Portfolio...................... .80% .55%
Focused Growth Portfolio.......................... 1.10% .80%
Small Company Index Portfolio..................... .40% .20%
International Equity Index Portfolio.............. .50% .25%
International Growth Portfolio.................... 1.00% .80%
</TABLE>
- --------
* Northern has voluntarily agreed to reduce its advisory fee for the Global
Asset Portfolio to .35% of the Portfolio's average daily net assets for the
current fiscal year.
Prior to April 1, 1998, Northern served as investment adviser to the U.S.
Treasury Index, Equity Index, Small Company Index and International Equity
Index Portfolios pursuant to advisory agreements substantially identical to
those currently in effect for such Portfolios.
The difference between the stated advisory fee and the actual advisory fees
paid by the Portfolios reflects the fact that the Investment Adviser did not
charge the full amount of the advisory fees to which it would have been
entitled.
Northern also receives compensation as the Trust's custodian and transfer
agent under separate agreements. The fees payable by the Portfolios for these
services are described in this Prospectus under "Summary of Expenses"
60
<PAGE>
and in the Additional Statement. Different transfer agency fees are payable
with respect to the Class A, B, C and D Shares in the Portfolios.
On September 2, 1997, the shareholders of the International Growth Portfolio
approved a new investment advisory agreement which would allow this Portfolio
to implement a "manager of managers" structure with Northern and one of its
affiliates, and would allow the Portfolio's investment advisers to enter into
sub-advisory agreements with respect to the Portfolio with other firms in the
future without further shareholder approval. This structure cannot be
implemented, however, without an exemptive order of the SEC and final
authorization by the Board of Trustees, and at present it is uncertain when,
or if, this structure will become effective.
PORTFOLIO MANAGERS
The table below sets forth information on the persons primarily responsible
for the day-to-day management of the actively-managed Fixed Income and Equity
Portfolios.
<TABLE>
<CAPTION>
YEARS PRIMARILY FIVE YEAR
NAME AND TITLE PORTFOLIO RESPONSIBLE EMPLOYMENT HISTORY
- ---------------------- -------------------- --------------- ------------------
<S> <C> <C> <C>
Jon D. Brorson Balanced Since 1996 Mr. Brorson joined Northern
Senior Vice President, Diversified Growth Since 1996 in 1996. From 1990 to 1996,
Northern Focused Growth Since 1996 he was with Hardline
Global Asset Since 1998 Investment Corp. where his
primary responsibilities
included portfolio
management, investment
research, sales and trading.
Robert A. LaFleur International Growth Since 1994 Mr. LaFleur joined Northern
Senior Vice President, in 1982. During the past
Northern five years, Mr. LaFleur has
managed international equity
portfolios, including common
and collective trust funds
invested principally in
foreign securities.
Michael J. Lannan International Bond Since 1994 Mr. Lannan joined Northern
Vice President, in 1986. During the past
Northern five years, Mr. Lannan has
managed various fixed income
portfolios, including common
and collective trust funds
and a portfolio of another
investment company invested
in obligations of domestic
and foreign issuers.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY FIVE YEAR
NAME AND TITLE PORTFOLIO RESPONSIBLE EMPLOYMENT HISTORY
- ---------------------- -------------------------- --------------- ------------------
<S> <C> <C> <C>
Monty M. Memler Balanced Since 1993 Mr. Memler joined Northern
Vice President, in 1986. During the past
Northern five years, Mr. Memler has
managed various fixed income
portfolios, including common
and collective trust funds
and a mutual fund for
another investment company.
Steven Schafer U.S. Government Securities Since 1995 During the past five years,
Second Vice President, Intermediate Bond Since 1997 Mr. Schafer has managed
Northern various fixed income
portfolios, including common
and collective funds and a
portfolio of another
investment company, as
portfolio manager in
Northern's Fixed Income
Management Group. In
addition, Mr. Schafer served
as Credit Analyst at
Northern following both
industrial companies and
utilities prior thereto.
Mark J. Wirth Short-Intermediate Bond Since 1993 Mr. Wirth joined Northern in
Senior Vice President, Bond Since 1993 1986. During the past five
Northern years, Mr. Wirth has managed
various fixed income
portfolios, including common
and collective trust funds.
He is a senior strategist in
the taxable fixed income
group.
</TABLE>
YEAR 2000
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000"
issues, which stem from using two digits to reflect the year in computer
programs and data. Computer programmers and other designers of equipment that
use microprocessors have long abbreviated dates by eliminating the first two
digits of the year under the assumption that those two digits will always be
19. As the Year 2000 approaches, many systems may be unable to accurately
process certain date-based information, which could cause a variety of
operational problems for businesses.
Northern Trust's data processing software and hardware provide essential
support to virtually all of its business units, including the units that
provide services to the Trust so successfully addressing Year 2000 issues is
of the highest importance. Failure to complete renovation of the critical
systems used by Northern on a timely basis could have a materially adverse
effect on its ability to provide such services--as could Year 2000 problems
experienced by others. Although the nature of the problem is such that there
can be no complete assurance it will be successfully resolved, Northern Trust
has indicated that a renovation and risk mitigation program is well under way
and that it has a dedicated Year 2000 Project Team whose members have
significant systems
62
<PAGE>
development and maintenance experience. Northern Trust's Year 2000 project
includes a comprehensive testing plan. Northern Trust has advised the Trust
that it expects to complete work on its critical systems by December 31, 1998,
so that testing with outside parties may be conducted during 1999.
Northern Trust also will have a program to monitor and assess the efforts of
other parties. However, it cannot control the success of those efforts.
Contingency plans are being established where appropriate to provide Northern
Trust with alternatives in case these entities experience significant Year 2000
difficulties which impact Northern Trust.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as administrator
and distributor for the Portfolios. As compensation for its administrative
services (which include supervision with respect to the Trust's non-investment
advisory operations) and the assumption of related expenses, Goldman Sachs is
entitled to a fee from each Portfolio, computed daily and payable monthly, at
an annual rate of .15% of the average daily net assets of each of the
International Equity Index, International Growth and International Bond
Portfolios, and .10% of the average daily net assets of each other Portfolio.
No compensation is payable by the Trust to Goldman Sachs for its distribution
services.
In addition, Goldman Sachs has agreed that it will reimburse each Portfolio for
its expenses (including the fees payable is Goldman Sachs as administrator, but
excluding the fees payable in Northern for its duties as investment adviser and
transfer agent, servicing fees and extraordinary expenses, such as interest,
taxes and indemnification expenses) which exceed on an annualized basis .25% of
each of the International Bond, International Growth and International Equity
Index Portfolios' average daily net assets and .10% of each other Portfolio's
average daily net assets for any fiscal year. In addition, Northern intends to
voluntarily reduce its advisory fee for the Portfolios during the Trust's
current fiscal year. The result of these reimbursements and fee reductions will
be to increase the performance of the Portfolios during the periods for which
the reimbursements and reductions are made.
SHAREHOLDER SERVICING PLAN
Pursuant to a Shareholder Servicing Plan ("Servicing Plan") adopted by the
Board of Trustees of the Trust, the Trust may enter into agreements ("Servicing
Agreements") with banks, corporations, brokers, dealers and other financial
institutions which may include Northern and its affiliates ("Servicing
Agents"), under which they will render (or arrange for the rendering of)
administrative support services for investors who beneficially own Class B, C
and D Shares of each Portfolio. Beneficial owners of Class C and D Shares
require extensive administrative support services while beneficial owners of
Class B Shares need only some of these services. Administrative support
services, which are described more fully in the Additional Statement, may
include processing purchase and redemption requests from investors, placing net
purchase and redemption orders with Northern acting as the Trust's transfer
agent, providing necessary personnel and facilities to establish and maintain
investor accounts and records, and providing information periodically to
investors showing their positions in Portfolio shares.
For these services, fees are payable by the Trust to Servicing Agents at an
annual rate of up to .10%, .15% and .25% of the average daily net asset value
of Class B Shares, Class C Shares and Class D Shares, respectively, held or
serviced by such Servicing Agents for beneficial shareholders ("Servicing
Fees"). Conflict of interest restrictions may apply to the receipt of
compensation paid by the Trust to a Servicing Agent in connection with
63
<PAGE>
the investment of fiduciary funds in Portfolio shares. Banks and other
institutions regulated by the Office of Comptroller of the Currency, Board of
Governors of the Federal Reserve System and state banking commissions, and
investment advisers and other money managers subject to the jurisdiction of
the SEC, the Department of Labor or state securities commissions, are urged to
consult legal counsel before entering into Servicing Agreements.
SERVICE INFORMATION
Class A Shares are designed to be purchased by institutional investors or
others who can obtain information about their shareholder accounts and who do
not require the Transfer Agent or Servicing Agent services that are provided
for Class B, C and D shareholders.
Class B Shares are designed to be purchased by organizations maintaining
record ownership on behalf of beneficial owners where certain services of the
Transfer Agent and a Servicing Agent are required that are incident to the
separation of record and beneficial ownership.
Class C Shares are designed to be purchased by institutional investors who
require certain account related services of the Transfer Agent and a Servicing
Agent that are incident to the investor being the beneficial owner of shares.
Class D Shares are designed to be purchased by investors having a relationship
with an organization which requires that account related services and
information be provided to the investor and organization by the Transfer Agent
and a Servicing Agent.
Any person entitled to receive compensation for selling or servicing shares of
a Portfolio may receive different compensation with respect to one particular
class of shares over another in the same Portfolio.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," each Portfolio is responsible for the payment of its
expenses. Such expenses include, without limitation, the fees and expenses
payable to Northern and Goldman Sachs, brokerage fees and commissions, fees
for the registration or qualification of Portfolio shares 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 shareholders 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.
Because the Global Asset Portfolio may invest a substantial portion of its
assets in shares of other investment companies, investors in the Portfolio
will indirectly bear a proportionate share of such investment companies'
operating expenses in addition to those of the Portfolio. See "Special Risks
and Other Considerations Relating to the Global Asset Portfolio" above.
64
<PAGE>
INVESTING
PURCHASE OF SHARES
Shares of the Portfolios are sold on a continuous basis by the Trust's
distributor, Goldman Sachs, to institutional investors that either maintain
certain institutional accounts at Northern or its affiliates or invest an
aggregate of at least $5 million in one or more Portfolios of the Trust.
Goldman Sachs has established several procedures for purchasing Portfolio
shares in order to accommodate different types of institutional investors.
PURCHASE OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Class A, B, C and D Shares
of each Portfolio are offered to Northern, its affiliates and other
institutions and organizations, including certain defined contribution plans
having at least $30 million in assets or annual contributions of at least $5
million (the "Institutions"), acting on behalf of their customers, clients,
employees, participants and others (the "Customers") and for their own
account. Institutions may purchase shares of a Portfolio through procedures
established in connection with the requirements of their institutional
accounts or through procedures set forth herein with respect to Institutions
that invest directly. Institutions should contact Northern or an affiliate for
further information regarding purchases through institutional accounts. There
is no minimum initial investment in the Portfolios for Institutions that
maintain institutional accounts with Northern or its affiliates.
PURCHASE OF SHARES DIRECTLY FROM THE TRUST. An Institution that purchases
shares directly may do so by means of one of the following procedures,
provided that it makes an aggregate minimum initial investment of $5 million
in one or more Portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase shares of a Portfolio
by mail should mail a check or Federal Reserve draft payable to the
specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company, P.O.
Box 75943, Chicago, Illinois 60675-5943. An application will be incomplete
if it does not include a corporate resolution with the corporate seal and
secretary's certification, or other acceptable evidence of authority. If an
Institution desires to purchase the shares of more than one Portfolio, the
Institution should send a separate check for each Portfolio. All checks
must be payable in U.S. dollars and drawn on a bank located in the United
States. A $20 charge will be imposed if a check does not clear. The Trust
may delay transmittal of redemption proceeds for shares recently purchased
by check until such time as it has assured itself that good funds have been
collected for the purchase of such shares. This may take up to fifteen (15)
days. Cash and third party checks are not acceptable for the purchase of
Trust shares.
PURCHASE BY TELEPHONE. An Institution desiring to purchase shares of a
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to identify
the name of the Portfolio with respect to which shares are to be purchased
and the manner of payment. Please indicate whether a new account is being
established or an additional payment is being made to an existing account.
If an additional payment is being made to an existing account, please
provide the Institution's name and Portfolio Account Number. Purchase
orders are effected upon receipt by the Transfer Agent of Federal funds or
other immediately available funds in accordance with the terms set forth
below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase
shares of a Portfolio by wire or ACH Transfer should call the Transfer
Agent at 1-800-637-1380 for instructions if it is not making an
65
<PAGE>
additional payment to an existing account. An Institution that wishes to
add to an existing account should wire Federal funds or effect an ACH
Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Shareholder's Name)
For more information concerning requirements for the purchase of shares,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. Except as provided below under "Miscellaneous," a
purchase order for shares received by the Transfer Agent by 3:00 p.m., Chicago
time, on a Business Day (as defined under "Miscellaneous") will be effected on
that Business Day at the net asset value determined on that day with respect
to each Portfolio (other than the Small Company Index and International Equity
Index Portfolios), and at the net asset value plus an additional transaction
fee of .50% and 1.00% of the net asset value determined on that day with
respect to the Small Company Index and International Equity Index Portfolios,
respectively, provided that either: (a) the Transfer Agent receives the
purchase price in Federal funds or other immediately available funds prior to
3:00 p.m., Chicago time, on the same Business Day such order is received; or
(b) payment is received on the next Business Day in the form of Federal funds
or other immediately available funds in an institutional account maintained by
an Institution with Northern or an affiliate. Orders received after 3:00 p.m.
will be effected at the next determined net asset value, provided that payment
is made as provided herein. If an Institution accepts a purchase order from a
Customer on a non-Business Day, the order will not be executed until it is
received and accepted by the Transfer Agent on a Business Day in accordance
with the foregoing procedures.
MISCELLANEOUS PURCHASE INFORMATION. Shares are purchased without a sales
charge imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more investment portfolios of the
Trust. The Trust reserves the right to waive this minimum and to determine the
manner in which the minimum investment is satisfied. There is no minimum for
subsequent investments.
The Small Company Index and International Equity Index Portfolios require the
payment of an additional transaction fee on purchases of shares of the
Portfolios equal to .50% and 1.00%, respectively, of the dollar amount
invested. The additional transaction fee is paid to the Portfolios, not to
Goldman Sachs or the Investment Adviser. It is not a sales charge. The amount
applies to initial investments in the Portfolios and subsequent purchases
(including purchases made by exchange from the other Portfolios of the Trust),
but not to reinvested dividends or capital gain distributions. The purpose of
the additional transaction fee is to indirectly allocate transaction costs
associated with new purchases to investors making those purchases, thus
protecting existing shareholders. These costs include: (1) brokerage costs;
(2) market impact costs--i.e., the increase in market prices which may result
when the Portfolios purchase thinly traded stocks; (3) sales charges relating
to the purchase of shares in certain unaffiliated investment companies; and,
most importantly, (4) the effect of the "bid-ask" spread in the over-the-
counter market. (Securities in the over-the-counter market are bought at the
"ask" or purchase price, but are valued in the Portfolios at the last quoted
bid price). The additional transaction fees represent the Investment Adviser's
estimate of the brokerage and other transaction costs which may be incurred by
the Small Company Index and International Equity Index Portfolios in acquiring
stocks of small capitalization or foreign
66
<PAGE>
companies. Without the additional transaction fee, the Portfolios would
generally be selling their shares at a price less than the cost to the
Portfolios of acquiring the portfolio securities necessary to maintain their
investment characteristics, thereby resulting in reduced investment performance
for all shareholders in the Portfolios. With the additional transaction fee,
the transaction costs of acquiring additional stocks are not borne by all
existing shareholders, but are defrayed by the transaction fees paid by those
investors making additional purchases of shares. Because these transaction
costs do not need to be paid out of their other assets, the Small Company Index
and International Equity Index Portfolios are expected to track their
designated indices more closely.
See "Miscellaneous" below for information on when the Trust may advance the
time by which purchase requests must be received.
Institutions may impose different minimum investment and other requirements on
Customers purchasing shares through them. Depending on the terms governing the
particular account, Institutions may impose account charges such as asset
allocation fees, account maintenance fees, compensating balance requirements or
other charges based upon account transactions, assets or income which will have
the effect of reducing the net return on an investment in a Portfolio. In
addition, certain Institutions may enter into Servicing Agreements with the
Trust whereby they will perform (or arrange to have performed) various
administrative support services for Customers who are the beneficial owners of
Class B, C and D Shares and receive fees from the Portfolios for such services;
such fees will be borne exclusively by the beneficial owners of Class B, C and
D Shares, respectively. See "Trust Information--Shareholder Servicing Plan."
The level of administrative support services, as well as transfer agency
services, required by an Institution and its Customers generally will determine
whether they purchase shares of Class A, B, C or D. The exercise of voting
rights and the delivery to Customers of shareholder communications from the
Trust will be governed by the Customers' account agreements with the
Institutions. Customers should read this Prospectus in connection with any
relevant agreement describing the services provided by an Institution and any
related requirements and charges, or contact the Institution at which the
Customer maintains its account for further information.
Institutions that purchase shares on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
funds on a timely basis. An Institution will be responsible for all losses and
expenses of a Portfolio as a result of a check that does not clear, an ACH
transfer that is rejected, or any other failure to make payment in the time and
manner described above, and Northern may redeem shares from an account it
maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. Federal regulations require
that the Transfer Agent be furnished with a taxpayer identification number upon
opening or reopening an account. Purchase orders without such a number or an
indication that a number has been applied for will not be accepted. If a number
has been applied for, the number must be provided and certified within sixty
days of the date of the order.
Payment for shares of a Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing shares
of the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such Institutions may be
required to register as dealers pursuant to state law.
67
<PAGE>
Northern and NTQA may, at their own expense, provide compensation to certain
dealers and other financial intermediaries who provide services to their
Customers who invest in the Trust or whose Customers purchase significant
amounts of shares of the Trust. The amount of such compensation may be made on
a one-time and/or periodic basis, and may represent all or a portion of the
annual fees that are earned by Northern and NTQA as Investment Advisers (after
adjustments) and are attributable to shares held by such Customers. Such
compensation will not represent an additional expense to the Trust or its
shareholders, since it will be paid from assets of Northern, NTQA or their
affiliates.
REDEMPTION OF SHARES
REDEMPTION OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Institutions may redeem
shares of a class through procedures established by Northern and its
affiliates in connection with the requirements of their institutional
accounts. Institutions should contact Northern or an affiliate for further
information regarding redemptions through institutional accounts.
REDEMPTION OF SHARES DIRECTLY. Institutions that purchase shares directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
shares in accordance with procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem shares by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of shares or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem shares by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange shares by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the shareholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instructions.
All checks will be made payable to the shareholder of record and mailed
only to the shareholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape recordings for six months, and will
request a form of identification if such identification has been furnished
to the Transfer Agent or the Trust.
68
<PAGE>
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification, (ii) a signature guarantee by a financial
institution that is a participant in the Stock Transfer Agency Medallion
Program ("STAMP") in accordance with rules promulgated by the SEC (a
signature notarized by a notary public is not acceptable) or (iii) such
other evidence of authority as may be acceptable to the Transfer Agent. A
redemption request by mail will not be effective unless signed by a person
authorized by the corporate resolution or other acceptable evidence of
authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
Class A, B, C or D Shares of a Portfolio having a value of at least $1,000 for
Class A, B, C or D Shares, respectively, of other portfolios of the Trust as
to which the Institution or Customer maintains an existing account with an
identical title.
Exchanges will be effected by a redemption of Class A, B, C or D Shares of the
Portfolio held and the purchase of shares of the portfolio acquired. Customers
of Institutions should contact their Institutions for further information
regarding the Trust's exchange privilege and Institutions should contact the
Transfer Agent as appropriate. The Trust reserves the right to modify or
terminate the exchange privilege at any time upon 60 days written notice to
shareholders of record and to reject any exchange request. Exchanges are only
available in states where an exchange can legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
shares are effected at the net asset value per share next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or shares); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Shares--Other Requirements." Exchange orders
involving the purchase of shares of the Small Company Index Portfolio and
International Equity Index Portfolio are effected at the net asset value per
share next determined after receipt in good order by the Transfer Agent plus
an additional transaction fee equal to .50% and 1.00%, respectively, of such
value. See "Purchase of Shares--Miscellaneous Purchase Information" above.
Exchange orders of the other Portfolios are effected at the net asset value
per share next determined after receipt in good order by the Transfer Agent.
If received by Northern with respect to an institutional account it maintains
or the Transfer Agent by 3:00 p.m., Chicago time, on a Business Day, a
redemption request normally will result in proceeds being credited to such
account or sent on the next Business Day. Proceeds for redemption orders
received on a non-Business Day will normally be sent on the second Business
Day after receipt in good order.
MISCELLANEOUS REDEMPTION AND EXCHANGE INFORMATION. All redemption proceeds
will be sent by check unless Northern is directed otherwise. The ACH system
may be utilized for payment of redemption proceeds. Redemption of shares may
not be effected if a shareholder has failed to submit a completed and properly
executed (with corporate resolution or other acceptable evidence of authority)
new account application. If shares to be redeemed were recently purchased by
check, the Trust may delay transmittal of redemption proceeds until such time
as it has assured itself that good funds have been collected for the purchase
of such shares. This may take up to fifteen (15) days. The Trust reserves the
right to defer crediting, sending or wiring redemption proceeds for up to
seven days after receiving the redemption order if, in its judgment, an
earlier payment could adversely affect a Portfolio.
69
<PAGE>
See "Miscellaneous" below for information on when the Trust may advance the
time by which redemption and exchange requests must be received.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his shares to
the extent necessary to maintain the required minimum balance. The Trust also
reserves the right to redeem shares held by any shareholder who provides
incorrect or incomplete account information or when such involuntary
redemptions are necessary to avoid adverse consequences to the Trust and its
shareholders.
DISTRIBUTIONS
Distributions from a Portfolio's net investment income and annualized capital
gains are made as follows:
<TABLE>
<CAPTION>
INVESTMENT INCOME
DIVIDENDS CAPITAL
------------------- GAINS
DECLARED PAID DISTRIBUTION
--------- --------- ------------
<S> <C> <C> <C>
U.S. Government Securities Portfolio........... Monthly Monthly Annually
Short-Intermediate Bond Portfolio.............. Monthly Monthly Annually
U.S. Treasury Index Portfolio.................. Monthly Monthly Annually
Bond Portfolio................................. Monthly Monthly Annually
Intermediate Bond Portfolio.................... Monthly Monthly Annually
International Bond Portfolio................... Quarterly Quarterly Annually
Balanced Portfolio............................. Quarterly Quarterly Annually
Global Asset Portfolio......................... Quarterly Quarterly Annually
Equity Index Portfolio......................... Quarterly Quarterly Annually
Diversified Growth Portfolio................... Annually Annually Annually
Focused Growth Portfolio....................... Annually Annually Annually
Small Company Index Portfolio.................. Annually Annually Annually
International Equity Index Portfolio........... Annually Annually Annually
International Growth Portfolio................. Annually Annually Annually
</TABLE>
Dividends and distributions will reduce a Portfolio's net asset value by the
amount of the dividend or distribution. All dividends and distributions are
automatically reinvested (without any sales charge or additional purchase
price amount) in additional shares of the same Portfolio at their net asset
value per share determined on the payment date. However, a holder may elect,
upon written notification to the Transfer Agent, to have dividends or capital
gain distributions (or both) paid in cash or reinvested in the same class of
shares of another Portfolio at their net asset value per share (plus an
additional purchase price amount equal to .50% and 1.00% of the amount
invested in the case of the Small Company Index Portfolio and International
Equity Index Portfolio, respectively) determined on the payment date (provided
the holder maintains an account in such Portfolio). Shareholders of record
must make such election, or any revocation thereof, in writing to the Transfer
Agent. The election will become effective with respect to dividends paid two
days after its receipt by the Transfer Agent.
70
<PAGE>
Net loss, if any, from certain foreign currency transactions or instruments
that is otherwise taken into account with respect to the Global Asset,
International Bond, International Growth and International Equity Index
Portfolios in calculating net investment income or net realized capital gains
for accounting purposes may not be taken into account in determining the
amount of dividends to be declared and paid, with the result that a portion of
the Portfolios' dividends may be treated as a return of capital, nontaxable to
the extent of a shareholder's tax basis in his shares.
Because of the different servicing fees and transfer agency fees payable with
respect to the Class A, B, C and D Shares in a Portfolio, the amount of such
Portfolio's net investment income available for distribution to the holders of
such shares will be effectively reduced by the amount of such fees. See
"Shareholder Service Plan" and "Investment Adviser, Transfer Agent and
Custodian" under the heading "Trust Information" in this Prospectus.
TAXES
Each Portfolio intends to qualify as a separate "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally will relieve the Portfolios of liability for Federal
income taxes to the extent their earnings are distributed in accordance with
the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that each Portfolio distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income for such year. In general, a Portfolio's investment company taxable
income will be its taxable income, subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. Each Portfolio
intends to distribute as dividends substantially all of its investment company
taxable income each year. Such dividends will be taxable as ordinary income to
the Portfolio's shareholders who are not currently exempt from Federal income
taxes whether they are received in cash or reinvested in additional shares.
(Federal income taxes for distributions to an IRA or other qualified
retirement plan are deferred or eliminated under the Code.) Such ordinary
income distributions will qualify for the dividends received deduction for
corporations to the extent of the total qualifying dividends received by the
distributing Portfolio from domestic corporations for the taxable year. It is
not expected that any Fixed Income Portfolio distributions will qualify for
the dividends received deduction for corporations.
Substantially all of each Portfolio's net realized long-term capital gains
(including 28% rate gains) will be distributed at least annually to its
shareholders. The Portfolios generally will have no tax liability with respect
to such gains and the distributions will be taxable to Portfolio shareholders
who are not currently exempt from Federal income taxes as long-term capital
gains (20% or 28% rate gain, depending upon the breakdown of the Portfolio's
long-term capital gain), regardless of how long the shareholders have held the
shares and whether such gains are received in cash or reinvested in additional
shares. Shareholders should note that, upon sale or exchange of Portfolio
shares, if the shareholder has not held such shares for more than six months,
any loss on the sale or exchange of those shares will be treated as long term
capital loss to the extent of the capital gain dividends received with respect
to the shares.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed for
Federal tax purposes to have been paid by the Portfolio and received by the
shareholders on December 31 of such year if such dividends are paid during
January of the following year.
71
<PAGE>
An investor considering buying shares of a Portfolio on or just before the
record date of a dividend should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, will be taxable.
A taxable gain or loss may be realized by a shareholder upon the redemption,
transfer or exchange of shares of a Portfolio depending upon the tax basis and
their price at the time of redemption, transfer or exchange.
It is expected that dividends and certain interest income earned by the
International Bond, International Growth and International Equity Index
Portfolios from foreign securities will be subject to foreign withholding
taxes or other taxes. So long as more than 50% of the value of the Portfolios'
total assets at the close of any taxable year consists of stock or securities
(including debt securities) of foreign corporations, the Portfolios may elect,
for Federal income tax purposes, to treat certain foreign taxes paid by them,
including generally any withholding taxes and other foreign income taxes, as
paid by their shareholders. Should the Portfolios make this election, the
amount of such foreign taxes paid by the Portfolios will be included in their
shareholders' income pro rata (in addition to taxable distributions actually
received by them), and such shareholders will be entitled either (a) to credit
their proportionate amounts of such taxes against their Federal income tax
liabilities, or (b) to deduct such proportionate amounts from their Federal
taxable income under certain circumstances.
The Global Asset Portfolio may invest in the International Bond, International
Equity Index and International Growth Portfolios which expect to be eligible
to make the above-described election. While the Global Asset Portfolio will be
able to deduct the foreign taxes that it will be treated as receiving if the
election is made, the Portfolio will not itself be able to elect to treat its
foreign taxes as paid by its shareholders. Accordingly, the shareholders of
the Global Asset Portfolio will not have the option of claiming a foreign tax
credit for foreign taxes paid by the International Bond, International Equity
Index and International Growth Portfolios, while persons who invest directly
in such underlying Portfolios may have that option.
If the Global Asset, International Bond, International Growth and
International Equity Index Portfolios invest in certain "passive foreign
investment companies" ("PFICs"), they will be subject to Federal income tax
(and possibly additional interest charges) on a portion of any "excess
distribution" or gain from the disposition of such investments, even if they
distribute such income to their shareholders. If a Portfolio elects to treat
the PFIC as a "qualified electing fund" ("QEF") and the PFIC furnishes certain
financial information in the required form, a Portfolio would instead be
required to include in income each year its allocable share of the ordinary
earnings and net capital gains of the QEF, regardless of whether such income
is received, and such amounts would be subject to the various distribution
requirements described above. In addition, effective for the tax years
beginning after 1997, a Portfolio may elect instead to recognize any
appreciation in the PFIC shares that it owns by marking them to market as of
the last Business Day of each taxable year. Again, gain recognized under this
"mark-to-market" approach would be subject to the various distribution
requirements described above, even if no cash is received currently from the
PFIC investment.
Shareholders of record will be advised by the Trust at least annually as to
the Federal income tax consequences of distributions made to them each year.
The foregoing discussion summarizes some of the important Federal tax
considerations generally affecting the Portfolios and their shareholders and
is not intended as a substitute for careful tax planning. Accordingly,
potential investors in the Portfolios should consult their tax advisers with
specific reference to their own Federal, state and local tax situation.
72
<PAGE>
NET ASSET VALUE
The net asset value per share of each Portfolio for purposes of pricing
purchase and redemption orders is calculated by Northern as of 3:00 p.m.,
Chicago Time, on each Business Day. The time at which the net asset value per
share of a Portfolio is calculated may be advanced on days on which Northern
or the securities markets close early. See "Miscellaneous" below. Net asset
value per share of a particular class in a Portfolio is calculated by dividing
the value of all securities and other assets belonging to a Portfolio that are
allocated to such class, less the liabilities charged to that class, by the
number of the outstanding shares of that class. Because the Global Asset
Portfolio expects to invest a substantial portion of its assets in the
Benchmark Portfolios and other funds, the Portfolio's net asset value per
share will fluctuate with changes in the per share value of such other
investment portfolios.
U.S. and foreign investments held by a Portfolio are valued at the last quoted
sales price on the exchange on which such securities are primarily traded,
except that securities listed on an exchange in the United Kingdom are valued
at the average of the closing bid and ask prices. If any securities listed on
a U.S. securities exchange are not traded on a valuation date, they will be
valued at the last quoted bid price. If securities listed on a foreign
securities exchange are not traded on a valuation date, they will be valued at
the most recent quoted trade price. Securities which are traded in the U.S.
over-the-counter markets are valued at the last quoted bid price. Securities
which are traded in the foreign over-the-counter markets are valued at the
last sales price, except that such securities traded in the United Kingdom are
valued at the average of the closing bid and ask prices. Shares of investment
companies held by the Portfolios will be valued at their respective net asset
values. Any securities, including restricted securities, for which current
quotations are not readily available are valued at fair value as determined in
good faith by the Investment Adviser under the supervision of the Board of
Trustees. Short-term investments are valued at amortized cost which the
Investment Adviser has determined, pursuant to Board authorization,
approximates market value. Securities may be valued on the basis of prices
provided by independent pricing services when such prices are believed to
reflect the fair market value of such securities.
PERFORMANCE INFORMATION
The performance of a class of shares of a Portfolio may be compared to those
of other mutual funds with similar investment objectives and to bond, stock
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of
mutual funds. For example, the performance of a class of shares may be
compared to data prepared by Lipper Analytical Services, Inc. or other
independent mutual fund reporting services. In addition, the performance of a
class may be compared to the Lehman Brothers Government/Corporate Bond Index
(or its components, including the Treasury Bond Index), S&P Index, S&P/Barra
Growth Index, the Russell Index, the EAFE Index or other unmanaged stock and
bond indices, including, but not limited to, the Merrill Lynch 1-5 Year
Government Bond Index, the Merrill Lynch 1-5 Year Corporate/Government Bond
Index, the 3-month LIBOR Index, the 91-day Treasury Bill Rate, the Composite
Index, the J.P. Morgan Non-U.S. Government Bond Index, and the Dow Jones
Industrial Average, a recognized unmanaged index of common stocks of 30
industry companies listed on the New York Stock Exchange. Performance data as
reported in national financial publications such as Money Magazine,
Morningstar, Forbes, Barron's, The Wall Street Journal and The New York Times,
or in publications of a local or regional nature, may also be used in
comparing the performance of a class of shares of a Portfolio.
73
<PAGE>
The Portfolios calculate their total returns for each class of shares on an
"average annual total return" basis for various periods from the dates the
respective Portfolios commenced investment operations and for other periods as
permitted under the rules of the SEC. Average annual total return reflects the
average annual percentage change in value of an investment in the class over
the measuring period. Total returns for each class of shares may also be
calculated on an "aggregate total return" basis for various periods. Aggregate
total return reflects the total percentage change in value over the measuring
period. Both methods of calculating total return reflect changes in the price
of the shares and assume that any dividends and capital gain distributions
made by the Portfolio with respect to a class during the period are reinvested
in the shares of that class. When considering average total return figures for
periods longer than one year, it is important to note that the annual total
return of a class for any one year in the period might have been more or less
than the average for the entire period. The Portfolios may also advertise from
time to time the total return of one or more classes of shares on a year-by-
year or other basis for various specified periods by means of quotations,
charts, graphs or schedules.
The yield of a class of shares in the Fixed Income Portfolios, the Balanced
Portfolio and the Global Asset Portfolio is computed based on the net income
of such class during a 30-day (or one month) period (which period will be
identified in connection with the particular yield quotation). More
specifically, a Portfolio's yield for a class of shares is computed by
dividing the per share net income for the class during a 30-day (or one month)
period by the net asset value per share on the last day of the period and
annualizing the result on a semi-annual basis.
The Small Company Index and International Equity Index Portfolios may
advertise total return data without reflecting the .50% and 1.00% portfolio
transaction fee in accordance with the rules of the SEC. Quotations which do
not reflect the fee will, of course, be higher than quotations which do.
Because of the different servicing fees and transfer agency fees payable with
respect to the Class A, B, C and D Shares in a Portfolio, the performance of
such shares will be effectively reduced by the amount of such fees. For
example, because Class A Shares bear the lowest servicing and transfer agency
fees, the return of Class A Shares will be more than the return of other
classes of shares of the same Portfolio. See "Shareholder Servicing Plan" and
"Investment Adviser, Transfer Agent and Custodian" under the heading "Trust
Information" in this Prospectus.
The performance of each class of shares of the Portfolios is based on
historical earnings, will fluctuate and is not intended to indicate future
performance. The investment return and principal value of an investment in a
class will fluctuate so that when redeemed, shares may be worth more or less
than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed
yield for a stated period of time. Total return data should also be considered
in light of the risks associated with a Portfolio's composition, quality,
maturity, operating expenses and market conditions. Any fees charged by
Institutions directly to their Customer accounts in connection with
investments in a Portfolio will not be included in calculations of performance
data.
74
<PAGE>
ORGANIZATION
Each Portfolio is a series of The Benchmark Funds, which was formed as a
Delaware business trust on July 1, 1997 under an Agreement and Declaration of
Trust. The Portfolios were formerly series of The Benchmark Funds, a
Massachusetts business trust, which were reorganized into the Trust on March
31, 1998. As of the date of this Prospectus, the Trust has created eighteen
separate series of shares of beneficial interest representing interests in
eighteen investment portfolios, fourteen of which are described in this
Prospectus; the other series of shares are described in separate prospectuses.
The business and affairs of the Trust are managed by or under the direction of
its Board of Trustees. The Declaration of Trust of the Trust authorizes the
Board of Trustees to create and classify shares of beneficial interest in
separate series, without further action by shareholders. Additional series may
be added in the future. The Trustees also have authority to classify or
reclassify any unissued shares into additional series or classes within a
series. Pursuant to such authority, the Board of Trustees has classified four
classes of shares in each Portfolio: the Class A Shares, Class B Shares, Class
C Shares and Class D Shares. Each share of a Portfolio is without par value,
represents an equal proportionate interest in that Portfolio with each other
share of its class in that Portfolio and is entitled to such dividends and
distributions earned on such Portfolio's assets as are declared in the
discretion of the Board of Trustees.
The Trust's shareholders are entitled at the discretion of the Board of
Trustees to vote either on the basis of the number of shares held or the
aggregate net asset value represented by such shares. Each series entitled to
vote on a matter will vote thereon in the aggregate and not by series, except
as otherwise required by law or when the matter to be voted on affects only
the interests of shareholders of a particular series. The Additional Statement
gives examples of situations in which the law requires voting by series.
Voting rights are not cumulative and, accordingly, the persons holding more
than 50% of the aggregate voting power of the Trust may elect all of the
Trustees irrespective of the vote of the other shareholders. In addition,
holders of each of the Class A, B, C and D shares representing interests in
the same Portfolio have equal voting rights except that only shares of a
particular class within the Portfolio will be entitled to vote on matters
submitted to a vote of shareholders (if any) relating to shareholder servicing
expenses and transfer agency fees that are payable by that class.
As of February 28, 1998, Northern possessed sole or shared voting or
investment power for its customer accounts with respect to more than 50% of
the outstanding shares of the Trust.
The Trust does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Trustees will
promptly call a meeting of shareholders to vote upon the removal of any
Trustee when so requested in writing by the record holders of 10% or more of
the outstanding shares. To the extent required by law, the Trust will assist
in shareholder communications in connection with such a meeting.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
75
<PAGE>
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is (800) 621-2550.
When a shareholder moves, the shareholder is responsible for sending written
notice to the Trust of any new mailing address. The Trust and its transfer
agent may charge a shareholder their reasonable costs in locating a
shareholder's current address in accordance with SEC regulations.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, which is Monday through
Friday, except for holidays observed by Northern and/or the Exchange other
than Good Friday. For 1998 the holidays of Northern and/or the Exchange are:
New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving
and Christmas Day. On those days when Northern or the Exchange closes early as
a result of unusual weather or other circumstances, the Portfolios reserve the
right to advance the time on that day by which purchase, redemption and
exchange requests must be received. In addition, on any Business Day when The
Bond Market Association recommends that the securities markets close or close
early, the Portfolios reserve the right to cease or to advance the deadline
for accepting purchase, redemption and exchange orders for same Business Day
credit. Purchase, redemption and exchange requests received after the advanced
closing time will be effected on the next Business Day. Each Portfolio
reserves, however, the right to reject any purchase order and also to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment would
adversely affect such Portfolio. See "Investing--Purchase of Shares" and
"Investing--Redemption of Shares" above for more information.
---------------------
The U.S. Treasury Index Portfolio is not sponsored, endorsed, sold or promoted
by Lehman, nor does Lehman guarantee the accuracy and/or completeness of the
Lehman Index or any data included therein. Lehman makes no warranty, express
or implied, as to the results to be obtained by the Portfolio, owners of the
Portfolio, any person or any entity from the use of the Lehman Index or any
data included therein. Lehman makes no express or implied warranties and
expressly disclaims all such warranties of merchantability or fitness for a
particular purpose or use with respect to the Lehman Index or any data
included therein.
---------------------
The Equity Index Portfolio is not sponsored, endorsed, sold or promoted by
S&P, nor does S&P guarantee the accuracy and/or completeness of the S&P Index
or any data included therein. S&P makes no warranty, express or implied, as to
the results to be obtained by the Portfolio, owners of the Portfolio, any
person or any entity from the use of the S&P Index or any data included
therein. S&P makes no express or implied warranties and expressly disclaims
all such warranties of merchantability or fitness for a particular purpose for
use with respect to the S&P Index or any data included therein.
---------------------
The International Equity Index Portfolio is not sponsored, endorsed, sold or
promoted by MSCI, nor does MSCI guarantee the accuracy and/or completeness of
the EAFE Index or any data included therein. MSCI makes no warranty, express
or implied, as to the results to be obtained by the Portfolio, owners of the
Portfolio, any person or any entity from the use of the EAFE Index or any data
included therein. MSCI makes no express or implied
76
<PAGE>
warranties and expressly disclaims all such warranties of merchantability or
fitness for a particular purpose for use with respect to the EAFE Index or any
data included therein.
---------------------
The Small Company Index Portfolio is not sponsored, endorsed, sold or promoted
by Russell, nor does Russell guarantee the accuracy and/or completeness of the
Russell Index or any data included therein. Russell makes no warranty, express
or implied, as to the results to be obtained by the Portfolio, owners of the
Portfolio, any person or any entity from the use of the Russell Index or any
data included therein. Russell makes no express or implied warranties and
expressly disclaims all such warranties of merchantability or fitness for a
particular purpose for use with respect to the Russell Index or any data
included therein.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
77
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
BALANCED PORTFOLIO
GLOBAL ASSET 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, 1998 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the Balanced Portfolio, Global Asset
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, 1998. 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
----
<S> <C>
ADDITIONAL INVESTMENT INFORMATION....................... B-3
Investment Objectives and Policies................. B-3
Investment Restrictions............................ B-18
ADDITIONAL TRUST INFORMATION............................ B-22
Trustees and Officers.............................. B-22
Investment Advisers, Transfer Agent and Custodian.. B-28
Portfolio Transactions............................. B-36
Administrator and Distributor...................... B-41
Shareholder Servicing Plan......................... B-43
Counsel and Auditors............................... B-45
In-Kind Purchases.................................. B-46
PERFORMANCE INFORMATION................................. B-46
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
TAXES.................................................. B-55
General............................................ B-55
Taxation of Certain Financial Instruments.......... B-57
Foreign Investors.................................. B-59
Conclusion......................................... B-59
DESCRIPTION OF SHARES................................... B-60
OTHER INFORMATION....................................... B-66
FINANCIAL STATEMENTS.................................... B-67
APPENDIX A.............................................. 1-A
APPENDIX B.............................................. 1-B
</TABLE>
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.
SHARES 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.
Prospective investors in the Global Asset Portfolio should note that the Trust
has filed an application with the Securities and Exchange Commission requesting
an exemption from certain provisions of the 1940 Act to allow the Portfolio to
conduct its investment operations as described in its Prospectus. As of the
date of this Additional Statement, the requested exemption had not been granted,
and there is no assurance that it will be. No shares of the Portfolio will be
sold unless and until the requested exemption is granted.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the investment objectives and policies of the
Balanced, Global Asset, Equity Index, Diversified Growth, Focused Growth, Small
Company Index, International Equity Index, and International Growth Portfolios
(the "Portfolios") of The Benchmark Funds (the "Trust") as set forth in the
Prospectus.
Warrants. The Balanced, Global Asset, Diversified Growth, Focused Growth,
--------
Small 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 shares or attached to other securities are not
subject to this restriction.
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, General Services Administration, Central
Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, and the Maritime Administration.
Foreign Securities. Unanticipated political or social developments may
------------------
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 making
certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
B-3
<PAGE>
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 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, Global Asset, Diversified Growth, Focused
Growth, International Equity Index and International Growth Portfolios are
authorized to enter into forward foreign 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 an Investment Adviser 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 declines or
B-4
<PAGE>
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 Global Asset and International Growth
Portfolios, Northern may purchase or sell forward foreign currency exchange
contracts to seek to increase total return.
Liquid assets equal to the amount of a Portfolio's assets that could be
required to consummate forward contracts will be segregated except to the extent
the contracts are otherwise "covered." The segregated assets will be valued at
market or fair value. If the market or fair value of such assets declines,
additional liquid assets will be segregated daily so that the value of the
segregated assets 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 Portfolio segregates liquid assets in the amount of the
difference. 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 Portfolio segregates liquid assets in the
amount of the difference.
Options. Each Portfolio may buy put options and buy call options and 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.
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,
B-5
<PAGE>
liquid assets in such amount are segregated) 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 Portfolio segregates liquid assets in the amount of the difference.
The Portfolios will write put options only if they are "secured" by segregated
liquid assets 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
assets (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 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
B-6
<PAGE>
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.
Supranational Bank Obligations. The Balanced and Global Asset Portfolios
------------------------------
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 Balanced and Global Asset Portfolios may purchase
-------------------
stripped securities. The Treasury Department has
B-7
<PAGE>
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 Portfolios may purchase securities
registered in the STRIPS program. Under the STRIPS program, each 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 and Global Asset Portfolios 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.
The Prospectus discusses other types of stripped securities that may be
purchased by the Portfolios, 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, a Portfolio may fail to fully recoup
its initial investment in these securities. The market value
B-8
<PAGE>
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 share.
Asset-Backed Securities. The Balanced and Global Asset Portfolios 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
Portfolios 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 Treasury. FNMA
is a government-sponsored organization owned entirely by private
B-9
<PAGE>
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 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 and
-------------------------------------------------------
Global Asset Portfolio may enter into interest rate swaps for hedging purposes
and not for speculation. Interest rate swaps, floors and swaps 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. 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
B-10
<PAGE>
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, The Northern Trust Company ("Northern") and
Northern Trust Quantitative Advisors, Inc. ("NTQA" and, collectively with
Northern, the "Investment Advisers") 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 segregated by the Portfolio.
The Balanced and Global Asset Portfolios will not enter into an interest
rate swap, floor or cap transaction, and the International Equity Index,
International Growth and Global Asset 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.
Futures Contracts and Related Options. Each Portfolio may invest in
-------------------------------------
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.
B-11
<PAGE>
Real Estate Investment Trusts. The Small Company Index Portfolio may
-----------------------------
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
----------------------------------------------------------------
Transactions. When a Portfolio purchases securities on a when-issued, delayed
- ------------
delivery or forward commitment basis, the Portfolio will segregate 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 Portfolio will segregate the portfolio securities
themselves. 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
---------------------------------------------------------------------
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
B-12
<PAGE>
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, the Investment
Advisers 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 principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
B-13
<PAGE>
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
---------------------
with financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by the Investment Advisers 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 segregate
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.
Investment Companies.
--------------------
The 1940 Act generally permits the Global Asset Portfolio to invest without
limitation in other investment companies that are part of the same "group of
investment companies" (as defined in the 1940 Act), provided certain limitations
are observed. Generally, these limitations require that the Portfolio (a) limit
its investments to shares of other investment companies that are part of the
same "group of investment companies," Government securities and short-term
paper, (b) observe certain limitations on the amount of sales loads and
distribution-related fees that are borne directly and indirectly by its
shareholders; and (c) not invest in other investment companies structured as
"funds of funds." If the SEC grants the order of exemption that has been
requested by the Trust, (a) the Global Asset Portfolio will be permitted to hold
investments other than those identified above, including domestic and foreign
equity and fixed income securities and securities of unaffiliated investment
companies; and (b) the Portfolios will be permitted to invest in the securities
of unaffiliated investment companies as described below.
With respect to (i) the investments of the Global Asset Portfolio in
securities issued by all unaffiliated investment
B-14
<PAGE>
companies, (ii) the investments of other Portfolios in which the Global Asset
Portfolio invests in (a) unaffiliated money market funds and (b) other
unaffiliated investment companies issuing shares which are traded like
traditional equity securities on a national stock exchange or the NASDAQ
National Market System ("Exchange-Traded Funds") and (iii) the investments of
other Portfolios in which the Global Asset Portfolio does not invest in the
securities of all unaffiliated investment companies, such investments will be
limited so that, as determined after a purchase is made, either (x) not more
than 3% of the total outstanding stock of such investment company will be owned
by the Portfolio, the Trust as a whole and their affiliated persons (as defined
in the 1940 Act) or (y) the percentage limitations in the next sentence are
satisfied. In all cases, each Portfolio in which the Global Asset Portfolio
invests will limit its investments in other types of investment companies not
listed in (ii) above so that, as determined after a purchase is made, (i) not
more than 5% of the value of its total assets will be invested in the securities
of any one investment company; (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group (not including investments in money market funds and Exchange-Traded
Funds); and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Portfolio. In addition, each Portfolio
in which the Global Asset Portfolio invests will limit its investments in
unaffiliated money market funds so that no more than 25% of such Portfolio's
assets are invested in such money market funds.
Certain investment companies, i.e., unaffiliated investment companies whose
securities are purchased by the Portfolios, may not be obligated to redeem such
securities in an amount exceeding 1% of their total outstanding securities
during any period of less than 30 days. Therefore, such securities that exceed
this amount may be illiquid.
If 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.
A Portfolio may invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objective, policy and restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described above. 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.
B-15
<PAGE>
World Equity Benchmark Shares ("WEBS")
- --------------------------------------
As outlined in the Prospectus, the International Equity Index and Global Asset
Portfolios may invest in WEBS and similar securities of investment companies
that invest in securities included in foreign securities indices. WEBS are
listed on the American Stock Exchange (the "AMEX"), and were initially offered
to the public in 1996. The market prices of WEBS are expected to fluctuate in
accordance with both changes in the net asset values of their underlying indices
and supply and demand of WEBS on the AMEX. To date WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating history, and information is lacking regarding the
actual performance and trading liquidity of WEBS for extended periods or over
complete market cycles. In addition, there is no assurance that the
requirements of the AMEX necessary to maintain the listing of WEBS will continue
to be met or will remain unchanged. In the event substantial market or other
disruptions affecting WEBS should occur in the future, the liquidity and value
of a Portfolio's shares could also be substantially and adversely affected, and
the International Equity Index Portfolio's ability to provide investment results
approximating the performance of securities in the EAFE Index could be impaired.
If such disruptions were to occur, the Portfolio could be required to reconsider
the use of WEBS as part of its investment strategy.
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 share.
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
B-16
<PAGE>
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, 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, the Investment Advisers perform their own analysis of the
issuers whose lower-rated securities the Portfolio purchases. Because of this,
the Portfolio's performance may depend more on their own credit analysis than is
the case of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, the Investment Advisers consider
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. The Investment Advisers
continuously monitor 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
B-17
<PAGE>
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 the Investment Advisers determine 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
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 shares 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
shares.
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.
B-18
<PAGE>
(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.
(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) Make any investment inconsistent with the Portfolio's classification as
a diversified investment company under the 1940 Act.
(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 and Global Asset Portfolios, 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
B-19
<PAGE>
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.
(11) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may purchase securities of other investment companies to the full extent
permitted under Section 12 of the 1940 Act (or any successor provision
thereto) or under any regulation or order of the Securities and Exchange
Commission; and each Portfolio may invest all or substantially all of its
assets in a single open-end investment company or series thereof with
substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
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 a Portfolio, does not exceed 10% of the value of the Portfolio's total
assets.
Except to the extent otherwise provided in Investment Restriction No. 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 will
B-20
<PAGE>
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.
B-21
<PAGE>
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is set forth
below.
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
William H. Springer, 68 Chairman Vice Chairman of Ameritech (a
701 Morningside Drive and telecommunications holding company),
Lake Forest, IL 60045 Trustee 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-diversified management
investment company) from April 1992
to present; Trustee, Goldman Sachs
Trust from 1989 to present.
Richard Gordon Cline, 62 Trustee Chairman, Hussman International Inc.
4200 Commerce Court (commercial refrigeration company)
Suite 300 since January 1998; Chairman,
Lisle, IL 60532 Hawthorne Investors, Inc. (a
management advisory services and
private investment company) since
January 1996; Chairman and CEO of
NICOR Inc. (a diversified public
utility holding company) from 1986
to 1995, and President, 1992-1993;
Director: Whitman Corporation (a
diversified holding company); Kmart
Corporation (a retailing company);
Ryerson Tull, Inc. (a metals
distribution company); and
University of Illinois
Foundation.
Edward J. Condon, Jr., 57 Trustee Chairman of The Paradigm Group Ltd.
Sears Tower, Suite 9650 (a financial advisor) since July
233 S. Wacker Drive 1993; Vice President and Treasurer
Chicago, IL 60606 of Sears, Roebuck and Co. (a retail
corporation) from February 1989
B-22
<PAGE>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
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; Member of the
Board of Managers of The Liberty
Hampshire Company, LLC; Vice
Chairman and Director of Energenics
LLC; Director of University
Eldercare, Inc.; Director of the
Girl Scouts of Chicago; and Trustee
of Dominican University.
John W. English, 64 Trustee Private Investor; Vice President
50-H New England Avenue and Chief Investment Officer of The
P.O. Box 640 Ford Foundation (a charitable trust)
Summit, NJ 07902-0640 from 1981 until 1993; Trustee: The
China Fund, Inc.; 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.
Sandra Polk Guthman, 53 Trustee President and CEO of Polk Bros.
420 N. Wabash Avenue Foundation (an Illinois not-for-
Suite 204 profit corporation) from 1993 to
Chicago, IL 60611 present; Director of Business
Transformation from 1992-1993, and
Midwestern Director of Marketing
from 1988-1992, IBM Corporation;
Director: MBIA Insurance Corporation
of Illinois (bank holding company)
since 1994 and Avondale Financial
Corporation (a stock
B-23
<PAGE>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
savings and loan holding company)
since 1995.
Frederick T. Kelsey, 70 Trustee Consultant to Goldman Sachs from
4010 Arbor Lane, #102 December 1985 through February 1988;
Northfield, IL 60093 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
and other investment companies
affiliated with Goldman Sachs
through August 1985; President from
1983 to 1985, and Trustee from 1983
to 1994, The Centerland Funds and
its successor, The Pilot Funds;
Trustee, various management
investment companies affiliated with
Zurich Kemper Investments.
Richard P. Strubel, 58 Trustee Managing Director, Tandem Partners,
70 West Madison St Inc. (a privately held management
Suite 1400 services firm) since 1990; President
Chicago, IL 60602 and CEO, Microdot, Inc. (a privately
held manufacturing firm) from 1984
to 1994; Trustee, Goldman Sachs
Trust from 1987 to present; Director
of Kaynar Technologies Inc. (a
leading manufacturer of aircraft
fasteners); Trustee of the
University of Chicago; Director of
Children's Memorial Medical
Center.
Frank E. Polefrone, 41 President Director of Financial Institutions
4900 Sears Tower Sales and Marketing of Goldman Sachs
Chicago, IL 60606 Asset Management ("GSAM") since
March 1997; Marketing/Product
Development of Federated investors
from August 1982 through December
1996.
B-24
<PAGE>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
James A. Fitzpatrick, 38 Vice Vice President, GSAM (since
4900 Sears Tower President April 1997); Vice President and
Chicago, IL 60606 General Manager, First Data
Corporation -Investor Services Group
prior thereto.
John W. Mosior, 58 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of Shareholder Servicing of
Chicago, IL 60606 GSAM (since November 1989).
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs (since
4900 Sears Tower President April 1985); Manager, Shareholder
Chicago, IL 60606 Servicing of GSAM (since November
1989).
Scott M. Gilman, 37 Treasurer Director, Mutual Fund
One New York Plaza Administration, GSAM (since April
New York, NY 10004 1994); Assistant Treasurer of
Goldman Sachs Funds Management, Inc.
(since March 1993); Vice President,
Goldman Sachs (since March 1990).
John Perlowski, 32 Assistant Vice President, Goldman Sachs (since
One New York Plaza Treasurer July 1995); Director, Investors Bank
New York, NY 10004 and Trust Company, (November 1993 to
July 1995); Audit Manager of Arthur
Andersen, LLP (prior thereto).
Michael J. Richman, 36 Secretary Associate General Counsel, GSAM
85 Broad Street (since February 1994); Vice
New York, NY 10004 President and Assistant General
Counsel of Goldman Sachs (since June
1992); Counsel to the Funds Group of
GSAM (since June 1992); Partner of
Hale and Dorr (September 1991 to
June 1992).
Deborah A. Farrell, 26 Assistant Legal Assistant, Goldman Sachs
85 Broad Street Secretary (since January 1994;) Formerly at
New York, NY 10004 Cleary, Gottlieb, Steen &
Hamilton.
B-25
<PAGE>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
Steven E. Hartstein, 33 Assistant Legal Products Analyst, Goldman
85 Broad Street Secretary Sachs (since June 1993); Funds
New York, NY 10004 Compliance Officer, Citibank Global
Asset Management (August 1991 to
June 1993).
Howard B. Surloff, 32 Assistant Vice President and Assistant General
85 Broad Street Secretary Counsel, Goldman Sachs (since
New York, NY 10004 November 1993 and May 1994,
respectively); Counsel to the Funds
Group of GSAM since November 1993);
Associate of Shereff, Friedman,
Hoffman & Goodman, LLP (prior
thereto).
Valerie A. Zondorak, 31 Assistant Vice President, Goldman Sachs (since
85 Broad Street Secretary March 1997); Counsel to the Funds
New York, NY 10004 Group, GSAM (since March 1997);
Associate, Shereff, Friedman,
Hoffman & Goodman, LLP (prior
thereto).
B-26
<PAGE>
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
the Investment Advisers, 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, Mosior, Gilman, Richman, Surloff and Hartstein and
Mmes. Farrell, Mucker and Zondorak hold similar positions with one or more
investment companies that are advised by Goldman Sachs. As a result of the
responsibilities assumed by the Investment Advisers under the Advisory Agreement
with the Trust, by Northern under its 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.
Each Trustee will hold office for an indefinite term until the earliest of (1)
the next meeting of shareholders if any, called for the purpose of considering
the election or re-election of such Trustee and until the election and
qualification of his or her successor, if any, elected at such meeting; (2) the
date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
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-27
<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, 1997:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits from
Aggregate Accrued as Registrant
Compensation Part of and Fund
from Trust's Complex Paid
Name of Trustee Registrant Expenses to Trustees
- --------------- ---------- -------- -----------
<S> <C> <C> <C>
William H. Springer $43,500 $0 $43,500
Richard G. Cline ***
Edward J. Condon, Jr. $31,000 $0 $31,000
John W. English $31,000 $0 $31,000
James J. Gavin* $34,000 $0 $34,000
Sandra Polk Guthman ***
Frederick T. Kelsey $35,000 $2,863** $37,863
Richard P. Strubel $39,000 $0 $39,000
</TABLE>
* Retired as of November 30, 1997.
** Interest from deferred compensation.
*** Mr. Cline and Ms. Guthman were elected as Trustees of the Trust in
September 1997.
INVESTMENT ADVISERS, TRANSFER AGENT AND CUSTODIAN
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. 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
B-28
<PAGE>
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. NTQA, also a wholly-owned subsidiary of Northern Trust
Corporation, serves as investment adviser principally to defined benefit and
defined contribution plans and manages over 60 equity and bond commingled and
common trust funds. As of December 31, 1997, the Investment Advisers and their
affiliates had approximately $196 billion in assets under management for clients
including public and private retirement funds, endowments, foundations, trusts,
corporations, other investment companies and individuals.
Subject to the general supervision of the Board of Trustees, the Investment
Advisers make the decisions with respect to and places orders for all purchases
and sales of portfolio securities for the Portfolios. The Advisory Agreements
with the Trust provide that in selecting brokers or dealers to place orders for
transactions (a) on common and preferred stocks, the Investment Advisers shall
use their best judgment to obtain the best overall terms available, and (b) on
bonds and other fixed income obligations, the Investment Advisers shall attempt
to obtain best net price and execution. In assessing the best overall terms
available for any transaction, the Investment Advisers are to consider all
factors they deem 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, the Investment Advisers may consider the brokerage and
research services provided to the Portfolios and/or other accounts over which
the Investment Advisers or an affiliate of Northern exercise 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. 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, the Investment
Advisers will normally deal directly with dealers who make a market in the
instruments involved except in those circumstances where more favorable prices
B-29
<PAGE>
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 the Investment
Advisers believe such practice to be in the Portfolios' interests.
On occasions when the Investment Advisers deem 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 them (including any other Portfolio, investment
company or account for which the Investment Advisers act as adviser), the
Agreements provide that the Investment Advisers, 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 the Investment Advisers in the manner they consider to be most equitable
and consistent with their 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 Agreements permit the Investment Advisers, at their discretion
but subject to applicable law, to select the executing broker or dealer on the
basis of their opinion of the reliability and quality of such broker or dealer.
The Advisory Agreements provide that the Investment Advisers may render
similar services to others so long as its services under such Agreements are not
impaired thereby. The Advisory Agreements also provide that the Trust will
indemnify the Investment Advisers 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.
At a meeting held on September 2, 1997, shareholders of the International
Growth Portfolio approved a new advisory agreement with Northern and another
wholly-owned subsidiary of Northern Trust Corporation (The Northern Trust
Company of Connecticut, which has
B-30
<PAGE>
principal offices at 300 Atlantic Street, Stamford, Connecticut 06901) that
would permit the Portfolio to implement a "manager-of-managers" structure. This
agreement will become effective only if the Securities and Exchange Commission
grants an exemption that permits the Portfolio to implement a manager-of-
managers structure, and the Board of Trustees of the Trust acts to effectuate
the structure with respect to the Portfolio. The new advisory agreement would
be identical in all material respects to the current Advisory Agreement for the
International Growth Portfolio, except that the new agreement would appoint both
Northern and The Northern Trust Company of Connecticut as the advisers of the
Portfolio and would allow the advisers to (1) delegate their duties to sub-
advisers, (2) implement a manager-of-managers structure and (3) enter into sub-
advisory agreements in the future without further shareholder approval. Fees
payable to the sub-advisers would be payable by Northern and The Northern Trust
Company of Connecticut and not by the Portfolio, and the current investment
advisory fee rate payable by the Portfolio would not change. At present, it is
uncertain when, or if, the manager-of-managers structure will become
effective.
Under its Transfer Agency Agreement with the Trust, with respect to shares
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 shares in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions shareholder 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 shares 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 shares 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 statements of additional
information, 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)
B-31
<PAGE>
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% of the average daily net asset value of the Class A, B, C
and D Shares, 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, subject to
certain monitoring responsibilities, 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.
B-32
<PAGE>
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) 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.
Northern's fee under the Custodian Agreement and Foreign Custody Agreement
are subject to reduction based on the Portfolios' daily uninvested cash balances
(if any).
Unless sooner terminated, the Advisory Agreements, the Custodian Agreement
(or in the case of the International Growth Portfolio and International Equity
Index Portfolio, the Foreign Custody Agreement) and the Transfer Agency
Agreement will continue in effect with respect to a particular Portfolio until
April 30, 1999 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 shares 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
shareholder action) on 60 days' written notice to
B-33
<PAGE>
Northern or NTQA and by Northern or NTQA on 60 days' written notice to the
Trust.
Prior to April 1, Northern served as investment adviser to the Equity
Index, Small Company Index and International Equity Index Portfolios on the same
terms as those described above.
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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $270,536 $ 226,872 $ 81,249
Equity Index Portfolio (2) 830,952 603,016 380,061
Diversified Growth Portfolio (2) 795,346 768,689 845,029
Focused Growth Portfolio (1) 934,052 811,643 609,180
Small Company Index Portfolio (2) 242,421 212,150 172,085
International Growth Portfolio (3) 993,121 1,089,874 1,180,413
International Equity Index Portfolio (4) 44,662 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.
(4) Commenced investment operations on April 1, 1997.
For the same fiscal periods ended November 30 as indicated, Northern waived
advisory fees as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 162,322 $ 136,185 $108,249
Equity Index Portfolio (2) 1,661,904 1,206,801 760,122
Diversified Growth Portfolio (2) 361,521 349,197 384,104
Focused Growth Portfolio (1) 350,269 304,447 228,443
Small Company Index Portfolio (2) 242,421 212,148 172,085
International Growth Portfolio (3) 248,280 272,159 295,103
International Equity Index Portfolio (4) 44,662 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.
(4) Commenced investment operations on April 1, 1997.
For the fiscal periods ended November 30 as indicated, the amount of the
Transfer Agency Fee incurred by each Portfolio was as follows:
B-34
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 10,622 $ 8,853 $ 3,624
Equity Index Portfolio (2) 172,360 92,186 40,881
Diversified Growth Portfolio (2) 15,280 14,368 15,548
Focused Growth Portfolio (1) 19,546 12,738 7,810
Small Company Index Portfolio (2) 12,676 11,706 8,647
International Growth Portfolio (3) 12,624 13,559 14,784
International Equity Index Portfolio (4) 1,780 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.
(4) Commenced Equity Index Portfolio on April 1, 1997.
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 24,371 $ 21,294 $ 25,924
Equity Index Portfolio (2) 142,960 154,259 126,649
Diversified Growth Portfolio (2) 27,587 26,634 34,074
Focused Growth Portfolio (1) 23,050 21,498 25,698
Small Company Index Portfolio (2) 66,695 67,319 65,810
International Growth Portfolio (3) 158,611 170,117 160,492
International Equity Index Portfolio (4) 49,999 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.
(4) Commenced investment operations on April 1, 1997.
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 and NTQA believe that they may perform the
services contemplated by their agreements with the Trust without violation of
such banking laws or regulations, which are applicable to them. 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
B-35
<PAGE>
statutes and regulations, could prevent Northern and NTQA from continuing to
perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern or NTQA 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 or NTQA 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 share of any Portfolio
or result in a financial loss to any shareholder. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates 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 and its
affiliates 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 Agreements, the Investment Advisers agree 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 Agreements provide that at such time as the Agreements are 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 the Investment
Advisers, 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
shareholders of the Portfolio.
During the fiscal year ended November 30, 1997, the International Equity
Index Portfolio acquired and sold securities of Banque Paribas and Societe
Generale Securities Corporation, each a regular broker/dealer. At November 30,
1997, the International Equity Index Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940
B-36
<PAGE>
Act, or their parents: Societe Generale, with an approximate aggregate value of
$72,000.
During the fiscal year ended November 30, 1997, the International Growth
Portfolio acquired and sold securities of Banque Paribas, Deutsche Bank and
Societe Generale Securities Corporation, each a regular broker/dealer. At
November 30, 1997, 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: Deutsche Bank, with an approximate
aggregate value of $1,603,000.
During the fiscal year ended November 30, 1997, the Balanced Portfolio
acquired and sold securities of Donaldson, Lufkin & Jenrette Securities Corp.,
Societie Generale Securities Corporation, Banque Paribas and Credit Commerciale
de France, each a regular broker/dealer. At November 30, 1997, the Balanced
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:
Donaldson, Lufkin & Jenrette Securities Corporation, with an approximate
aggregate value of $249,000.
During the fiscal year ended November 30, 1997, the Small Company Index
Portfolio acquired and sold securities of Credit Commercicle de France, Banque
Paribas, Cznadian Imperial Bank and Societe Generale Securities Corporation,
each a regular broker/dealer.
During the fiscal year ended November 30, 1997, the Equity Index Portfolio
acquired and sold securities of Credit Commerciale de France, Banque Paribas,
Societe Generale Securities Corporation and Deutsche Bank, each a regular
broker/dealer.
During the fiscal year ended November 30, 1997, the Diversified Growth Portfolio
acquired and sold securities of Credit Commerciale de France, Banque Paribas,
Societe Generale Securities Corporation, Deutsche Bank and Union Bank of
Switzerland, each a regular broker/dealer.
During the fiscal year ended November 30, 1997, the Focused Growth Portfolio
acquired and sold securities of Banque Paribas, Union Bank of Switzerland,
Societe Generale Securities Corporation, Credit Commerciale de France and Banque
Brussels Lambert, each a regular broker/dealer.
B-37
<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, 1997: Paid Persons Paid Research
- -------- ---- ------- ---- --------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 32,642 $ 0 $ $
Equity
Index
Portfolio 131,385 0
Focused
Growth
Portfolio 300,436 1,484 (0.49)*
Diversified
Growth
Portfolio 202,193 0
Small
Company
Index
Portfolio 73,241 0
International
Growth
Portfolio 1,163,242 0
International
Equity Index
Portfolio 0
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-38
<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, 1997: 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-39
<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, 1997: 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-40
<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 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 shareholders,
periodic updating of the prospectuses 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 shares), 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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 54,096 $ 45,373 $ 36,250
Equity Index Portfolio (2) 830,785 603,816 380,061
Diversified Growth Portfolio (2) 144,576 139,259 153,642
Focused Growth Portfolio (1) 116,731 101,553 76,148
Small Company Index Portfolio (2) 121,184 106,073 86,043
International Growth Portfolio (3) 159,139 136,235 147,552
International Equity Index Portfolio 26,233 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.
(4) Commenced investment operations on April 1, 1997.
For the fiscal periods ended November 30 as indicated and prior to May 1,
1997, Goldman Sachs 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:
B-41
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $32,260 $ 68,595 $ 54,375
Equity Index Portfolio (2) 54,050 176,462 229,985
Diversified Growth Portfolio (2) 69,234 170,691 176,821
Focused Growth Portfolio (1) 63,979 148,402 114,221
Small Company Index Portfolio (2) 65,061 152,457 129,064
International Growth Portfolio (3) 68,441 168,984 173,776
International Equity Index Portfolio (4) 1,560 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.
(4) Commenced investment operations on April 1, 1997.
In addition, pursuant to an undertaking that commenced August 1, 1992,
Goldman Sachs 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 shareholders. There have been no waivers pursuant to this agreement during
the last three fiscal periods.
Goldman Sachs has agreed for the current fiscal year to reimburse each
Portfolio for all expenses (including fees payable to Goldman Sachs as
administrator, but excluding advisory fees, transfer agency fees, servicing fees
and extraordinary expenses) which exceed on an annualized basis .25% of the
International Equity Index and International Growth Portfolios' respective
average daily net assets and .10% of each other Portfolio's average daily net
assets. Prior to May 1, 1997, this undertaking was voluntary with respect to
the Portfolios. As of May 1, 1997, this undertaking is contractual with respect
to all 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:
B-42
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 74,341 $ 65,547 $ 79,928
Equity Index Portfolio (2) 304,060 306,865 194,615
Diversified Growth Portfolio (2) 89,069 98,425 100,038
Focused Growth Portfolio (1) 79,410 80,020 87,261
Small Company Index Portfolio (2) 128,881 134,838 116,594
International Growth Portfolio (3) 67,398 55,347 N/A
International Equity Index Portfolio (4) 56,393 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.
(4) Commenced investment operations on April 1, 1997.
Unless sooner terminated, the Administration Agreement will continue in
effect with respect to a particular Portfolio until April 30, 1999, 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 shares 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 shareholder 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 shareholders 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.
SHAREHOLDER SERVICING PLAN
As stated in the Portfolios' Prospectus, Institutions may enter into
Servicing Agreements with the Trust under which they
B-43
<PAGE>
provide (or arrange to have provided) support services to their Customers or
other investors who beneficially own such shares 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 Shares,
respectively, beneficially owned by such Customers or investors.
For the fiscal periods ended November 30 as indicated, the aggregate amount
of the Shareholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio
Class B N/A N/A N/A
Class C (1) $ 8,026 $ 7,123 N/A
Class D (2) 710 61 N/A
Equity Index Portfolio
Class B N/A N/A N/A
Class C (3) 99,924 46,497 $4,339
Class D (4) 52,360 7,257 480
Diversified Growth Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (4) 1,466 703 326
Focused Growth Portfolio
Class B N/A N/A N/A
Class C (5) 11,222 3,028 N/A
Class D (6) 2,037 1,224 437
Small Company Index Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (6) 993 252 45
International Growth Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (7) 379 201 4
</TABLE>
(1) Class C Shares were issued on December 29, 1995.
(2) Class D Shares were issued on February 20, 1996.
(3) Class C Shares were issued on September 28, 1995.
(4) Class D Shares were issued on September 14, 1994.
(5) Class C Shares were issued on June 14, 1996.
(6) Class D Shares were issued on December 8, 1994.
(7) Class D Shares 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 Customers or other investors; (2) providing Customers or
other investors with a service that invests their assets in shares 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 shares 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
B-44
<PAGE>
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 shares; (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 shares of
certain classes beneficially owned by Customers or other investors; (11) if
required by law, forwarding shareholder communications from the Trust (such as
proxy statements and proxies, shareholder 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
"Shareholder Servicing Plan"), which has been adopted by the Board of Trustees.
Pursuant to the Shareholder 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 shareholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their shares in
an efficient manner.
COUNSEL AND AUDITORS
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite
1100, Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
B-45
<PAGE>
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 shares 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 shares 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 shares 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:
T=(ERV)1-1
--- -
P N
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.
B-46
<PAGE>
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
shares 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 set forth below are made assuming that (1) all dividends
and capital gain distributions are reinvested on the reinvestment dates at the
price per share existing on the reinvestment date, (2) all recurring fees
charged to all shareholder accounts are included, and (3) the portfolio
transaction fee is taken into account for purchases of shares 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
Shares at the time of their commencement. 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 Shares also
include, for the periods prior to the inception of such classes, the performance
of the Portfolios' Class A Shares. Because the fees and expenses of Class C and
Class D Shares are, respectively, 0.24% and 0.39% higher than those of Class A
Shares, actual performance for periods
B-47
<PAGE>
prior to the inception of Class C and Class D Shares 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 Advisers, 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 Shares, as applicable, are shown below
with and without such fee waivers and expense reimbursements.
B-48
<PAGE>
FOR PERIODS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (%) AGGREGATE TOTAL RETURNS (%)
SINCE SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIVERSIFIED GROWTH/1/
CLASS A
with fee waivers and 27.06 13.82 15.80 - 27.06 91.03 333.60 -
expense reimbursements
without fee waivers and 26.58 13.34 15.31 - 26.58 87.03 315.59 -
expense reimbursements
CLASS D
with fee waivers and 26.60 13.57 15.67 - 26.60 88.94
expense reimbursements
without fee waivers and 26.10 13.08 15.18 - 26.10 84.90 310.93 -
expense reimbursements
FOCUSED GROWTH/2/
CLASS A
with fee waivers and 27.05 - - 15.37 27.05 -
expense reimbursements
without fee waivers and 26.48 - - 14.70 26.48 - - 83.42
expense reimbursements
CLASS C
with fee waivers and 26.75 - - 15.29 26.75 -
expense reimbursements
without fee waivers and 26.19 - - 14.64 26.19 - - 83.00
expense reimbursements
CLASS D
with fee waivers and 26.52 - - 15.06 26.52 -
expense reimbursements
without fee waivers and 25.96 - - 14.41 25.96 - - 81.34
expense reimbursements
</TABLE>
B-49
<PAGE>
FOR PERIODS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (%) AGGREGATE TOTAL RETURNS (%)
SINCE SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INDEX/3/
CLASS A
with fee waivers and 27.93 19.79 18.33 - 27.93 146.66 438.21 -
expense reimbursements
without fee waivers and 27.63 19.40 17.95 - 27.63 142.67 421.17 -
expense reimbursements
CLASS C
with fee waivers and 27.64 19.68 18.27 - 27.64 145.53 435.48 -
expense reimbursements
without fee waivers and 27.33 19.56 17.89 - 27.33 141.56 418.53 -
expense reimbursements
CLASS D
with fee waivers and 27.45 19.56 18.21 - 27.45 144.30 432.77 -
expense reimbursements
without fee waivers and 27.14 19.18 17.84 - 27.14 140.45 416.33 -
expense reimbursements
SMALL COMPANY INDEX/4/
CLASS A
with fee waivers and 23.06 16.10 - 13.46 23.06 110.94 - 225.37
expense reimbursements
and portfolio transaction
fee
with fee waivers and
expense reimbursements
but without portfolio
transaction fee
without fee waivers and
expense reimbursements
but with portfolio
transaction fee
without fee waivers and 22.59 15.51 - 12.90 22.59 105.64 - 210.69
expense reimbursements
and portfolio transaction
fee
CLASS D
with fee waivers and 22.68 16.01 - 13.42 22.68 110.12 - 224.19
expense reimbursements
without fee waivers and 22.21 15.16 - 12.72 22.21 102.54 - 205.95
expense reimbursements
</TABLE>
B-50
<PAGE>
FOR PERIODS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (%) AGGREGATE TOTAL RETURNS (%)
SINCE SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH/5/
CLASS A
with fee waivers and 4.21 9.63 - 5.23 4.21 58.36 - 46.00
expense reimbursements
without fee waivers and 3.86 9.24 - 4.87 3.86 55.56 - 42.29
expense reimbursements
CLASS D
with fee waivers and 3.79 9.36 - 5.05 3.79 56.42 - 44.19
expense reimbursements
without fee waivers and 3.45 8.98 - 4.70 3.45 53.72 - 40.59
expense reimbursements
BALANCED/6/
CLASS A
with fee waivers and 17.29 - - 10.89 17.29 - - 57.97
expense reimbursements
without fee waivers and 16.67 - - 10.12 16.67 - - 53.17
expense reimbursements
CLASS C
with fee waivers and 17.00 - - 10.77 17.00 - - 57.19
expense reimbursements
without fee waivers and 16.38 - - 10.02 16.38 - - 52.54
expense reimbursements
CLASS D 16.82 - - 10.72 16.82 - - 56.89
with fee waivers and
expense reimbursements
without fee waivers and 16.20 - - 9.97 15.20 - - 52.25
expense reimbursements
</TABLE>
B-51
<PAGE>
FOR PERIODS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (%) AGGREGATE TOTAL RETURNS (%)
SINCE SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY INDEX/7/
CLASS A
with fee waivers and - - - inception - - - 5.45
expense reimbursements 4/1/97
and portfolio transaction
fee
with fee waivers and
expense reimbursements but
without portfolio
transaction fee
without fee waivers and
expense reimbursements
but with portfolio
transaction fee
without fee waivers and - - - inception - - - 4.40
expense reimbursements 4/1/97
and portfolio transaction
fee
</TABLE>
- ----------------------
1. For Class A and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For Class
D Shares, performance data from January 11, 1993 to September 14, 1994
(commencement of Class D Shares) is that of Class A Shares. Because the fees
and expenses of Class D Shares are .39% higher than those of Class A Shares,
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 Shares at the time of
their inception.
2. For Class C and Class D Shares, performance from July 1, 1993 to June 14,
1996 (commencement of Class C Shares) and December 8, 1994 (commencement of
Class D Shares), respectively, is that of Class A Shares. Class A Shares
commenced operations on July 1, 1993. Because fees and expenses of Class C and
Class D Shares are .24% and .39%, respectively, higher than those of Class A
Shares, actual performance would have been lower had such higher expenses been
taken into account.
3. For Class A, C and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For Class
C and D Shares, performance data from January 11, 1993 to September 28, 1995
(commencement of Class C Shares) and September 14, 1994 (commencement of Class D
Shares), respectively, is that of Class A Shares. Because fees and expenses of
Class C and Class D Shares are .24% and .39%, respectively, higher than those of
B-52
<PAGE>
Class A Shares, 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 Shares
at the time of their inception.
4. For Class A and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For Class
D Shares, performance data from January 11, 1993 to December 8, 1994,
(commencement of Class D Shares) is that of Class A Shares. Because the fees
and expenses of Class D Shares are .39% higher than those of Class A Shares,
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 Shares at the time of
their inception.
5. For Class A and Class D Shares, performance data prior to March 28, 1994
(commencement of Portfolio) is that of a predecessor collective fund. For Class
D Shares, performance data from March 28, 1994 to November 16, 1994
(commencement of Class D Shares) is that of Class A Shares. Because the fees
and expenses of Class D Shares are .39% higher than those of Class A Shares,
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 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 Shares at the time of their
inception.
6. For Class C and Class D Shares, performance from July 1, 1993 to December
29, 1995 (commencement of Class C Shares) and February 20, 1996 (commencement of
Class D Shares), respectively, is that of Class A Shares. Class A Shares
commenced operations on July 1, 1993. Because fees and expenses of Class C and
Class D Shares are .24% and .39%, respectively, higher than those of Class A
Shares, actual performance would have been lower had such higher expenses been
taken into account.
7. Commenced operations on April 1, 1997.
B-53
<PAGE>
Each of the Balanced Portfolio and the Global Asset Portfolio calculates its 30-
day (or one month) standard yield as described in the Prospectus for a class of
shares in accordance with the method prescribed by the SEC for mutual funds:
Yield = 2[(/ / p +1)/6/1]
--------
nd
**
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = maximum offering price per share on the last day of the period.
For the 30-day period ended November 30, 1997, the annualized yields of the
Class A, Class C and Class D Shares of the Balanced Portfolio was 2.68%, 2.44%
and 2.29%, 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 Shares would have been 2.54%, 2.30% and 2.15%, 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 Shares in a Portfolio, performance
quotations for shares of Class B, C and D of the Portfolio will be lower than
the quotations for Class A Shares of the Portfolio, which will not bear any fees
for shareholder support services and will bear minimal transfer agency fees.
B-54
<PAGE>
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their shareholders that are not described in the
Portfolios' Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Portfolios or their shareholders, 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
shareholders, 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").
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 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 intends to distribute to shareholders any excess of net
long-term capital gain over net short-term capital loss ("net capital gain") for
each taxable year. Such gain is
B-55
<PAGE>
distributed as a capital gain dividend and is taxable to shareholders as long-
term capital gain (20% or 28% rate gain, as applicable), regardless of the
length of time the shareholder has held the shares, whether such gain was
recognized by the Portfolio prior to the date on which a shareholder acquired
shares of the Portfolio and whether the distribution was paid in cash or
reinvested in shares. In addition, investors should be aware that any loss
realized upon the sale, exchange or redemption of shares held for six months or
less will be treated as a long-term capital loss to the extent of the capital
gain dividends the shareholder has received with respect to such shares.
In the case of corporate shareholders, 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 nominal 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. The maximum tax rate on
capital gains for individuals is 20% if the property was held more than 18
months; for property held for more than 12 months, but not longer than 18
months, the maximum tax rate on capital gains is 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 shareholders. In
such event, all distributions 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
shareholders.
Shareholders 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 or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
B-56
<PAGE>
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 shareholder (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 prior 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 shareholders to comply with the Distribution
Requirement and on the income or gain qualifying under the Income Requirement
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. 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
B-57
<PAGE>
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 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.
Certain foreign currency contracts entered into by a Portfolio may be
subject to the "mark-to-market" process, but gain or loss will be treated as
100% ordinary income or loss. 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, or settlement by
reference to the value of, a foreign currency of a type in which regulated
futures contracts are traded; (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 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 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.
B-58
<PAGE>
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 shareholders 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 shareholders include individuals other than U.S.
citizens, residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign shareholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain
on the redemption of shares or in respect of capital gain dividends, provided
such shareholder submits a statement, signed under penalties of perjury,
attesting to such shareholder's exempt status. Different tax consequences apply
to a foreign shareholder engaged in a U.S. trade or business. Foreign
shareholders 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
B-59
<PAGE>
explanation of the tax treatment of the Portfolio or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Shareholders 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 SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional shares 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
eighteen existing series, which represent interests in the Trust's eighteen
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 shares into additional series or classes
within a series. Pursuant to such authority, the Trustees have authorized the
issuance of an unlimited number of shares of beneficial interest in four
separate classes of shares in each of the Trust's non-money market portfolios:
Class A, B, C and D Shares. Under the terms of the Trust Agreement, each share
of each Portfolio is without par value, represents an equal proportionate
interest in the particular Portfolio with each other share 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, shareholders of each class of a Portfolio are
entitled to share pro rata in the net assets belonging to that class available
for distribution. Shares do not have any preemptive or conversion rights. The
right of redemption is described under "Investing-Redemption of Shares" in the
Prospectus. In addition, pursuant to the terms of the 1940 Act, the right of a
shareholder to redeem shares 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
B-60
<PAGE>
shareholders of the Portfolio. The Trust may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions. In addition, shares 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 shareholders of the Portfolio. Shares 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
shares, 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 shares 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 shares 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
are exempt from the separate voting requirements stated above. In addition,
shareholders of each of the classes in a particular investment portfolio have
equal voting rights except that only shares of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to shareholder servicing expenses and transfer
agency fees that are payable by that class.
The Trust is not required to hold annual meetings of Shareholders and does
not intend to hold such meetings. In the event that a meeting of Shareholders
is held, each Share of the Trust will be entitled, as determined by the Trustees
without the
B-61
<PAGE>
vote or consent of Shareholders, either to one vote for each Share or to one
vote for each dollar of net asset value represented by such Shares on all
matters presented to Shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees.
Meetings of Shareholders of the 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 Shares entitled to vote at such meeting. The Shareholders
of the Trust will have voting rights only with respect to the limited number of
matters specified in the Trust Agreement and such other matters as the Trustees
may determine or may be required by law.
The Trust Agreement authorizes the Trustees, without Shareholder approval
(except as stated in the next paragraph), to cause the 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 Trust, or any series thereof. In addition, the Trustees,
without Shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement 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 Shareholders of any class into one or more
separate groups and to provide for the different treatment of Shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of Shareholders that are so
classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement
without a Shareholder vote. However, Shareholders of the Trust have the right
to vote on any amendment (i) that would adversely affect the voting rights of
Shareholders; (ii) that is required by law to be approved by Shareholders; (iii)
that would amend the voting provisions of the Trust Agreement; or (iv) that the
Trustees determine to submit to Shareholders.
The Trust Agreement permits the termination of the Trust or of any series
or class of the Trust (i) by a majority of the affected Shareholders at a
meeting of Shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without Shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its Shareholders. The factors
and events
B-62
<PAGE>
that the Trustees may take into account in making such determination include (i)
the inability of the Trust or any series or class to maintain its assets at an
appropriate size; (ii) changes in laws or regulations governing the Trust, or
any series or class thereof, or affecting assets of the type in which it
invests; or (iii) economic developments or trends having a significant adverse
impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders
are not personally liable for obligations of the Trust. The Delaware Act
entitles the Trust to the same limitation of liability as is available to
shareholders of private for-profit corporations. However, no similar statutory
or other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Trust, business trust or a
shareholder is subject to the jurisdiction of courts in such other states, those
courts may not apply Delaware law and may subject the shareholders to liability.
To offset this risk, the Trust Agreement (i) contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation and instrument
entered into or executed by the Trust or its Trustees and (ii) provides for
indemnification out of the property of the applicable series of the Trust of any
shareholder held personally liable for the obligations of the Trust solely by
reason of being or having been a shareholder and not because of the
shareholder's acts or omissions or for some other reason. Thus, the risk of a
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (3) the applicable series of the Trust is unable to
meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any
person other than the Trust or a shareholder and that a Trustee will not be
liable for any act as a Trustee. However, nothing in the Trust Agreement
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 Trust Agreement provides for indemnification of Trustees, officers and
agents of the Trust unless the recipient is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
B-63
<PAGE>
In addition to the requirements of Delaware law, the Trust Agreement
provides that a Shareholder of the Trust may bring a derivative action on behalf
of the Trust only if the following conditions are met: (a) Shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding Shares of the Trust, or 10% of the outstanding Shares of
the series or class to which such action relates, must join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such Shareholder request and to
investigate the basis of such claim. The Trust Agreement also provides that no
person, other than the Trustees, who is not a Shareholder of a particular series
or class shall be entitled to bring any derivative action, suit or other
proceeding on behalf of or with respect to such series or class. The Trustees
will be entitled to retain counsel or other advisers in considering the merits
of the request and may require an undertaking by the Shareholders making such
request to reimburse the Trust for the expense of any such advisers in the event
that the Trustees determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's Shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the Trust
Agreement with respect to such series or class; and/or (c) may have no power or
authority with respect to any other series or class. The Trustees are not
currently considering the appointment of Series Trustees for the Trust.
As of March _____, 1998, substantially all of the Portfolios' outstanding
shares 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 shares 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 shares of the following Portfolios
as of March _____, 1998:
B-64
<PAGE>
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF OUTSTANDING
SHARES SHARES
------ ------
<S> <C> <C>
BALANCED PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 1,451,721 33.15%
Retirement Trust for Employees
of Tetra Pak Inc. 796,335 18.19%
Jordan Industries, Inc. 450,009 10.28%
LaPorte, The Retirement Plus Plan 301,843 6.89%
DIVERSIFIED GROWTH PORTFOLIO
The Northern Trust Company
Pension Plan 4,423,922 43.15%
The Pension Plan for Home Office
Employees of Mutual Trust Equity 574,794 5.61%
EQUITY INDEX PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 8,279,929 15.19%
Libby-Owens-Ford Company
Savings Trust 4,154,766 7.62%
Meadows Foundation Incorporated 5,585,984 10.25%
FOCUSED GROWTH PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 4,123,213 44.33%
Doe Run Resources Corporation
Retirement Plan 987,029 10.61%
Rexene Corporation
Retirement Plan 650,968 7.00%
Kitch Drotchas Planability
Trust Profit Sharing Plan 482,583 5.19%
SMALL COMPANY PORTFOLIO
The Northern Trust Company
Pension Plan 2,121,542 21.92%
Doe Run Resources Corporation
Retirement Plan 760,303 7.86%
Kettering Foundation 888,082 9.18%
Global Industrial Technologies,
Inc. Master Retirement Trust 521,249 5.39%
INTERNATIONAL EQUITY INDEX
The Northern Trust Company
Pension Plan 1,178,522 25.52%
NI Gas Savings Investment
and Thrift Trust 803,653 17.40%
The Northern Trust Company
Thrift Incentive Plan 523,385 11.33%
Fel-Pro Incorporated Employees
Profit Sharing & Retirement Trust 850,756 18.42%
</TABLE>
B-65
<PAGE>
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF OUTSTANDING
SHARES SHARES
------ ------
<S> <C> <C>
Lincoln Electric Company Master
Retirement Trust 702,025 15.20%
INTERNATIONAL GROWTH PORTFOLIO
The Northern Trust Company
Pension Plan 1,466,965 14.84%
First National Bank of
North Dakota 767,299 7.76%
Global Industrial Technologies, Inc.
Master Retirement Trust 892,207 9.03%
Tuthill Corporation Master
Retirement Trust 632,811 6.40%
White Cap, Inc. Master
Retirement Trust 671,109 6.79%
</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.
B-66
<PAGE>
Each Portfolio is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees and expenses payable to Northern,
NTQA and Goldman Sachs, brokerage fees and commissions, any portfolio losses,
fees for the registration or qualification of Portfolio shares 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 shareholders 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 shares" 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 shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares 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 the Portfolios'
shareholders for the fiscal year ended November 30, 1997 (the "Annual Report")
are hereby 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-67
<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. The obligor's
capacity to meet its financial commitment on the obligation is extremely
strong.
AA: Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A: Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
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 is less
vulnerable to non-payment than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity
to meet its financial commitment on the obligation. Debt rated B is more
vulnerable to non-payment but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's capacity
or willingness to meet its financial commitment on the obligation. 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.
S&P may attach the rating "r" to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high
1-A
<PAGE>
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 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 rating denotes the probable credit stature
upon completion of some act or the fulfillment of some condition. The notation
(P) when applied to forward delivery bonds indicates that the rating is
2-A
<PAGE>
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 IBCA, Inc.
("Fitch") for corporate and municipal bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is unlikely to be affected
by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk
and indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events. 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 "F1+."
3-A
<PAGE>
A: Bonds considered to be investment grade and of high credit quality.
These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity
may, nevertheless, 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 good credit quality.
These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments
is adequate, but adverse changes in economic conditions and circumstances,
however, are more likely to impair this category.
BB: Bonds considered to be speculative. These ratings indicate that there
is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
B: Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
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: Strong capacity to pay principal and interest. Those issues
determined to possess very strong 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
4-A
<PAGE>
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.
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 obligor's capacity to meet
its financial commitment is strong. Those issues for which the obligor's
capacity to meet its financial commitment on the obligation is extremely strong
are denoted in A-1+. Capacity for timely payment on commercial paper rated A-2
is satisfactory but the obligor's capacity to meet its financial commitment on
the obligation 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. Prime-1
repayment capacity will often be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
5-A
<PAGE>
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:
F1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F1+.
F2 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 F1+ and F1 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 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 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 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 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
3-B
<PAGE>
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 the
Investment Advisers. 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 the
Investment Advisers. It 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.
4-B
<PAGE>
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 the Investment Advisers 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 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
5-B
<PAGE>
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 the
Investment Advisers' 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 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
6-B
<PAGE>
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 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
7-B
<PAGE>
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
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERMEDIATE BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
This Statement of Additional Information (the "Additional Statement") dated
April 1, 1998 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, Intermediate Bond and
International Bond Portfolios (the "Portfolios") of The Benchmark Funds (the
"Prospectus") dated April 1, 1998. 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 U.S. Government
Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
Intermediate Bond and International Bond Portfolios..................... B-16
ADDITIONAL TRUST INFORMATION.............................................. B-20
Trustees and Officers................................................... B-20
Investment Advisers, Transfer Agent and Custodian....................... B-27
Administrator and Distributor........................................... B-35
Shareholder Servicing Plan.............................................. B-38
Counsel and Auditors.................................................... B-40
In-Kind Purchases....................................................... B-40
PERFORMANCE INFORMATION................................................... B-41
TAXES..................................................................... B-49
General................................................................. B-49
Taxation of Certain Financial Instruments............................... B-51
Foreign Investors....................................................... B-53
Conclusion.............................................................. B-54
B-1
<PAGE>
DESCRIPTION OF SHARES..................................................... B-54
OTHER INFORMATION......................................................... B-60
FINANCIAL STATEMENTS...................................................... B-61
APPENDIX A................................................................ 1-A
APPENDIX B................................................................ 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.
SHARES 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 U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
Intermediate Bond and International Bond Portfolios (the "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, 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
underlying principal of the U.S. Government obligations, the holder will resell
the stripped securities in custodial receipt programs with
B-3
<PAGE>
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 share.
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-Intermediate Bond, Bond, Intermediate Bond
and International Bond Portfolios may purchase asset-backed securities, which
are securities backed by mortgages, installment contracts, credit card
receivables or other assets. Asset-backed securities represent
B-4
<PAGE>
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 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
B-5
<PAGE>
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.
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
B-6
<PAGE>
the U.S. dollar or another foreign currency or for other reasons, the Short-
Intermediate Bond, Bond, Intermediate Bond and International Bond Portfolios are
authorized to enter into forward foreign 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.
Liquid assets equal to the amount of a Portfolio's assets that could be required
to consummate forward contracts will be segregated except to the extent the
contracts are otherwise "covered." The segregated assets will be valued at
market or fair value. If the market or fair value of such assets declines,
additional liquid assets will be segregated daily so that the value of the
segregated assets will equal the amount of such commitments
B-7
<PAGE>
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 Portfolio segregates liquid assets in
the amount of the difference. 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 Portfolio segregates liquid
assets in the amount of the difference.
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 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 segregated.
B-8
<PAGE>
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 segregated) 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 Portfolio segregates liquid assets in the amount of the difference.
The Portfolios will write put options only if they are "secured" by segregated
liquid assets 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
B-9
<PAGE>
put) option on the spread between the same two securities and segregates 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.
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
assets (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 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
B-10
<PAGE>
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 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
B-11
<PAGE>
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 when-issued, delayed delivery or
forward commitment basis, the Portfolio will segregate 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 Portfolio will segregate the portfolio securities themselves.
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. 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
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"
B-12
<PAGE>
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 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 variable and floating
rate instruments that may be acquired by the Portfolios, The Northern Trust
Company ("Northern") and Northern Trust Quantitative Advisors, Inc. ("NTQA" and,
collectively with Northern, the "Investment Advisers") 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
principal of the instrument will be backed by an unconditional bank letter or
line of credit, guarantee or commitment to lend.
Investment Companies. With respect to the investments of the Portfolios in the
securities of other investment companies, such investments will be limited so
that, as determined after a purchase is made, either (a) not more than 3% of the
total outstanding stock of such investment company will be owned by a Portfolio,
the Trust as a whole and their affiliated persons (as defined in the 1940 Act);
or (b)(i) not more than 5% of the value of the total assets of a Portfolio will
be invested in the securities of any one investment company, (ii) not more than
10% of the value of its total assets will be invested in the aggregate in
securities of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio. Certain investment companies whose securities are purchased by the
Portfolios may not be obligated to
B-13
<PAGE>
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.
If 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. A Portfolio may invest all or
substantially all of its assets in a single open-end investment company or
series thereof with substantially the same investment objective, policies and
restrictions as the Portfolio. However, each Portfolio currently intends to
limit its investments in securities issued by other investment companies to the
extent described above. 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.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by the Investment Advisers 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 segregate 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 securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
B-14
<PAGE>
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 share.
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 markets 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, 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
B-15
<PAGE>
agencies may not always reflect current conditions and events, in addition to
using recognized rating agencies and other sources, the Investment Advisers
perform their own analysis of the issuers whose lower-rated securities the
Portfolios hold. Because of this, the Portfolios' performance may depend more
on their own credit analysis than in the case of mutual funds investing in
higher-rated securities.
In selecting lower-rated securities, the Investment Advisers consider 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. The Investment Advisers
continuously monitor 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
the Investment Adviser 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 shares and by requirements which
enable the Portfolios to receive favorable tax treatment.
Investment Restrictions Applicable to the U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, Intermediate Bond and
International Bond Portfolios
B-16
<PAGE>
The U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury Index,
Bond, Intermediate 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 shares.
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.
(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).
B-17
<PAGE>
(8) 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.
B-18
<PAGE>
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.
(9) 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.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio may
(a) purchase securities of other investment companies to the full extent
permitted under Section 12 of the 1940 Act (or any successor provision thereto)
or under any regulation or order of the Securities and Exchange Commission; and
(b) invest all or substantially all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objective, policies and fundamental restrictions as the Portfolio.
In addition, with respect to the U.S. Government Securities, Short-Intermediate,
U.S. Treasury Index, Bond and Intermediate Bond Portfolios:
(11) The Portfolio may not make any investment inconsistent with the
Portfolio's classification as a diversified investment company under the 1940
Act, provided that this restriction does not apply to the International Bond
Portfolio.
B-19
<PAGE>
In applying the restriction No. 8 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 No. 8 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
shareholder 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 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.
B-20
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers
Information pertaining to the Trustees and officers of the Trust is set forth
below.
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
William H. Springer, 68 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications
Lake Forest, IL 60045 Trustee holding 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); and
Director of Baker, Fentress & Co. (a
closed-end, non-diversified
management investment company) from
April 1992 to present; Trustee,
Goldman Sachs Trust from 1989 to
present.
Richard Gordon Cline, 62 Trustee Chairman, Hussman International
4200 Commerce Court Inc. (commercial refrigeration
Suite 300 company) since January 1998;
Lisle, IL 60532 Chairman, Hawthorne Investors, Inc.
(a management advisory services and
private investment company) since
January 1996; Chairman and CEO of
NICOR Inc. (a diversified public
utility holding company) from 1986 to
1995, and President, 1992-1993;
Director: Whitman Corporation (a
diversified holding company); Kmart
Corporation (a retailing company);
Ryerson Tull, Inc. (a metals
distribution company); and University
of Illinois Foundation.
Edward J. Condon, Jr., 57 Trustee Chairman of The Paradigm
Sears Tower, Suite 9650 Group, Ltd. (a financial
233 S. Wacker Drive advisor) since July 1993;
Chicago, IL 60606 Vice President and Treasurer of
Sears, Roebuck and Co. (a
B-21
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
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.; Member of the
Board of Managers of The Liberty
Hampshire Company, LLC; Vice Chairman
and Director of Energenics LLC;
Director of University Eldercare,
Inc.; Director of the Girl Scouts of
Chicago; and Trustee of Dominican
University.
John W. English, 64 Trustee Private Investor; Vice President
50-H New England Avenue and Chief Investment Officer of
P.O. Box 640 The Ford Foundation
Summit, NJ 07902-0640 (a charitable trust) from 1981 until
1993; Trustee: The China Fund, Inc.;
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.
Sandra Polk Guthman, 53 Trustee President and CEO of Polk
420 N. Wabash Avenue Bros. Foundation (an Illinois
Suite 204 not-for-profit corporation)
Chicago, IL 60611 from 1993 to present; Director of
Business Transformation from
1992-1993, and Midwestern Director of
Marketing from 1988-1992, IBM
Corporation; Director: MBIA Insurance
B-22
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
Corporation of Illinois (bank holding
company) since 1994 and Avondale
Financial Corporation (a stock
savings and loan holding company)
since 1995.
Frederick T. Kelsey, 70 Trustee Consultant to Goldman Sachs
4010 Arbor Lane, #102 from December 1985 through
Northfield, IL 60093 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
and other investment companies
affiliated with Goldman Sachs through
August 1985; President from 1983 to
1985, and Trustee from 1983 to 1984,
Trustee, various management
investment companies affiliated with
Zurich Kemper Investments.
Richard P. Strubel, 58 Trustee Managing Director, Tandem Partners,
70 West Madison St Inc. (a privately held management
Suite 1400 services firm) since 1990; President
Chicago, IL 60602 and Chief Executive Officer,
Microdot, Inc. (a privately held
manufacturing firm) from 1984 to
1994; Trustee, GoldmanSachs Trust
from 1987 to present; Director of
Kaynar Technologies, Inc. (a leading
manufacturer of aircraft fasteners);
Trustee of the University of Chicago;
Director of Children's Memorial
Medical Center.
Frank E. Polefrone, 41 President Director of Financial Institutions
4900 Sears Tower sales and marketing of Goldman Sachs
Chicago, IL 60606 Asset Management ("GSAM") since March
1997; Marketing/Products Development
of Federated
B-23
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
Investors from August 1982
through December 1996.
James A. Fitzpatrick, 38 Vice Vice President, GSAM (since
4900 Sears Tower President April 1997); Vice President
Chicago, IL 60606 and General Manager, First Data
Corporation - Investor Services
Group prior thereto.
John W. Mosior, 58 Vice Vice President, Goldman
4900 Sears Tower President Sachs; Manager, Shareholder
Chicago, IL 60606 Servicing of GSAM (since
November 1989).
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President (since April 1985); Manager,
Chicago, IL 60606 Shareholder Servicing of GSAM
(since November 1989).
Scott M. Gilman, 37 Treasurer Director, Mutual Funds
One New York Plaza Administration of GSAM
New York, NY 10004 (since April 1994); Assistant
Treasurer of Goldman Sachs Funds
Management, Inc. (since March 1993);
Vice President, Goldman Sachs (since
March 1990).
John Perlowski, 32 Assistant Vice President, Goldman
One New York Plaza Treasurer Sachs (since July 1995);
New York, NY 10004 Director, Investors Bank and Trust
Company (November 1993 to July 1995);
Audit Manager of Arthur Andersen, LLP
(prior thereto).
Michael J. Richman, 36 Secretary Assoc. General Counsel of
85 Broad Street GSAM (since February 1994);
New York, NY 10004 Vice President and Assistant General
Counsel of Goldman Sachs (since June
1992); Counsel to the Funds Group of
GSAM (since June 1992); Partner of
Hale and Dorr from September 1991 to
June 1992.
B-24
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
Deborah A. Farrell, 26 Assistant Legal Assistant, Goldman Sachs
85 Broad Street Secretary (since January 1994);
New York, NY 10004 Formerly at Cleary, Gottlieb,
Steen & Hamilton.
Steven E. Hartstein, 33 Assistant Legal Products Analyst, Goldman Sachs
85 Broad Street Secretary (since June 1993); Funds Compliance
New York, NY 10004 Officer, Citibank Global Asset
Management (August 1991 to June
1993).
Howard B. Surloff, 32 Assistant Vice President & Assistant
85 Broad Street Secretary General Counsel of Goldman
New York, NY 10004 Sachs (since November 1993 and
May 1994, respectively); Counsel to
the Funds Group, GSAM (since November
1993); Associate of Shereff Friedman,
Hoffman & Goodman, LLP prior thereto.
Valerie A. Zondorak, 31 Assistant Vice President, Goldman Sachs (since
85 Broad Street Secretary March 1997); Counsel to the Funds
New York, NY 10004 Group, GSAM (since March 1997);
Associate of Shereff Friedman,
Hoffman & Goodman, LLP (prior
thereto).
B-25
<PAGE>
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
the Investment Advisers, 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, Mosior, Gilman, Richman, Surloff and Hartstein and
Mmes. Farrell, Mucker, and Zondorak hold similar positions with one or more
investment companies that are advised by Goldman Sachs. As a result of the
responsibilities assumed by the Investment Advisers under the Advisory
Agreement, Transfer Agency Agreements with the Trust, by Northern under its
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 distribu tor.
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.
Each Trustee will hold office for an indefinite term until the earliest of (1)
the next meeting of shareholders if any, called for the purpose of considering
the election or re-election of such Trustee and until the election and
qualification of his or her successor, if any, elected at such meeting; (2) the
date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust; or (3) in accordance with the current resolutions of the
Board of Trustees (which may be changed without shareholder vote), on the last
day of the fiscal year of the Trust in which he or she attains the age of 72
years.
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, 1997:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits from Registrant
Aggregate Accrued as and Fund Complex
Compensation Part of Paid to
Name of Trustee from Registrant Trust's Expenses Trustees
- ------------------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
William H. Springer $43,500 $ 0 $43,500
Richard G. Cline ***
Edward J. Condon, Jr. $31,000 $ 0 $31,000
John W. English $31,000 $ 0 $31,000
James J. Gavin* $34,000 $ 0 $34,000
Sandra Polk Guthman ***
Frederick T. Kelsey $35,000 $2,863** $37,863
Richard P. Strubel $39,000 $ 0 $39,000
</TABLE>
* Retired as of November 30, 1997.
** Interest from deferred compensation.
*** Mr. Cline and Ms. Guthman were elected as Trustees of the Trust in
September 1997.
B-27
<PAGE>
Investment Advisers, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. 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. NTQA, also
a wholly-owned subsidiary of Northern Trust Corporation, serves as investment
adviser principally to defined benefit and defined contribution plans and
manages over 60 equity and bond commingled and common trust funds. As of
December 31, 1997, the Investment Advisers and their affiliates had
approximately $196 billion in assets under management for clients including
public and private retirement funds, endowments, foundations, trusts,
corporations other investment companies and individuals.
Subject to the general supervision of the Board of Trustees, the Investment
Advisers make decisions with respect to and places orders for all purchases and
sales of portfolio securities for each Portfolio. The Advisory Agreements with
the Trust provide that in selecting brokers or dealers to place orders for
transactions the Investment Advisers shall attempt to obtain best net price and
execution or, with respect to the International Bond and Intermediate Bond
Portfolios, their best judgment to obtain the best overall terms available. In
assessing the best overall terms available for any transaction, the Investment
Advisers are to consider all factors they deem 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, the
Investment Advisers may consider the brokerage and research services provided to
the Portfolios and/or other accounts over which the Investment Advisers or an
affiliate of Northern exercise investment discretion. These
B-28
<PAGE>
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. Transactions on foreign
securities 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, the
Investment Advisers 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 the Investment
Advisers believe such practice to be in the Portfolios' interests.
On occasions when the Investment Advisers deem 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 them (including any other Portfolio, investment
company or account for which the Investment Advisers act as adviser), the
Agreements provide that the Investment Adviser, 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 the Investment Advisers in the
manner they consider to be most equitable and consistent with their 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 Agreements permit the
Investment Advisers, at their discretion but subject to applicable law, to
select the executing broker or dealer on the basis of their opinion of the
reliability and quality of such broker or dealer.
B-29
<PAGE>
The Advisory Agreements provide that the Investment Advisers may render
similar services to others so long as its services under such Agreements are not
impaired thereby. The Advisory Agreements also provide that the Trust will
indemnify the Investment Advisers 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 shares 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 shares in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions shareholder 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 shares 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 shares 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 statements of additional
information, 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 Shares, 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, subject to certain monitoring responsibilities, 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 U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury Index,
Bond and Intermediate 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
B-31
<PAGE>
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 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.
Northern's fees under the Custodian Agreement and Foreign Custody Agreement are
subject to reduction based on the Portfolios' daily uninvested cash balances (if
any).
Unless sooner terminated, the Advisory Agreements, the Custodian Agreement (or
in the case of the International Bond Portfolio the Foreign Custody Agreement)
and the Transfer Agency Agreement will continue in effect with respect to a
particular Portfolio until April 30, 1999 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
shares 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 shareholder action) on 60 days' written notice to Northern or NTQA
and by Northern or NTQA on 60 days' written notice to the Trust.
Prior to April 1, 1998, Northern served as investment adviser to the U.S.
Treasury Index Portfolio on the same terms as those described above. 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:
B-32
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $ $219,457 $ 77,685
Short-Intermediate Bond
Portfolio (2) $ $421,548 $305,155
U.S. Treasury Index Portfolio (2) $ $ 26,172 $ 49,400
Bond Portfolio (2) $ $830,217 $663,400
Intermediate Bond Portfolio (3) N/A N/A
International Bond Portfolio (4) $ $224,098 $224,564
</TABLE>
______________
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(4) Commenced investment operations on March 28, 1994.
For the same fiscal periods ended November 30 as indicated, Northern waived
advisory fees as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $ 300,491 $ 307,297 $108,759
Short-Intermediate Bond
Portfolio (2) $ 600,427 $ 589,702 $427,217
U.S. Treasury Index Portfolio (2) $ 73,133 $ 43,719 $ 82,333
Bond Portfolio (2) $1,520,709 $1,162,601 $928,746
Intermediate Bond Portfolio(3) $ 12,240 N/A N/A
International Bond Portfolio (4) $ 57,422 $ 63,958 $ 64,150
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investments operations on July 31, 1997.
(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:
B-33
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $12,116 $12,058 $ 3,163
Short-Intermediate Bond
Portfolio (2) $17,908 $16,929 $12,216
U.S. Treasury Index Portfolio (2) $ 4,802 $ 2,414 $ 3,366
Bond Portfolio (2) $74,971 $39,420 $28,014
Intermediate Bond Portfolio(3) $ 347 N/A N/A
International Bond Portfolio (4) $ 2,957 $ 3,220 $ 3,209
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(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:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $21,469 $19,709 $23,744
Short-Intermediate Bond
Portfolio (2) $29,972 $28,060 $24,834
U.S. Treasury Index Portfolio (2) $21,465 $20,242 $22,734
Bond Portfolio (2) $48,245 $46,249 $35,344
Intermediate Bond Portfolio(3) $ 7,200 N/A N/A
International Bond Portfolio (4) $67,525 $67,555 $46,838
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(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 and NTQA believe that they may perform the
services contemplated by their agreements with the Trust without violation of
such banking laws or regulations, which are applicable to them. It should be
noted, however, that future changes in either Federal or state statutes and
regulations relating to the permissible activities of banks and
B-34
<PAGE>
their subsidiaries or affiliates, as well as future judicial or administrative
decisions or interpretations of current and future statutes and regulations,
could prevent Northern and NTQA from continuing to perform such services for the
Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern and NTQA 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 NTQA 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 share of any Portfolio
or result in a financial loss to any shareholder. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates 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 and its
affiliates 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 Agreements, the Investment Advisers agree 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
Agreements provide that at such time as the Agreements are 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 the Investment
Advisers, 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
shareholders of the Portfolio. For the past three fiscal years, none of the
Portfolios paid brokerage commissions.
During the fiscal year ended November 30, 1997, the Short-Intermediate Bond
Portfolio acquired and sold securities of Societe Generale Securities
Corporation, Banque Paribas and Donaldson, Lufkin & Jenrette Securities, Inc.,
each a regular broker/dealer.
B-35
<PAGE>
At November 30, 1997, 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 $4,993,000; and Donaldson, Lufkin & Jenrette
Securities, Inc., with an approximate aggregate market value of $2,865,000.
During the fiscal year ended November 30, 1997, the Bond Portfolio acquired and
sold securities of Donaldson, Lufkin & Jenrette Securities, Inc., a regular
broker/dealer. At November 30, 1997, 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: Donaldson, Lufkin & Jenrette Securities,
Inc., with an approximate aggregate market value of $5,256,000.
During the fiscal year ended November 30, 1997, the Intermediate Bond Portfolio
acquired and sold securities of Societe Generale Securities Corporation a
regular broker/dealer. During the fiscal year ended November 30, 1997 the
International Bond Portfolio acquired and sold securities of Banque Brussels
Lambert, Banque Paribas and Societe Generale Securities Corporation, each a
regular broker/dealer.
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 shareholders,
periodic updating of the prospectuses 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 shares), 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:
B-36
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $ 85,832 $ 87,782 $ 31,074
Short-Intermediate Bond
Portfolio (2) $171,514 $168,616 $122,062
U.S. Treasury Index Portfolio (2) $ 29,247 $ 17,448 $ 32,933
Bond Portfolio (2) $434,400 $332,084 $265,356
Intermediate Bond Portfolio (3) $ 3,470 N/A N/A
International Bond Portfolio (4) $ 36,801 $ 32,014 $ 32,075
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated and prior to May 1, 1997,
Goldman Sachs voluntarily agreed to waive a portion of its Administration Fee
for each Portfolio then in existence 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>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $52,820 $131,975 $ 46,611
Short-Intermediate Bond
Portfolio (2) $72,454 $185,161 $161,031
U.S. Treasury Index Portfolio (2) $17,382 $ 26,353 $ 49,400
Bond Portfolio (2) $95,064 $243,306 $232,678
Intermediate Bond Portfolio (3) N/A N/A N/A
International Bond Portfolio (4) $18,779 $ 48,221 $ 48,112
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(4) Commenced investment operations on March 28, 1994.
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs 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
shareholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
B-37
<PAGE>
Goldman Sachs has agreed for the current fiscal year to reimburse each
Portfolio for all expenses (including fees payable to Goldman Sachs as
administrator, but excluding advisory fees, transfer agent fees, servicing fees
and extraordinary expenses) which 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. Prior to May 1, 1997, this undertaking
was voluntary with respect to the Portfolios. As of May 1, 1997, this
undertaking is contractual with respect to all 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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) $ 70,879 $ 68,799 $ 72,798
Short-Intermediate Bond
Portfolio (2) $103,948 $ 97,056 $ 87,069
U.S. Treasury Index Portfolio (2) $ 71,652 $ 67,218 $ 76,730
Bond Portfolio (2) $165,969 $142,673 $112,995
Intermediate Bond Portfolio (3) $ 54,096 N/A N/A
International Bond Portfolio (4) $ 82,249 $ 87,159 $ 52,493
- --------------
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on July 31, 1997.
(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, 1999, 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 shares 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 shareholder 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 shareholders 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.
Shareholder 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
shares 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 Shares, respectively, of the U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, Intermediate Bond and
International Bond Portfolios beneficially owned by such Customers or investors.
For the fiscal periods ended November 30 as indicated, the aggregate amount of
the Shareholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
B-38
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
U.S. Government Securities Portfolio
Class B N/A N/A N/A
Class C (6) $ 5,225 $5,040 N/A
Class D (1) $ 710 $ 452 $ 978
Short-Intermediate Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (2) $ 1,349 $ 127 $ 17
U.S. Treasury Index Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (3) $ 3,353 $1,198 $ 130
Bond Portfolio
Class B N/A N/A N/A
Class C (4) $51,720 $6,686 $2,292
Class D (2) $ 887 $ 397 $ 181
Intermediate Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D N/A N/A N/A
International Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (5) N/A $ 30 N/A
</TABLE>
_________________
(1) Class D Shares were issued on September 15, 1994.
(2) Class D Shares were issued on September 14, 1994.
(3) Class D Shares were issued on November 16, 1994.
(4) Class C Shares were issued on July 3, 1995.
(5) Class D Shares were issued on November 20, 1995.
(6) Class C Shares 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 shares 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 shares 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 shares; (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 shares of certain classes
beneficially owned by Customers or other investors; (11) if required by law,
forwarding shareholder communications from the Trust (such as proxy statements
and proxies, shareholder 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.
B-39
<PAGE>
The Trust's agreements with Institutions are governed by a Plan (called the
"Shareholder Servicing Plan") which has been adopted by the Board of Trustees.
Pursuant to the Shareholder 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 shareholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their shares in
an efficient manner.
Counsel and Auditors
Drinker Biddle & Reath LLP, 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 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 shares 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.
B-40
<PAGE>
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a class of
shares 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:
T=(ERV) 1/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 terms of
years.
Each Portfolio that advertises an "aggregate total return" for a class of shares
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 set forth below are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per share existing on the reinvestment date and (2) all recurring fees charged
to all shareholder 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
B-41
<PAGE>
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
Shares 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 Shares also include, for the
periods prior to the inception of such classes, the performance of the
Portfolios' Class A Shares. Because the fees and expenses of Class C and Class D
Shares are, respectively, 0.24% and 0.39% higher than those of Class A Shares,
actual performance for periods prior to the inception of Class C and Class D
Shares 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 Advisers, 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 Shares, as applicable, are shown below
with and without such fee waivers and expense reimbursements.
B-42
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond/1/
Class A
with fee waivers and
expense reimbursements 81.17 8.48 9.73 - 8.17 50.23 153.08 -
without fee waivers and 7.71 7.95 9.21 - 7.71 46.59 141.34 -
expense reimbursements
Class C 7.88 8.36 9.67 - 7.88 49.40 151.70 -
with fee waivers and
expense reimbursements
without fee waivers and 7.42 7.83 9.14 - 7.42 45.78 139.79 -
expense reimbursements
Class D
with fee waivers and 7.74 8.21 9.59 - 7.74 48.37 149.87
expense reimbursements
without fee waivers and 7.28 7.68 9.07 - 7.28 44.77 138.26 -
expense reimbursements
Intermediate Bond
Class A - - - inception - - 1.17
with fee waivers and 8/1/97
expense reimbursements
without fee waivers and inception - - - 0.52
expense reimbursements 8/1/97
Short-Intermediate Bond/2/
Class A
with fee waivers and 5.95 6.21 7.36 - 5.95 25.15 103.43 -
expense reimbursements
without fee waivers and 5.44 5.63 6.77 - 5.44 31.50 92.53 -
expense reimbursements
</TABLE>
B-43
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D
with fee waivers and 5.54 5.94 7.22 - 5.54 33.44 100.80 -
expense reimbursements
without fee waivers and 5.04 5.34 6.62 - 5.04 29.71 89.83 -
expense reimbursements
U.S. Treasury Index/3/
Class A
with fee waivers and 7.44 7.25 8.74 - 7.44 41.90 131.15 -
expense reimbursements
without fee waivers and 6.81 6.59 8.07 - 6.81 37.59 117.30 -
expense reimbursements
Class D
with fee waivers and 7.03 7.00 8.62 - 7.03 40.26 128.61 -
expense reimbursements
without fee waivers and 6.40 6.34 7.94 - 6.40 35.98 114.70 -
expense reimbursements
U.S. Government Securities/4/
Class A
with fee waivers and 5.93 - - 5.23 5.93 - - 26.83
expense reimbursements
without fee waivers and
expense reimbursements 5.38 - - 4.54 5.38 - - 22.99
Class C
with fee waivers and 5.67 - - 5.13 5.67 - - 26.23
expense reimbursements
without fee waivers and 5.12 - - 4.45 5.12 - - 22.47
expense reimbursements
</TABLE>
B-44
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns (%) Aggregate Total Returns (%)
Since Since
1 Year 5 Year 10 year Inception 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D
with fee waivers and 5.52 - - 15.06 5.52 - - 25.12
expense reimbursements
without fee waivers and 4.95 - - 4.24 4.95 - - 21.33
expense reimbursements
International Bond/5/
Class A
with fee waivers and -3.02 - - 7.51 -3.02 - 30.55
expense reimbursements
without fee waivers and -3.58 - - 6.91 -3.58 - - 27.89
expense reimbursements
Class D
with fee waivers and -3.38 - - 7.28 -3.38 - 29.55
expense reimbursements
without fee waivers and -3.95 - - 6.68 -3.95 - - 26.88
expense reimbursements
</TABLE>
- ----------------------
1. For Class A, C and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class C and D Shares, performance data from January 11, 1993 to July 3,
1995 (commencement of Class C Shares) and September 14, 1994 (commencement
of Class D Shares), respectively, is that of Class A Shares. Because the
fees and expenses of Class C and Class D Shares are .24% and .39%,
respectively, higher than those of Class A Shares, 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 Shares at the time of
their inception.
2. For Class A and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Shares, performance data from January 11, 1993 to September 14,
1994 (commencement of Class D Shares) is that of Class A Shares. Because
the fees and expenses of Class D Shares are .39% higher than those of Class
A Shares, actual performance would have been lower had such higher fees and
expenses been
B-45
<PAGE>
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
Shares at the time of their inception.
3. For Class A and D Shares, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Shares, performance data from January 11, 1993 to November 16, 1994
(commencement of Class D Shares) is that of Class A Shares. Because the
fees and expenses of Class D Shares are .39% higher than those of Class A
Shares, 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 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. The performance data of the
predecessor collective fund is adjusted to reflect the higher fees and
expenses applicable to Class A Shares at the time of their inception.
4. For Class C and D Shares, performance data prior to December 29, 1995
(commencement of Class C Shares), and September 15, 1994 (commencement of
Class D Shares), respectively, is that of Class A Shares. Class A Shares
commenced operations April 5, 1993. Because fees and expenses of Class C
and D Shares are .24% and .39%, respectively, higher than those of Class A
Shares, actual performance would have been lower had such higher fees and
expenses been taken into account.
5. For Class D Shares, performance data prior to November 20, 1995
(commencement of Class D Shares) is that of Class A Shares. Class A Shares
commenced operations on March 28, 1994. Because the fees and expenses of
Class D Shares are .39% higher than those of Class A Shares, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-46
<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:
Yield = 2[(ab+1) 6/1]
--
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 shares outstanding during the
period entitled to receive dividends; and
d = net asset value per share on the last day of the period.
For the 30-day period ended November 30, 1997, the annualized yields for the
Class A, Class B, Class C and Class D Shares of the Portfolios were as follows:
<TABLE>
<CAPTION>
30-Day Yield
-------------
<S> <C>
U.S. Government Securities
Portfolio
Class A 5.92%
Class B N/A
Class C 5.65
Class D 5.50
Short-Intermediate Bond
Portfolio
Class A 6.05
Class B N/A
Class C N/A
Class D 5.68
U.S. Treasury Index Portfolio
Class A 5.79
Class B N/A
Class C N/A
Class D 5.40
Bond Portfolio
Class A 6.01
Class B N/A
Class C 5.77
Class D 5.63
</TABLE>
B-47
<PAGE>
<TABLE>
<S> <C>
Intermediate Bond Portfolio
Class A 6.06
Class B N/A
Class C N/A
Class D N/A
International Bond Portfolio
Class A 4.527
Class B N/A
Class C N/A
Class D 3.88
</TABLE>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations. See "Investment Advisers, 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 Shares would have been as follows:
<TABLE>
<CAPTION>
30-Day Yield
------------
<S> <C>
U.S. Government Securities
Portfolio
Class A 5.85
Class B N/A
Class C 5.58
Class D 5.43
Short-Intermediate Bond Portfolio
Class A 5.95
Class B N/A
Class C N/A
Class D 5.58
U.S. Treasury Index Portfolio
Class A 5.5
Class B N/A
Class C N/A
Class D 5.15
Bond Portfolio
Class A 5.9
Class B N/A
Class C 5.70
Class D 5.56
</TABLE>
B-48
<PAGE>
<TABLE>
<S> <C>
Intermediate Bond Portfolio
Class A 4.30
Class B N/A
Class C N/A
Class D N/A
International Bond Portfolio
Class A 3.9
Class B N/A
Class C N/A
Class D 3.58
</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 Shares in a Portfolio, performance quotations for
shares of Class B, C and D of the Portfolio will be lower than the quotations
for Class A Shares of the Portfolio, which will not bear any fees for
shareholder support services and will bear minimal transfer agency fees.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their shareholders that are not described in the
Portfolios' Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Portfolios or their shareholders, 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
shareholders, 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
B-49
<PAGE>
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").
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 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 intends to distribute to shareholders 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 shareholders as long-term capital gain (20% or 28% rate gain, as
applicable), regardless of the length of time the shareholder has held the
shares, whether such gain was recognized by the Portfolio prior to the date on
which a shareholder acquired shares of the Portfolio and whether the
distribution was paid in cash or reinvested in shares. In addition, investors
should be aware that any loss realized upon the sale, exchange or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of the capital gain dividends the shareholder has received with
respect to such shares. It is not expected that any distributions will qualify
for the dividends received deduction for corporations.
Ordinary income of individuals is taxable at a nominal 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. The maximum tax rate on
capital gains for individuals is 20% if the property was held more than 18
months; for property held for more than 12 months, but not longer than 18
months, the maximum tax rate on capital gains is 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 shareholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
B-50
<PAGE>
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 shareholders.
Shareholders 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 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 shareholder (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
shareholders to comply with the Distribution Requirement and on the income or
gain qualifying under the Income Requirement 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
B-51
<PAGE>
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. 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 each Portfolio's taxable year, but gains and losses will be
subject to such 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.
Certain foreign currency contracts entered into by a Portfolio may be subject to
the "mark-to-market" process, but gain or loss will be treated as 100% ordinary
income or loss. 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, or settlement by reference to the value of, a
foreign currency of a type in which regulated futures contracts are traded; (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 and wash sales rules and the
requirement to capitalize interest and carrying charges may apply.
B-52
<PAGE>
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 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 shareholders 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 shareholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign shareholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of shares or in respect of
B-53
<PAGE>
capital gain dividends, provided such shareholder submits a statement, signed
under penalties of perjury, attesting to such shareholder's exempt status.
Different tax consequences apply to a foreign shareholder engaged in a U.S.
trade or business. Foreign shareholders 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
shareholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Shareholders 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 SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional shares 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 eighteen
existing series, which represent interests in the Trust's eighteen 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 shares into additional series or classes within a series. Pursuant to
such authority, the Trustees have authorized the issuance of an unlimited number
of shares of beneficial interest in four separate classes of shares in each of
its non-money market portfolios: Class A, B, C and D Shares. Under the terms of
the Trust Agreement, each share of each Portfolio is without par value,
represents an equal proportionate interest in the particular Portfolio with each
other share 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, shareholders of each
class of a Portfolio are entitled to share pro rata in the net assets belonging
to that class available for distribution. Shares do not have any preemptive or
conversion rights. The right of
B-54
<PAGE>
redemption is described under "Investing-Redemption of Shares" in the
Prospectus. In addition, pursuant to the terms of the 1940 Act, the right of a
shareholder to redeem shares 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 shareholders of the Portfolio. The Trust may also suspend or
postpone the recordation of the transfer of its shares upon the occurrence of
any of the foregoing conditions. In addition, shares 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 shareholders of the Portfolio. Shares 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 shares,
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 shares 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 shares 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
are exempt from the separate
B-55
<PAGE>
voting requirements stated above. In addition, shareholders of each of the
classes in a particular investment portfolio have equal voting rights except
that only shares of a particular class of an investment portfolio will be
entitled to vote on matters submitted to a vote of shareholders (if any)
relating to shareholder servicing expenses and transfer agency fees that are
payable by that class.
The Trust is not required to hold annual meetings of Shareholders and does not
intend to hold such meetings. In the event that a meeting of Shareholders is
held, each Share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of Shareholders, either to one vote for each Share
or to one vote for each dollar of net asset value represented by such Shares on
all matters presented to Shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees.
Meetings of Shareholders of the 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 Shares entitled to vote at such meeting. The Shareholders
of the Trust will have voting rights only with respect to the limited number of
matters specified in the Trust Agreement and such other matters as the Trustees
may determine or may be required by law.
The Trust Agreement authorizes the Trustees, without Shareholder approval
(except as stated in the next paragraph), to cause the 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 Trust, or any series thereof. In addition, the Trustees,
without Shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement 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 Shareholders of any class into one or more separate
groups and to provide for the different treatment of Shares held by the
different groups, provided that such merger, consolidation, termination or other
reorganization is approved by a majority of the outstanding voting securities
(as defined in the 1940 Act) of each group of Shareholders that are so
classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement without a
Shareholder vote. However, Shareholders of the Trust have the right to vote on
any amendment (i) that would
B-56
<PAGE>
adversely affect the voting rights of Shareholders; (ii) that is required by law
to be approved by Shareholders; (iii) that would amend the voting provisions of
the Trust Agreement; or (iv) that the Trustees determine to submit to
Shareholders.
The Trust Agreement permits the termination of the Trust or of any series or
class of the Trust (i) by a majority of the affected Shareholders at a meeting
of Shareholders of the Trust, series or class; or (ii) by a majority of the
Trustees without Shareholder approval if the Trustees determine that such action
is in the best interest of the Trust or its Shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust, or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders are not
personally liable for obligations of the Trust. The Delaware Act entitles the
Trust to the same limitation of liability as is available to shareholders of
private for-profit corporations. However, no similar statutory or other
authority limiting business trust shareholder liability exists in many other
states. As a result, to the extent that the Trust or a shareholder is subject
to the jurisdiction of courts in such other states, those courts may not apply
Delaware law and may subject the shareholders to liability. To offset this
risk, the Trust Agreement (i) contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into or
executed by the Trust or its Trustees and (ii) provides for indemnification out
of the property of the applicable series of the Trust of any shareholder held
personally liable for the obligations of the Trust solely by reason of being or
having been a shareholder and not because of the shareholder's acts or omissions
or for some other reason. Thus, the risk of a shareholder incurring financial
loss beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the liability arises under tort law or, if
not, no contractual limitation of liability is in effect; and (3) the applicable
series of the is unable to meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any person
other than the Trust or a shareholder and that a Trustee will not be liable for
any act as a Trustee. However, nothing in the Trust Agreement 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
B-57
<PAGE>
disregard of the duties involved in the conduct of his or her office. The Trust
Agreement provides for indemnification of Trustees, officers and agents of the
Trust unless the recipient is liable by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agreement provides
that a Shareholder of the Trust may bring a derivative action on behalf of the
Trust only if the following conditions are met: (a) Shareholders eligible to
bring such derivative action under Delaware law who hold at least 10% of the
outstanding Shares of the Trust, or 10% of the outstanding Shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such Shareholder request and to investigate the basis
of such claim. The Trust Agreement also provides that no person, other than the
Trustees, who is not a Shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to retain
counsel or other advisers in considering the merits of the request and may
require an undertaking by the Shareholders making such request to reimburse the
Trust for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more series or
classes of the Trust's Shares (the "Series Trustees"). To the extent provided by
the Trustees in the appointment of Series Trustees, Series Trustees (a) may, but
are not required to, serve as Trustees of the Trust or any other series or class
of the Trust; (b) may have, to the exclusion of any other Trustee of the Trust,
all the powers and authorities of Trustees under the Trust Agreement with
respect to such series or class; and/or (c) may have no power or authority with
respect to any other series or class. The Trustees are not currently considering
the appointment of Series Trustees for the Trust.
As of March 11, 1998, substantially all of the Portfolios' outstanding shares
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 shares 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,
B-58
<PAGE>
Chicago, IL 60675) beneficially owned five percent or more of the outstanding
shares of the following Portfolios as of March 11, 1998:
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
--------- ----------
<S> <C> <C>
International Bond Portfolio
The Northern Trust Company Pension Plan 857,716 66.54%
Doe Run Resources Corporation
Retirement Plan 178,38 13.84%
U.S. Treasury Index Portfolio
Moody Bible Institute/General 273,208 26.74%
Accreditation Council for Graduate 75,948
Medical Education 7.43%
Hubbell D.C. Trust 62,575 6.12%
Herget National Bank 113,819 11.14%
Old Second National Bank 81,498 7.98%
Short-Intermediate Bond Portfolio
Local 393 Health & Welfare Trust 573,299 5.94%
Bond Portfolio
The Northern Trust Company Pension Plan 2,001,544 7.83%
The Northern Trust Company Thrift
Incentive Plan 1,716,741 6.72%
Phycor, Inc. Savings and Profit Sharing
Plan 2,084,258 8.16%
U.S. Government Securities Portfolio
Electrical Insurance Trust
Supplemental Unemployment Benefit Fund 560,802 23.50%
Sheet Metal Workers Locas 265 Health &
Welfare Plan 420,239 17.61%
Mafco Rabbi 371,199 15.55%
Illinois State Painters Welfare Fund 238,243 9.98%
Jordan Industries, Inc. 152,250 6.38%
La Porte, The Retirement Plus Plan 161,104 6.75%
Intermediate Bond Portfolio
Illinois Masonic Medical Center
Restricted Investment Fund 299,816 37.93%
Illinois Masonic Medical Center Board
Designated Capital Fund 180,761 22.87%
Illinois Masonic Medical Center William
Barr Pavilion Funded Depreciation Fund 116,203 14.70%
Illinois Masonic Medical Center Special
Account - Northern Trust 61,174 7.74%
Fed-Pro Incorporated Employees Profit
Sharing and Retirement Trust 49,057 6.21%
</TABLE>
B-59
<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, NTQA and
Goldman Sachs, brokerage fees and commissions, fees for the registration or
qualification of Portfolio shares 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
shareholders 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 shares" 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 policy, the vote of
the lesser of (i) 67% or more of the shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares 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.
B-60
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1997 (the "Annual Report")
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 and attached hereto. Copies
of the Annual Report may be obtained by writing to Goldman, Sachs & Co., Funds
Group, 4900 Sears Tower, Chicago, IL 60606, or by calling Goldman Sachs toll-
free at 800-621-2550.
B-61
<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. The obligor's
capacity to meet its financial commitment on the obligation is extremely
strong.
AA: Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A: Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet it's financial
commitment on the obligation.
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 is less
vulnerable to non-payment than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity
to meet its financial commitment on the obligation. Debt rated B is more
vulnerable to non-payment but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's capacity
or willingness to meet its financial commitment on the obligation. 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.
S&P may attach the rating "r" to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high
1-A
<PAGE>
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 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 rating denotes the probable credit stature
upon completion of some act or the fulfillment of some condition. The notation
(P) when applied to forward delivery bonds indicates that the rating is
2-A
<PAGE>
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 IBCA, Inc.
("Fitch") for corporate and municipal bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of investment risk and
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is unlikely to be affected
by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments.
Because bonds related in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated "F1+."
3-A
<PAGE>
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 good credit quality.
These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments
is adequate, but adverse changes in economic conditions and circumstances,
however, are more likely to impair this category.
BB: Bonds considered to be speculative. These ratings indicate that there
is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
B: Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
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: Strong capacity to pay principal and interest. Those issues
determined to possess very strong 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
4-A
<PAGE>
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.
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 obligor's capacity to meet
its financial commitment is strong. Those issues for which the obligor's
capacity to meet its financial commitment on the obligation is extremely strong
are denoted in A-1+. Capacity for timely payment on commercial paper rated A-2
is satisfactory but the obligor's capacity to meet its financial commitment on
the obligation 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. Prime-1
repayment capacity will often be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
5-A
<PAGE>
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:
F1+ securities possess exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest degree of assurance for
timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F1+.
F2 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 F1+ and F1 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
III. 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 example, when a particular
3-B
<PAGE>
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 the Investment Advisers. 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 the Investment Advisers. It is also possible that, where a
Portfolio had sold futures to hedge its portfolio against
4-B
<PAGE>
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 the Investment Advisers 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 contracts have been
used to hedge portfolio securities, such securities will generally not be sold
until the futures contract can be terminated. In such
5-B
<PAGE>
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 the
Investment Advisers' 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 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
6-B
<PAGE>
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 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
7-B
<PAGE>
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>
The
Benchmark Funds
Fixed Income
and
Equity
Portfolios
Annual Report
November 30, 1997
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion of Portfolio Performance........................... 2
Voting Results of Special Meeting of Unitholders........................... 20
Fixed Income Portfolios
Statements of Investments
Bond Portfolio......................................................... 21
Intermediate Bond Portfolio............................................ 23
International Bond Portfolio........................................... 24
Short-Intermediate Bond Portfolio...................................... 25
U.S. Government Securities Portfolio................................... 27
U.S. Treasury Index Portfolio.......................................... 28
Statements of Assets and Liabilities..................................... 29
Statements of Operations................................................. 30
Statements of Changes in Net Assets...................................... 31
Financial Highlights..................................................... 33
Equity Portfolios
Statements of Investments
Balanced Portfolio..................................................... 39
Diversified Growth Portfolio........................................... 41
Equity Index Portfolio................................................. 43
Focused Growth Portfolio............................................... 49
International Equity Index Portfolio................................... 51
International Growth Portfolio......................................... 62
Small Company Index Portfolio.......................................... 64
Statements of Assets and Liabilities..................................... 84
Statements of Operations................................................. 85
Statements of Changes in Net Assets...................................... 86
Financial Highlights..................................................... 88
Notes to the Financial Statements.......................................... 95
Report of Independent Auditors............................................. 101
</TABLE>
- --------------------------------------------------------------------------------
1
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
BENCHMARK BOND PORTFOLIO
Overall, interest rates changed only marginally during the fiscal year, even
though the first half of the year witnessed a meaningful rise in rates, and the
second half saw an equally meaningful decline. Similarly, non-Treasury spreads
generally tightened early in the year while reversing course later. Both
patterns--but the interest rate move in particular--reflected the conflicting
signals given by cyclical versus secular economic forces. An economy growing
faster than what many consider trend growth, and the inflation and Federal
Reserve tightening fears it engendered, captured investors' attention early and
resulted in increasing rates. Positive secular developments and the resulting
declines in actual measured inflation and the fiscal deficit, among other
positive trends, eventually eased cyclical fears and pushed rates down. The
turmoil in Southeast Asia late in the period added to the positive backdrop. In
reality, this disturbance can be viewed as an effect of the secular
developments as opposed to a cause of the market rally.
For the year, the flattening of the yield curve, the outperformance of the
mortgage sector and disparate sector performance in a generally flat corporate
sector drove the fixed-income market's relative performance. The Portfolio
posted solid relative returns primarily on good securities and sector selection
decisions.
As we begin the new fiscal year, the Portfolio is positioned with moderately
greater interest rate sensitivity than its benchmark, and it is overweighted in
non-Treasury sectors. A calendar-year-end widening in asset-backed security
spreads has led to increased exposure in that sector. The Portfolio continues
to maintain a high quality profile.
MARK J. WIRTH
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BOND PORTFOLIO
VS. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Units
Bond Portfolio Lehman Brother
<S> <C> <C>
- -------------------------------------
1/11/93 $10,000 $10,000
- -------------------------------------
11/30/93 $11,060 $11,052
- -------------------------------------
11/30/94 $10,613 $10,641
- -------------------------------------
11/30/95 $12,900 $12,587
- -------------------------------------
11/30/96 $13,619 $13,291
- -------------------------------------
11/30/97 $14,732 $14,275
- -------------------------------------
</TABLE>
Past performance is not predictive of future performance.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class A Corporate
November 30, 1997: Units Bond Index
<S> <C> <C>
One Year: 8.17% 7.41%
- ----------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 8.24% 7.55%
</TABLE>
Class C Units
<TABLE>
<CAPTION>
Bond Portfolio Lehman Brother
<S> <C> <C>
- -------------------------------------
7/3/95 $10,000 $10,000
- -------------------------------------
11/30/95 $10,608 $10,499
- -------------------------------------
11/30/96 $11,174 $11,086
- -------------------------------------
11/30/97 $12,054 $11,907
- -------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class C Corporate
November 30, 1997: Units Bond Index
<S> <C> <C>
One Year: 7.88% 7.41%
- ----------------------------------------------------------------------------------------
Since Commencement on 7/3/95: 8.05% 7.49%
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BOND PORTFOLIO
VS. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class D Units
Bond Portfolio Lehman Brothers
- ------------------------------------------
<S> <C> <C>
9/14/94 $10,000 $10,000
- ------------------------------------------
11/30/94 $ 9,906 $9,891
- ------------------------------------------
11/30/95 $11,992 $11,700
- ------------------------------------------
11/30/96 $12,612 $12,354
- ------------------------------------------
11/30/97 $13,588 $13,269
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class D Corporate
November 30, 1997: Units Bond Index
<S> <C> <C>
One Year: 7.74% 7.41%
- ----------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 10.01% 9.20%
</TABLE>
3
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
BENCHMARK INTERMEDIATE BOND PORTFOLIO
Despite the continuing crisis in Southeast Asia, U.S. stock prices firmed
during November 1997 as foreign countries' restructuring plans and
International Monetary Fund aid came into focus. While this support did not
flow as strongly into the corporate and mortgage bond market, it at least
halted the underperformance that these sectors experienced in October 1997.
This movement caused U.S. corporate bonds to end the year virtually unchanged
relative to Treasury bonds. On the other hand, mortgage-backed securities
performed strongly based on a year-long decline in volatility.
The Intermediate Bond Portfolio commenced operations on August 1, 1997, with
initial investments in Treasury securities and some select positions in
corporate, mortgage and asset-backed securities. Given the recent lag in spread
sector prices, the Portfolio did experience some modest underperformance due to
its overweighting in corporate and mortgage bonds. Based on current interest
rate and spread levels, these markets look more attractive, and we expect to
hold these positions going forward.
STEVE SCHAFER
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK INTERMEDIATE
BOND PORTFOLIO VS. THE LEHMAN BROTHERS INTERM. GOV'T/CORP INDEX
[CHART APPEARS HERE]
Class A Units
-----------------------------------------
Intermediate Lehman Brothers Interm.
Bond Portfolio Gov't/Corp. Index
-------------- -----------------------
8/1/97 $10,000 $10,000
11/30/97 $10,117 $10,200
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Return** Lehm. Int.
For Period Ended Class A Govt/Corp
November 30, 1997: Units Index
<S> <C> <C>
Since Commencement on 8/1/97: 1.17% 2.00%
</TABLE>
**Average Annual Total Return is not annualized for periods less than one year.
4
<PAGE>
- --------------------------------------------------------------------------------
Benchmark International Bond Portfolio
The fiscal year's global financial environment was marked by certain events
that had negative implications for the Portfolio's performance. First, there
was a material increase in the price of longer-dated, high-quality bonds,
primarily due to improved inflation and weaker-than-expected global growth. The
Asian financial crisis further benefited bonds, as next year's growth and
inflation expectations were revised lower. Second, the dollar appreciated
sharply against major currencies due to strong domestic fundamentals and the
global flight to quality/liquidity. The greenback gained more than 10% versus
both the yen and the Deutschemark. The notable exception to the trend was the
British pound, which was virtually unchanged versus the dollar.
Given the Portfolio's international status, the majority of its market
exposure was to both foreign bonds and currencies. As such, the past year's
environment was by no means ideal. Although participants benefited from a rise
in bond prices, the dollar's sharp appreciation more than offset these gains
for U.S.-based investors. Of some consolation was the Portfolio's
outperformance versus its benchmark, which was largely due to an underweighted
position in Japan and an overweighted position in the United Kingdom.
As the new fiscal year begins, we retain the Portfolio's interest rate
posture, given our constructive outlook for global inflation and generally
attractive real yields. We also maintain a strong bias toward very high-quality
issuers. Because the Portfolio is invested in non-U.S. bonds and currencies,
returns continue to be strongly influenced by the direction of the dollar.
Michael 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
<TABLE>
<CAPTION>
[CHART APPEARS HERE]
Class A Units
International Bond Portfolio J.P. Morgan Non-U.S.Government Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
3/25/94 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/94 $10,403 $10,521
- --------------------------------------------------------------------------------
11/30/95 $12,296 $12,589
- --------------------------------------------------------------------------------
11/30/96 $13,461 $13,487
- --------------------------------------------------------------------------------
11/30/97 $13,055 $13,022
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
J.P. Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class A Government
November 30, 1997: Units Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
One Year: -3.02% -3.45%
- --------------------------------------------------------------------------------
Since Commencement on 3/28/94: 7.51% 7.43%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
[CHART APPEARS HERE]
Class D Units
International Bond Portfolio J.P. Morgan Non-U.S.Government Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
11/20/95 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/95 $ 9,970 $ 9,912
- --------------------------------------------------------------------------------
11/30/96 $10,872 $10,619
- --------------------------------------------------------------------------------
11/30/97 $10,504 $10,253
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
J.P. Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class D Government
November 30, 1997: Units Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
One Year: -3.38% -3.45%
- --------------------------------------------------------------------------------
Since Commencement on 11/20/95: 2.45% 1.24%
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Management's Discussion of Portfolio Performance
Benchmark Short-Intermediate Bond Portfolio
Overall, interest rates changed only marginally during the fiscal year, even
though the first half of the year witnessed a meaningful rise in rates, and the
second half saw an equally meaningful decline. Similarly, non-Treasury spreads
generally tightened early in the year while reversing course later. Both
patterns--but the interest rate move in particular--reflected the conflicting
signals given by cyclical versus secular economic forces. An economy growing
faster than what many consider trend growth, and the inflation and Federal
Reserve tightening fears it engendered, captured investors' attention early and
resulted in increasing rates. Positive secular developments and the resulting
declines in actual measured inflation and the fiscal deficit, among other
positive trends, eventually eased cyclical fears and pushed rates down. The
turmoil in Southeast Asia late in the period added to the positive backdrop. In
reality, this disturbance can be viewed as an effect of the secular
developments as opposed to a cause of the market rally.
For the year, the flattening of the yield curve, the outperformance of the
mortgage sector and disparate sector performance in a generally flat corporate
sector drove the fixed-income market's relative performance. The Portfolio
outperformed its benchmark before fees, though it slightly trailed on an after-
fee basis. With little net change in interest rates or spreads, the Portfolio
relied on a yield advantage from overweighting non-Treasury sectors to outpace
its benchmark.
As we begin the new fiscal year, the Portfolio is positioned with moderately
greater interest rate sensitivity than its benchmark, and it is overweighted in
non-Treasury sectors. A calendar-year-end widening in asset backed security
spreads has led to increased exposure in that sector. The Portfolio continues
to maintain a high quality profile.
Mark J. 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 BOND INDEX
<TABLE>
<CAPTION>
[CHART APPEARS HERE]
Class A Units
Short-Intermediate Bond Portfolio Merrill Lynch 1-5 Corporate/Government
Index
- --------------------------------------------------------------------------------
<S> <C> <C>
1/11/93 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/93 $10,590 $10,641
- --------------------------------------------------------------------------------
11/30/94 $10,679 $10,596
- --------------------------------------------------------------------------------
11/30/95 $11,916 $11,893
- --------------------------------------------------------------------------------
11/30/96 $12,592 $12,582
- --------------------------------------------------------------------------------
11/30/97 $13,341 $13,348
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total 1-5 Corporate/
Returns For Periods Ended Class A Government
November 30, 1997: Units Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.95% 6.09%
- --------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.07% 6.08%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
[CHART APPEARS HERE]
Class D Units
Short-Intermediate Bond Portfolio Merrill Lynch 1-5 Corporate/Government
Index
- --------------------------------------------------------------------------------
<S> <C> <C>
9/14/94 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/94 $ 9,970 $ 9,928
- --------------------------------------------------------------------------------
11/30/95 $11,076 $11,143
- --------------------------------------------------------------------------------
11/30/96 $11,654 $11,788
- --------------------------------------------------------------------------------
11/30/97 $12,300 $12,507
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total 1-5 Corporate/
Returns For Periods Ended Class D Government
November 30, 1997: Units Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.54% 6.09%
- --------------------------------------------------------------------------------
Since Commencement on 9/14/94: 6.65% 7.21%
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
Benchmark U.S. Government Securities Portfolio
With the crisis in Southeast Asia continuing to spread during the final
months of fiscal 1997, the U.S. bond market remained a primary recipient of
investment capital. This demand allowed yields on short-term government bonds
to return to near their lows of the past fiscal year. Throughout the year, bond
yields increased by as much as 1.0% on fears that strong economic growth would
cause the Federal Reserve to tighten monetary policy.
However, moderately slower domestic growth coupled with investors' fears of a
world-wide financial meltdown caused the markets to re-evaluate the situation.
As foreign countries' restructuring plans and International Monetary Fund aid
came into focus, the need for any Federal Reserve action was delayed, and
currently no action is priced into the bond market over the next year. Five-
year government interest rates closed the fiscal year nearly unchanged in
yield, though they did trade within a range of 1.25% over the 12-month period.
On an absolute basis, this range-bound move in rates caused the return on
government-bond funds to consist primarily of interest income. In this
environment, maintaining additional portfolio yield in the form of callable
agencies or mortgage-backed securities was a rewarding strategy. Thus, our
modest overweight to mortgage-backed securities was a source of incremental
positive performance. The Portfolio's performance moved in step with its
benchmark, as the generous "real yields" currently available in the bond market
have kept us fully invested in bonds.
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
[CHART APPEARS HERE]
Class A Units
-----------------------------------------
U.S. Government Merrill Lynch 1-5
Securities Portfolio Government Index
-------------------- -----------------
4/5/93 $10,000 $10,000
11/30/93 $10,300 $10,346
11/30/94 $10,241 $10,295
11/30/95 $11,386 $11,538
11/30/96 $11,972 $12,192
11/30/97 $12,682 $12,929
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class A 1-5 Government
November 30, 1997: Units Index
<S> <C> <C>
One Year: 5.93% 6.04%
- ------------------------------------------------------------------------------------------
Since Commencement on 4/5/93: 5.23% 5.67%
</TABLE>
[CHART APPEARS HERE]
Class C Units
-----------------------------------------
U.S. Government Merrill Lynch 1-5
Securities Portfolio Government Index
-------------------- -----------------
12/29/95 $10,000 $10,000
11/30/96 $10,405 $10,476
11/30/97 $10,995 $11,109
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class C 1-5 Government
November 30, 1997: Units Index
<S> <C> <C>
One Year: 5.67% 6.04%
- ----------------------------------------------------------------------------------------
Since Commencement on 12/29/95: 5.05% 5.62%
</TABLE>
7
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
Management's Discussion of Portfolio Performance
Benchmark U.S. Government Securities Portfolio--Continued
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK U.S. GOVERNMENT SECURITIES PORTFOLIO VS. THE
MERRILL LYNCH 1-5 GOVERNMENT INDEX
[CHART APPEARS HERE]
Class D Units
-----------------------------------------
U.S. Government Merrill Lynch 1-5
Securities Portfolio Government Index
-------------------- -----------------
9/15/94 $10,000 $10,000
11/30/94 $ 9,910 $ 9,913
11/30/95 $10,966 $11,110
11/30/96 $11,490 $11,740
11/30/97 $12,123 $12,450
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class D 1-5 Government
November 30, 1997: Units Index
<S> <C> <C>
One Year: 5.52% 6.04%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/15/94: 6.18% 7.07%
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
BENCHMARK U.S. TREASURY INDEX PORTFOLIO
During the fiscal year ended November 30, 1997, Treasury rates changed only
marginally, rising in the first part of the year and falling in the latter
part. Two forces counteracted each other: A fast growing economy created fears
of a Federal Reserve tightening, while declines in actual measured inflation
and the secular deficit pushed rates lower. The yield curve flattened during
the year.
As it seeks to do, the Benchmark U.S. Treasury Index Portfolio performed in
line with the Lehman Treasury Index. We will continue to pursue a passive
investment strategy by investing in securities that represent the Index. These
efforts seek to provide returns that closely track the returns 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 TREASURY BOND INDEX
[CHART APPEARS HERE]
Class A Units
--------------------------------------
U.S. Treasury Lehman Brothers
Index Portfolio Treasury Bond Index
--------------- -------------------
1/11/93 $10,000 $10,000
11/30/93 $10,994 $11,019
11/30/94 $10,576 $10,625
11/30/95 $12,369 $12,473
11/30/96 $13,000 $13,127
11/30/97 $13,967 $14,088
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Lehman Brothers
Returns For Periods Ended Class A U.S. Treasury
November 30, 1997: Units Bond Index
<S> <C> <C>
One Year: 7.44% 7.32%
- ----------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 7.07% 7.26%
</TABLE>
[CHART APPEARS HERE]
Class D Units
--------------------------------------
U.S. Treasury Lehman Brothers
Index Portfolio Treasury Bond Index
--------------- -------------------
11/16/94 $10,000 $10,000
11/30/94 $10,037 $10,069
11/30/95 $11,687 $11,821
11/30/96 $12,239 $12,441
11/30/97 $13,099 $13,352
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Lehman Brothers
Returns For Periods Ended Class D U.S. Treasury
November 30, 1997: Units Bond Index
<S> <C> <C>
One Year: 7.03% 7.32%
- -----------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 9.28% 9.97%
</TABLE>
9
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Management's Discussion of Portfolio Performance
Benchmark Balanced Portfolio
The performance of the Benchmark Balanced Portfolio closely paralleled that of
its composite index for the fiscal year ending November 30, 1997. This was due
primarily to our positive stance on equities during the year as well as the
strong relative performance of both the equity and bond components of the
Portfolio.
During the first half of the fiscal year, the emphasis within the Portfolio's
equity component remained on large-capitalization, multi-national issues. These
stocks were among the market leaders. But, as the market broadened mid year, we
expanded our equity reach to include several smaller- to mid-sized growth
issues that exhibited strong earnings growth potential. We continue to focus on
these stocks while maintaining a relatively low risk profile in the entire
equity portfolio.
Bonds also contributed to our relative performance improvement. Throughout
the year, our slightly longer duration and our preference for corporate bonds
proved to be a successful strategy. As we enter a new fiscal year, this is a
strategy that we continue to implement.
Overall, our enhanced risk control measures, with respect to asset allocation
and equity and bond management, contributed positively to performance over the
past 12 months. As the markets continue to exhibit unprecedented volatility and
uncertainty, we feel our diligence in managing risk will serve us well, both on
an absolute and relative basis.
JON BRORSON
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. THE S&P 500 COMPOSITE
STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX AND THE COMPOSITE INDEX
[CHART APPEARS HERE]
Class A Units
<TABLE>
<CAPTION>
Lehman Brothers Intermediate Composite
Balanced Portfolio S&P 500 Government Corp 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
- --------------------------------------------------------------------------------
11/30/97 $15,797 $23,607 $12,897 $18,052
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns
For Periods Ended Class A S&P 500 Lehman Composite
November 30, 1997: Units Index Brothers Index*
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year: 17.29% 28.52% 6.33% 18.29%
- -----------------------------------------------------------------------------
Since Commencement
on 7/1/93: 10.89% 21.44% 5.92% 14.29%
- -----------------------------------------------------------------------------
</TABLE>
[CHART APPEARS HERE]
Class C Units
<TABLE>
<CAPTION>
Balanced Portfolio S&P 500 Composite Index Lehman Brothers
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/2/96 $10,000 $10,000 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/96 $11,272 $12,546 $11,582 $10,473
- --------------------------------------------------------------------------------
11/30/97 $13,188 $16,124 $13,701 $11,135
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns
For Periods Ended Class C S&P 500 Lehman Composite
November 30, 1997: Units Index Brothers Index*
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year: 17.00% 28.52% 6.33% 18.29%
- -----------------------------------------------------------------------------
Since Commencement
on 12/29/95: 15.47% 28.33% 5.77% 17.87%
- -----------------------------------------------------------------------------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. THE S&P 500 COMPOSITE
STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX AND THE COMPOSITE INDEX
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Balanced Portfolio Lehman Brothers S&P 500 Composite Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
2/20/96 $10,000 $10,000 $10,000 $10,000
- --------------------------------------------------------------------------------
11/30/96 $11,055 $10,455 $12,026 $11,227
- --------------------------------------------------------------------------------
11/30/97 $12,914 $11,116 $15,456 $13,281
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
Average Annual
Total Returns
For Periods Ended Class D S&P 500 Lehman Composite
November 30, 1997: Units Index Brothers Index*
- -------------------------------------------------------------------
One Year: 16.82% 28.52% 6.33% 18.29%
- -------------------------------------------------------------------
Since Commencement
on 2/20/96: 15.47% 27.74% 6.13% 17.30%
- -------------------------------------------------------------------
*The Composite Index consists of 55%, 40% and 5% of the S&P 500, The Lehman
Brothers Intermediate Government/Corporate Bond Index and 91-Day Treasury
Bills, respectively.
11
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
BENCHMARK DIVERSIFIED GROWTH PORTFOLIO
The fiscal-year performance of the Benchmark Diversified Growth Portfolio was
very strong relative to other mutual funds in its peer group. The Portfolio's
performance lagged that of the broader market index for the period.
Earlier in the year, we favored large-capitalization issues, which clearly
were the market leaders. Investors seemed to disregard the high absolute and
relative premiums that were being paid for many of these issues, and they
forced prices up accordingly. Later, though, we began to slowly move away from
these issues. In their place we selectively added several more mid-sized growth
issues that the market had largely ignored to that point. The Portfolio still
has exposure to many large-cap stocks, but it's now tilted toward domestically
oriented mid-sized growth companies, which we feel are attractively priced on a
relative valuation basis.
Throughout the past year, we have been diligent in evaluating the individual
and portfolio risks associated with every investment we make. The performance
improvements we have made are due in part to this enhancement to our management
process. As the markets continue to exhibit unprecedented volatility and
uncertainty, we feel our diligence in managing risk will serve us well, both on
an absolute and relative basis.
JON BRORSON
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
[CHART APPEARS HERE]
Class A Units
---------------------------
Diversified S&P 500
Growth Portfolio Index
---------------- -------
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
11/30/97 $19,100 $25,130
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class A S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 27.06% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 14.15% 20.73%
</TABLE>
[CHART APPEARS HERE]
Class D Units
---------------------------
Diversified S&P 500
Growth Portfolio Index
---------------- -------
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
11/30/97 $17,956 $21,925
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class D S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 26.60% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 19.98% 27.67%
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
BENCHMARK EQUITY INDEX PORTFOLIO
Performance from retail, capital goods and financial stocks had the greatest
impact on the total return of the S&P 500 Index for the fiscal year ended
November 30, 1997. The Index returned 28.52% for the period, outpacing small-
capitalization stocks, as measured by the Russell 2000 Index, by more than 5.3
percentage points.
There were 30 additions and deletions to the Index during the 1997 fiscal
year. Some of the more notable changes included: the addition of State Street
following the completion of the merger between Nynex and Bell Atlantic; the
addition of Charles Schwab, which replaced Morgan Stanley; and the addition of
Health South Corp. in place of Boatman's Bancshares, which was acquired by
NationsBank.
The Fund's slight underperformance relative to the S&P 500 Index was due
primarily to expenses.
Going forward, we will continue to follow a passive strategy seeking to
provide returns that closely track those of 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
[CHART APPEARS HERE]
Class A Units
--------------------------
Equity S&P 500
Index Portfolio Index
--------------- -------
1/11/93 $10,000 $10,000
11/30/93 $11,088 $11,041
11/30/94 $11,104 $11,161
11/30/95 $15,168 $15,291
11/30/96 $19,344 $19,554
11/30/97 $24,747 $25,130
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class A S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 27.93% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 20.36% 20.73%
</TABLE>
[CHART APPEARS HERE]
Class C Units
--------------------------
Equity S&P 500
Index Portfolio Index
--------------- -------
9/28/95 $10,000 $10,000
11/30/95 $10,394 $10,402
11/30/96 $13,225 $13,302
11/30/97 $16,881 $17,095
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class C S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 27.64% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 9/28/95: 27.21% 28.03%
</TABLE>
13
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
BENCHMARK EQUITY INDEX PORTFOLIO--CONTINUED
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK EQUITY INDEX
PORTFOLIO VS. THE S&P 500 COMPOSITE STOCK PRICE INDEX
[CHART APPEARS HERE]
Class D Units
--------------------------
Equity
Index Portfolio S&P 500
--------------- -------
9/14/94 $10,000 $10,000
11/30/94 $ 9,732 $ 9,738
11/30/95 $13,255 $13,341
11/30/96 $16,860 $17,060
11/30/97 $21,488 $21,925
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class D S&P 500
November 30, 1997: Units Index
- --------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.45% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 26.87% 27.67%
- --------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
Benchmark Focused Growth Portfolio
Most large-capitalization domestic equity indexes registered strong fiscal-year
gains. Surpassing the performance of the S&P 500 Index once again proved to be
a difficult task for most money managers. While the Focused Growth Portfolio
did fall short of the S&P 500 for the period, we are happy to report that we
have made significant progress in the Portfolio's performance relative to its
peer group, and we are confident this momentum can continue.
Throughout the year, we focused our attention on companies with a high degree
of earnings predictability. This is a theme that we believe will be even more
important in 1998, as earnings growth may become scarce, and higher relative
returns accrue to those companies that can deliver on their earnings forecasts.
In the first part of the fiscal year, companies with predictable earnings
flow generally were large, multi-national firms, and the securities of these
companies dominated the Portfolio. Recently, volatility in the international
markets and earnings uncertainties for companies with foreign exposure have
caused us to tilt the Portfolio toward domestic, mid-sized growth companies. On
a relative valuation basis, we feel that many of these issues are attractively
priced.
Throughout the year, we were diligent in evaluating the individual and
portfolio risks associated with every investment we made. The performance
improvements we have experienced are due in part to this management
enhancement. As the markets continue to exhibit unprecedented volatility and
uncertainty, we feel our diligence in managing risk will serve us well, both on
an absolute and relative basis.
Jon Brorson
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX
[CHART APPEARS HERE]
Class A Units
-------------------------
Focused Growth
Portfolio S&P 500
-------------- -------
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
11/30/97 $18,816 $23,607
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class A S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 27.05% 28.52%
- ----------------------------------------------------------------------------------------------
Since Commencement on 7/1/93: 15.37% 21.44%
</TABLE>
[CHART APPEARS HERE]
Class C Units
-------------------------
Focused Growth
Portfolio S&P 500
-------------- -------
6/14/96 $10,000 $10,000
11/30/96 $10,751 $11,481
11/30/97 $13,627 $14,756
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class C S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 26.75% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 6/14/96: 23.56% 30.40%
</TABLE>
15
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Management's Discussion of Portfolio Performance
Benchmark Focused Growth Portfolio--Continued
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX
[CHART APPEARS HERE]
Class D Units
-------------------------
Focused Growth
Portfolio S&P 500
-------------- -------
12/8/94 $10,000 $10,000
11/30/95 $13,097 $13,767
11/30/96 $15,378 $17,605
11/30/97 $19,458 $22,626
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class D S&P 500
November 30, 1997: Units Index
<S> <C> <C>
One Year: 26.52% 28.52%
- --------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 25.02% 31.51%
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
Benchmark International Equity Index Portfolio
International stocks, as represented by the Europe Australia and Far East
(EAFE) Index, fell 0.40% for the 12 month period ended November 30, 1997,
trailing the U.S. market, represented by the S&P 500 Index, by almost 30
percentage points. Both Japan and Hong Kong fell nearly 24% for the fiscal
year, while most of the larger European markets posted gains. In the United
Kingdom, for example, the market was up 22%. The German market posted a 20%
gain, while France returned 9%.
The Portfolio's performance surpassed that of the EAFE Index since commencing
investment operations in April 1997. We will practice a passive investment
strategy as we seek returns that approximate those of the international stock
market in general and the EAFE Index in particular.
Andrew Buchner
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL
EQUITY INDEX PORTFOLIO VS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE,
AUSTRALIA, AND FAR EAST (EAFE) INDEX
[CHART APPEARS HERE]
Class A Units
----------------------------
International
Equity Index EAFE Index
------------- ----------
4/1/97 $10,000 $10,000
11/30/97 $10,545 $10,440
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Return**
For Period Ended Class A EAFE
November 30, 1997: Units Index
<S> <C> <C>
Commencement on 4/1/97: 5.45% 4.40%
- --------------------------------------------------------------------------------------------------
</TABLE>
**Average Annual Total Return is not annualized for periods less than one year.
17
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
Management's Discussion of Portfolio Performance
Benchmark International Growth Portfolio
In the first half of the fiscal year, falling interest rates, expectations for
robust earnings, a strong dollar and firm liquidity inflows fueled a powerful
global equity rally. By late summer, though, global financial markets appeared
overvalued and serious problems emerged in Southeast Asia and in the Japanese
financial system. As Thailand devalued its currency, a domino effect hit, with
every country in Asia, except Hong Kong, devaluing its currency. The Portfolio
had a diversified exposure to the Southeast Asian markets in modest proportions
early in the year, but by August 1997 we had eliminated this exposure.
By fall it had become apparent that the problems in Southeast Asia were
spreading to northern Asia and other emerging markets. As a result, global
equity markets experienced corrections, with emerging markets the hardest hit.
The Portfolio was well prepared for this, as we had reduced the number of high
volatility stocks and lowered the Portfolio's emerging-market exposure.
Recently, the focus has returned to Japan, where additional negative economic
news and a string of bankruptcies sent the market and the yen sharply lower.
Until early fall, the Portfolio held a modest underweight in Japan, but by late
October 1997 we further trimmed its exposure to the Japanese market and
increased its weighing in Europe, where strong exposure to financial stocks has
helped performance.
This strategy helped the Portfolio outperform its benchmark index during the
fiscal year. In addition, our focus on high-quality growth stocks and
underweighted exposure to cyclical and commodity stocks helped increase the
Portfolio's fiscal-year performance.
Robert La Fleur
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN BENCHMARK
INTERNATIONAL GROWTH PORTFOLIO VS.
THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALIA, AND
FAR EAST (EAFE) INDEX
[CHART APPEARS HERE]
Class A Units
-------------------------
International
Growth EAFE
Portfolio Index
------------- -------
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
11/30/97 $11,429 $12,218
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class A EAFE
November 30, 1997: Units Index
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 4.21% -0.40%
- ----------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 3.69% 5.59%
- ----------------------------------------------------------------------------------------------
</TABLE>
[CHART APPEARS HERE]
Class D Units
-------------------------
International
Growth EAFE
Portfolio Index
------------- -------
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
11/30/97 $10,776 $11,762
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class D EAFE
November 30, 1997: Units Index
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 3.79% -0.40%
- ----------------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 2.49% 5.48%
- ----------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
BENCHMARK SMALL COMPANY INDEX
Small-capitalization stocks, as represented by the Russell 2000 Index, posted a
23.24% return for the fiscal year ended November 30, 1997. The Russell 2000
underperformed relative to the S&P 500 Index, which returned 28.52% for the
same period. The Portfolio is managed to closely track the performance of the
Russell 2000 Index after adjusting for expenses.
The Russell 2000 Index represents the smaller two-thirds of the 3,000 largest
companies in the Russell 3000 Index. Companies leave the index as a result of
mergers, acquisitions and other events following the annual index
reconstitution in June. As of the end of November 1997, the Russell 2000 Index
included 1,919 companies. The market capitalization of companies in the index
ranged from $40 million to $2.5 billion, and the median company size was $463
million. The total market capitalization of the Russell 2000, after adjusting
for cross holdings, was $765.6 billion at the end of November 1997.
During the next 12 months we will continue to efficiently manage the
portfolio to seek to provide small cap equity returns that closely track those
of the Russell 2000 Index.
ROBERT H. BERGSON
Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK SMALL COMPANY
PORTFOLIO VS. THE RUSSELL 2000 SMALL STOCK INDEX
[CHART APPEARS HERE]
Class A Units
-----------------------
Small Russell
Company 2000
Portfolio Index
--------- -------
1/11/93 $10,000 $10,000
11/30/93 $11,409 $11,515
11/30/94 $11,233 $11,363
11/30/95 $14,352 $14,576
11/30/96 $16,642 $16,976
11/30/97 $20,480 $20,921
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class A Russell 2000
November 30, 1997: Units Index
<S> <C> <C>
One Year: 23.06% 23.24%
- -------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 15.79% 16.29%
</TABLE>
Class D Units
-----------------------
Small Russell
Company 2000
Portfolio Index
--------- -------
12/8/94 $10,000 $10,000
11/30/95 $13,162 $13,263
11/30/96 $15,295 $15,447
11/30/97 $18,764 $19,036
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total
Returns For Periods Ended Class D Russell 2000
November 30, 1997: Units Index
<S> <C> <C>
One Year: 22.68% 23.24%
- -------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 23.51% 24.11%
</TABLE>
19
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
VOTING RESULTS OF SPECIAL MEETING OF UNITHOLDERS
At a Special Meeting of Unitholders of the Trust (the "Meeting") called on
September 2, 1997 and reconvened on September 16, 1997, the following actions
were taken:
(1) The following individuals were elected to serve on the Board of Trustees
by the unitholders of all Portfolios of the Trust voting together in the
aggregate:
<TABLE>
<CAPTION>
Number of
Number of Votes
Name of Trustee Votes For Withheld
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Richard G. Cline 4,342,632,239 76,704,013
Edward J. Condon 4,342,191,351 77,144,902
John W. English 4,342,191,351 77,144,902
James J. Gavin, Jr. 4,328,946,859 90,389,394
Sandra P. Guthman 4,342,187,348 77,148,905
Frederick T. Kelsey 4,333,070,647 86,265,606
William H. Springer 4,342,190,200 77,146,053
Richard P. Strubel 4,342,191,351 77,144,902
- ---------------------------------------------------------------------------------------------
</TABLE>
(2) The approval of the selection of Ernst & Young LLP as the Trust's
independent auditors for the fiscal year ending November 30, 1997 was ratified
by all the unitholders of all Portfolios of the Trust voting together in the
aggregate as follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
4,355,519,334 26,510 63,790,409
- ---------------------------------------------------------------------------------------------------
</TABLE>
(3) An Agreement and Plan of Reorganization pursuant to which each Portfolio
will be reorganized as a series of a Delaware business trust also named The
Benchmark Funds was approved by all Portfolios except the U.S. Government
Securities Portfolio (voting separately on a Portfolio-by-Portfolio basis) as
follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond 14,013,294 70 3,602
International Bond 1,159,413 0 0
Short-Intermediate Bond 5,059,335 0 56,763
U.S. Government Securities 1,717,204 2,274,396 0
U.S. Treasury Index 798,755 0 0
Balanced 3,209,274 0 0
Diversified Growth 7,642,977 0 0
Equity Index 26,783,890 0 0
Focused Growth 5,054,058 0 0
International Equity Index 1,576,255 0 197,211
International Growth 8,340,115 1,541 0
Small Company Index 6,335,551 0 0
- ----------------------------------------------------------------------------------------
</TABLE>
(4)(a) A new fundamental investment policy regarding investments in other
investment company securities was approved by each of the Portfolios (voting
separately on a Portfolio-by-Portfolio basis) as follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- ----------------------------------------------------------
<S> <C> <C> <C>
Bond 14,013,412 3,553 1
International Bond 1,159,413 0 0
Short-Intermediate Bond 5,059,335 0 56,763
U.S. Government Securities 3,450,477 541,123 0
U.S. Treasury Index 798,755 0 0
Balanced 3,209,274 0 0
Diversified Growth 7,642,977 0 0
Equity Index 22,998,787 3,785,102 0
Focused Growth 5,054,058 0 0
International Equity Index 1,576,255 0 197,211
International Growth 8,340,115 1,541 0
Small Company Index 6,335,551 0 0
- ----------------------------------------------------------
</TABLE>
(4)(b) A related amendment to the Trust's Declaration of Trust was approved
by all the unitholders of all Portfolios of the Trust voting together in the
aggregate as follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
4,221,718,223 101,504,918 96,113,107
- -------------------------------------------------------------------------------------------------
</TABLE>
(5) A new fundamental investment restriction for each diversified Portfolio
concerning issuer diversification was approved by each of the Portfolios
except the U.S. Government Securities Portfolio (voting separately on a
Portfolio-by-Portfolio basis) as follows:
<TABLE>
<CAPTION>
Votes
Portfolio Votes For Against Abstained
- ----------------------------------------------------------
<S> <C> <C> <C>
Bond 14,013,364 0 3,602
Short-Intermediate Bond 5,059,335 0 56,763
U.S. Government Securities 1,647,185 2,344,415 0
U.S. Treasury Index 798,755 0 0
Balanced 3,209,274 0 0
Diversified Growth 7,642,977 0 0
Equity Index 26,783,890 0 0
Focused Growth 5,054,058 0 0
International Equity Index 1,576,255 0 197,211
International Growth 8,340,115 1,541 0
Small Company Index 6,335,551 0 0
- ----------------------------------------------------------
</TABLE>
(6) A new investment advisory agreement with Northern Trust and RCB Trust
Company, which will allow the International Growth Portfolio to implement a
"manager of managers" structure and enter into sub-advisory agreements in the
future without further unitholder approval was approved by the unitholders of
the International Growth Portfolio (voting together as a single class) as
follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
8,341,656 0 0
- -------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------
BOND PORTFOLIO
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--3.8%
AUTOMOTIVE--2.0%
WFS Financial Owner Trust,
Series 1997-A, Class A-3
$ 10,000 6.500% 09/20/01 $ 10,063
--------
HOME EQUITY LOANS--1.8%
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class A
9,200 7.410 11/26/28 9,189
- ------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $19,197) $ 19,252
- ------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--12.0%
American Southwest
Financial Securities Corp.,
Series 1996 FHA-1, Class A-
1
$ 8,442 6.675% 12/25/01 $ 8,485
Countrywide Funding Corp.,
Series 1993-1, Class A-4
13,567 4.384 10/25/23 12,431
Countrywide Mortgage Backed
Securities Inc., Series
1993-D, Class A-11
6,047 5.796 01/25/09 5,263
Delta Funding Corp.,
Interest Only Stripped
Security, Series 1991-1,
Class A-4(/1/)
-- 18.000 01/01/06 38
Donaldson, Lufkin &
Jenrette
Mortgage Acceptance Corp.,
Adjustable Rate, Interest
Only Stripped Security,
Series 1995-QE9
-- 18.000 11/25/25 866
Donaldson, Lufkin &
Jenrette
Mortgage Acceptance Corp.,
Series 1994-Q8, Class 2-A1
4,367 7.250 05/25/24 4,390
PNC Mortgage Securities
Corp.,
Series 1996-PR1, Class
A(/1/)
9,593 8.151 04/28/27 9,889
Residential Asset
Securitization Trust
Series 1997-A8, Class A-3
12,331 7.000 10/25/27 12,362
Residential Funding
Mortgage Securities I,
Inc., Principal Only
Stripped Securities,
Series 1997-S18, Class A-2
9,986 18.853 7,766
- ------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $60,834) $ 61,490
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
CORPORATE AND FOREIGN GOVERNMENT
BONDS--15.0%
FINANCIAL--1.0%
General Motors
Acceptance Corp.
$ 4,285 8.875% 06/01/00 $ 5,075
--------
FOREIGN GOVERNMENT BOND--3.2%
Quebec Province,
Canada
Medium Term Note
15,450 7.220 07/22/36 16,315
--------
INDUSTRIAL--3.0%
Penney (J.C.) &
Co., Inc.
15,000 6.900 08/15/03 15,434
--------
INSURANCE SERVICES--4.7%
Anthem
Insurance(/1/)
6,000 9.000 04/01/27 6,655
Lumberman's Mutual
Casualty Co.
2,000 9.150 07/01/26 2,285
4,000 8.300 12/01/37 4,085
Prudential
Insurance Co.
10,000 8.300 07/01/25 10,924
--------
23,949
--------
SANITARY SERVICES--3.1%
WMX Technologies
15,300 7.100 08/01/03 16,066
- --------------------------------------------------------
TOTAL CORPORATE AND FOREIGN
GOVERNMENT BONDS (Cost
$73,355) $ 76,839
- --------------------------------------------------------
U.S. GOVERNMENT AGENCIES--7.7%
COLLATERALIZED MORTGAGE OBLIGATIONS--
7.7%
FANNIE MAE REMIC TRUST--3.0%
Series 1991-127,
Class SA
$ 493 11.658% 09/25/98 $ 509
Series 1996-M4,
Class A
6,645 7.750 03/17/17 6,822
Series 1990-3,
Class 3-D
256 8.500 07/25/18 256
Series 1992-73,
Class G
256 7.500 04/25/21 7,574
--------
15,161
--------
FANNIE MAE REMIC TRUST
INTEREST ONLY STRIPPED
SECURITIES--1.0%
Series 278, Class 2
-- 7.149 08/01/25 1,704
Series 1997-20,
Class IO
-- 9.347 03/25/27 3,387
--------
5,091
--------
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Description
- ----------------------------------------------------
Principal
Amount/ Maturity
Shares Rate Date Value
- ----------------------------------------------------
BOND PORTFOLIO--CONTINUED
<C> <S> <C> <C>
FANNIE MAE REMIC TRUST
PRINCIPAL ONLY STRIPPED SECURITIES--
3.7%
Series 1993-161,
Class B
$ 2,262 7.770% 10/25/18 $ 2,206
Series 1993-132,
Class D
1,947 8.315 10/25/22 1,180
Series 1993-184,
Class L
7,585 6.013 09/25/23 5,386
Series 1993-205,
Class EA
3,150 6.414 09/25/23 2,384
Series 1994-9,
Class G
1,101 6.570 11/25/23 1,061
Series 1996-14,
Class PR
8,892 6.281 01/25/24 6,618
--------
18,835
--------
MORTGAGE-BACKED SECURITIES--
0.0%
FREDDIE MAC--0.0%
$ 1 6.500% 06/01/04 $ 1
- ----------------------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $36,593) $ 39,088
- ----------------------------------------------------
U.S. GOVERNMENT OBLIGA-
TIONS--50.3%
U.S. TREASURY NOTES--17.1%
$ 35,270 6.750% 05/31/99 $ 35,755
24,895 6.875 08/31/99 25,334
3,300 7.750 01/31/00 3,428
21,075 7.500 02/15/05 23,028
--------
87,545
--------
U.S. TREASURY BONDS--33.2%
108,355 6.625 07/31/01 111,064
39,245 7.125 02/15/23 44,200
15,000 6.000 02/15/26 14,763
--------
170,027
- ----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $250,155) $257,572
- ----------------------------------------------------
PREFERRED STOCKS--3.8%
AGENCY--2.9%
Home Ownership
15,000 Funding Corp. $ 14,915
--------
REAL ESTATE--0.9%
Tier One
4,600 Properties, Inc. 4,558
- ----------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $19,600) $ 19,473
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------
<C> <S> <C> <C>
FLOATING RATE BANK NOTES--5.7%
Lloyds Bank PLC
$ 14,950 6.188% 12/15/97 $ 13,446
Midland Bank PLC
2,500 6.125 12/29/97 2,150
National
Westminster Bank
15,300 6.000 02/27/98 13,541
- ----------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $28,172) $ 29,137
- ----------------------------------------
SHORT-TERM INVESTMENT--0.1%
Banco Central
Hispanoamericano,
Grand Cayman
$ 659 5.750% 12/01/97 $ 659
- ----------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $659) $ 659
- ----------------------------------------
TOTAL INVESTMENTS--98.4%
(Cost $488,565) $503,510
- ----------------------------------------
Other assets, less
liabilities--1.6% 8,159
- ----------------------------------------
NET ASSETS--100.0% $511,669
- ----------------------------------------
- ----------------------------------------
</TABLE>
(/1/)At November 30, 1997, the Portfolio owned restricted securities valued at
approximately $16,582 (3.2% of net assets), with an aggregate cost basis of
$16,116. These securities may not be publicly sold without registration under
the Securities Act of 1933 (the 1933 Act). The value of these securities is
determined by valuations supplied by a pricing service or brokers or, if not
available, in accordance with procedures established by the Trustees.
See accompanying notes to financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------------
INTERMEDIATE BOND PORTFOLIO
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--5.8%
AUTOMOTIVE--4.2%
Olympic Automobile
Receivables Trust,
Series 1996-D, Class A-
4
$ 500 6.050% 08/15/02 $ 500
HOME EQUITY LOANS--1.6%
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class A
200 7.410 11/26/28 200
- -----------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $699) $ 700
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--8.4%
GE Capital Mortgage
Services, Inc.,
Series 1997-5, Class A-
2
$ 500 7.500% 06/25/27 $ 504
Residential Asset
Securitization Trust,
Series 1997-A8, Class
A-3
500 7.000 10/25/27 501
- -----------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATION
(Cost $998) $ 1,005
- -----------------------------------------------------
CORPORATE BONDS--12.8%
INDUSTRIAL--3.6%
Penney (J.C.) & Co.,
Inc.
$ 400 7.400% 04/01/37 $ 428
-------
INSURANCES SERVICES--5.4%
Lumberman's Mutual
Casualty Co.
100 9.150 07/01/26 114
200 8.300 12/01/37 204
Prudential Insurance
Co.
300 8.300 07/01/25 328
-------
646
-------
SANITARY SERVICES--3.8%
WMX Technologies, Inc.
440 7.100 08/01/03 462
- -----------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$1,528) $ 1,536
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------
Principal Maturity
Amount Rate Date Value
- ---------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--
51.7%
U.S. TREASURY NOTES--26.1%
$1,300 6.750% 05/31/99 $ 1,318
1,660 7.500 02/15/05 1,814
-------
3,132
-------
U.S. TREASURY BOND--25.6%
3,000 6.625 07/31/01 3,075
- ---------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $6,195) $ 6,207
- ---------------------------------------
FLOATING RATE BANK NOTES--
10.8%
Hong Kong and
Shanghai Bank
$ 500 5.938% 01/16/98 $ 395
Lloyds Bank PLC
500 6.188 12/15/97 450
National
Westminster Bank
500 6.000 02/27/98 442
- ---------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,376) $ 1,287
- ---------------------------------------
SHORT-TERM INVESTMENTS--9.1%
Banco Central
Hispanoamericano,
Grand Cayman
$ 479 5.750% 12/01/97 $479
Federal Home Loan
Bank Discount Note
610 5.500 12/01/97 610
- ---------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,089) $ 1,089
- ---------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $11,885) $11,824
- ---------------------------------------
Other assets, less liabili-
ties--1.4% 173
- ---------------------------------------
NET ASSETS--100.0% $11,997
- ---------------------------------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO
<C> <S> <C> <C>
DEBT OBLIGATIONS--96.0%
AUSTRALIAN DOLLAR--3.0%
Commonwealth of
Australia
980 10.000% 10/15/02 $ 786
-------
BELGIAN FRANC--2.2%
Kingdom of Belgium
18,275 7.500 07/29/08 574
-------
BRITISH POUND STERLING--17.3%
Abbey National PLC
825 6.000 08/10/99 1,356
BAA PLC
525 7.875 02/10/07 916
Lloyds Bank PLC
800 7.375 03/11/04 1,365
Treasury of Great
Britain
525 7.500 12/07/06 941
-------
4,578
-------
CANADIAN DOLLAR--5.3%
Province of Ontario
1,050 7.250 09/27/05 799
Province of Quebec
725 10.250 10/15/01 595
-------
1,394
-------
DANISH KRONE--6.5%
Kingdom of Denmark
10,100 8.000 03/15/06 1,718
-------
FRENCH FRANC--4.6%
Electricite de France
6,200 8.600 04/09/04 1,232
-------
GERMAN MARK--15.4%
Federal Republic of
Germany
1,795 6.250 01/04/24 1,047
LKB Global Bond
1,500 6.000 05/10/99 870
Republic of Austria
1,670 8.000 01/30/02 1,049
Republic of Finland
1,920 5.500 02/09/01 1,110
-------
4,076
-------
ITALIAN LIRA--10.0%
Republic of Italy
4,000,000 8.500 04/01/04 2,655
-------
JAPANESE YEN--15.4%
Asian Development Bank
90,000 5.000 02/05/03 831
European Bank for
Reconstruction
and Development
95,000 5.875 11/26/99 823
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ----------------------------------------------
<C> <S> <C> <C>
International Bank
for Reconstruction
and Development
100,000 4.500% 03/20/03 $ 911
Japan Development
Bank
160,000 6.500 09/20/01 1,511
-------
4,076
-------
NETHERLANDS GUILDER--5.5%
Kingdom of the
Netherlands
2,615 8.500 03/15/01 1,460
-------
SPANISH PESETA--4.8%
Kingdom of Spain
120,000 11.300 01/15/02 982
35,000 10.000 02/28/05 295
-------
1,277
-------
SWEDISH KRONA--4.3%
Kingdom of Sweden
7,400 10.250 05/05/03 1,144
-------
UNITED STATES DOLLAR--1.7%
U.S. Treasury Bond
400 7.125 02/15/23 451
- ----------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $25,640) $25,421
- ----------------------------------------------
SHORT-TERM INVESTMENT--0.4%
United States Dollar
Banco Central
Hispanoamericano,
Grand Cayman
$ 112 5.750% 12/01/97 $ 112
- ----------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$112) $ 112
- ----------------------------------------------
TOTAL INVESTMENTS--96.4%
(Cost $25,752) $25,533
- ----------------------------------------------
Other assets, less liabilities--3.6% 941
- ----------------------------------------------
NET ASSETS--100.0% $26,474
- ----------------------------------------------
- ----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------
SHORT-INTERMEDIATE BOND PORTFOLIO
<C> <S> <C> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES--15.8%
AUTOMOTIVE--6.8%
Olympic Automobile
Receivables Trust Series
1995-D, Class A-3
$ 756 5.950% 11/15/99 $ 757
Series 1995-A, Class A
1,569 7.875 07/15/01 1,590
Series 1996-D, Class A-4
4,075 6.050 08/15/02 4,073
Olympic Automobile
Receivables Trust,
Interest Only Stripped
Security
Series 1995-D, Class I
-- 15.076 01/15/99 474
Premier Auto Trust
Series 1994-1, Class A-3
377 4.750 02/02/00 376
Western Financial
Automobile Loan Trust
Series 1994-4, Class A-1
728 7.100 01/01/00 732
Series 1997-A, Class A-3
5,800 6.500 09/20/01 5,836
--------
13,838
--------
HOME EQUITY LOAN--1.6%
Delta Funding Home Equity
Loan Trust, Interest Only
Stripped Security
Series 1997-2, Class AIO
-- 5.657 06/25/27 3,169
--------
FINANCIAL--7.4%
California Infrastructure
PG&E,
Series 1997-1, Class A-3
7,250 6.150 06/25/02 7,249
IMC Excess Cashflow
Securities Trust,
Series 1997-A, Class A
4,000 7.410 11/26/28 3,995
Southern Pacific Secured
Asset Corp.
Series 1997-2, Class AIO
37,500 5.720 07/25/00 3,747
--------
14,991
- --------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $33,452) $ 31,998
- --------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--20.0%
AAMES Mortgage Trust,
Interest Only Stripped
Security
Series 1997-B, Class AIO
$ -- 5.835% 07/15/00 $ 2,425
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
Donaldson, Lufkin &
Jenrette
Mortgage Acceptance
Corp.,
Interest Only Stripped
Security
Series 1997-CF2, Class
CP
$ -- 6.595% 11/15/04 $ 6,434
Series 1994-Q8, Class
2A1
1,878 7.250 05/25/24 1,888
Financial Asset
Securitization, Inc.,
Series 1997-NAMC, Class
FXA-3
6,074 7.350 04/25/27 6,131
GE Capital Mortgage
Services, Inc.,
Series 1994-15, Class A-
16
7,692 6.000 04/25/09 7,419
PNC Mortgage Securities
Corp.,
Series 1996-PR1, Class A
2,757 8.227 04/28/27 2,842
Prudential Home Mortgage
Securities Co.,
Series 1994-1, Class A-3
8,513 6.000 02/25/09 8,407
Residential Asset
Securitization Trust,
Series 1997-A8, Class A3
5,000 7.000 10/25/27 5,013
- --------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $40,719) $ 40,559
- --------------------------------------------------------------
CORPORATE BONDS--8.0%
BROKERAGE SERVICES--5.6%
Donaldson, Lufkin &
Jenrette, Inc.
Medium Term Note
$ 6,500 5.625% 02/15/16 $ 6,371
Salomon Brothers, Inc.
Medium Term Notes
3,000 5.500 01/31/98 2,996
2,000 5.700 02/11/98 1,997
--------
11,364
--------
ELECTRICAL UTILITY--2.4%
Tenaga Nasional Berhad
4,800 7.200 04/29/07 4,787
- --------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $16,279) $ 16,151
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--4.6%
COLLATERALIZED MORTGAGE OBLIGATIONS--4.6%
FANNIE MAE REMIC TRUST--2.2%
Series 1996-M4, Class A
$ 4,430 7.750% 03/17/17 $ 4,548
--------
FANNIE MAE REMIC TRUST
PRINCIPAL ONLY STRIPPED SECURITY--
0.8%
Series 1993-161, Class B
565 7.770 10/25/18 552
Series 1994-9, Class G
1,101 6.590 11/25/23 1,062
--------
1,614
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------
SHORT-INTERMEDIATE BOND PORTFOLIO--CONTINUED
<C> <S> <C> <C>
FREDDIE MAC REMIC TRUST
PRINCIPAL ONLY STRIPPED SECU-
RITY--1.6%
Series 1571, Class
BA
$ 3,280 3.694% 04/15/19 $ 3,140
- --------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $8,302) $ 9,302
- --------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--
47.7%
U.S. TREASURY NOTES--47.7%
$12,000 6.750% 05/31/99 $ 12,165
13,675 6.875 08/31/99 13,917
17,900 7.750 01/31/00 18,594
4,000 5.500 12/31/00 3,962
11,890 6.625 06/30/01 12,180
23,000 6.625 07/31/01 23,575
12,000 6.250 01/31/02 12,163
- --------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $95,757) $ 96,556
- --------------------------------------------------------------
SHORT-TERM INVESTMENT--5.8%
Banco Central
Hispanoamericano,
Grand Cayman
$11,692 5.750% 12/01/97 $ 11,692
- --------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $11,692) $ 11,692
- --------------------------------------------------------------
TOTAL INVESTMENTS--101.9%
(Cost $206,201) $206,258
- --------------------------------------------------------------
Liabilities, less other as-
sets--(1.9)% (3,910)
- --------------------------------------------------------------
NET ASSETS--100.0% $202,348
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
<C> <S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES--69.5%
COLLATERALIZED MORTGAGE OBLIGATIONS--49.8%
FREDDIE MAC--14.5%
Series: 1227, Class G
$ 4,125 9.199% 05/15/99 $ 4,263
Series: 1296, Class H
1,781 11.505 07/15/99 1,890
Series: 1520, Class F
576 5.650 09/15/04 573
--------
6,726
--------
FANNIE MAE REMIC TRUST--35.3%
Series: 1991-127, Class S
2,171 11.979 09/25/98 2,250
Series: 1997-M1, Class A
3,098 6.783 01/17/03 3,126
Series: 1993-085, Class PD
2,518 5.500 07/25/03 2,506
Series 1993-133, Class EZ
3,845 5.850 02/25/17 3,814
Series 1996-M4, Class A
2,953 7.750 03/17/17 3,032
Series: 1992-2000, Class E
980 6.250 06/25/17 978
Series: 1998-14, Class 14-F
187 9.200 12/25/17 192
Series: 1997-20, Class IO,
Interest Only Stripped
Security
-- 9.347 03/25/27 550
--------
16,448
--------
MORTGAGE-BACKED SECURITIES--15.3%
FREDDIE MAC--0.9%
Pool #410092
$ 413 7.837% 11/01/24 $ 427
--------
FANNIE MAE--6.3%
Pool #124945
2,811 7.752 01/01/31 2,939
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
POOL NUMBER TO BE ASSIGNED*--8.1%
3,750 5.500 12/30/27 3,748
--------
7,114
--------
AGENCY OBLIGATIONS--4.4%
FREDDIE MAC--1.1%
$ 500 7.130% 06/30/05 $ 500
--------
TENNESSEE VALLEY AUTHORITY NOTE--3.3%
1,500 6.235 07/15/45 1,536
--------
2,036
- ------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $32,182) $ 32,324
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -----------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--28.5%
U.S. TREASURY BOND--8.8%
$ 4,000 6.625% 07/31/01 $ 4,100
---------
U.S. TREASURY NOTE--19.7%
9,000 6.250 01/31/02 9,122
- -----------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $13,059) $ 13,222
- -----------------------------------------
SHORT-TERM INVESTMENT--9.1%
Federal Home Loan Bank
Discount Note
$ 4,250 5.500% 12/01/97 $ 4,248
- -----------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $4,250) $ 4,248
- -----------------------------------------
TOTAL INVESTMENTS--107.1%
(Cost $49,491) $ 49,794
- -----------------------------------------
Liabilities, less other as-
sets--(7.1)% (3,291)
- -----------------------------------------
NET ASSETS--100.0% $ 46,503
- -----------------------------------------
- -----------------------------------------
</TABLE>
*The Portfolio may purchase securities with delivery or payments to occur at a
later date. At the time the Portfolio enters into a commitment to purchase a
security, the transaction is recorded and the value of the security is
reflected in the net asset value. The value of the security may vary with
market fluctuations. No interest accrues to the Portfolio until payment takes
place. At the time the Portfolio enters into this type of transaction it is
required to segregate cash or other liquid assets at least equal to the value
of the securites purchased. At November 30, 1997, the Portfolio had a purchase
commitment outstanding of approximately $3,748 (8.1% of net assets), with a
corresponding amount of assets segregated.
See accompanying notes to financial statements.
27
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. TREASURY INDEX PORTFOLIO
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--97.3%
U.S. TREASURY NOTES--66.4%
$ 3,000 5.250% 02/28/99 $ 2,990
3,900 9.125 05/15/99 4,080
850 7.875 11/15/99 882
3,800 7.750 01/30/00 3,947
4,100 6.500 05/31/01 4,183
1,800 7.550 11/15/01 1,902
3,400 6.250 02/15/03 3,458
800 5.750 08/15/03 795
1,300 6.250 02/15/07 1,331
--------
23,568
--------
U.S. TREASURY BONDS--30.9%
435 13.875 05/15/11 659
660 14.000 11/15/11 1,022
490 13.250 05/15/14 778
2,350 7.250 05/15/16 2,643
900 8.125 05/15/21 1,120
1,900 8.000 11/15/21 2,340
2,400 6.250 02/15/23 2,439
--------
11,001
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $33,630) 34,569
- ------------------------------------------------------
SHORT-TERM INVESTMENT--1.5%
Federal Home Loan Bank
Discount Note
$ 535 5.500% 12/01/97 $ 535
- ------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $535) $ 535
- ------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(Cost $34,165) $ 35,104
- ------------------------------------------------------
Other assets, less
liabilities--1.2% 442
- ------------------------------------------------------
NET ASSETS--100.0% $ 35,546
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1997
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties, at cost $488,565 $11,885 $25,752 $206,201 $49,491 $34,165
- ------------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $503,510 $11,824 $25,533 $206,258 $49,794 $35,104
Cash and foreign curren-
cies 1,254 49 44 21 5 136
Receivables:
Interest 7,509 163 894 3,345 469 337
Fund units sold 7 -- -- 301 -- --
Investment securities
sold -- -- -- -- 13 --
Foreign tax reclaims -- -- 17 -- -- --
Administrator 29 -- 7 17 4 7
Deferred organization
costs, net 2 23 21 2 5 2
Other assets 6 -- 4 2 18 3
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS 512,317 12,059 26,520 209,946 50,308 35,589
- ------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 408 -- -- 254 31 18
Investment securities
purchased -- -- -- 7,249 3,727 --
Accrued expenses:
Advisory fees 101 2 15 43 14 4
Administration fees 41 1 3 17 5 3
Transfer agent fees 8 -- -- 2 1 --
Custodian fees 5 2 5 3 2 2
Other liabilities 85 57 23 30 25 16
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 648 62 46 7,598 3,805 43
- ------------------------------------------------------------------------------------------------
NET ASSETS $511,669 $11,997 $26,474 $202,348 $46,503 $35,546
- ------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $494,296 $12,060 $26,344 $202,009 $46,371 $35,606
Accumulated undistrib-
uted net investment in-
come 338 19 38 56 -- 56
Accumulated net realized
gains (losses) on
investments, forward
foreign currency
contracts and foreign
currency transactions 2,090 (21) 313 226 (171) (1,055)
Net unrealized
appreciation
(depreciation) on
investments, forward
foreign currency
contracts and foreign
currency transactions 14,945 (61) (219) 57 303 939
Net unrealized losses on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- (2) -- -- --
- ------------------------------------------------------------------------------------------------
NET ASSETS $511,669 $11,997 $26,474 $202,348 $46,503 $35,546
- ------------------------------------------------------------------------------------------------
Total units outstanding
(no par value), unlim-
ited units authorized
Class A 21,851 603 1,310 9,892 2,154 1,626
Class C 2,400 -- -- -- 156 --
Class D 29 -- 5 44 16 82
- ------------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per unit
Class A $ 21.08 $ 19.89 $ 20.13 $ 20.36 $ 19.99 $ 20.81
Class C $ 21.07 -- -- -- $ 19.98 --
Class D $ 21.05 -- $ 20.06 $ 20.31 $ 19.94 $ 20.77
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Short- U.S. U.S.
Intermediate International Intermediate Government Treasury
Bond Bond Bond Bond Securities Index
Portfolio Portfolio(a) Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME: $30,512 $216 $1,886(b) $13,800 $5,345 $1,937
- ------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 2,607 21 258 1,029 515 117
Administration fees 529 3 56 244 138 46
Transfer agent fees 75 1 3 18 12 5
Registration fees 57 33 20 37 23 24
Unitholder servicing
fees 53 -- -- 1 6 3
Custodian fees 48 7 68 30 22 21
Professional fees 18 4 4 7 4 4
Amortization of deferred
organization costs 13 2 16 13 13 13
Trustee fees and ex-
penses 11 1 2 4 2 2
Other 21 6 9 11 8 8
- ------------------------------------------------------------------------------------------------
TOTAL EXPENSES 3,432 78 436 1,394 743 243
Less voluntary waivers
of:
Investment advisory
fees (1,521) (12) (57) (600) (300) (73)
Administration fees (94) -- (19) (72) (53) (17)
Less: Expenses reimburs-
able by Administrator (166) (54) (82) (102) (71) (72)
- ------------------------------------------------------------------------------------------------
Net expenses 1,651 12 278 620 319 81
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 28,861 204 1,608 13,180 5,026 1,856
Net realized gains
(losses) on:
Investment transactions 3,869 (21) 305 (623) 76 (56)
Forward foreign cur-
rency contracts -- -- (130) -- -- --
Foreign currency trans-
actions -- -- (78) -- -- --
Net change in unrealized
appreciation (deprecia-
tion) on investments,
forward foreign cur-
rency contracts and
foreign currency
transactions 4,710 (61) (2,827) (2,110) (46) 382
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- -- 3 -- -- --
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $37,440 $122 $(1,119) $10,447 $5,056 $2,182
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
(b) Net of $22 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
30
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1997 and 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Intermediate
Bond Bond International
Portfolio Portfolio Bond Portfolio
------------------ ------------ ----------------
1997 1996 1997 (a) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 28,861 $ 21,225 $ 204 $ 1,608 $ 1,892
Net realized gains (losses)
on investments, forward
foreign currency contracts
and foreign currency
transactions 3,869 2,094 (21) 97 976
Net change in unrealized
appreciation
(depreciation) on
investments, forward
foreign currency contracts
and foreign currency
transactions 4,710 (3,905) (61) (2,827) 20
Net change in unrealized
gains on translations of
other assets and
liabilities denominated in
foreign currencies -- -- -- 3 6
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations 37,440 19,414 122 (1,119) 2,894
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A
UNITHOLDERS FROM:
Net investment income (25,700) (20,213) (185) (1,390) (2,300)
Net realized gain on
investment transactions -- -- -- (520) --
Return of capital -- (556) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class
A unitholders (25,700) (20,769) (185) (1,910) (2,300)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C
UNITHOLDERS FROM:
Net investment income (2,140) (264) -- -- --
Return of capital -- (7) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class
C unitholders (2,140) (271) -- -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D
UNITHOLDERS FROM:
Net investment income (23) (8) -- (3) (1)
Net realized gain on
investment transactions -- -- -- (1) --
Return of capital -- (1) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class
D unitholders (23) (9) -- (4) (1)
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of
units 155,583 143,593 11,875 1,168 5,918
Reinvested distributions 22,888 18,565 185 1,525 1,747
Cost of units redeemed (92,369) (79,885) -- (7,465) (6,747)
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
Class A unit transactions 86,102 82,273 12,060 (4,772) 918
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of
units 60,626 4,311 -- -- --
Reinvested distributions 2,140 271 -- -- --
Cost of units redeemed (21,561) (1,032) -- -- --
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from Class C unit
transactions 41,205 3,550 -- -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of
units 657 127 -- 47 41
Reinvested distributions 22 9 -- 4 1
Cost of units redeemed (306) (37) -- (7) --
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from Class D unit
transactions 373 99 -- 44 42
- --------------------------------------------------------------------------------
Net increase (decrease) 137,257 84,287 11,997 (7,761) 1,553
Net assets--beginning of
year 374,412 290,125 -- 34,235 32,682
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $511,669 $374,412 $11,997 $26,474 $34,235
- --------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME: $ 338 $ -- $ 19 $ 38 $ 31
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
31
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
For the Years Ended November 30, 1997 and 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Short- U.S. Government
Intermediate Bond Securities U.S. Treasury
Portfolio Portfolio Index Portfolio
------------------ ------------------- -----------------
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS:
Net investment income $ 13,180 $ 9,828 $ 5,026 $ 4,572 $ 1,856 $ 1,035
Net realized gains
(losses) on
investments (623) 392 76 (58) (56) 91
Net change in
unrealized
appreciation
(depreciation) on
investments (2,110) (1,308) (46) (201) 382 (239)
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 10,447 8,912 5,056 4,313 2,182 887
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS
A UNITHOLDERS FROM:
Net investment income (12,516) (9,596) (4,820) (4,393) (1,746) (1,005)
Net realized gain on
investment
transactions (414) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total distributions to
Class A unitholders (12,930) (9,596) (4,820) (4,393) (1,746) (1,005)
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS
C UNITHOLDERS FROM:
Net investment income -- -- (204) (159) -- --
- ------------------------------------------------------------------------------------
Total distributions to
Class C unitholders -- -- (204) (159) -- --
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS
D UNITHOLDERS FROM:
Net investment income (39) (3) (17) (9) (79) (26)
Net realized gain on
investment
transactions (1) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total distributions to
Class D unitholders (40) (3) (17) (9) (79) (26)
- ------------------------------------------------------------------------------------
CLASS A UNIT
TRANSACTIONS:
Proceeds from the sale
of units 121,515 69,730 68,991 104,606 20,990 13,176
Reinvested
distributions 11,648 8,697 4,525 4,198 1,197 746
Cost of units redeemed (82,865) (82,742) (122,819) (72,555) (14,944) (5,169)
- ------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from Class A
unit transactions 50,298 (4,315) (49,303) 36,249 7,243 8,753
- ------------------------------------------------------------------------------------
CLASS C UNIT
TRANSACTIONS:
Proceeds from the sale
of units -- -- 1,328 4,695 -- --
Reinvested
distributions -- -- 204 159 -- --
Cost of units redeemed -- -- (1,940) (1,298) -- --
- ------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from Class C
unit transactions -- -- (408) 3,556 -- --
- ------------------------------------------------------------------------------------
CLASS D UNIT
TRANSACTIONS:
Proceeds from the sale
of units 638 328 111 210 1,106 592
Reinvested
distributions 27 3 6 8 40 26
Cost of units redeemed (110) (2) (29) (60) (321) (66)
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
Class D unit
transactions 555 329 88 158 825 552
- ------------------------------------------------------------------------------------
Net increase (decrease) 48,330 (4,673) (49,608) 39,715 8,425 9,161
Net assets--beginning
of year 154,018 158,691 96,111 56,396 27,121 17,960
- ------------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $202,348 $154,018 $ 46,503 $ 96,111 $ 35,546 $27,121
- ------------------------------------------------------------------------------------
ACCUMULATED
UNDISTRIBUTED NET
INVESTMENT INCOME: $ 56 $ 45 $ -- $ 75 $ 56 $ 25
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 20.77 $ 20.96 $ 18.29 $ 20.70 $ 20.00
Income (loss) from invest-
ment operations:
Net investment income 1.34 1.29 1.17 1.42 1.42
Net realized and unrealized
gain (loss) 0.29 (0.19) 2.66 (2.21) 0.66
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 1.63 1.10 3.83 (0.79) 2.08
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (1.32) (1.26) (1.14) (1.46) (1.38)
Net realized gain -- -- -- (0.15) --
Return of capital -- (0.03) (0.02) (0.01) --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.32) (1.29) (1.16) (1.62) (1.38)
- --------------------------------------------------------------------------------
Net increase (decrease) 0.31 (0.19) 2.67 (2.41) 0.70
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 21.08 $ 20.77 $ 20.96 $ 18.29 $ 20.70
- --------------------------------------------------------------------------------
Total return (d) 8.17% 5.57% 21.55% (4.04)% 10.60%
Ratio to average net assets
of (e):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.36%
Expenses, before waivers
and reimbursements 0.77% 0.84% 0.84% 0.87% 0.92%
Net investment income, net
of waivers and reimburse-
ments 6.66% 6.39% 5.94% 7.31% 7.84%
Net investment income, be-
fore waivers and reim-
bursements 6.25% 5.91% 5.46% 6.80% 7.28%
Portfolio turnover rate 76.30% 101.38% 74.19% 103.09% 89.06%
Net assets at end of year
(in thousands) $460,514 $366,850 $286,301 $257,391 $245,112
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------- -------------------------------
1997 1996 1995 (b) 1997 1996 1995 1994 (c)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.78 $ 20.96 $ 20.21 $20.76 $20.94 $18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.29 1.25 0.47 1.24 1.22 1.08 0.28
Net realized and
unrealized gain (loss) 0.28 (0.18) 0.74 0.30 (0.18) 2.66 (0.45)
- -------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.57 1.07 1.21 1.54 1.04 3.74 (0.17)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.28) (1.22) (0.45) (1.25) (1.19) (1.09) (0.28)
Return of capital -- (0.03) (0.01) -- (0.03) - -
- -------------------------------------------------------------------------------------
Total distributions to
unitholders (1.28) (1.25) (0.46) (1.25) (1.22) (1.09) (0.28)
- -------------------------------------------------------------------------------------
Net increase (decrease) 0.29 (0.18) 0.75 0.29 (0.18) 2.65 (0.45)
- -------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 21.07 $ 20.78 $ 20.96 $21.05 $20.76 $20.94 $18.29
- -------------------------------------------------------------------------------------
Total return (d) 7.88% 5.33% 6.08% 7.74% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 1.01% 1.08% 1.08% 1.16% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and re-
imbursements 6.39% 6.09% 5.59% 6.27% 5.99% 5.48% 6.31%
Net investment income,
before waivers and re-
imbursements 5.98% 5.61% 5.11% 5.86% 5.51% 5.00% 5.80%
Portfolio turnover rate 76.30% 101.38% 74.19% 76.30% 101.38% 74.19% 103.09%
Net assets at end of
year (in thousands) $50,554 $ 7,342 $ 3,704 $ 601 $ 220 $ 120 $ 15
- -------------------------------------------------------------------------------------
</TABLE>
(a)For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b)For the period July 3, 1995 (Class C units issue date) through November 30,
1995.
(c)For the period September 14, 1994 (Class D units issue date) through
November 30, 1994.
(d)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. 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.
33
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Year Ended November 30,
INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------
1997 (a)
- ------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 20.00
Income (loss) from investment operations:
Net investment income 0.38
Net realized and unrealized loss (0.15)
- ------------------------------------------------------------------
Total income from investment operations 0.23
- ------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.34)
- ------------------------------------------------------------------
Total distributions to unitholders (0.34)
- ------------------------------------------------------------------
Net decrease (0.11)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 19.89
- ------------------------------------------------------------------
Total return (b) 1.17%
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements 0.36%
Expenses, before waivers and reimbursements 2.28%
Net investment income, net of waivers and reimbursements 5.87%
Net investment income, before waivers and reimbursements 3.95%
Portfolio turnover rate 56.99%
Net assets at end of year (in thousands) $11,997
- ------------------------------------------------------------------
</TABLE>
(a) For the period August 1, 1997 (commencement of operations) through
November 30, 1997.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized.
See accompanying notes to financial statements.
34
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
INTERNATIONAL BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
----------------------------------- -----------------------
1997 1996 1995 1994(a) 1997 1996 1995(b)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 22.16 $ 21.74 $ 19.93 $ 20.00 $22.14 $21.74 $22.17
Income (loss) from in-
vestment operations:
Net investment income 1.02 1.54 1.26 0.79 0.97 1.37 0.02
Net realized and
unrealized gain (loss) (1.70) 0.43 2.28 0.01 (1.72) 0.51 (0.08)
- ---------------------------------------------------------------------------------------
Total income (loss) from
investment operations (0.68) 1.97 3.54 0.80 (0.75) 1.88 (0.06)
- ---------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
(c) (1.01) (1.55) (1.73) (0.87) (0.99) (1.48) (0.37)
Net realized gain (0.34) -- -- -- (0.34) -- --
- ---------------------------------------------------------------------------------------
Total distributions to
unitholders (1.35) (1.55) (1.73) (0.87) (1.33) (1.48) (0.37)
- ---------------------------------------------------------------------------------------
Net increase (decrease) (2.03) 0.42 1.81 (0.07) (2.08) 0.40 (0.43)
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.13 $ 22.16 $ 21.74 $ 19.93 $20.06 $22.14 $21.74
- ---------------------------------------------------------------------------------------
Total return (d) (3.02)% 9.47% 18.20% 4.03% (3.38)% 9.04% (0.30)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.96% 0.96% 0.96% 0.96% 1.35% 1.35% 1.35%
Expenses, before waiv-
ers and reimbursements 1.52% 1.58% 1.47% 1.49% 1.91% 1.97% 1.86%
Net investment income,
net of waivers and re-
imbursements 5.61% 5.91% 5.92% 5.93% 5.36% 5.67% 3.26%
Net investment income,
before waivers and re-
imbursements 5.05% 5.29% 5.41% 5.40% 4.80% 5.05% 2.75%
Portfolio turnover rate 29.29% 33.89% 54.46% 88.65% 29.29% 33.89% 54.46%
Net assets at end of
year (in thousands) $26,383 $34,183 $32,673 $26,947 $ 91 $ 52 $ 9
- ---------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 20, 1995 (Class D units issue date) through
November 30, 1995.
(c) 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.
(d) 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. 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.
35
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
SHORT-INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
----------------------------------------------- -------------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 1995 1994 (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.70 $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.66 $20.71 $19.53 $19.82
Income (loss) from in-
vestment operations:
Net investment income 1.46 1.14 1.02 0.97 0.85 1.43 1.07 0.94 0.23
Net realized and
unrealized gain (loss) (0.29) (0.01) 1.19 (0.80) 0.31 (0.34) (0.02) 1.18 (0.29)
- -----------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.17 1.13 2.21 0.17 1.16 1.09 1.05 2.12 (0.06)
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.46) (1.16) (1.01) (0.97) (0.83) (1.39) (1.10) (0.94) (0.23)
Net realized gain (0.05) -- -- -- -- (0.05) -- -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.51) (1.16) (1.01) (0.97) (0.83) (1.44) (1.10) (0.94) (0.23)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.34) (0.03) 1.20 (0.80) 0.33 (0.35) (0.05) (1.18) (0.29)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.36 $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.31 $20.66 $20.71 $19.53
- -----------------------------------------------------------------------------------------------------------
Total return (c) 5.95% 5.68% 11.58% 0.84% 5.90% 5.54% 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% 0.36% 0.75% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.81% 0.88% 0.91% 0.95% 1.00% 1.20% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and re-
imbursements 7.68% 5.83% 5.14% 4.84% 4.79% 7.48% 4.96% 4.85% 4.42%
Net investment income,
before waivers and re-
imbursements 7.23% 5.31% 4.59% 4.25% 4.15% 7.03% 4.44% 4.30% 3.83%
Portfolio turnover rate 48.49% 47.68% 54.68% 48.67% 19.48% 48.49% 47.68% 54.68% 48.67%
Net assets at end of
year (in thousands) $201,457 $153,675 $158,678 $96,209 $107,550 $ 891 $ 343 $ 13 $ 1
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period September 14, 1994 (Class D units issue date) through
November 30, 1994.
(c) 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. 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.
36
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 20.07 $ 20.08 $ 19.05 $ 20.07 $ 20.00
Income (loss) from invest-
ment operations:
Net investment income 1.21 1.02 1.05 0.91 0.55
Net realized and
unrealized gain (loss) (0.07) (0.01) 1.02 (1.02) 0.05
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.14 1.01 2.07 (0.11) 0.60
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.22) (1.02) (1.04) (0.91) (0.53)
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.22) (1.02) (1.04) (0.91) (0.53)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.08) (0.01) 1.03 (1.02) 0.07
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 19.99 $ 20.07 $ 20.08 $ 19.05 $ 20.07
- --------------------------------------------------------------------------------
Total return (d) 5.93% 5.15% 11.18% (0.57)% 3.00%
Ratio to average net assets
of (e):
Expenses, net of waivers
and reimbursements 0.36% 0.36% 0.36% 0.36% 0.43%
Expenses, before waivers
and reimbursements 0.85% 0.94% 1.09% 1.12% 1.18%
Net investment income, net
of waivers and reimburse-
ments 5.86% 5.22% 5.43% 4.62% 4.18%
Net investment income, be-
fore waivers and reim-
bursements 5.37% 4.64% 4.70% 3.86% 3.43%
Portfolio turnover rate 95.73% 119.75% 141.14% 45.55% 20.59%
Net assets at end of year
(in thousands) $43,073 $92,351 $56,329 $25,293 $32,479
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------- -------------------------------
1997 1996 (b) 1997 1996 1995 1994 (c)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $20.06 $20.13 $20.03 $20.04 $19.05 $19.43
Income (loss) from invest-
ment operations:
Net investment income 1.14 0.91 1.16 0.96 0.96 0.22
Net realized and unrealized
gain (loss) (0.04) (0.12) (0.10) (0.03) 1.00 (0.38)
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 1.10 0.79 1.06 0.93 1.96 (0.16)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (1.18) (0.86) (1.15) (0.94) (0.97) (0.22)
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.18) (0.86) (1.15) (0.94) (0.97) (0.22)
- --------------------------------------------------------------------------------
Net increase (decrease) (0.08) (0.07) (0.09) (0.01) 0.99 (0.38)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $19.98 $20.06 $19.94 $20.03 $20.04 $19.05
- --------------------------------------------------------------------------------
Total return (d) 5.67% 4.05% 5.52% 4.77% 10.66% (0.90)%
Ratio to average net assets
of (e):
Expenses, net of waivers
and reimbursements 0.60% 0.60% 0.75% 0.75% 0.75% 0.75%
Expenses, before waivers
and reimbursements 1.09% 1.18% 1.24% 1.33% 1.48% 1.51%
Net investment income, net
of waivers and reimburse-
ments 5.63% 4.97% 5.50% 4.83% 5.08% 4.65%
Net investment income, be-
fore waivers and reim-
bursements 5.14% 4.39% 5.01% 4.25% 4.35% 3.89%
Portfolio turnover rate 95.73% 119.75% 95.73% 119.75% 141.14% 45.55%
Net assets at end of year
(in thousands) $3,118 $3,535 $ 312 $ 225 $ 67 $ 13
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period April 5, 1993 (commencement of operations) through November
30, 1993.
(b) For the period December 29, 1995 (Class C units issue date) through
November 30, 1996.
(c) For the period September 15, 1994 (Class D units issue date) through
November 30, 1994.
(d) 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. 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.
37
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
U.S. TREASURY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A Class D
--------------------------------------------- --------------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 1995 1994 (b)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 20.60 $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.57 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.26 1.19 1.11 1.15 0.95 1.20 1.17 1.00 0.09
Net realized and
unrealized gain (loss) 0.20 (0.18) 2.01 (1.93) 1.02 0.18 (0.24) 2.03 (0.03)
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.46 1.01 3.12 (0.78) 1.97 1.38 0.93 3.03 0.06
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.25) (1.19) (1.11) (1.14) (0.92) (1.18) (1.11) (1.05) (0.09)
Net realized gain -- -- -- (0.36) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.25) (1.19) (1.11) (1.50) (0.92) (1.18) (1.11) (1.05) (0.09)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.21 (0.18) 2.01 (2.28) 1.05 0.20 (0.18) 1.98 (0.03)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.81 $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.77 $20.57 $20.75 $18.77
- ---------------------------------------------------------------------------------------------------------
Total return (c) 7.44% 5.10% 16.95% (3.80)% 9.94% 7.03% 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% 0.26% 0.65% 0.65% 0.65% 0.65%
Expenses, before waiv-
ers and reimbursements 0.82% 1.04% 0.89% 0.79% 0.83% 1.21% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and
reimbursements 6.36% 5.93% 5.09% 5.60% 5.11% 6.07% 5.57% 5.41% 6.05%
Net investment income,
before waivers and
reimbursements 5.80% 5.15% 4.46% 5.07% 4.54% 5.51% 4.79% 4.78% 5.52%
Portfolio turnover rate 72.61% 42.49% 80.36% 52.80% 77.75% 72.61% 42.49% 80.36% 52.80%
Net assets at end of
year (in thousands) $33,839 $26,273 $17,674 $37,305 $71,456 $1,707 $ 848 $ 286 $ --
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period November 16, 1994 (Class D units issue date) through
November 30, 1994.
(c) 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 net asset value at the end of the year. 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.
38
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
BALANCED PORTFOLIO
<C> <S> <C>
COMMON STOCKS--57.1%
BANKING--1.2%
13,200 Banc One Corp. $ 678
-------
BROKERAGE AND FINANCIAL SERVICES--1.4%
21,000 Schwab (Charles) Corp. 810
-------
COMMUNICATIONS--3.9%
20,600 Ameritech Corp. 1,587
4,000 Lucent Technologies 321
9,000 Snyder Communications Inc. 305
-------
2,213
-------
COMPUTERS AND OFFICE MACHINES--4.3%
11,300 Cisco Systems, Inc.* 975
6,600 Hewlett-Packard Co. 403
7,300 Microsoft Corp. 1,033
-------
2,411
-------
CONSUMER PRODUCTS--3.2%
4,500 Gillette Co. 415
9,800 Procter & Gamble Co. 748
22,700 Staples, Inc. 640
-------
1,803
-------
CREDIT INSTITUTIONS--0.7%
14,000 MBNA Corp. 371
-------
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--6.0%
5,500 Emerson Electric Co. 303
19,400 General Electric Co. 1,430
9,700 Intel Corp. 753
10,300 Linear Technology Corp. 663
7,000 Solectron Corp. 255
-------
3,404
-------
FOOD AND BEVERAGE--2.8%
5,000 Coca-Cola (The) Co. 313
14,400 PepsiCo, Inc. 531
17,700 Philip Morris Cos., Inc. 770
-------
1,614
-------
HEALTH SERVICES--6.3%
6,000 Cardinal Health, Inc. 455
37,950 Health Management Associates, Inc., Class A* 930
11,000 Health South Rehabilitation Corp. 289
13,200 Johnson & Johnson Co. 831
15,400 Medtronic, Inc. 735
11,000 Omnicare, Inc. 318
-------
3,558
-------
INSURANCE SERVICES--2.9%
8,100 American International Group, Inc. 817
13,400 MBIA, Inc. 843
-------
1,660
-------
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------
<C> <S> <C>
MORTGAGE AGENCIES--1.7%
17,900 Fannie Mae $ 945
-------
OIL AND GAS--5.9%
6,600 Chevron Corp. 529
13,400 Exxon Corp. 817
14,800 Royal Dutch Petroleum Co. ADR 780
14,600 Schlumberger Ltd. ADR 1,202
-------
3,328
-------
PHARMACEUTICALS--3.5%
2,800 Bristol-Myers Squibb Co. 262
9,400 Merck & Co., Inc. 889
6,000 Warner-Lambert Co. 839
-------
1,990
-------
PROFESSIONAL SERVICE--4.8%
6,000 Accustaff 177
14,400 Cintas Corp. 560
6,800 Computer Sciences Corp.* 538
12,000 Newell Co. 490
19,050 Oracle Systems Corp.* 635
8,000 Paychex, Inc. 328
-------
2,728
-------
RECREATION AND LEISURE SERVICES--0.6%
6,500 Carnival Corp. Class A 351
-------
RETAIL--7.9%
13,400 Consolidated Stores Corp. 652
6,000 Fastenal 318
12,150 Home Depot (The), Inc. 680
20,400 Starbucks Corp.* 711
39,000 Walgreen Co. 1,255
20,000 Wal-Mart Stores, Inc. 799
-------
4,415
- ----------------------------------------------------------
TOTAL COMMON STOCKS (Cost $20,481) $32,279
- ----------------------------------------------------------
PREFERRED STOCK--1.8%
AGENCY--1.8%
1,000 Home Ownership Funding Corp. $ 994
- ----------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $1,000) $ 994
- ----------------------------------------------------------
ASSET-BACKED SECURITIES--2.8%
AUTOMOTIVE--2.8%
Olympic Automobile Receivables Trust,
Series 1995-D, Class A-3
$ 132 5.950% Due 11/15/99 $ 132
Series 1996-D, Class A-4
600 6.050 Due 08/15/02 600
Premier Auto Trust,
Series 1994-1, Class A-3
26 4.750 Due 02/02/00 26
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Principal Amount Description Value
- -------------------------------------
BALANCED PORTFOLIO--CONTINUED
<S> <C> <C>
Western Financial Grantor Trust,
Series 1994-4, Class A-1
$ 73 7.100% Due 01/01/00 $ 73
Series 1995-5, Class A-1
349 5.875 Due 03/01/02 349
Western Financial Owner Trust,
Series 1997-A Class A-3
400 6.500 Due 09/20/01 403
- -----------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (Cost $1,580) $1,583
- -----------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--2.1%
Donaldson, Lufkin & Jenrette
Mortgage Acceptance Corp.
Series 1994-Q8, Class 2-A1
$248 7.250% Due 05/25/24 $ 249
Financial Asset Securitization, Inc.
Series 1997-NAMC, Class FXA-3
900 7.350 Due 04/25/27 909
- -----------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,141) $1,158
- -----------------------------------------------------
CORPORATE AND FOREIGN GOVERNMENT BONDS--11.0%
FINANCIAL--5.1%
Finova Capital, Corp.
$500 6.190% Due 10/20/99 $ 499
Lehman Brothers Holdings, Inc.
570 7.375 Due 05/15/07 585
Lehman Brothers Holdings, Inc.
Medium Term Note
305 6.900 Due 01/29/01 309
Lumbermens Mutual Casualty Co.
115 9.150 Due 07/01/26 131
235 8.300 Due 12/01/37 240
Petrozvata Financial, Inc.,
Series: Class B
600 8.220 Due 04/01/17, putable 05/15/00 632
Salomon, Inc. Medium Term Note
500 5.500 Due 01/31/98 499
------
2,895
------
INDUSTRIAL--1.5%
Penney (J. C.), Inc.
830 6.900 Due 08/15/26, putable 08/15/03 854
------
SANITARY SERVICES--1.5%
WMX Technologies, Inc.
800 7.100 Due 08/01/26, putable 08/01/03 840
------
SOVEREIGN--1.1%
Quebec Province, Canada Medium Term Note
600 7.220 Due 07/22/36, putable 07/22/06 634
------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------
<C> <S> <C>
UTILITY--1.8%
Tenaga Nasional Berhad
$1,000 7.200% Due 04/29/07, putable 04/29/02 $ 997
- -----------------------------------------------------------
TOTAL CORPORATE AND FOREIGN GOVERNMENT BONDS
(Cost $6,087) $ 6,220
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCIES--2.3%
FANNIE MAE REMIC TRUST--2.3%
Series 1991-37, Class G
$ 243 8.150% Due 08/25/05 $ 245
Series 1992-200, Class E
490 6.250 Due 06/25/17 489
Series 1996-M4, Class A
554 7.750 Due 03/17/17 569
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $1,273) $ 1,303
- -----------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--12.7%
U.S. TREASURY NOTES--12.7%
$1,435 6.750% Due 05/31/99 $ 1,455
175 6.250 Due 05/31/00 177
1,325 7.750 Due 02/15/01 1,398
1,550 6.625 Due 06/30/01 1,588
1,525 6.625 Due 07/31/01 1,563
200 6.250 Due 02/15/03 203
690 7.500 Due 02/15/05 754
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $7,069) $ 7,138
- -----------------------------------------------------------
FLOATING RATE BANK NOTES--3.3%
Lloyds Bank PLC
$1,000 6.188% Due 12/15/97 $ 899
National Westminster Bank
1,100 6.000 Due 02/27/98 974
- -----------------------------------------------------------
TOTAL FLOATING RATE BANK NOTES
(Cost $1,850) $ 1,873
- -----------------------------------------------------------
SHORT-TERM INVESTMENT--6.2%
Banco Central Hispanoamericano,
Grand Cayman
$3,485 5.750% Due 12/01/97 $ 3,485
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $3,485) $ 3,485
- -----------------------------------------------------------
TOTAL INVESTMENTS--99.3%
(Cost $43,966) $56,033
- -----------------------------------------------------------
Other assets, less liabilities--0.7% 351
- -----------------------------------------------------------
NET ASSETS--100.0% $56,384
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
DIVERSIFIED GROWTH PORTFOLIO
<C> <S> <C>
COMMON STOCKS--95.8%
BANKING--4.3%
36,940 Banc One Corp. $ 1,898
15,000 BankAmerica Corp. 1,095
11,000 Citicorp 1,319
8,200 Wells Fargo & Co. 2,519
--------
6,831
--------
BROKERAGE SERVICES--1.6%
64,000 Schwab (Charles) Corp. 2,468
--------
COMMUNICATIONS--3.5%
24,000 Ameritech Corp. 1,849
34,000 BellSouth Corp. 1,862
25,000 SBC Communications, Inc. 1,820
--------
5,531
--------
COMPUTERS AND OFFICE MACHINES--8.2%
26,300 Cisco Systems, Inc.* 2,268
21,000 Compaq Computer Corp. 1,311
14,000 International Business Machines Corp. 1,534
25,000 McAfee Associates, Inc.* 1,144
31,800 Microsoft Corp. 4,500
69,450 Oracle Systems Corp.* 2,313
--------
13,070
--------
CONSUMER PRODUCTS--5.8%
84,700 Newell Co. 3,457
78,000 Philip Morris Cos., Inc. 3,393
31,500 Procter & Gamble Co. 2,404
--------
9,254
--------
CREDIT INSTITUTIONS--1.0%
58,400 MBNA Corp. 1,551
--------
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--10.0%
35,000 Emerson Electric Co. 1,925
71,000 General Electric Co. 5,236
44,800 Intel Corp. 3,478
39,900 Linear Technology Corp. 2,569
20,000 Motorola, Inc. 1,258
40,000 Solectron Corp. 1,458
--------
15,924
--------
FOOD AND BEVERAGES--2.4%
28,000 Coca-Cola (The) Co. 1,750
55,800 PepsiCo, Inc. 2,058
--------
3,808
--------
HEALTH SERVICES--7.3%
24,000 Cardinal Health Inc. 1,818
122,500 Health Management Associates, Inc., Class A* 3,001
86,000 HEALTHSOUTH Corp. 2,257
33,000 Johnson & Johnson Co. 2,077
85,000 Omnicare, Inc. 2,454
--------
11,607
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
INDUSTRIAL INSTRUMENTS--1.4%
36,600 Hewlett-Packard Co. $ 2,235
--------
INSURANCE SERVICES--4.1%
35,850 American International Group, Inc. 3,614
46,800 MBIA, Inc. 2,942
--------
6,556
--------
MORTGAGE AGENCIES--3.2%
75,700 Fannie Mae 3,998
25,000 Freddie Mac 1,031
--------
5,029
--------
OIL AND GAS--11.4%
32,000 Chevron Corp. 2,566
72,800 Exxon Corp. 4,441
59,700 Mobil Corp. 4,295
54,800 Royal Dutch Petroleum Co. ADR 2,887
48,800 Schlumberger Ltd. ADR 4,017
--------
18,206
--------
PHARMACEUTICALS--7.2%
25,000 Abbott Laboratories 1,625
19,000 Bristol-Myers Squibb Co. 1,779
24,000 Lilly (Eli) & Co. 1,514
30,400 Merck & Co., Inc. 2,875
33,200 Pfizer, Inc. 2,415
9,000 Warner-Lambert Co. 1,259
--------
11,467
--------
PROFESSIONAL SERVICES--6.5%
50,000 AccuStaff, Inc.* 1,478
68,400 Cintas Corp. 2,659
22,400 Computer Sciences Corp.* 1,774
60,000 Paychex, Inc. 2,460
60,000 Snyder Communications, Inc. 2,036
--------
10,407
--------
RECREATION AND LEISURE SERVICES--2.7%
49,900 Carnival Corp., Class A 2,698
16,000 Disney (The Walt) Co. 1,519
--------
4,217
--------
RETAIL--13.4%
60,000 Consolidated Stores Corp.* 2,917
30,000 Fastenal Co. 1,590
57,050 Home Depot (The), Inc. 3,191
23,000 Kohl's Corp.* 1,665
95,850 Staples, Inc.* 2,702
59,000 Starbucks Corp.* 2,057
85,700 Wal-Mart Stores, Inc. 3,423
118,600 Walgreen Co. 3,817
--------
21,362
--------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares and number of contracts)
<TABLE>
<CAPTION>
Shares/ Principal Amount Description Value
- ---------------------------------------------
DIVERSIFIED GROWTH PORTFOLIO--CONTINUED
<C> <S> <C>
TELECOMMUNICATIONS--1.8%
22,000 Lucent Technologies, Inc. $ 1,763
20,000 Tellabs, Inc.* 1,040
--------
2,803
- -----------------------------------------------------
TOTAL COMMON STOCKS (Cost $101,155) $152,326
- -----------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.1%
U.S. Treasury Bill #
$ 230 4.930% Due 01/02/98 $ 229
- -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $229) $ 229
- -----------------------------------------------------
SHORT-TERM INVESTMENT--5.2%
Banco Central Hispanoamericano,
Grand Cayman
$ 8,273 5.750% Due 12/01/97 $ 8,273
- -----------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $8,273) $ 8,273
- -----------------------------------------------------
TOTAL INVESTMENTS--101.1%
(Cost $109,657) $160,828
- -----------------------------------------------------
Liabilities, less other assets--(1.1)% (1,749)
- -----------------------------------------------------
NET ASSETS--100.0% $159,079
- -----------------------------------------------------
- -----------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Unrealized
Number of Contract Contract Contract Gain
Type Contracts Amount Position Expiration (Loss)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RUSSELL 2000 14 $2,958 Long 12/19/97 $ 65
S&P MIDCAP 20 3,341 Long 12/19/97 (131)
- ---------------------------------------------------------------------------------
$ (66)
- ---------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
# Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
EQUITY INDEX PORTFOLIO
<C> <S> <C>
COMMON STOCKS--96.8%
AGRICULTURE--0.1%
8,200 Pioneer Hi-Bred International, Inc. $ 837
--------
APPAREL--0.1%
8,700 Liz Claiborne, Inc. 437
15,800 VF Corp. 730
--------
1,167
--------
BANKING--7.7%
12,200 Ahmanson (H. F.) & Co. 726
72,849 Banc One Corp. 3,743
47,500 Bank of New York Co., Inc. 2,553
87,352 BankAmerica Corp. 6,377
18,200 BankBoston Corp. 1,622
12,400 Bankers Trust New York Corp. 1,470
24,900 Barnett Banks, Inc. 1,752
52,946 Chase Manhattan Corp. 5,751
57,300 Citicorp 6,872
13,200 Comerica, Inc. 1,124
25,300 CoreStates Financial Corp. 1,956
19,250 Fifth Third Bancorp 1,357
37,007 First Chicago NBD Corp. 2,896
70,230 First Union Corp. 3,424
7,100 Golden West Financial Corp. 636
23,900 Huntington Bancshares, Inc. 813
27,200 KeyCorp 1,834
31,500 Mellon Bank Corp. 1,786
22,400 Morgan (J. P.) & Co., Inc. 2,558
26,900 National City Corp. 1,796
89,060 NationsBank Corp. 5,349
93,700 Norwest Corp. 3,508
38,400 PNC Bank Corp. 2,066
6,900 Republic New York Corp. 750
20,100 State Street Corp. 1,196
26,700 SunTrust Banks, Inc. 1,896
30,639 U.S. Bancorp 3,296
21,000 Wachovia Corp. 1,617
10,966 Wells Fargo & Co. 3,369
--------
74,093
--------
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
35,718 Houston Industries, Inc. 846
1,000 NACCO Industries, Inc. 109
--------
955
--------
BROKERAGE AND FINANCIAL SERVICES--1.9%
58,600 American Express Co. 4,622
33,050 Charles Schwab Corp. 1,274
31,301 Fleet Financial Group, Inc. 2,068
17,000 Green Tree Financial Corp. 521
41,400 Merrill Lynch & Co., Inc. 2,906
73,349 Morgan Stanley, Dean Witter, Discover & Co. 3,984
21,900 Synovus Financial Corp. 699
31,290 Washington Mutual, Inc. 2,163
--------
18,237
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
CHEMICALS AND ALLIED PRODUCTS--10.5%
96,200 Abbott Laboratories $ 6,253
13,700 Air Products and Chemicals, Inc. 1,051
8,100 Allergan, Inc. 274
81,100 American Home Products Corp. 5,667
33,200 Amgen, Inc.* 1,697
34,900 Baxter International, Inc. 1,767
124,600 Bristol-Myers Squibb Co. 11,666
12,900 Clorox Co. 1,001
37,000 Colgate-Palmolive Co. 2,472
28,500 Dow Chemical Co. 2,814
141,400 du Pont (E. I.) de Nemours & Co. 8,564
9,775 Eastman Chemical Co. 590
8,100 Ecolab, Inc. 413
4,700 FMC Corp.* 343
6,800 Goodrich (B. F.) Co. 303
9,100 Grace (W. R.) & Co. 662
7,500 Great Lakes Chemical Corp. 337
12,400 Hercules, Inc. 602
13,700 International Flavors & Fragrances, Inc. 660
139,096 Lilly (Eli) & Co. 8,772
151,000 Merck & Co., Inc. 14,279
17,500 Morton International, Inc. 596
8,400 Nalco Chemical Co. 326
161,600 Pfizer, Inc. 11,756
63,520 Pharmacia & Upjohn, Inc. 2,144
22,400 PPG Industries, Inc. 1,298
19,800 Praxair, Inc. 870
7,700 Rohm & Haas Co. 708
91,600 Schering-Plough Corp. 5,742
21,600 Sherwin-Williams Co. 617
12,500 Sigma-Aldrich Corp. 452
15,500 Union Carbide Corp. 684
33,900 Warner-Lambert Co. 4,742
--------
100,122
--------
COMMUNICATIONS--8.3%
63,000 AirTouch Communications, Inc.* 2,473
23,400 Alltel Corp. 930
68,800 Ameritech Corp. 5,302
203,100 AT&T Corp. 11,348
97,080 Bell Atlantic Corp. 8,664
124,000 BellSouth Corp. 6,789
12,300 Clear Channel Communications, Inc.* 833
43,600 Comcast Corp., Class A 1,221
20,500 Frontier Corp. 502
119,600 GTE Corp. 6,047
24,800 HBO & Co. 1,113
80,264 Lucent Technologies, Inc. 6,431
9,200 Mallinckrodt, Inc. 340
86,500 MCI Communications Corp. 3,801
18,400 NextLevel Systems, Inc.* 244
11,700 Providian Corp. 516
114,256 SBC Communications, Inc. 8,319
53,800 Sprint Corp. 3,151
22,600 Tellabs, Inc.* 1,175
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
59,900 US West Communications Group $ 2,707
75,800 US West Media Group* 2,013
44,100 Viacom, Inc., Class B* 1,544
112,800 WorldCom, Inc.* 3,610
--------
79,073
--------
COMPUTERS AND OFFICE MACHINES--6.5%
9,100 Adobe Systems, Inc. 382
15,900 Apple Computer, Inc.* 282
26,300 Bay Networks, Inc.* 791
19,700 Cabletron Systems, Inc.* 453
10,100 Ceridian Corp.* 443
83,700 Cisco Systems, Inc.* 7,219
94,495 Compaq Computer Corp. 5,900
5,900 Data General Corp.* 106
41,400 Dell Computer Corp.* 3,485
19,100 Digital Equipment Corp.* 941
61,600 EMC Corp.* 1,867
122,800 International Business Machines Corp. 13,454
149,800 Microsoft Corp. 21,197
15,900 Parametric Technology Co.* 804
18,000 Pitney Bowes, Inc. 1,513
30,600 Seagate Technology, Inc.* 694
22,100 Silicon Graphics, Inc.* 290
13,300 Tandy Corp. 572
43,100 3Com Corp.* 1,562
21,900 Unisys Corp.* 313
--------
62,268
--------
CONSTRUCTION--0.2%
13,900 Dover Corp. 932
21,900 Dresser Industries, Inc. 819
--------
1,751
--------
CONSUMER PRODUCTS--5.0%
16,600 Avon Products, Inc. 960
21,400 Fortune Brands, Inc. 774
70,000 Gillette Co. 6,462
166,400 Johnson & Johnson 10,473
69,584 Kimberly-Clark Corp. 3,623
303,000 Philip Morris Cos., Inc. 13,181
168,900 Procter & Gamble Co. 12,889
--------
48,362
--------
CREDIT INSTITUTIONS--0.6%
6,600 Beneficial Corp. 512
13,400 Countrywide Credit Industries, Inc. 549
13,400 Household International, Inc. 1,688
62,687 MBNA Corp. 1,665
14,300 MGIC Investment Corp. 836
--------
5,250
--------
ELECTRONICS AND ELECTRICAL EQUIPMENT--7.4%
17,600 Advanced Micro Devices, Inc.* 384
27,456 AMP, Inc. 1,193
11,230 Andrew Corp.* 298
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
45,600 Applied Materials, Inc.* $ 1,505
15,300 Cooper Industries, Inc. 790
14,700 DSC Communications Corp.* 332
55,500 Emerson Electric Co. 3,053
409,400 General Electric Co. 30,193
10,000 Harris Corp. 474
204,200 Intel Corp. 15,851
14,600 ITT Corp.* 1,108
10,500 Kla-Tencor Corp.* 407
17,700 LSI Logic Corp.* 412
12,300 Maytag Corp. 397
26,300 Micron Technology, Inc.* 654
74,400 Motorola, Inc. 4,678
20,200 National Semiconductor Corp.* 669
5,600 National Service Industries, Inc. 262
32,800 Northern Telecom Ltd. 2,946
5,500 Raychem Corp. 520
9,700 Scientific-Atlanta, Inc. 194
63,300 Tele-Communications, Inc.* 1,450
48,000 Texas Instruments, Inc. 2,364
6,900 Thomas & Betts Corp. 313
9,300 Whirlpool Corp. 510
--------
70,957
--------
FOOD AND BEVERAGES--6.7%
61,500 Anheuser-Busch Cos., Inc. 2,656
70,029 Archer-Daniels-Midland Co. 1,497
8,600 Brown-Forman Corp., Class B 442
57,500 Campbell Soup Co. 3,220
310,200 Coca-Cola (The) Co. 19,387
59,100 ConAgra, Inc. 2,124
4,600 Coors (Adolph) Co., Class B 166
18,000 CPC International, Inc. 1,861
20,000 General Mills, Inc. 1,480
46,200 Heinz (H. J.) Co. 2,313
17,900 Hershey Foods Corp. 1,099
51,600 Kellogg Co. 2,393
86,000 McDonalds Corp. 4,171
191,400 PepsiCo, Inc. 7,058
17,200 Quaker Oats Co. 912
13,300 Ralston-Ralston Purina Group 1,237
60,100 Sara Lee Corp. 3,178
46,400 Seagram (The) Co. Ltd. 1,499
19,130 Tricon Global Restaurants* 647
80,000 Unilever N.V. 4,645
23,000 UST, Inc. 710
12,700 Whitman Corp. 334
14,500 Wrigley (Wm.) Jr. Co. 1,147
--------
64,176
--------
FURNITURE--0.1%
20,600 Masco Corp. 971
--------
GENERAL BUILDING CONTRACTORS--0.1%
3,600 Centex Corp. 228
15,900 Honeywell, Inc. 1,041
4,800 Kaufman & Broad Home Corp. 104
--------
1,373
--------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
GLASS, CLAY AND STONE PRODUCTS--0.2%
28,900 Corning, Inc. $ 1,226
19,900 Newell Co. 812
--------
2,038
--------
HEALTH SERVICES--1.1%
10,600 ALZA Corp.* 283
13,800 Beverly Enterprises, Inc.* 235
81,795 Columbia/HCA Healthcare Corp. 2,413
18,500 Guidant Corp. 1,189
48,400 HEALTHSOUTH Corp.* 1,271
20,500 Humana, Inc.* 455
7,950 Manor Care, Inc. 280
58,500 Medtronic, Inc. 2,793
11,500 St. Jude Medical, Inc.* 341
37,900 Tenet Healthcare Corp.* 1,201
--------
10,461
--------
HEAVY CONSTRUCTION--0.2%
10,500 Fluor Corp. 377
5,100 Foster Wheeler Corp. 157
31,700 Halliburton Co. 1,710
--------
2,244
--------
INDUSTRIAL INSTRUMENTS--2.1%
7,200 Bard (C. R.), Inc. 216
6,900 Bausch & Lomb, Inc. 273
15,300 Becton, Dickinson & Co. 789
13,900 Biomet, Inc. 332
24,300 Boston Scientific Corp.* 1,098
40,700 Eastman Kodak Co. 2,467
130,100 Hewlett-Packard Co. 7,944
10,500 Johnson Controls, Inc. 481
5,400 Millipore Corp. 209
5,500 Perkin-Elmer Corp. 383
5,700 Polaroid Corp. 242
29,600 Raytheon Co. 1,656
6,200 Tektronix, Inc. 260
9,200 United States Surgical Corp. 243
40,700 Xerox Corp., Inc. 3,162
--------
19,755
--------
INSURANCE SERVICES--4.7%
18,757 Aetna, Inc. 1,414
54,365 Allstate Corp. 4,669
31,070 American General Corp. 1,674
87,712 American International Group, Inc. 8,842
20,900 Aon Corp. 1,106
21,600 Chubb Corp. 1,532
9,300 CIGNA Corp. 1,555
23,500 Conseco, Inc. 1,094
10,000 General Re Corp. 1,985
14,800 Hartford Financial Services Group, Inc. 1,240
8,825 Jefferson-Pilot Corp. 673
12,700 Lincoln National Corp. 906
14,400 Loews Corp. 1,528
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
<C> <S> <C>
21,100 Marsh & McLennan Cos., Inc. $ 1,571
11,200 MBIA, Inc. 704
9,000 Progressive Corp. 918
17,400 SAFECO Corp. 850
10,500 St. Paul Cos., Inc. 840
24,400 SunAmerica, Inc. 988
17,300 Torchmark Corp. 706
7,900 Transamerica Corp. 858
143,037 Travelers Group, Inc. 7,223
23,500 United Healthcare Corp. 1,223
17,400 UNUM Corp. 825
13,900 USF&G Corp. 281
--------
45,205
--------
JEWELRY AND PRECIOUS METALS--0.0%
4,900 Jostens, Inc. 118
--------
LUMBER AND WOOD PRODUCTS--0.0%
13,700 Louisiana-Pacific Corp. 277
--------
MACHINERY--1.3%
21,100 Baker Hughes, Inc. 884
11,800 Black & Decker Corp. 434
3,200 Briggs & Stratton Corp. 164
12,400 Brunswick Corp. 415
9,300 Case Corp. 577
47,100 Caterpillar, Inc. 2,258
5,000 Cincinnati Milacron, Inc. 148
4,800 Cummins Engine Co., Inc. 309
31,500 Deere & Co. 1,727
6,300 General Signal Corp. 257
6,200 Harnischfeger Industries, Inc. 237
20,750 Ingersoll-Rand Co. 848
21,300 Tenneco, Inc. 923
18,800 Thermo Electron Corp.* 692
7,900 Timken (The) Co. 280
66,600 Tyco International Ltd. 2,614
--------
12,767
--------
MANUFACTURING--0.1%
3,500 Aeroquip-Vickers, Inc. 179
7,000 Alberto-Culver Co., Class B 218
14,800 ITT Industries, Inc. 470
2,600 Pulte Corp. 105
--------
972
--------
MERCHANDISE--GENERAL--0.1%
7,600 Snap-On, Inc. 334
11,100 Stanley Works (The) 489
--------
823
--------
METAL MINING--0.3%
46,600 Barrick Gold Corp. 772
28,700 Battle Mountain Gold Co. 145
11,650 Cyprus Amax Minerals Co. 213
17,200 Echo Bay Mines Ltd.* 40
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
24,900 Freeport-McMoRan Copper & Gold, Inc., Class B $ 521
18,300 Homestake Mining Co. 192
20,900 Inco, Ltd. 398
19,497 Newmont Mining Corp. 586
29,900 Placer Dome, Inc. 366
--------
3,233
--------
METAL PRODUCTS--0.2%
22,027 Allegheny Teledyne, Inc. 567
3,800 Ball Corp. 146
5,700 Crane Co. 240
6,900 McDermott International, Inc. 217
13,925 Parker-Hannifin Corp. 620
--------
1,790
--------
MORTGAGE AGENCIES--1.1%
132,700 Fannie Mae 7,008
86,900 Freddie Mac 3,585
--------
10,593
--------
NATURAL GAS--0.7%
11,300 Apache Corp. 415
13,300 Coastal Corp. 779
6,900 Columbia Gas System, Inc. 502
11,900 Consolidated Natural Gas Co. 718
2,500 Eastern Enterprises 101
38,300 Enron Corp. 1,484
6,100 NICOR, Inc. 246
3,500 ONEOK, Inc. 131
10,400 Pacific Enterprises 368
4,400 Peoples Energy Corp. 161
10,700 Sonat, Inc. 466
19,850 Williams (The) Cos., Inc. 1,061
--------
6,432
--------
OFFICE EQUIPMENT--0.1%
16,600 Ikon Office Solutions, Inc. 505
--------
OIL AND GAS--5.2%
7,500 Anadarko Petroleum Corp. 487
22,052 Burlington Resources, Inc. 981
81,900 Chevron Corp. 6,567
309,400 Exxon Corp. 18,873
3,100 Helmerich & Payne, Inc. 236
41,400 Occidental Petroleum Corp. 1,229
13,200 Oryx Energy Co.* 356
10,800 Rowan Cos., Inc.* 367
268,100 Royal Dutch Petroleum Co. 14,126
61,900 Schlumberger Ltd. 5,095
31,776 Union Pacific Resources Group, Inc. 790
6,700 Western Atlas, Inc.* 466
--------
49,573
--------
PACKAGING AND CONTAINER PRODUCTS--0.1%
16,000 Crown Cork & Seal Co., Inc. 781
17,500 Owens-Illinois, Inc.* 593
--------
1,374
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
PAPER PRODUCTS--1.4%
12,900 Avery Dennison Corp. $ 540
6,600 Bemis Co., Inc. 278
7,000 Boise Cascade Co. 236
12,000 Champion International Corp. 643
23,600 Fort James, Corp. 923
11,400 Georgia-Pacific Corp. 973
37,835 International Paper Co. 1,795
6,500 Mead Corp. 420
52,000 Minnesota Mining & Manufacturing Co. 5,067
12,404 Stone Container Corp.* 155
7,100 Temple-Inland, Inc. 406
8,700 Union Camp Corp. 523
12,750 Westvaco Corp. 416
24,900 Weyerhaeuser Co. 1,315
--------
13,690
--------
PERSONAL SERVICES--0.6%
13,000 Block (H&R), Inc. 533
19,900 HFS, Inc.* 1,366
31,300 Hilton Hotels Corp. 974
15,900 Marriot International, Inc. 1,152
31,500 Service Corp. International 1,152
13,900 Willamette Industries, Inc. 488
--------
5,665
--------
PETROLEUM--2.7%
11,500 Amerada Hess Corp. 644
61,400 Amoco Corp. 5,526
9,300 Ashland, Inc. 434
40,100 Atlantic Richfield Co. 3,268
6,000 Kerr-McGee Corp. 398
98,300 Mobil Corp. 7,071
5,900 Pennzoil Co. 393
32,900 Phillips Petroleum Co. 1,594
9,100 Sun Co., Inc. 368
66,000 Texaco, Inc. 3,729
30,900 Unocal Corp. 1,230
36,000 USX--Marathon Group 1,233
--------
25,888
--------
PRINTING AND PUBLISHING--1.3%
9,400 American Greetings Corp. 345
10,300 Deluxe Corp. 364
18,300 Donnelley (RR) & Sons Co. 645
12,000 Dow Jones & Co., Inc. 607
35,400 Gannett Co., Inc. 2,055
3,800 Harland (John H.) Co. 79
10,900 Knight-Ridder, Inc. 546
12,400 McGraw Hill Cos., Inc. 849
6,700 Meredith Corp. 234
11,100 Moore Corp. Ltd. 173
12,000 New York Times Co., Class A 713
70,000 Time Warner, Inc. 4,078
12,000 Times Mirror Co., Class A 713
15,300 Tribune Co. 863
--------
12,264
--------
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
PROFESSIONAL SERVICES--1.9%
6,000 Autodesk, Inc. $ 231
36,600 Automatic Data Processing, Inc. 2,059
68,325 Computer Associates International, Inc. 3,557
9,600 Computer Sciences Corp.* 760
51,225 CUC International, Inc.* 1,473
18,900 Equifax, Inc. 645
55,500 First Data Corp. 1,571
15,600 Interpublic Group of Cos., Inc. 748
43,700 Novell, Inc.* 404
122,500 Oracle Corp.* 4,081
9,700 Ryder System, Inc. 352
7,300 Safety-Kleen Corp. 203
3,100 Shared Medical Systems Corp. 198
46,100 Sun Microsystems, Inc.* 1,660
--------
17,942
--------
RECREATION AND LEISURE SERVICES--1.1%
84,400 Disney (The Walt) Co. 8,013
8,800 Harcourt General, Inc. 482
12,600 Harrah's Entertainment, Inc.* 253
4,600 King World Productions, Inc.* 250
36,345 Mattel, Inc. 1,456
22,400 Mirage Resorts, Inc.* 532
--------
10,986
--------
RESEARCH AND CONSULTING SERVICES--0.2%
20,500 Cognizant Corp. 879
21,300 Dun & Bradstreet (The) Corp. 596
5,700 EG&G, Inc. 112
--------
1,587
--------
RETAIL--5.0%
30,700 Albertson's, Inc. 1,362
34,000 American Stores Co. 674
18,900 Autozone, Inc.* 567
13,200 Charming Shoppes, Inc.* 65
12,300 Circuit City Stores, Inc. 404
26,603 Costco Companies, Inc.* 1,179
21,500 CVS Corp. 1,427
19,100 Darden Restaurants, Inc. 227
27,200 Dayton-Hudson Corp. 1,807
14,000 Dillard Department Stores, Inc., Class A 512
26,200 Federated Department Stores, Inc.* 1,194
33,500 Gap, Inc. 1,799
7,500 Giant Food, Inc., Class A 253
4,800 Great Atlantic & Pacific Tea Co., Inc. 148
15,875 Hasbro, Inc. 461
91,250 Home Depot (The), Inc. 5,104
60,900 Kmart Corp.* 765
31,800 Kroger Co.* 1,095
34,000 Limited, Inc. (The) 818
4,900 Longs Drug Stores, Inc. 143
21,700 Lowe's Cos., Inc. 997
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
29,100 May Department Stores Co. $ 1,564
4,600 Mercantile Stores Co., Inc. 297
36,100 Nike, Inc., Class B 1,758
9,700 Nordstrom, Inc. 572
31,100 Penney (J.C.) Co., Inc. 1,998
7,900 Pep Boys-Manny, Moe & Jack 198
7,000 Reebok International Ltd.* 275
15,400 Rite Aid Corp. 1,013
49,000 Sears, Roebuck & Co. 2,245
7,600 SUPERVALU , Inc. 299
20,400 TJX Cos., Inc. 704
35,700 Toys "R" Us, Inc.* 1,218
283,200 Wal-Mart Stores, Inc. 11,310
61,600 Walgreen Co. 1,983
16,500 Wendy's International, Inc. 347
18,600 Winn-Dixie Stores, Inc. 752
16,900 Woolworth Corp.* 365
--------
47,899
--------
RUBBER AND PLASTICS--0.6%
5,100 Armstrong World Industries, Inc. 352
9,800 Cooper Tire & Rubber Co. 219
19,500 Goodyear Tire & Rubber Co. 1,183
73,700 Monsanto Co. 3,220
18,700 Rubbermaid, Inc. 453
7,600 Tupperware Corp. 181
--------
5,608
--------
SANITARY SERVICES--0.3%
24,700 Browning-Ferris Industries, Inc. 881
41,100 Laidlaw, Inc. 534
56,680 Waste Management, Inc. 1,396
--------
2,811
--------
SERVICE INDUSTRY MACHINERY--0.3%
15,866 Pall Corp. 335
88,300 Westinghouse Electric Corp. 2,649
--------
2,984
--------
STEEL PRODUCTS--0.6%
28,400 Alcan Aluminum Ltd. 765
21,700 Aluminum Co. of America 1,459
13,200 Armco, Inc.* 70
5,300 ASARCO, Inc. 132
14,100 Bethlehem Steel Corp.* 145
18,087 Engelhard Corp. 322
6,100 Inland Steel Industries, Inc. 117
11,000 Nucor Corp. 550
6,700 Owens Corning 246
7,600 Phelps Dodge Corp. 504
9,200 Reynolds Metals Co. 524
10,700 USX--U.S. Steel Group 335
12,075 Worthington Industries, Inc. 219
--------
5,388
--------
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares and number of contracts)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
TEXTILES--0.0%
9,200 Fruit of the Loom, Inc., Class A* $ 214
4,500 Russell Corp. 138
2,500 Springs Industries, Inc., Class A 126
--------
478
--------
TRANSPORTATION PARTS AND EQUIPMENT--4.0%
70,800 AlliedSignal, Inc. 2,628
125,200 Boeing Co. 6,651
84,300 Chrysler Corp. 2,893
13,100 Dana Corp. 612
9,700 Eaton Corp. 916
7,900 Echlin, Inc. 250
4,500 Fleetwood Enterprises, Inc. 161
149,300 Ford Motor Co. 6,420
7,800 General Dynamics Corp. 676
91,200 General Motors Corp. 5,563
31,200 Illinois Tool Works, Inc. 1,710
24,254 Lockheed Martin Corp.* 2,366
9,120 Navistar International Corp.* 201
8,300 Northrop Grumman Corp. 936
9,720 PACCAR, Inc. 535
26,100 Rockwell International Corp. 1,272
20,600 Textron, Inc. 1,218
15,400 TRW, Inc. 874
29,400 United Technologies Corp. 2,203
--------
38,085
--------
TRANSPORTATION SERVICES--1.2%
11,500 AMR Corp.* 1,394
19,465 Burlington Northern Santa Fe Corp. 1,781
4,900 Caliber Systems, Inc. 262
27,200 CSX Corp. 1,423
9,200 Delta Air Lines, Inc. 1,025
14,400 Federal Express Corp.* 966
47,100 Norfolk Southern Corp. 1,498
27,450 Southwest Airlines Co. 671
30,900 Union Pacific Corp. 1,854
11,300 US Airways Group, Inc.* 623
--------
11,497
--------
UTILITIES--2.4%
23,700 American Electric Power Co. 1,175
18,500 Baltimore Gas & Electric Co. 568
18,900 Carolina Power & Light Co. 706
26,500 Central & South West Corp. 662
19,710 Cinergy Corp. 702
29,400 Consolidated Edison Co. of New York, Inc. 1,110
23,200 Dominion Resources, Inc. 902
18,100 DTE Energy Co. 594
45,043 Duke Energy Co. 2,342
49,600 Edison International 1,330
30,200 Entergy Corp. 785
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
28,700 FirstEnergy Corp.* $ 775
22,800 FPL Group, Inc. 1,275
15,100 GPU, Inc. 596
18,100 Niagara Mohawk Power Corp.* 173
9,200 Northern States Power Co. 505
54,800 Pacific Gas & Electric Co. 1,548
37,000 PacifiCorp 863
27,800 Peco Energy Co. 676
20,600 PP&L Resources, Inc. 484
29,000 Public Service Enterprise Group, Inc. 846
85,600 Southern Co. 2,054
30,112 Texas Utilities Co. 1,204
27,000 Unicom Corp. 786
12,800 Union Electric Co. 510
--------
23,171
--------
WHOLESALE--0.4%
13,600 Cardinal Health, Inc. 1,030
4,700 Fleming Cos., Inc. 78
22,475 Genuine Parts Co. 719
6,200 Grainger (W.W.), Inc. 580
3,600 Potlatch Corp. 175
21,800 Sysco Corp. 971
--------
3,553
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $611,739) $927,248
- ---------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
U.S. Treasury Bill #
$ 1,455 5.260%Due 01/02/98 $ 1,433
- ---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $1,433) $ 1,433
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENT--3.0%
Banco Central Hispanoamericano,
Grand Cayman
$28,932 5.750%Due 12/01/97 $ 28,932
- ---------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $28,932) $ 28,932
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(Cost $642,104) $957,613
- ---------------------------------------------------------------------------
Other assets, less liabilities--0.0% 84
- ---------------------------------------------------------------------------
NET ASSETS--100.0% $957,697
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</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 500 124 $29,401 Long 12/19/97 $201
- -------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
# Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
FOCUSED GROWTH PORTFOLIO
<C> <S> <C>
COMMON STOCKS--95.5%
BANKING--6.4%
15,000 BankAmerica Corp. $ 1,095
19,200 Chase Manhattan Corp. 2,086
9,500 Citicorp 1,139
50,000 MBNA Corp. 1,328
38,800 State Street Corp. 2,309
--------
7,957
--------
COMMUNICATIONS--3.5%
17,000 Ameritech Corp. 1,310
42,900 SBC Communications, Inc. 3,124
--------
4,434
--------
COMPUTERS AND OFFICE MACHINES--8.5%
23,700 Cisco Systems, Inc.* 2,044
15,000 Compaq Computer Corp. 936
20,700 Computer Sciences Corp.* 1,639
16,700 International Business Machines Corp. 1,830
21,700 Microsoft Corp. 3,071
33,300 Oracle Systems Corp.* 1,109
--------
10,629
--------
CONSUMER PRODUCTS--5.7%
10,300 Gillette Co. 951
43,000 Newell Co. 1,755
60,000 Philip Morris Cos., Inc. 2,610
23,400 Procter & Gamble Co. 1,786
--------
7,102
--------
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--9.4%
20,000 Emerson Electric Co. 1,100
62,700 General Electric Co. 4,624
27,000 Intel Corp. 2,096
20,000 Linear Technology Corp. 1,288
14,000 Motorola, Inc. 880
48,500 Selectron Corp.* 1,767
--------
11,755
--------
FINANCIAL--1.9%
61,200 Charles Schwab (The) Corp. 2,360
--------
FOOD AND BEVERAGES--3.9%
46,100 Coca-Cola (The) Co. 2,881
52,900 PepsiCo, Inc. 1,951
--------
4,832
--------
HEALTH SERVICES--8.9%
27,000 Cardinal Health, Inc. 2,045
23,500 Guidant Corp. 1,510
97,500 Health Management Associates, Inc., Class A* 2,389
75,000 HEALTHSOUTH Corp.* 1,969
55,000 Medtronic, Inc. 2,626
20,000 Omnicare, Inc. 578
--------
11,117
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
INDUSTRIAL INSTRUMENTS--1.6%
32,800 Hewlett-Packard Co. $ 2,003
--------
INSURANCE SERVICES--4.5%
25,950 American International Group, Inc. 2,616
25,000 MBIA, Inc. 1,572
25,000 MGIC Investment Corp. 1,461
--------
5,649
--------
MORTGAGE AGENCIES--2.9%
46,400 Fannie Mae 2,451
30,000 Freddie Mac 1,238
--------
3,689
--------
OIL AND GAS--5.8%
19,000 Chevron Corp. 1,523
41,000 Exxon Corp. 2,501
20,000 Mobil Corp. 1,439
34,400 Royal Dutch Petroleum Co. 1,812
--------
7,275
--------
OIL FIELD MACHINERY AND EQUIPMENT--2.7%
20,000 Dril-Quip, Inc.* 599
20,000 Halliburton Co. 1,079
20,400 Schlumberger Ltd. ADR 1,679
--------
3,357
--------
PHARMACEUTICALS--8.4%
24,400 Abbott Laboratories 1,586
19,500 Bristol Myers Squibb Co. 1,825
20,200 Lilly (Eli) & Co. 1,274
40,000 Pfizer, Inc. 2,910
25,200 Schering-Plough Corp. 1,580
10,000 Warner-Lambert Co. 1,399
--------
10,574
--------
PROFESSIONAL SERVICES--5.1%
65,000 AccuStaff, Inc.* 1,921
34,200 Cintas Corp. 1,330
40,000 Paychex, Inc. 1,640
45,000 Snyder Communications, Inc. 1,527
--------
6,418
--------
RECREATION AND LEISURE SERVICES--2.6%
37,300 Carnival Corp., Class A 2,016
13,000 Disney (The Walt) Co. 1,234
--------
3,250
--------
RETAIL--11.1%
47,000 Consolidated Stores Corp.* 2,285
20,000 Fastenal Co. 1,060
44,000 Home Depot (The) Inc. 2,461
19,700 Kohls Corp.* 1,426
70,000 Staples, Inc.* 1,973
30,000 Starbucks Corp.* 1,046
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares and number of contracts)
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ----------------------------------------------------------------------------
FOCUSED GROWTH PORTFOLIO--CONTINUED
<C> <S> <C>
70,000 Wal-Mart Stores, Inc. $ 2,796
28,000 Walgreen Co. 901
--------
13,948
--------
TELECOMMUNICATIONS EQUIPMENT--2.6%
21,700 Lucent Technologies, Inc. 1,739
30,000 Tellabs, Inc.* 1,560
--------
3,299
- ----------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $95,750) $119,648
- ----------------------------------------------------------------------------
OTHER INVESTMENTS--2.4%
12,500 Standard & Poor's 500 Depository Receipt
Unit Trust, Series 1 $ 1,195
30,000 Standard & Poor's 400 Mid-Cap Depository Receipt Unit
Trust, Series 1 1,892
- ----------------------------------------------------------------------------
TOTAL OTHER INVESTMENTS (Cost $2,956) $ 3,087
- ----------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.1%
U.S. Treasury Bill #
$85 4.930%Due 01/02/98 $ 85
- ----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $85) $ 85
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENT--2.3%
Banco Central Hispanoamericano,
Grand Cayman
$2,896 5.750%Due 12/01/97 $ 2,896
- ----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $2,896) $ 2,896
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS--100.3%
(Cost $101,687) $125,716
- ----------------------------------------------------------------------------
Liabilities, less other assets--(0.3)% (383)
- ----------------------------------------------------------------------------
NET ASSETS--100.0% $125,333
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Loss
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P MIDCAP 14 $2,294 Long 12/19/97 $47
- ----------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
# Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO
<C> <S> <C>
COMMON STOCKS--82.3%
AUSTRALIA--1.9%
500 Aberfoyle Ltd. $ 1
3,000 Amcor Ltd. 13
1,300 Ashton Mining Ltd. 1
1,400 Australian Gas Light Co. Ltd. 9
3,700 Australian National Industries Ltd. 3
5,399 Boral Ltd. 14
1,000 Brambles Industries Ltd. 19
9,400 Broken Hill Proprietary Co. Ltd. 86
2,500 Burns Philp & Co. Ltd. 1
3,966 Coca-Cola Amatil Ltd. 30
5,485 Coles Myer Ltd. 27
1,500 CRA Ltd. 17
3,400 Crown Ltd. 2
4,700 CSR Ltd. 16
1,800 David Jones Ltd. 2
1,000 Delta Gold NL 1
1,400 Email Ltd. 3
607 Faulding (F.H.) & Co. Ltd. 3
9,200 Foster's Brewing Group Ltd. 17
2,237 Futuris Corp. Ltd. 2
5,400 General Property Trust Units 10
2,981 Gio Australia Holdings Ltd. 7
5,996 Goodman Fielder Ltd. 9
1,218 Great Central Mines Ltd. 1
1,900 Hardie (James) Industries Ltd. 5
1,300 Ici Australia Ltd. 9
1,200 Leighton Holdings Ltd. 5
1,150 Lend Lease Corp. Ltd. 24
7,767 M.I.M. Holdings Ltd. 6
900 Metal Manufactures Ltd. 1
6,900 National Australia Bank 91
1,100 Newcrest Mining Ltd. 1
9,400 News Corp. Ltd. 50
7,739 Normandy Mining Ltd. 7
3,400 North Ltd. 9
4,800 Pacific Dunlop Ltd. 10
4,200 Pioneer International Ltd. 11
900 Plutonic Resources Ltd. 1
1,781 QBE Insurance Group Ltd. 8
3,100 QCT Resources Ltd. 2
900 Resolute Ltd. 1
1,000 RGC Ltd. 1
500 Rothmans Holdings Ltd. 3
2,800 Santos Ltd. 12
1,900 Schroders Property Fund 2
900 Smith (Howard) Ltd. 7
400 Sons of Gwalia Ltd. 1
2,953 Southcorp Holdings Ltd. 9
1,500 Stockland Trust Group 4
1,400 TABCORP Holdings Ltd. 7
5,500 Westfield Trust 11
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------
<C> <S> <C>
8,300 Westpac Banking Corp. Ltd. $ 52
5,363 WMC Ltd. 17
-------
661
-------
AUSTRIA--0.3%
11 Austria Mikro Systeme International A.G. 1
122 Austrian Airlines Osterreichische Luftverkehrs A.G.* 3
270 Bank Austria A.G. 13
33 Bank Austria A.G. (Partial Certificates) 1
16 Bau Holdings A.G. 1
52 Bohler-Uddeholm A.G. 3
8 BWT A.G. 1
136 Creditanstalt-Bankverein 7
32 EA-Generali A.G. 8
101 Flughafen Wien A.G. 4
18 Lenzing 1
52 Mayr-Melnhof Karton A.G. 3
38 Oesterreichische Brau-Beteiligungs A.G. 2
146 Oesterreichische Elektrizitaetswirtschafts A.G. 11
127 OMV A.G. 17
66 Radex-Heraklith Industriebeteiligungs A.G. 2
48 Steyr-Daimler-Puch A.G. 1
24 Universale-Bau A.G. 1
71 VA Technologies A.G. 10
41 Wienerberger Baustoffindustrie A.G. 8
-------
98
-------
BELGIUM--1.0%
100 Algemene Maatschappij voor Nijverheidskredit N.V. 4
50 Barco Industries 10
6 Bekaert N.V. 4
40 CBR Cementbedrisven 4
180 Delhaize-Le Lion 9
300 Electrabel S.A. 67
200 Fortis A.G. 40
100 Generale de Banque S.A. 41
100 Gevaert N.V. 4
100 Gevaert N.V. Warrants* 0
100 Groupe Bruxelles Lambert S.A. 15
56 Kredietbank N.V. 23
120 Petrofina S.A. 46
63 Royale Belge 17
500 Solvay S.A. 30
375 Tractebel 32
100 Union Miniere Group 7
-------
353
-------
DENMARK--0.9%
12 Aarhus Oliefabrik A/S, Class A 1
12 Aarhus Oliefabrik A/S, Class B, Limited Voting 1
20 Aktieselskabet Korn-OG Foderstof Kompagniet A/S 1
54 Bang & Olufsen Holdings A/S 3
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
DENMARK--Continued
176 Carlsberg A/S, Class A $ 10
101 Carlsberg A/S, Class B 6
2 D/S 1912, Class B 80
275 Danisco A/S 15
300 Den Danske Bank 36
85 Det Ostasiatiske Kompagni A/S* 1
160 FLS Industries A/S, Class B 4
105 GN Store Nord A/S 2
124 International Service System A/S, Class B* 4
6 J. Lauritzen Holding A/S 1
29 NKT Holding A/S 3
340 Novo-Nordisk A/S, Class B 42
45 Radiometer A/S, Class B 2
154 SAS Danmark A/S 2
25 Sophus Berendsen A/S, Class A 4
97 Sophus Berendsen A/S, Class B 15
589 Tele Danmark A/S 35
254 Unidanmark A/S, Class A 18
-------
286
-------
FINLAND--0.6%
500 Kemira Oy 5
500 Kesko 7
3,000 Merita Ltd., Class A 15
100 Metra Oy, Class A 3
200 Metra Oy, Class B 5
800 Nokia AB, Class A 64
500 Nokia AB, Class K 40
500 Outokumpu Oy, Class A 7
200 Pohjola Insurance Group, Class A 7
100 Pohjola Insurance Group, Class B 4
16 Rauma Group 0
400 Sampo Insurance Co. Ltd., Class A 13
1,300 Upm-Kymmene Corp. 28
-------
198
-------
FRANCE--7.0%
200 Accor S.A.* 38
950 Alcatel Alsthom S.A. 119
1,850 AXA-UAP 134
1,200 Banque Nationale de Paris 59
10 Bongrain S.A. 4
125 Bouygues 13
210 Canal Plus 37
220 Carrefour S.A. 118
350 Casino Guichard-Perrachon S.A. 19
50 Chargeurs S.A. 3
750 Cie Generale des Eaux 99
300 Cie Generale des Eaux Warrants* 0
50 Club Mediterranee 4
175 Compagnie Bancaire S.A. 26
507 Compagnie de Saint Gobain 69
675 Compagnie Financiere de Paribas 49
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
50 Compagnie Generale de Geophysique S.A. $ 5
50 Compagnie Parisienne de Reescompte 4
30 Comptoirs Modernes 15
50 Credit National/Natexis 3
600 CSF 17
400 Danone 64
50 Dollfus-Mieg & Cie S.A. 1
1,400 Elf Aquitaine S.A. 163
150 Eridania Beghin-Say S.A. 23
50 Essilor International 14
25 Eurafrance S.A. 10
10 Europe 1 Communication 2
50 Groupe GTM 3
450 Havas S.A. 29
100 Imetal S.A. 12
400 L'Air Liquide 63
390 L'OREAL 149
500 Lafarage S.A. 33
650 Lagardere S.C.A. 19
160 Legrand S.A. 31
500 LVMH Moet Hennessy Louis Vuitton 86
942 Lyonnaise des Eaux S.A. 101
780 Michelin, Class B 42
150 Moulinex 4
100 Nord-Est S.A. 2
40 Pathe 8
350 Pernod-Ricard 18
300 Peugeot Citroen 34
125 Pinault Printemps-Redoute S.A. 64
100 Primagaz Cie 8
110 Promodes 40
2,050 Rhone-Poulenc, Class A 92
20 Sagem S.A. 9
100 Salomon 9
500 Sanofi S.A. 50
750 Schneider S.A. 40
100 SEFIMEG 5
250 SEITA 9
150 Sidel S.A. 9
75 Simco S.A. 5
50 Skis Rossignol S.A. 1
300 Societe BIC S.A. 21
550 Societe Generale 72
100 Societe Technip 10
50 Sodexho Alliance S.A. 27
100 Sommer-Allibert 3
1,250 Total S.A., Class B 131
50 Union du Credit-Bail Immobilier 5
50 Union Immobiliere de France 3
1,200 Usinor Sacilor 19
350 Valeo S.A. 23
80 Worms et Compagnie 6
------
2,407
------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
GERMANY--7.3%
250 Adidas A.G. $ 35
1,060 Allianz A.G. 251
50 AMB Aachener & Muenchener Beteiligungs- A.G. 51
2,750 BASF A.G. 97
3,250 Bayer A.G. 120
1,350 Bayer Hypotheken-und Wechsel-Bank A.G. 59
1,500 Bayerische Vereinsbank A.G. 89
350 Beiersdorf A.G. 15
50 CKAG Colonia Konzern A.G. 4
350 Continental A.G. 9
2,300 Daimler-Benz A.G. 163
150 Degussa A.G. 7
2,400 Deutsche Bank A.G. 154
1,450 Deutsche Lufthansa A.G. 28
9,700 Deutsche Telekom A.G. 197
200 Deutz A.G.* 1
100 Douglas Holdings A.G. 4
2,150 Dresdner Bank A.G. 83
50 FAG Kugelfischer Georg Schaefer A.G. 1
220 Heidelbergerzement A.G. 17
250 Hochtief A.G. 10
40 Karstadt A.G. 14
40 Linde A.G. 25
100 Man A.G. 30
195 Mannesmann A.G. 91
750 Merck KGaA 27
1,010 Metro A.G. 46
500 Muenchener Ruckversicherungs-Gesellschaft A.G. 156
55 Preussag A.G. 16
1,550 RWE A.G. 76
300 SAP A.G. 87
300 Schering A.G. 29
100 SGL Carbon A.G. 13
2,000 Siemens A.G. 153
120 Thyssen A.G. 29
2,300 VEBA A.G. 137
150 Viag A.G. 76
160 Volkswagen A.G. 91
-------
2,491
-------
HONG KONG--2.2%
4,000 Applied International Holdings-Rights* 0
10,000 Applied International Holdings* 1
8,200 Bank of East Asia Ltd. 17
21,000 Cathay Pacific Airways 18
14,000 Cheung Kong Holdings Ltd. 99
15,500 China Light & Power Co. Ltd. 78
12,000 Chinese Estates Holdings 6
2,000 Dickson Concepts International Ltd 4
5,000 Elec & Eltek International Holdings Ltd. 2
4,000 Giordano International Ltd. 1
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
8,000 Hang Lung Development Co. $ 12
8,000 Hang Seng Bank Ltd. 70
4,000 Hong Kong & Shanghai Hotels Ltd. 4
15,200 Hong Kong China Gas Co. Ltd. 27
50,400 Hong Kong Telecommunications Ltd. 96
16,000 Hopewell Holdings Ltd. 4
17,000 Hutchinson Whampoa Ltd. 113
4,000 Hysan Development Co. Ltd. 8
2,400 Johnson Electric Holdings Ltd. 6
1,000 Kumagai Gum Ltd. 1
2,000 Miramar Hotel & Investment Ltd. 3
6,000 New World Development Co. Ltd. 22
4,000 Oriental Press Group 1
2,000 Peregrine Investments Holdings Ltd. 2
2,000 Playmates Toys Holdings 1
14,400 Regal Hotels International 2
5,000 Shangri-La Asia Ltd. 4
4,000 Shun Tak Holdings Ltd. 1
4,000 Sino Land Co. 2
6,000 South China Morning Post Holdings Ltd. 5
2,000 Stelux Holdings 1
10,000 Sun Hung Kai Properties Ltd. 76
7,000 Swire Pacific Ltd. 35
2,000 Tai Cheung Holdings Ltd. 1
2,000 Television Broadcasts Ltd. 5
9,000 Wharf Holdings Ltd. 18
1,000 Wing Lung Bank 4
-------
750
-------
IRELAND--0.4%
4,223 Allied Irish Banks PLC 37
217 Crean (James) PLC 1
1,906 CRH PLC 23
1,470 Fyffes PLC 2
933 Greencore Group PLC 4
1,238 Independent Newspapers PLC 7
1,574 Irish Life PLC 8
821 Kerry Group PLC 9
5,420 Smurfit (Jefferson) Group PLC 16
3,621 Waterford Wedgewood PLC 4
1,093 Woodchester Investments PLC 4
-------
115
-------
ITALY--3.3%
5,000 Assicurazioni Generali 112
9,000 Banca Commerciale Italiana 26
3,000 Banco Ambrosiano S.p.A. 10
1,000 Banco Ambrosiano Veneto S.p.A. 2
3,000 Banco Ambrosiano Veneto S.p.A.-Rights* 11
1,000 Banco Ambrosiano Veneto S.p.A.-Rights* 1
3,000 Banco Ambrosiano Veneto S.p.A.-Rights* 2
1,000 Banco Ambrosiano Veneto S.p.A.-Rights* 0
1,000 Banco Popolare di Milano 5
1,000 Benetton Group S.p.A. 15
1,000 Bulgari S.p.A. 5
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
ITALY--Continued
1,000 Burgo (Cartiere) S.p.A. $ 6
1,000 Cementir S.p.A. 2
11,000 Credito Italiano 30
3,000 Edison S.p.A. 16
41,000 ENI S.p.A. 239
1,000 Falck Acciaierie & Ferriere Lombarde 4
18,400 Fiat S.p.A. 53
4,300 Fiat-RNC S.p.A. 7
2,000 Impregilo S.p.A. 1
4,000 Istituto Bancario San Paolo di Torino 33
3,000 Istituto Mobiliare Italiano S.p.A. 31
20,000 Istituto Nationale Assicurazioni 35
1,000 Italcementi S.p.A. 6
4,000 Italgas S.p.A. 15
1,000 La Rinascente S.p.A. 8
2,000 Magneti Marelli 3
6,000 Mediaset S.p.A.* 30
2,000 Mediobanca S.p.A.* 14
1,000 Mondadori (Arnoldo) Editore S.p.A. 8
3,000 Montedison S.p.A. 2
26,000 Montedison-RNC S.p.A. 21
11,240 Olivetti Group* 6
8,000 Parmalat Finanziaria S.p.A. 12
8,000 Pirelli S.p.A. 20
2,000 Riunione Adriatica di Sicurta S.p.A. 19
1,000 Riunione Adriatica di Sicurta-RNC S.p.A. 6
1,000 Sirti S.p.A. 6
3,000 Snia BPD S.p.A. 3
1,000 Societa Assicuratrice Industriale S.p.A. 10
34,000 Telecom Italia Mobile S.p.A. 138
8,000 Telecom Italia Mobile-RNC S.p.A. 17
19,111 Telecom Italia S.p.A. 119
4,488 Telecom Italia-RNC S.p.A. 18
-------
1,127
-------
JAPAN--21.2%
2,000 77 Bank 16
1,000 Acom Co. Ltd. 54
3,000 Ajinomoto Co. 27
1,000 Alps Electric Co. Ltd. 11
2,000 Amada Co. Ltd. 10
2,000 Aoki Corp.* 0
300 Arabian Oil Co. 6
10,000 Asahi Bank Ltd. 42
3,000 Asahi Breweries Ltd. 42
8,000 Asahi Chemical Industry Co. Ltd. 34
6,000 Asahi Glass Co. Ltd. 38
3,000 Ashikaga Bank Ltd. 4
200 Autobacs Seven Co. Ltd. 7
25,000 Bank of Tokyo-Mitsubishi Ltd. 362
5,000 Bank of Yokohama Ltd. 16
4,000 Bridgestone Corp. 87
1,000 Brother Industries Ltd. 2
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
5,000 Canon, Inc. $ 121
1,000 Casio Computer Co. Ltd. 8
4,000 Chiba Bank Ltd. 16
2,000 Chichibu Onoda Cement Corp. 5
1,000 Chiyoda Corp.* 2
1,000 Chugai Pharmaceutical Co. Ltd. 6
2,000 Citizen Watch Co. Ltd. 13
3,000 Cosmo Oil Co. Ltd. 6
400 CSK Corp. 12
4,000 Dai Nippon Ink & Chemicals, Inc. 14
4,000 Dai Nippon Printing Co. Ltd. 79
1,000 Dai Nippon Screen MFG Co. Ltd. 6
2,000 Daicel Chemical Industry Ltd. 4
2,000 Daido Steel Co. Ltd. 3
4,000 Daiei, Inc. 17
1,000 Daifuku Co. Ltd. 6
1,000 Daiichi Pharmaceutical 12
1,000 Daikin Industries Ltd. 5
1,000 Daikyo, Inc. 1
1,000 Daimaru, Inc. 3
800 Daito Trust Construction Co. 5
3,000 Daiwa House Industry Co. Ltd. 24
7,000 Daiwa Securities Co. Ltd. 24
2,000 Denki Kagaku Kogyo Kabushiki Kaisha 4
4,000 Denso Corp. 73
22 East Japan Railway Co. 100
1,000 Ebara Corp. 11
1,000 Eisai Co. Ltd. 15
1,000 Ezaki Glico Co. Ltd. 7
1,100 Fanuc 41
15,000 Fuji Bank Ltd. 81
3,000 Fuji Photo Film Co. 108
2,000 Fujikura Ltd. 14
3,000 Fujita Corp. 1
1,000 Fujita Kanko, Inc. 11
9,000 Fujitsu Ltd. 101
3,000 Furukawa Electric Co. Ltd. 15
2,000 Gunma Bank 15
1,000 Gunze Ltd. 2
4,000 Hankyu Corp. 19
1,000 Hankyu Department Stores, Inc. 7
2,000 Haseko 1
2,000 Hazama Corp. 1
1,000 Higo Bank 6
18,000 Hitachi Ltd. 128
5,000 Hitachi Zosen Corp. 10
3,000 Hokuriku Bank 5
5,000 Honda Motor Co. Ltd. 181
1,000 House Foods Corp. 13
1,000 Hoya Corp. 31
1,000 Inax 4
12,000 Industrial Bank of Japan 107
1,000 Isetan 6
2,000 Ishihara Sangyo Kaisha 3
2,000 Ito-Yokado Co. 90
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
7,000 Itochu Corp. $ 18
1,000 Itoham Foods 4
1,000 Iwataini International Corp. 2
1,000 Jaccs Co. Ltd. 6
8,000 Japan Airlines* 25
5,000 Japan Energy Corp. 7
1,000 Japan Metals & Chemicals 1
2,000 Japan Steel Works* 2
1,000 JGC Corp. 2
4,000 Joyo Bank 16
2,000 JUSCO Co. 34
4,000 Kajima Corp. 13
1,000 Kamigumi Co. Ltd. 4
1,000 Kandenko Co. Ltd. 6
2,000 Kanebo Ltd. 2
2,000 Kaneka Corp. 11
4,600 Kansai Electric Power Co., Inc. 78
1,000 Kansai Paint 3
3,000 Kao Corp. 40
6,000 Kawasaki Heavy Industries Ltd. 15
2,000 Kawasaki Kisen Kaisha Ltd. 3
14,000 Kawasaki Steel Corp. 23
2,000 Keihin Electric Express Railway Co. Ltd. 8
1,000 Kikkoman Corp. 6
1,000 Kinden Corp. 11
7,000 Kinki Nippon Railway 39
5,000 Kirin Brewery Co. Ltd. 39
5,000 Komatsu Ltd. 30
200 Konami Co. Ltd. 5
2,000 Konica Corp. 11
1,000 Koyo Seiko Co. 6
1,000 Kuarabo Industries 1
6,000 Kubota Corp. 21
3,000 Kumagai Gumi Co. Ltd. 2
2,000 Kuraray Co. Ltd. 17
1,000 Kureha Chemical Industry 2
1,000 Kyocera Corp. 48
2,000 Kyowa Hakko Kogyo 10
1,000 Lion Corp. 3
6,000 Marubeni Corp. 15
1,000 Maruha Corp. 1
2,000 Marui Co. Ltd. 31
9,000 Matsushita Electric Industrial Co. Ltd. 140
1,000 Meiji Milk Products Co. Ltd. 3
2,000 Meiji Seika 8
2,000 Minebea Co. Ltd. 22
9,000 Mitsubishi Chemical Corp. 18
7,000 Mitsubishi Corp. 55
9,000 Mitsubishi Electric Corp. 25
5,000 Mitsubishi Estate Co. Ltd. 58
2,000 Mitsubishi Gas Chemical Go. 5
15,000 Mitsubishi Heavy Industries Ltd. 59
5,000 Mitsubishi Materials Corp. 11
2,000 Mitsubishi Oil Co. Ltd. 4
2,000 Mitsubishi Paper Mills 4
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
3,000 Mitsubishi Rayon Co. $ 9
5,000 Mitsubishi Trust & Banking Corp. 67
7,000 Mitsui & Co. 49
1,800 Mitsui Chemicals, Inc. 5
3,000 Mitsui Engineering & Shipbuilding Co. Ltd. 3
3,000 Mitsui Fudosan Co. Ltd. 32
3,000 Mitsui Marine & Fire Insurance Co. Ltd. 15
2,000 Mitsui Mining & Smelting 8
5,000 Mitsui O.S.K. Lines Ltd.* 8
5,000 Mitsui Trust & Banking Co. Ltd. 8
2,000 Mitsukoshi Ltd. 6
1,000 Murata Manufacturing Co. Ltd. 30
1,000 Mycal Corp. 8
3,000 Nagoya Railroad Co. Ltd. 11
2,000 Nankai Electric Railway 9
7,000 NEC Corp. 74
2,000 NGK Insulators Ltd. 19
1,000 NGK Spark Plug Co. 7
2,000 Nichido Fire & Marine Insurance 11
1,000 Nichirei Corp. 3
2,000 Nihon Cement Co. Ltd. 6
2,000 Niigata Engineering Co. Ltd.* 1
2,000 Nikon Corp. 22
5,000 Nippon Express Co. Ltd. 26
2,000 Nippon Fire & Marine Insurance 6
2,000 Nippon Light Metal Co. 4
1,000 Nippon Meat Packers, Inc. 13
5,000 Nippon Oil Co. Ltd. 18
4,000 Nippon Paper Industries Co. 20
2,000 Nippon Sheet Glass Co. Ltd. 4
1,000 Nippon Shinpan Co. 1
1,000 Nippon Shokubai K.K. Co. 5
31,000 Nippon Steel Corp. 57
1,000 Nippon Suisan Kaisha Ltd.* 1
63 Nippon Telegraph & Telephone Corp. 518
5,000 Nippon Yusen Kabushiki Kaisha 15
1,000 Nishimatsu Construction 4
11,000 Nissan Motor Co. Ltd. 48
1,000 Nisshinbo Industries, Inc. 6
15,000 NKK Corp. 15
1,000 NOF Corp. 2
8,000 Nomura Securities Co. Ltd. 99
2,000 NSK Ltd. 8
2,000 NTN Corp. 7
3,000 Obayashi Corp. 14
3,000 Odakyu Electric Railway 14
5,000 Oji Paper Co. Ltd. 21
1,000 Okumura Corp. 3
1,000 Olympus Optical Co. Ltd. 7
1,000 Omron Corp. 17
1,000 Onward Kasiyama Co. Ltd. 14
2,000 Orient Corp. 4
11,000 Osaka Gas Co. Ltd. 25
200 Oyo Corp. 4
2,000 Penta-Ocean Construction 3
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
JAPAN--Continued
1,000 Renown, Inc.* $ 1
1,000 Rohm Co. Ltd. 99
15,000 Sakura Bank Ltd. 52
1,000 Sankyo Aluminium Industry Co. 1
2,000 Sankyo Co. Ltd. 64
1,000 Sanwa Shutter Corp. 6
8,000 Sanyo Electric Co. 23
2,000 Sapporo Breweries Ltd. 11
1,000 Sato Kogyo 1
500 Sega Enterprises 11
1,000 Seiyu Ltd. 4
2,000 Sekisui Chemical Co. Ltd. 15
3,000 Sekisui House Ltd. 22
5,000 Sharp Corp. 34
3,000 Shimizu Corp. 10
2,000 Shin-Etsu Chemical Co. Ltd. 48
2,000 Shionogi & Co. 11
2,000 Shiseido Co. Ltd. 27
3,000 Shizuoka Bank 28
5,000 Showa Denko K.K. 7
2,000 Snow Brand Milk Products 5
1,900 Sony Corp. 162
17,000 Sumitomo Bank Ltd. 216
7,000 Sumitomo Chemicals Co. 23
5,000 Sumitomo Corp. 32
3,000 Sumitomo Electric Industries 40
1,000 Sumitomo Forestry Co. Ltd. 7
3,000 Sumitomo Heavy Industries Ltd. 9
3,000 Sumitomo Marine & Fire Insurance 15
14,000 Sumitomo Metal Industries 29
2,000 Sumitomo Metal Mining Co. 8
2,000 Sumitomo Osaka Cement Co. Ltd. 4
5,000 Taisei Corp. 12
2,000 Taisho Pharmaceutical Co. 50
1,000 Takara Shuzo 4
1,000 Takashimaya Co. Ltd. 8
4,000 Takeda Chemical Industries 117
4,000 Teijin Ltd. 11
1,000 Teikoku Oil Co. Ltd. 3
1,000 Toa Corp. 2
4,000 Tobu Railway Co. 14
200 Toho Co. 22
2,400 Tohoku Electric Power 36
9,000 Tokai Bank 48
7,000 Tokio Marine & Fire Insurance 66
6,100 Tokyo Electric Power Co. 110
1,000 Tokyo Electron Ltd. 38
12,000 Tokyo Gas Co. Ltd. 29
700 Tokyo Steel Manufacturing 4
1,000 Tokyo Tatemono Co. Ltd. 3
1,000 Tokyotokeiba 2
5,000 Tokyu Corp. 21
3,000 Toppan Printing Co. Ltd. 41
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
6,000 Toray Industries, Inc. $ 27
3,000 Tosoh Corp. 6
1,000 Tostem Corp. 11
2,000 Toto Ltd. 18
1,000 Toyo Engineering Corp. 1
1,000 Toyo Seikan Kaisha 17
3,000 Toyobo Ltd. 5
1,000 Toyoda Automatic Loom Works 19
19,000 Toyota Motor Corp. 548
1,000 Tsubakimoto Chain 5
3,000 Ube Industries Ltd. 5
2,000 Unitika Ltd.* 1
1,000 Yamaguchi Bank 13
1,000 Yamaha Corp. 14
5,000 Yamaichi Securities Co. Ltd. 0
2,000 Yamanouchi Pharmaceutical Co. Ltd. 49
2,000 Yamato Transport Co. Ltd. 25
1,000 Yamazaki Baking Co. Ltd. 12
5,000 Yasuda Trust & Banking 4
1,000 Yokogawa Electric 7
-------
7,261
-------
MALAYSIA--0.8%
1,000 Aluminium Co. of Malaysia Berhad 0
2,000 AMMB Holdings Berhad 2
6,000 Amsteel Corp. Berhad 2
1,000 Antah Holdings Berhad 0
1,000 Aokam Perdana Berhad* 0
4,000 Berjaya Group Berhad 1
3,000 Berjaya Leisure Berhad 2
4,000 Commerce Asset Holdings Berhad 2
7,000 DCB Holdings Berhad 4
2,000 Edaran Otomobil Nasional Berhad 5
3,000 Ekran Berhad 2
5,000 Golden Hope Plantations Berhad 6
1,000 Golden Plus Holdings Berhad 0
2,000 Guinness Anchor Berhad 2
3,000 Highlands & Lowlands Berhad 3
1,000 Hong Leong Industries Berhad 1
3,000 Hong Leong Properties Berhad 1
2,000 Hume Industries Berhad 2
3,000 Idris Hydraulic Berhad* 1
3,000 IGB Corp. Berhad 1
4,000 IOI Corp. Berhad 2
2,000 Jaya Tiasa Holdings Berhad 4
2,000 Johan Holdings Berhad 1
2,000 Kedah Cement Holdings Berhad 1
1,000 Kelanamas Industries Berhad 0
2,000 Kemayan Corp. Berhad 1
1,000 Kian Joo Can Factory Berhad 1
3,000 Kuala Lumpur Kepong Berhad 7
3,000 Land and General Berhad 1
2,000 Landmarks 1
2,000 Leader Universal Holdings Berhad 1
7,000 Magnum Corp. Berhad 5
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
5,400 Malayan Banking Berhad $ 14
2,000 Malayan Cement Berhad 1
6,000 Malayan United Industries Berhad 2
1,500 Malayawata Steel Berhad 0
8,000 Malaysia International Shipping Berhad 9
4,000 Malaysia Mining Corp. Berhad 2
4,000 Malaysian Airline System Berhad 3
2,000 Malaysian Mosaics Berhad 1
1,000 Malaysian Oxygen Berhad 3
1,000 Malaysian Pacific Industries 3
4,666 Malaysian Resources Corp. Berhad 2
4,000 MBF Capital Berhad 2
4,000 Metroplex Berhad 1
5,000 Mulpha International Berhad 1
4,000 Multi-Purpose Holdings 1
2,000 Mycom Berhad 1
2,000 Nestle Berhad 10
1,000 New Straits Times Press Berhad 1
1,600 Oriental Holdings Berhad 2
1,000 Palmco Holdings Berhad 0
3,000 Pan-Malaysia Cement Works Berhad 1
2,000 Perlis Plantations Berhad 4
3,000 Perusahaan Otomolbil Nasional Berhad 4
1,000 Petaling Garden Berhad 1
1,000 Pilecon Engineering Berhad 0
3,000 Promet Berhad* 1
3,000 Public Bank Berhad 1
6,000 Public Bank Berhad (Foreign Market) 4
2,000 R.J. Reynolds Berhad 3
2,000 Rashid Hussain Berhad 2
5,000 Resorts World Berhad 7
2,400 Roghmans of Pall Mall Berhad 21
2,000 Selangor Properties Berhad 1
2,000 Shell Refining Co. Berhad 4
11,000 Sime Darby Berhad 11
2,000 Sungei Way Holdings Berhad 1
3,000 Ta Enterprise Berhad 1
3,000 Tan Chong Motor Holdings Berhad 2
3,000 Technology Resources Industries Berhad* 2
13,500 Telekom Malaysia Berhad 30
14,000 Tenaga Nasional Berhad 26
3,000 Time Engineering Berhad 1
2,000 UMW Holdings Berhad 2
4,000 United Engineers Malaysia Ltd. 4
4,000 YTL Corp. Berhad 4
2,000 YTL Corp. Berhad, Class A 2
-------
261
-------
NETHERLANDS--5.0%
6,879 ABN AMRO Holdings N.V. 131
384 Akzo Nobel 68
181 Assurantieconcern Stad Rotterdam anno 1720N.V. 9
3,515 Elsevier N.V. 59
453 Getronics N.V. 16
265 Heineken N.V. 45
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
162 Hollandsche Beton Groep N.V. $ 3
141 IHC Caland N.V. 7
4,282 ING Groep N.V. 174
389 KLM Royal Dutch Airlines N.V. 14
2,537 Koninklijke Ahold N.V. 68
188 Koninklijke Hoogovens N.V. 8
546 Koninklijke KNP BT N.V. 12
119 Koninklijke Nedlloyd N.V. 3
167 Koninklijke Pakhoed N.V. 4
2,479 Koninklijke PTT Nederland N.V. 100
106 Oce-Van Der Grinten N.V. 12
1,866 Philips Electronics N.V. 123
12,110 Royal Dutch Petroleum Co. 630
160 Stork N.V. 6
3,208 Unilever N.V. 187
360 Wolters Kluwer N.V. 48
-------
1,727
-------
NEW ZEALAND--0.3%
12,500 Brierley Investments Ltd. 9
7,600 Carter Holt Harvey Ltd. 11
200 Fisher & Paykel Industries Ltd. 1
1,218 Fletcher Challenge Building 4
1,622 Fletcher Challenge Energy 7
3,817 Fletcher Challenge Forests 3
3,200 Fletcher Challenge Paper 4
2,200 Lion Nathan Ltd. 5
8,400 Telecom Corp. of New Zealand Ltd. 43
-------
87
-------
NORWAY--0.5%
400 Aker RGI ASA 7
40 Aker RGI ASA, Class B 1
300 Bergesen d.y. ASA, Class A 8
100 Bergesen d.y. ASA, Class B 3
3,000 Christiania Bank Og Kreditkasse 11
100 Dyno Industrier ASA 2
200 Elkem ASA 3
200 Hafslund ASA 1
100 Hafslund ASA, Class B 0
200 Kvaerner ASA 10
100 Kvaerner ASA, Class B 5
100 Leif Hoegh & Co. ASA 2
100 NCL Holdings ASA Rights* 0
900 NCL Holdings ASA* 3
1,200 Norsk Hydro ASA 61
200 Norske Skogindustrier ASA 6
130 Nycomed ASA, Class A 4
65 Nycomed ASA, Class B 2
200 Orkla ASA, Class A 17
100 Orkla ASA, Class B 8
200 Petroleum Geo-Services ASA* 13
1,400 Storebrand ASA* 9
100 Unitor ASA 1
-------
177
-------
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
PORTUGAL--0.3%
700 Banco Comercial Portugues S.A. (BCP) $ 15
400 Banco Espirito Santo e Comercial de Lisboa S.A. 11
1,800 EDP-Electricidade de Portugal S.A. 32
900 Portugal Telecom S.A. (Registered) 42
-------
100
-------
SINGAPORE--0.9%
1,000 Chuan Hup Holdings Ltd. 0
4,000 City Developments Ltd. 20
2,000 Comfort Group Ltd. 1
2,000 Cycle & Carriage Ltd. 9
5,000 DBS Land Ltd. 9
6,000 Development Bank of Singapore Ltd. 57
1,000 First Capital Corp. Ltd. 1
2,000 Fraser & Neave Ltd. 10
2,000 Goldtron Ltd. 0
2,000 Hai Sun Hup Group Ltd. 1
1,000 Haw Par Brothers International Ltd. 1
2,000 Hotel Properties Ltd. 1
1,000 Inchcape Berhad 3
6,000 IPC Corp. 1
4,250 Keppel Corp. Ltd. 15
2,000 Lum Chang Holdings Ltd. 1
2,000 NatSteel Ltd. 4
4,000 Neptune Orient Lines Ltd. 2
9,600 Overseas Chinese Banking Corp. Ltd. 58
1,000 Overseas Union Enterprise Ltd. 2
2,000 Parkways Holdings Ltd. 5
1,000 Sembawang Co. Ltd. 3
1,000 Sembawang Marine and Logistics 2
3,000 Singapore Airlines Ltd. 20
2,000 Singapore Press Holdings Ltd. 27
2,000 Singapore Technologies Industrial Corp. 2
23,000 Singapore Telecommunications Ltd. 44
1,000 Straits Trading Co. Ltd. 1
4,000 United Industrial Corp. Ltd. 2
2,000 United Overseas Bank Ltd. 12
2,000 United Overseas Land Ltd. 2
-------
316
-------
SPAIN--2.3%
75 Acerinox S.A. 12
1,250 Autopistas Concesionaria ESP 17
3,477 Banco Bilbao Vizcaya S.A. 105
1,680 Banco Central Hispanoamericano 32
2,442 Banco Santander S.A. 74
625 Corporacion Bancaria de Espana S.A. 39
75 Corporacion Financiera Alba 8
155 Corporacion Mapfre 8
295 Dragados & Construcciones S.A. 6
250 Ebro Agricolas Compania de Alimentacion S.A. 4
100 Empresa Nacional de Celulosas S.A. 2
5,350 Empresa Nacional de Electricidad S.A. 101
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------------
<C> <S> <C>
800 Ercros S.A. $ 1
300 Fomenta de Construcciones S.A. 12
775 Gas Natural SDG S.A., Class E 38
4,618 Iberdrola S.A. 59
125 Inmobiliaria Metropolitana Vasco Central S.A. 5
200 Inmobiliaria Urbis S.A. 2
25 Portland Valderrivas S.A. 2
250 Prosegur CIA de Seguridad S.A. 2
1,550 Repsol S.A. 67
205 Sarrio S.A. 1
225 Sociedade General de Aguas de Barcelona S.A. 9
225 Sociedade General de Aguas de Barcelona S.A.--Rights* 0
205 Tabacalera S.A. 15
4,812 Telefonica de Espana 139
1,561 Union Electrica Fenosa S.A. 16
200 Uralita S.A. 2
200 Vallehermoso S.A. 6
100 Viscofan Industria Navarra de Envolturas Celulosicas S.A. 2
50 Zardoya Otis S.A. 6
5 Zardoya Otis S.A.--Bonus Shares 0
-------
792
-------
SWEDEN--2.0%
3,300 ABB AB, Class A 42
1,400 ABB AB, Class B 17
500 AGA AB, Class A 7
400 AGA AB, Class B 5
6,066 Astra AB, Class A 105
1,500 Astra AB, Class B 25
500 Atlas Copco AB, Class A 15
200 Atlas Copco AB, Class B 6
316 Electrolux AB, Class B 25
92 Granges AB* 1
900 Hennes & Mauritz AB, Class B 42
200 Scancem AB, Class A 8
300 Securitas AB, Class B 9
408 Skandia Forsakrings AB 22
2,400 Skandinaviska Enskilda Banken, Class A 28
500 Skanska AB, Class B 21
100 SKF AB, Class A 2
200 SKF AB, Class B 5
1,100 Stora Kopparbergs Bergslags Aktiebolag, Class A 15
100 Stora Kopparbergs Bergslags Aktiebolag, Class B 1
800 Svenska Cellulosa AB, Class B 17
1,000 Svenska Handelsbanken, Class A 35
1,700 Swedish Match AB 6
4,300 Telefonaktiebolaget LM Ericsson, Class B 175
400 Trelleborg AB, Class B 6
500 Volvo AB, Class A 13
1,600 Volvo AB, Class B 43
-------
696
-------
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
SWITZERLAND--5.7%
35 ABB A.G. (Bearer)* $ 47
55 Adecco S.A. 16
10 Alusuisse-Lonza Holdings A.G. (Registered) 9
1,450 Credit Suisse Group (Registered) 212
3 Fischer (Georg) A.G. 4
25 Holderbank Financiere Glarus A.G. (Registered) 4
10 Holderbank Financiere Glarus A.G., Class B 9
190 Nestle S.A. (Registered) 280
30 Novartis A.G. (Bearer) 48
290 Novartis A.G. (Registered) 463
8 Roche Holdings A.G. (Bearer) 122
33 Roche Holdings A.G. (Genusss) 295
350 Schweizerischer Bankverein (Registered)* 101
5 SGS Societe Generale de Surveillance Holdings S.A., Class B 9
20 SMH A.G. (Bearer) 11
70 Swiss Re (Registered) 114
100 Union Bank of Switzerland (Bearer) 127
75 Union Bank of Switzerland (Registered) 19
170 Zurich Versicherungsgesellschaft (Registered) 72
-------
1,962
-------
UNITED KINGDOM--18.4%
8,000 Abbey National PLC 127
1,000 AMEC PLC 2
439 Amstrad PLC 0
1,000 Anglian Water PLC 14
2,000 Argos PLC 21
4,000 Arjo Wiggins Appleton PLC 11
5,000 Associated British Foods PLC 46
16,662 B.A.T. Industries PLC 149
8,205 Barclays PLC 197
1,000 Barratt Developments PLC 4
4,753 Bass PLC 68
2,000 BBA Group PLC 13
21,294 BG PLC 102
2,000 BICC Group PLC 5
4,000 Blue Circle Industries PLC 23
2,608 BOC Group PLC 42
4,889 Boots Co. PLC 72
1,000 Bowthorpe PLC 7
3,000 BPB PLC 17
2,000 British Aerospace PLC 55
5,000 British Airways PLC 45
2,000 British Land Co. PLC 22
29,172 British Petroleum Co. PLC 398
9,000 British Sky Broadcasting Group PLC 67
10,000 British Steel PLC 23
32,469 British Telecommunications PLC 250
21,948 BTR PLC 76
1,000 Burmah Castrol PLC 17
12,000 Cable & Wireless PLC 109
5,116 Cadbury Schweppes PLC 53
2,900 Caradon PLC 9
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
3,000 Carlton Communications PLC $ 23
23,000 Centrica PLC* 33
3,000 Coats Viyella PLC 5
4,000 Commercial Union PLC 55
2,079 Courtaulds PLC 10
1,000 Courtaulds Textiles PLC 6
1,000 De La Rue PLC 7
1,000 Delta PLC 5
2,000 Electrocomponents PLC 14
4,137 EMI Group PLC 31
2,000 English China Clays PLC 9
3,000 FKI PLC 9
14,190 General Electric Co. PLC 92
1,806 GKN PLC 39
18,000 Glaxo Wellcome PLC 394
5,017 Granada Group PLC 72
11,000 Grand Metropolitan PLC 100
2,000 Great Portland Estates PLC 8
5,000 Great Universal Stores PLC 59
5,000 Guardian Royal Exchange PLC 24
9,866 Guiness PLC 89
1,008 Hammerson PLC 8
3,000 Hanson PLC 15
4,000 Harrisons & Crosfield PLC 8
1,000 Hepworth PLC 4
9,000 HSBC Holdings PLC 219
4,000 HSBC Holdings PLC (75P) 102
1,000 Hyder PLC 16
2,000 IMI PLC 12
4,000 Imperial Chemical Industries PLC 59
1,000 Johnson Matthey PLC 9
3,000 Kingfisher PLC 41
6,000 Ladbroke Group PLC 27
1,000 Laird Group PLC 7
2,646 Land Securities Group PLC 43
5,000 LASMO PLC 22
6,000 Legal & General Group PLC 51
1,000 Lex Service PLC 7
26,082 Lloyds TSB Group PLC 297
4,001 Lonrho PLC 6
7,000 LucasVarity PLC 22
14,522 Marks & Spencer PLC 149
2,000 Marley PLC 4
2,142 MEPC PLC 19
1,000 Mercury Asset Management Group PLC 28
1,000 Meyer International PLC 7
9,000 National Grid Group PLC 45
6,000 National Power PLC 57
2,000 Next PLC 25
1,000 Ocean Group PLC 10
2,920 Pearson PLC 41
3,112 Peninsular and Oriental Steam Navigation Co. 34
5,290 Pilkington PLC 12
1,000 Provident Financial PLC 12
10,000 Prudential Corp. PLC 107
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
UNITED KINGDOM--Continued
1,000 Racal Electronics PLC $ 4
3,000 Railtrack Group PLC (Partial Paid) 50
4,000 Rank Group PLC 23
3,000 Redland PLC 17
4,832 Reed International PLC 51
8,000 Reuters Holdings PLC 90
3,000 Rexam PLC 15
1,000 RMC Group PLC 15
7,000 Rolls-Royce PLC 28
7,000 Royal & Sun Alliance Insurance Group PLC 63
4,000 Royal Bank Scotland Group PLC 46
5,474 RTZ Corp. PLC 66
3,000 Rugby Group PLC 6
6,000 Safeway PLC 33
8,953 Sainsbury (J) PLC 73
1,000 Schroders PLC 29
3,000 Scottish & Newcastle PLC 35
5,000 Scottish Power PLC 40
7,410 Sears PLC 6
3,000 Sedgwick Group PLC 6
2,000 Slough Estates PLC 12
28,000 SmithKline Beecham PLC 260
1,000 Smiths Industries PLC 13
2,000 Southern Electric PLC 15
2,000 St. James Place Capital PLC 5
2,000 T&N PLC 8
4,529 Tarmac PLC 9
2,000 Tate & Lyle PLC 16
2,000 Taylor Woodrow PLC 6
10,583 Tesco PLC 85
2,000 Thames Water PLC 30
1,714 Thorn PLC 4
2,000 TI Group PLC 16
1,000 Transport Development Group PLC 3
1,162 Unigate PLC 11
15,868 Unilever PLC 125
2,579 United Biscuits Holdings PLC 9
3,000 United Utilities PLC 39
2,000 Vickers PLC 8
1,000 Viglen Technology Letters of Entitlement to Litigation Notes 0
1,000 Viglen Technology PLC 1
1,630 Viglen Technology PLC 4
16,000 Vodafone Group PLC 107
2,666 Williams PLC 14
2,000 Willis Corroon 4
1,000 Wilson (Connolly) Holdings PLC 3
2,000 Wimpey (George) PLC 4
3,000 Wolseley PLC 26
4,000 Zeneca Group PLC 127
-------
6,313
- -------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost $28,982) $28,178
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK--0.5%
AUSTRALIA--0.1%
7,100 News Corp. Ltd. $ 35
2,600 Sydney Harbour Casino Holdings Ltd.* 2
-------
37
-------
AUSTRIA--0.0%
4 Bau Holdings A.G.--Vorzug 0
75 Bank Austria A.G.--Vorzug 3
74 Creditanstalt-Bankverein--Vorzug 4
4 EA-Generali A.G.--Vorzug 1
-------
8
-------
FRANCE--0.0%
100 Casino Guichard--Perrachon S.A. 4
-------
GERMANY--0.4%
950 RWE A.G.--Non Voting 38
200 SAP A.G.--Vorzug 61
50 Volkswagen A.G.--Non Voting 23
-------
122
-------
ITALY--0.0%
5,300 Fiat S.p.A. 8
- -------------------------------------------------------
TOTAL PREFERRED STOCK (Cost $145) $ 179
- -------------------------------------------------------
OTHER--8.9%
AUSTRALIA--0.4%
15,000 WEBS Index Series--Australia $ 138
-------
GERMANY--1.1%
23,000 WEBS Index Series--Germany 388
-------
HONG KONG--0.2%
7,400 WEBS Index Series--Hong Kong 82
-------
ITALY--0.0%
800 WEBS Index Series--Italy 15
-------
JAPAN--3.6%
115,800 WEBS Index Series--Japan 1,216
-------
SPAIN--0.5%
7,400 WEBS Index Series--Spain 149
-------
SWEDEN--0.4%
7,500 WEBS Index Series--Sweden 141
-------
SWITZERLAND--1.1%
25,100 WEBS Index Series--Switzerland 373
-------
UNITED KINGDOM--1.6%
30,800 WEBS Index Series--United Kingdom 534
- -------------------------------------------------------
TOTAL OTHER (Cost $3,514) $ 3,036
- -------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ----------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--0.5%
Banco Central Hispanoamericano,
Grand Cayman
$ 163 5.750%Due 12/01/97 $ 163
- ----------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $163) $ 163
- ----------------------------------------------------
TOTAL INVESTMENTS--92.2%
(Cost $32,804) $31,556
- ----------------------------------------------------
Other assets, less liabilities--7.8% 2,688
- ----------------------------------------------------
NET ASSETS--100.0% $34,244
- ----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*Non-income producing security.
At November 30, 1997 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<S> <C>
Industry/Sector
- -----------------------------------
Banks 13.5%
Capital Goods 5.5
Consumer Goods 17.3
Energy/Utilities 12.8
Financial Services 7.9
Pharmaceuticals/Health Care 7.5
Multi-Industry 12.8
Raw Materials 6.8
Retail 3.8
Technology 3.5
Transportation 2.1
Other 6.5
- -----------------------------------
Total 100.0%
- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO
<C> <S> <C>
COMMON STOCKS--94.0%
ARGENTINA--0.3%
25,000 Banco Rio de la Plata S.A. $ 314
--------
AUSTRALIA--1.9%
75,000 National Australia Bank 994
185,000 News (The) Corp. Ltd. 990
--------
1,984
--------
AUSTRIA--0.7%
5,000 VA Technologie A.G. 753
--------
CZECH REPUBLIC--0.5%
90,000 Czechoslovakia & Slovak Investment Corp.* 540
12,000 Czechoslovakia & Slovak Investment Corp. Warrants* 8
--------
548
--------
FRANCE--9.5%
7,000 Accor S.A.* 1,323
8,000 Alcatel Alsthom 1,003
27,000 Axa-UAP 1,959
6,000 Castorama Dubois Investisse 708
9,000 Cie Generale des Eaux 1,189
25,000 Credit Commercial de France 1,482
12,000 Elf Aquitaine S.A. 1,392
17,000 Lafarge S.A. 1,123
--------
10,179
--------
GERMANY--8.7%
3,000 Allianz A.G. 712
25,000 Deutsche Bank A.G. 1,603
20,000 Commerzbank A.G. 695
15,000 Deutsche Telekom A.G. 304
30,000 Deutsche Telekom A.G. ADR 613
4,000 Karstadt A.G. 1,390
27,000 Siemens A.G. 1,585
40,000 VEBA A.G. 2,377
--------
9,279
--------
ITALY--5.6%
80,000 Assicurazioni Generali 1,794
600,000 Credito Italiano 1,642
110,000 ENI S.p.A. 642
435,000 Pirelli S.p.A. 1,080
140,000 Telecom Italia S.p.A. 873
--------
6,031
--------
JAPAN--21.9%
80,000 Bank Of Tokyo-Mitsubishi Ltd. 1,160
115,000 Daiwa House Industry Co. Ltd. 928
100,000 Fujitsu Ltd. 1,120
140,000 Industrial Bank of Japan Ltd. 1,251
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
425,000 Itochu Corp. $ 1,102
25,000 Jafco Co. Ltd. 901
130,000 Kirin Brewery Co. Ltd. 1,001
17,000 Matsumotokiyoshi 599
70,000 Mitsubishi Estate Co. Ltd. 812
185,000 Mitsui & Co. 1,286
7,000 Nintendo Co. Ltd. 724
110,000 Nippon Compys Corp. 1,439
235 Nippon Telegraph & Telephone Corp. 1,933
60,000 Nomura Securities Co. Ltd. 743
230,000 Obayashi Corp. 1,081
10,000 Promise Co. Ltd. 552
70,000 Ricoh Co. Ltd. 845
110,000 Sanwa Bank (The) Ltd. 1,207
15,000 Secom Co. Ltd. 940
140,000 Sumitomo Realty & Development Co. Ltd. 938
60,000 Takashimaya Co. Ltd. 480
115,000 Tokio Marine & Fire Insurance 1,090
40,000 Xebio Co. Ltd. 483
55,000 Uny Co. Ltd. 811
--------
23,426
--------
NETHERLANDS--5.3%
25,000 ING Groep N.V. 1,016
35,000 Koninklijke PTT Nederland N.V. 1,405
28,000 Vendex International N.V. 1,462
75,000 VNU 1,796
--------
5,679
--------
NORWAY--0.9%
55,000 Saga Petroleum ASA, Class A 979
--------
PORTUGAL--1.8%
35,000 Cimpor S.A. 887
22,000 Portugal Telecom S.A. 1,009
--------
1,896
--------
SOUTH AFRICA--0.6%
30,000 Nedcor Ltd. 680
--------
SOUTH KOREA--0.0%
368 Daewoo Corp. 1
--------
SPAIN--2.5%
30,000 Banco Bilbao Vizcaya S.A. 906
20,000 Repsol S.A. ADR 863
10,000 Telefonica de Espana ADR 865
--------
2,634
--------
SWEDEN--3.1%
35,000 Autoliv, Inc. 1,325
25,000 Electrolux AB, Series B 1,969
--------
3,294
--------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- -------------------------------------------------------------
<C> <S> <C>
SWITZERLAND--7.5%
1,100 Nestle S.A. $ 1,619
1,100 Novartis A.G. 1,758
155 Roche Holding A.G. 1,387
1,200 Union Bank of Switzerland 1,528
4,000 Zurich Versicherungs-Gesellschaft A.G. 1,683
--------
7,975
--------
UNITED KINGDOM--23.2%
175,000 Baa PLC 1,473
19,000 British Pertroleum Co. PLC ADR 1,577
130,000 CRH PLC 1,528
240,000 General Electric Co. PLC 1,559
35,000 Glaxo Wellcome PLC ADR 1,599
165,000 Grand Metropolitan PLC 1,498
320,000 Ladbroke Group PLC 1,450
160,000 Lloyds TSB Group PLC 1,820
280,000 National Grid Group PLC 1,387
110,000 National Westminster Bank PLC 1,664
125,000 Pearson PLC 1,737
245,000 Shell Transport & Trading Co. 1,663
32,000 SmithKline Beecham PLC ADR 1,588
270,000 Tomkins PLC 1,369
115,000 United Utilities PLC 1,474
22,000 Vodafone Group PLC ADR 1,452
--------
24,838
- -------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $96,129) $100,490
- -------------------------------------------------------------
SHORT-TERM INVESTMENT--6.5%
Banco Central Hispanoamericano,
Grand Cayman
$ 7,006 5.750% Due 12/01/97 $ 7,006
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $7,006) $ 7,006
- -------------------------------------------------------------
TOTAL INVESTMENTS--100.5%
(Cost $103,135) $107,496
- -------------------------------------------------------------
Liabilities, less other assets--(0.5)% (488)
- -------------------------------------------------------------
NET ASSETS--100.0% $107,008
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Non-income producing security.
At November 30, 1997 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<CAPTION>
Industry/Sector
- -----------------------------------
<S> <C>
Banks 11.3%
Basic Industry 16.0
Capital Goods 10.3
Consumer Goods 17.9
Financial Services 16.3
Pharmaceuticals/Health Care 6.3
Real Estate 1.7
Retail 2.9
Technology 1.9
Telecommunications 8.4
Other 7.0
- -----------------------------------
Total 100.0%
- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO
<C> <S> <C>
COMMON STOCKS--92.9%
AGRICULTURE--0.5%
4,800 DeKalb Genetics Corp. $ 187
6,053 Delta & Pine Land Co. 160
6,400 Dimon, Inc. 160
8,300 Longview Fibre Co. 134
1,400 Tejon Ranch Co. 41
--------
682
--------
APPAREL--0.5%
2,900 Converse, Inc.* 21
5,200 Designer Holdings, Ltd.* 49
2,100 Donna Karan Intl, Inc.* 25
900 Fossil, Inc.* 20
1,400 Gadzooks, Inc.* 39
4,000 Genesco, Inc.* 52
1,100 Guess ?, Inc.* 9
3,900 Hartmarx Corp.* 32
3,450 Kellwood Co. 118
5,500 Nautica Enterprises, Inc.* 154
1,500 Oshkosh B' Gosh, Inc. 49
1,100 Oxford Industries, Inc. 39
2,700 St. John Knits, Inc. 103
4,800 Tultex Corp.* 22
1,450 Unitog Co. 33
--------
765
--------
BANKING--7.0%
3,750 Aames Financial Corp. 51
1,880 Albank Financial Corp. 87
3,750 Amcore Financial, Inc. 89
1,500 Anchor Bancorp, Inc. 47
1,200 Area Bancshares Corp. 24
8,054 Associated Banc-Corp. 401
500 Bancfirst Corp. 17
3,200 BancorpSouth, Inc. 122
1,402 Bank Granite Corp. Club, Inc. 43
1,700 BankAtlantic Bancorp, Inc. 24
1,300 Banknorth Group, Inc. 79
2,000 Bay View Capital Corp. 68
989 Brenton Banks, Inc. 32
1,300 BSB Bancorp, Inc. 40
980 BT Financial Corp. 46
1,200 Capital Bancorp of Miami, Florida 62
200 Capital City Bank Group, Inc. 7
1,000 CBT Corp. 30
1,599 Chemical Financial Corp. 64
2,087 Chittenden Corp. 92
1,350 CitFed Bancorp, Inc. 68
900 Citizens Bancshares of Ohio 56
2,550 Citizens Banking Corp. of Michigan 75
2,901 CNB Bancshares, Inc. 121
3,000 Coast Savings Financial, Inc.* 180
4,900 Colonial BancGroup, Inc. 149
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
2,661 Commerce Bancorp, Inc. $ 112
2,754 Commonwealth Bancorp 56
1,200 Community Bank System, Inc. 34
3,000 Community First Bankshares 142
1,330 Community Trust Bancorp, Inc. 40
1,500 CPB, Inc. 31
3,580 Cullen/Frost Bankers, Inc. 190
1,000 CVB Financial Corp. 29
3,163 Downey Financial Corp. 87
1,388 F & M Bancorp 51
3,255 F & M National Corp. 104
1,767 Fidelity National Corp. 46
1,500 First Citizens Bankshares, Class A.* 164
1,800 First Commerce Bankshares, Inc. 47
3,600 First Commonwealth Financial Corp. 92
700 First Federal Financial Corp. 31
1,381 First Financial Bankshares, Inc. 62
902 First Financial Corp. of Indiana 39
2,375 First Midwest Bancorp, Inc. of Illinois 94
1,422 First Source Corporation 41
1,050 First United Bancshares of Ark 40
1,832 First Western Bancorp 52
2,450 Firstbank of Illinois Co. 78
2,025 Firstbank Puerto Rico 68
2,236 FNB Corp. 74
2,825 Fort Wayne National Corp. 107
6,424 Fulton Financial Corp. 197
1,100 GBC Bancorp 60
2,300 Great Financial Corp. 110
1,100 Hamilton Bancorp, Inc* 31
1,210 Hancock Holding Co. 72
1,168 Harleysville National Corp. 43
1,650 Heritage Financial Services, Inc. 42
3,429 Hubco, Inc. 119
3,621 Imperial Bancorp* 169
3,764 Imperial Credit Industries, Inc.* 90
1,000 Investors Financial Services Corp. 42
1,000 Irwin Financial Corp. 40
8,409 Keystone Financial, Inc. 313
1,500 Klamath First Bancorp 33
1,900 Liberty Corp. 86
5,294 Magna Group, Inc. 212
1,800 Mainstreet Bankgroup, Inc. 49
1,200 Merchants New York Bancorp 35
3,974 Mid Am, Inc. 83
1,236 Mid-America Bancorp 37
500 Mississippi Valley Bancshares, Inc. 29
1,800 ML Bancorp, Inc. 52
600 National Bancorp of Alaska, Inc. 72
1,610 National City Bancshares, Inc. 77
1,468 National Penn Bancshares, Inc. 46
1,470 NBT Bancorp, Inc. 38
1,300 Ocean Financial Corp. 48
4,295 Old National Bancorp 199
1,400 Omega Financial Corp. 48
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
2,095 ONBANCorp, Inc. $ 141
4,431 One Valley Bancorp, Inc. 168
1,950 Oriental Financial Group 59
1,100 Park National Corp. 97
4,400 Peoples Heritage Financial Group, Inc. 188
1,494 Provident Bankshares Corp. 89
2,610 Republic Bancorp, Inc. 45
3,200 Riggs National Corp. 78
2,000 S & T Bancorp, Inc. 80
1,100 Santa Barbara Bancorp 50
2,800 Security Capital Corp. 61
1,600 Silicon Valley Bancshares* 84
1,500 Southwest Bancorporation of Texas* 45
14,343 Sovereign Bancorp, Inc. 272
5,519 St. Paul Bancorp, Inc. 135
1,900 Sterling Bancshares, Inc. of Texas 37
4,400 Stratus Computer, Inc.* 143
600 Student Loan Corp. 30
400 Sumitomo Bank of California 14
3,562 Susquehanna Bancshares, Inc. 116
2,500 T.R. Financial Corp. 82
2,150 Texas Regional Bancshares, Class A 59
1,700 Triangle Bancorp, Inc. 47
2,600 Trust Co. of Jersey City 57
3,730 Trustco Bank Corp. 91
5,200 Trustmark Corp. 194
2,532 UMB Financial Corp. 132
1,033 Un Planters Corp. 64
2,400 United Bankshares, Inc. 113
3,100 Us Trust Corp 183
800 USBancorp, Inc. 52
4,000 UST Corp. 106
2,100 Vermont Financial Services Corp. 58
2,200 Webster Financial Corp. 138
2,550 Wesbanco, Inc. 77
1,900 West Coast Bancorp of Oregon 50
2,300 Westamerica Bancorp 210
1,618 Westcorp, Inc. 28
3,400 Weternbank Puerto Rico 63
3,375 Whitney Holding Corp. 169
--------
10,362
--------
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
3,800 Arch Coal, Inc. 100
1,100 Nacco Industries, Inc. 120
--------
220
--------
BROKERAGE AND FINANCIAL SERVICES--3.2%
400 American Financial Enterprises, Inc. 16
400 Ameritrade Holdings Corp., Class A* 13
5,800 Amresco, Inc.* 162
6,100 Arcadia Financial, Ltd.* 51
2,900 Bank Plus Corporation* 32
4,600 Bank United Corp., Class A 193
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
787 BOK Financial Corp.* $ 32
400 Capital Factors Holdings, Inc.* 7
2,100 CapMAC Holdings, Inc. 71
2,100 CFX Corporation 58
95 Charter One Financial, Inc. 6
2,400 Cityscape Financial Corp.* 4
3,600 CMAC Investment Corp. 187
3,450 Commercial Federal Corp. 166
5,750 Crawford & Co., Class B 119
3,500 Credit Acceptance Corp.* 18
6,000 Crimmi Mae, Inc. 89
800 Delta Financial Corp.* 13
2,100 Dime Community Bancorp, Inc. 49
2,300 Doral Financial Corp. 50
900 Everen Capital Corp. 36
1,550 Financial Federal Corp.* 33
2,700 First Colorado Bancorp, Inc. 61
1,300 First Federal Capital Corp. 36
1,600 First Federal Financial Corp.* 58
2,667 First Financial Bancorp 126
1,000 First Financial Holdings, Inc. 43
1,198 First Indiana Corp. 31
1,500 First Republic Bank* 41
1,700 First Savings Bank of Washington 43
1,300 First Savings Bank, SLA 50
3,700 Firstplus Financial Group* 141
800 Flagstar Bancorp, Inc.* 15
1,000 Fund American Enterprise Holdings, Inc. 123
1,600 Grand Premier Financial, Inc. 23
2,800 Hambrecht & Quist Group* 107
700 Harbor Florida Bancorp, Inc. 46
100 Harbor Florida Bancorp, Inc. 7
1,300 Harris Financial, Inc. 25
2,800 HFNC Financial Corp. 42
3,700 Homeside, Inc.* 102
4,000 IMC Mortgage Company* 54
3,400 Insignia Financial Group, Inc., Class A* 67
2,000 Interra Financial, Inc. 110
1,300 Interwest Bancorp, Inc. 51
500 Investment Technology Group, Inc.* 15
1,600 Jefferies Group, Inc. 113
3,433 Legg Mason, Inc.* 166
1,600 Life Bancorp, Inc. 50
3,500 Long Beach Financial Corp.* 38
3,900 Long Island Bancorp, Inc. 184
2,880 McDonald & Co. Investments, Inc. 78
24,600 Mercury Finance Co. 18
500 Metris Companies, Inc. 19
3,737 Morgan Keegan, Inc. 75
2,734 New York Bancorp, Inc. 97
4,200 Ocwen Financial Corp.* 102
3,000 Pff Bancorp, Inc. * 55
7,150 Phoenix Duff & Phelps Corp. 54
3,500 Pioneer Group, Inc. 110
1,800 Piper Jaffray Cos., Inc. 50
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
BROKERAGE AND FINANCIAL SERVICES--Continued
2,100 Queens County Bancorp, Inc. $ 74
3,285 Quick & Reilly Group, Inc. 123
3,850 Raymond James Financial, Inc. 137
1,400 Reliance Bancorp, Inc. 46
1,997 Resource Bancshares Mortgage Group, Inc. 27
7,000 Roslyn Bancorp, Inc. 152
1,900 SEI Corp. 79
2,250 Source Services Corp.* 47
1,200 Southern Pacific Funding Corp.* 15
800 St Francis Capital Corp. 31
300 Value Line, Inc. 11
770 WFS Financial, Inc.* 9
1,700 WSFS Financial Corp.* 33
--------
4,815
--------
CHEMICALS, ALLIED PRODUCTS AND PHARMACEUTICALS--
3.5%
3,600 Affymetrix, Inc.* 124
3,600 Albermarle Corp. 90
2,600 Alberto-Culver Co., Class B 81
1,900 Algos Pharmeceuticals Corp.* 49
5,100 Alliance Pharmaceutical Corporation* 49
76 Alpha 1 Biomedicals, Inc. 0
2,300 Alpharma, Inc., Class A 53
1,900 American Safety Razor Co.* 36
4,600 Amylin Pharmaceuticals, Inc.* 31
1,300 Andrx Corp. * 51
1,100 Aphton Corp.* 13
2,400 Arris Pharmaceutical Corp.* 23
1,000 Bush Boake Allen, Inc.* 28
1,100 Cadus Pharmaceutical Corp.* 14
5,600 Calgon Carbon Corp. 62
3,900 Capstone Pharmacy Services, Inc.* 43
1,400 Carbide/Graphite Group * 54
900 Cardinal Health ,Inc. 68
3,700 Carter-Wallace, Inc. 61
1 Cell Genesys, Inc. 0
4,000 Cephalone, Inc.* 41
1,400 Chemed Corp. 55
3,300 Chemfirst, Inc. 88
3,000 Cygnus, Inc.* 68
500 Del Laboratories, Inc. 18
3,700 Dexter Corp. 147
1,700 Diagnostic Products Corp. 47
1,500 Emisphere Technologies, Inc.* 30
2,300 Fuller (H.B.) Co. 113
2,200 GelTex Pharmaceuticals, Inc.* 62
1,700 General Chemical Group, Inc. 47
3,700 Geon Co. 87
5,500 Georgia Gulf Corp. 171
2,500 Guilford Pharmaceuticals, Inc.* 56
7,200 Hanna (M.A) Co. 178
2,000 Herbalife International, Inc. 40
6,101 ICN Pharmaceuticals, Inc. 302
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
5,400 ICOS Corp.* $ 75
3,600 Immunomedics, Inc.* 18
4,700 Interneuron Pharamaceuticals* 56
4,200 Isis Pharmaceuticals, Inc.* 62
3,600 Jones Medical Industries, Inc. 119
800 Kos Pharmaceuticals, Inc.* 13
1,300 Kronos, Inc.* 41
1,200 KV Pharmaceutical Co., Class B* 26
5,100 Lawter International, Inc. 59
1,500 Learonal, Inc. 40
1,771 Life Technologies, Inc. 54
3,575 Lilly Industrial, Inc. 66
1,000 MacDermid, Inc. 72
1,000 McWhorter Technologies, Inc.* 24
3,500 Medimmune, Inc.* 134
4,400 Millennium Pharmaceuticals* 88
3,600 Mineral Technologies, Inc. 158
1,000 Miravant Medical Technologies* 47
4,468 Mississippi Chemical Corp. 87
2,500 NBTY, Inc.* 54
500 NCH Corp. 34
4,300 Nexstar Pharmeceuticals, Inc.* 59
3,800 NL Industries* 62
3,700 Noeprobe Corp.* 30
3,600 OM Group, Inc. 138
3,400 Regeneron Pharmaceuticals, Inc.* 34
3,300 Roberts Pharmaceutical Corp.* 34
5,900 Schulman (A.), Inc. 132
3,000 Scotts Co.* 88
4,400 Sepracor, Inc.* 162
4,900 Sequus Pharmaceuticals, Inc.* 38
900 Sonus Pharmaceuticals, Inc.* 35
1,400 Stepan Co. 39
2,900 Techne Corp.* 54
6,500 Terra Industries, Inc. 79
2,635 Tetra Tech, Inc.* 67
1,800 Tetra Technologies, Inc.* 42
3,000 Transkaryotic Therapies, Inc.* 104
1,100 USA Detergents, Inc.* 12
1,700 Valhi, Inc. 16
4,000 Vertex Pharmaceuticals, Inc.* 111
2,230 WD-40 Co. 60
4,400 Wellman, Inc. 93
--------
5,296
--------
COMMUNICATIONS--5.1%
2,700 ACC Corp.* 126
1,500 Ackerley Communications, Inc. 24
900 Aerial Communications, Inc.* 8
5,800 Aliant Communications, Inc. 175
2,990 American Radio Systems Corp. 149
2,600 American Mobile Satellite Corp.* 20
4,300 ANTEC Corp.* 66
1,000 BET Holdings, Inc.* 54
2,700 Black Box Corp.* 96
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
1,120 Block Drug Co., Inc. $ 51
2,900 Bowne & Co., Inc. 111
7,824 Brightpoint, Inc.* 126
6,100 Brooks Fiber Properties* 334
2,650 Cable Design Technologies Corp.* 107
2,500 Cablevision Sytems, Class A* 205
2,400 California Microwave* 44
2,100 Cellstar Corp.* 54
1,600 Cellular Communications International, Inc.* 70
3,680 Cellular Technical Services, Inc.* 10
5,200 Century Communications Corp., Class A* 36
2,100 CFW Communications Co. 48
2,300 CIDCO, Inc.* 47
2,200 Commnet Cellular, Inc.* 78
1,667 Commonwealth Telephone Enterprise * 48
7,950 Comsat Corp. 182
1,300 Consolidated Graphics, Inc.* 62
2,100 Corecomm, Inc.* 28
1,400 Cox Radio, Inc., Class A* 47
1,500 Data Transmission Network Corp.* 41
1,250 Davox Corp.* 41
7,200 DSP Communications, Inc.* 115
1,500 Echostar Communications, Class A* 27
1,300 Emmis Broadcasting Corp., Class A* 59
400 Forrester Research, Inc.* 9
1,600 General Communications, Inc.* 11
4,950 Hawaiian Electric Industries 193
1,700 Heftel Broadcasting Corp., Class A* 126
4,000 HighwayMaster Communications, Inc.* 26
1,900 Integrated Circuit Systems* 53
2,700 Intermedia Communications, Inc.* 134
2,600 IXC Communications, Inc.* 90
7,200 Jacor Communications, Inc.* 315
2,500 Jones Intercable, Inc., Class A* 35
7,800 Journal Register Co.* 132
2,200 Lamar Advertising Co.* 68
3,300 Level One Communications, Inc.* 138
2,400 Mail-Well, Inc.* 78
3,200 Marvel Entertainment Group* 4
1,800 Mastec, Inc.* 46
5,100 Mcleodusa, Inc., Class A* 189
1,900 Media General, Inc. 81
1,300 Metro Networks, Inc.* 40
6,957 Metromedia International Group, Inc.* 68
8,000 Mobile Telecommunications Technologies Corp.* 139
4,633 NTL, Inc.* 130
1,500 Ods Networks, Inc.* 13
4,800 Omnipoint Corp.* 101
1,900 On Command Corp.* 24
2,600 Outdoor Systems, Inc.* 80
6,000 P-COM, Inc.* 106
1,300 Pacific Gateway Exchange, Inc.* 51
1,598 Park Electrochemical Corp. 42
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
2,600 Paxson Communications Corp.* $ 22
2,200 Periphonics Corp.* 21
57 Perspective Biosystems, Inc. 0
2,900 Plantronics, Inc.* 108
2,400 Powertel, Inc.* 47
800 Precision Response Corporation* 6
2,200 Primus Telecommunications Group* 31
3,700 RCN Corporation* 121
1,600 SAGA Communications, Inc.* 31
1,100 Sawtek, Inc.* 32
1,100 SFX Broadcasting, Inc., Class A* 83
1,400 Sinclair Broadcast Group A* 52
1,500 Smartalk Teleservices, Inc.* 32
2,400 Snyder Communications, Inc.* 81
2,700 TCA Cable TV, Inc. 112
8,300 TCI Satellite Entertainment, Class A* 56
5,400 Tel-Save Holdings, Inc.* 117
4,100 Telespectrum Worldwide, Inc. 16
1,200 TMP Worldwide, Inc.* 22
1,350 Transaction Network Services, Inc.* 24
3,200 True North Communications, Inc. 82
6,300 U.S. Satellite Broadcasting Systems 53
4,200 United International Holdings, Inc., Class A* 44
600 United Television, Inc. 62
1,900 United Video Satellite Group, Inc.* 49
2,600 Universal Outdoor Holdings* 116
2,400 Usld Communications Corp.* 50
5,800 Vanguard Cellular Systems, Inc.* 81
4,100 Waters Corp.* 176
2,900 West Teleservices Corp.* 34
11,300 Western Wireless Corp., Class A 210
3,700 Westwood One, Inc.* 109
5,300 WinStar Communications, Inc.* 140
1,400 Woodward Governor Co. 46
1,800 Young Broadcasting Corp.* 65
--------
7542
--------
COMPUTERS AND OFFICE MACHINES--5.0%
600 Act Manufacturing, Inc.* 9
2,900 Actel Corp.* 43
3,900 Alliance Semiconductor Corp.* 25
3,100 Amati Communications Corp.* 61
3,900 American Business Info., Class B* 43
6,600 American Management Systems* 154
800 Apex Pc Solutions, Inc.* 18
1,000 Applied Graphics Technologies* 47
1,700 Arqule, Inc.* 35
1,100 Aspect Development, Inc.* 47
1,200 Atmi, Inc.* 39
4,000 Auspex Systems, Inc.* 45
3,700 Avid Technology, Inc.* 108
2,300 Aware, Inc.* 23
800 BA Merchants Services, Inc.* 13
3,466 BancTec, Inc.* 86
1,700 BEA Systems, Inc.* 24
</TABLE>
See accompanying notes to financial statements.
67
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
COMPUTERS AND OFFICE MACHINES--CONTINUED
400 BGS Systems, Inc. $ 13
2,884 Boole & Babbage, Inc.* 85
6,000 Borland International, Inc.* 61
1,600 BT Office Products International, Inc.* 16
1,600 CACI International, Inc., Class A* 32
1,796 Cambrex Corp. 81
3,200 CCC Information Services Group.* 61
900 CFM Technologies, Inc.* 17
3,500 Chips & Technologies, Inc.* 54
9,500 Cirrus Logic, Inc.* 126
1,300 Claremont Technology Group* 24
1,100 CNET, Inc.* 23
500 Complete Business Solutions* 17
3,000 Compserve Corp.* 38
4,000 Comverse Technology, Inc.* 135
7,800 Copytele, Inc.* 28
1,300 Cybermedia, Inc.* 29
2,600 Cylink Corp.* 29
1,500 Data Dimensions, Inc.* 27
6,200 Data General Corp.* 111
800 Day Runner, Inc.* 31
1,000 Deltek Systems, Inc.* 17
1,400 Dialogic Corp.* 59
5,500 Diamond Multimedia Systems, Inc.* 54
800 Digital Link Corp.* 18
700 Dupont Photomasks, Inc.* 27
2,500 Dynatech Corp.* 91
5,300 E* Trade Group, Inc. 133
1,900 Edify Corp.* 32
1,800 Encad, Inc.* 70
1,500 Evans & Sutherland Computer Corp.* 47
3,300 Exabyte Corp.* 32
1,500 Exar Corp.* 38
800 Factset Research Systems, Inc.* 20
2,500 Filenet Corp.* 69
2,400 Fonix Corp.* 14
3,100 Forte Software, Inc.* 31
4,900 FTP Software, Inc.* 11
800 General Binding Corp. 24
4,100 GT Interactive Software Corp.* 34
1,550 HBO & Co. 70
5,900 HMT Technology Corp.* 77
2,800 Hyperion Software Corp.* 121
800 I2 Technologies, Inc. 36
1,300 Indus International, Inc.* 18
3,600 Industri-Matematik Intl. Corp.* 98
1,700 Infinity Financial Tech., Inc.* 29
1,500 Information Management Resources* 39
4,500 Information Resources, Inc.* 67
6,700 Intergraph Corp.* 71
3,100 International Network Services* 56
8,200 International Rectifier Corp.* 116
2,100 Interpool, Inc. 29
1,900 Itron, Inc.* 34
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
6,100 Learning Company, Inc.* $ 111
1,000 LHS Group, Inc.* 43
2,175 Lycos, Inc.* 66
5,100 Macromedia, Inc.* 51
900 Mastech Corporation 26
200 Medic Computer Systems, Inc.* 7
1,400 Medical Manager Corp.* 26
2,600 Mercury Interactive Corp.* 63
800 Metro Information Services, Inc.* 21
2,100 Metromail Corp.* 38
1,900 Micro Linear Corp.* 14
4,600 Microprobe, Inc.* 22
1,300 Micros Systems, Inc.* 68
1,300 Microtouch Systems, Inc.* 27
800 Midway Games, Inc.* 16
3,400 Mylex Corp.* 27
2,200 National Computer Systems, Inc. 80
2,600 National Techteam, Inc.* 28
1,600 Neomagic Corp.* 27
2,300 Network Data Process Corp.* 116
2,500 Network Computing Devices* 21
6,900 Network General Corp.* 130
3,800 Object Design, Inc.* 36
1,500 Objective Systems Integrator* 14
2,800 Open Market, Inc.* 29
700 Pegasystems, Inc.* 13
2,600 Phoenix Technologies Ltd.* 38
9,998 Platinum Technology, Inc.* 260
2,400 Plexus Corp. 64
4,700 PMC-Sierra, Inc. 129
1,600 Proxim, Inc.* 19
1,000 Radiant Systems, Inc.* 20
1,000 Radisys, Inc.* 45
1,900 Rambus, Inc.* 106
12,385 Rational Software Corp.* 125
7,100 Read-Rite Corp.* 136
8,000 S3, Inc.* 51
4,400 Safeguard Scientifics, Inc.* 139
2,600 Sandisk Corp.* 64
3,100 Santa Cruz Operation, Inc.* 18
900 Seachange International, Inc.* 9
700 Semtech Corp.* 34
6,500 Sequent Computer Systems, Inc.* 151
4,500 Shiva Corp.* 40
3,200 Siebel Systems, Inc.* 133
1,900 SMART Modular Technologies, Inc.* 118
1,800 Splash Technology Holdings, Inc.* 59
600 Sunquest Information Systems * 5
1,500 Sykes Enterprises, Inc.* 35
3,050 Sylvan Learning Systems, Inc.* 124
2,800 Synetic, Inc.* 114
3,950 Technology Solutions Co.* 122
3,000 Transition Systems, Inc,* 63
2,920 Triarc Cos., Inc., Class A* 70
1,800 Trident Microsystems, Inc.* 21
3,100 USCS International, Inc.* 59
</TABLE>
See accompanying notes to financial statements.
68
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
2,100 Walker Interactive Systems* $ 27
1,500 Wall Data, Inc.* 24
6,100 Wang Labs, Inc.* 135
2,300 Wonderware Corp.* 42
5,200 Xylan Corp.* 107
2,900 Zebra Technologies Corp.* 92
2,500 Zitel Corp.* 28
--------
7,486
--------
CREDIT INSTITUTIONS--0.3%
3,972 Astoria Financial Corp. 219
1,800 IBS Financial Corp. 31
1,300 JSB Financial, Inc. 61
2,000 National Auto Credit, Inc.* 13
2,300 Ryland Group, Inc. 50
--------
374
--------
ELECTRICAL SERVICES--2.1%
1,500 Advanced Lighting Technologies, Inc.* 32
8,500 Atlantic Energy, Inc. 171
2,300 Black Hills Corp. 73
6,800 Checkfree Corp.* 178
2,200 CILCORP, Inc. 97
3,300 Eastern Utilities Association 79
9,700 El Paso Electric Co.* 65
2,900 Electroglas, Inc.* 55
2,700 Empire District Electric Co. 51
2,600 Envoy Corp.* 80
4,900 IES Industries, Inc. 172
1,600 Interstate Power Co. 53
2,550 Madison Gas & Electric Co. 52
5,300 Minnesota Power & Light Co. 205
8,000 Nevada Power Co. 186
2,200 Orange & Rockland Utilities, Inc. 88
1,900 Otter Tail Power Co. 66
6,100 PMT Services, Inc.* 96
6,700 Public Service Co. of New Mexico 137
6,300 Rochester Gas & Electric Corp. 173
5,000 Sierra Pacific Resources 169
3,850 SIGCORP, Inc. 103
1,600 TNP Enterprises, Inc. 44
5,180 Tucson Electric Power Co.* 90
2,200 United Illuminating Co. 90
8,950 Washington Water Power Co. 191
5,000 WPL Holdings, Inc. 153
3,800 WPS Resources Corp. 115
1,650 Yankee Energy System, Inc. 39
2,000 Zurn Industries, Inc. 69
--------
3,172
--------
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--6.1%
1,000 ADE Corp.* 23
3,000 Adtran, Inc.* 108
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
700 Advanced Energy Industries, Inc.* $ 14
1,075 AFC Cable Systems, Inc.* 29
3,800 Allen Telecom, Inc. * 77
2,900 Alpine Group, Inc. * 57
2,100 Altron, Inc.* 33
9,800 Ametek, Inc. 233
6,300 Ampex Corp.* 16
2,800 Amphenol Corp., Class A* 142
2,300 ANADIGICS, Inc.* 76
5,700 Anixter International, Inc.* 102
4,022 Applied Magnetics Corp.* 68
7,900 Aspect Telecommunications, Inc.* 177
2,400 Associated Group, Inc.* 78
3,575 Avant! Corp.* 86
3,220 Baldor Electric Co. 100
3,900 Belden, Inc. 129
1,900 Benchmark Electronics, Inc. 53
3,000 Berg Electronics Corp.* 69
4,400 BMC Industries, Inc. 82
4,100 Boston Technology, Inc.* 88
3,850 Burr-Brown Corp.* 116
1,000 C & D Technologies, Inc. 46
5,200 C-Cube Microsystems, Inc.* 110
3,200 Calpine Corporation* 47
5,400 Cellnet Data Systems, Inc.* 45
2,800 Central Hudson Gas & Electric 108
3,600 Central Lousiana Electric 105
5,200 Central Maine Power Co. 73
5,500 Checkpoint Systems, Inc.* 89
1,450 Chicago Miniature Lamp, Inc.* 49
1,500 Coherent Communications Systems Corp.* 41
1,500 Cohu, Inc. 53
2,900 Commonwealth Energy System 83
3,800 Computer Products, Inc.* 75
3,500 Credence Systems Corp.* 94
3,009 CTS Corp. 102
4,500 Cymer, Inc.* 86
9,850 Delmarva Power & Light 208
1,000 Digital Lightwave, Inc.* 21
6,000 Digital Microwave Corp.* 95
3,900 DII Group* 87
7,400 EG&G, Inc. 145
1,284 Electro Rent Corp.* 48
1,400 Electro Scientific Industries, Inc.* 58
1,000 Eltron International, Inc.* 31
1,300 Encore Wire Corp. * 45
2,400 ESS Technology, Inc.* 24
1,800 Essex International, Inc.* 58
1,400 Esterline Technologies Corp.* 50
2,300 FEI Company* 38
6,578 Flowserve Corporation 177
2,800 General Cable Corp. 96
3,100 General DataComm Industries, Inc.* 16
1,500 Geotel Communications Co.* 27
9,700 Glenayre Technologies, Inc.* 105
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--CONTINUED
<C> <S> <C>
4,900 Griffon Corp.* $ 76
1,400 HADCO Corp.* 87
3,010 Harman International Industries, Inc. 152
1,800 Holophane Corp.* 41
3,200 Hutchinson Technologies, Inc.* 76
1,600 Imnet Systems, Inc.* 26
12,900 Integrated Device Technology, Inc.* 131
3,000 Inter-Tel, Inc.* 63
7,800 Interdigital Communications Corp.* 34
2,600 Intervoice, Inc.* 25
500 JPM Company 12
3,000 Juno Lighting, Inc. 58
2,600 Kuhlman Corp. 92
900 Lecroy Corp.* 34
4,000 Lincoln Electric Co. 149
3,000 Littelfuse, Inc.* 83
3,100 Lojack Corp.* 43
5,700 LTX Corp.* 32
3,400 Magnetek, Inc.* 71
4,550 Methode Electronics, Inc., Class A 74
1,900 Micrel, Inc.* 66
1,100 Moog, Inc., Class A* 40
3,100 MRV Communications, Inc.* 88
800 National Presto Industries, Inc. 31
1,700 Natural Microsystems Corp.* 81
2,400 North Pittsburgh Systems 42
2,878 Northwestern Public Service Co. 60
2,840 Oak Industries, Inc.* 79
400 Optical Cable Corp.* 4
5,800 Pagemart Wireless, Inc., Class A* 57
16,500 Paging Network, Inc.* 199
1,300 Perceptron, Inc.* 29
5,600 Picturetel Corp.* 49
4,237 Pioneer Standard Electronics, Inc. 70
700 Powerwave Technologies, Inc.* 17
4,100 Premisys Communications, Inc.* 113
2,475 PriCellular Corp.* 27
4,900 Ramtron International Corp.* 32
3,200 Robotic Vision Systems, Inc.* 44
1,800 Rofin-Sinar Technologies, Inc.* 27
2,800 Sammina Corp.* 190
2,100 SDL, Inc.* 35
1,400 Sheldahl, Inc.* 21
5,000 Silicon Valley Group, Inc.* 119
1,600 Siliconix, Inc.* 77
1,100 Sipex Corporation* 34
1,700 Spectrian Corp.* 35
1,000 Speedfam International, Inc.* 26
1,100 SPS Transaction Services, Inc.* 24
1,300 Standard Motor Products, Inc. 26
1,700 Stanford Telecommunications, Inc.* 38
1,000 Superior Telecom, Inc.* 38
2,000 Supertex, Inc.* 25
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
2,600 Symetricon, Inc.* $ 33
2,300 Technitrol, Inc. 73
1,600 Tekelec* 61
500 Thermedics Detection, Inc.* 5
2,900 Thermedics, Inc.* 46
500 Thermo Optek Corp.* 9
600 Thermoquest Corporation * 10
500 ThermoSpectra Corp.* 5
1,700 Thomas Industries, Inc. 54
1,300 Triquint Semiconductor, Inc.* 26
1,600 Triumph Group, Inc.* 52
3,000 Ultratech Stepper, Inc.* 74
5,400 Uniphase Corp.* 217
3,800 Unitrode Corp.* 71
2,900 Valence Technology, Inc.* 19
1,300 Veeco Instruments, Inc.* 52
5,100 Vicor Corp.* 144
2,400 Westell Technologies, Inc., Class A* 40
2,800 Windmere Corp. 68
1,700 Woodhead Industries, Inc. 33
3,000 World Access, Inc.* 74
1,000 Yurie Systems, Inc.* 25
4,547 Zenith Electronics Corp.* 35
3,250 Zilog, Inc.* 62
1,500 Zygo Corp.* 32
1,200 Zytec Corp.* 31
--------
9,044
--------
FOOD AND BEVERAGES--2.0%
5,000 Applebee's International, Inc. 106
6,700 Bob Evans Farms, Inc. 134
2,000 Boston Beer Co., Inc.* 19
963 California Water Service Co. 52
2,400 Canandaigua Brands, Inc., Class A* 115
2,400 Canandaigua Wine Company, Inc.* 113
1,600 Cheesecake Factory, Inc.* 49
400 Coca-Cola Bottling Co. 25
6,000 Coors (Adolph) Co., Class B 216
3,600 Dreyer's Grand Ice Cream, Inc. 87
3,300 Earthgrains Co. 143
1,100 Fine Host Corp.* 32
6,100 Fleming Companies, Inc. 101
2,800 Great Atlantic & Pac Tea Co. 86
5,600 Host Marriott Services Corp.* 82
3,500 Hudson Foods, Inc. 66
1,500 IHOP Corp.* 51
2,700 International Multifoods Corp. 73
2,800 Lance, Inc. 71
3,400 Landry's Seafood Restaurants, Inc.* 96
5,700 Lone Star Steakhouse Saloon, Inc.* 106
3,800 Luby's Cafeterias, Inc. 75
2,100 Michael Foods, Inc. 46
600 Mondavi (Robert) Corp., Class A* 28
700 National Beverage Corp.* 7
3,050 Papa Johns International, Inc.* 101
2,400 Rainforest Cafe, Inc.* 86
</TABLE>
See accompanying notes to financial statements.
70
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
1,400 Rare Hospitality Intl, Inc.* $ 15
7,600 Richfoods Holdings, Inc. 208
1,200 Riviana Foods, Inc. 23
2,600 Ruby Tuesday, Inc.* 68
7,600 Ryan's Family Steak Houses, Inc.* 67
2,050 Sbarro, Inc. 57
7,000 Shoney's Inc.* 31
5,000 Smithfield Foods, Inc.* 177
3,160 Suiza Foods Corp.* 184
600 United Natural Foods, Inc.* 14
1,200 Worthington Foods, Inc. 28
--------
3,038
--------
FOOD AND MANUFACTURING--0.4%
2,000 Dominick's Supermarkets, Inc.* 78
98 Farmer Bros. Co. 15
1,950 Performance Food Group Co.* 41
5,300 Ralcorp Holding, Inc.* 90
1,000 Sanderson Farms, Inc. 12
3,887 Savannah Foods & Industries, Inc. 69
100 Seaboard Corp. 36
3,700 Smucker (J.M.) Co. 92
900 TurboChef, Inc.* 9
4,100 Universal Foods Corp. 170
--------
612
--------
FURNITURE AND FIXTURES--0.6%
2,100 Bassett Furniture Industries, Inc. 62
1,300 Bush Industries, Inc. 34
2,100 CORT Business Services Corp.* 70
4,400 Ethan Allen Interiors, Inc.* 169
9,200 Heilig-Meyers Co. 119
2,900 Kimball International, Inc. 116
1,800 Knoll, Inc.* 54
2,500 La-Z-Boy Chair Co. 108
3,800 Royal Appliance Manufacturing Co.* 26
2,400 Triangle Pacific Corp.* 77
--------
835
--------
GENERAL BUILDING CONTRACTORS--1.0%
1,700 ABT Building Products Corp.* 31
2,700 AMCOL International Co. 65
1,700 Blount, Inc. 86
3,158 D. R. Horton, Inc. 56
3,900 Eagle Hardware & Garden, Inc.* 66
2,750 Fairfield Communities, Inc. * 127
4,600 Fleetwood Enterprises 164
6,300 Kaufman & Broad Home Corp. 137
1,700 N V R, Inc. * 38
1,000 NCI Building Systems, Inc.* 38
7,450 Oakwood Homes 224
2,356 Palm Harbor Homes, Inc.* 68
2,400 Pulte Corp. 97
4,800 Standard Pacific Corp. 65
3,600 Toll Brothers, Inc.* 87
1,879 U.S. Home Corp.* 70
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,400 Webb (Del E.) Corp. $ 52
--------
1,471
--------
GLASS, CLAY AND STONE PRODUCTS--0.6%
600 Ameron, Inc. 39
4,900 Ball Corp. 189
1,700 Centex Construction Products, Inc.* 52
5,600 Gentex Corp.* 139
2,700 Medusa Corp. 110
1,390 Mikasa, Inc. 19
1,400 Photronics, Inc.* 67
700 Puerto Rican Cement Co. 30
3,600 Southdown, Inc. 208
--------
853
--------
HEALTH SERVICES--4.4%
2,900 Access Health Marketing, Inc.* 86
1,600 Alternative Living Services * 43
1,700 American HomePatient, Inc.* 35
4,500 Apogee, Inc. 100
8,300 Apria Healthcare Group, Inc. * 131
5,000 Arterial Vascular Engineer * 277
2,300 ATL Ultrasound, Inc. 99
1,300 Atria Communities, Inc. * 22
1,300 Barr Labs, Inc.* 47
1,400 Bio-Rad Labs, Inc.* 35
1,800 Cardiothoracic Systems, Inc. * 11
1,400 Carematrix Corporation * 37
4,200 Cerner Corp.* 101
1,000 Closure Medical Corporation * 25
1,600 Compdent Corp.* 33
2,000 Cooper Companies, Inc. * 78
3,700 COR Therapeutics, Inc.* 84
9,250 Covance, Inc. * 168
5,300 Creative BioMolecules, Inc.* 41
2,000 Curative Health Services, Inc.* 57
3,223 Enzo Biochem, Inc.* 52
2,100 Fuisz Technologies, Ltd.* 19
12,000 Gensia, Inc.* 61
3,500 Graham Field Health PDS * 52
2,400 Gulf South Medical Supply, Inc.* 78
3,700 Haemonetics Corp.* 54
2,021 Healthdyne Technologies, Inc.* 39
1,943 HealthPlan Services Corp.* 38
2,400 Heartport, Inc. * 54
1,600 Henry Schein, Inc. 56
3,600 Human Genome Sciences, Inc.* 148
1,900 I-STAT Corp.* 35
2,900 IDEC Pharmaceuticals Corp.* 101
5,600 Idexx Laboratories, Inc. * 89
800 IDX Systems Corp.* 24
12,700 Imatron, Inc. * 43
3,200 Incyte Pharmaceuticals, Inc.* 129
2,200 Inhale Therapeutic Systems* 68
6,448 Integrated Health Services 196
</TABLE>
See accompanying notes to financial statements.
71
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
HEALTH SERVICES--Continued
4,500 Invacare Corp. $ 104
800 Lab Holdings, Inc. 19
400 Labone, Inc. 7
7,600 Laboratory Corp. of American Holdings * 16
1,400 Landauer, Inc. 37
4,458 Ligand Pharmaceuticals, Inc.* 57
4,700 Magellan Health Services, Inc.* 112
3,700 Mariner Health Group, Inc.* 54
2,200 Martek Biosciences Corp.* 25
2,800 Maxicare Health Plans, Inc.* 36
1,700 Medical Resources, Inc. * 15
2,200 Medicis Pharmaceutical, Class A * 94
2,100 Mediq, Inc * 21
1,100 MiniMed, Inc.* 41
1,800 MMI Cos., Inc. 43
1,633 Morrison Health Care, Inc. 29
1,500 Myriad Genetics, Inc.* 41
5,300 Nabi, Inc. * 23
2,500 National Surgery Centers, Inc.* 63
2,900 NCS Healthcare, Inc., Class A * 77
2,800 Neurex Corp.* 44
1,900 Neurogen Corp.* 37
5,000 Neuromedical Systems, Inc.* 19
9,800 Novacare, Inc. * 121
3,200 Nova Corp.* 86
3,200 Oakley, Inc. * 30
2,100 Oec Medical Systems, Inc. * 45
2,900 OIS Optical Imaging Systems, Inc.* 5
900 Oxigene, Inc. * 16
4,000 Paracelsus Healthcare Corp. * 22
2,810 Paragon Health Network, Inc. * 146
2,600 PathoGenesis Corp.* 92
1,600 Pediatrix Medical Group* 71
900 Perclose, Inc.* 18
10,700 Perrigo Co.* 152
1,100 PHP Healthcare Corp.* 18
6,200 Physician Sales & Service * 141
2,600 Prime Medical Services, Inc.* 34
2,300 Psychemedics Corp. 14
4,800 Quest Diagnostics, Inc. * 78
3,600 Renal Care Group, Inc. * 114
3,700 Renal Treatment Centers, Inc. * 123
1,200 RES-CARE, Inc.* 28
5,200 Rexall Sundown, Inc.* 124
600 RightChoice Managed Care, Inc., Class A* 6
1,900 Rural/Metro Corp.* 64
1,400 Sabratek Corp. * 37
2,700 Safeskin Corp.* 129
2,400 Serologicals Corp.* 53
6,880 Sun Healthcare Group, Inc.* 148
1,500 Sunrise Assisted Living, Inc. * 54
3,000 Thermo Cardiosystems, Inc. * 58
2,300 Thermolase Corp. * 32
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
6,333 Total Renal Care Holdings * $ 164
1,000 Trex Medical Corp. * 14
2,200 Triangle Pharmaceuticals, Inc. * 40
3,000 Twinlab Corporation * 55
1,400 Universal Health Realty Income Trust 29
3,100 Veterinary Centers of America, Inc.* 39
2,300 Vical, Inc.* 32
2,221 Vitalink Pharmacy Services, Inc.* 53
5,300 Vivus, Inc.* 119
4,500 Zila, Inc.* 28
--------
6,492
--------
HEAVY CONSTRUCTION--0.5%
2,300 American Residential Services 31
5,900 Dal-Tile International, Inc. * 64
2,150 Elcor Corp. 52
2,100 Florida Rock Industries, Inc. 55
1,500 Giant Cement Holdings, Inc. * 37
1,950 Granite Construction, Inc. 45
7,003 Lennar Corp. 146
1,800 Lone Star Industries, Inc. 94
400 Mestek, Inc. * 7
2,091 Morrison Knudsen Corp.* 21
1,500 Nortek, Inc. * 37
1,500 Republic Group, Inc. 29
1,400 Synthetic Industries, Inc. * 41
2,500 TJ International, Inc. 62
300 Watsco, Inc. 8
--------
729
--------
INDUSTRIAL INSTRUMENTS--2.6%
3,500 Acuson Corp.* 67
3,000 ADAC Laboratories * 63
3,300 Alkermes, Inc.* 65
1,100 Analogic Corp. 41
2,200 Arrow International, Inc.* 77
4,600 Ballard Medical Products 106
2,600 Barnett, Inc.* 53
1,700 Biomatrix, Inc.* 50
2,300 Buckeye Cellulose Corp.* 101
5,800 Cincinnati Milacron, Inc.* 171
1,800 Circon Corp.* 27
3,100 CNS, Inc. * 24
5,400 Cognex Corp.* 144
1,800 Coherent, Inc.* 68
2,150 Commercial Intertech Corp. 38
2,450 CONMED Corp.* 58
976 Cubic Corp. 29
2,500 Cytyc Corp.* 54
2,400 Daniel Industries, Inc. 45
2,200 Datascope Corp.* 56
1,900 Dionex Corp.* 95
3,400 Etec Systems, Inc. * 156
4,100 Ferro Corp. 157
3,300 Fisher Scientific International, Inc. 158
2,300 Fluke (John) Manufacturing Co., Inc.* 55
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
4,300 Genrad, Inc.* $ 114
4,700 Gilead Sciences, Inc.* 162
875 Hach Co. 10
1,800 Hologic, Inc.* 47
4,200 Kennametal, Inc. 221
900 Lunar Corp.* 20
2,300 Marquette Medical Systems, Inc.* 52
3,300 Mascotech, Inc. 57
3,964 Mentor Corp. 135
600 Mine Safety Appliances Co. 40
1,500 MTS Systems Corp. 58
2,800 Physio-Control International Corp.* 44
1,900 Possis Corp.* 27
3,200 Respironics, Inc.* 86
2,600 SangStat Medical Corp.* 91
1,600 Spine-Tech, Inc. * 53
1,800 Staar Surgical Co.* 31
1,100 Starrett (L.S.) Co. 42
2,800 Sunrise Medical, Inc.* 44
1,000 Tech-Sym Corp.* 30
2,650 TECNOL Medical Products, Inc.* 58
1,800 Theragenics Corp.* 72
2,500 Theratech, Inc.* 26
3,600 Trimble Navigation, Ltd.* 76
900 Vital Signs, Inc. 18
1,296 Watkins-Johnson Co. 41
2,500 Watsco, Inc. 65
2,400 X-Rite, Inc. 46
1,700 Zoltek Companies, Inc.* 63
---------
3,787
---------
INSURANCE SERVICES--3.8%
2,000 Acceptance Insurance Cos., Inc.* 49
3,000 Alfa Corp. 49
2,375 Allied Group, Inc. 97
1,424 American Annuity Group, Inc.* 30
1,450 American Heritage Life Investment Corp. 53
3,700 Amerin Corp.* 86
800 Amerus Life Holdings, Class A 26
2,200 Amvestors Financial Corp. 48
3,100 Argonaut Group, Inc. 103
1,900 Baldwin & Lyons, Inc. 46
3,700 Berkley (W.R.) Corp. 154
1,700 Blanch (E.W.) Holdings, Inc. 59
1,700 Capital RE Corp. 95
1,400 Capitol Transamerica Corp. 33
1,300 Chartwell Re Corporation 44
1,100 Citizens Corporation 32
2,000 CNA Surety Corporation * 29
3,200 Commerce Group, Inc. 100
5,300 Coventry Corp.* 79
2,399 Delphi Financial Group, Inc.* 96
2,100 Enhance Financial Services Group, Inc. 117
1,700 Executive Risk, Inc. 111
2,700 FBL Financial Group, Inc., Class A 107
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
4,974 FINL Security Assurance Holdings, Inc. $ 218
1,600 First American Financial, Corp. 98
1,200 Foremost Corp. of America 73
3,612 Fremont General Corp. 166
4,068 Frontier Insurance Group, Inc. 98
3,085 Gainsco, Inc. 26
2,600 Gallagher (Arthur J.) & Co. 93
1,500 Guarantee Life Companies, Inc. 37
500 Guaranty National Corp. 18
2,000 Harleysville Group, Inc. 46
4,200 Hartford Life, Class A 161
4,900 HCC Insurance Holdings, Inc.* 92
2,400 Highlands Insurance Group, Inc.* 68
2,100 Hilb, Rogal & Hamilton Co. 40
3,200 HSB Group, Inc. 166
3,300 International Alliance Services, Inc.* 48
4,100 John Alden Financial Corp. 110
600 Kansas City Life Insurance Co. 50
1,400 Life Reinsurance Corp. 80
2,800 Life USA Holding, Inc.* 47
700 Markel Corp.* 108
900 Meadowbrook Insurance Group, Inc. 21
3,300 Medical Assurance, Inc.* 94
2,300 NAC Re Corp. 103
300 National Western Life Insurance Co.* 28
600 Nationwide Financial Services, Class A 21
700 Nymagic, Inc. 18
4,480 Orion Capital Corp. 202
900 Penn Treaty American Corp.* 29
4,300 Penncorp Financial Group, Inc. 145
900 Philadelphia Consolidated Holding Corporation 15
1,050 Poe & Brown, Inc. 44
4,000 Presidential Life Corp. 81
1,951 PXRE Corp. 58
6,100 Reinsurance Group of America, Inc. 260
1,914 Reliastar Financial Corp. 71
2,700 Risk Capital Holdings, Inc.* 62
1,165 RLI Corp. 51
2,100 Scpie Holdings, Inc. 59
2,300 Selective Insurance Group, Inc. 116
2,500 Sierra Health Services, Inc.* 91
1,650 State Auto Financial Corp. 41
1,200 Titan Holdings, Inc. 25
1,950 Trenwick Group, Inc. 72
2,100 Triad Guaranty, Inc. 62
4,120 United Cos. Financial Corp. 91
1,150 United Fire & Casualty Co. 50
1,300 United Wisconsin Services, Inc. 32
2,000 Vesta Insurance Group, Inc. 110
1,800 Washington National Corp. 60
1,600 Zenith National Insurance Corp. 43
--------
5,641
--------
JEWELRY AND PRECIOUS METALS--0.0%
1,500 Oneida Ltd. 56
--------
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
LEATHER PRODUCTS--0.2%
2,900 Brown Group, Inc. $ 47
2,700 Justin Industries, Inc. 39
800 Timberland Co.* 62
2,300 Wolverine Tube, Inc.* 73
--------
221
--------
LUMBER AND WOOD PRODUCTS--0.1%
850 Halter Marine Group, Inc.* 24
5,600 Newport News Shipbuilding* 136
2,200 Pope & Talbot, Inc. 36
--------
196
--------
MACHINERY--2.6%
2,800 Aftermarket Technology Corp.* 57
600 Ag-Chem Equipment Co., Inc.* 10
1,300 Alamo Group, Inc. 27
1,700 Allied Products Corp. 41
1,400 Asyst Technologies, Inc.* 43
1,800 Avondale Industries, Inc.* 51
1,800 Brown & Sharpe Mfg. Co., Class A * 18
1,600 Cascade Corp. 29
1,300 Chart Industries, Inc. 30
1,800 Columbus Mckinnon Corp. 42
2,266 Commercial Metals Co. 75
3,200 Donaldson Co., Inc. 154
1,100 DT Industries, Inc. 31
1,500 Excel Industries, Inc. 29
3,000 Figgie International Holdings, Inc.* 41
668 Franklin Electric Co., Inc. 37
3,600 FSI International, Inc.* 55
1,200 Gardner Denver Machinery, Inc. * 45
1,400 Gleason Corp. 36
3,600 Global Industrial Technologies, Inc.* 64
1,997 Graco, Inc. 71
4,800 Hayes Wheels Intl., Inc. * 143
2,700 Helix Technology Corp. 64
1,000 Hirsch International Corp., Class A * 20
4,725 IDEX Corp. 157
6,800 Imation Corp. * 119
3,000 Indentix, Inc. 30
2,700 Integrated Process Equipment Corp.* 58
2,600 Ionics, Inc.* 96
7,000 JLG Industries, Inc. 90
5,300 Kaydon Corp. 175
3,600 Kulicke & Soffa Industries, Inc.* 99
1,500 Lindsay Manufacturing Co.* 61
2,825 Manitowoc Co., Inc. 94
8,300 Marine Drilling Co., Inc.* 189
9,600 Mentor Graphics Corp. * 91
3,600 Modine Manufacturing Co. 122
3,450 Mohawk Industries, Inc.* 104
2,300 Nordson Corp. 121
2,300 Omniquip International, Inc. 44
1,600 Osmonics, Inc.* 23
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
599 Pilgrims Pride Corp. $ 10
3,400 Regal-Beloit Corp. 92
2,300 Rexel, Inc.* 52
1,248 Robbins & Myers, Inc. 48
5,000 Roper Industries, Inc. 144
1,800 Specialty Equipment Cos., Inc.* 28
2,200 SPX Corp. 150
3,800 TBC Corp. * 38
1,800 Terex Corp. * 37
1,200 Thermadyne Holdings Corp. * 36
1,900 Thermo Fibertek, Inc. * 22
3,125 Titan International, Inc. 63
1,900 Toro Co. 84
700 Tractor Supply Co.* 11
2,700 Varco International, Inc.* 138
--------
3,839
--------
MANUFACTURING--GENERAL--1.0%
700 Bacou U.S.A., Inc.* 12
3,280 Brady (W.H.) Co. 101
1,000 Consolidated Cigar Holdings, Inc. * 28
2,550 Cuno, Inc. * 43
1,100 DBT Online, Inc. * 28
6,500 First Brands Corp. 167
9,000 Furniture Brands International, Inc.* 176
2,800 General Cigar Holdings, Inc. 66
1 General Cigar Holdings, Inc., Class B * 0
3,000 Hexcel Corp.* 76
2,300 Innovex, Inc. 53
1,300 Insilico Corp.* 45
2,000 Jabil Circuit, Inc.* 96
6,300 Kemet Corp.* 149
1,000 Matthews International Corp., Class A 43
4,600 Polymer Group, Inc. * 45
1,500 Rockshox, Inc. * 13
2,600 Samsonite Corp.* 94
2,400 Seattle Filmworks, Inc.* 24
800 Simpson Manufacturing Co.* 28
1,700 Toy Biz, Inc.* 15
2,600 Tracor, Inc.* 73
700 Tremont Corp.* 40
700 Trigen Energy Corp. 16
1,800 U. S. Can Corporation * 30
500 Wesley Jessen Visioncare * 15
2,400 Westinghouse Air Brake Co. 55
2,800 Wireless Telecom Group, Inc. 20
--------
1,551
--------
MERCHANDISE--GENERAL--0.8%
2,100 Action Performance Companies, Inc.* 61
500 Aep Industries, Inc. * 15
4,700 American Pad & Paper Co. * 68
3,900 Amerisource Corp.* 253
800 Amscan Holdings, Inc. * 13
3,000 Central Garden & Pet Co. * 85
3,000 Church & Dwight Co., Inc. 87
</TABLE>
See accompanying notes to financial statements.
74
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
1,600 Cross (A.T.) Co. $ 17
3,100 Department 56, Inc.* 90
1,400 Hunt Corp. 30
6,300 Jostens, Inc. 151
2,500 Libbey, Inc. 99
4,400 Playtex Products, Inc.* 43
3,000 Silgan Holdings, Inc. * 104
--------
1,116
--------
METAL MINING--0.3%
1,700 Cleveland Cliffs, Inc. 73
3,500 Coeur D'Alene Mines Corp. * 30
3,900 Freeport-McMoran Copper and Gold, Inc. 123
4,317 Getchell Gold Corp.* 113
8,900 Hecla Mining Co.* 44
2,900 Stillwater Mining Co. * 53
--------
436
--------
METAL PRODUCTS--1.1%
1,200 Alltrista Corp.* 35
7,800 Amax Gold, Inc.* 17
3,000 Applied Industrial Tech, Inc. 85
2,900 Aptargroup, Inc. 165
1,700 Barnes Group, Inc. 44
1,050 Butler Manufacturing Co. 36
3,200 Century Aluminum Company 47
1,400 Chase Brass Industries, Inc.* 34
1,100 Citation Corp.* 19
2,600 Clarcor, Inc. 77
2,300 Commonwealth Industrial, Inc. 38
5,600 Equitable Resources 181
2,500 Material Sciences Corp.* 37
1,400 Maverick Tube Corp. * 40
4,700 Miller Industries, Inc.* 46
1,900 NN Ball & Roller, Inc. 16
2,600 Oregon Metallurgical Corp.* 84
700 Penn Engineering & Manufacturing Corp. 18
2,200 Quanex Corp. 65
800 Ryerson Tull, Inc., Class A * 12
1,500 Shaw Group, Inc. * 37
600 Special Metals Corp. * 11
1,628 SPS Technologies, Inc.* 71
2,700 Titanium Metals Corporation * 83
2,900 TriMas Corp. 90
2,900 Watts Industries, Inc., Class A 74
3,100 Wyman-Gordon Co.* 66
2,000 Zero Corp. 56
--------
1,584
--------
MINING, QUARRYING OF NONMETALLIC MINERAL--0.2%
2,500 Cliff's Drilling Co.* 139
2,300 RMI Titanium Corp.* 55
2,600 Zeigler Coal Holding Co. 41
--------
235
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS INVESTING INSTITUTIONS--1.6%
5,524 BRE Properties, Inc. $ 159
3,800 Burnham Pacific Properties, Inc. 54
8,375 Capstead Mortgage Corp. 211
7,804 Champion Enterprises, Inc.* 150
1,300 Corus Bankshares, Inc. 45
6,600 Franchise Finance Corp. 175
9,600 Geotek Communications, Inc.* 19
2,808 Horizon Group, Inc. * 33
3,700 Hospital Properties Trust 132
4,800 IRT Property Co. 58
800 John Nuveen and Company, Inc. 29
3,000 Koger Equity, Inc. 63
3,600 LTC Properties, Inc. 74
2,559 MAF Bancorp, Inc. 83
2,200 Meridian Industrial Trust, Inc. 51
6,100 Merry Land & Investment Co., Inc. 143
2,200 MGI Properties, Inc. 51
7,800 Mid Atlantic Medical Services, Inc.* 104
6,199 Patriot American Hospitality, Inc. 194
900 PEC Israel Economic Corp.* 18
1,604 Peoples First Corp. 58
4,800 Reckson Associates Realty Corp. 128
2,400 Redwood Trust, Inc. 61
2,200 Seacor Holdings, Inc.* 123
4,300 Smith, (Charles E.)
Residential Realty, Inc. 148
1,800 Trans Financial Bancorp, Inc. 62
--------
2,426
--------
NATURAL GAS TRANSMISSION--1.2%
4,750 Atmos Energy Corp. 126
2,200 Bay State Gas Co. 65
1,400 Colonial Gas Co. 35
1,500 Connecticut Energy Corp. 39
1,700 CTG Resources, Inc. 41
3,100 Eastern Enterprises 125
2,000 Energen Corp. 76
15,800 Kelley Oil and Gas Corp.* 46
2,800 Laclede Gas Co. 72
1,600 NUI Corp. 39
3,800 Oneok, Inc. 142
4,776 Piedmont Natural Gas Co. 156
4,200 Primark Corp.* 142
3,150 Public Service Co. of North Carolina, Inc. 64
2,757 Tejas Gas Corp.* 169
5,300 UGI Corp. 147
7,000 Washington Gas Light Co. 188
3,000 Wicor, Inc. 138
--------
1,810
--------
OIL AND GAS--2.9%
9,100 AGL Resources, Inc. 179
900 Aquila Gas Pipeline Corp. 13
1,700 Atwood Oceanics, Inc.* 84
5,040 Barrett Resources Corp.* 149
</TABLE>
See accompanying notes to financial statements.
75
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
OIL AND GAS--Continued
1,400 Belco Oil & Gas Corp.* $ 29
5,000 Benton Oil & Gas Co.* 72
2,900 Berry Petroleum Co. 54
4,200 Brown (Tom), Inc.* 92
3,300 Cabot Oil & Gas Corp. 68
3,100 Calmat Co. 81
800 Carbo Ceramics, Inc. 26
7,500 Chesapeake Energy Corp. 58
4,100 Coho Energy, Inc.* 42
3,900 Comstock Resources, Inc.* 51
3,600 Cross Timbers Oil Co. 83
3,600 Devon Energy Corp. 140
500 DLB Oil & Gas, Inc.* 6
2,000 Forcenergy, Inc.* 62
4,500 Forest Oil Corp.* 72
11,400 Grey Wolf, Inc.* 71
16,300 Harken Energy Corp.* 91
1,300 Houston Exploration Company* 28
2,400 HS Resources, Inc.* 38
1,100 Hugoton Energy Corp.* 11
3,600 Indiana Energy, Inc. 101
6,500 Input/ Output, Inc.* 168
3,800 KCS Energy, Inc. 90
1,900 Key Energy Group, Inc.* 46
5,176 Meridian Resource Corp.* 55
5,800 National-Oilwell, Inc.* 184
2,900 New Jersey Resources 101
1,100 North Carolina Natural Gas 36
3,600 Northwest Natural Gas Co. 101
3,200 Nuevo Energy Co.* 133
1,800 Ocean Energy, Inc.* 101
3,700 Oceaneering International, Inc.* 76
11,000 Parker Drilling Co.* 145
1,800 Patterson Energy, Inc.* 66
1,500 Pennsylvania Enterprises, Inc. 38
2,700 Plains Resources, Inc.* 45
3,100 Pool Energy Services Co.* 80
6,900 Pride International, Inc.* 191
5,700 Quaker State Corp. 88
1,000 Rutherford-Moran Oil Corp.* 20
2,093 Semco Energy, Inc. 36
4,200 Snyder Oil Corp. 83
1,220 South Jersey Industries 31
1,380 Southern Union Company* 35
4,400 Southwest Gas Corp. 82
4,000 Southwestern Energy Company 47
1,800 St Mary Land & Exploration 74
2,720 Swift Energy Co.* 59
5,200 Titan Exploration, Inc.* 62
7,000 Tuboscope Vetco International Corp.* 172
3,900 Unit Corp.* 43
5,200 Vintage Petroleum, Inc. 101
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
3,300 Western Gas Resources, Inc. 75
--------
4,365
--------
ORDNANCE AND ACCESSORIES--0.0%
3,100 Sturm Ruger & Co., Inc. $ 56
--------
OTHER SERVICES--1.8%
1,300 Abacus Direct Corp.* 54
3,700 ADR Information Services, Inc.* 89
9,150 Acnielsen Corp.* 205
800 Administaff, Inc. 18
2,600 Apac Teleservices, Inc.* 36
1,400 Applied Analytical Industries, Inc.* 17
3,000 Budget Group, Inc., Class A* 107
1,400 Caribiner Intl., Inc.* 59
800 Central Parking Corp. 46
400 Christiana Companies* 15
1,000 CKS Group, Inc.* 13
1,600 Coinmach Laundry Corp.* 32
800 Computer Learning Centers* 44
5,307 Concentra Managed Care, Inc.* 180
1,400 Education Management Corp.* 35
1,000 Firearms Training Systems* 6
3,500 FPA Medical Management, Inc.* 90
4,100 Franklin Covey Co.* 87
2,650 Kelly Services, Inc., Class A 77
1,600 McGrath Rentcorp 35
11,700 Medaphis Corp.* 59
1,700 Medquist, Inc.* 44
1,600 Memberworks, Inc.* 29
600 Metzler Group, Inc.* 23
2,300 Moneygram Payment Systems, Inc.* 30
1,100 National Processing, Inc.* 11
700 NCO Group, Inc.* 27
8,100 Ogden Corp. 216
3,800 Physicians Reliance Network* 37
1,400 Pixar, Inc.* 32
1,300 Profit Recovery Group International* 20
1,100 Quick Response Services, Inc.* 39
1,180 Registry, Inc.* 52
1,400 Rental Service Corp.* 35
3,300 Rollins, Inc. 67
24 Score Board, Inc. 0
1,500 Service Experts, Inc.* 41
1,200 Sovran Self Storage, Inc. 37
2,200 Staffmark, Inc.* 77
850 Strayer Education, Inc. 29
500 Superior Consultant Holdings* 15
2,500 Trico Marine Services, Inc.* 70
6,800 Trigon Healthcare, Inc.* 174
1,600 U S Rentals, Inc.* 41
400 Vincam Group, Inc.* 14
1,600 Wackenhut Corrections Corp.* 45
5,800 Walter Industries, Inc.* 115
1,500 Whittman-Hart, Inc.* 49
--------
2,673
--------
</TABLE>
See accompanying notes to financial statements.
76
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
PAPER PRODUCTS--0.6%
3,400 Chesapeake Corp. $ 116
1,900 Deltic Timber Corp. 55
8,500 Gaylord Container Corp.* 58
2,200 Greif Bros. Corp. 73
2,179 Mosinee Paper Corp. 65
1,700 Paragon Trade Brands, Inc. * 38
4,932 Paxar Corp.* 74
5,570 Rock-Tenn Co. 113
2,600 Schweitzer-Mauduit International, Inc. 92
2,300 Shorewood Packaging Corp.* 55
1,900 Universal Forest Products, Inc. 29
4,500 Wausau Paper Mills Co. 96
--------
864
--------
PERSONAL SERVICES--0.4%
4,150 Bristol Hotel Co.* 103
2,900 Catalina Marketing Corp.* 134
1,900 CPI Corp. 35
1,500 Equity Corp. International * 32
3,050 G & K Services, Inc. 112
4,100 Glatfelter (P.H) Co. 78
1,973 Marcus Corp. 56
4,600 Red Roof Inns, Inc.* 73
1,400 Unifirst Corp. 36
--------
659
--------
PETROLEUM PRODUCTS--0.4%
3,300 Lomak Petroleum, Inc. 57
2,956 Louis Dreyfus Natural Gas Corp.* 61
5,200 Newfield Exploration, Inc.* 121
10,160 Newpark Resources, Inc.* 203
900 RPC, Inc. 24
1,800 Seitel, Inc.* 69
1,800 Stone Energy Corp.* 52
4,300 Tesoro Petroleum Corp.* 71
--------
658
--------
PRINTING AND PUBLISHING--1.0%
1,950 American Business Products, Inc. 40
6,700 American Media, Inc., Class A * 52
2,600 Big Flower Press Holdings, Inc.* 57
900 CSS Industries, Inc.* 30
1,000 Devon Group, Inc.* 42
1,400 Express Scripts, Inc.* 83
2,600 Gibson Greetings, Inc.* 61
4,200 Golden Books Family Entertainment, Inc.* 39
5,000 Harland (John H.) Co. 103
4,800 Houghton Mifflin Co. * 179
2,575 McClatchy Newspapers, Inc., Class A 74
2,108 Merrill Corp. 42
1,750 Nelson (Thomas), Inc. 20
1,900 New England Business Service, Inc. 60
2,800 Playboy Enterprises, Inc.* 38
1,666 Pulitzer Publishing Co. 91
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,000 Scholastic Corp.* $ 76
2,100 Standard Register Co. 72
400 Steck-Vaughn Publishing Corp.* 6
7,500 Topps, Inc.* 19
400 Waverly, Inc.* 17
2,100 Wiley (John) & Sons, Inc. 96
6,100 World Color Press, Inc.* 163
--------
1,460
--------
PROFESSIONAL SERVICES--5.5%
2,620 ABM Industries, Inc. 73
6,600 Acclaim Entertainment, Inc.* 27
1,900 Activision, Inc.* 30
5,800 Acxiom Corp.* 100
600 Advent Software, Inc.* 14
3,925 Advo, Inc. * 85
5,800 Affiliated Computer Services, Inc.* 136
2,300 Alternative Resources Corp.* 56
2,600 AMERCO* 73
5,300 American Oncology Resources, Inc.* 72
2,374 Analysts International Corp. 113
1,800 Arbor Software Corp.* 54
3,400 Aspen Technologies, Inc.* 130
5,000 Banta Corp. 125
1,600 Barra, Inc.* 45
4,700 BDM International* 137
3,500 BE Aerospace, Inc.* 111
2,100 Bell & Howell Co.* 50
2,500 Billing Information Concepts* 111
4,100 Bisys Group, Inc.* 131
900 BRC Holdings, Inc.* 37
3,300 Broderbund Software, Inc.* 96
1,600 CDI Corp.* 66
1,200 Ciber, Inc.* 53
4,100 Citrix Systems, Inc.* 294
3,300 Clarify, Inc.* 35
2,100 ClinTrials Research, Inc.* 18
4,400 Computer Horizons Corp.* 145
2,400 Computer Task Group, Inc. 76
10,200 Computervision Corp.* 37
4,500 COREStaff, Inc.* 121
4,100 CSG Systems International, Inc.* 152
1,500 Documentum, Inc.* 47
4,200 Employee Solutions, Inc.* 23
1,500 Fair Isaac & Co. 64
3,200 Gerber Scientific, Inc. 64
8,500 Global Industries, Ltd.* 136
100 Grey Advertising, Inc. 36
2,600 HA-LO Industries, Inc.* 66
2,850 Harbinger Corp.* 86
1,900 HCIA, Inc.* 23
1,850 Henry (Jack) & Associates, Inc. 47
2,600 HNC Software, Inc. * 82
878 Holly Corp. 24
2,500 HPR, Inc.* 66
1,400 IKOS Systems, Inc.* 11
</TABLE>
See accompanying notes to financial statements.
77
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
PROFESSIONAL SERVICES--Continued
1,700 Inacom Corp.* $ 48
1,700 Infocus Systems* 56
1,500 Inso Corp.* 16
2,500 Integrated Systems Consulting Group, Inc.* 39
6,400 Interim Services, Inc.* 181
3,300 Intersolv, Inc.* 53
500 Intevac, Inc.* 5
900 Iron Mountain, Inc.* 34
750 ITT Educational Services, Inc.* 16
1,400 JDA Software Group, Inc.* 43
2,000 Landstar Systems, Inc.* 52
1,400 Layne Christensen Company* 24
1,600 Learning Tree International, Inc.* 40
2,800 Legato Systems, Inc.* 107
2,600 Manugistics Group, Inc.* 91
2,100 May & Speh, Inc.* 28
4,650 MDU Resources Group, Inc. 139
3,700 National Health Investors, Inc. 147
2,150 National Instruments Corp.* 58
3,400 Network Equipment Technologies, Inc.* 50
1,100 NHP, Inc.* 32
1,550 Nichols Research Corp.* 36
2,200 Nimbus CD International, Inc.* 22
2,200 Norrell Corp. 54
6,000 Oak Technology, Inc.* 50
1,700 On Assignment, Inc.* 40
5,400 Orthodontic Centers of America, Inc.* 98
1,900 Personnel Group of America, Inc.* 69
2,400 PhyMatrix Corp.* 35
4,900 Physician Computer Network, Inc.* 24
4,900 Physician Resource Group, Inc.* 28
1,250 Pinkertons, Inc.* 29
2,500 Policy Management Systems Corp.* 162
3,600 Pre-Paid Legal Services, Inc.* 102
3,400 Premiere Technologies, Inc.* 81
1,900 Progress Software Corp.* 39
1,600 Project Software & Development, Inc.* 31
2,500 Protein Design Labs, Inc.* 105
5,400 PSINET, Inc.* 36
900 Raptor Systems, Inc.* 14
3,300 Remedy Corp.* 144
2,700 Romac International, Inc.* 53
500 Sapient Corp.* 26
3,250 Scopus Technologies, Inc.* 39
7,500 Sitel Corp.* 70
6,600 Sotheby's Holdings, Inc., Class A 113
1,000 SPSS, Inc.* 25
5,400 Structural Dynamics Research Corp.* 90
4,750 System Software Associates, Inc.* 63
2,600 Systems & Computer Technology Corp.* 122
3,300 Systemsoft Corp.* 24
2,500 Telxon Corp. 61
750 Thermo Ecotek Corporation* 10
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
565 Thermo TerraTech, Inc.* $ 5
1,550 Thermotrex Corp.* 38
6,900 Vanstar Corp.* 95
1,500 Vantive Corp. * 36
3,500 Veritas DGC, Inc.* 140
4,275 Veritas Software Corp.* 187
3,000 Viasoft, Inc.* 110
2,100 VideoServer, Inc.* 32
2,700 Viewlogic Systems, Inc.* 72
3,700 Visio Corp.* 139
1,700 VISX Corp.* 42
1,300 Volt Information Sciences, Inc.* 83
2,097 Wackenhut Corp. 45
3,125 Wind River Systems* 121
3,600 Xircom, Inc.* 38
3,700 Yahoo!, Inc.* 189
1,500 Zoran Corp.* 26
--------
8,130
--------
REAL ESTATE--6.3%
1,100 Alexandria Real Estate 34
2,300 Allied Capital Commercial 74
1,500 Ambassador Apartments, Inc. 30
2,400 Amercian General Hospitality Corporation 65
3,400 American Health Properties, Inc. 88
1,812 American Homestar Corp.* 25
2,500 AMLI Residential Properties 58
5,700 Apartment Investment & Management Co. 202
5,400 Arden Realty Group, Inc. 164
1,800 Associated Estates Realty Corp. 41
5,800 Avalon Properties, Inc. 178
1,100 Avatar Holdings, Inc.* 31
4,000 Bay Apartment Communities, Inc. 160
1,800 Bedford Property Investors 37
4,200 Berkshire Realty, Inc. 48
1,400 Boykin Lodging Company 36
3,503 Bradley Real Estate Trust 71
8,000 California Realty Corp. 318
5,064 Camden Property Trust 166
2,500 Capstone Capital Corp. 59
2,500 Castle & Cooke, Inc.* 42
1,700 CB Community Real Estate Services* 57
3,500 CBL & Associates Properties, Inc. 84
2,700 Centerpoint Properties Corp. 89
4,100 Chateau Communities, Inc. 125
2,300 Chelsea GCA Realty, Inc. 87
8,100 Choice Hotels Intl., Inc.* 141
4,000 Colonial Property Trust* 115
3,800 Commercial Net Lease Realty 61
7,500 Cornerstone Properties, Inc. 145
5,200 Cornerstone Realty Income Trust 59
3,700 Cousins Properties, Inc. 112
4,500 Crown American Realty Trust 40
3,100 Developers Diversified Realty Corp. 121
6,700 Dynex Capital, Inc. 93
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
2,600 Eastgroup Properties $ 56
5,300 Equity Inns, Inc. 80
2,000 Essex Property Trust, Inc. 72
3,300 Evans Withycombe Residential, Inc. 82
3,400 Excel Realty Trust, Inc. 104
6,300 Federal Realty Investment Trust 159
5,000 FelCor Suite Hotel, Inc. 182
5,800 First Industrial Realty Trust 205
4,400 First Union Real Estate 65
1,000 Forest City Enterprises, Inc. 57
3,100 Gables Residential Trust 84
5,600 General Growth Properties, Inc. 207
1,262 Getty Realty Corp. 24
3,300 Glenborough Realty Trust, Inc. 89
3,500 Glimcher Realty Trust 77
2,000 Great Lakes REIT, Inc. 38
3,100 Grubb & Ellis Co. * 39
4,600 Health Care Property Investors, Inc. 182
3,600 Health Care REIT, Inc. 92
2,700 Healthcare Realty Trust 79
7,300 Highwoods Properties, Inc. 262
1,300 Home Properties of New York, Inc. 35
2,100 Imperial Credit Mortgage Holdings 37
8,300 INMC Mortgage Holdings, Inc. 188
5,100 Innkeepers USA Trust 82
2,800 Irvine Apartment Communities, Inc. 87
2,500 JDN Realty Co. 78
2,500 JP Realty, Inc. 63
3,300 Kilroy Realty Corp. 87
6,600 Liberty Property Trust 184
4,200 LNR Property, Inc. 98
3,800 Macerich Co. 103
3,700 Manufactured Home Communities, Inc. 101
900 Maxxam, Inc.* 42
2,000 Mid-America Apartment Communities, Inc. 55
3,600 Mills Corp. 100
2,000 National Golf Properties, Inc. 64
6,700 Nationwide Health Properties, Inc. 158
2,500 Oasis Residential, Inc. 55
3,100 Ocwen Asset Investment Corp.* 56
1,900 Pacific Gulf Properties, Inc. 43
1,200 Pennsylvania Real Estate Investmentt Trust 29
4,868 Post Properties, Inc. 188
3,700 Prentiss Properties Trust 96
2,000 PRI Automation, Inc.* 68
2,000 Price Enterprises, Inc. 36
1,700 Price REIT, Inc. 67
4,200 Prime Retail, Inc. 61
4,100 Realty Income Corporation 107
3,500 Regency Realty Corp. 93
3,300 RFS Hotel Investors, Inc. 63
1,600 Saul Centers, Inc. 28
4,500 Shurguard Storage Centers, Inc. 124
2,400 Storage Trust Realty 60
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
4,400 Storage USA, Inc. $ 172
3,300 Summit Property, Inc. 68
2,600 Sun Communities, Inc. 95
5,000 Sunstone Hotel Investors, Inc. 88
1,200 Tanger Factory Outlet Center 35
5,600 Taubman Centers, Inc. 69
3,100 Thornburg Mortgage Asset Corp. 61
2,500 Town & Country Trust 44
2,900 Trinet Corporate Realty Trust 112
2,700 Urban Shopping Centers, Inc. 90
2,400 Walden Residential Properties, Inc. 59
5,800 Washington Real Estate Investment Trust 95
2,800 Weeks Corp. 90
700 Wellsford Residential Property Trust 11
2,800 Western Investment Real Estate Trust 39
2,600 Winston Hotels, Inc. 36
--------
9,391
--------
RECREATIONAL AND LEISURE SERVICES--1.6%
700 AMC Entertainment, Inc.* 15
1,000 Anchor Gaming* 80
4,800 Ascent Entertainment Group, Inc.* 52
3,000 Authentic Fitness Corp. 49
737 Autotote Corp. Class A 2
7,300 Aztar Corp.* 51
300 Bally's Grand, Inc.* 15
5,700 Boyd Gaming Corp.* 41
3,900 Capstar Hotel Company* 146
1,600 Carmike Cinemas, Inc.* 50
1,500 Coleman Co., Inc.* 20
600 Dover Downs Entertainment 13
1,400 Family Golf Centers, Inc.* 40
5,500 Florida Panthers Holdings, Inc.* 103
2,900 Galoob (Lewis) Toys, Inc.* 34
900 GC Cos., Inc.* 39
5,300 Grand Casinos* 70
2,200 Hollywood Park, Inc.* 43
2,000 Homestead Village, Inc.* 31
3,500 Interstate Hotels Company* 130
2,317 K2, Inc. 64
2,700 Lydall, Inc.* 55
7,800 Malibu Entertainment Worldwide* 28
1,800 North Face, Inc.* 39
2,900 Panavision, Inc.* 67
1,100 Penn National Gaming, Inc.* 13
900 Penske Motorsports, Inc.* 24
1,800 Premier Parks, Inc.* 70
1,200 Primadonna Resorts, Inc.* 20
6,500 Prime Hospitality Corp.* 124
700 Quintel Entertainment, Inc.* 4
2,600 Rio Hotel & Casino, Inc.* 54
3,800 Sabre Group Holdings, Inc.* 98
1,400 Scientific Games Holdings Corp.* 29
2,600 Showboat, Inc. 50
2,400 Signature Resorts, Inc.* 64
1,300 Skyline Corp. 35
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
RECREATIONAL AND LEISURE SERVICES--Continued
1,700 Sodak Gaming, Inc.* $ 15
2,000 Speedway Motorsports, Inc.* 44
3,500 Spelling Entertainment Group, Inc.* 30
3,400 Station Casinos, Inc.* 23
1,600 Suburban Lodges of America* 39
2,633 Sunburst Hospitality Corp.* 26
1,600 Ticketmaster Group, Inc.* 36
3,600 Trump Hotels and Casino Resorts, Inc.* 31
4,200 Vail Resorts, Inc.* 111
900 Vistana, Inc.* 20
1,300 West Marine, Inc.* 27
600 White River Corp.* 41
2,900 WMS Industries, Inc.* 67
--------
2,372
--------
RESEARCH AND CONSULTING SERVICES--1.0%
5,400 Advance Tissue Science, Inc.* 69
4,800 Agouron Pharmaceuticals, Inc.* 184
7,400 Bio-Technology General Corp.* 93
4,600 Columbia Laboratories, Inc.* 63
275 Computer Management Sciences, Inc.* 4
7,300 Cytogen Corp.* 23
2,100 Dames & Moore, Inc. 26
700 Data Processing Resources Corp.* 16
3,400 Jacobs Engineering Group, Inc.* 90
6,000 Liposome Technology, Inc.* 36
2,600 Mycogen Corp.* 51
2,300 NeoPath, Inc.* 38
3,350 NFO Research, Inc.* 59
1,900 OHM Corp.* 16
2,900 Organogenesis, Inc.* 99
3,200 Parexel International Corp.* 110
2,745 Pharmaceutical Product Development, Inc.* 42
5,900 Scios-Nova, Inc.* 45
1,500 Spacelabs Medical, Inc.* 32
1,100 Stone & Webster, Inc. 52
5,050 Summit Technology, Inc.* 33
9,000 Symantec Corp.* 225
3,900 U.S. Bioscience, Inc.* 36
--------
1,442
--------
RETAIL--4.9%
800 99 Cents Only Stores 28
2,500 Aaron Rents, Inc. 42
1,100 Abercrombie & Fitch Co., Class A* 33
470 Alexander's, Inc.* 43
900 Amazon Com., Inc.* 45
4,700 Americredit Corp.* 130
3,600 Ames Department Stores, Inc.* 61
4,100 AnnTaylor Stores, Inc.* 58
4,812 Apple South, Inc. 88
4,500 Arbor Drugs, Inc. 122
5,500 Best Buy, Inc.* 160
6,000 BJ'S Wholesale Club, Inc. 175
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
12,550 Brinker International, Inc.* $ 185
900 Brylane, Inc.* 47
600 Buckle, Inc.* 20
7,340 Buffets, Inc.* 65
3,180 Burlington Coat Factory Warehouse* 59
2,600 Carson Pirie Scott & Co.* 134
3,900 Cash America International, Inc. 49
17,000 Charming Shoppes, Inc.* 83
2,500 Circuit City Stores, Inc.* 30
6,800 CKE Restaurants, Inc. 255
7,250 Claire's Stores, Inc. 164
2,300 Cole National Corp.* 79
2,523 Consolidated Products, Inc.* 49
1,400 Cost Plus, Inc. of California* 46
800 Cross-Continent Auto Retailer* 7
268 Dart Group Corp. 31
400 Delia*s, Inc.* 9
2,600 Dress Barn, Inc* 67
2,100 Einstein/Noah Bagel Corp.* 15
2,600 Fabri-Centers of America, Inc., Class A* 54
4,900 Fedders Corp. 28
7,400 Fingerhut Cos., Inc. 154
6,400 Foodmaker, Inc.* 99
4,900 Footstar, Inc.* 147
1,800 Friedmans, Inc., Class A* 26
2,900 Garden Ridge Corp.* 44
1,300 Genovese Drug Stores, Class A 24
2,400 Global Directmail Corp.* 43
1,000 Goody's Family Clothing, Inc.* 33
2,300 Guitar Center, Inc.* 50
4,000 Gymboree Corp.* 116
3,500 Hancock Fabrics, Inc. 49
4,000 Hollywood Entertainment Corp.* 35
5,400 Homebase, Inc.* 45
1,100 Ingles Markets, Inc. 15
1,900 International Dairy Queen, Inc., Class A* 50
3,550 Just For Feet, Inc.* 60
1,200 Kenneth Cole Productions, Class A 20
2,400 Lands' End, Inc.* 85
2,100 Linens 'N Things, Inc.* 72
4,900 Longs Drug Stores, Inc. 143
4,000 Mac Frugal's Bargains Close-Outs, Inc.* 172
2,175 Men's (The) Warehouse, Inc.* 76
3,900 Michael's Stores, Inc.* 126
5,500 Micro Warehouse, Inc.* 80
3,600 National Media Corp.* 15
2,323 Natures Sunshine Products, Inc. 51
1,500 NPC International, Inc.* 20
1,900 Nu Skin Asia Pacific, Class A* 38
2,000 O'Reilly Automotive, Inc.* 47
2,150 Pacific Sunwear California* 70
1,800 Paul Harris Stores* 38
3,050 Petco Animal Supplies, Inc.* 90
10,852 Pier I Imports, Inc. 243
7,300 Proffitt's, Inc.* 223
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
2,000 Quality Food Centers, Inc.* $ 126
2,500 Regis Corp. 59
2,400 Renters Choice, Inc.* 54
16,100 Service Merchandise Co., Inc.* 54
2,500 Shopko Stores, Inc.* 53
2,450 Showbiz Pizza Time, Inc.* 53
1,900 Sonic Corp.* 53
2,600 Spiegel, Inc., Class A* 14
5,100 Sports Authority, Inc.* 100
4,400 Stage Stores, Inc.* 185
2,800 Stanhome, Inc. 72
1,450 Stein Mart, Inc.* 43
7,800 Stride Rite Corp. 93
8,800 Sunglass Hut International* 56
1,100 Syms Corp.* 13
1,900 Talbots, Inc. 40
2,600 The Finish Line, Class A* 49
1,300 Tuesday Morning Corp.* 32
20,484 U S Office Products Co.* 407
1,400 Ugly Duckling Corp.* 13
2,300 United Auto Group, Inc.* 32
1,500 Urban Outfitters, Inc.* 26
3,300 Valmont Industries, Inc. 72
1,500 Value City Department Stores, Inc.* 11
1,800 Wet Seal, Inc.* 53
3,200 Whole Foods Market, Inc.* 147
3,100 Williams-Sonoma, Inc.* 118
1,700 Wilmar Industries, Inc.* 45
5,600 Zale Corp.* 125
--------
7,258
--------
RUBBER AND PLASTICS--0.5%
2,100 ACX Technologies, Inc.* 56
4,300 Carlisle Cos., Inc. 183
2,300 Foamex International, Inc.* 25
1,500 Furon Co. 59
700 Liqui-Box Corp. 26
2,194 Myers Industries, Inc. 38
2,400 O'Sullivan Corp.* 31
1,200 Rogers Corp.* 49
3,900 Sola International, Inc.* 118
2,200 Spartech Corp. 36
1,100 Tredegar Industries, Inc. 72
2,100 West Co., Inc. 67
--------
760
--------
SANITARY SERVICES--0.5%
15,500 Allied Waste Industries, Inc.* 338
2,700 Centennial Cellular Corp.* 52
9,600 Laidlaw Environment Services, Inc.* 43
9,400 Safety-Kleen Corp. 261
3,100 Superior Services, Inc.* 73
--------
767
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
SERVICE INDUSTRY MACHINERY--0.2%
2,000 Applied Power, Inc.* $ 122
1,700 Scotsman Industries, Inc. 43
1,400 Tennant Co. 53
2,062 Wynn's International, Inc. 67
--------
285
--------
SOCIAL SERVICES--0.2%
447 Berlitz International, Inc.* 12
4,400 DeVry, Inc.* 118
3,118 Omega Healthcare Investors, Inc. 113
--------
243
--------
STEEL PRODUCTS--1.2%
1,900 Acme Metals, Inc.* 24
7,200 AK Steel Holdings, Inc. 142
1,400 Amcast Industrial Corp. 35
15,200 Armco, Inc.* 81
4,700 Birmingham Steel Corp. 72
2,500 Brush Wellman, Inc. 59
3,100 Carpenter Technology Corp. 146
700 Chaparral Steel Co. 11
400 Curtiss Wright Corp. 31
500 Gibraltar Steel Corp.* 10
1,900 Handy & Harman 43
1,800 IMCO Recycling, Inc. 28
3,000 Intermet Corp.* 56
2,900 J & L Specialty Steel, Inc. 28
3,500 Kaiser Aluminum Corp.* 36
3,300 Lone Star Technologies, Inc.* 96
2,400 Lukens, Inc. 40
2,800 Mueller Industries, Inc.* 130
3,400 National Steel Corp., Class B* 51
3,500 Oregon Steel Mills, Inc. 69
1,350 Reliance Steel & Aluminum Co. 38
1,100 Rouge Industries, Inc., Class A 17
700 Shiloh Industries, Inc.* 13
1,900 Standex International Corp. 67
5,900 Steel Dynamics, Inc.* 109
3,400 Texas Industries, Inc. 158
3,500 Transmontaigne Oil Co.* 53
3,700 UNR Industries, Inc. 19
--------
1,662
--------
TEXTILES--0.5%
3,000 Albany International Corp. 73
9,900 Burlington Industries, Inc.* 144
3,900 Cone Mills Corp.* 31
1,200 Culp, Inc. 22
700 Fab Industries, Inc. 21
1,900 Galey & Lord, Inc.* 34
3,097 Guilford Mills, Inc. 78
3,400 Interface, Inc. 102
3,900 Phillips-Van Heusen 54
800 Pillowtex Corp. 21
</TABLE>
See accompanying notes to financial statements.
81
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1997
(All amounts in thousands, except shares and number of contracts)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--CONTINUED
<C> <S> <C>
TEXTILES--Continued
1,100 Quiksilver, Inc.* $ 29
4,500 Ruddick Corp. 92
2,000 Springs Industries, Inc. 101
--------
802
--------
TRANSPORTATION PARTS AND EQUIPMENT--1.7%
2,700 AAR Corp. 104
1,500 Alliant Techsystems, Inc.* 89
3,550 Arctic Cat, Inc. 37
3,500 Arvin Industries, Inc. 121
2,500 Aviall, Inc.* 35
1,500 Banner Aerospace, Inc.* 14
2,000 Borg Warner Automotive, Inc.* 36
2,200 Breed Technologies, Inc. 44
1 Chancellor Corp.* 0
2,500 Coachmen Industries, Inc. 56
9,800 Collins & Aikman Corp.* 87
1,200 Copart, Inc.* 21
1,400 Detroit Diesel Corp.* 32
900 Ducommun, Inc.* 29
2,500 Eaton Vance Corp. 87
2,700 Exide Corp. 64
2,200 Fairchild Corp.* 50
5,700 Federal-Mogul Corp. 234
5,200 Gencorp, Inc. 130
2,000 Huffy Corp. 30
2,600 OEA, Inc. 81
5,200 Orbital Sciences Corp.* 133
4,200 Polaris Industries, Inc. 127
1,700 Remec, Inc.* 40
3,600 Rohr, Inc.* 110
5,700 Rollins Truck Leasing Corp. 96
1,300 Sequa Corp.* 74
2,600 Simpson Industries, Inc. 30
1,900 Smith (A.O.) Corp. 81
2,725 Standard Products Co. 68
5,000 Stewart & Stevenson Services, Inc. 108
3,300 Superior Industries International, Inc. 86
689 Thor Industries, Inc. 22
2,600 Tower Automotive, Inc.* 102
3,200 Wabash National Corp. 91
1,400 Walbro Corp. 20
2,400 Winnebago Industries, Inc. 18
--------
2,587
--------
TRANSPORTATION SERVICES--1.9%
4,950 Air Express International Corp. 141
3,400 Airborne Freight Corp. 216
1,300 Airnet Systems, Inc.* 26
5,400 Airtran Holdings, Inc.* 27
2,300 Alaska Air Group, Inc.* 86
3,400 American Freightways, Inc.* 49
6,430 American West Holdings Corp. 101
3,300 Arnold Industries, Inc. 59
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
3,600 Asa Holdings, Inc. $ 105
1,400 Atlas Air, Inc.* 37
1,900 Circle International Corp., Inc. 48
2,500 Coach USA, Inc.* 70
3,500 Consolidated Freightways Corp.* 55
1,700 Covenant Transportation, Inc., Class A* 27
1,200 Eagle USA Airfreight, Inc.* 37
3,900 Expeditors International of Washington, Inc. 151
400 Florida East Coast Industries 38
3,500 Fritz Companies, Inc.* 46
7,400 Greyhound Lines, Inc.* 29
2,539 Heartland Express, Inc.* 60
3,500 Hunt (J.B.) Transportation Services, Inc. 57
1,900 Hvide Marine, Inc., Class A* 54
3,900 Kirby Corp.* 72
600 Kitty Hawk, Inc.* 11
600 Knight Transportation, Inc.* 16
1,400 M.S. Carriers, Inc.* 34
1,200 Mesaba Holdings, Inc.* 26
1,550 Midwest Express Holdings, Inc.* 53
2,800 Motivepower Industries, Inc.* 74
3,400 Offshore Logistics, Inc.* 77
6,200 OMI Corp.* 64
4,300 Overseas Shipholding Group, Inc. 104
3,300 Pittston Burlington Group 91
2,000 Roadway Express, Inc. 54
2,100 Swift Transportation Co., Inc.* 58
7,900 Trans World Airlines, Inc.* 60
4,150 US Freightways Corporation 127
3,450 Werner Enterprises, Inc. 74
1,600 Wyndham Hotel Corp.* 68
2,500 Xtra Corp. 131
4,300 Yellow Corp.* 112
--------
2,825
--------
WATER SUPPLY--0.3%
1,100 Aquarion Co. 33
4,025 Culligan Water Technologies, Inc.* 180
1,300 E'Town Corp. 46
2,700 Philadelphia Suburban Corp. 67
1,460 Southern California Water Co. 33
4,252 United Water Resources, Inc. 77
--------
436
--------
WHOLESALE--1.1%
1,000 Aviation Sales Company* 36
1,400 Bindley Western Industries, Inc. 43
4,000 Caraustar Industries, Inc. 128
4,200 Casey's General Stores, Inc. 99
1,756 Castle (A. M.) & Co. 41
1,100 CDW Computer Centers, Inc.* 65
5,100 CHS Electronics, Inc.* 96
3,500 Compucom Systems, Inc.* 36
700 Daisytek International Corp.* 27
1,400 Discount Auto Parts, Inc.* 26
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
5,400 Handleman Co.* $ 36
2,000 Hughes Supply, Inc. 66
2,200 JP Foodservice, Inc.* 65
2,900 Kaman Corp. 54
4,500 Kent Electronics Corp.* 150
1,000 Lawson Products, Inc. 30
2,700 Marshall Industries* 93
2,450 Microage, Inc.* 49
1,800 Nash-Finch Co. 34
4,000 Owens & Minor, Inc. Holdings Co. 56
2,200 Patterson Dental Co.* 90
1,600 Russ Berrie & Co., Inc. 48
4,475 Rykoff-Sexton, Inc.* 99
1,700 Smart & Final, Inc. 31
2,400 United Stationers, Inc.* 102
1,900 VWR Corp.* 50
--------
1,650
- --------------------------------------------------------
TOTAL COMMON STOCKS (Cost $111,753) $138,031
- --------------------------------------------------------
RIGHTS--0.0%
1,650 Metrocall, Inc. Variable Rights $ 0
- --------------------------------------------------------
TOTAL RIGHTS (Cost $0) $ 0
- --------------------------------------------------------
WARRANTS--0.0%
248 Coram Healthcare Corp., Exp. 7/11/99 $ 0
350 Millicom American Satellite Corp.,
Exp. 06/30/99 0
- --------------------------------------------------------
TOTAL WARRANTS (Cost $0) $ 0
- --------------------------------------------------------
OTHER INVESTMENTS--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
1,420 Escrow Strawbridge & Clothier 0
1,700 Escrow Takecare, Inc.* 0
- --------------------------------------------------------
TOTAL OTHER INVESTMENTS (Cost $0) $ 0
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATION--0.1%
U.S. Treasury Bill #
$ 250 5.126% Due 01/02/98 $ 248
- -----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $250) $ 248
- -----------------------------------------------------
SHORT-TERM INVESTMENT--6.3%
Banco Central Hispanoamericano,
Grand Cayman
$ 9,315 5.750% Due 12/01/97 $ 9,315
- -----------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost $9,315) $ 9,315
- -----------------------------------------------------
TOTAL INVESTMENTS--99.3%
(Cost $121,318) $147,594
- -----------------------------------------------------
Other assets, less liabilities--0.7% 983
- -----------------------------------------------------
NET ASSETS--100.0% $148,577
- -----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
OPEN FUTURES CONTRACTS:
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Loss
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RUSSELL 2000 34 $7,593 Long 12/19/97 $159
- ---------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Security pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
83
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1997
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties, at cost $43,966 $109,657 $642,104 $101,687 $32,804 $103,135 $121,318
- ---------------------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $56,033 $160,828 $957,613 $125,716 $31,556 $107,496 $147,594
Cash and foreign curren-
cies 55 1 8 1 245 88 1
Receivables:
Dividends and interest 299 160 1,671 97 45 143 102
Foreign tax reclaims -- -- -- -- 20 151 --
Fund units sold 77 -- 222 8 2,501 1 2,509
Investment securities
sold -- 2,260 -- 1,194 -- 1,875 6
Administrator 7 8 43 7 -- 8 13
Deferred organization
costs, net 7 1 1 10 13 19 1
Other assets 1 1 49 1 55 1 48
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS 56,479 163,259 959,607 127,034 34,435 109,782 150,274
- ---------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed -- 102 958 41 -- 6 3
Investment securities
purchased 55 3,948 704 1,535 100 2,639 1,632
Accrued expenses:
Advisory fees 23 71 77 81 6 70 22
Administration fees 5 13 77 10 4 13 11
Custodian fees 3 2 18 1 5 11 21
Transfer agent fees 1 1 17 2 -- 1 1
Other liabilities 8 43 59 31 76 34 7
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 95 4,180 1,910 1,701 191 2,774 1,697
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $56,384 $159,079 $957,697 $125,333 $34,244 $107,008 $148,577
- ---------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $42,065 $88,814 $572,024 $79,032 $35,186 $100,142 $111,888
Accumulated undistrib-
uted net investment in-
come 60 1,072 465 304 314 880 1,272
Accumulated net realized
gains (losses) on
investments, options,
futures and foreign
currency transactions 2,192 18,088 69,498 22,015 (5) 1,631 9,300
Net unrealized apprecia-
tion (depreciation) on
investments, options,
futures and foreign
currency transactions 12,067 51,105 315,710 23,982 (1,248) 4,361 26,117
Net unrealized losses on
translation of other
assets and liabilities
denominated in foreign
currencies -- -- -- -- (3) (6) --
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $56,384 $159,079 $957,697 $125,333 $34,244 $107,008 $148,577
- ---------------------------------------------------------------------------------------------------------
Total units outstanding
(no par value),
unlimited units
authorized
Class A 3,787 9,774 42,022 7,148 3,245 10,154 9,827
Class C 338 -- 4,139 515 -- -- --
Class D 24 44 1,532 75 -- 23 46
- ---------------------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption
price per unit
Class A $ 13.59 $ 16.20 $ 20.09 $ 16.20 $ 10.55 $ 10.52 $ 15.05
Class C $ 13.56 -- $ 20.05 $ 16.16 -- -- --
Class D $ 13.54 $ 16.03 $ 20.00 $ 16.01 -- $ 10.39 $ 15.01
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
84
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1997
(All amounts in thousands)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International International Company
Balanced Growth Index Growth Equity Index Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio(a) Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend $ 390 $ 1,906 $ 14,703 $ 1,319 $ 374 $2,211 $ 1,666
Interest 1,561 150 952 99 28 313 200
- ----------------------------------------------------------------------------------------------------------
TOTAL INCOME 1,951 2,056 15,655 1,418 402(b) 2,524(c) 1,866
- ----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 433 1,157 2,493 1,284 89 1,241 484
Administration fees 86 213 883 180 27 228 186
Custodian fees 24 28 143 23 50 158 67
Registration fees 22 24 64 24 9 23 26
Amortization of deferred
organization costs 13 14 14 17 2 14 13
Transfer agent fees 11 15 172 20 2 13 13
Unitholder servicing
fees 9 1 152 13 -- -- 1
Professional fees 4 7 32 4 4 7 7
Trustee fees and ex-
penses 2 4 19 2 2 4 4
Other 10 22 127 17 7 14 23
- ----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 614 1,485 4,099 1,584 192 1,702 824
Less voluntary waivers
of:
Investment advisory
fees (163) (362) (1,662) (350) (45) (248) (242)
Administration fees (32) (68) (52) (64) (1) (69) (65)
Less: Expenses reimburs-
able by Administrator (74) (89) (304) (79) (56) (67) (129)
- ----------------------------------------------------------------------------------------------------------
Net expenses 345 966 2,081 1,091 90 1,318 388
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,606 1,090 13,574 327 312 1,206 1,478
Net realized gains
(losses) on:
Investment transactions 2,227 18,208 68,839 23,248 (5) 4,391 9,472
Futures transactions -- (73) 4,094 62 -- -- 496
Foreign currency trans-
actions -- -- -- -- 2 (23) --
Written options trans-
actions -- -- -- 86 -- -- --
Net change in unrealized
appreciation (deprecia-
tion) on investments,
options, futures, and
foreign currency
transactions 4,839 14,940 119,879 4,216 (1,248) 138 13,285
Net change in unrealized
losses on translation
of other assets and
liabilities denominated
in foreign currencies -- -- -- -- (3) (21) --
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $8,672 $34,165 $206,386 $27,939 $ (942) $5,691 $24,731
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) Net of $33 in non-reclaimable foreign withholding taxes.
(c) Net of $227 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
85
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1997 and 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Balanced Diversified
Portfolio Growth Portfolio
---------------- ------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 1,606 $ 1,366 $ 1,090 $ 1,372
Net realized gains (losses) on
investments, options, futures and
foreign currency transactions 2,227 1,834 18,135 14,453
Net change in unrealized appreciation
(depreciation) on investments, options,
futures, and foreign currency
transactions 4,839 2,874 14,940 10,529
Net change in unrealized losses on
translations of other assets and
liabilities denominated in foreign
currencies -- -- -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 8,672 6,074 34,165 26,354
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (1,436) (1,231) (1,369) (1,750)
Net realized gains (1,132) -- (14,420) (1,919)
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (2,568) (1,231) (15,789) (3,669)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS
FROM:
Net investment income (151) (132) -- --
Net realized gains (152) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (303) (132) -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS
FROM:
Net investment income (8) (2) (4) (2)
Net realized gains (6) -- (45) (3)
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (14) (2) (49) (5)
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 7,638 11,431 13,555 14,860
Reinvested distributions 2,538 1,076 14,520 3,424
Cost of units redeemed (9,103) (10,419) (29,982) (45,585)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class A unit transactions 1,073 2,088 (1,907) (27,301)
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 1,106 6,132 -- --
Reinvested distributions 303 132 -- --
Cost of units redeemed (3,329) (797) -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class C unit transactions (1,920) 5,467 -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 140 232 215 227
Reinvested distributions 14 2 49 5
Cost of units redeemed (96) (9) (93) (75)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class D unit transactions 58 225 171 157
- --------------------------------------------------------------------------------
Net increase (decrease) 4,998 12,489 16,591 (4,464)
Net assets--beginning of year 51,386 38,897 142,488 146,952
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $56,384 $51,386 $159,079 $142,488
- --------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME $ 60 $ 49 $ 1,072 $ 1,355
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
See accompanying notes to financial statements.
86
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International
Equity
Equity Index Focused Growth Index International Small Company
Portfolio Portfolio Portfolio Growth Index Portfolio
- -------------------- ------------------ ------------- Portfolio ------------------
------------------
<CAPTION>
1997 1996 1997 1996 1997 (a) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13,574 $ 12,697 $ 327 $ 110 $ 312 $ 1,206 $ 989 $ 1,478 $ 1,443
72,933 36,012 23,396 11,548 (3) 4,368 8,942 9,968 12,846
119,879 100,945 4,216 5,017 (1,248) 138 3,186 13,285 976
-- -- -- -- (3) (21) (22) -- --
- ------------------------------------------------------------------------------------------------
206,386 149,654 27,939 16,675 (942) 5,691 13,095 24,731 15,265
- ------------------------------------------------------------------------------------------------
(12,212) (11,982) (130) (317) -- (1,022) (2,919) (1,364) (1,002)
(32,814) (15,194) (12,039) (1,293) -- (5,790) -- (13,019) (5,764)
- ------------------------------------------------------------------------------------------------
(45,026) (27,176) (12,169) (1,610) -- (6,812) (2,919) (14,383) (6,766)
- ------------------------------------------------------------------------------------------------
(1,052) (603) (4) -- -- -- -- -- --
(2,679) (570) (811) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
(3,731) (1,173) (815) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
(313) (60) -- (2) -- (1) (1) (1) (1)
(399) (26) (79) (8) -- (4) -- (13) (2)
- ------------------------------------------------------------------------------------------------
(712) (86) (79) (10) -- (5) (1) (14) (3)
- ------------------------------------------------------------------------------------------------
340,805 338,095 21,470 32,348 36,436 11,482 28,193 46,673 28,946
41,881 24,880 11,306 1,413 -- 5,984 2,297 13,462 6,297
(354,580) (279,296) (37,017) (27,923) (1,250) (47,748) (51,182) (35,376) (25,770)
- ------------------------------------------------------------------------------------------------
28,106 83,679 (4,241) 5,838 35,186 (30,282) (20,692) 24,759 9,473
- ------------------------------------------------------------------------------------------------
41,164 52,571 171 6,934 -- -- -- -- --
3,733 1,029 814 -- -- -- -- -- --
(28,213) (25,869) (623) (598) -- -- -- -- --
- ------------------------------------------------------------------------------------------------
16,684 27,731 362 6,336 -- -- -- -- --
- ------------------------------------------------------------------------------------------------
22,852 6,392 491 168 -- 200 71 583 223
561 86 79 10 -- 4 -- 14 3
(5,161) (332) (133) (96) -- (64) (2) (238) (13)
- ------------------------------------------------------------------------------------------------
18,252 6,146 437 82 -- 140 69 359 213
- ------------------------------------------------------------------------------------------------
219,959 238,775 11,434 27,311 34,244 (31,268) (10,448) 35,452 18,182
737,738 498,963 113,899 86,588 -- 138,276 148,724 113,125 94,943
- ------------------------------------------------------------------------------------------------
$ 957,697 $737,738 $125,333 $113,899 $34,244 $107,008 $138,276 $148,577 $113,125
- ------------------------------------------------------------------------------------------------
$ 465 $ 468 $ 304 $ 111 $ 314 $ 880 $ 720 $ 1,272 $ 1,159
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
87
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Class A
--------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 12.24 $ 11.05 $ 9.50 $ 10.22 $ 10.00
Income (loss) from investment op-
erations:
Net investment income 0.38 0.34 0.34 0.24 0.09
Net realized and unrealized gain
(loss) 1.66 1.19 1.55 (0.72) 0.22
- --------------------------------------------------------------------------------
Total income (loss) from invest-
ment operations 2.04 1.53 1.89 (0.48) 0.31
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (0.38) (0.34) (0.34) (0.22) (0.09)
Net realized gain (0.31) -- -- (0.02) --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (0.69) (0.34) (0.34) (0.24) (0.09)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.35 1.19 1.55 (0.72) 0.22
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 13.59 $ 12.24 $ 11.05 $ 9.50 $ 10.22
- --------------------------------------------------------------------------------
Total return (d) 17.29% 14.07% 20.22% (4.76)% 3.12%
Ratio to average net assets of
(e):
Expenses, net of waivers and re-
imbursements 0.61% 0.61% 0.61% 0.61% 0.61%
Expenses, before waivers and re-
imbursements 1.11% 1.20% 1.28% 1.50% 1.62%
Net investment income, net of
waivers and reimbursements 2.99% 3.03% 3.36% 2.56% 2.20%
Net investment income, before
waivers and reimbursements 2.49% 2.44% 2.69% 1.68% 1.19%
Portfolio turnover rate 59.06% 104.76% 93.39% 75.69% 35.03%
Average commission rate per share $0.0652 $0.0718 NA NA NA
Net assets at end of year (in
thousands) $51,475 $45,157 $38,897 $31,462 $15,928
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------- ----------------
1997 1996 (b) 1997 1996 (c)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 12.24 $ 11.12 $ 12.23 $ 11.34
Income from investment operations:
Net investment income 0.36 0.29 0.34 0.22
Net realized and unrealized gain 1.64 1.12 1.64 0.96
- ------------------------------------------------------------------------------
Total income from investment operations 2.00 1.41 1.98 1.18
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.37) (0.29) (0.36) (0.29)
Net realized gain (0.31) -- (0.31) --
- ------------------------------------------------------------------------------
Total distributions to unitholders (0.68) (0.29) (0.67) (0.29)
- ------------------------------------------------------------------------------
Net increase 1.32 1.12 1.31 0.89
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 13.56 $ 12.24 $ 13.54 $ 12.23
- ------------------------------------------------------------------------------
Total return (d) 17.00% 12.72% 16.82% 10.55%
Ratio to average net assets of (e):
Expenses, net of waivers and reimburse-
ments 0.85% 0.85% 1.00% 1.00%
Expenses, before waivers and reimburse-
ments 1.35% 1.44% 1.50% 1.59%
Net investment income, net of waivers and
reimbursements 2.75% 2.80% 2.60% 2.78%
Net investment income, before waivers and
reimbursements 2.25% 2.21% 2.10% 2.19%
Portfolio turnover rate 59.06% 104.76% 59.06% 104.76%
Average commission rate per share $0.0652 $0.0718 $0.0652 $0.0718
Net assets at end of year (in thousands) $ 4,587 $ 5,997 $ 322 $ 232
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period July 1, 1993 (commencement of operations) through November
30, 1993.
(b) For the period December 29, 1995 (Class C units issue date) through
November 30, 1996.
(c) For the period February 20, 1996 (Class D units issue date) through
November 30, 1996.
(d) 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. 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 these periods.
See accompanying notes to financial statements.
88
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
DIVERSIFIED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.36 $ 12.20 $ 9.88 $ 10.65 $ 10.00
Income (loss) from invest-
ment operations:
Net investment income 0.11 0.14 0.15 0.09 0.09
Net realized and unrealized
gain (loss) 3.33 2.33 2.26 (.83) 0.65
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 3.44 2.47 2.41 (.74) 0.74
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (0.14) (0.15) (0.09) (0.01) (0.09)
Net realized gain (1.46) (0.16) -- (0.02) --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.60) (0.31) (0.09) (0.03) (0.09)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.84 2.16 2.32 (0.77) 0.65
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.20 $ 14.36 $ 12.20 $ 9.88 $ 10.65
- --------------------------------------------------------------------------------
Total return (c) 27.06% 20.83% 24.55% (6.98)% 7.38%
Ratio to average net assets
of (d):
Expenses, net of waivers
and reimbursements 0.67% 0.66% 0.69% 0.67% 0.71%
Expenses, before waivers
and reimbursements 1.03% 1.10% 1.12% 1.08% 1.13%
Net investment income, net
of waivers and reimburse-
ments 0.76% 0.98% 1.16% 0.77% 1.04%
Net investment income, be-
fore waivers and reim-
bursements 0.40% 0.54% 0.73% 0.35% 0.62%
Portfolio turnover rate 45.53% 59.99% 81.65% 78.94% 140.88%
Average commission rate per
share $ 0.0669 $ 0.0655 NA NA NA
Net assets at end of year
(in thousands) $158,383 $142,055 $146,731 $164,963 $199,053
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
----------------------------------
1997 1996 1995 1994 (b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 14.26 $ 12.16 $ 9.88 $10.41
Income (loss) from investment operations:
Net investment income 0.09 0.11 0.11 0.01
Net realized and unrealized gain (loss) 3.27 2.29 2.25 (0.54)
- -------------------------------------------------------------------------------
Total income (loss) from investment opera-
tions 3.36 2.40 2.36 (0.53)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.13) (0.14) (0.08) --
Net realized gain (1.46) (0.16) -- --
- -------------------------------------------------------------------------------
Total distributions to unitholders (1.59) (0.30) (0.08) --
- -------------------------------------------------------------------------------
Net increase (decrease) 1.77 2.10 2.28 (0.53)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.03 $ 14.26 $12.16 $ 9.88
- -------------------------------------------------------------------------------
Total return (c) 26.60% 20.39% 24.19% (5.14)%
Ratio to average net assets of (d):
Expenses, net of waivers and reimburse-
ments 1.06% 1.05% 1.08% 1.05%
Expenses, before waivers and reimburse-
ments 1.42% 1.49% 1.51% 1.46%
Net investment income, net of waivers and
reimbursements 0.37% 0.59% 0.73% 0.94%
Net investment income, before waivers and
reimbursements 0.01% 0.15% 0.30% 0.53%
Portfolio turnover rate 45.53% 59.99% 81.65% 78.94%
Average commission rate per share $0.0669 $0.0655 NA NA
Net assets at end of year (in thousands) $ 696 $ 433 $ 221 $ 40
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period September 14, 1994 (Class D units issue date) through
November 30, 1994.
(c) 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. 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 these periods.
See accompanying notes to financial statements.
89
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
1997 1996 1995 1994 1993 (a)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 16.79 $ 13.86 $ 10.60 $ 10.78 $ 10.00
Income (loss) from in-
vestment operations:
Net investment income 0.30 0.31 0.30 0.27 0.22
Net realized and
unrealized gain (loss) 4.13 3.36 3.47 (0.18) 0.78
- ---------------------------------------------------------------------------------
Total income from in-
vestment operations 4.43 3.67 3.77 0.09 1.00
- ---------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.30) (0.31) (0.30) (0.27) (0.22)
Net realized gain (0.83) (0.43) (0.21) -- --
- ---------------------------------------------------------------------------------
Total distributions to
unitholders (1.13) (0.74) (0.51) (0.27) (0.22)
- ---------------------------------------------------------------------------------
Net increase (decrease) 3.30 2.93 3.26 (0.18) 0.78
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.09 $ 16.79 $ 13.86 $ 10.60 $ 10.78
- ---------------------------------------------------------------------------------
Total return (d) 27.93% 27.53% 36.60% 0.87% 10.08%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.22% 0.22% 0.22% 0.23% 0.21%
Expenses, before waiv-
ers and reimbursements 0.46% 0.50% 0.54% 0.59% 0.66%
Net investment income,
net of waivers and re-
imbursements 1.66% 2.12% 2.54% 2.62% 2.62%
Net investment income,
before waivers and re-
imbursements 1.42% 1.84% 2.22% 2.25% 2.17%
Portfolio turnover rate 18.96% 18.02% 15.27% 71.98% 2.06%
Average commission rate
per share $ 0.0264 $ 0.0228 NA NA NA
Net assets at end of
year (in thousands) $844,065 $675,804 $479,763 $281,817 $219,282
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------------------------- ---------------------------------
1997 1996 1995 (b) 1997 1996 1995 1994 (c)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $ 16.79 $ 13.86 $ 13.43 $ 16.77 $ 13.83 $10.60 $10.96
Income (loss) from in-
vestment operations:
Net investment income 0.26 0.28 0.05 0.26 0.27 0.25 0.02
Net realized and
unrealized gain (loss) 4.11 3.35 0.45 4.07 3.36 3.47 (0.31)
- ----------------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.37 3.63 0.50 4.33 3.63 3.72 (0.29)
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.28) (0.27) (0.07) (0.27) (0.26) (0.28) (0.07)
Net realized gain (0.83) (0.43) -- (0.83) (0.43) (0.21) --
- ----------------------------------------------------------------------------------------
Total distributions to
unitholders (1.11) (0.70) (0.07) (1.10) (0.69) (0.49) (0.07)
- ----------------------------------------------------------------------------------------
Net increase (decrease) 3.26 2.93 0.43 3.23 2.94 3.23 (0.36)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 20.05 $ 16.79 $ 13.86 $ 20.00 $ 16.77 $13.83 $10.60
- ----------------------------------------------------------------------------------------
Total return (d) 27.64% 27.24% 3.94% 27.45% 27.20% 36.20% (2.68)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.46% 0.46% 0.46% 0.61% 0.61% 0.61% 0.60%
Expenses, before waiv-
ers and reimbursements 0.70% 0.74% 0.78% 0.85% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and re-
imbursements 1.42% 1.89% 2.29% 1.27% 1.78% 2.07% 2.67%
Net investment income,
before waivers and re-
imbursements 1.18% 1.61% 1.97% 1.03% 1.50% 1.75% 2.31%
Portfolio turnover rate 18.96% 18.02% 15.27% 18.96% 18.02% 15.27% 71.98%
Average commission rate
per share $0.0264 $0.0228 NA $0.0264 $0.0228 NA NA
Net assets at end of
year (in thousands) $82,982 $53,929 $18,390 $30,650 $ 8,005 $ 810 $ 3
- ----------------------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period September 28, 1995 (Class C units issue date) through
November 30, 1995.
(c) For the period September 14, 1994 (Class D units issue date) through
November 30, 1994.
(d) 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. 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 these periods.
See accompanying notes to financial statements.
90
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
FOCUSED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
-----------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.48 $ 12.53 $ 9.79 $ 10.43 $ 10.00
Income (loss) from invest-
ment operations:
Net investment income 0.05 0.02 0.05 0.02 0.01
Net realized and
unrealized gain (loss) 3.37 2.17 2.71 (0.66) 0.43
- --------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.42 2.19 2.76 (0.64) 0.44
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.02) (0.05) (0.02) -- (0.01)
Net realized gain (1.68) (0.19) -- -- --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.70) (0.24) (0.02) -- (0.01)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.72 1.95 2.74 (0.64) 0.43
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $ 16.20 $ 14.48 $ 12.53 $ 9.79 $ 10.43
- --------------------------------------------------------------------------------
Total return (d) 27.05% 17.82% 28.38% (6.15)% 4.33%
Ratio to average net assets
of (e):
Expenses, net of waivers
and reimbursements 0.92% 0.91% 0.91% 0.91% 0.91%
Expenses, before waivers
and reimbursements 1.34% 1.43% 1.47% 1.55% 1.88%
Net investment income, net
of waivers and reimburse-
ments 0.30% 0.12% 0.46% 0.24% 0.14%
Net investment loss, be-
fore waivers and reim-
bursements (0.12)% (0.40)% (0.10)% (0.39)% (0.83)%
Portfolio turnover rate 108.29% 116.78% 85.93% 74.28% 27.48%
Average commission rate per
share $ 0.0681 $ 0.0730 NA NA NA
Net assets at end of year
(in thousands) $115,802 $106,250 $86,099 $57,801 $32,099
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
----------------
---------------
1997 1996 (b) 1997 1996 1995 (c)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $ 14.47 $ 13.46 $ 14.37 $ 12.48 $ 9.55
Income (loss) from invest-
ment operations:
Net investment income
(loss) 0.01 (0.01) 0.03 (0.03) 0.02
Net realized and unrealized
gain 3.37 1.02 3.30 2.15 2.93
- --------------------------------------------------------------------------------
Total income from investment
operations 3.38 1.01 3.33 2.12 2.95
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (0.01) -- (0.01) (0.04) (0.02)
Net realized gain (1.68) -- (1.68) (0.19) --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.69) -- (1.69) (0.23) (0.02)
- --------------------------------------------------------------------------------
Net increase 1.69 1.01 1.64 1.89 2.93
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 16.16 $ 14.47 $ 16.01 $ 14.37 $12.48
- --------------------------------------------------------------------------------
Total return (d) 26.75% 7.51% 26.52% 17.42% 30.97%
Ratio to average net assets
of (e):
Expenses, net of waivers
and reimbursements 1.16% 1.15% 1.31% 1.30% 1.30%
Expenses, before waivers
and reimbursements 1.58% 1.67% 1.73% 1.82% 1.86%
Net investment income
(loss), net of waivers and
reimbursements 0.06% (0.12)% (0.09)% (0.28)% (0.11)%
Net investment loss, before
waivers and reimbursements (0.36)% (0.64)% (0.51)% (0.80)% (0.67)%
Portfolio turnover rate 108.29% 116.78% 108.29% 116.78% 85.93%
Average commission rate per
share $0.0681 $0.0730 $0.0681 $0.0730 NA
Net assets at end of year
(in thousands) $ 8,325 $ 6,993 $ 1,206 $ 656 $ 489
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period July 1, 1993 (commencement of operations) through November
30, 1993.
(b) For the period June 14, 1996 (Class C units issue date) through November
30, 1996.
(c) For the period December 8, 1994 (Class D units issue date) through
November 30, 1995.
(d) 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. 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 these periods.
See accompanying notes to financial statements.
91
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Year Ended November 30,
INTERNATIONAL EQUITY INDEX
<TABLE>
<CAPTION>
Class A
--------
1997 (a)
- ------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.00
Income from investment operations:
Net investment income 0.10
Net realized and unrealized gain 0.45
- ------------------------------------------------------------------
Total income from investment operations 0.55
- ------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income --
Net realized gain --
- ------------------------------------------------------------------
Total distributions to unitholders --
- ------------------------------------------------------------------
Net increase 0.55
- ------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.55
- ------------------------------------------------------------------
Total return(b) 5.45%
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements 0.51%
Expenses, before waivers and reimbursements 1.08%
Net investment income, net of waivers and reimbursements 1.75%
Net investment income, before waivers and reimbursements 1.18%
Portfolio turnover rate 8.16%
Average commission rate per share $0.0207
Net assets at end of year (in thousands) $34,244
- ------------------------------------------------------------------
</TABLE>
(a) For the period April 1, 1997 (commencement of operations) through November
30, 1997.
(b) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year. Total
return is not annualized for periods less than one year.
(c) Annualized.
See accompanying notes to financial statements.
92
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
INTERNATIONAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A
----------------------------------------
1997 1996 1995 1994 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.63 $ 9.88 $ 10.21 $ 10.00
Income (loss) from investment opera-
tions:
Net investment income 0.11 0.10 0.12 0.05
Net realized and unrealized gain
(loss) 0.31 0.87 (0.36) 0.16
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations 0.42 0.97 (0.24) 0.21
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.08) (0.22) (0.05) --
Net realized gain (0.45) -- (0.04) --
- --------------------------------------------------------------------------------
Total distributions to unitholders (0.53) (0.22) (0.09) --
- --------------------------------------------------------------------------------
Net increase (decrease) (0.11) 0.75 (0.33) 0.21
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.52 $ 10.63 $ 9.88 $ 10.21
- --------------------------------------------------------------------------------
Total return (c) 4.21% 9.96% (2.32)% 2.11%
Ratio to average net assets of (d):
Expenses, net of waivers and reim-
bursements 1.06% 1.06% 1.06% 1.04%
Expenses, before waivers and reim-
bursements 1.37% 1.43% 1.38% 1.47%
Net investment income, net of waiv-
ers and reimbursements 0.97% 0.73% 1.22% 0.76%
Net investment income, before waiv-
ers and reimbursements 0.66% 0.36% 0.90% 0.33%
Portfolio turnover rate 154.62% 202.47% 215.31% 77.79%
Average commission rate per share $ 0.0265 $ 0.0292 NA NA
Net assets at end of year (in thou-
sands) $106,774 $138,182 $148,704 $133,212
- --------------------------------------------------------------------------------
<CAPTION>
Class D
----------------------------------------
1997 1996 1995 1994 (b)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.54 $ 9.83 $ 10.21 $ 10.47
Income (loss) from investment opera-
tions:
Net investment income 0.09 0.01 0.19 --
Net realized and unrealized gain
(loss) 0.29 0.92 (0.48) (0.26)
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations 0.38 0.93 (0.29) (0.26)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.08) (0.22) (0.05) --
Net realized gain (0.45) -- (0.04) --
- --------------------------------------------------------------------------------
Total distributions to unitholders (0.53) (0.22) (0.09) --
- --------------------------------------------------------------------------------
Net increase (decrease) (0.15) 0.71 (0.38) (0.26)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 10.39 $ 10.54 $ 9.83 $ 10.21
- --------------------------------------------------------------------------------
Total return (c) 3.79% 9.59% (2.78)% (2.56)%
Ratio to average net assets of (d):
Expenses, net of waivers and reim-
bursements 1.45% 1.45% 1.45% 1.35%
Expenses, before waivers and reim-
bursements 1.76% 1.82% 1.77% 1.78%
Net investment income, net of waiv-
ers and reimbursements 0.58% 0.44% 2.01% --
Net investment income (loss), be-
fore waivers and reimbursements 0.27% 0.07% 1.69% (0.43)%
Portfolio turnover rate 154.62% 202.47% 215.31% 77.79%
Average commission rate per share $ 0.0265 $ 0.0292 NA NA
Net assets at end of year (in thou-
sands) $ 234 $ 94 $ 20 --
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period March 28, 1994 (commencement of operations) through
November 30, 1994.
(b) For the period November 16, 1994 (Class D units issue date) through
November 30, 1994.
(c) 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. 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 these periods.
See accompanying notes to financial statements.
93
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
SMALL COMPANY INDEX PORTFOLIO
<TABLE>
<CAPTION>
Class A
-----------------------------------------------
1997 1996 1995 1994 1993 (a)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 13.97 $ 12.98 $ 10.86 $ 11.29 $ 10.00
Income (loss) from investment
operations:
Net investment income 0.15 0.19 0.16 0.14 0.11
Net realized and unrealized
gain (loss) 2.69 1.75 2.67 (0.30) 1.29
- --------------------------------------------------------------------------------
Total income (loss) from in-
vestment operations 2.84 1.94 2.83 (0.16) 1.40
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (0.17) (0.14) (0.15) (0.02) (0.11)
Net realized gain (1.59) (0.81) (0.56) (0.25) --
- --------------------------------------------------------------------------------
Total distributions to
unitholders (1.76) (0.95) (0.71) (0.27) (0.11)
- --------------------------------------------------------------------------------
Net increase (decrease) 1.08 0.99 2.12 (0.43) 1.29
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 15.05 $ 13.97 $ 12.98 $ 10.86 $ 11.29
- --------------------------------------------------------------------------------
Total return (c) 23.06% 15.96% 27.76% (1.54)% 14.09%
Ratio to average net assets of
(d):
Expenses, net of waivers and
reimbursements 0.32% 0.32% 0.32% 0.33% 0.31%
Expenses, before waivers and
reimbursements 0.68% 0.79% 0.81% 0.86% 1.02%
Net investment income, net of
waivers and reimbursements 1.22% 1.36% 1.31% 1.27% 1.25%
Net investment income, before
waivers and reimbursements 0.86% 0.89% 0.82% 0.74% 0.54%
Portfolio turnover rate 42.66% 46.26% 38.46% 98.43% 26.31%
Average commission rate per
share $ 0.0319 $ 0.0257 NA NA NA
Net assets at end of year (in
thousands) $147,887 $112,856 $94,899 $ 77,120 $54,763
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------
1997 1996 1995 (b)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.96 $ 12.95 $10.51
Income from investment operations:
Net investment income 0.17 0.13 0.18
Net realized and unrealized gain 2.62 1.83 2.96
- ---------------------------------------------------------------------------
Total income from investment operations 2.79 1.96 3.14
- ---------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.15) (0.14) (0.14)
Net realized gain (1.59) (0.81) (0.56)
- ---------------------------------------------------------------------------
Total distributions to unitholders (1.74) (0.95) (0.70)
- ---------------------------------------------------------------------------
Net increase 1.05 1.01 2.44
- ---------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 15.01 $ 13.96 $12.95
- ---------------------------------------------------------------------------
Total return (c) 22.68% 16.20% 31.62%
Ratio to average net assets of (d):
Expenses, net of waivers and reimbursements 0.71% 0.71% 0.71%
Expenses, before waivers and reimbursements 1.07% 1.18% 1.20%
Net investment income, net of waivers and reim-
bursements 0.76% 1.02% 0.90%
Net investment income, before waivers and reim-
bursements 0.40% 0.55% 0.41%
Portfolio turnover rate 42.66% 46.26% 38.46%
Average commission rate per share $0.0319 $0.0257 NA
Net assets at end of year (in thousands) $ 690 $ 269 $ 44
- ---------------------------------------------------------------------------
</TABLE>
(a) For the period January 11, 1993 (commencement of operations) through
November 30, 1993.
(b) For the period December 8, 1994 (Class D units issue date) through
November 30, 1995.
(c) 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. 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 these periods.
See accompanying notes to financial statements.
94
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
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 seventeen portfolios, each
with its own investment objective. Each Portfolio, other than the
International Bond Portfolio, is classified as a diversified investment
company. 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 and equity portfolios
(the "Portfolios").
Each of the 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, 1997, 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.
(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. Exchange traded futures and options are valued at the
settlement price as established by the exchange on which they are traded.
Index futures are marked to market on a daily basis. 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) Investment Transactions and Investment Income
Investment transactions are recorded as of 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. The interest rates reflected in the Statements of
Investments represent either the stated coupon rate, annualized yield on date
of purchase for discount notes, the current reset rate for floating rate
securities or, for interest only or principal only securities, the current
effective yield. Dividend income is recorded on the ex-dividend date.
Dividends from foreign securities are recorded on the ex-date, or as soon as
the information is available.
(c) 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.
(d) Futures Contracts
Each Portfolio may invest in long or short futures contracts for hedging
purposes, to increase total return (i.e., for speculative purposes) or to
maintain liquidity. The Portfolios bear the market risk arising from changes
in the value of these financial instruments. 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 liquid assets. Subsequently, as the market
price of the futures contract fluctuates, gains or losses are recorded and
payments are made, on a daily basis, between the portfolio and the broker. The
Statements of Operations reflect gains and losses as realized for closed
futures contracts and as unrealized for open futures contracts.
At November 30, 1997, the Diversified Growth, Equity Index, Focused Growth
and Small Company Index Portfolios had entered into long exchange traded
futures contracts. The aggregate market value of assets pledged to cover
margin requirements for open positions at November 30, 1997 was approximately
$229,000, $1,433,000, $85,000, and $248,000 for the Diversified Growth, Equity
Index, Focused Growth and Small Company Index Portfolios, respectively.
(e) Options Contracts
Each Portfolio may purchase and write (sell) put and call options on foreign
and domestic stock indices, foreign
95
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
currencies, and U.S. and foreign securities that are traded on U.S. and
foreign securities exchanges and over-the-counter markets. These transactions
are for hedging (or cross-hedging) purposes 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 securities 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, 1997 for the Portfolios were as follows:
<TABLE>
<CAPTION>
Premiums Focused Growth
- -------------------------------------------------------------------
(In thousands)
<S> <C>
Options outstanding, at November 30, 1996 $ --
Options written 111
Options terminated in closing purchase transactions (26)
Options expired (67)
Options exercised (18)
- -------------------------------------------------------------------
Options outstanding, at November 30, 1997 $ --
- -------------------------------------------------------------------
</TABLE>
The Portfolios did not write put options during the year ended November 30,
1997.
(f) Stripped Securities
Stripped securities represent the right to receive 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 securities and the value of principal only stripped
securities vary inversely with changes in interest rates.
(g) Forward Foreign Currency Exchange Contracts
Certain Portfolios are authorized to enter into forward foreign currency
exchange 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 Bond and
International Growth Portfolios may enter into foreign currency exchange
contracts for speculative purposes. The objective of a 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 exchange
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.
At November 30, 1997, there were no outstanding forward foreign currency
exchange contracts.
(h) 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, interest and
dividend 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.
(i) 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, 1997, the Portfolios had approximately the following amounts
of capital loss carryforwards for U.S. federal tax purposes:
96
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Year(s) of Expiration
- ----------------------------------------------------------------
(in thousands)
<S> <C> <C>
Intermediate Bond $ 21 2005
Short-Intermediate Bond 10 2005
U.S. Government Securities 130 2001 to 2003
U.S. Treasury Index 1,046 2002 to 2005
International Equity Index 4 2005
- ----------------------------------------------------------------
</TABLE>
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
(j) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(k) 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.
(l) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
- -------------------------------------
<S> <C>
Bond Monthly
Intermediate Bond Monthly
International Bond Quarterly
Short-Intermediate Bond Monthly
U.S. Government Securities Monthly
U.S. Treasury Index Monthly
Balanced Quarterly
Diversified Growth Annually
Equity Index Quarterly
Focused Growth Annually
International Equity Index Annually
International Growth Annually
Small Company Index Annually
- -------------------------------------
</TABLE>
Each Portfolio's net realized capital gains are distributed at least
annually. Income dividends and capital gain 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 22, 1997 to unitholders of record on December 19, 1997, as
follows:
<TABLE>
<CAPTION>
Short-Term Long-Term
Capital Capital
Gain Gain Total
- --------------------------------------------------------
<S> <C> <C> <C>
Bond $ -- $0.1211 $0.1211
Intermediate Bond -- -- --
International Bond 0.0741 0.2214 0.2955
Short-Intermediate Bond 0.0270 -- 0.0270
U.S. Government Securities -- -- --
U.S. Treasury Index -- -- --
Balanced 0.1368 0.3764 0.5132
Diversified Growth 0.0441 1.8151 1.8592
Equity Index 0.0387 1.3993 1.4380
Focused Growth 0.9226 1.9313 2.8539
International Equity Index -- -- --
International Growth 0.5737 -- 0.5737
Small Company Index 0.0924 0.7969 0.8893
- --------------------------------------------------------
</TABLE>
(m) Reclassifications
At November 30, 1997, certain Portfolios made reclassifications among their
capital accounts to reflect the characterization of certain income and capital
gains distributions for federal income tax purposes, as follows:
<TABLE>
<CAPTION>
Undistributed Undistributed
Net Investment Net Capital
Amounts in Thousands Income Gains/(Losses)
- ---------------------------------------------------------
<S> <C> <C>
Bond $(660) $660
International Bond (208) 208
Short-Intermediate Bond (614) 614
U.S. Government Securities (60) 60
International Growth (23) 23
International Equity Index 2 (2)
- ---------------------------------------------------------
</TABLE>
These reclassifications had no impact on the net asset value of the
Portfolios and are designed to present those 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, 1997, are as follows:
97
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
<TABLE>
<CAPTION>
Net
Advisory Less: Advisory
Fee Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
Intermediate Bond .60 .35 .25
International Bond .90 .20 .70
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
Balanced .80 .30 .50
Diversified Growth .80 .25 .55
Equity Index .30 .20 .10
Focused Growth 1.10 .30 .80
International Equity Index .50 .25 .25
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, for the Portfolios.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement (as amended May 1, 1997) with
Goldman Sachs whereby each Portfolio pays the Administrator a fee, computed
daily and payable monthly, at an annual rate of .10% of the Portfolio's
average daily net assets, except the International Bond, International Equity
Index and International Growth Portfolios which pay the Administrator a fee,
computed daily and payable monthly, at an annual rate of .15% of their
respective average daily net assets.
In addition, if in any fiscal year the sum of a Portfolio's expenses,
including the administration fee, but excluding the investment advisory fee
and transfer agency fee payable to Northern pursuant to its agreements with
the Trust, servicing fees, and extraordinary expenses (such as taxes, interest
and indemnification expenses), exceeds on an annualized basis .10% of a
Portfolio's average daily net assets (0.25% for International Growth
Portfolio, International Bond Portfolio and International Equity Index
Portfolio), Goldman Sachs will reimburse each Portfolio for the amount of the
excess pursuant to the terms of the administration agreement.
Prior to May 1, 1997 each Portfolio paid the Administrator a fee, computed
daily and payable monthly, based on the average daily net assets of each
Portfolio at the rates set forth below:
<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>
Prior to May 1, 1997, Goldman Sachs also voluntarily agreed to limit
administration fees to .10% of average daily net assets for each Portfolio. 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, 1997. Furthermore, Goldman Sachs voluntarily
agreed to reimburse 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 such fiscal year for the Bond, Short-Intermediate Bond, U.S.
Government Securities, U.S. Treasury Index, Balanced, Diversified Growth,
Equity Index, Focused Growth and Small Company Index Portfolios and .25% of
the average daily net assets for such fiscal year for the International Bond,
International Equity Index and International Growth Portfolios.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1997 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.
98
<PAGE>
- -------------------------------------------------------------------------------
6. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1997 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from
Purchases maturities sales 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 $281,135 $171,611 $237,619 $75,350
Intermediate Bond 11,040 5,326 4,809 725
International Bond -- 8,089 -- 12,141
Short-Intermediate Bond 54,397 74,510 65,113 13,725
U.S. Government Securities 77,111 -- 124,791 --
U.S. Treasury Index 28,902 -- 21,070 --
Balanced 18,477 11,557 18,201 14,525
Diversified Growth -- 64,396 -- 86,524
Equity Index -- 166,567 -- 153,926
Focused Growth -- 123,991 -- 140,804
International Equity Index -- 34,737 -- 2,191
International Growth -- 180,012 -- 212,909
Small Company Index -- 59,604 -- 50,315
- -------------------------------------------------------------------------
</TABLE>
As of November 30, 1997, 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 $15,391 $1,662 $13,729 $489,781
Intermediate Bond 35 96 (61) 11,885
International Bond 990 1,209 (219) 25,752
Short-Intermediate Bond 2,134 2,077 57 206,201
U.S. Government Securities 376 114 262 49,532
U.S. Treasury Index 945 15 930 34,174
Balanced 12,223 158 12,065 43,968
Diversified Growth 52,083 1,077 51,006 109,822
Equity Index 327,384 14,006 313,378 644,235
Focused Growth 25,541 1,524 24,017 101,699
International Equity Index 2,089 3,371 (1,282) 32,838
International Growth 8,543 4,975 3,568 103,928
Small Company Index 34,383 8,122 26,261 121,333
- -----------------------------------------------------------------------------
</TABLE>
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, 1997 was approximately
$1,000, $9,000, $90,000, $7,000, $2,000, and $10,000 for the International
Bond, Diversified Growth, Equity Index, Focused Growth, International Growth
and Small Company Index Portfolios, respectively. These amounts are included
in "Other Expenses" on the Statements of Operations.
As of November 30, 1997, there were no outstanding borrowings.
8. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,554 1,111 4,475 4,190
Intermediate Bond 594 9 -- 603
International Bond 56 74 363 (233)
Short-Intermediate Bond 5,953 572 4,056 2,469
U.S. Government Securities 3,473 227 6,148 (2,448)
U.S. Treasury Index 1,031 59 740 350
Balanced 609 205 717 97
Diversified Growth 939 1,144 2,201 (118)
Equity Index 18,925 2,547 19,705 1,767
Focused Growth 1,481 905 2,575 (189)
International Equity Index 3,356 -- 111 3,245
International Growth 1,116 606 4,566 (2,844)
Small Company Index 3,221 1,087 2,562 1,746
- -----------------------------------------------------------------------
</TABLE>
99
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1997
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-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
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>
Transactions in Class C units for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 2,988 104 1,045 2,047
U.S. Government Securities 67 10 97 (20)
Balanced 89 25 266 (152)
Equity Index 2,220 226 1,520 926
Focused Growth 12 65 45 32
- ----------------------------------------------------------------------
</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
Balanced 548 11 69 490
Equity Index 3,499 70 1,685 1,884
Focused Growth 529 -- 46 483
- --------------------------------------------------------------------
</TABLE>
Transactions in Class D units for the year ended November 30, 1997 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 32 1 15 18
International Bond 3 -- -- 3
Short-Intermediate Bond 31 1 5 27
U.S. Government
Securities 6 -- 1 5
U.S. Treasury Index 55 2 16 41
Balanced 12 1 8 5
Diversified Growth 16 4 6 14
Equity Index 1,302 34 281 1,055
Focused Growth 32 6 9 29
International Growth 19 -- 5 14
Small Company
Index 43 1 17 27
- -------------------------------------------------------------------
</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
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>
100
<PAGE>
The Benchmark Funds
Fixed Income and Equity Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Fixed Income and Equity Portfolios
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of the Bond, Intermediate Bond, International
Bond, Short-Intermediate Bond, U.S. Government Securities, U.S. Treasury Index,
Balanced, Diversified Growth, Equity Index, Focused Growth, International Equity
Index, International Growth and Small Company Index Portfolios, comprising the
Fixed Income and Equity Portfolios of The Benchmark Funds, as of November 30,
1997, and the related statements of operations, changes in net assets 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 verification of the investments owned at
November 30, 1997 by physical examination of the securities held by the
custodian and by correspondence with central depositories, unaffiliated
subcustodian banks 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, Intermediate Bond, International Bond, Short-Intermediate Bond, U.S.
Government Securities, U.S. Treasury Index, Balanced, Diversified Growth, Equity
Index, Focused Growth, International Equity Index, International Growth and
Small Company Index Portfolios, comprising the Fixed Income and Equity
Portfolios of The Benchmark Funds, at November 30, 1997, the results of their
operations, the changes in their net assets and financial highlights for the
periods indicated therein, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 16, 1998
101
<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
Richard Gordon Cline
Edward J. Condon, Jr.
John W. English
Sandra Polk Guthman
Frederick T. Kelsey
Richard P. Strubel
Officers
Frank Polefrone, President
James Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Deborah Farrell, Assistant Secretary
Steven Hartstein, Assistant Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath LLP
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.
<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
The
Benchmark
Funds
Money
Market
Portfolios
Service Shares
PROSPECTUS
APRIL 1, 1998
<PAGE>
THE BENCHMARK FUNDS
(Advised by The Northern Trust Company)
THE NORTHERN TRUST COMPANY INVESTMENT ADVISER, TRANSFER
50 S. LaSalle Street AGENT AND CUSTODIAN
Chicago, Illinois 60675
312-630-6000
--------------------
This Prospectus describes the Service Class of shares ("Service Shares" or
"shares") of four short-term money market portfolios (the "Portfolios") offered
by The Benchmark Funds (the "Trust") to institutional investors. Each
Portfolio, other than the Tax-Exempt Portfolio, seeks to maximize current
income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Tax-Exempt Portfolio seeks to provide, to the
extent consistent with the preservation of capital and prescribed portfolio
standards, a high level of income exempt from regular Federal income tax.
The GOVERNMENT SELECT PORTFOLIO invests in selected short-term obligations
of the U.S. Government, its agencies and instrumentalities the interest on
which is generally exempt from state income taxation.
The GOVERNMENT PORTFOLIO invests in short-term obligations of the U.S.
Government, its agencies and instrumentalities and related repurchase
agreements.
The DIVERSIFIED ASSETS PORTFOLIO invests in money market instruments of
both U.S. and foreign issuers, including certificates of deposit, bankers'
acceptances, commercial paper and repurchase agreements.
The TAX-EXEMPT PORTFOLIO invests primarily in short-term municipal
instruments the interest on which is exempt from regular Federal income
tax.
Each Portfolio is advised by The Northern Trust Company ("Northern"). Shares
are sold and redeemed without any purchase or redemption charge imposed by the
Trust, although Northern and other institutions may charge their customers for
services provided in connection with their investments.
This Prospectus provides information about the Portfolios that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated April 1, 1998 is available upon request
without charge by writing to the Trust's distributor, Goldman, Sachs & Co.
("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or by calling 1-
800-621-2550.
SHARES 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 SHARE.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 1, 1998.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS 3
- ----------
Description of Trust 3
Summary of Expenses 3
INVESTMENT INFORMATION 6
- ----------------------
Government Select Portfolio 6
Government Portfolio 7
Diversified Assets Portfolio 7
Tax-Exempt Portfolio 7
Description of Securities and Com-
mon Investment Techniques 8
Investment Restrictions 14
TRUST INFORMATION 15
- -----------------
Board of Trustees 15
Investment Adviser, Transfer Agent
and Custodian 15
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Year 2000 15
Administrator and Distributor 16
Service Plan 16
Expenses 17
INVESTING 18
---------
Purchase of Service Shares 18
Redemption of Service Shares 20
Distributions 23
Taxes 23
NET ASSET VALUE 25
---------------
PERFORMANCE INFORMATION 25
-----------------------
ORGANIZATION 26
------------
MISCELLANEOUS 27
-------------
</TABLE>
2
<PAGE>
HIGHLIGHTS
DESCRIPTION OF TRUST
The Trust is an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment policies, as described below
under "Investment Information." All of the Portfolios are classified as
diversified companies. Northern serves as investment adviser, transfer agent
and custodian. Goldman Sachs serves as distributor and administrator.
Shares of the Portfolios are offered exclusively to institutional investors.
See "Investing--Purchase of Service Shares" and "Investing--Redemption of
Service Shares" for information on how to place purchase and redemption orders.
Each Portfolio seeks to maintain a net asset value of $1.00 per share. The
assets of each Portfolio will be invested in dollar-denominated debt securities
with remaining maturities of thirteen months or less as defined by the
Securities and Exchange Commission (the "SEC"), and each Portfolio's dollar-
weighted average portfolio maturity will not exceed 90 days. All securities
acquired by the Portfolios will be determined by Northern, under guidelines
established by the Trust's Board of Trustees, to present minimal credit risks,
and will be "Eligible Securities" as defined by the SEC. There can be no
assurance that the Portfolios will be able to achieve a stable net asset value
on a continuous basis, or that they will achieve their investment objectives.
Investors should note that one or more of the Portfolios may purchase variable
and floating rate instruments, enter into repurchase agreements, reverse
repurchase agreements and securities loans, acquire U.S. dollar-denominated
instruments of foreign issuers and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. None of the
Portfolios will invest in instruments denominated in a foreign currency.
SUMMARY OF EXPENSES
The following table sets forth the estimated annualized operating expenses for
Service Shares of the Portfolios for the current fiscal year. Hypothetical
examples based on the table are also shown.
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases....................... None None None None
Sales Charge Imposed on Rein-
vested Distributions............ None None None None
Deferred Sales Load Imposed on
Redemptions..................... None None None None
Redemption Fees.................. None None None None
Exchange Fees.................... None None None None
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Annual Operating Expenses After
Expense Reimbursements and Fee
Reductions (as a percentage of
average daily net assets)
Management Fees (After Fee Re-
ductions)...................... .10% .25% .25% .25%
12b-1 Fees...................... None None None None
Other Operating Expenses
Servicing Agent Fees............ .25% .25% .25% .25%
Transfer Agency Fees............ .01% .01% .01% .01%
Other Expenses (After Expense
Reimbursements and Fee Reduc-
tions)(1)...................... .18% .18% .18% .18%
---- ---- ---- ----
Total Operating Expenses (After
Expense Reimbursements and Fee
Reductions)...................... .54% .69% .69% .69%
==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES. Based on the foregoing table, you would pay the following
expenses on a hypothetical $1,000 investment in Service Shares assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Select Portfolio..................... $6 $17 $30 $68
Government Portfolio............................ $7 $22 $38 $86
Diversified Assets Portfolio.................... $7 $22 $38 $86
Tax-Exempt Portfolio............................ $7 $22 $38 $86
</TABLE>
- --------
(1) "Other Expenses" include the payment of a fee to Northern, Goldman Sachs or
other institutions under the service plan equal to .08% of the average
daily net asset value of the Service Shares. See "Trust Information--
Service Plan" for additional information.
The information with respect to Service Shares is estimated and reflects the
expenses each Portfolio expects to incur with respect to such Shares during the
current fiscal year. The expense information included in the table and the
hypothetical example above relate only to Service Shares (the class offered by
this Prospectus) and should not be considered as representative of past or
future performance. During the Trust's last fiscal year, Northern voluntarily
reduced its advisory fee for the Government Select Portfolio (payable at the
annual rate of .25% of the Portfolio's average daily net assets) to .10% per
annum. For the fiscal period December 1, 1996 through April 30, 1997, Goldman
Sachs charged an administration fee with respect to each Portfolio during such
period at the annual rate of .25% of the first $100 million, .15% of the next
$200 million, .075% of the next $450 million and .05% of any excess over $750
million of the Portfolio's average daily net assets. For the period May 1, 1997
through November 30, 1997, Goldman Sachs was entitled to an administration fee
equal to .10% of the average daily net assets of each Portfolio. In addition,
during the fiscal year, Goldman Sachs reimbursed each Portfolio's expenses
(including the fees payable to Goldman Sachs as administrator, but excluding
the fees payable to Northern for its duties as adviser and certain
extraordinary expenses) which exceeded on an annualized basis .10% of the
Portfolio's average daily net assets for such fiscal year. On April 1, 1998,
upon the offering of the Portfolios' Service Shares and Premier Shares, Goldman
Sachs will reimburse each Portfolio's expenses (including fees payable to
Goldman Sachs as administrator, but
4
<PAGE>
excluding the fees payable to Northern for its duties as adviser and transfer
agent, payments under the service plan for the Portfolios' Premier Shares and
Service Shares and certain extraordinary expenses) which exceed on an
annualized basis .10% of the Portfolio's average daily net assets. Without the
undertakings of Northern and Goldman Sachs, "Other Expenses" of the Government
Select, Government, Diversified Assets and Tax-Exempt Portfolios would be .22%,
.20%, .19% and .22%, respectively; and "Total Operating Expenses" of the
Government Select, Government, Diversified Assets and Tax-Exempt Portfolios
would be .73%, .71%, .70% and .73%, respectively. For a more complete
description of the Portfolios' expenses, see "Trust Information" in this
Prospectus.
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS SHAREHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
SHAREHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF SERVICE SHARES." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
5
<PAGE>
INVESTMENT INFORMATION
The investment objective of each Portfolio, other than the Tax-Exempt
Portfolio, is to seek to maximize current income to the extent consistent with
the preservation of capital and maintenance of liquidity by investing
exclusively in high quality money market instruments. The Tax-Exempt Portfolio
seeks to provide its shareholders, to the extent consistent with the
preservation of capital and prescribed portfolio standards, with a high level
of income exempt from Federal income tax by investing primarily in municipal
instruments. The investment objective of a Portfolio may not be changed without
the vote of the majority of the outstanding shares of the particular Portfolio
(as defined below under "Organization"). Except as expressly noted below,
however, a Portfolio's investment policies may be changed without a vote of
shareholders.
All securities acquired by the Portfolios will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks and will be "Eligible Securities" as defined by the SEC. Eligible
Securities include, generally, (i) securities that either (a) have short-term
debt ratings at the time of purchase in the two highest rating categories by at
least two unaffiliated nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (b)
are issued or guaranteed by persons with such ratings, and (ii) securities that
are unrated (including securities of issuers that have long-term but not short-
term ratings) but are determined to be of comparable quality. Securities that
are in the highest short-term rating category as described above (and unrated
securities determined to be of comparable quality) are designated "First Tier
Securities." Under normal circumstances, the Government Select, Government and
Diversified Assets Portfolios intend to limit purchases of securities to First
Tier Securities. The Additional Statement includes a description of applicable
NRSRO ratings.
Each Portfolio is managed so that the average maturity of all instruments in
the Portfolio (on a dollar-weighted basis) will not exceed 90 days. In no event
will the Portfolios purchase any securities which mature more than 13 months
from the date of purchase (except for certain variable and floating rate
instruments and securities collateralizing repurchase agreements). Securities
in which the Portfolios invest may not earn as high a level of income as long-
term or lower quality securities, which generally have greater market risk and
more fluctuation in market value.
GOVERNMENT SELECT PORTFOLIO
The Government Select Portfolio seeks to achieve its investment objective by
investing exclusively in securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. In making
investments, Northern will seek to acquire, under normal market conditions,
only those U.S. Government securities the interest on which is generally exempt
from state income taxation. Securities generally eligible for this exemption
include those issued by the U.S. Treasury and certain U.S. Government agencies
and instrumentalities, including the Federal Home Loan Bank and the Federal
Farm Credit Banks Funding Corp. The Portfolio intends to limit investments to
exempt U.S. Government securities. However, under extraordinary circumstances,
such as when appropriate exempt securities are unavailable, the Portfolio may
make investments in non-exempt U.S. Government securities and cash equivalents,
and may hold uninvested cash. See "Investing--Taxes" below for certain tax
considerations.
6
<PAGE>
GOVERNMENT PORTFOLIO
The Government Portfolio seeks to achieve its investment objective by investing
exclusively in:
(A) Marketable securities issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities and
custodial receipts with respect thereto; and
(B) Repurchase agreements relating to the above instruments.
DIVERSIFIED ASSETS PORTFOLIO
In pursuing its investment objective, the Diversified Assets Portfolio may
invest in a broad range of government, bank and commercial obligations that are
available in the money markets. In particular, the Portfolio may invest in:
(A) U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
(B) U.S. dollar-denominated obligations of foreign commercial banks where
such banks have total assets in excess of $5 billion;
(C) High quality commercial paper and other obligations issued or
guaranteed by U.S. and foreign corporations and other issuers rated (at the
time of purchase) A-2 or higher by Standard & Poor's Ratings Group ("S&P"),
Prime-2 or higher by Moody's Investors Service, Inc. ("Moody's"), Duff 2 or
higher by Duff & Phelps Credit Rating Co. ("D&P"), F-2 or higher by Fitch
IBCA, Inc. ("Fitch") or TBW-2 or higher by Thomson BankWatch, Inc. ("TBW");
(D) Rated and unrated corporate bonds, notes, paper and other instruments
that are of comparable quality to the commercial paper permitted to be
purchased by the Portfolio;
(E) Asset-backed securities (including interests in pools of assets such as
mortgages, installment purchase obligations and credit card receivables);
(F) Securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and custodial
receipts with respect thereto;
(G) U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities thereof;
(H) Repurchase agreements relating to the above instruments; and
(I) Securities issued or guaranteed by state or local governmental bodies.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio invests primarily in high quality short-term
instruments, the interest on which is, in the opinion of bond counsel for the
issuers, exempt from regular Federal income tax ("Municipal Instruments"). Such
opinions may contain various assumptions, qualifications or exceptions that are
reasonably acceptable to Northern. In particular, the Portfolio may invest in:
(A) Fixed and variable rate notes and similar debt instruments rated MIG-2,
VMIG-2 or Prime-2 or higher by Moody's, SP-2 or A-2 or higher by S&P, AA or
higher by D&P or F-2 or higher by Fitch;
7
<PAGE>
(B) Tax-exempt commercial paper and similar debt instruments rated Prime-2
or higher by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2
or higher by Fitch;
(C) Rated and unrated municipal bonds, notes, paper or other instruments
that are of comparable quality to the tax-exempt commercial paper permitted
to be purchased by the Portfolio; and
(D) Municipal bonds and notes which are guaranteed as to principal and
interest by the U.S. Government or an agency or instrumentality thereof or
which otherwise depend directly or indirectly on the credit of the United
States.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding shares of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from Municipal
Instruments except under extraordinary circumstances, such as when Northern
believes that market conditions indicate that the Portfolio should adopt a
temporary defensive posture by holding uninvested cash or investing in taxable
short-term securities ("Taxable Investments"). Taxable Investments will consist
exclusively of instruments that may be purchased by the Diversified Assets
Portfolio.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
BANK OBLIGATIONS. Domestic and foreign bank obligations in which the
Diversified Assets Portfolio may invest include certificates of deposit, bank
and deposit notes, bankers' acceptances and fixed time deposits. Such
obligations may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Total assets of a bank are determined on the basis of
the bank's most recent annual financial statements.
FOREIGN OBLIGATIONS. In addition to the obligations of foreign commercial banks
and foreign branches of U.S. banks, the Diversified Assets Portfolio may
acquire commercial obligations issued by Canadian corporations and Canadian
counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Diversified Assets
Portfolio may also invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations may include debt obligations of
supranational entities, including international organizations (such as the
European Coal and Steel Community and the International Bank for Reconstruction
and Development (also known as the World Bank)) designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Investments
by the Diversified Assets Portfolio in foreign issuer obligations will not
exceed 50% of the Portfolio's total assets measured at the time of purchase.
Obligations of foreign issuers acquired by the Diversified Assets Portfolio may
involve risks that are different than those of obligations of domestic issuers.
These risks include unfavorable political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks and, generally, there may be less publicly
available information
8
<PAGE>
regarding such issuers. The Trust could also encounter difficulties in
obtaining or enforcing a judgment against a foreign issuer (including a foreign
branch of a U.S. bank).
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolios may purchase rated and
unrated variable and floating rate instruments, which may have stated
maturities in excess of the Portfolios' maturity limitations subject to
applicable SEC regulations. In the case of the Diversified Assets Portfolio,
such instruments may include variable amount master demand notes that permit
the indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by Northern to be of comparable quality at the
time of the purchase to rated instruments purchasable by the Portfolios. The
absence of an active secondary market with respect to particular variable and
floating rate instruments could, however, make it difficult for a Portfolio to
dispose of the instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss with
respect to such instruments. Variable and floating rate instruments held by a
Portfolio will be subject to the Portfolio's 10% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days and a reliable trading market is absent.
UNITED STATES GOVERNMENT OBLIGATIONS. Each Portfolio may invest in a variety of
U.S. Treasury obligations, consisting of bills, notes and bonds, which
principally differ only in their interest rates, maturities and time of
issuance. These obligations include "stripped" securities issued by the U.S.
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
The Portfolios may also invest in other securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities. Obligations of certain
agencies and instrumentalities, such as the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others are supported only by the credit of the
instrumentalities. No assurance can be given that the U.S. Government would
provide financial support to its agencies or instrumentalities if it is not
obligated to do so by law. There is no assurance that these commitments will be
undertaken or complied with in the future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations may therefore be regarded as
illiquid.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolios (other than the
Government Select Portfolio) may also purchase participations in trusts that
hold U.S. Treasury securities (such as TIGRs and CATS) where the trust
participations evidence ownership in either the future interest payments or the
future principal payments on the U.S. Treasury obligations. These
participations are normally issued at a discount to their "face value," and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Investments by the Government Portfolio in such custodial receipts will not
exceed 35% of the value of that Portfolio's total assets.
9
<PAGE>
REPURCHASE AGREEMENTS. Each Portfolio may, in accordance with its investment
objective, policies and guidelines established by the Trust's Board of
Trustees, agree to purchase portfolio securities from financial institutions
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price ("repurchase agreements"). Although the securities subject to a
repurchase agreement may bear maturities exceeding 13 months, settlement for
the repurchase agreement will never be more than one year after a Portfolio's
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements are held either by the
Trust's custodian or subcustodian (if any), or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose a Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
REVERSE REPURCHASE AGREEMENTS. The Government Select, Government and
Diversified Assets Portfolios may enter into reverse repurchase agreements
which involve the sale of money market securities held by a Portfolio, with an
agreement to repurchase the securities at an agreed upon price (including
interest) and date. A Portfolio will use the proceeds of reverse repurchase
agreements to purchase other money market securities either maturing, or under
an agreement to resell, at a date simultaneous with or prior to the expiration
of the reverse repurchase agreement. A Portfolio will utilize reverse
repurchase agreements, which may be viewed as borrowings (or leverage) by the
Portfolio, when it is anticipated that the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. During the time a reverse
repurchase agreement is outstanding, the Portfolio will segregate liquid assets
having a value at least equal to the repurchase price. A Portfolio may enter
into reverse repurchase agreements with banks, brokers and dealers, and has the
authority to enter into reverse repurchase agreements in amounts not exceeding
in the aggregate one-third of the Portfolio's total assets. See "Additional
Investment Information--Investment Restrictions" in the Additional Statement.
SECURITIES LENDING. The Portfolios may seek additional income from time to time
by lending their portfolio securities on a short-term basis to banks, brokers
and dealers under agreements requiring that the loans be secured by collateral
in the form of cash, cash equivalents or U.S. Government securities or
irrevocable bank letters of credit maintained on a current basis equal in value
to at least the market value of the securities loaned. A Portfolio may not make
such loans in excess of 33 1/3% of the value of the Portfolio's total assets
(including the loan collateral). Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities loaned, or
possibly loss of rights in the collateral should the borrower of the securities
become insolvent.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Portfolio may purchase
when-issued securities and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased on a when-issued or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, or if the value of the security to be sold increases prior to the
settlement date. Conversely, securities sold on a delayed-delivery or forward
commitment basis involve the risk that the value of the security to be sold may
increase prior to the settlement date. A Portfolio is required to segregate
liquid assets until three days prior to the settlement date, having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments, or to otherwise cover its position. Although a Portfolio would
generally purchase securities on a when-issued or forward
10
<PAGE>
commitment basis with the intention of acquiring securities, the Portfolio may
dispose of a when-issued security or forward commitment prior to settlement if
Northern deems it appropriate to do so.
INVESTMENT COMPANIES. In connection with the management of their daily cash
positions, the Portfolios may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or penny-
rounding method of valuation ("money market funds"), and may invest in
securities issued by other types of investment companies consistent with their
investment objectives and policies. Investments by a Portfolio in other money
market funds and investment companies will be subject to the limitations of the
1940 Act as described in more detail in the Additional Statement. Although the
Portfolios do not expect to do so in the forseeable future, each Portfolio is
authorized to invest substantially all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objective, policies and fundamental restrictions as the Portfolio. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory fees and other expenses the Portfolio bears directly in connection
with its own operations. The Trust has been advised by its counsel that exempt-
interest dividends received by the Tax-Exempt Portfolio as a shareholder of a
regulated investment company paying such dividends will receive the same
Federal tax treatment as interest received by the Portfolio on Municipal
Instruments held by it.
MUNICIPAL AND RELATED INSTRUMENTS. Municipal Instruments in which the Tax-
Exempt Portfolio may invest include debt obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities.
Municipal Instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Portfolio may purchase short-term Tax Anticipation
Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
Municipal Instruments include both "general" and "revenue" obligations. General
obligations are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue obligations are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source such as lease payments from the user of the facility
being financed. Industrial development bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of an industrial revenue bond is usually
directly related to the credit standing of the private user of the facility
involved.
The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a moral
obligation bond is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer.
11
<PAGE>
Municipal bonds with a series of maturity dates are called Serial Bonds. The
Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds") where the Portfolio obtains
at the time of purchase the right to put the bond back to the issuer or a third
party at par at least every thirteen months. Put Bonds with conditional puts
(that is, puts which cannot be exercised if the issuer defaults on its payment
obligations) will present risks that are different than those of other
Municipal Instruments because of the possibility that the Portfolio might hold
a long-term Put Bond on which a default occurs following its acquisition by the
Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations
are held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of
floating or variable rate obligation that represents interests in a pool of
municipal obligations held by a bank.
The Tax-Exempt Portfolio may acquire "standby commitments" with respect to the
Municipal Instruments it holds. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option specified Municipal Instruments at a
specified price. The acquisition of a standby commitment may increase the cost,
and thereby reduce the yield, of the Municipal Instruments to which the
commitment relates. The Portfolio will acquire standby commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Municipal Instruments purchased by the Tax-Exempt Portfolio may be backed by
letters of credit or other forms of credit enhancement issued by foreign (as
well as domestic) banks and other financial institutions. The credit quality of
these banks and financial institutions could, therefore, cause loss to a
Portfolio that invests in Municipal Instruments. Letters of credit and other
obligations of foreign financial institutions may involve certain risks in
addition to those of domestic obligations. (See "Foreign Obligations" above.)
As stated, the Tax-Exempt Portfolio expects to invest primarily in Municipal
Instruments. However, the Portfolio may from time to time hold uninvested cash
or invest a portion of its assets in Taxable Investments. The Portfolio does
not intend to invest more than 25% of the value of its total assets in
industrial development bonds or similar obligations where the non-governmental
entities supplying the revenues from which such bonds or obligations are to be
paid are in the same industry. The Portfolio may, however, invest 25% or more
of its total assets in (a) Municipal Instruments the interest upon which is
paid solely from revenues of similar projects, and (b) industrial development
obligations. In addition, although the Tax-Exempt Portfolio does not expect to
do so during normal market conditions, it may invest more than 25% of the value
of its total assets in Municipal Instruments whose issuers are in the same
state. When a substantial percentage of the Portfolio's assets is invested in
instruments which are used to finance facilities involving a particular
industry, whose issuers are in the same state or which are otherwise related,
there is a possibility that an economic, business or political development
affecting one such instrument would likewise affect the other related
instruments.
12
<PAGE>
So long as other suitable Municipal Instruments are available for investment,
the Tax-Exempt Portfolio does not intend to invest in "private activity bonds"
the interest from which may be treated as an item of tax preference to
shareholders under the Federal alternative minimum tax.
The Diversified Assets Portfolio may also invest up to 5% of its net assets
from time to time in municipal instruments or other securities issued by state
and local governmental bodies when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of other permitted short-term taxable investments.
Dividends paid on such investments will be taxable to shareholders.
ISSUER DIVERSIFICATION. In accordance with current SEC regulations, each
Portfolio intends to limit investments in the securities of any single issuer
(excluding cash, cash items, certain repurchase agreements, U.S. Government
securities or securities of other investment companies) to not more than 5% of
the value of its total assets at the time of purchase, except that (a) 25% of
the value of the total assets of each Portfolio may be invested in the
securities of any one issuer for a period of up to three Business Days; and (b)
securities subject to certain unconditional guarantees are subject to different
diversification requirements as described in the Additional Statement. In
addition, the Portfolios will limit their investments in securities that are
not First Tier Securities as prescribed by SEC regulations.
DERIVATIVE INSTRUMENTS. Each Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest rates or indices, and include
(but are not limited to) various structured debt obligations (including certain
variable and floating rate instruments). Derivative instruments present, to
varying degrees, market risk that the performance of the underlying assets,
interest rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
risk that, if interest rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument will not correlate
exactly to the value of the underlying assets, rates or indices on which it is
based; and operations risk that loss will occur as a result of inadequate
systems and controls, human error or otherwise. Some derivative instruments are
more complex than others, and for those instruments that have been developed
recently, information is lacking regarding their actual performance over
complete market cycles. Northern will evaluate the risks presented by the
derivative instruments purchased by the Portfolios, and will determine, in
connection with its day-to-day management of the Portfolios, how they will be
used in furtherance of the Portfolios' investment objectives. It is possible,
however, that Northern's evaluations will prove to be inaccurate or incomplete
and, even when accurate and complete, it is possible that the Portfolios will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
ILLIQUID OR RESTRICTED SECURITIES. A Portfolio will not invest more than 10% of
its net assets in securities which are illiquid, including repurchase
agreements and time deposits that do not provide for payment to the Trust
within seven days after notice and certificates of participation for which
there is no readily available secondary market and certain securities which are
subject to trading restrictions because they are not registered under the
Securities Act of 1933 (the "1933 Act").
13
<PAGE>
If otherwise consistent with their investment objectives and policies, the
Portfolios may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and securities that are not registered under the 1933 Act but can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as Northern
determines, under guidelines approved by the Trust's Board of Trustees, that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
MISCELLANEOUS. Although the Portfolios will generally not seek profits through
short-term trading, each Portfolio may dispose of any portfolio security prior
to its maturity if, on the basis of a revised credit evaluation of the issuer
or other considerations, Northern believes such disposition is advisable.
Subsequent to its purchase, a portfolio security may be assigned a lower rating
or cease to be rated. Such an event would not necessarily require the
disposition of the security, if the continued holding of the security is
determined to be in the best interest of the Portfolio and its shareholders.
In determining the creditworthiness of the issuers of portfolio securities that
may be purchased and held by the Portfolios, Northern gathers and reviews
historical financial data and, through the use of a proprietary software
computer program, analyzes and attempts to assess the fundamental strengths and
weaknesses of individual issuers, industries and market sectors. Exposure
limits are established by Northern for each security in conformance with the
objectives and policies stated in this Prospectus, and are thereafter adjusted
periodically in response to changes in relevant credit factors.
Pursuant to an SEC order, each Portfolio may engage in principal transactions
effected in the ordinary course of business with Goldman Sachs.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
shares of a Portfolio. Each Portfolio will limit its investments so that less
than 25% of the Portfolio's total assets will be invested in the securities of
issuers in any one industry (with certain limited exceptions). Each Portfolio
may borrow money from banks for temporary or emergency purposes or to meet
redemption requests, provided that the Portfolio maintains asset coverage of at
least 300% for all such borrowings.
14
<PAGE>
TRUST INFORMATION
BOARD OF TRUSTEES
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for each Portfolio.
As transfer agent, Northern performs various shareholder servicing functions,
and any shareholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of December 31, 1997, Northern Trust
Corporation and its subsidiaries had approximately $25.3 billion in assets,
$16.4 billion in deposits and employed over 7,553 persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $1 trillion of
assets as of December 31, 1997, including approximately $196.5 billion of
assets for which Northern and its affiliates had investment management
responsibility.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolios and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an annual
rate of .25% of the average daily net assets of each Portfolio.
For serving as investment adviser during the fiscal year ended November 30,
1997, Northern earned fees paid by the Government Portfolio, the Diversified
Assets Portfolio and the Tax-Exempt Portfolio at the rate of .25% (per annum)
of each Portfolio's average daily net assets. For serving as investment adviser
during the fiscal year ended November 30, 1997, Northern earned fees (after
waivers) paid by the Government Select Portfolio at the rate of .10% (per
annum) of its average daily net assets.
Northern also receives compensation as the Trust's custodian and transfer agent
under separate agreements. The fees payable by the Portfolios for these
services are described in this Prospectus under "Summary of Expenses" and in
the Additional Statement. Different transfer agency fees are payable with
respect to the Portfolios' different share classes.
YEAR 2000
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000"
issues, which stem from using two digits to reflect the year in computer
programs and data. Computer programmers and other designers of equipment that
use microprocessors have long abbreviated dates by eliminating the first two
digits of the year under the
15
<PAGE>
assumption that those two digits will always be 19. As the Year 2000
approaches, many systems may be unable to accurately process certain date-based
information, which could cause a variety of operational problems for
businesses.
Northern Trust's data processing software and hardware provide essential
support to virtually all of its business units, including the units that
provide services to the Trust, so successfully addressing Year 2000 issues is
of the highest importance. Failure to complete renovation of the critical
systems used by Northern on a timely basis could have a materially adverse
effect on its ability to provide such services--as could Year 2000 problems
experienced by others. Although the nature of the problem is such that there
can be no complete assurance it will be successfully resolved, Northern Trust
has indicated that a renovation and risk mitigation program is well under way
and that it has a dedicated Year 2000 Project Team whose members have
significant systems development and maintenance experience. Northern Trust's
Year 2000 project includes a comprehensive testing plan. Northern Trust has
advised the Trust that it expects to complete work on its critical systems by
December 31, 1998, so that testing with outside parties may be conducted during
1999.
Northern Trust is also will have a program to monitor and assess the efforts of
other parties. However, it cannot control the success of those efforts.
Contingency plans are being established where appropriate to provide Northern
Trust with alternatives in case these entities experience significant Year 2000
difficulties which impact Northern Trust.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as administrator
and distributor for the Portfolios. Subject to the limitations described below,
as compensation for its administrative services (which include supervision with
respect to the Trust's non-investment advisory operations) and the assumption
of related expenses, Goldman Sachs is entitled to a fee from each Portfolio,
computed daily and payable monthly, at an annual rate of .10% of the average
daily net assets of each Portfolio. No compensation is payable by the Trust to
Goldman Sachs for its distribution services.
In addition, Goldman Sachs has agreed that it will reimburse each Portfolio's
expenses (including the fees payable to Goldman Sachs as administrator, but
excluding the fees payable to Northern for its duties as investment adviser and
transfer agent, payments under the service plan for the Portfolios' Service and
Premier Share classes and extraordinary expenses such as interest, taxes and
indemnification expenses) which exceed on an annualized basis .10% of such
Portfolio's average daily net assets for any fiscal year. In addition, as of
the date of this Prospectus, Northern will continue to reduce its advisory fee
for the Government Select Portfolio. The result of these reimbursements and fee
reductions will be to increase the yields of the Portfolios during the periods
for which the reimbursements and reductions are made.
SERVICE PLAN
Pursuant to a Service Plan ("Service Plan") adopted by the Board of Trustees of
the Trust with respect to the Service Shares, banks, trust companies and other
institutions and organizations including Northern and its affiliates
("Servicing Agents") may enter into agreements ("Servicing Agreements") under
which they will render (or arrange for the rendering of) administrative support
services for Service Share investors for the fees described below ("Service
Fees").
16
<PAGE>
Administrative support services to be provided by Servicing Agents, which are
described more fully in the Additional Statement, may include establishing and
maintaining individual accounts and records with respect to Service Shares
owned by their Customers (as defined below), processing purchase, redemption
and exchange orders for their Customers, placing net purchase and redemption
orders with Northern acting as the Trust's transfer agent and providing cash
management or sweep accounts and similar programs and services for their
Customers. For these administrative support services, the Service Plan provides
for the payment of fees to Servicing Agents at an annual rate of up to .25% of
the average daily net asset value of the Service Shares beneficially owned by
their Customers. In addition, the Service Plan provides for the payment of fees
to Northern, Goldman Sachs or other institutions at an annual rate of up to
.08% of the average daily net asset value of Service Shares serviced by such
institutions for ongoing consulting services, technology and systems support
services relating to cash management or sweep account services. All fees
payable under the Service Plan are borne solely by Service Shares and not by
the Portfolios' other share classes.
Conflict of interest restrictions may apply to the receipt of compensation by
the Trust to a Servicing Agent in connection with the investment of fiduciary
funds in Service Shares. Banks and other institutions regulated by the Office
of Comptroller of the Currency, Board of Governors of the Federal Reserve
System and state banking commissions, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before
entering into Servicing Agreements.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," each Portfolio is responsible for the payment of its
expenses. Such expenses include without limitation, the fees and expenses
payable to Northern and Goldman Sachs, fees for the registration or
qualification of Portfolio shares 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, Service 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 shareholders 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.
17
<PAGE>
INVESTING
PURCHASE OF SERVICE SHARES
Service Shares are offered to Northern, its affiliates and other institutions
and organizations, including certain defined contribution plans having at least
$30 million in assets or annual contributions of at least $5 million (the
"Institutions"), acting on behalf of their customers, clients, employees,
participants and others (the "Customers"). Service Shares of the Portfolios are
sold on a continuous basis by the Trust's distributor, Goldman Sachs, to
Institutions that have agreed to render (or arrange for the rendering of)
administrative support services to Customers pursuant to a Servicing Agreement
and either maintain certain institutional accounts with Northern or its
affiliates or invest an aggregate of at least $5 million in one or more
Portfolios of the Trust. See "Trust Information--Servicing Plan" above. The
Trust has established procedures for purchasing Service Shares in order to
accommodate different types of Institutions.
PURCHASE OF SERVICE SHARES THROUGH INSTITUTIONAL ACCOUNTS. Any Institution
maintaining an institutional account at Northern or an affiliate may make
purchases through such institutional account either by directing automatic
investment of cash balances in excess of certain agreed upon amounts or by
directing investments from time to time on a non-automatic basis. The nature of
an Institution's relationship with Northern or an affiliate will determine
whether the Institution maintains an institutional account as well as the
procedures available for purchases. Institutions should contact Northern or an
affiliate for further information in this regard. There is no minimum initial
investment for Institutions that maintain institutional accounts with Northern
or its affiliates.
PURCHASE OF SERVICE SHARES DIRECTLY FROM THE TRUST. An Institution that
purchases Service Shares directly may do so by means of one of the following
procedures, provided it makes an aggregate minimum initial investment of $5
million in one or more Portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase Service Shares of a
Portfolio by mail should mail a check or Federal Reserve draft payable to
the specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company,
P.O. Box 75943, Chicago, Illinois 60675-5943. An application will be
incomplete if it does not include a corporate resolution with the corporate
seal and secretary's certification or other acceptable evidence of
authority. If an Institution desires to purchase the Service Shares of more
than one Portfolio, the Institution should send a separate check for each
Portfolio. All checks must be payable in U.S. dollars and drawn on a bank
located in the United States. A $20 charge will be imposed if a check does
not clear. The proceeds of redemptions of shares purchased by check may be
delayed up to 15 days to allow the Trust to determine that the check has
cleared and been paid. Cash and third party checks are not acceptable for
the purchase of Service Shares.
PURCHASE BY TELEPHONE. An Institution desiring to purchase Service Shares
of a Portfolio by telephone should call Northern acting as the Trust's
transfer agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to
identify the name of the Portfolio with respect to which Service Shares are
to be purchased and the manner of payment. Please indicate whether a new
account is being established or an additional payment is being made to an
existing account. If an additional payment is being made to an existing
account, please provide the Institution's name and Portfolio Account
Number. Purchase orders are
18
<PAGE>
effected upon receipt by the Transfer Agent of Federal funds or other
immediately available funds in accordance with the terms set forth below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase
Service Shares of a Portfolio by wire or ACH Transfer should call the
Transfer Agent at 1-800-637-1380 for instructions if it is not making an
additional payment to an existing account. An Institution that wishes to
add to an existing account should wire Federal funds or effect an ACH
Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Shareholder's Name)
For other information concerning requirements for the purchase of Service
Shares, call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. Except as provided below under "Miscellaneous," a
purchase order for Service Shares placed with the Transfer Agent by 1:00 p.m.,
Chicago time, on a Business Day (as defined under "Miscellaneous") will be
effected on that Business Day at the net asset value next determined on that
day with respect to a Portfolio, provided that the Transfer Agent receives the
purchase price in Federal funds or other immediately available funds prior to
1:00 p.m., Chicago time, on the same Business Day such order is received.
Orders received after 1:00 p.m. on a Business Day will be effected at the net
asset value next determined on the following Business Day, provided that
payment is received as provided herein. Purchase orders received on a non-
Business Day will not be executed until the following Business Day in
accordance with the foregoing procedures. An order generated pursuant to an
automatic investment direction of an Institution that has an institutional
account with Northern or its affiliates will normally be placed either on the
Business Day that funds are available in such account or on the first Business
Day thereafter, depending upon the terms of the Institution's automatic
investment arrangements. Shares of a Portfolio are entitled to the dividends
declared by the Portfolio beginning on the Business Day the purchase order is
executed.
MISCELLANEOUS PURCHASE INFORMATION. Shares are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more investment portfolios of the
Trust. The Trust reserves the right to waive this minimum and to determine the
manner in which the minimum investment is satisfied. There is no minimum for
subsequent investments.
Institutions intending to place a purchase order of $5 million or more directly
with the Trust through the Transfer Agent are requested to give advance notice
to the Transfer Agent no later than 11:00 a.m. Chicago Time on a Business Day
in order to assist in the processing of the order.
See "Miscellaneous" below for information on when the Trust may advance the
time by which purchase requests must be received.
Institutions may impose minimum investment and other requirements on Customers
purchasing shares through them. Depending on the terms governing the particular
account, Institutions may impose account charges such as asset allocation fees,
account maintenance fees, compensating balance requirements or other
19
<PAGE>
charges based upon account transactions, assets or income, which will have the
effect of reducing the net return on an investment in a Portfolio. In addition,
Institutions will enter into Servicing Agreements with the Trust whereby they
will perform (or manage to have performed) various administrative support
services for Customers who are the beneficial owners of Service Shares. These
services may include providing sweep accounts or similar programs to their
Customers. See "Trust Information--Service Plan." The exercise of voting rights
and the delivery to Customers of shareholder communications from the Trust will
be governed by the Customers' account agreements with the Institutions.
Customers should read this Prospectus in connection with any relevant agreement
describing the services provided by an Institution and any related requirements
and charges, or contact the Institution at which the Customer maintains its
account for further information.
Institutions that purchase shares on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
Federal funds on a timely basis. An Institution will be responsible for all
losses and expenses of a Portfolio as a result of a check that does not clear,
an ACH transfer that is rejected, or any other failure to make payment in the
time and manner described above, and Northern may redeem shares from an account
it maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. In those cases in which an
Institution pays for shares by check, Federal funds will generally become
available two Business Days after a purchase order is received. Federal
regulations require that the Transfer Agent be furnished with a taxpayer
identification number upon opening or reopening an account. Purchase orders
without such a number or an indication that a number has been applied for will
not be accepted. If a number has been applied for, the number must be provided
and certified within sixty days of the date of the order.
Payment for shares of a Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing shares
of the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such institutions may be
required to register as dealers pursuant to state law.
Northern may, at its own expense, provide compensation to certain dealers and
other financial intermediaries who provide services to their Customers who
invest in the Trust or whose Customers purchase significant amounts of shares
of a Portfolio. The amount of such compensation may be made on a one-time
and/or periodic basis, and may represent all or a portion of the annual fees
that are earned by Northern as investment adviser to such Portfolio (after
adjustments) and are attributable to shares held by such Customers. Such
compensation will not represent an additional expense to the Trust or its
shareholders, since it will be paid from assets of Northern or its affiliates.
REDEMPTION OF SERVICE SHARES
Institutions may redeem shares of a Portfolio through procedures established by
Northern and its affiliates in connection with the requirements of their
institutional accounts or through procedures set forth herein with respect to
Institutions that invest directly.
20
<PAGE>
REDEMPTION OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Institutions may redeem
shares in their institutional accounts at Northern or its affiliates. For
Institutions that participate in an automatic investment service described
above under "Purchase of Service Shares," Northern or its affiliates will
calculate on each Business Day the number of shares that need to be redeemed in
order to bring the Institution's account up to any agreed upon minimum amount.
Redemption requests on behalf of an Institution will normally be placed either
on the Business Day the redemption amount is calculated or on the first
Business Day thereafter, depending upon the terms of the Institution's
automatic investment arrangements. In the latter case, however, Northern or its
affiliates normally will provide funds by provisionally crediting the
institutional account of the Institution on the Business Day on which the
calculation is made. The nature of an Institution's relationship with Northern
or an affiliate will determine whether the Institution maintains an
"institutional account" as well as the procedures available for redemptions.
Institutions should contact Northern or an affiliate for further information in
this regard.
REDEMPTION OF SHARES DIRECTLY. Institutions that purchase shares directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
shares in accordance with the procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem shares by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of shares or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem shares by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange shares by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the shareholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instruments.
All checks will be made payable to the shareholder of record and mailed
only to the shareholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape
21
<PAGE>
recordings for six months, and will request a form of identification if
such identification has been furnished to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification), (ii) a signature guarantee by a financial
institution that is a participant in the Stock Transfer Agency Medallion
Program ("STAMP") in accordance with rules promulgated by the SEC (a
signature notarized by a notary public is not acceptable) or (iii) such
other means or evidence of authority as may be acceptable to the Transfer
Agent. A redemption request by mail will not be effective unless signed by
a person authorized by the corporate resolution or other acceptable
evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
Service Shares of a Portfolio having a value of at least $1,000 for Service
Shares of other Portfolios as to which the Institution or Customer maintains an
existing account with an identical title.
Exchanges will be effected by a redemption of shares of the Portfolio held and
the purchase of shares of the portfolio acquired. Customers of Institutions
should contact their Institutions for further information regarding the Trust's
exchange privilege and Institutions should contact the Transfer Agent as
appropriate. Customers and Institutions exercising the exchange privilege
should read the relevant prospectus prior to making an exchange. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to shareholders of record and to reject any
exchange request. Exchanges are only available in states where an exchange can
legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
shares are effected at the net asset value per share next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or shares); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Service Shares--Other Requirements." Exchange orders
are effected at the net asset value per share next determined after receipt in
good order by the Transfer Agent. Payment for redeemed shares for which a
redemption order is received by Northern with respect to an institutional
account it maintains or the Transfer Agent as of 1:00 p.m., Chicago time, on a
Business Day normally will be made in Federal funds or other immediately
available funds wired or sent by check to the redeeming shareholder or, if
selected, the shareholder's institutional account with Northern on that
Business Day. Redemption orders received after 1:00 p.m. will be effected the
next Business Day. Proceeds for redemption orders received on a non-Business
Day will normally be sent on the next Business Day after receipt in good order.
MISCELLANEOUS REDEMPTION AND EXCHANGE INFORMATION. All redemption proceeds will
be sent by check unless Northern or the Transfer Agent is directed otherwise.
The ACH system may be utilized for payment of redemption proceeds. Redemption
of shares may not be effected if a shareholder has failed to submit a completed
and properly executed (with corporate resolution or other acceptable evidence
of authority) new account application. Institutions intending to place exchange
and redemption orders for same day proceeds
22
<PAGE>
of $5 million or more directly with the Trust through the Transfer Agent are
requested to give advance notice to the Transfer Agent no later than 11:00 a.m.
Chicago Time on a Business Day. The proceeds of redemptions of shares purchased
by check may be delayed up to 15 days to allow the Trust to determine that the
check has cleared and been paid. The Trust reserves the right to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment could
adversely affect a Portfolio.
See "Miscellaneous" below for information on when the Trust may advance the
time by which redemption and exchange requests must be received.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized. Dividends on shares are earned through and
including the day prior to the day on which they are redeemed.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his shares to
the extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Shareholders of each Portfolio are entitled to dividends and distributions
arising from the net income and capital gains, if any, earned on investments
held by the particular Portfolio. Dividends from each Portfolio's net income
are declared daily as a dividend to shareholders of record at the close of
business on the days the dividends are declared (or 3:00 p.m., Chicago time, on
non-Business Days).
Net income of the Service Shares of each Portfolio includes interest accrued on
the assets of such Portfolio and allocated to its Service Shares less the
estimated expenses charged to the Service Shares of such Portfolio. Net
realized short-term capital gains of each Portfolio will be distributed at
least annually. The Portfolios do not expect to realize net long-term capital
gains.
Dividends declared during a calendar month will be paid as soon as practicable
following the end of the month, except that such dividends will be paid
promptly upon a total redemption of shares in any account not subject to a
standing order for the purchase of shares. All distributions are paid by each
Portfolio in cash or are automatically reinvested (without any sales charge) in
additional Service Shares of the same Portfolio. Arrangements may be made for
the crediting of such distributions to a shareholder's account with Northern,
its affiliates or its correspondent banks.
TAXES
Management of the Trust intends that each Portfolio will qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best interest of
the Portfolio's shareholders. Such qualification generally relieves each
Portfolio of liability for Federal income taxes to the extent its earnings are
distributed in accordance with the Code, but shareholders,
23
<PAGE>
unless otherwise exempt, will pay income taxes on amounts so distributed
(except distributions that constitute "exempt-interest dividends" or that are
treated as a return of capital). Dividends paid from net short-term capital
gains are treated as ordinary income dividends. None of the Portfolios'
distributions will be eligible for the corporate dividends received deduction.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Investors in the Portfolio should note, however,
that taxpayers are required to report the receipt of tax-exempt interest and
"exempt-interest dividends" on their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
taxable to persons subject to alternative minimum taxes. First, tax-exempt
interest and "exempt-interest dividends" derived from certain private activity
bonds issued after August 7, 1986 generally will constitute an item of tax
preference for corporate and noncorporate taxpayers in determining alternative
minimum tax liability. Second, all tax-exempt interest and "exempt-interest
dividends" must be taken into account by corporate taxpayers in determining
certain adjustments for alternative minimum tax purposes. Shareholders who are
recipients of Social Security Act or Railroad Retirement Act benefits should
note that tax-exempt interest and "exempt-interest dividends" will be taken
into account in determining the taxability of their benefit payments. To the
extent, if any, that dividends paid by the Tax-Exempt Portfolio to its
shareholders are derived from taxable interest or from capital gains, such
dividends will be subject to Federal income tax, whether received in cash or
reinvested in additional shares.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable and will apply such percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages
for any particular day.
The Trust will send written notices to shareholders annually regarding the tax
status of distributions made by each Portfolio. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in those months will be deemed for Federal tax purposes to have
been paid by a Portfolio and to have been received by the shareholders on
December 31 of that year, if the dividends are actually paid during the
following January.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, investors
should consult their tax advisers with specific reference to their own Federal,
state and local tax situation. In particular, although the Government Select
Portfolio intends to invest primarily in U.S. Government securities the
interest on which is generally exempt from state income taxation, an investor
should consult his or her own tax adviser to determine whether distributions
from the Portfolio are exempt from state income taxation in the investor's own
situation. Similarly, dividends paid by the Portfolios may be taxable to
investors under state or local law as dividend income even though all or a
portion of such dividends may be derived from interest on obligations which, if
realized directly, would be exempt from such income taxes. Future legislative
or administrative changes or court decisions may materially affect the tax
consequences of investing in one or more of the Portfolios.
24
<PAGE>
NET ASSET VALUE
The net asset value per share of each Portfolio for purposes of purchases and
redemptions is calculated by Northern as of 3:00 p.m., Chicago time,
immediately after the declaration of net income earned by shareholders of
record, on each Business Day (as defined below under "Miscellaneous"), except
for days during which no shares are tendered to the Portfolio for redemption
and no orders to purchase or sell shares are received by the Portfolio and
except for days on which there is an insufficient degree of trading in the
Portfolio's securities for changes in the value of such securities to
materially affect the net asset value per share. The time at which the net
asset value per share of a Portfolio is calculated may be advanced on days on
which Northern or the securities markets close early. See "Miscellaneous"
below. Net asset value per Service Share of each Portfolio is calculated by
adding the value of all securities and other assets belonging to the Portfolio
that are allocated to the Service Shares, subtracting the liabilities charged
to the Service Shares and dividing by the number of Service Shares of the
Portfolio outstanding.
In seeking to maintain a net asset value of $1.00 per share with respect to
each Portfolio for purposes of purchases and redemptions, the Trust values the
portfolio securities held by a Portfolio pursuant to the amortized cost
method. Under this method, investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period of maturity. See "Amortized Cost
Valuation" in the Additional Statement. There can be no assurance that a
Portfolio will be able at all times to maintain a net asset value per share of
$1.00.
PERFORMANCE INFORMATION
From time to time the Portfolios may advertise the "yields" and "effective
yields", and the Government Select Portfolio and Tax-Exempt Portfolio may
advertise the "tax-equivalent yields", of Service Shares. These yield figures
will fluctuate, are based on historical earnings and are not intended to
indicate future performance. "Yield" refers to the net investment income
generated by an investment in the Portfolio over a seven-day period identified
in the advertisement. This net investment income is then "annualized." That
is, the amount of net investment income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. "Effective yield" is calculated
similarly but, when annualized, the net investment income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The "tax-equivalent yield" demonstrates the level
of taxable yield necessary to produce an after-tax yield equivalent to a
Portfolio's tax-free yield. It is calculated by taking that portion of the
seven-day "yield" which is tax-exempt and adjusting it to reflect the tax
savings associated with a stated tax rate. The "tax-equivalent yield" will
always be higher than the Portfolio's yield.
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Yield will be affected by portfolio quality, composition, maturity,
market conditions and the level of the Portfolio's operating expenses.
Each Portfolio may also quote from time to time the total return on its
Service Shares in accordance with SEC regulations.
25
<PAGE>
ORGANIZATION
Each Portfolio is a series of The Benchmark Funds, which was formed as a
Delaware business trust on July 1, 1997 under an Agreement and Declaration of
Trust. The Portfolios were formerly series of The Benchmark Funds, a
Massachusetts business trust, and were reorganized into the Trust on March 31,
1998. As of the date of this Prospectus, the Trust has created eighteen
separate series of shares of beneficial interest representing interests in
eighteen investment portfolios, four of which are described in this Prospectus;
the other series of shares are described in a separate prospectus. The business
and affairs of the Trust are managed by or under the direction of its Board of
Trustees. The Declaration of Trust of the Trust authorizes the Board of
Trustees to classify or reclassify any unissued shares into additional series
or classes within a series. Pursuant to such authority, the Board of Trustees
has classified three classes of shares in each Portfolio: the Shares, Service
Shares and Premier Shares. This Prospectus relates only to Service Shares of
the Portfolios described herein.
Each share of a Portfolio is without par value, represents an equal
proportionate interest in that Portfolio with each other share of its class in
that Portfolio and is entitled to such dividends and distributions earned on
such Portfolio's assets as are declared in the discretion of the Board of
Trustees. Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees and amounts payable
under the Service Plan relating to Service Shares and Premier Shares. Because
of these class-specific expenses, the performance of a Portfolio's Service
Shares is expected to be higher than the performance of the Portfolio's Premier
Shares but lower than that of the Portfolio's other class of shares. Any person
entitled to receive compensation for selling or servicing shares of a Portfolio
may receive different compensation with respect to one particular class of
shares over another in the same Portfolio. For further information regarding
the Trust's other share classes, contact Goldman Sachs at 1-800-621-2550.
The Trust's shareholders are entitled at the discretion of the Board of
Trustees to vote either on the basis of the number of shares held or the
aggregate net asset value represented by such shares. Each series entitled to
vote on a matter will vote thereon in the aggregate and not by series, except
as otherwise required by law or when the matter to be voted on affects only the
interests of shareholders of a particular series. The Additional Statement
gives examples of situations in which the law requires voting by series. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate voting power of the Trust may elect all of the Trustees irrespective
of the vote of the other shareholders. In addition, holders of all shares
(regardless of class) representing interests in the same Portfolio have equal
voting rights except that only shares of a particular class within the
Portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to class-specific expenses that are payable by
that class of shares.
As of February 28, 1998, Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding shares of the Trust.
The Trust does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Trustees will
promptly call a meeting of shareholders to vote upon the removal of any Trustee
when so requested in writing by the record holders of 10% or more of the
outstanding shares. To the extent required by law, the Trust will assist in
shareholder communications in connection with such a meeting.
26
<PAGE>
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is 1-800-621-2550.
When a shareholder moves, the shareholder is responsible for sending written
notice to the Trust of any new mailing address. The Trust and its transfer
agent may charge a shareholder their reasonable costs in locating a
shareholder's current address in accordance with SEC regulations.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, which is Monday through
Friday, except for holidays observed by Northern and/or the Exchange other than
Good Friday. For 1998, the holidays of Northern and/or the Exchange are: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and
Christmas Day. On those days when Northern or the Exchange closes early as a
result of unusual weather or other circumstances, the Portfolios reserve the
right to advance the time on that day by which purchase, redemption and
exchange requests must be received. In addition, on any Business Day when The
Bond Market Association recommends that the securities markets close or close
early, the Portfolios reserve the right to cease or to advance the deadline for
accepting purchase, redemption and exchange orders for same Business Day
credit. Purchase, redemption and exchange requests received after the advanced
closing time will be effected on the next Business Day. Each Portfolio
reserves, however, the right to reject any purchase order and also to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment would
adversely affect such Portfolio. See "Investing--Purchase of Service Shares"
and "Investing--Redemption of Service Shares" above for more information.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
27
<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
The
Benchmark
Funds
Money
Market
Portfolios
Premier Shares
PROSPECTUS
APRIL 1, 1998
<PAGE>
THE BENCHMARK FUNDS
(Advised by The Northern Trust Company)
THE NORTHERN TRUST COMPANY INVESTMENT ADVISER, TRANSFER
50 S. LaSalle Street AGENT AND CUSTODIAN
Chicago, Illinois 60675
312-630-6000
--------------------
This Prospectus describes the Premier Class of shares ("Premier Shares" or
"shares") of four short-term money market portfolios (the "Portfolios") offered
by The Benchmark Funds (the "Trust") to institutional investors. Each
Portfolio, other than the Tax-Exempt Portfolio, seeks to maximize current
income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Tax-Exempt Portfolio seeks to provide, to the
extent consistent with the preservation of capital and prescribed portfolio
standards, a high level of income exempt from regular Federal income tax.
The GOVERNMENT SELECT PORTFOLIO invests in selected short-term obligations
of the U.S. Government, its agencies and instrumentalities the interest on
which is generally exempt from state income taxation.
The GOVERNMENT PORTFOLIO invests in short-term obligations of the U.S.
Government, its agencies and instrumentalities and related repurchase
agreements.
The DIVERSIFIED ASSETS PORTFOLIO invests in money market instruments of
both U.S. and foreign issuers, including certificates of deposit, bankers'
acceptances, commercial paper and repurchase agreements.
The TAX-EXEMPT PORTFOLIO invests primarily in short-term municipal
instruments the interest on which is exempt from regular Federal income
tax.
Each Portfolio is advised by The Northern Trust Company ("Northern"). Shares
are sold and redeemed without any purchase or redemption charge imposed by the
Trust, although Northern and other institutions may charge their customers for
services provided in connection with their investments.
This Prospectus provides information about the Portfolios that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated April 1, 1998 is available upon request
without charge by writing to the Trust's distributor, Goldman, Sachs & Co.
("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or by calling 1-
800-621-2550.
SHARES 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 SHARE.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 1, 1998.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS 3
- ----------
Description of Trust 3
Summary of Expenses 3
INVESTMENT INFORMATION 6
- ----------------------
Government Select Portfolio 6
Government Portfolio 7
Diversified Assets Portfolio 7
Tax-Exempt Portfolio 7
Description of Securities and Com-
mon Investment Techniques 8
Investment Restrictions 14
TRUST INFORMATION 15
- -----------------
Board of Trustees 15
Investment Adviser, Transfer Agent
and Custodian 15
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Year 2000 15
Administrator and Distributor 16
Service Plan 16
Expenses 17
INVESTING 18
---------
Purchase of Premier Shares 18
Redemption of Premier Shares 20
Distributions 23
Taxes 23
NET ASSET VALUE 25
---------------
PERFORMANCE INFORMATION 25
-----------------------
ORGANIZATION 26
------------
MISCELLANEOUS 27
-------------
</TABLE>
2
<PAGE>
HIGHLIGHTS
DESCRIPTION OF TRUST
The Trust is an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment policies, as described below
under "Investment Information." All of the Portfolios are classified as
diversified companies. Northern serves as investment adviser, transfer agent
and custodian. Goldman Sachs serves as distributor and administrator.
Shares of the Portfolios are offered exclusively to institutional investors.
See "Investing--Purchase of Premier Shares" and "Investing--Redemption of
Premier Shares" for information on how to place purchase and redemption orders.
Each Portfolio seeks to maintain a net asset value of $1.00 per share. The
assets of each Portfolio will be invested in dollar-denominated debt securities
with remaining maturities of thirteen months or less as defined by the
Securities and Exchange Commission (the "SEC"), and each Portfolio's dollar-
weighted average portfolio maturity will not exceed 90 days. All securities
acquired by the Portfolios will be determined by Northern, under guidelines
established by the Trust's Board of Trustees, to present minimal credit risks,
and will be "Eligible Securities" as defined by the SEC. There can be no
assurance that the Portfolios will be able to achieve a stable net asset value
on a continuous basis, or that they will achieve their investment objectives.
Investors should note that one or more of the Portfolios may purchase variable
and floating rate instruments, enter into repurchase agreements, reverse
repurchase agreements and securities loans, acquire U.S. dollar-denominated
instruments of foreign issuers and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. None of the
Portfolios will invest in instruments denominated in a foreign currency.
SUMMARY OF EXPENSES
The following table sets forth the estimated annualized operating expenses for
Premier Shares of the Portfolios for the current fiscal year. Hypothetical
examples based on the table are also shown.
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases....................... None None None None
Sales Charge Imposed on Rein-
vested Distributions............ None None None None
Deferred Sales Load Imposed on
Redemptions..................... None None None None
Redemption Fees.................. None None None None
Exchange Fees.................... None None None None
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Annual Operating Expenses After
Expense Reimbursements and Fee
Reductions (as a percentage of
average daily net assets)
Management Fees (After Fee Re-
ductions)...................... .10% .25% .25% .25%
12b-1 Fees...................... None None None None
Other Operating Expenses:
Servicing Agent Fees............ .50% .50% .50% .50%
Transfer Agency Fees............ .02% .02% .02% .02%
Other Expenses (After Expense
Reimbursements and Fee Reduc-
tions)(1)...................... .18% .18% .18% .18%
---- ---- ---- ----
Total Operating Expenses (After
Expense Reimbursements and Fee
Reductions)...................... .80% .95% .95% .95%
==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES. Based on the foregoing table, you would pay the following
expenses on a hypothetical $1,000 investment in Premier Shares, assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Select Portfolio..................... $ 8 $26 $44 $ 99
Government Portfolio............................ $10 $30 $53 $117
Diversified Assets Portfolio.................... $10 $30 $53 $117
Tax-Exempt Portfolio............................ $10 $30 $53 $117
</TABLE>
- --------
(1) "Other Expenses" include the payment of a fee to Northern, Goldman Sachs or
other institutions under the service plan equal to .08% of the average
daily net asset value of the Premier Shares. See "Trust Information--
Service Plan" for additional information.
The information with respect to Premier Shares is estimated and reflects the
expenses each Portfolio expects to incur with respect to such Shares during the
current fiscal year. The expense information included in the table and the
hypothetical example above relate only to Premier Shares (the class offered by
this Prospectus) and should not be considered as representative of past or
future performance. During the Trust's last fiscal year, Northern voluntarily
reduced its advisory fee for the Government Select Portfolio (payable at the
annual rate of .25% of the Portfolio's average daily net assets) to .10% per
annum. For the fiscal period December 1, 1996 through April 30, 1997, Goldman
Sachs charged an administration fee with respect to each Portfolio during such
period at the annual rate of .25% of the first $100 million, .15% of the next
$200 million, .075% of the next $450 million and .05% of any excess over $750
million of the Portfolio's average daily net assets. For the period May 1, 1997
through November 30, 1997, Goldman Sachs was entitled to an administration fee
equal to .10% of the average daily net assets of each Portfolio. In addition,
during the fiscal year, Goldman Sachs reimbursed each Portfolio's expenses
(including the fees payable to Goldman Sachs as administrator, but excluding
the fees payable to Northern for its duties as adviser and certain
extraordinary expenses) which exceeded on an annualized basis .10% of the
Portfolio's average daily net assets for such fiscal year. On April 1, 1998,
upon the offering of the Portfolios' Premier Shares and Service Shares, Goldman
Sachs will reimburse each Portfolio's expenses (including fees payable to
Goldman Sachs as administrator, but excluding the fees payable to Northern for
its duties as adviser and transfer agent, payments under the service plan for
4
<PAGE>
the Portfolios' Premier Shares and Service Shares and certain extraordinary
expenses) which exceed on an annualized basis .10% of the Portfolio's average
daily net assets. Without the undertakings of Northern and Goldman Sachs,
"Other Expenses" of the Government Select, Government, Diversified Assets and
Tax-Exempt Portfolios would be .22%, .20%, .19% and .22%, respectively; and
"Total Operating Expenses" of the Government Select, Government, Diversified
Assets and Tax-Exempt Portfolios would be .99%, .97%, .96% and .99%,
respectively. For a more complete description of the Portfolios' expenses, see
"Trust Information" in this Prospectus.
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS SHAREHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
SHAREHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF PREMIER SHARES." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
5
<PAGE>
INVESTMENT INFORMATION
The investment objective of each Portfolio, other than the Tax-Exempt
Portfolio, is to seek to maximize current income to the extent consistent with
the preservation of capital and maintenance of liquidity by investing
exclusively in high quality money market instruments. The Tax-Exempt Portfolio
seeks to provide its shareholders, to the extent consistent with the
preservation of capital and prescribed portfolio standards, with a high level
of income exempt from Federal income tax by investing primarily in municipal
instruments. The investment objective of a Portfolio may not be changed without
the vote of the majority of the outstanding shares of the particular Portfolio
(as defined below under "Organization"). Except as expressly noted below,
however, a Portfolio's investment policies may be changed without a vote of
shareholders.
All securities acquired by the Portfolios will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks and will be "Eligible Securities" as defined by the SEC. Eligible
Securities include, generally, (i) securities that either (a) have short-term
debt ratings at the time of purchase in the two highest rating categories by at
least two unaffiliated nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (b)
are issued or guaranteed by a person with such ratings, and (ii) securities
that are unrated (including securities of issuers that have long-term but not
short-term ratings) but are determined to be of comparable quality. Securities
that are in the highest short-term rating category as described above (and
unrated securities determined to be of comparable quality) are designated
"First Tier Securities." Under normal circumstances, the Government Select,
Government and Diversified Assets Portfolios intend to limit purchases of
securities to First Tier Securities. The Additional Statement includes a
description of applicable NRSRO ratings.
Each Portfolio is managed so that the average maturity of all instruments in
the Portfolio (on a dollar-weighted basis) will not exceed 90 days. In no event
will the Portfolios purchase any securities which mature more than 13 months
from the date of purchase (except for certain variable and floating rate
instruments and securities collateralizing repurchase agreements). Securities
in which the Portfolios invest may not earn as high a level of income as long-
term or lower quality securities, which generally have greater market risk and
more fluctuation in market value.
GOVERNMENT SELECT PORTFOLIO
The Government Select Portfolio seeks to achieve its investment objective by
investing exclusively in securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. In making
investments, Northern will seek to acquire, under normal market conditions,
only those U.S. Government securities the interest on which is generally exempt
from state income taxation. Securities generally eligible for this exemption
include those issued by the U.S. Treasury and certain U.S. Government agencies
and instrumentalities, including the Federal Home Loan Bank and the Federal
Farm Credit Banks Funding Corp. The Portfolio intends to limit investments to
exempt U.S. Government securities. However, under extraordinary circumstances,
such as when appropriate exempt securities are unavailable, the Portfolio may
make investments in non-exempt U.S. Government securities and cash equivalents,
and may hold uninvested cash. See "Investing--Taxes" below for certain tax
considerations.
6
<PAGE>
GOVERNMENT PORTFOLIO
The Government Portfolio seeks to achieve its investment objective by investing
exclusively in:
(A) Marketable securities issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities and
custodial receipts with respect thereto; and
(B) Repurchase agreements relating to the above instruments.
DIVERSIFIED ASSETS PORTFOLIO
In pursuing its investment objective, the Diversified Assets Portfolio may
invest in a broad range of government, bank and commercial obligations that are
available in the money markets. In particular, the Portfolio may invest in:
(A) U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
(B) U.S. dollar-denominated obligations of foreign commercial banks where
such banks have total assets in excess of $5 billion;
(C) High quality commercial paper and other obligations issued or
guaranteed by U.S. and foreign corporations and other issuers rated (at the
time of purchase) A-2 or higher by Standard & Poor's Ratings Group ("S&P"),
Prime-2 or higher by Moody's Investors Service, Inc. ("Moody's"), Duff 2 or
higher by Duff & Phelps Credit Rating Co. ("D&P"), F-2 or higher by Fitch
IBCA, Inc. ("Fitch") or TBW-2 or higher by Thomson BankWatch, Inc. ("TBW");
(D) Rated and unrated corporate bonds, notes, paper and other instruments
that are of comparable quality to the commercial paper permitted to be
purchased by the Portfolio;
(E) Asset-backed securities (including interests in pools of assets such as
mortgages, installment purchase obligations and credit card receivables);
(F) Securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and custodial
receipts with respect thereto;
(G) U.S. dollar-denominated securities issued or guaranteed by one or more
foreign governments or political subdivisions, agencies or
instrumentalities thereof;
(H) Repurchase agreements relating to the above instruments; and
(I) Securities issued or guaranteed by state or local governmental bodies.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio invests primarily in high quality short-term
instruments, the interest on which is, in the opinion of bond counsel for the
issuers, exempt from regular Federal income tax ("Municipal Instruments"). Such
opinions may contain various assumptions, qualifications or exceptions that are
reasonably acceptable to Northern. In particular, the Portfolio may invest in:
7
<PAGE>
(A) Fixed and variable rate notes and similar debt instruments rated MIG-2,
VMIG-2 or Prime-2 or higher by Moody's, SP-2 or A-2 or higher by S&P, AA or
higher by D&P or F-2 or higher by Fitch;
(B) Tax-exempt commercial paper and similar debt instruments rated Prime-2
or higher by Moody's, A-2 or higher by S&P, Duff 2 or higher by D&P or F-2
or higher by Fitch;
(C) Rated and unrated municipal bonds, notes, paper or other instruments
that are of comparable quality to the tax-exempt commercial paper permitted
to be purchased by the Portfolio; and
(D) Municipal bonds and notes which are guaranteed as to principal and
interest by the U.S. Government or an agency or instrumentality thereof or
which otherwise depend directly or indirectly on the credit of the United
States.
As a matter of fundamental policy, changeable only with the approval of the
holders of a majority of the outstanding shares of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from Municipal
Instruments except under extraordinary circumstances, such as when Northern
believes that market conditions indicate that the Portfolio should adopt a
temporary defensive posture by holding uninvested cash or investing in taxable
short-term securities ("Taxable Investments"). Taxable Investments will consist
exclusively of instruments that may be purchased by the Diversified Assets
Portfolio.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
BANK OBLIGATIONS. Domestic and foreign bank obligations in which the
Diversified Assets Portfolio may invest include certificates of deposit, bank
and deposit notes, bankers' acceptances and fixed time deposits. Such
obligations may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Total assets of a bank are determined on the basis of
the bank's most recent annual financial statements.
FOREIGN OBLIGATIONS. In addition to the obligations of foreign commercial banks
and foreign branches of U.S. banks, the Diversified Assets Portfolio may
acquire commercial obligations issued by Canadian corporations and Canadian
counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Diversified Assets
Portfolio may also invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations may include debt obligations of
supranational entities, including international organizations (such as the
European Coal and Steel Community and the International Bank for Reconstruction
and Development (also known as the World Bank)) designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Investments
by the Diversified Assets Portfolio in foreign issuer obligations will not
exceed 50% of the Portfolio's total assets measured at the time of purchase.
Obligations of foreign issuers acquired by the Diversified Assets Portfolio may
involve risks that are different than those of obligations of domestic issuers.
These risks include unfavorable political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
8
<PAGE>
obligations. In addition, foreign branches of U.S. banks and foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks and, generally, there may be less publicly
available information regarding such issuers. The Trust could also encounter
difficulties in obtaining or enforcing a judgment against a foreign issuer
(including a foreign branch of a U.S. bank).
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolios may purchase rated and
unrated variable and floating rate instruments, which may have stated
maturities in excess of the Portfolios' maturity limitations subject to
applicable SEC regulations. In the case of the Diversified Assets Portfolio,
such instruments may include variable amount master demand notes that permit
the indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by Northern to be of comparable quality at the
time of the purchase to rated instruments purchasable by the Portfolios. The
absence of an active secondary market with respect to particular variable and
floating rate instruments could, however, make it difficult for a Portfolio to
dispose of the instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss with
respect to such instruments. Variable and floating rate instruments held by a
Portfolio will be subject to the Portfolio's 10% limitation on illiquid
investments when the Portfolio may not demand payment of the principal amount
within seven days and a reliable trading market is absent.
UNITED STATES GOVERNMENT OBLIGATIONS. Each Portfolio may invest in a variety of
U.S. Treasury obligations, consisting of bills, notes and bonds, which
principally differ only in their interest rates, maturities and time of
issuance. These obligations include "stripped" securities issued by the U.S.
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
The Portfolios may also invest in other securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities. Obligations of certain
agencies and instrumentalities, such as the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others are supported only by the credit of the
instrumentalities. No assurance can be given that the U.S. Government would
provide financial support to its agencies or instrumentalities if it is not
obligated to do so by law. There is no assurance that these commitments will be
undertaken or complied with in the future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations may therefore be regarded as
illiquid.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolios (other than the
Government Select Portfolio) may also purchase participations in trusts that
hold U.S. Treasury securities (such as TIGRs and CATS) where the trust
participations evidence ownership in either the future interest payments or the
future principal
9
<PAGE>
payments on the U.S. Treasury obligations. These participations are normally
issued at a discount to their "face value," and may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Investments by the Government
Portfolio in such custodial receipts will not exceed 35% of the value of that
Portfolio's total assets.
REPURCHASE AGREEMENTS. Each Portfolio may, in accordance with its investment
objective, policies and guidelines established by the Trust's Board of
Trustees, agree to purchase portfolio securities from financial institutions
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price ("repurchase agreements"). Although the securities subject to a
repurchase agreement may bear maturities exceeding 13 months, settlement for
the repurchase agreement will never be more than one year after a Portfolio's
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements are held either by the
Trust's custodian or subcustodian (if any), or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose a Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
REVERSE REPURCHASE AGREEMENTS. The Government Select, Government and
Diversified Assets Portfolios may enter into reverse repurchase agreements
which involve the sale of money market securities held by a Portfolio, with an
agreement to repurchase the securities at an agreed upon price (including
interest) and date. A Portfolio will use the proceeds of reverse repurchase
agreements to purchase other money market securities either maturing, or under
an agreement to resell, at a date simultaneous with or prior to the expiration
of the reverse repurchase agreement. A Portfolio will utilize reverse
repurchase agreements, which may be viewed as borrowings (or leverage) by the
Portfolio, when it is anticipated that the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. During the time a reverse
repurchase agreement is outstanding, the Portfolio will segregate liquid assets
having a value at least equal to the repurchase price. A Portfolio may enter
into reverse repurchase agreements with banks, brokers and dealers, and has the
authority to enter into reverse repurchase agreements in amounts not exceeding
in the aggregate one-third of the Portfolio's total assets. See "Additional
Investment Information--Investment Restrictions" in the Additional Statement.
SECURITIES LENDING. The Portfolios may seek additional income from time to time
by lending their portfolio securities on a short-term basis to banks, brokers
and dealers under agreements requiring that the loans be secured by collateral
in the form of cash, cash equivalents or U.S. Government securities or
irrevocable bank letters of credit maintained on a current basis equal in value
to at least the market value of the securities loaned. A Portfolio may not make
such loans in excess of 33 1/3% of the value of the Portfolio's total assets
(including the loan collateral). Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities loaned, or
possibly loss of rights in the collateral should the borrower of the securities
become insolvent.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Portfolio may purchase
when-issued securities and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased on a when-issued or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, or if the value of the security to be sold
10
<PAGE>
increases prior to the settlement date. Conversely, securities sold on a
delayed-delivery or forward commitment basis involve the risk that the value of
the security to be sold may increase prior to the settlement date. A Portfolio
is required to segregate liquid assets until three days prior to the settlement
date, having a value (determined daily) at least equal to the amount of the
Portfolio's purchase commitments, or to otherwise cover its position. Although
a Portfolio would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities, the Portfolio may
dispose of a when-issued security or forward commitment prior to settlement if
Northern deems it appropriate to do so.
INVESTMENT COMPANIES. In connection with the management of their daily cash
positions, the Portfolios may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or penny-
rounding method of valuation ("money market funds"), and may invest in
securities issued by other types of investment companies consistent with their
investment objectives and policies. Investments by a Portfolio in other money
market funds and investment companies will be subject to the limitations of the
1940 Act as described in more detail in the Additional Statement. Although the
Portfolios do not expect to do so in the forseeable future, each Portfolio is
authorized to invest substantially all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objective, policies and fundamental restrictions as the Portfolio. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory fees and other expenses the Portfolio bears directly in connection
with its own operations. The Trust has been advised by its counsel that exempt-
interest dividends received by the Tax-Exempt Portfolio as a shareholder of a
regulated investment company paying such dividends will receive the same
Federal tax treatment as interest received by the Portfolio on Municipal
Instruments held by it.
MUNICIPAL AND RELATED INSTRUMENTS. Municipal Instruments in which the Tax-
Exempt Portfolio may invest include debt obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities.
Municipal Instruments may be issued to obtain funds for various public
purposes, including capital improvements, the refunding of outstanding
obligations, general operating expenses, and lending to other public agencies.
Among other instruments, the Portfolio may purchase short-term Tax Anticipation
Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
Municipal Instruments include both "general" and "revenue" obligations. General
obligations are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue obligations are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source such as lease payments from the user of the facility
being financed. Industrial development bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of an industrial revenue bond is usually
directly related to the credit standing of the private user of the facility
involved.
11
<PAGE>
The Tax-Exempt Portfolio may also invest in "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of a moral
obligation bond is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer.
Municipal bonds with a series of maturity dates are called Serial Bonds. The
Portfolio may purchase Serial Bonds and other long-term securities provided
that they have a remaining maturity meeting the Tax-Exempt Portfolio's maturity
requirements. The Portfolio may also purchase long-term variable and floating
rate bonds (sometimes referred to as "Put Bonds") where the Portfolio obtains
at the time of purchase the right to put the bond back to the issuer or a third
party at par at least every thirteen months. Put Bonds with conditional puts
(that is, puts which cannot be exercised if the issuer defaults on its payment
obligations) will present risks that are different than those of other
Municipal Instruments because of the possibility that the Portfolio might hold
a long-term Put Bond on which a default occurs following its acquisition by the
Portfolio.
The Tax-Exempt Portfolio may acquire securities in the form of custodial
receipts evidencing rights to receive a specific future interest payment,
principal payment or both on certain municipal obligations. Such obligations
are held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts,"
"Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-CATS") and
"Municipal Zero-Coupon Receipts." The Portfolio may also purchase certificates
of participation that, in the opinion of counsel to the issuer, are exempt from
regular Federal income tax. Certificates of participation are a type of
floating or variable rate obligation that represents interests in a pool of
municipal obligations held by a bank.
The Tax-Exempt Portfolio may acquire "standby commitments" with respect to the
Municipal Instruments it holds. Under a standby commitment, a dealer agrees to
purchase at the Portfolio's option specified Municipal Instruments at a
specified price. The acquisition of a standby commitment may increase the cost,
and thereby reduce the yield, of the Municipal Instruments to which the
commitment relates. The Portfolio will acquire standby commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Municipal Instruments purchased by the Tax-Exempt Portfolio may be backed by
letters of credit or other forms of credit enhancement issued by foreign (as
well as domestic) banks and other financial institutions. The credit quality of
these banks and financial institutions could, therefore, cause loss to a
Portfolio that invests in Municipal Instruments. Letters of credit and other
obligations of foreign financial institutions may involve certain risks in
addition to those of domestic obligations. (See "Foreign Obligations" above.)
As stated, the Tax-Exempt Portfolio expects to invest primarily in Municipal
Instruments. However, the Portfolio may from time to time hold uninvested cash
or invest a portion of its assets in Taxable Investments. The Portfolio does
not intend to invest more than 25% of the value of its total assets in
industrial development bonds or similar obligations where the non-governmental
entities supplying the revenues from which such bonds or obligations are to be
paid are in the same industry. The Portfolio may, however, invest 25% or more
of its total assets in (a) Municipal Instruments the interest upon which is
paid solely from revenues of similar projects, and (b) industrial development
obligations. In addition, although the Tax-Exempt Portfolio does not expect to
do so during normal market conditions, it may invest more than 25% of the value
of its total assets in Municipal Instruments whose issuers are in the same
state. When a substantial percentage of
12
<PAGE>
the Portfolio's assets is invested in instruments which are used to finance
facilities involving a particular industry, whose issuers are in the same state
or which are otherwise related, there is a possibility that an economic,
business or political development affecting one such instrument would likewise
affect the other related instruments.
So long as other suitable Municipal Instruments are available for investment,
the Tax-Exempt Portfolio does not intend to invest in "private activity bonds"
the interest from which may be treated as an item of tax preference to
shareholders under the Federal alternative minimum tax.
The Diversified Assets Portfolio may also invest up to 5% of its net assets
from time to time in municipal instruments or other securities issued by state
and local governmental bodies when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of other permitted short-term taxable investments.
Dividends paid on such investments will be taxable to shareholders.
ISSUER DIVERSIFICATION. In accordance with current SEC regulations, each
Portfolio intends to limit investments in the securities of any single issuer
(excluding cash, cash items, certain repurchase agreements, U.S. Government
securities or securities of other investment companies) to not more than 5% of
the value of its total assets at the time of purchase, except that (a) 25% of
the value of the total assets of each Portfolio may be invested in the
securities of any one issuer for a period of up to three Business Days; and (b)
securities subject to certain unconditional guarantees are subject to different
diversification requirements as described in the Additional Statement. In
addition, the Portfolios will limit their investments in securities that are
not First Tier Securities as prescribed by SEC regulations.
DERIVATIVE INSTRUMENTS. Each Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest rates or indices, and include
(but are not limited to) various structured debt obligations (including certain
variable and floating rate instruments). Derivative instruments present, to
varying degrees, market risk that the performance of the underlying assets,
interest rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
risk that, if interest rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument will not correlate
exactly to the value of the underlying assets, rates or indices on which it is
based; and operations risk that loss will occur as a result of inadequate
systems and controls, human error or otherwise. Some derivative instruments are
more complex than others, and for those instruments that have been developed
recently, information is lacking regarding their actual performance over
complete market cycles. Northern will evaluate the risks presented by the
derivative instruments purchased by the Portfolios, and will determine, in
connection with its day-to-day management of the Portfolios, how they will be
used in furtherance of the Portfolios' investment objectives. It is possible,
however, that Northern's evaluations will prove to be inaccurate or incomplete
and, even when accurate and complete, it is possible that the Portfolios will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
ILLIQUID OR RESTRICTED SECURITIES. A Portfolio will not invest more than 10% of
its net assets in securities which are illiquid, including repurchase
agreements and time deposits that do not provide for payment to the Trust
13
<PAGE>
within seven days after notice and certificates of participation for which
there is no readily available secondary market and certain securities which are
subject to trading restrictions because they are not registered under the
Securities Act of 1933 (the "1933 Act").
If otherwise consistent with their investment objectives and policies, the
Portfolios may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and securities that are not registered under the 1933 Act but can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as Northern
determines, under guidelines approved by the Trust's Board of Trustees, that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
MISCELLANEOUS. Although the Portfolios will generally not seek profits through
short-term trading, each Portfolio may dispose of any portfolio security prior
to its maturity if, on the basis of a revised credit evaluation of the issuer
or other considerations, Northern believes such disposition is advisable.
Subsequent to its purchase, a portfolio security may be assigned a lower rating
or cease to be rated. Such an event would not necessarily require the
disposition of the security, if the continued holding of the security is
determined to be in the best interest of the Portfolio and its shareholders.
In determining the creditworthiness of the issuers of portfolio securities that
may be purchased and held by the Portfolios, Northern gathers and reviews
historical financial data and, through the use of a proprietary software
computer program, analyzes and attempts to assess the fundamental strengths and
weaknesses of individual issuers, industries and market sectors. Exposure
limits are established by Northern for each security in conformance with the
objectives and policies stated in this Prospectus, and are thereafter adjusted
periodically in response to changes in relevant credit factors.
Pursuant to an SEC order, each Portfolio may engage in principal transactions
effected in the ordinary course of business with Goldman Sachs.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
shares of a Portfolio. Each Portfolio will limit its investments so that less
than 25% of the Portfolio's total assets will be invested in the securities of
issuers in any one industry (with certain limited exceptions). Each Portfolio
may borrow money from banks for temporary or emergency purposes or to meet
redemption requests, provided that the Portfolio maintains asset coverage of at
least 300% for all such borrowings.
14
<PAGE>
TRUST INFORMATION
BOARD OF TRUSTEES
The business and affairs of the Trust and each Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for each Portfolio.
As transfer agent, Northern performs various shareholder servicing functions,
and any shareholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of December 31, 1997, Northern Trust
Corporation and its subsidiaries had approximately $25.3 billion in assets,
$16.4 billion in deposits and employed over 7,553 persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $1 trillion of
assets as of December 31, 1997, including approximately $196.5 billion of
assets for which Northern and its affiliates had investment management
responsibility.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolios and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an annual
rate of .25% of the average daily net assets of each Portfolio.
For serving as investment adviser during the fiscal year ended November 30,
1997, Northern earned fees paid by the Government Portfolio, the Diversified
Assets Portfolio and the Tax-Exempt Portfolio at the rate of .25% (per annum)
of each Portfolio's average daily net assets. For serving as investment adviser
during the fiscal year ended November 30, 1997, Northern earned fees (after
waivers) paid by the Government Select Portfolio at the rate of .10% (per
annum) of its average daily net assets.
Northern also receives compensation as the Trust's custodian and transfer agent
under separate agreements. The fees payable by the Portfolios for these
services are described in this Prospectus under "Summary of Expenses" and in
the Additional Statement. Different transfer agency fees are payable with
respect to a Portfolios' different share classes.
YEAR 2000
Like every other business dependent upon computerized information processing,
Northern Trust Corporation ("Northern Trust") must deal with "Year 2000"
issues, which stem from using two digits to reflect the year in computer
programs and data. Computer programmers and other designers of equipment that
use
15
<PAGE>
microprocessors have long abbreviated dates by eliminating the first two digits
of the year under the assumption that those two digits will always be 19. As
the Year 2000 approaches, many systems may be unable to accurately process
certain date-based information, which could cause a variety of operational
problems for businesses.
Northern Trust's data processing software and hardware provide essential
support to virtually all of its businesses, including the units that provide
services to the Trust, so successfully addressing Year 2000 issues is of the
highest importance. Failure to complete renovation of the critical systems used
by Northern on a timely basis could have a materially adverse effect on its
ability to provide such services -- as could Year 2000 problems experienced by
others. Although the nature of the problem is such that there can be no
complete assurance it will be successfully resolved, Northern Trust has
indicated that a renovation and risk mitigation program is well under way and
that it has a dedicated Year 2000 Project Team whose members have significant
systems development and maintenance experience. Northern Trust's Year 2000
project includes a comprehensive testing plan. Northern Trust has advised the
Trust that it expects to complete work on its critical systems by December 31,
1998, so that testing with outside parties may be conducted during 1999.
Northern Trust also will have a program to monitor and assess the efforts of
other parties. However, it cannot control the success of those efforts.
Contingency plans are being established where appropriate to provide Northern
Trust with alternatives in case these entities experience significant Year 2000
difficulties which impact Northern Trust.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as administrator
and distributor for the Portfolios. Subject to the limitations described below,
as compensation for its administrative services (which include supervision with
respect to the Trust's non-investment advisory operations) and the assumption
of related expenses, Goldman Sachs is entitled to a fee from each Portfolio,
computed daily and payable monthly, at an annual rate of .10% of the average
daily net assets of each Portfolio. No compensation is payable by the Trust to
Goldman Sachs for its distribution services.
In addition, Goldman Sachs has agreed that it will reimburse each Portfolio's
expenses (including the fees payable to Goldman Sachs as administrator, but
excluding the fees payable to Northern for its duties as investment adviser and
transfer agent, payments under the service plan for the Portfolios' Premier and
Service Share classes and extraordinary expenses such as interest, taxes and
indemnification expenses) which exceed on an annualized basis .10% of such
Portfolio's average daily net assets for any fiscal year. In addition, as of
the date of this Prospectus, Northern will continue to reduce its advisory fee
for the Government Select Portfolio. The result of these reimbursements and fee
reductions will be to increase the yields of the Portfolios during the periods
for which the reimbursements and reductions are made.
SERVICE PLAN
Pursuant to a Service Plan ("Service Plan") adopted by the Board of Trustees of
the Trust with respect to the Premier Shares, banks, trust companies and other
institutions and organizations including Northern and its affiliates
("Servicing Agents") may enter into agreements ("Servicing Agreements") under
which they will render (or arrange for the rendering of) administrative support
services and personal and account maintenance services for Premier Share
investors for the fees described below ("Service Fees").
16
<PAGE>
Administrative support services to be provided by Servicing Agents, which are
described more fully in the Additional Statement, may include establishing and
maintaining individual accounts and records with respect to Premier Shares
owned by their Customers (as defined below), processing purchase, redemption
and exchange orders for their Customers, placing net purchase and redemption
orders with Northern acting as the Trust's transfer agent and providing cash
management or sweep accounts and similar programs and services for their
Customers. For these administrative support services, the Service Plan provides
for the payment of fees to Servicing Agents at an annual rate of up to .25% of
the average daily net asset value of the Premier Shares beneficially owned by
their Customers. Personal and account maintenance services provided under the
Service Plan, which are also described more fully in the Additional Statement,
may include providing information to investors regarding the Portfolios or
relating to the status of their accounts and acting as liaison between
investors and the Trust. For these liaison services, the Service Plan provides
for the additional payment of fees to Servicing Agents at an annual rate of up
to .25% of the average daily net asset value of Premier Shares beneficially
owned by their Customers. The Service Plan also provides for the payment of
fees to Northern, Goldman Sachs or other institutions at an annual rate of up
to .08% of the average daily net asset value of Premier Shares serviced by such
institutions for ongoing consulting services, technology and systems support
services relating to cash management or sweep account services. All fees
payable under the Service Plan are borne solely by Premier Shares and not by
the Portfolios' other share classes.
Conflict of interest restrictions may apply to the receipt of compensation by
the Trust to a Servicing Agent in connection with the investment of fiduciary
funds in Premier Shares. Banks and other institutions regulated by the Office
of Comptroller of the Currency, Board of Governors of the Federal Reserve
System and state banking commissions, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before
entering into Servicing Agreements.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," each Portfolio is responsible for the payment of its
expenses. Such expenses include, without limitation, the fees and expenses
payable to Northern and Goldman Sachs, fees for the registration or
qualification of Portfolio shares 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, Service 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 shareholders 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.
17
<PAGE>
INVESTING
PURCHASE OF PREMIER SHARES
Premier Shares are offered to Northern, its affiliates and other institutions
and organizations, including certain defined contribution plans having at least
$30 million in assets or annual contributions of at least $5 million (the
"Institutions"), acting on behalf of their customers, clients, employees,
participants and others (the "Customers"). Premier Shares of the Portfolios are
sold on a continuous basis by the Trust's distributor, Goldman Sachs, to
Institutions that have agreed to render (or arrange for the rendering of)
administration support and shareholder liaison services to Customers pursuant
to a Servicing Agreement and either maintain certain institutional accounts
with Northern or its affiliates or invest an aggregate of at least $5 million
in one or more Portfolios of the Trust. See "Trust Information--Servicing Plan"
above. The Trust has established procedures for purchasing Premier Shares in
order to accommodate different types of Institutions.
PURCHASE OF PREMIER SHARES THROUGH INSTITUTIONAL ACCOUNTS. Any Institution
maintaining an institutional account at Northern or an affiliate may make
purchases through such institutional account either by directing automatic
investment of cash balances in excess of certain agreed upon amounts or by
directing investments from time to time on a non-automatic basis. The nature of
an Institution's relationship with Northern or an affiliate will determine
whether the Institution maintains an institutional account as well as the
procedures available for purchases. Institutions should contact Northern or an
affiliate for further information in this regard. There is no minimum initial
investment for Institutions that maintain institutional accounts with Northern
or its affiliates.
PURCHASE OF PREMIER SHARES DIRECTLY FROM THE TRUST. An Institution that
purchases Premier Shares directly may do so by means of one of the following
procedures, provided it makes an aggregate minimum initial investment of $5
million in one or more Portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase Premier Shares of a
Portfolio by mail should mail a check or Federal Reserve draft payable to
the specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company, P.O.
Box 75943, Chicago, Illinois 60675-5943. An application will be incomplete
if it does not include a corporate resolution with the corporate seal and
secretary's certification, or other acceptable evidence of authority. If an
Institution desires to purchase the Premier Shares of more than one
Portfolio, the Institution should send a separate check for each Portfolio.
All checks must be payable in U.S. dollars and drawn on a bank located in
the United States. A $20 charge will be imposed if a check does not clear.
The proceeds of redemptions of shares purchased by check may be delayed up
to 15 days to allow the Trust to determine that the check has cleared and
been paid. Cash and third party checks are not acceptable for the purchase
of Premier Shares.
PURCHASE BY TELEPHONE. An Institution desiring to purchase Premier Shares
of a Portfolio by telephone should call Northern acting as the Trust's
transfer agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to
identify the name of the Portfolio with respect to which Premier Shares are
to be purchased and the manner of payment. Please indicate whether a new
account is being established or an additional payment is being made to an
existing account. If an additional payment is being made to an
18
<PAGE>
existing account, please provide the Institution's name and Portfolio
Account Number. Purchase orders are effected upon receipt by the Transfer
Agent of Federal funds or other immediately available funds in accordance
with the terms set forth below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase
Premier Shares of a Portfolio by wire or ACH Transfer should call the
Transfer Agent at 1-800-637-1380 for instructions if it is not making an
additional payment to an existing account. An Institution that wishes to
add to an existing account should wire Federal funds or effect an ACH
Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Shareholder's Name)
For other information concerning requirements for the purchase of Premier
Shares, call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. Except as provided below under "Miscellaneous," a
purchase order for Premier Shares placed with the Transfer Agent by 1:00 p.m.,
Chicago time, on a Business Day (as defined under "Miscellaneous") will be
effected on that Business Day at the net asset value next determined on that
day with respect to a Portfolio, provided that the Transfer Agent receives the
purchase price in Federal funds or other immediately available funds prior to
1:00 p.m., Chicago time, on the same Business Day such order is received.
Orders received after 1:00 p.m. on a Business Day will be effected at the net
asset value next determined on the following Business Day, provided that
payment is received as provided herein. Purchase orders received on a non-
Business Day will not be executed until the following Business Day in
accordance with the foregoing procedures. An order generated pursuant to an
automatic investment direction of an Institution that has an institutional
account with Northern or its affiliates will normally be placed either on the
Business Day that funds are available in such account or on the first Business
Day thereafter, depending upon the terms of the Institution's automatic
investment arrangements. Shares of a Portfolio are entitled to the dividends
declared by the Portfolio beginning on the Business Day the purchase order is
executed.
MISCELLANEOUS PURCHASE INFORMATION. Shares are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more investment portfolios of the
Trust. The Trust reserves the right to waive this minimum and to determine the
manner in which the minimum investment is satisfied. There is no minimum for
subsequent investments.
Institutions intending to place a purchase order of $5 million or more directly
with the Trust through the Transfer Agent are requested to give advance notice
to the Transfer Agent no later than 11:00 a.m. Chicago Time on a Business Day
in order to assist in the processing of the order.
See "Miscellaneous" below for information on when the Trust may advance the
time by which purchase requests must be received.
Institutions may impose minimum investment and other requirements on Customers
purchasing shares through them. Depending on the terms governing the particular
account, Institutions may impose account
19
<PAGE>
charges such as asset allocation fees, account maintenance fees, compensating
balance requirements or other charges based upon account transactions, assets
or income, which will have the effect of reducing the net return on an
investment in a Portfolio. In addition, Institutions will enter into Servicing
Agreements whereby they will perform (or arrange to have performed) various
administrative support services and shareholder liaison services for Customers
who are the beneficial owners of Premier Shares. These services may include
providing sweep accounts or similar programs to their Customers. See "Trust
Information--Service Plan." The exercise of voting rights and the delivery to
Customers of shareholder communications from the Trust will be governed by the
Customers' account agreements with the Institutions. Customers should read this
Prospectus in connection with any relevant agreement describing the services
provided by an Institution and any related requirements and charges, or contact
the Institution at which the Customer maintains its account for further
information.
Institutions that purchase shares on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
Federal funds on a timely basis. An Institution will be responsible for all
losses and expenses of a Portfolio as a result of a check that does not clear,
an ACH transfer that is rejected, or any other failure to make payment in the
time and manner described above, and Northern may redeem shares from an account
it maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. In those cases in which an
Institution pays for shares by check, Federal funds will generally become
available two Business Days after a purchase order is received. Federal
regulations require that the Transfer Agent be furnished with a taxpayer
identification number upon opening or reopening an account. Purchase orders
without such a number or an indication that a number has been applied for will
not be accepted. If a number has been applied for, the number must be provided
and certified within sixty days of the date of the order.
Payment for shares of a Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing shares
of the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such institutions may be
required to register as dealers pursuant to state law.
Northern may, at its own expense, provide compensation to certain dealers and
other financial intermediaries who provide services to their Customers who
invest in the Trust or whose Customers purchase significant amounts of shares
of a Portfolio. The amount of such compensation may be made on a one-time
and/or periodic basis, and may represent all or a portion of the annual fees
that are earned by Northern as investment adviser to such Portfolio (after
adjustments) and are attributable to shares held by such Customers. Such
compensation will not represent an additional expense to the Trust or its
shareholders, since it will be paid from assets of Northern or its affiliates.
REDEMPTION OF PREMIER SHARES
Institutions may redeem shares of a Portfolio through procedures established by
Northern and its affiliates in connection with the requirements of their
institutional accounts or through procedures set forth herein with respect to
Institutions that invest directly.
20
<PAGE>
REDEMPTION OF SHARES THROUGH INSTITUTIONAL ACCOUNTS. Institutions may redeem
shares in their institutional accounts at Northern or its affiliates. For
Institutions that participate in an automatic investment service described
above under "Purchase of Premier Shares," Northern or its affiliates will
calculate on each Business Day the number of shares that need to be redeemed in
order to bring the Institution's account up to any agreed upon minimum amount.
Redemption requests on behalf of an Institution will normally be placed either
on the Business Day the redemption amount is calculated or on the first
Business Day thereafter, depending upon the terms of the Institution's
automatic investment arrangements. In the latter case, however, Northern or its
affiliates normally will provide funds by provisionally crediting the
institutional account of the Institution on the Business Day on which the
calculation is made. The nature of an Institution's relationship with Northern
or an affiliate will determine whether the Institution maintains an
"institutional account" as well as the procedures available for redemptions.
Institutions should contact Northern or an affiliate for further information in
this regard.
REDEMPTION OF SHARES DIRECTLY. Institutions that purchase shares directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
shares in accordance with the procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem shares by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of shares or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem shares by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, shareholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange shares by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the shareholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instruments.
All checks will be made payable to the shareholder of record and mailed
only to the shareholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape
21
<PAGE>
recordings for six months, and will request a form of identification if
such identification has been furnished to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification), (ii) a signature guarantee by a financial
institution that is a participant in the Stock Transfer Agency Medallion
Program ("STAMP") in accordance with rules promulgated by the SEC (a
signature notarized by a notary public is not acceptable) or (iii) such
other means or evidence of authority as may be acceptable to the Transfer
Agent. A redemption request by mail will not be effective unless signed by
a person authorized by the corporate resolution or other acceptable
evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
Premier Shares of a Portfolio having a value of at least $1,000 for Premier
Shares of other Portfolios to which the Institution or Customer maintains an
existing account with an identical title.
Exchanges will be effected by a redemption of shares of the Portfolio held and
the purchase of shares of the portfolio acquired. Customers of Institutions
should contact their Institutions for further information regarding the Trust's
exchange privilege and Institutions should contact the Transfer Agent as
appropriate. Customers and Institutions exercising the exchange privilege
should read the relevant prospectus prior to making an exchange. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to shareholders of record and to reject any
exchange request. Exchanges are only available in states where an exchange can
legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
shares are effected at the net asset value per share next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or shares); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Premier Shares--Other Requirements." Exchange orders
are effected at the net asset value per share next determined after receipt in
good order by the Transfer Agent. Payment for redeemed shares for which a
redemption order is received by Northern with respect to an institutional
account it maintains or the Transfer Agent as of 1:00 p.m., Chicago time, on a
Business Day normally will be made in Federal funds or other immediately
available funds wired or sent by check to the redeeming shareholder or, if
selected, the shareholder's institutional account with Northern on that
Business Day. Redemption orders received after 1:00 p.m. will be effected the
next Business Day. Proceeds for redemption orders received on a non-Business
Day will normally be sent on the next Business Day after receipt in good order.
MISCELLANEOUS REDEMPTION AND EXCHANGE INFORMATION. All redemption proceeds will
be sent by check unless Northern or the Transfer Agent is directed otherwise.
The ACH system may be utilized for payment of redemption proceeds. Redemption
of shares may not be effected if a shareholder has failed to submit a completed
and properly executed (with corporate resolution or other acceptable evidence
of authority) new account application. Institutions intending to place exchange
and redemption orders for same day proceeds
22
<PAGE>
of $5 million or more directly with the Trust through the Transfer Agent are
requested to give advance notice to the Transfer Agent no later than 11:00 a.m.
Chicago Time on a Business Day. The proceeds of redemptions of shares purchased
by check may be delayed up to 15 days to allow the Trust to determine that the
check has cleared and been paid. The Trust reserves the right to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment could
adversely affect a Portfolio.
See "Miscellaneous" below for information on when the Trust may advance the
time by which redemption and exchange requests must be received.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized. Dividends on shares are earned through and
including the day prior to the day on which they are redeemed.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his shares to
the extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Shareholders of each Portfolio are entitled to dividends and distributions
arising from the net income and capital gains, if any, earned on investments
held by the particular Portfolio. Dividends from each Portfolio's net income
are declared daily as a dividend to shareholders of record at the close of
business on the days the dividends are declared (or 3:00 p.m., Chicago time, on
non-Business Days).
Net income of the Premier Shares of each Portfolio includes interest accrued on
the assets of such Portfolio and allocated to its Premier Shares less the
estimated expenses charged to the Premier Shares of such Portfolio. Net
realized short-term capital gains of each Portfolio will be distributed at
least annually. The Portfolios do not expect to realize net long-term capital
gains.
Dividends declared during a calendar month will be paid as soon as practicable
following the end of the month, except that such dividends will be paid
promptly upon a total redemption of shares in any account not subject to a
standing order for the purchase of shares. All distributions are paid by each
Portfolio in cash or are automatically reinvested (without any sales charge) in
additional Premier Shares of the same Portfolio. Arrangements may be made for
the crediting of such distributions to a shareholder's account with Northern,
its affiliates or its correspondent banks.
TAXES
Management of the Trust intends that each Portfolio will qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best interest of
the Portfolio's shareholders. Such qualification generally relieves each
Portfolio of liability for Federal income taxes to the extent its earnings are
distributed in accordance with the Code, but shareholders,
23
<PAGE>
unless otherwise exempt, will pay income taxes on amounts so distributed
(except distributions that constitute "exempt-interest dividends" or that are
treated as a return of capital). Dividends paid from net short-term capital
gains are treated as ordinary income dividends. None of the Portfolios'
distributions will be eligible for the corporate dividends received deduction.
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Investors in the Portfolio should note, however,
that taxpayers are required to report the receipt of tax-exempt interest and
"exempt-interest dividends" on their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
taxable to persons subject to alternative minimum taxes. First, tax-exempt
interest and "exempt-interest dividends" derived from certain private activity
bonds issued after August 7, 1986 generally will constitute an item of tax
preference for corporate and noncorporate taxpayers in determining alternative
minimum tax liability. Second, all tax-exempt interest and "exempt-interest
dividends" must be taken into account by corporate taxpayers in determining
certain adjustments for alternative minimum tax purposes. Shareholders who are
recipients of Social Security Act or Railroad Retirement Act benefits should
note that tax-exempt interest and "exempt-interest dividends" will be taken
into account in determining the taxability of their benefit payments. To the
extent, if any, that dividends paid by the Tax-Exempt Portfolio to its
shareholders are derived from taxable interest or from capital gains, such
dividends will be subject to Federal income tax, whether received in cash or
reinvested in additional shares.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which are exempt from the regular Federal income tax, which
constitute an item of tax preference for purposes of the Federal alternative
minimum tax, and which are fully taxable and will apply such percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages
for any particular day.
The Trust will send written notices to shareholders annually regarding the tax
status of distributions made by each Portfolio. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in those months will be deemed for Federal tax purposes to have
been paid by a Portfolio and to have been received by the shareholders on
December 31 of that year, if the dividends are actually paid during the
following January.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, investors
should consult their tax advisers with specific reference to their own Federal,
state and local tax situation. In particular, although the Government Select
Portfolio intends to invest primarily in U.S. Government securities the
interest on which is generally exempt from state income taxation, an investor
should consult his or her own tax adviser to determine whether distributions
from the Portfolio are exempt from state income taxation in the investor's own
situation. Similarly, dividends paid by the Portfolios may be taxable to
investors under state or local law as dividend income even though all or a
portion of such dividends may be derived from interest on obligations which, if
realized directly, would be exempt from such income taxes. Future legislative
or administrative changes or court decisions may materially affect the tax
consequences of investing in one or more of the Portfolios.
24
<PAGE>
NET ASSET VALUE
The net asset value per share of each Portfolio for purposes of purchases and
redemptions is calculated by Northern as of 3:00 p.m., Chicago time,
immediately after the declaration of net income earned by shareholders of
record, on each Business Day (as defined below under "Miscellaneous"), except
for days during which no shares are tendered to the Portfolio for redemption
and no orders to purchase or sell shares are received by the Portfolio and
except for days on which there is an insufficient degree of trading in the
Portfolio's securities for changes in the value of such securities to
materially affect the net asset value per share. The time at which the net
asset value per share of a Portfolio is calculated may be advanced on days on
which Northern or the securities markets close early. See "Miscellaneous"
below. Net asset value per Premier Share of each Portfolio is calculated by
adding the value of all securities and other assets belonging to the Portfolio
that are allocated to the Premier Shares, subtracting the liabilities charged
to the Premier Shares and dividing by the number of Premier Shares of the
Portfolio outstanding.
In seeking to maintain a net asset value of $1.00 per share with respect to
each Portfolio for purposes of purchases and redemptions, the Trust values the
portfolio securities held by a Portfolio pursuant to the amortized cost
method. Under this method, investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period of maturity. See "Amortized Cost
Valuation" in the Additional Statement. There can be no assurance that a
Portfolio will be able at all times to maintain a net asset value per share of
$1.00.
PERFORMANCE INFORMATION
From time to time the Portfolios may advertise the "yields" and "effective
yields", and the Government Select Portfolio and Tax-Exempt Portfolio may
advertise the "tax-equivalent yields", of Premier Shares. These yield figures
will fluctuate, are based on historical earnings and are not intended to
indicate future performance. "Yield" refers to the net investment income
generated by an investment in the Portfolio over a seven-day period identified
in the advertisement. This net investment income is then "annualized." That
is, the amount of net investment income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. "Effective yield" is calculated
similarly but, when annualized, the net investment income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The "tax-equivalent yield" demonstrates the level
of taxable yield necessary to produce an after-tax yield equivalent to a
Portfolio's tax-free yield. It is calculated by taking that portion of the
seven-day "yield" which is tax-exempt and adjusting it to reflect the tax
savings associated with a stated tax rate. The "tax-equivalent yield" will
always be higher than the Portfolio's yield.
The Portfolios' yields may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Yield will be affected by portfolio quality, composition, maturity,
market conditions and the level of the Portfolio's operating expenses.
Each Portfolio may also quote from time to time the total return on its
Premier Shares in accordance with SEC regulations.
25
<PAGE>
ORGANIZATION
Each Portfolio is a series of The Benchmark Funds, which was formed as a
Delaware business trust on July 1, 1997 under an Agreement and Declaration of
Trust. The Portfolios were formerly series of The Benchmark Funds, a
Massachusetts business trust, and were reorganized into the Trust on March 31,
1998. As of the date of this Prospectus, the Trust has created eighteen
separate series of shares of beneficial interest representing interests in
eighteen investment portfolios, four of which are described in this Prospectus;
the other series of shares are described in a separate prospectus. The business
and affairs of the Trust are managed by or under the direction of its Board of
Trustees. The Declaration of Trust of the Trust authorizes the Board of
Trustees to classify or reclassify any unissued shares into additional series
or classes within a series. Pursuant to such authority, the Board of Trustees
has classified three classes of shares in each Portfolio: the Shares, Service
Shares and Premier Shares. This Prospectus relates only to Premier Shares of
the Portfolios described herein.
Each share of a Portfolio is without par value, represents an equal
proportionate interest in that Portfolio with each other share of its class in
that Portfolio and is entitled to such dividends and distributions earned on
such Portfolio's assets as are declared in the discretion of the Board of
Trustees. Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees and amounts payable
under the Service Plan relating to Service Shares and Premier Shares. Because
of these class-specific expenses, the performance of a Portfolio's Premier
Shares is expected to be lower than the performance of the Portfolio's other
two share classes. Any person entitled to receive compensation for selling or
servicing shares of a Portfolio may receive different compensation with respect
to one particular class of shares over another in the same Portfolio. For
further information regarding the Trust's other share classes, contact Goldman
Sachs at 1-800-621-2550.
The Trust's shareholders are entitled at the discretion of the Board of
Trustees to vote either on the basis of the number of shares held or the
aggregate net asset value represented by such shares. Each series entitled to
vote on a matter will vote thereon in the aggregate and not by series, except
as otherwise required by law or when the matter to be voted on affects only the
interests of shareholders of a particular series. The Additional Statement
gives examples of situations in which the law requires voting by series. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate voting power of the Trust may elect all of the Trustees irrespective
of the vote of the other shareholders. In addition, holders of all shares
(regardless of class) representing interests in the same Portfolio have equal
voting rights except that only shares of a particular class within the
Portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to class-specific expenses that are payable by
that class of shares.
As of February 28, 1998, Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding shares of the Trust.
The Trust does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Trustees will
promptly call a meeting of shareholders to vote upon the removal of any Trustee
when so requested in writing by the record holders of 10% or more of the
outstanding shares. To the extent required by law, the Trust will assist in
shareholder communications in connection with such a meeting.
26
<PAGE>
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is 1-800-621-2550.
When a shareholder moves, the shareholder is responsible for sending written
notice to the Trust of any new mailing address. The Trust and its transfer
agent may charge a shareholder their reasonable costs in locating a
shareholder's current address in accordance with SEC regulations.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, which is Monday through
Friday, except for holidays observed by Northern and/or the Exchange other than
Good Friday. For 1998, the holidays of Northern and/or the Exchange are: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and
Christmas Day. On those days when Northern or the Exchange closes early as a
result of unusual weather or other circumstances, the Portfolios reserve the
right to advance the time on that day by which purchase, redemption and
exchange requests must be received. In addition, on any Business Day when The
Bond Market Association recommends that the securities markets close or close
early, the Portfolios reserve the right to cease or to advance the deadline for
accepting purchase, redemption and exchange orders for same Business Day
credit. Purchase, redemption and exchange requests received after the advanced
closing time will be effected on the next Business Day. Each Portfolio
reserves, however, the right to reject any purchase order and also to defer
crediting, sending or wiring redemption proceeds for up to seven days after
receiving a redemption order if, in its judgment, an earlier payment would
adversely affect such Portfolio. See "Investing--Purchase of Premier Shares"
and "Investing--Redemption of Premier Shares" above for more information.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
27
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
SERVICE SHARES
PREMIER SHARES
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, 1998 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectuses for the Service Shares and Premier Shares of
the Government Select, Government, Diversified Assets and Tax-Exempt Portfolios
(the "Portfolios") of The Benchmark Funds (each, a "Prospectus") dated April 1,
1998. Copies of each 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. Each Portfolio
also offers an additional share class that is described in a separate statement
of additional information.
-----------------
INDEX
Page
----
ADDITIONAL INVESTMENT INFORMATION...................... 3
Investment Objectives and Policies................ 3
Investment Restrictions........................... 10
ADDITIONAL TRUST INFORMATION........................... 14
Trustees and Officers............................. 14
Investment Adviser, Transfer Agent and Custodian.. 21
Administrator and Distributor..................... 27
Counsel and Auditors.............................. 29
In-Kind Purchases................................. 29
PERFORMANCE INFORMATION................................ 29
AMORTIZED COST VALUATION............................... 31
DESCRIPTION OF SERVICE SHARES AND PREMIER SHARES....... 32
ADDITIONAL INFORMATION CONCERNING TAXES................ 37
General 37
Special Tax Considerations Pertaining to the
Tax-Exempt Portfolio............................ 39
Foreign Investors................................. 40
<PAGE>
Conclusion........................................ 40
SERVICE PLAN........................................... 40
OTHER INFORMATION...................................... 43
FINANCIAL STATEMENTS................................... 44
APPENDIX A (Description of Securities Ratings)......... A-1
----------------
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 of Service Shares and Premier Shares 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.
SHARES 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 SHARE.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
-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, 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.
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.
-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, as calculated under applicable SEC regulations,
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, 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
-4-
<PAGE>
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.
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 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
-5-
<PAGE>
instrument may, subject to SEC regulations, be deemed to have a maturity shorter
than its 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
With respect to the investments of the Portfolios in the securities of other
investment companies, such investments will be limited so that, as determined
after a purchase is made, either (a) not more than 3% of the total outstanding
stock of such investment company will be owned by a Portfolio, the Trust as a
whole and their affiliated persons (as defined in the 1940 Act); or (b)(i) not
more than 5% of the value of the total assets of a Portfolio will be invested in
the securities of any one investment company, (ii) not more than 10% of the
value of its total assets will be invested in the aggregate in securities of
investment companies as a group, and (iii) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Portfolio.
Unaffiliated money market funds whose securities are purchased by the Portfolios
may not be obligated to redeem such securities in an amount exceeding 1% of
their total outstanding securities during any period of less than 30 days.
Therefore, such securities that exceed this amount may be illiquid.
If 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.
A Portfolio may invest all or substantially all of its assets in a single open-
end investment company or series thereof with substantially the same investment
objective, policies and restrictions as the Portfolio. However, each Portfolio
currently intends to limit its investments in securities issued by other
investment companies to the extent described above. 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.
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
-6-
<PAGE>
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 segregate 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.
-7-
<PAGE>
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 will segregate 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 Portfolio will segregate the portfolio securities themselves.
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
-8-
<PAGE>
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 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
-9-
<PAGE>
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.
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 shares.
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
-10-
<PAGE>
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) Make any investment inconsistent with the Portfolio's classification as
a diversified investment company under the 1940 Act.
(8) 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.
(9) 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
-11-
<PAGE>
fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
(10) Notwithstanding any of the Trust's other fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), each Portfolio
may (a) purchase securities of other investment companies to the full
extent permitted under Section 12 of the 1940 Act (or any successor
provision thereto) or under any regulation or order of the Securities and
Exchange Commission; and (b) invest all or substantially all of its assets
in a single open-end investment company or series thereof with
substantially the same investment objective, policies and fundamental
restrictions as the Portfolio.
* * *
The freedom of action reserved in Restriction No. 8 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. Obligations of U.S.
branches of foreign banks may include certificates of deposit, bank and deposit
notes, bankers' acceptances and fixed time deposits, and may be general
obligations of the parent bank or may be limited to the issuing branch. Such
obligations will meet the criteria for "Eligible Securities" as described in the
Prospectus.
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 No. 8, 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 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
-12-
<PAGE>
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.
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.
The Portfolios intend, as a non-fundamental policy, to diversify their
investments in accordance with current SEC regulations. Investments in the
securities of any single issuer (excluding cash, cash items, certain repurchase
agreements, U.S. Government securities and securities of other investment
companies) will be limited to not more than 5% of the value of a Portfolio's
total assets at the time of purchase, except that 25% of the value of the total
assets of each Portfolio may be invested in the securities of any one issuer for
a period of up to three Business Days. A security that has an unconditional
guarantee meeting special SEC requirements (a "Guarantee") does not need to
satisfy the foregoing issuer diversification requirements that would otherwise
apply, but the Guarantee is instead subject to the following diversification
requirements: Immediately after the acquisition of the security, a Portfolio
may not have invested more than 10% of its total assets in securities issued by
or subject to Guarantees from the same person, except that a Fund may, subject
to certain conditions, invest up to 25% of its total assets in securities issued
or subject to Guarantees of the same person. This percentage is 100% if the
Guarantee is issued by the U.S. Government or an agency thereof. In addition,
the Tax-Exempt Portfolio will limit its investments in certain conduit
securities that are not rated in the highest short-term rating category as
determined by two NRSROs (or one NRSRO if the security is rated by only one
NRSRO) or, if unrated, are not of comparable quality ("Second Tier Securities"),
to 5% of its total assets, with investments in any one such issuer being limited
to no more than 1% of the Portfolio's total assets or $1 million, whichever is
greater, measured at the time of purchase. Conduit securities subject to this
limitation are Municipal Instruments that are not subject to a Guarantee and
involve an arrangement whereunder a person, other than a municipal issuer,
provides for or secures repayment of the security and are not: (i) fully and
unconditionally guaranteed by a municipal issuer; or (ii) payable from the
general revenues of the municipal issuer or other municipal issuers; or (iii)
related to a project owned and operated by a municipal issuer; or (iv) related
to a facility leased to and under the control of an industrial or commercial
enterprise that is part of a public project which, as a whole, is owned and
under the control of a municipal issuer. The Diversified Assets Portfolios will
limit its investments in all Second Tier Securities (that are not subject to a
Guarantee) in accordance with the foregoing percentage limitations.
-13-
<PAGE>
In addition to the foregoing, each Portfolio is subject to additional
diversification requirements imposed by SEC regulations on the acquisition of
securities subject to other types of demand features and puts whereunder a
Portfolio has the right to sell the securities to third parties.
ADDITIONAL TRUST INFORMATION
Trustees and Officers
Information pertaining to the Trustees and officers of the Trust is set forth
below.
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------- ---------- ------------------------------------
William H. Springer, 68 Chairman Vice Chairman of Ameritech (a
701 Morningside Drive and telecommunications holding company),
Lake Forest, IL 60045 Trustee 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-diversified management
investment company) from April 1992
to present; Trustee, Goldman Sachs
Trust from 1989 to present.
Richard Gordon Cline, 62 Trustee Chairman, Hussman International Inc.
4200 Commerce Court (commercial refrigeration company)
Suite 300 since January 1998; Chairman,
Lisle, IL 60532 Hawthorne Investors, Inc. (a
management advisory services and
private investment company) since
January 1996; Chairman and CEO of
NICOR Inc. (a diversified public
utility holding company) from 1986
to 1995, and President, 1992-1993;
Director: Whitman Corporation (a
diversified holding company); Kmart
Corporation (a retailing company);
Ryerson Tull, Inc. (metals
distribution company); and
University of Illinois Foundation.
Edward J. Condon, Jr., 57 Trustee Chairman of The Paradigm Group,
233 S. Wacker Dr. Sears Tower, Suite 9650 Ltd. (a
Chicago, IL 60606 financial advisor) since July 1993;
Vice President and Treasurer of
Sears, Roebuck and Co. (a
-14-
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------- ---------- ------------------------------------
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; Member
of the Board of Managers of The
Liberty Hampshire Company, LLC; Vice
Chairman and Director of Energenics
LLC; Director of University
Eldercare, Inc.; Director of the
Girl Scouts of Chicago; and Trustee
of Dominican University.
John W. English, 64 Trustee Private Investor; Vice President and
50-H New England Ave. Chief Investment Officer of The
P.O. Box 640 Ford Foundation (a charitable trust)
Summit, NJ 07902-0640 from 1981 until 1993; Trustee: The
China Fund, Inc.; 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.
Sandra Polk Guthman, 53 Trustee President and CEO of Polk Bros.
420 N. Wabash Avenue Foundation (an Illinois not-for-
Suite 204 profit corporation) from 1993 to
Chicago, IL 60611 present; Director of Business
Transformation from 1992-1993, and
Midwestern Director of Marketing
from 1988-1992, IBM Corporation;
Director: MBIA Insurance
Corporation of Illinois (bank
holding company) since 1994 and
Avondale Financial Corporation (a
stock savings and loan holding
company) since 1995.
-15-
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------- ---------- ------------------------------------
Frederick T. Kelsey, 70 Trustee Consultant to Goldman Sachs from
4010 Arbor Lane #102 December 1985 through February 1988;
Northfield, IL 60093 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
and other investment companies
affiliated with Goldman Sachs
through August 1985; President from
1983 to 1985, and Trustee from 1983
to 1994, The Centerland Funds and
its successor, The Pilot Funds;
Trustee, various management
investment companies affiliated with
Zurich Kemper Investments.
Richard P. Strubel, 58 Trustee Managing Director, Tandem Partners,
70 West Madison St Inc. (a privately held management
Suite 1400 services firm) since 1990; President
Chicago, IL 60602 and CEO, Microdot, Inc. (a privately
held manufacturing firm) from 1984
to 1994; Trustee, Goldman Sachs
Trust from 1987 to present; Director
of Kaynar Technologies Inc. (a
leading manufacturer of aircraft
fasteners); Trustee of the
University of Chicago; Director of
Children's Memorial Medical Center.
Frank E. Polefrone, 41 President Director of Financial Institutions
4900 Sears Tower Sales and Marketing of Goldman,
Chicago, IL 60606 Sachs Asset Management ("GSAM")
since March 1997; Marketing/Product
Development of Federated Investors
from August 1982 through December
1996.
James A. Fitzpatrick, 38 Vice Vice President, GSAM (since April
4900 Sears Tower President 1997); Vice President and General
Chicago, IL 60606 Manager, First Data Corporation -
Investors Services Group prior
thereto.
John W. Mosior, 58 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of Shareholder Servicing of
Chicago, IL 60606 GSAM (since November 1989).
-16-
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------- ---------- ------------------------------------
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President (since April 1985); Manager,
Chicago, IL 60606 Shareholder Servicing of GSAM (since
November 1989).
Scott M. Gilman, 37 Treasurer Director, Mutual Fund
One New York Plaza Administration, GSAM (since April
New York, NY 10004 1994); Assistant Treasurer of
Goldman Sachs Funds Management, Inc.
(since March 1993); Vice President,
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 Company
(November 1993 to July 1995); Audit
Manager of Arthur Andersen, LLP
(prior thereto).
Michael J. Richman, 36 Secretary Associate General Counsel, GSAM
85 Broad Street (since February 1994); Vice President
New York, NY 10004 and Assistant General Counsel of
Goldman Sachs (since June 1992);
Counsel to the Funds Group of GSAM
(since June 1992); Partner of Hale
and Dorr (September 1991 to June
1992).
Howard B. Surloff, 32 Assistant Vice President and Assistant General
85 Broad Street Secretary Counsel, Goldman Sachs (since
New York, NY 10004 November 1993 and May 1994,
respectively); Counsel to the Funds
Group, GSAM (since November 1993);
Associate of Shereff, Friedman,
Hoffman & Goodman, LLP (prior
thereto).
Valerie A. Zondorak, 32 Assistant Vice President, Goldman Sachs (since
85 Broad Street Secretary March 1997); Counsel to the Funds
New York, NY 10004 Group, GSAM (since March 1997);
Associate, Shereff, Friedman,
Hoffman & Goodman, LLP (prior
thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst, Goldman
85 Broad Street Secretary Sachs (since June 1993); Funds
New York, NY 10004 Compliance Officer, Citibank Global
Asset Management (August 1991 to June
1993).
-17-
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------- ---------- ------------------------------------
Deborah A. Farrell, 26 Assistant Legal Assistant, Goldman Sachs
85 Broad Street Secretary (since January 1994); Formerly at
New York, NY 10004 Cleary, Gottlieb, Steen & Hamilton.
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, Mosior, Gilman, Richman, Surloff and Hartstein and Mmes. Farrell,
Mucker and Zondorak 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.
Each Trustee will hold office for an indefinite term until the earliest of (1)
the next meeting of shareholders, if any, called for the purpose of considering
the election or re-election of such Trustee and until the election and
qualification of his or her successor, if any, elected at such meeting; (2) the
date a Trustee resigns or retires, or a Trustee is removed by the Board of
Trustees or shareholders, in accordance with the Trust's Agreement and
Declaration of Trust, or (3) in accordance with the current
-18-
<PAGE>
resolutions of the Board of Trustees (which may be changed without shareholder
vote), on the last day of the fiscal year of the Trust in which he or she
attains the age of 72 years.
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.
-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, 1997:
<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 $43,500 $ 0 $43,500
Richard G. Cline*** $ 0
Edward J. Condon, Jr. $31,000 $ 0 $31,000
John W. English $31,000 $ 0 $31,000
James J. Gavin* $34,000 $ 0 $34,000
Sandra Polk Guthman*** $ 0
Frederick T. Kelsey $35,000 $2,863 $37,863
Richard P. Stubel $39,000 $ 0 $39,000
</TABLE>
* Retired as of November 30, 1997.
** Interest from deferred compensation.
*** Mr. Cline and Ms. Guthman were elected as Trustees of the Trust in
September 1997.
-20-
<PAGE>
Investment Adviser, Transfer Agent and Custodian
Northern, a wholly-owned subsidiary of Northern Trust Corporation, a bank
holding company, is one of the nation's leading providers of trust and
investment management services. As of December 31, 1997, Northern and its
affiliates had over $196 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. To the extent the
execution and price available from more than one broker, dealer or other such
persons are believed to be comparable, Northern may, at its discretion but
subject to applicable law, select the executing broker, dealer or such other
persons on the basis of Northern's opinion of the reliability and quality of
such broker, dealer or such other persons.
For the fiscal years ended November 30, 1997, 1996 and 1995, 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.
-21-
<PAGE>
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 information) 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 shares of the Portfolios, and the disbursement of the proceeds of
redemptions, (3) establish and maintain separate omnibus accounts with respect
to shareholders 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 shareholders,
(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 statements of
additional information, and
-22-
<PAGE>
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 with respect to Service Shares and Premium Shares and the assumption
by Northern of related expenses, Northern is entitled to a fee from the Trust,
calculated daily and payable monthly, at the following annual rates: (i) .01%
of the average daily net asset value of the outstanding Service Shares of each
Portfolio; and (ii) .02% of the average daily net asset value of the outstanding
Premier Shares of each Portfolio. The transfer agency fee attributable to each
class of shares is borne solely by that class. 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 Service Shares and Premium Shares.
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, subject to certain monitoring responsibilities,
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. 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.
-23-
<PAGE>
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.
Northern's fees under the Custodian Agreement are subject to reduction based on
the Portfolios' daily uninvested cash balances (if any).
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, 1999, 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 shares 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 shareholder 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 (after fee waivers) incurred by each Portfolio was as follows:
1997 1996 1995
---------- ---------- ----------
Government Select Portfolio $1,018,467 $ 772,113 $ 569,065
Government Portfolio 3,243,435 2,617,746 1,938,878
Diversified Assets Portfolio 8,947,074 7,832,358 7,080,710
Tax-Exempt Portfolio 1,731,836 1,885,156 1,687,136
In addition, for the fiscal periods ended November 30 as indicated, Northern
waived additional advisory fees with respect to the Government Select Portfolio
in the amounts of $1,527,701, $1,157,788 and $853,605.
-24-
<PAGE>
For the fiscal periods ended November 30 as indicated, the amount of the
Transfer Agency Fee incurred by each Portfolio was as follows:
1997 1996 1995
-------- ------- --------
Government Select Portfolio $ 30,361 $22,274 $ 25,000
Government Portfolio 35,042 31,048 32,000
Diversified Assets Portfolio 127,270 64,579 110,000
Tax-Exempt Portfolio 22,028 14,883 32,000
For the fiscal periods ended November 30 as indicated, the amount of the
Custodian Fees incurred by each Portfolio was as follows:
1997 1996 1995
-------- -------- --------
Government Select Portfolio $ 97,683 $ 96,787 $ 75,122
Government Portfolio 140,110 131,957 101,086
Diversified Assets Portfolio 412,075 360,387 317,635
Tax-Exempt Portfolio 100,513 105,936 97,551
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 share of any Portfolio or result
in a financial loss to any shareholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing shares of an open-end investment company were relaxed, the Trust
expects that Northern and its affiliates would consider the possibility of
offering to perform some or all of the services now provided by
-25-
<PAGE>
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 and its
affiliates 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.)
Portfolio Transactions
During the fiscal year ended November 30, 1997, 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.,
Lehman Brothers, Inc., Nomura Securities, and SBC Warburg Inc., each a regular
broker/dealer. At November 30, 1997, 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: Donaldson, Lufkin & Jenrette
Securities, Inc., with an approximate aggregate market value of $200,000,000.
During the fiscal year ended November 30, 1997, the Government Portfolio
acquired and sold securities of Bear Stearns & Co., J.P. Morgan Securities,
Inc., Nomura Securities, UBS Securities, Donaldson, Lufkin & Jenrette
Securities, Inc., HSBC Securities, Inc., Lehman Brothers, Inc., SBC Warburg
Inc., Prudential Securities Incorporated and Merrill Lynch & Co., Inc., each a
regular broker/dealer. At November 30, 1997, 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: Donaldson, Lufkin & Jenrette,
with an approximate aggregate market value of $100,000,000; HSBC Securities,
Inc., with an approximate aggregate market value of $2,000,000; SBC Warburg
Inc., with an approximate aggregate market value of $100,000,000;
-26-
<PAGE>
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 the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to shareholders,
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 shares), 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:
1997 1996 1995
---------- ---------- ----------
Government Select Portfolio $1,048,482 $ 897,049 $ 751,804
Government Portfolio 1,208,401 1,036,172 895,112
Diversified Assets Portfolio 3,082,370 2,079,083 1,928,672
Tax-Exempt Portfolio 749,232 885,446 828,163
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs 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
shareholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
Goldman Sachs has agreed for the current fiscal year to reimburse each Portfolio
for the sum of the Portfolios' expenses (including fees payable to Goldman Sachs
as administrator, but excluding the fees payable to Northern for its duties as
investment adviser and transfer agent, payments under the service plan for the
Portfolios'
-27-
<PAGE>
Service and Premier Share classes, and extraordinary expenses) which exceed on
an annualized basis .10% of each Portfolio's average daily net assets. Prior to
May 1, 1997, this undertaking was voluntary with respect to the Portfolios. As
of May 1, 1997, this undertaking is contractual with respect to all Portfolios.
For the fiscal periods ended November 30 as indicated, and prior to May 1, 1997,
Goldman Sachs 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 other expense by the following amounts:
1997 1996 1995
-------- -------- --------
Government Select Portfolio $360,250 $364,826 $346,936
Government Portfolio 262,895 305,696 369,546
Diversified Assets Portfolio 477,791 0 0
Tax-Exempt Portfolio 305,530 382,218 389,481
Effective April 1, 1998, (upon the offering of the Service and Premier Shares),
Goldman Sachs will reimburse "other expenses" of each Portfolio (including fees
payable to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as adviser and transfer agent, payments under the
service plan for Service and Premier Shares, and certain extraordinary expenses)
exceeds on an annualized basis .10% of each Portfolio's average daily net
assets.
Unless sooner terminated, the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 1999, 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 shares 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 shareholder 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
shareholders 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.
-28-
<PAGE>
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 LLP, 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, 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 shares of a Portfolio may, at 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 Service Shares and Premier Shares, and
"tax-equivalent yields" with respect to Service Shares and Premier Shares 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. Yield, effective yield and tax equivalent yield are computed
separately for each class of shares. Each class of shares has different fees
and expenses, and consequently, may have different yields for the same period.
In arriving at such quotations as to "yield," the Trust first determines the net
change
-29-
<PAGE>
during the period in the value of a hypothetical pre-existing account having a
balance of one Service Share or Premier Share at the beginning of the period
(such net change being inclusive of the value of any additional shares of the
same class issued in connection with distributions of net investment income as
well as net investment income accrued on both the original share and any such
additional shares, 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 Service Shares and Premier Shares 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. 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 shares of the Portfolios are not reflected in the
calculation of yields for the Portfolios.
Each Portfolio's yields fluctuate, 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 indicative 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 class of shares of the Portfolio as compared to
comparable classes of shares of other money market funds and other investment
vehicles. However, yields of comparable classes of shares 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 the total return of its Service
Shares or Premier Shares in accordance with SEC regulations.
-30-
<PAGE>
The yields and total returns of each class of shares of a Portfolio will be
calculated separately from the yields and total returns of the other share
classes.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset value
of $1.00 per share 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 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 share. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per share and the net asset value
per share 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
shareholders, the Trust will take action in accordance
-31-
<PAGE>
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
shareholder income accruals, redeeming shares in kind, or utilizing a net asset
value per share 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 shareholders which might arise from Market Value
Differences. In particular, if losses were sustained by a Portfolio, the number
of outstanding shares might be reduced in order to maintain a net asset value
per share of $1.00. Such reduction would be effected by having each shareholder
proportionately contribute to the Portfolio's capital the necessary shares to
restore such net asset value per share. Each shareholder 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 share 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 SERVICE SHARES AND PREMIER SHARES
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional shares 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
eighteen series which represent interests in the eighteen respective portfolios.
The Trust Agreement also permits the Board of Trustees to classify or reclassify
any unissued shares into classes within a series. Pursuant to such authority,
the Trustees have authorized the issuance of an unlimited number of shares of
beneficial interest in three separate classes of shares in each of the
Portfolios: Shares, Service Shares and Premier Shares. This Additional
Statement (and the related Prospectus) relates only to the Service Shares and
Premier Shares of the four Portfolios described herein. For information on the
other class of shares in each Portfolio and
-32-
<PAGE>
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 share of each Portfolio is without
par value, represents an equal proportionate interest in the particular
Portfolio with each other share 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,
shareholders of each class of a Portfolio are entitled to share pro rata in the
net assets belonging to that class available for distribution. Shares do not
have any preemptive or conversion rights. The right of redemption is described
under "Investing-Redemption of Shares" 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 shareholder to redeem shares 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 shareholders of the Portfolio. The
Trust may also suspend or postpone the recordation of the transfer of its shares
upon the occurrence of any of the foregoing conditions. In addition, shares 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 shareholders of the Portfolio. Shares 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 shares,
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
-33-
<PAGE>
majority of the outstanding shares 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 shares 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
are exempt from the separate voting requirements stated above. In addition,
shareholders of each of the classes in a particular investment portfolio have
equal voting rights except that only shares of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
shareholders (if any) relating to shareholder servicing expenses and transfer
agency fees that are payable by that class.
The Trust is not required to hold annual meetings of shareholders and does not
intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to shareholders, including the election of Trustees (this
method of voting being referred to as "dollar-based voting"). However, to the
extent required by the 1940 Act or otherwise determined by the Trustees, series
and classes of the Trust will vote separately from each other. Shareholders of
the Trust do not have cumulative voting rights in the election of Trustees.
Meetings of shareholders of the 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 shares entitled to vote at such meeting. The shareholders
of the Trust will have voting rights only with respect to the limited number of
matters specified in the Trust Agreement and such other matters as the Trustees
may determine or may be required by law.
The Trust Agreement authorizes the Trustees, without shareholder approval
(except as stated in the next paragraph), to cause the 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 Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a "master-feeder" structure by investing
substantially all of the assets of a series of the Trust in the securities of
another open-end investment company or pooled portfolio.
The Trust Agreement also authorizes the Trustees, in connection with the
merger, consolidation, termination or other reorganization
-34-
<PAGE>
of the Trust or any series or class, to classify the shareholders of any class
into one or more separate groups and to provide for the different treatment of
shares held by the different groups, provided that such merger, consolidation,
termination or other reorganization is approved by a majority of the outstanding
voting securities (as defined in the 1940 Act) of each group of shareholders
that are so classified.
The Trust Agreement permits the Trustees to amend the Trust Agreement without a
shareholder vote. However, shareholders of the Trust have the right to vote on
any amendment (i) that would adversely affect the voting rights of shareholders;
(ii) that is required by law to be approved by shareholders; (iii) that would
amend the voting provisions of the Trust Agreement; or (iv) that the Trustees
determine to submit to shareholders.
The Trust Agreement permits the termination of the Trust or of any series or
class of the Trust (i) by a majority of the affected shareholders at a meeting
of shareholders of the Trust, series or class; or (ii) by a majority of the
Trustees without shareholder approval if the Trustees determine that such action
is in the best interest of the Trust or its shareholders. The factors and
events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing the
Trust, or any series or class thereof, or affecting assets of the type in which
it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
Under the Delaware Business Trust Act (the "Delaware Act"), shareholders are not
personally liable for obligations of the Trust. The Delaware Act entitles a
shareholder of the Trust to the same limitation of liability as is available to
shareholders of private for-profit corporations. However, no similar statutory
or other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Trust or a shareholder is
subject to the jurisdiction of courts in such other states, those courts may not
apply Delaware law and may subject the shareholders to liability. To offset this
risk, the Trust Agreement (i) contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into or
executed by the Trust or its Trustees and (ii) provides for indemnification out
of the property of the applicable series of the Trust of any shareholder held
personally liable for the obligations of the Trust solely by reason of being or
having been a shareholder and not because of the shareholder's acts or omissions
or for some other reason. Thus, the risk of a shareholder incurring financial
loss beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present:
-35-
<PAGE>
(1) a court refuses to apply Delaware law; (2) the liability arises under tort
law or, if not, no contractual limitation of liability is in effect; and (3) the
applicable series of the Trust is unable to meet its obligations.
The Trust Agreement provides that the Trustees will not be liable to any person
other than the Trust or a shareholder and that a Trustee will not be liable for
any act as a Trustee. However, nothing in the Trust Agreement 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 Trust Agreement
provides for indemnification of Trustees, officers and agents of the Trust
unless the recipient is liable by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office.
The Trust Agreement provides that each shareholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
In addition to the requirements of Delaware law, the Trust Agreement provides
that a shareholder of the Trust may bring a derivative action on behalf of the
Trust only if the following conditions are met: (a) shareholders eligible to
bring such derivative action under Delaware law who hold at least 10% of the
outstanding shares of the Trust, or 10% of the outstanding shares of the series
or class to which such action relates, must join in the request for the Trustees
to commence such action; and (b) the Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis
of such claim. The Trust Agreement also provides that no person, other than the
Trustees, who is not a shareholder of a particular series or class shall be
entitled to bring any derivative action, suit or other proceeding on behalf of
or with respect to such series or class. The Trustees will be entitled to
retain counsel or other advisers in considering the merits of the request and
may require an undertaking by the shareholders making such request to reimburse
the Trust for the expense of any such advisers in the event that the Trustees
determine not to bring such action.
The Trustees may appoint separate Trustees with respect to one or more series or
classes of the Trust's shares (the "Series Trustees"). To the extent provided
by the Trustees in the appointment of Series Trustees, Series Trustees (a) may,
but are not required to, serve as Trustees of the Trust or any other series or
class of the Trust; (b) may have, to the exclusion of any other Trustee of the
Trust, all the powers and authorities of Trustees under the Trust Instrument
with respect to such series or class; and/or (c) may have no power or authority
with respect to any other
-36-
<PAGE>
series or class. The Trustees are not currently considering the appointment of
Series Trustees for the Delaware Trust.
Shares 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 __, 1998, the trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares 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 percent or more of the outstanding
shares of the Portfolios as of March __, 1998:
Percentage of
Number of Outstanding
Shares Shares
--------- -------------
GOVERNMENT SELECT PORTFOLIO _____
Midway National Bank
Arcadia Trust, N.A.
TAX-EXEMPT PORTFOLIO _____
Lor, Inc. Pooled Investment
Partnership
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 shareholders. 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
shareholders, 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 shareholders.
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 shareholders an amount equal to at least the
sum of 90% of its investment company taxable income and 90% of its net tax-
exempt
-37-
<PAGE>
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"). 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 shareholders 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. Under
the Taxpayer Relief Act of 1997, for capital gains on securities recognized
after July 28, 1997, the maximum tax rate for individuals is 20% if the property
was held more than 18 months; for property held for more than 12 months, but not
longer than 18 months, the maximum tax rate on capital gains continues to be
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 (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
shareholder (i) who has provided either an
-38-
<PAGE>
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. Shares 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 shareholders not later than 60
days after the close of the 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
-39-
<PAGE>
shareholders receiving dividends from the Portfolio with respect to such year.
Interest on indebtedness incurred by a shareholder to purchase or carry
Portfolio shares generally is not deductible for Federal income tax purposes if
the Portfolio's distributions are not subject to Federal income tax.
Foreign Investors
Foreign shareholders 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 shareholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign shareholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of shares or in respect of capital gain dividends, provided such
shareholder submits a statement, signed under penalties of perjury, attesting to
such shareholder's exempt status. Different tax consequences apply to a foreign
shareholder engaged in a U.S. trade or business. Foreign shareholders 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
shareholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Shareholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
SERVICE PLAN
The Trust, on behalf of the Portfolios, has adopted a Service Plan (the "Plan")
with respect to the Service Shares and Premier Shares. Under the Plan, the
Trust, on behalf of the Service Shares and the Premier Shares of each Portfolio,
is authorized to pay to Northern a monthly or quarterly service fee in respect
of (i) administrative support services performed and expenses incurred in
connection with such Portfolio's Service Shares and Premier Shares and (ii)
personal and account maintenance services performed and expenses incurred in
connection with such Portfolio's Premier Shares as set forth below. The fee
paid for such services (the "Service Fee")
-40-
<PAGE>
during any one year shall not exceed: (i) .33% of the average daily net asset
value of the Service Shares of such Portfolio and (ii) .58% of the average daily
net asset value of the Premier Shares of such Portfolio during such period;
provided, however, that the fee paid for personal and account maintenance
services and expenses shall not exceed .25% of the average daily net asset value
of the Premier Shares of such Portfolio for such period. Northern will
determine the amount of the Service Fee to be paid to one or more brokers,
dealers, other financial institutions or other industry professionals
(collectively, "Service Agents") and the basis on which such payments will be
made. Payments to a Service Agent will be subject to compliance by the Service
Agent with the terms of the related Plan agreement entered into by the Service
Agent. The Service Fees payable pursuant to this Plan shall not pertain to
services or expenses which are primarily intended to result in the sales of
Service Shares and Premier Shares.
Payments of the Service Fee with respect to Service Shares and Premier Shares
will be used to compensate or reimburse Northern and the Service Agents for
administrative support services and expenses, which may include without
limitation: (i) acting or arranging for another party to act, as recordholder
and nominee of Service Shares and Premier Shares of a Portfolio beneficially
owned by Customers; (ii) establishing and maintaining individual accounts and
records with respect to Service Shares and Premier Shares of a Portfolio owned
by Customers; (iii) processing and issuing confirmations concerning Customer
orders to purchase, redeem and exchange Service Shares and Premier Shares of a
Portfolio; (iv) receiving and transmitting funds representing the purchase price
or redemption proceeds of Service Shares and Premier Shares of a Portfolio; (v)
processing dividend payments on behalf of Customers; (vi) forwarding shareholder
communications from the Trust (such as proxy statements and proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices); (vii) providing such statistical and other information as may
be reasonably requested by the Trust or necessary for the Trust to comply with
applicable federal or state law; (viii) facilitating the inclusion of a
Portfolio in investment, retirement, asset allocation, cash management or sweep
accounts or similar programs or services offered to their Customers or to
Customers of other Service Agents; (ix) facilitating electronic or computer
trading and/or processing in a Portfolio to their Customers or to Customers of
other Service Agents; and (x) performing any other similar administrative
support services. Payments of the Service Fee with respect to the Premier
Shares will also be used to compensate or reimburse Northern and the Service
Agents for personal and account maintenance services and expenses, which may
include, without limitation: (i) providing facilities to answer inquiries and
respond to correspondence with Customers and other investors about the status of
their accounts or about other aspects of the Trust or the applicable Portfolio;
(ii) assisting Customers in completing application forms, selecting dividend and
other account options and
-41-
<PAGE>
opening custody accounts with the Service Agents; (iii) providing services to
Customers intended to facilitate, or improve their understanding of the benefits
and risks of, a Portfolio to Customers, including asset allocation and other
similar services; (iv) acting as liaison between Customers and the Trust,
including obtaining information from the Trust and assisting the Trust in
correcting errors and resolving problems; and (v) performing any similar
personal and account maintenance services.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Agent's receipt of compensation
paid by the Trust in connection with the investment of fiduciary funds in
Service or Premier Shares. Service Agents, including banks regulated by the
Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit
Insurance Corporation, and investment advisers and other money managers subject
to the jurisdiction of the SEC, the Department of Labor or state securities
commissions, are urged to consult legal advisers before investing fiduciary
assets in Service or Premier Shares.
The Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of such Plan or the related agreements, approved the Plan and
related agreement for each Portfolio at a meeting called for the purpose of
voting on such Plan and related agreement on January 27, 1998. The Plan and
related agreement will remain in effect until April 30, 1999 and will continue
in effect thereafter only if such continuance is specifically approved annually
by a vote of the Board of Trustees in the manner described above.
The Plan may not be amended to increase materially the amount to be spent for
the services described therein without approval of the Board of Trustees in the
manner described above. The Plan may be terminated as to the Service Class and
the Premier Class at any time by a majority of the non-interested Trustees. A
service agreement may be terminated at any time, without payment of any penalty,
by vote of a majority of the Trustees as described above or by any party to the
agreement on not more than sixty (60) days' written notice to any other party to
the agreement. Each service agreement shall terminate automatically if
assigned. While the Plan is in effect, the selection and nomination of those
Trustees who are not interested persons shall be committed to the non-interested
members of the Board of Trustees. The Board of Trustees has determined that, in
its judgment, there is a reasonable likelihood that the Plan will benefit each
Portfolio and holders of Service and Premier Shares of such Portfolio. The Plan
provides that the Board of Trustees will review, at least quarterly, a written
report of the amount expended under the Plan and the purposes of the
expenditures.
-42-
<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 shares 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 services and auditing fees and expenses, Service 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 shareholders 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.
The term "majority of the outstanding shares" 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 shares of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares 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.
-43-
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to the Portfolios'
shareholders for the fiscal year ended November 30, 1997 (the "Annual Report")
are hereby incorporated herein by reference. No other parts of the Annual
Report, including without limitation, "Managements' Discussion of Portfolio
Performance," are incorporated by reference herein and attached hereto. Copies
of the Annual Report may be obtained by writing to Goldman, Sachs & Co., 4900
Sears Tower, Chicago, IL 60606, or by calling Goldman Sachs toll-free at 800-
621-2550.
-44-
<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 IBCA, 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 that the obligor's capacity to meet its
financial commitment on the obligation is extremely strong. Bonds rated AA by
S&P demonstrate that the obligor's capacity to meet its financial commitment on
the obligation is strong, 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.
A-1
<PAGE>
Treasury debt. Securities rated AA are of high credit quality. 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 capacity for
timely payment of financial commitments, which is unlikely to be affected by
reasonably foreseeable events. AA bonds are considered to be investment grade
and of very high credit quality. These ratings denote a very low expectation of
investment risk and indicate very strong capacity for timely payment of
financial commitments. 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 F1+. 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: "Strong capacity to
pay principal and interest. Those issues determined to possess very strong
characteristics will be given a plus (+) designation." Municipal notes rated SP-
2 are deemed to have satisfactory capacity to pay principal and interest.
A-2
<PAGE>
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.
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 F1+, F1 and F2. F1+ securities
possess exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment. F1
securities possess very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree than issues
rated F1+. F2 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 F1+ and F1 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 senior debt obligations not having an original maturity in excess of
one year. 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 obligor's capacity to meet its financial
commitment is strong. Those issues for which the obligor's capacity to meet its
financial commitment is extremely strong will be denoted with a plus (+) sign
designation. The A-2 designation indicates that the obligor's capacity to meet
its financial commitment 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 D-1 and D-2. D&P
employs three designations, D-1 plus, D-1 and D-1 minus, within the highest
rating category. D-1 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. D-1
A-3
<PAGE>
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. D-1 minus 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.
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 Shared States commercial banks,
thrifts and non-bank banks; non-Shared States banks; and broker-dealers and
other financial institutions. 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.
A-4
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
Included in Part A:
Financial Highlights for the U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond, Intermediate Bond, International Bond,
Balanced, Equity Index, Diversified Growth, Focused Growth, Small Company Index,
International Growth, International Equity Index, Government Select, Government,
Diversified Assets and Tax-Exempt Portfolios.
Incorporated by reference into Part B are the following financial statements:
Statement of Investments as of November 30, 1997 for the U.S. Government
Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond, Intermediate
Bond, International Bond, Balanced, Diversified Growth, Equity Index, Focused
Growth, International Growth, International Equity Index and Small Company Index
Portfolios.
Statement of Investments as of November 30, 1997 for the Diversified Assets,
Government, Government Select and Tax-Exempt Portfolios.
Statement of Assets and Liabilities as of November 30, 1997 for the U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
Intermediate Bond, International Bond, Balanced, Diversified Growth, Equity
Index, Focused Growth, International Growth, International Equity Index and
Small Company Index Portfolios.
Statement of Assets and Liabilities as of November 30, 1997 for the Diversified
Assets, Government, Government Select and Tax-Exempt Portfolios.
Statement of Operations for the year ended November 30, 1997 for the U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
Intermediate Bond, International Bond, Balanced, Diversified Growth, Equity
Index, Focused Growth, International Growth, International Equity Index and
Small Company Index Portfolios.
Statement of Operations for the year ended November 30, 1997 for the Diversified
Assets, Government, Government Select and Tax-Exempt Portfolios.
Statement of Changes in Net Assets for the years ended November 30, 1997 and
November 30, 1996 for the U.S. Government Securities, Short-Intermediate Bond,
U.S. Treasury Index, Bond, Intermediate Bond, International Bond, Balanced,
Diversified Growth, Equity Index, Focused Growth, International Growth,
International Equity Index and Small Company Index Portfolios.
Statement of Changes in Net Assets for the years ended November 30, 1997 and
November 30, 1996 for the Diversified Assets, Government, Government Select and
Tax-Exempt Portfolios.
<PAGE>
(b) Exhibits
The following exhibits are incorporated herein by reference to Post-Effective
Amendment No. 31 to Registrant's Registration Statement on Form N-1A (the
"Registration Statement") (Accession No. 0000950130-96-001086), Post-Effective
Amendment No. 32 to such Registration Statement (Accession No. 0000950130-97-
000170), Post-Effective Amendment No. 33 to such Registration Statement
(Accession No. 0000950130-97-001306), Post-Effective Amendment No. 34 to such
Registration Statement (Accession No. 0000950130-97-002471), Post-Effective
Amendment No. 35 to such Registration Statement (Accession No. 0000950131-97-
005862), Post-Effective Amendment No. 36 to such Registration Statement
(Accession No. 0000950131-98-00216) and Post-Effective Amendment No. 37 to such
Registration Statement (Accession No. 0000950131-98-00512):
1- Agreement and Declaration of Trust dated July 1, 1997 (Accession No.
0000950131-98-00216).
2- By-Laws of the Registrant dated July 8, 1997 (Accession No. 0000950131-
98-00216).
4- Instruments Defining Rights of Shareholders (Articles IV, V and VII of
the Agreement and Declaration of Trust dated July 1, 1997, are
incorporated by reference to Exhibit 1 hereof) (Accession No. 0000950131-
98-00216).
5- Advisory Agreement dated October 5, 1990 between Registrant and The
Northern Trust Company (Accession No. 0000950130-96-001086).
5(a)- Addendum No. 1, dated June 8, 1992, to Investment Advisory Agreement,
dated October 5, 1990, between The Northern Trust Company and the
Registrant (Accession No. 0000950130-96-001086).
5(b)- Addendum No. 2 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(c)- Addendum No. 3 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(d)- Addendum No. 4 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(e)- Addendum No. 5 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-97-002471).
5(f)- Addendum No. 6 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950131-97-005862).
2
<PAGE>
5(h)- Form of Assumption Agreement between The Northern Trust Company and
Northern Trust Quantitative Advisors, Inc. (Accession No. 0000950131-98-
00216).
6(a)- Addendum No. 1 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
6(b)- Addendum No. 2 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
6(d)- Addendum No. 4 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co (Accession No. 0000950130-97-002471).
6(e)- Addendum No. 5 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950131-97-005862).
7 - Not Applicable.
8(a)- Addendum No. 1 to Custodian Agreement between the Registrant and The
Northern Trust Company (Accession No. 0000950130-96-001086).
8(b)- Addendum No. 2 to Custodian Agreement between Registrant and The Northern
Trust Company (Accession No. 0000950130-96-001086).
8(c)- Addendum No. 3 to Custodian Agreement between Registrant and The Northern
Trust Company (Accession No. 0000950130-97-002471).
8(d)- Addendum No. 4 to Custodian Agreement between Registrant and The Northern
Trust Company (Accession No. 0000950131-97-005862).
8(h)- Addendum No. 1 to Foreign Custody Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950130-97-002471).
9(b)- Addendum No. 1 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950130-96-001086).
9(c)- Addendum No. 2 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950130-96-001086).
9(d)- Addendum No. 3 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950130-97-002471).
9(e)- Addendum No. 4 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950131-97-005862).
9(i)- Unitholder Servicing Plan for Subseries B, C and D Units and Related Form
of Servicing Agreement for Subseries B, C and D Units (Accession No.
0000950131-98-00216).
9(j)- Service Plan for the Service Class and the Premier Class (Accession No.
0000950131-98-00512).
3
<PAGE>
12- Not Applicable.
14- Not Applicable.
15- Not Applicable.
18- Amended and Restated Plan pursuant to Rule 18f-3 for Operation of a
Multi-Class System (Accession No. 0000950131-98-00512).
The following exhibits relating to The Benchmark Funds are filed herewith
electronically pursuant to EDGAR rules:
1(a)- Form of Amendment No.1 to the Agreement and Declaration of Trust.
5(g)- Addendum No. 7 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company.
5(i)- Form of Investment Advisory Agreement among Registrant, The Northern
Trust Company and RCB Trust Company.
6- Distribution Agreement dated June 8, 1992 between Registrant and Goldman,
Sachs & Co.
6(c)- Addendum No. 3 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co.
6(f)- Addendum No. 6 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co.
8- Custodian Agreement dated June 8, 1992 between Registrant and The
Northern Trust Company.
8(e)- Addendum No. 5 to Custodian Agreement between Registrant and The Northern
Trust Company.
8(f)- Addendum No. 6 to Custodian Agreement between the Registrant and The
Northern Trust Company.
8(g)- Foreign Custody Agreement between the Registrant and The Northern Trust
Company.
8(i)- Addendum No. 2 to Foreign Custody Agreement between the Registrant and
the Northern Trust.
8(j)- Foreign Custody Monitoring Agreement between Registrant and The Northern
Trust Company.
9 - Agreement and Plan of Reorganization between Registrant and The Benchmark
Tax-Exempt Fund.
9(a)- Revised and Restated Transfer Agency Agreement between Registrant and The
Northern Trust Company, dated January 8, 1993.
4
<PAGE>
9(f)- Addendum No. 5 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company.
9(g)- Amended and Restated Administration Agreement between the Registrant and
Goldman Sachs & Co.
9(h)- Addendum No. 1 to Amended and Restated Administration Agreement between
the Registrant and Goldman Sachs & Co.
10- Opinion of Drinker, Biddle & Reath LLP.
11(a)- Consent of Counsel.
11(b)- Consent of Ernst & Young LLP.
13- Subscription Agreement with Goldman, Sachs & Co.
13(a)- Amendment No. 1 to Subscription Agreement with Goldman, Sachs & Co.
13(b)- Amendment No. 2 to Subscription Agreement with Goldman, Sachs & Co.
13(c)- Amendment No. 3 to Subscription Agreement with Goldman, Sachs & Co.
16- Schedule for computation of performance data for Equity Index Portfolio,
Diversified Growth Portfolio, U.S. Treasury Index Portfolio, Short-
Intermediate Bond Portfolio and Bond Portfolio.
16(a)- Schedule for computation of performance data for Diversified Assets
Portfolio, Government Portfolio, Government Select Portfolio and Tax-
Exempt Portfolio.
16(b)- Schedule for computation of performance data for U.S. Government
Securities Portfolio.
16(c)- Schedule for computation of performance data for Balanced Portfolio,
Diversified Growth Portfolio, Equity Index Portfolio, Focused Growth
Portfolio and Small Company Index Portfolio.
27- Financial Data Schedules for the U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, Intermediate Bond,
International Bond, Balanced, Equity Index, Diversified Growth, Focused
Growth, Small Company Index, International Growth, International Equity
Index, Government Select, Government, Diversified Assets and Tax-Exempt
Portfolios.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Registrant is controlled by its Board of Trustees.
5
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class March 20, 1998
- -------------- ----------------
Class A Class C Class D
------- ------- -------
<S> <C> <C> <C>
Equity Index Portfolio Units............. 1 1 1
Small Company Index Portfolio Units...... 1 1 1
Diversified Growth Portfolio Units ...... 1 N/A 1
Focused Growth Portfolio Units .......... 1 1 1
U.S. Treasury Index Portfolio Units...... 1 1 1
U.S. Government Securities Portfolio
Units................................... 1 N/A 1
Short-Intermediate Bond Portfolio Units.. 1 N/A 1
Bond Portfolio Units .................... 1 1 1
Intermediate Bond Portfolio Units........ 1 N/A N/A
Balanced Portfolio Units ................ 1 1 1
International Growth Portfolio Units .... 1 1 1
International Bond Portfolio Units ...... 1 N/A 1
International Equity Index Portfolio
Units................................... 4 N/A N/A
Government Select Portfolio Units ....... 1 N/A N/A
Government Portfolio Units .............. 1 N/A N/A
Diversified Assets Portfolio Units ...... 1 N/A N/A
Tax-Exempt Portfolio Units............... 1 N/A N/A
</TABLE>
Item 27. Indemnification
---------------
Section 3 of Article IV of the Registrant's Agreement and Declaration of Trust
provide for indemnification of the Registrant's Trustees and officers under
certain circumstances. A copy of such Agreement and Declaration of Trust was
filed as Exhibit 1 to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A.
Paragraph 7 of the Advisory Agreement between the Registrant and The Northern
Trust Company provides for indemnification of The Northern Trust Company or, in
lieu thereof, contribution by the Registrant, under certain circumstances. A
copy of the Advisory Agreement was filed as Exhibit 5 to Post-Effective
Amendment No. 31 to Registrant's Registration Statement on Form N-1A.
Paragraph 7 of the Amended and Restated Administration Agreement between the
Registrant and Goldman, Sachs & Co. provides for indemnification of Goldman,
Sachs & Co. or, in lieu thereof, contribution by the Registrant, under certain
circumstances. A copy of the Amended and Restated Administration Agreement is
filed herewith as Exhibit 9(g).
A mutual fund and trustee and officer liability policy purchased jointly by the
Registrant and other investment companies advised and/or distributed by Goldman,
Sachs & Co. insures such persons and their respective Trustees, partners,
officers and employees, subject to the policy's coverage limits and exclusions
and varying deductibles, against loss resulting from claims by reason of any
act, error, omission, misstatement, misleading statement, neglect or breach of
duty.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The Northern Trust Company, Registrant's investment adviser, is a full
6
<PAGE>
service commercial bank and also provides a full range of trust and fiduciary
services. Set forth below is a list of all of the directors, senior officers and
those officers primarily responsible for Registrant's affairs of The Northern
Trust Company and, with respect to each such person, the name and business
address of the company (if any) with which such person has been connected at any
time since June 1, 1990, as well as the capacity in which such person was
connected.
Northern Trust Quantitative Advisors, Inc. ("NTQA") is an indirect wholly-owned
subsidiary of Northern Trust Corporation. The list required by this Item 28 of
officers and directors of NTQA, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV, filed by NTQA pursuant to the
Investment Advisers Act of 1940 (SEC File No. 801-333580).
7
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- -------------------------- ---------------
<S> <C> <C>
Duane L. Burnham Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60605
Abbott Laboratories Chairman and
100 Abbott Park Road Chief Executive
Abbott Park, IL 60064-3500 Officer
Dr. Dolores E. Cross Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
Chicago State Former President
University
95th Street at King Drive
Chicago, IL 60643
General Electric Company President,
3135 Easton Turnpike GE Fund
Fairfield, CT 06432
Susan Crown Northern Trust Corporation Director
Director 50 S. LaSalle Street
Chicago, IL 60675
Henry Crown and Company Vice President
222 N. LaSalle Street
Ste 2000
Chicago, IL 60601
John R. Goodwin Northern Trust Director,
Senior Vice President Quantitative Advisor, Inc. Managing
50 South LaSalle Street Director, Chief
Chicago, IL 60675 Investment
Officer
Robert S. Hamada Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
The University Edward Eagle
of Chicago Brown
Graduate School of Distinguished
Business Service
1101 East 58th Street Professor of
Chicago, IL 60637 Finance
A.M. Castle & Co. Director
3400 North Wolf Road
Franklin Park, IL 60131
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- --------------------------- -------------------------- ---------------
<S> <C> <C>
Robert S. Hamada (cont'd) Chicago Board of Trade Director
141 West Jackson Boulevard
Chicago, IL 60604
Barry G. Hastings Northern Trust President &
President, Chief Corporation Chief Operating
Operating Officer & 50 S. LaSalle Street Officer &
Director & Former Chicago, IL 60675 Director
Vice Chairman and
Senior Northern Trust Director
Executive Vice Securities, Inc.
President 50 S. LaSalle Street
Chicago, IL 60675
Northern Trust of Director
California Corporation
355 S. Grand Avenue
Los Angeles, CA 90017
Northern Trust Vice Chairman
of Florida of the Board
Corporation & Directors
700 Brickell Avenue
Miami, FL 33131
Nortrust Realty Director
Management, Inc.
50 South LaSalle Street
Chicago, IL 60675
Robert A. Helman Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
Mayer, Brown & Platt Partner
190 S. LaSalle Street,
38th/ Fl.
Chicago, IL 60603
Chicago Stock Exchange Governor
One Financial Plaza
440 S. LaSalle St.
Chicago, IL 60605
The Horsham Director
Corporation
24 Hazelton Avenue
Toronto, Ontario,
Canada
M5R 2E2
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------- -------------
<S> <C> <C>
Robert A. Helman Alberta Natural Gas Director
(cont'd) Company, Ltd.
2900, 240 Fourth Ave., N.W.
Calgary, Alberta
Canada T2P 4L7
Brambles USA, Inc. Director
400 N. Michigan Avenue
Chicago, IL 60611
Arthur L. Kelly Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
KEL Enterprises Ltd. Managing
Two First National Plaza Partner
20 S. Clark Street
Ste. 2222
Chicago, IL 60603
Bayerische Motoren Director
Werke(BMW) A.G. BMW Haus
Petuelring 130
Postfach 40 02 40
D-8000
Munich 40 Germany
Deere & Company Director
John Deere Rd.
Moline, IL 61265
Nalco Chemical Director
Company
One Nalco Center
Naperville, IL
60563-1198
Snap-on Incorporated Director
2801 80th Street
Kenosha, WI 53140
Tejas Gas Corporation Director
1301 McKinney St.
Houston, TX 77010
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ----------------------- ----------------- ---------------
<S> <C> <C>
Frederick A. Krehbiel Northern Trust Director
Director Corporation
50 South LaSalle Street
Chicago, IL 60675
Molex Incorporated Chairman and
2222 Wellington Court Chief Executive
Lisle, IL 60532-1682 Officer, Former
Vice Chairman
Nalco Chemical Company Director
One Nalco Center
Naperville, IL 60563-1198
Tellabs, Inc. Director
4951 Indiana Avenue
Lisle, IL 60532
Roger W. Kushla The Northern Trust Director
Senior Vice President Company of New York
40 Broad Street, 8th Fl.
New York, NY 10004
Robert A. LaFleur None
Senior Vice President
Thomas L. Mallman None
Senior Vice President
James J. Mitchell, III The Northern Trust Director
Executive Vice Company of New York
President 40 Broad Street, 8th Fl.
New York, NY 10004
The Northern Trust Director
Corporation
50 S. LaSalle Street
Chicago, IL 60675
William G. Mitchell Northern Trust Director
Director Corporation
50 South LaSalle Street
Chicago, IL 60675
The Interlake Corporation Director
7701 Harger Road
Oak Brook, IL
60521-1488
Peoples Energy Director
Corporation
122 South Michigan Ave
Chicago, IL 60603
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ----------------------- ----------------- ---------------
<S> <C> <C>
William G. Mitchell The Sherwin-Williams Director
(cont'd) Company
101 Prospect Avenue, N.W.
Cleveland, OH 44115-1075
Edward J. Mooney Northern Trust Corporation Director
Director 50 S. LaSalle
Chicago, IL 60675
Nalco Chemical Company Chairman, Chief
One Nalco Center Executive
Naperville, IL Officer,
60563-1198 President &
Director
Morton International, Inc. Director
100 North Riverside Plaza
Chicago, Il 60605
William A. Osborn Northern Trust Director
Chairman and Corporation
Chief Executive 50 S. LaSalle Street
Officer, Chicago, IL 60675
Former President
and Chief Operating
Officer & Former Senior Northern Trust of Director
Executive Vice California Corporation and Former
President 355 S. Grand Avenue Chairman of
Los Angeles, CA 90017 the Board
Northern Trust Bank of Former Chairman
California N.A. of the Board
355 S. Grand Avenue
Los Angeles, CA 90017
Nortrust Realty Director
Management Inc.
50 S. LaSalle St.
Chicago, IL 60675
Northern Futures Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
Sheila A. Penrose Northern Trust Global Director
Executive Vice Advisors, Inc.
President 29 Federal Street
Stamford, CT 06901
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ----------------------- ----------------- ---------------
<S> <C> <C>
Sheila A. Penrose Northern Trust Retirement Manager
(cont'd) Consulting, LLC
400 Perimeter Center Terrace
Suite 850
Atlanta, GA 30346
Northern Trust Corporation Director
50 S. LaSalle Street
Chicago, IL 60675
Northern Trust Director
Quantitative Advisors, Inc.
50 South LaSalle Street
Chicago, IL 60675
Perry R. Pero Northern Futures Director
Senior Executive Corporation
Vice President, 50 South LaSalle Street
Chief Financial Chicago, IL 60675
Officer
Northern Investment Former Chairman,
Corporation President
50 South LaSalle Street and Director
Chicago IL 60675 Former Treasurer
Northern Trust Global Director
Advisors, Inc.
29 Federal Street
Stamford ST 06901
Northern Trust Director
Securities, Inc.
50 South LaSalle Street
Chicago, IL 60675
Nortrust Realty Director
Management, Inc.
50 South LaSalle Street
Chicago, IL 60675
Northern Trust Corporation Director
50 S. LaSalle Street
Chicago, IL 60675
Northern Trust Director
Quantitative Advisors, Inc.
50 South LaSalle Street
Chicago, IL 60675
Stephen N. Potter Northern Trust Director,
Senior Vice President Quantitative Advisors, Inc. Managing Director
50 S. LaSalle Street
Chicago, IL 60675
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ----------------------- ----------------- ---------------
<S> <C> <C>
Peter L. Rossiter Schiff, Hardin Former
Executive Vice & Waite Partner
President and General 7200 Sears Tower
Counsel Chicago, IL 60606
Tanglewood Bancshares Former Vice
Inc President and
600 Bering Dr. Director
Houston, TX 77057
Consolidated Director
Communications Inc.
Illinois Consolidated
Telephone Company
121 S. 17th St.
Mattoon, IL 61938
Northern Trust Executive
Corporation Vice
50 South LaSalle President and
Street General
Chicago, IL 60675 Counsel
Harold B. Smith Illinois Tool Chairman of
Director Works Inc. the Executive
3600 West Lake Committee
Avenue
Glenview, IL
60025-5811
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
W. W. Grainger, Inc. Director
5500 West Howard Street
Skokie, IL 60077
Northwestern Mutual Trustee
Life Insurance Co.
720 East Wisconsin Avenue
Milwaukee, WI 53202
William D. Smithburg The Quaker Oats Retired Chairman
Director Company
321 North Clark Street
Chicago, IL 60610
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ----------------------- ----------------- ---------------
<S> <C> <C>
William D. Smithburg Abbott Laboratories Director
(cont'd) One Abbott Park Road
Abbott Park, IL 60675
Corning Incorporated Director
Corning, NY 14831
Prime Capital Director
Corporation
P.O. Box 8460
Rolling Meadows,
IL 60008
James M. Snyder Northern Trust Chairman, CEO
Executive Vice Quantitative Advisors, Inc. and Director
President 50 S. LaSalle Street
Chicago, IL 60675
Bide L. Thomas Northern Trust Director
Director Corporation
50 South LaSalle Street
Chicago, IL 60675
Commonwealth Edison Former
Company President
One First National and a
Plaza Former
Chicago, IL 60603 Director
MYR Group Inc. Director
*(formerly L.E. Myers
Company)
2550 W. Golf Rd.
Rolling Meadows, IL 600008
R. R. Donnelley Director
& Sons Company
77 West Wacker Drive
Chicago, IL 60601
Jeffrey H. Wessel Northern Trust President,
Executive Vice President Quantitative Advisors, Inc. Director
50 S LaSalle
Chicago, IL 60675
</TABLE>
* Name change
Item 29. Principal Underwriters
----------------------
(a) Goldman, Sachs & Co., or an affiliate or a division thereof, currently
serves as investment adviser and distributor of the units or shares of
Goldman Sachs Trust, Goldman Sachs Variable Insurance Trust and Trust for
Credit Unions. Goldman, Sachs & Co., or a division thereof, currently
serves as administrator and distributor for The Benchmark Funds and The
Commerce Funds.
15
<PAGE>
(b) Set forth below is certain information pertaining to the executive
committee of Goldman, Sachs & Co., Registrant's principal underwriter. None
of the members of the executive committee hold positions or offices with
the Registrant.
GOLDMAN SACHS EXECUTIVE COMMITTEE
Name and Principal
Business Address Position
---------------- --------
Jon S. Corzine (1) Chief Executive Officer
Robert J. Hurst (1) Managing Director
Henry M. Paulson, Jr.(1) Chief Operating Officer
John A. Thain (1)(3) Chief Financial Officer
John L. Thornton (3) Managing Director
Roy J. Zuckerberg (2) Managing Director
______________________
(1) 85 Broad Street, New York, NY 10004
(2) One New York Plaza, New York, NY 10004
(3) Peterborough Court, 133 Fleet Street, London EC4A 2BB,
England
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
The Agreement and Declaration of Trust, By-laws and minute books of the
Registrant are in the physical possession of Goldman, Sachs & Co., Goldman Sachs
Asset Management, 85 Broad Street, New York, New York, 10004. Records relating
to Goldman, Sachs & Co.'s functions as distributor and administrator for the
Registrant are located at the same address. All other accounts, books and other
documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of The Northern Trust Company, 50 S. LaSalle Street, Chicago,
Illinois 60675 and NTQA, 50 S. LaSalle Street, Chicago IL 60690.
Item 31. Management Services
-------------------
Not Applicable.
Item 32. Undertakings
------------
(a) The Annual Report will contain certain performance information and is
available to any recipient of the Prospectuses upon request and without
charge by writing to Goldman, Sachs & Co., 4900 Sears Tower, Chicago,
Illinois 60606.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this Post-Effective Amendment No. 38
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 38 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City and
State of New York on the 25th day of March 1998.
THE BENCHMARK FUNDS
By: /s/ Michael J. Richman
------------------------
Michael J. Richman
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- --------- --------------
<S> <C> <C>
SCOTT M. GILMAN * Treasurer March 25, 1998
- --------------------- and Chief
Scott M. Gilman Executive Officer
WILLIAM H. SPRINGER * Trustee March 25, 1998
- ---------------------
William H. Springer
RICHARD G. CLINE * Trustee March 25, 1998
- ---------------------
Richard G. Cline
EDWARD J. CONDON * Trustee March 25, 1998
- ---------------------
Edward J. Condon
JOHN W. ENGLISH * Trustee March 25, 1998
- ---------------------
John W. English
SANDRA P. GUTHMAN * Trustee March 25, 1998
- ---------------------
Sandra P. Guthman
FREDERICK T. KELSEY * Trustee March 25, 1998
- ---------------------
Frederick T. Kelsey
RICHARD P. STRUBEL * Trustee March 25, 1998
- ---------------------
Richard P. Strubel
*By: /s/ Michael J. Richman March 25, 1998
- ---------------------------------
Michael J. Richman,
Attorney-in-fact
</TABLE>
17
<PAGE>
Exhibit 1(a)
THE BENCHMARK FUNDS
(a Delaware business trust)
AMENDMENT NO. 1 TO THE AGREEMENT AND DECLARATION OF TRUST
The undersigned hereby certifies that the following resolutions were
duly adopted by the Board of Trustees of The Benchmark Funds (the "Delaware
Trust") on January 27, 1998:
RESOLVED, that pursuant to Article V of the Agreement and
Declaration of Trust of the Delaware Trust, an unlimited number of
authorized, unissued and unclassified shares of beneficial interest of
the Delaware Trust be, and hereby are, classified into: (i) four
separate classes of shares designated as Class A, Class B, Class C and
Class D Shares in the U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond, Intermediate Bond, International
Bond, Balanced, Equity Index, Diversified Growth, Focused Growth,
Small Company Index, International Equity Index, International Growth
and Global Asset Portfolios; and (ii) three separate classes of shares
designated as Shares, Service Class Shares and Premier Class Shares in
the Government Select, Government, Diversified Assets and Tax-Exempt
Portfolios;
FURTHER RESOLVED, that each share of each such class of the
Portfolios shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations, qualifications and
terms and conditions of redemption that are set forth in the Agreement
and Declaration of Trust of the Delaware Trust with respect to its
shares of beneficial interest; and
FURTHER RESOLVED, that the officers of the Delaware Trust be, and
each hereby is, authorized and empowered to execute and deliver any
and all documents, instruments, papers and writings, including, but
not limited to, any instrument to be filed with the Secretary of State
of the State of Delaware, and to do any and all other acts, in the
name of the Delaware Trust and on its behalf, as he, she or they may
deem necessary or desirable in connection with or in furtherance of
the foregoing resolutions.
Date: February __, 1998
---------------------------------
Michael J. Richman
Secretary
<PAGE>
Exhibit 5(g)
THE BENCHMARK FUNDS
ADDENDUM NO. 7 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 27th day of January, 1998, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY (the "Investment Adviser"), and Illinois state bank.
WHEREAS, the Trust and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of October 5, 1990 as amended by Addendum
No. 1 dated June 8, 1992, Addendum No. 2 dated January 8, 1993, Addendum No. 3
dated July 1, 1993, Addendum No. 4 dated March 25, 1994, Addendum No. 5 dated
January 22, 1997 and Addendum No. 6 dated April 22, 1997 (the "Advisory
Agreement"), pursuant to which the Trust appointed the Investment Adviser to act
as investment adviser to the Trust for the Diversified Assets Portfolio,
Government Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, U.S.
Treasury Index Portfolio, U.S. Government Securities Portfolio,
Short-Intermediate Bond Portfolio, Bond Portfolio, Intermediate Bond Portfolio,
Equity Index Portfolio, Small Company Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, Balanced Portfolio, International Growth
Portfolio, International Bond Portfolio and International Equity Index
Portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Trust establishes one or more additional investment portfolios with respect
to which it desires to retain the Investment Adviser to act as investment
adviser under the Advisory Agreement, the Trust shall so notify the Investment
Adviser in writing and if the Investment Adviser is willing to render such
services it shall notify the Trust in writing, and the compensation to be paid
to the Investment Adviser shall be that which is agreed to in writing by the
Trust and the Investment Adviser, and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Trust has
notified the Investment Adviser that it is establishing the Global Asset
Portfolio (the "Portfolio"), and that it desires to retain the Investment
Adviser to act as the investment adviser therefor, and the Investment Adviser
has notified the Trust that it is willing to serve as investment adviser for the
Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Trust for the Portfolio for the period
and on the terms set forth in the Advisory Agreement. The Investment
Adviser hereby accepts such appointment and agrees to render the
services set forth in the Advisory Agreement for the compensation
herein provided. Without limiting the generality of the foregoing, the
Investment Adviser shall (i) evaluate the attributes of any investment
company in which the Portfolio may invest and (ii) determine the
amount of the Portfolio's assets that are invested in any one or more
investment companies from time to time.
2. Duties. The Investment Adviser shall perform the following duties with
respect to common and preferred stocks of the Portfolio in lieu of
clauses (ii) and (iii) of paragraph 3(a) of the Advisory Agreement:
(a) The Investment Adviser shall place orders pursuant to its
determination either directly with the issuer or with any broker
and/or dealer or other persons who deal in the securities in which the
portfolio in question is trading. In executing portfolio transactions
and selecting brokers or dealers, the Investment Adviser shall use its
best judgment to obtain the best overall terms available. In assessing
the best overall terms available for any transaction, the Adviser
shall consider all factors it deems relevant, including the breadth of
the market in the
1
<PAGE>
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,
the Adviser may also consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to any Portfolio and/or other accounts over
which the Adviser and/or an affiliate of the Adviser exercises
investment discretion;
(b) The Investment Adviser may, on occasions when it deems the
purchase or sale of a security to be in the best interests of a
Portfolio as well as other fiduciary or agency accounts managed by the
Investment Adviser, aggregate, to the extent permitted by applicable
laws and regulations, the securities to be sold or purchased in order
to obtain best overall terms available 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 the Investment
Adviser in the manner it considers to be most equitable and consistent
with its fiduciary obligations to such Portfolio and to such other
accounts.
3. Compensation. For the services provided and the expenses assumed
pursuant to the Advisory Agreement, the Trust will pay the Investment
Adviser, and the Investment Adviser will accept as full compensation
therefor from the Trust, a fee at an annual rate of .60% of average
net assets for the Global Asset Portfolio. The fee will be computed
based on net assets on each day and will be paid to the Investment
Adviser monthly. Such fee as is attributable to the Portfolio shall be
a separate charge to such Portfolio and shall be the several (and not
joint or joint and several) obligation of the Portfolio.
4. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to
include the Global Asset Portfolio. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to them in the
Advisory Agreement.
5. Miscellaneous. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect, and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: By: /s/ Nancy L. Mucker
------------- ---------------------------------
Name: Nancy L. Mucker
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By: /s/ Thomas L. Mallman
------------- ---------------------------------
[Corporate Seal] Name: Thomas L. Mallman
Title: Senior Vice President
2
<PAGE>
Exhibit 5(i)
THE BENCHMARK FUNDS
INVESTMENT ADVISORY AGREEMENT
(International Growth Portfolio)
AGREEMENT made this ____ day of ________, 199_ among THE BENCHMARK FUNDS, a
Massachusetts business trust (the "Trust"), THE NORTHERN TRUST COMPANY, an
Illinois state bank ("Northern"), and RCB TRUST COMPANY, a Connecticut state-
chartered trust company ("RCB Trust").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust presently offers Units in a portfolio known as the
International Growth Portfolio (such Portfolio (the "Current Portfolio")
together with all other portfolios hereafter made subject to this Agreement
being herein collectively referred to as the "Portfolios"); and
WHEREAS, the Trust desires to retain Northern and RCB Trust (the
"Advisers") to render investment advisory services to the Current Portfolio as
indicated below and the Advisers are willing to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Advisers.
-----------------------
(a) The Trust hereby appoints the Advisers to act as investment
advisers to the Current Portfolio for the period and on the
terms herein set forth. The Advisers hereby accept such
appointment and agree to render the services herein set
forth for the compensation herein provided.
(b) In the event that the Trust establishes one or more
portfolios other than the Current Portfolio with respect to
which it desires to
<PAGE>
retain the Advisers to act as investment advisers hereunder,
it shall notify the Advisers in writing. If the Advisers are
willing to render such services under this Agreement they
shall notify the Trust in writing whereupon such portfolio
shall become a Portfolio hereunder and shall be subject to
the provisions of this Agreement to the same extent as the
Current Portfolio except to the extent that said provisions
(including those relating to the compensation payable by the
Trust to the Advisers) are modified with respect to such
Portfolio in writing by the Trust and the Advisers at the
time.
2. Delivery of Documents. The Trust has delivered (or will deliver as
soon as is possible) to the Advisers copies of each of the following documents:
(a) Agreement and Declaration of Trust dated as of July 15,
1982, together with all Amendments thereto (such Agreement
and Declaration of Trust, as presently in effect and as
amended from time to time, is herein called the "Trust
Agreement"), copies of which are also on file with the
Secretary of The Commonwealth of Massachusetts;
(b) By-Laws of the Trust (such By-Laws, as presently in effect
and as amended from time to time, are herein called the "By-
Laws");
(c) Administration Agreement between the Trust and its
Administrator;
(d) Distribution Agreement between the Trust and its
Distributor;
(e) Custodian Agreement between the Trust and its Custodian;
(f) Transfer Agency Agreement between the Trust and its Transfer
Agent;
(g) The Trust's Unitholder Servicing Plan and related Servicing
Agreements;
(h) Prospectus and Statement of Additional Information for the
Current Portfolio (such Prospectus and Statement of
Additional Information, as presently in effect and as
amended, supplemented and/or superseded from
-2-
<PAGE>
time to time, is herein called the "Prospectus" and
"Statement of Additional Information," respectively); and
(i) Post-Effective Amendment No. 34 to the Trust's Registration
Statement on Form N-1A (No. 2-80543) under the Securities
Act of 1933 (the "1933 Act") and Amendment No. 35 to the
Trust's Registration Statement on such form (No. 811-3605)
under the 1940 Act filed as a single document with the
Securities and Exchange Commission (the "SEC") (such
Registration Statement, as presently in effect and as
amended from time to time, is herein called the
"Registration Statement").
The Trust agrees to promptly furnish the Advisers from time to time
with copies of all amendments of or supplements to or otherwise current versions
of any of the foregoing documents not heretofore furnished.
3. Duties of Advisers and Delegation.
---------------------------------
(a) Subject to the general supervision of the Trustees of the
Trust, the Advisers shall provide for the management of the
investment operations of a Portfolio and the composition of
a Portfolio's assets, including the purchase, retention and
disposition thereof. In this regard, the Adviser shall
provide for:
(i) a continuous investment program for a Portfolio, the
determination from time to time of which investments or
securities will be purchased, retained or sold by a
Portfolio and which portion of the assets will be
invested or held uninvested as cash, and the
supervision of a Portfolio's assets; and
(ii) the placement of orders for a Portfolio either directly
with the issuer or with any broker and/or dealer or
other persons who deal in the securities in which the
Portfolio in question is dealing. Any person executing
portfolio transactions or selecting brokers or dealers
for a Portfolio shall use its best judgment to obtain
the best overall terms available. In assessing the
best overall terms available for any
-3-
<PAGE>
transaction, all factors deemed relevant may be
considered, including the breadth of the market in the
security, the price of the security, the financial
condition and execution capability of the broker or
dealer, and the 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, the brokerage and
research services (as those terms are defined in
section 28(e) of the Securities Exchange Act of 1934)
provided to the Portfolio and/or other accounts over
which an Adviser, sub-adviser and/or affiliate
exercises investment discretion may be considered. In
addition, any person executing portfolio transactions
may, when it deems the purchase or sale of a security
to be in the best interests of a Portfolio as well as
other fiduciary or agency accounts managed by it,
aggregate, to the extent permitted by applicable laws
and regulations, the securities to be sold or purchased
in order to obtain best overall terms available
execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred
in the transaction, will be made in the manner
considered to be most equitable and consistent with the
fiduciary obligations owed to the Portfolio and to such
other accounts.
(b) The Advisers shall perform their duties under this Agreement
either by taking such actions themselves or by delegating
some or all of their duties to one or more sub-advisers
pursuant to a written sub-advisory agreement or agreements.
Each such sub-advisory agreement shall be approved by the
Board of Trustees of the Trust and the unitholders of the
Portfolio in accordance with and to the extent required by
the 1940 Act or any rule or order of the SEC. The Advisers
will be solely responsible for payment of any fees,
compensation or expenses to any such sub-adviser under any
such sub-advisory agreement, and a Portfolio shall have no
-4-
<PAGE>
liability therefor. Notwithstanding the delegation of any
of their duties to any sub-adviser, the Advisers, subject to
review and approval by the Board of Trustees of the Trust,
shall:
(i) set a Portfolio's overall investment strategies;
(ii) monitor and evaluate the performance of sub-
advisers;
(iii) recommend to the Board of Trustees whether an
agreement with any proposed or current sub-adviser
should be approved, modified or terminated;
(iv) as deemed appropriate by the Advisers, allocate and
re-allocate a Portfolio's assets among sub-advisers;
and
(v) oversee compliance by a Portfolio's sub-advisers with
the Portfolio's investment objective, policies and
restrictions.
4. Other Covenants.
---------------
(a) The Advisers, in connection with their rights and duties
with respect to a Portfolio,
(i) shall use the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a
like character and with like aims; and
(ii) shall act in conformity with the Trust Agreement, By-
Laws, Registration Statement, Prospectus and Statement
of Additional Information and the instructions and
directions of the Trustees of the Trust, and will use
their best efforts to comply with and conform to the
requirements of the 1940 Act and all other applicable
federal and state laws, regulations and rulings.
-5-
<PAGE>
(b) The Advisers shall:
(i) comply with all applicable Rules and Regulations of the
SEC and will in addition conduct their activities under
this Agreement in accordance with other applicable law;
and
(ii) maintain a policy and practice of conducting their
investment advisory services hereunder independently of
the commercial banking operations of Northern and any
of its affiliated banks. When investment
recommendations are made for a Portfolio, the
investment advisory personnel will not inquire or take
into consideration whether the issuer of securities
proposed for purchase or sale for the Portfolio's
account are customers of the commercial banking
department of Northern or any of its affiliated banks.
(c) The Advisers shall not, unless permitted by the SEC:
(i) permit a Portfolio to execute transactions with the
Advisers or Goldman, Sachs & Co.; or
(ii) permit a Portfolio to purchase certificates of deposit
of Northern or its affiliate banks, commercial paper
issued by Northern's parent holding company or other
securities issued or guaranteed by Northern, its parent
holding company or their subsidiaries or affiliates.
(d) The Advisers shall render to the Trustees of the Trust such
periodic and special reports as the Trustees may reasonably
request.
(e) The services of the Advisers hereunder are not deemed
exclusive and the Advisers shall be free to render similar
services to others (including other investment companies) so
long as their services under this Agreement are not impaired
thereby.
5. Expenses. During the term of this Agreement, the Advisers shall pay
all costs incurred by them in connection with
-6-
<PAGE>
the performance of their duties under this Agreement, other than the cost
(including taxes, brokerage commissions and other transactions costs, if any) of
securities purchased or sold for a Portfolio.
6. Compensation.
------------
(a) For the services provided and the expenses assumed by the
Advisers pursuant to this Agreement with respect to the
Current Portfolio, the Trust shall pay as full compensation
therefor an aggregate fee to the Advisers at an annual rate
of 1.00% of the Current Portfolio's average net assets.
(b) The fee shall be computed based on net assets on each day
and shall be paid to the Advisers monthly. Such fee as is
attributable to a Portfolio shall be a separate charge to
the Portfolio and shall be the several (and not joint or
joint and several) obligation of the Portfolio.
7. Books and Records. The Advisers agree to maintain, and preserve
for the periods prescribed by Rule 31a-2 of the SEC under the 1940 Act, such
records as are required to be maintained by Rule 31a-1 of the SEC under the 1940
Act (other than clause (b)(4) and paragraphs (c), (d) and (e) thereof). The
Advisers further agree that all records which they maintain for the Trust are
the property of the Trust and they shall surrender promptly to the Trust any of
such records upon the Trust's request.
8. Indemnification.
---------------
(a) The Trust hereby agrees to indemnify and hold harmless the
Advisers, their directors, officers, and employees and each
person, if any, who controls either of them (collectively,
the "Indemnified Parties") against any and all losses,
claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the 1933 Act,
the Securities Exchange Act of 1934 or other federal or
state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon:
(i) any untrue statement or alleged untrue statement of a
material fact or any
-7-
<PAGE>
omission or alleged omission to state a material fact
required to be stated or necessary to make the
statements made not misleading in the Registration
Statement, the Prospectus, the Statement of Additional
Information, or any application or other document filed
in connection with the qualification of the Trust or
Units of the Trust under the Blue Sky or securities
laws of any jurisdiction ("Application"), except
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are
based upon any such untrue statement or omission or
alleged untrue statement or omission either pertaining
to a breach of the Advisers' duties in connection with
this Agreement or made in reliance upon and in
conformity with information furnished by, through or on
behalf of the Advisers for use in connection with the
Registration Statement, any Application, the Prospectus
or the Statement of Additional Information; or
(ii) subject to clause (i) above, the Advisers acting in
accordance with the terms hereof;
and the Trust shall reimburse each Indemnified Party for any
legal or other expense incurred by such Indemnified Party in
connection with investigating or defending any such loss,
claim, damages, liability or action.
(b) If the indemnification provided for in paragraph 8(a) is due
in accordance with the terms of such paragraph but is for
any reason held by a court to be unavailable from the Trust,
then the Trust shall contribute to the aggregate amount paid
or payable by the Trust and the Indemnified Parties as a
result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as
appropriate to reflect (i) the relative benefits received by
the Trust and such Indemnified Parties in connection with
the operation of the Trust, (ii) the relative fault of the
Trust and such Indemnified
-8-
<PAGE>
Parties, and (iii) any other relevant equitable
considerations. The Trust and the Advisers agree that it
would not be just and equitable if contribution pursuant to
this subparagraph (b) were determined by pro rata allocation
or other method of allocation which does not take account of
the equitable considerations referred to above in this
subparagraph (b). The amount paid or payable as a result of
the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subparagraph (b)
shall be deemed to include any legal or other expense
incurred by the Trust and the Indemnified Parties in
connection with investigating or defending any such loss,
claim, damage, liability or action. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(c) It is understood, however, that nothing in this paragraph 8
shall protect any Indemnified Party against, or entitle any
Indemnified Party to indemnification against, or
contribution with respect to, any liability to the Trust or
its Unitholders to which such Indemnified Party is subject,
by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of
a reckless disregard to its obligations and duties, under
this Agreement or otherwise, to an extent or in a manner
inconsistent with Section 17 of the 1940 Act.
9. Duration and Termination. Insofar as the holders of Units
representing the interests in the Current Portfolio are affected by this
Agreement, it shall continue, unless sooner terminated as provided herein, until
April 30 of the year following the year first above written, and, insofar as the
holders of Units representing the interests in each of the other Portfolios are
affected by this Agreement, it (as supplemented by the terms specified in any
notice and agreement pursuant to paragraph 1(b) hereof) shall continue (assuming
approval by the initial holder(s) of Units of such Portfolio) until April 30 of
the year following the year in which the Portfolio becomes a Portfolio
hereunder, and with respect to each Portfolio thereafter shall continue
automatically for periods of one year so long as each such latter continuance is
approved at least
-9-
<PAGE>
annually (a) by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons (as defined by the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Trustees of the Trust or by vote of a majority of
the outstanding Units (as defined with respect to voting securities in the 1940
Act) representing the interests in such Portfolio; provided, however, that this
Agreement may be terminated by the Trust as to any Portfolio at any time,
without the payment of any penalty, by vote of a majority of the Trustees of the
Trust or by vote of a majority of the outstanding Units (as so defined)
representing the interests in the Portfolio affected thereby on 60 days' written
notice to the Advisers, or by the Advisers at any time, without the payment of
any penalty, on 60 days' written notice to the Trust. This Agreement shall
automatically and immediately terminate in the event of its assignment (as
defined by the 1940 Act).
10. Name of the Trust. Northern agrees that the name "The Benchmark"
may be used in the name of each Portfolio and that such name, any related logos
and any service marks containing the words "The Benchmark" may be used in
connection with the Portfolio's business only for so long as this Agreement
(including any continuance or amendment hereof) remains in effect and that such
use shall be royalty free. At such time as this Agreement shall no longer be in
effect, each Portfolio shall cease such use. The Trust acknowledges that it has
no rights to the name "The Benchmark," such logos or service marks other than
those granted in this paragraph and that Northern reserves to itself the right
to grant the nonexclusive right to use the name "The Benchmark," such logos or
service marks to any other person, including, but not limited to, another
investment company.
11. Status of Advisers as Independent Contractors. The Advisers shall
for all purposes herein be deemed to be independent contractors and shall,
unless otherwise expressly provided herein or authorized by the Trustees of the
Trust from time to time, have no authority to act for or represent the Trust in
any way or otherwise be deemed agents of the Trust.
12. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved (a) by vote of a majority
of those Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such amendment, and (b)
by vote of a majority of the outstanding Units (as defined with respect to
voting securities by the 1940 Act) representing the interests in each Portfolio
affected by such amendment.
13. Unitholder Liability. This Agreement is executed by or on behalf
of the Trust with respect to each Portfolio and
-10-
<PAGE>
the obligations hereunder are not binding upon any of the Trustees, officers or
Unitholders of the Trust individually but are binding only upon the Trust and
its assets and property. All obligations of the Trust under this Agreement shall
apply only on a Portfolio-by-Portfolio basis, and the assets of one Portfolio
shall not be liable for the obligations of another Portfolio.
14. Miscellaneous. The Trust's Declaration of Trust as amended to date
is on file with the Secretary of The Commonwealth of Massachusetts. The captions
in this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be construed in
accordance with applicable federal law and (except as to paragraph 13 hereof
which shall be construed in accordance with the laws of The Commonwealth of
Massachusetts) the laws of the State of Illinois and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
(subject to the last sentence of paragraph 9) and, to the extent provided in
paragraph 8 hereof, each Indemnified Party. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to impose
any duty upon, any party to do anything in violation of any applicable laws or
regulations. Any provision in this Agreement requiring compliance with any
statute or regulation shall mean such statute or regulation as amended and in
effect from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
THE BENCHMARK FUNDS
_________________________
Title:
THE NORTHERN TRUST COMPANY
_________________________
Title:
RCB TRUST COMPANY
_________________________
Title:
-11-
<PAGE>
Exhibit 6
DISTRIBUTION AGREEMENT
Between
THE BENCHMARK FUNDS
and
GOLDMAN, SACHS & CO.
<PAGE>
CONTENTS
Paragraph Page
- --------- ----
1. Appointment of Distributor............................................. 1
2. Duties as Distributor.................................................. 2
3. Distribution Costs..................................................... 3
4. Duration and Termination............................................... 3
5. Amendment of Agreement................................................. 4
6. Unitholder Liability................................................... 4
7. Miscellaneous.......................................................... 4
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this 5th day of October, 1990 between THE BENCHMARK FUNDS, a
Massachusetts business trust (the "Trust"), and GOLDMAN, SACHS & CO., a New York
limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end, management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Trust presently intends to offer Units in four portfolios, the
Diversified Assets Portfolio, the Government Portfolio, the Tax-Exempt
Portfolio, and the Government Select Portfolio (such Portfolios together with
all other series subsequently established by the Trust and made subject to this
Agreement being herein referred to as the "Portfolios"); and
WHEREAS, the Trust desires to retain the Distributor to act as distributor to
provide for the sale and distribution of Units of the Portfolios, and the
Distributor is willing to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and other good and valuable consideration, receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment of Distributor. The Trust hereby appoints the Distributor as
exclusive distributor of the Units of each of the Portfolios on the terms and
for the periods set forth in this Agreement. The Distributor hereby accepts such
appointment and agrees to render the services and perform the duties set forth
in this paragraph 1 and in paragraph 2 without compensation.
<PAGE>
2. Duties as Distributor. The following provisions shall apply to the
Distributor's obligations as distributor under this Agreement;
(a) The Trust agrees to sell Units of each of the Portfolios through
the Distributor, as agent, from time to time during the term of this
Agreement upon the terms and at the current offering price described in the
Prospectus and Statement of Additional Information [as those terms are
defined in the Administration Agreement of even date herewith between the
Trust and the Distributor (the "Administration Agreement")]. Such sales
may, however, be suspended whenever in the judgment of the Trust it is in
its best interests to do so;
(b) The Distributor will hold itself available to receive or will
arrange for the receipt of orders for the purchase of Units of each
Portfolio and will (and shall have the authority to) receive and accept or
reject or arrange for the receipt and acceptance or rejection of such
orders on behalf of the Trust in accordance with the provisions of the
Prospectus and Statement of Additional Information.
(c) The Distributor shall not be obligated to sell any certain number
of Units of any Portfolio;
(d) In performing its duties hereunder, the Distributor shall act in
conformity with the Trust Agreement, By-Laws, Registration Statement,
Prospectus and Statement of Additional Information (as such terms are
defined in the Administration Agreement) and with the instructions and
directions of the Trustees of the Trust, and will use its best efforts to
comply with and conform to the requirements of the 1940 Act and all other
applicable federal and state laws, regulations and rulings including
without limitation any exemptive order issued by the Securities and
Exchange Commission to which the Trust may be subject;
(e) The Distributor shall be free to render to others services similar
to those rendered to the Trust hereunder so long as the Distributor's
services hereunder are not impaired thereby.
(f) The Distributor agrees to maintain, and preserve for the
-2-
<PAGE>
periods prescribed by Rule 31a-2 of the Securities and Exchange Commission
under the 1940 Act, such records as are required to be maintained by Rule
31a-1(d) under the 1940 Act.
3. Distribution Costs. During the term of this Agreement, the Distributor
will pay the following costs:
(a) Costs of all sales presentations, mailings, advertising and any
other distribution efforts by the Distributor with respect to the Units of
each of the Portfolios. Such costs shall not be deemed to include the costs
of preparing and setting in type Prospectuses, Statements of Additional
Information, proxy material, reports and notices and the printing and
distributing the same to existing Unitholders and regulatory authorities;
and
(b) Compensation of any personnel of the Distributor for activities in
connection with the distribution or sale of the Units of each of the
Portfolios.
4. Duration and Termination. This Agreement shall continue, unless sooner
terminated as provided herein, until April 30, 1992 and thereafter shall
continue automatically for periods of one year so long as each such latter
continuance is approved at least annually (a) by the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust or by vote of a majority of the outstanding Units (as
defined with respect to voting securities in the 1940 Act) representing the
interests in the Portfolios; provided, however, that this Agreement may be
terminated by the Trust as to any or all Portfolios at any time, without the
payment of any penalty, on 60 days' written notice to the Distributor or by the
Distributor at any time, without the payment of any penalty, on 60 days' written
notice to the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment (as defined in the 1940 Act).
-3-
<PAGE>
5. Amendment of Agreement. This Agreement may be amended by mutual
consent provided that such amendment is approved by vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment.
6. Unitholder Liability. This Agreement is executed by or on behalf of
the Trust with respect to each of the Portfolios and the obligations hereunder
are not binding upon any of the Trustees, officers or Unitholders of the Trust
individually but are binding only upon the Portfolio to which such obligations
pertain and the assets and property of such Portfolio.
7. Miscellaneous. The Trust's Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts. The captions in this Agreement
are included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be construed in accordance with
applicable federal law and (except as to paragraph 6 hereof which shall be
construed in accordance with the laws of the Commonwealth of Massachusetts) the
laws of the State of Illinois and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, subject to
paragraph 4 hereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE BENCHMARK FUNDS
By: /s/ Nancy L. Mucker Attest:
------------------------------ ------------------------------
Title: President
GOLDMAN SACHS & CO.
By: /s/ Nancy L. Mucker Attest:
------------------------------ ------------------------------
Partner
-5-
<PAGE>
Exhibit 6(c)
THE BENCHMARK FUNDS
ADDENDUM NO.3 TO THE DISTRIBUTION AGREEMENT
-------------------------------------------
This Addendum No. 3, dated as of the 25th day of March, 1994, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor").
WHEREAS, the Trust and the Distributor have entered into a Distribution
Agreement dated as of June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993 and Addendum No. 2 dated July 1, 1993 (the "Distribution Agreement"),
pursuant to which the Trust appointed the Distributor to act as distributor to
the Trust for the Diversified Assets Portfolio, the Government Portfolio, the
Tax-Exempt Portfolio, the Government Securities Portfolio, the California
Municipal Portfolio, the Short Duration Portfolio, Equity Index Portfolio, Small
Company Index Portfolio, Diversified Growth Portfolio, Focused Growth Portfolio,
U.S. Treasury Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio and Balanced Portfolio;
WHEREAS, the Trust is establishing the International Growth Portfolio
and International Bond Portfolio (the "Portfolios"), and it desires to retain
the Distributor to act as distributor to provide for the sale and distribution
of the Units of the Portfolios and the Distributor is willing to render such
services:
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Distributor as exclusive
distributor of the Units of each of the Portfolios on the terms and
for the periods set forth in the Distribution Agreement. The
Distributor hereby accepts such appointment and agrees to render the
services and perform the duties set forth in the Distribution
Agreement without compensation.
2. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Distribution Agreement shall be deemed to
include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, California
Municipal Portfolio, Short Duration Portfolio, Equity Index Portfolio,
Small Company Index Portfolio, Diversified Growth Portfolio, Focused
Growth Portfolio, U.S. Treasury Index Portfolio, U.S. Government
Securities Portfolio, Short-Intermediate Bond Portfolio, Bond
Portfolio, Balanced Portfolio, International Growth Portfolio and
International Bond Portfolio. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the
Distribution Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: By:
------------------------ /s/ Nancy L. Mucker
Vice President of the Trust
----------------------------------
GOLDMAN, SACHS & CO.
Attest: By:
------------------------ /s/ John McNulty
----------------------------------
Partner
<PAGE>
Exhibit 6(f)
THE BENCHMARK FUNDS
ADDENDUM NO. 6 TO THE DISTRIBUTION AGREEMENT
--------------------------------------------
This Addendum No. 6, dated as of the 27th day of January, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor").
WHEREAS, the Trust and the Distributor have entered into a Distribution
Agreement dated as of June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993, Addendum No. 2 dated July 1, 1993, Addendum No. 3 dated March 25, 1994,
Addendum No. 4 dated January 22, 1997 and Addendum No. 5 dated April 22, 1997
(the "Distribution Agreement"), pursuant to which the Trust appointed the
Distributor to act as distributor to the Trust for the Diversified Assets
Portfolio, Government Portfolio, Tax-Exempt Portfolio, Government Securities
Portfolio, Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio, U.S.
Government Securities Portfolio, Short-Intermediate Bond Portfolio, Bond
Portfolio, Intermediate Bond Portfolio, Balanced Portfolio, International Growth
Portfolio, International Bond Portfolio and International Equity Index
Portfolio;
WHEREAS, the Trust is establishing the Global Asset Portfolio (the
"Portfolio"), and it desires to retain the Distributor to act as distributor to
provide for the sale and distribution of the Units of the Portfolio and the
Distributor is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Distributor as exclusive
distributor of the Units of the Portfolio on the terms and for the
periods set forth in the Distribution Agreement. The Distributor
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Distribution Agreement without
compensation.
2. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Distribution Agreement shall be deemed to
include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio,
U.S. Government Securities Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Intermediate Bond Portfolio, Balanced
Portfolio, International Growth Portfolio, International Bond
Portfolio, International Equity Index Portfolio and Global Asset
Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Distribution
Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: By: /s/ Nancy L. Mucker
------------- ------------------------
Name: Nancy L. Mucker
Title: Vice President
GOLDMAN, SACHS & CO.
Attest: By: /s/ John P. McNulty
------------- ------------------------
Name: John P. McNulty
Title: Managing Director
<PAGE>
Exhibit 8
THE BENCHMARK FUNDS
CUSTODIAN AGREEMENT
Agreement dated this 8th day of June, 1992 between The Benchmark Funds, a
Massachusetts business trust (the "Trust"), and The Northern Trust Company, an
Illinois state bank ("Northern").
1. Appointment of Custodian. The Trust hereby appoints Northern custodian
of all securities (including repurchase agreements) and cash now owned or
hereafter acquired by the Trust, and Northern hereby accepts such appointment,
upon the terms and conditions set forth in this Agreement. The Trust agrees
promptly to deliver and pay, or cause to be delivered and paid, to Northern, as
custodian, all securities and cash now owned or hereafter acquired by the Trust.
It is understood that (a) the Trust is an open-end, management investment
company registered under the Investment Company Act of 1940 ("1940 Act") as a
series company with six portfolios but with the ability to create additional
portfolios (the initial portfolios and each such additional portfolio being
referred to herein as a "Portfolio"), and all such portfolios being collectively
referred to herein as the "Portfolios"), and (b) pursuant to section 18(f)(2) of
the 1940 Act each series of the Trust's Units [as defined in Trust's Agreement
and Declaration of Trust (the "Trust Agreement")], representing the interest in
a Portfolio, is preferred over all other series in respect of the assets
specifically allocated to such Portfolio.
2. Custody of Cash; Separate Accounts.
(a) Accounts. Northern will hold all cash of each Portfolio, in a
separate account or accounts in the name of such Portfolio,
subject only to draft or order by Northern in accordance with the
terms of this Agreement. If and when authored by proper
instructions of the Trustees or Officers of the Trust in
accordance with a vote of the majority of the Trustees of the
Trust, Northern may open and maintain an additional account or
accounts in such other banks or trust companies as may be
designated by such instructions, provided that such account or
accounts shall be in the name of Northern in its capacity as
custodian and subject only to its draft or order in accordance
with the terms of this Agreement.
(b) Proceeds of Sale of Units of Trust. Upon receipt of funds for the
purchase of Units of
<PAGE>
any Portfolio, Northern shall promptly deposit the purchase price
in the account or accounts maintained pursuant to Section 2A
hereof.
(c) Collections. Unless otherwise directed by proper instructions
from the Trustees or Officers of the Trust, Northern shall
collect, receive and deposit in the account or accounts
maintained pursuant to Section 2A hereof all income, principal
and other payments in respect of the securities held by it under
this Agreement and, subject to the other provisions of this
Agreement, do all other things necessary or proper in connection
with the collection of such income, principal and other payments.
Without limiting the generality of the foregoing, Northern shall:
(i) present for payment by the date of payment all coupons and
other income items requiring presentation;
(ii) present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable by
the date such securities become payable;
(iii) endorse and deposit for collection, on behalf of the
Trust, checks, drafts or other negotiable instruments no
later than the next business day as received;
(iv) execute ownership and other certificates and affidavits
for all Federal and State tax purposes in connection with
the collection of income; and
(v) notify the Trust as soon as reasonably practicable
whenever income, principal or other payments due on
securities are not collected in due course.
In any case in which Northern does not receive any such due and unpaid
income, principal or other payment within a reasonable time after it has made
proper demands for the same, it shall so notify the Trust in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
telephonic demands and oral responses to written and telephonic demands, and
await proper instructions from the Trustees or Officers of the Trust. Northern
shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction.
-2-
<PAGE>
3. Custody of Securities.
(a) Receipt of Securities. Northern will hold in a separate account,
and physically segregated at all times from those of any other
persons, firms, corporations or other Portfolios, pursuant to the
provisions hereof, all securities received by it for or for the
account of a Portfolio, subject to Sections 3D, 8A and 8B hereof.
All such securities shall be held or disposed of by Northern for
the Trust pursuant to the terms of this Agreement. Northern shall
have no power or authority to assign, hypothecate, pledge or
otherwise dispose of any such securities, except pursuant to
proper instructions and only for the account of the Trust as set
forth in Section 5 hereof. Any securities delivered to Northern
other than in bearer form shall be properly endorsed and in form
for transfer or shall be in the name of Northern, the Trust or a
nominee of Northern or the Trust, subject to Sections 3D, 8A and
8B hereof.
(b) Registered Name: Nominees. Northern shall register securities of
the Trust held by it under this Agreement, other than those in
bearer form, in the name of the Trust or Northern or a nominee of
the Trust or Northern. Securities of the Trust held by an agent
appointed pursuant to Section 8A hereof or a sub custodian
appointed pursuant to Section 8B hereof may be registered in the
name of such agent or custodian or a nominee of such agent or
sub-custodian.
(c) Record Keeping and Inventory. Northern shall maintain records of
all receipts, deliveries and locations of securities held by it
under this Agreement, together with a current inventory thereof.
Without limiting the generality of the foregoing, Northern shall
comply with such proper instructions from the Trustees or
Officers of the Trust as may be issued from time to time in this
regard. With respect to securities held by any agent appointed
pursuant to Section 8A hereof or any sub-custodian appointed
pursuant to Section 8B hereof, Northern may rely upon
certificates of the agent or sub-custodian as to its holdings, it
being understood that such reliance in no
-3-
<PAGE>
way relieves Northern of its responsibilities under this
Agreement. Northern will promptly report to the Trust the results
of such inspections, indicating any shortages or discrepancies
uncovered thereby, and will take appropriate action to remedy any
such shortages or discrepancies.
(d) Use of Securities Depositories. Northern, each agent appointed
pursuant to Section 8A hereof and each sub-custodian appointed
pursuant to Section 88 hereof may deposit all or any part of the
securities held by it hereunder and eligible therefor in the book
entry systems ("Depository Systems") covered by Rule 1 7f-4(b)
under the 1940 Act; provided, however, that (a) Northern, each
such agent and each such sub-custodian shall comply in all
respects with clauses (d) (1) through (d) (4) of Rule 1 7f under
the 1940 Act, (b) all books and records maintained by Northern
and each such agent and sub-custodian which relate to the Trust's
participation in such Depository Systems will at all times during
regular business hours be open to inspection by the Trust's duly
authorized officers, employees, agents and auditors, and the
Trust will be furnished with all the information in respect of
the services rendered to it as it may require, (c) in connection
with the use of such Depository Systems, Northern will cooperate
with the Trust in enforcing such rights as may exist against such
Depository Systems with respect to transactions or securities of
the Trust, (d) payment for securities purchased for the account
of any Portfolio shall be made only upon (i) receipt of advice
from the Depository System that such securities have been
transferred to the account (the "Account") contemplated by clause
(d) (2) of Rule 1 7f-4 under the 1940 Act and (ii) the making of
an entry on the records of Northern or such agent or custodian,
as the case may be, to reflect such payment and transfer for the
Account of such Portfolio, and (e) transfer of securities sold
for the Account of any Portfolio shall be made only upon (iii)
receipt of advice from the Depository System that payment for
such securities has been transferred to the Account, and (iv) the
making of an entry on the records of Northern or such agent or
sub-
-4-
<PAGE>
custodian, as the case may be, to reflect such transfer and
payment for the Account of such Portfolio. Northern, each agent
appointed pursuant to Section 8A hereof and each sub-custodian
appointed pursuant to Section 8B hereof may deposit all or any
part of the securities held by it hereunder and eligible therefor
in a clearing agency covered by Rule l7f-4(b) under the 1940 Act;
provided, however, that no such deposit may be made prior to the
express written approval by the Trust of such clearing agency
which approval may be subject to such conditions as the Trust may
from time to time determine.
(e) Distributions. Rights. Etc. Northern shall receive and collect
all distributions, rights and other items of like nature in
respect of securities held by it under this Agreement and deal
with the same in accordance with this Agreement and its other
obligations to the Trust.
(f) Proxies. Notices. Voting. Etc. Northern shall arrange for the
receipt by it of all forms of proxies and all notices of
meetings, calls, maturities, tender offers, exchange offers and
expirations of rights and any other notices, consents, or
announcements affecting or relating to securities held by
Northern, its agents appointed pursuant to Section 8A hereof and
all sub-custodians appointed pursuant to Section 88 hereof, and
upon issuance of proper instructions, Northern shall execute and
deliver or cause its nominee to execute and deliver such proxies
or other authorizations as may be necessary or appropriate.
(g) Nondiscretionarv Details. In general, Northern shall attend to
all nondiscretionary details in connection with the sale,
exchange, substitution, purchase, transfer or other dealing with
securities or property of the Trust except as otherwise from time
to time directed by proper instructions from the Trustees or
Officers of the Trust.
4. Disbursements of Cash. Upon the issuance of proper instructions,
Northern shall make payments or disbursements of cash of each Portfolio held by
it or subject to its draft or order under this Agreement, insofar as such cash
is available, only for the following purposes:
-5-
<PAGE>
(a) Purchases Generally. To pay for and receive securities purchased
for the Account of such Portfolio, payment to be made only (a)
upon receipt of the securities by Northern (or any bank, banking
firm, responsible commercial agent or trust company doing
business in the United States and/or any foreign country and
appointed by Northern pursuant to Section 8A hereof as Northern's
agent for this purpose or appointed as sub-custodian pursuant to
Section 8B hereof), registered as provided in Section 3B hereof
or in form for transfer satisfactory to Northern, (b) in the case
of a purchase effected through a Depository System, in accordance
with the conditions set forth in Section 3D hereof, or (c) in the
case of repurchase agreements, against delivery of the securities
which are the subject of such repurchase agreement in certificate
form or receipt of advice from a Depository System that such
securities have been transferred to the Account [except that in
the case of a repurchase agreement Northern may transfer funds to
the Account of the other party to the repurchase agreement (i.e,
the seller of the securities) prior to the receipt of written
evidence that the securities subject to such repurchase agreement
have been transferred by book-entry into the Account, provided
that Northern shall be responsible to the Trust in the event that
such securities are not so transferred by book-entry], the making
of an entry on the records of Northern reflecting such transfer,
and receipt of written evidence of the agreement by such person
to repurchase such securities from such Portfolio. All securities
accepted by Northern either shall be accompanied by payment of,
or a "due bill" for, any dividends, interest or other
distributions of the issuer, due the purchaser or Northern shall
take such action as may be necessary to obtain the same. In any
and every case of a purchase of securities for the Account of
such Portfolio where payment is made by Northern in advance of
receipt of the securities purchased, Northern shall be absolutely
liable to the Trust for such securities to the same extent as if
the securities had been received by Northern.
(b) Dividends and Distributions. To release or
-6-
<PAGE>
otherwise apply cash for the payment of dividends or other
distributions to Unitholders of such Portfolio which are payable
in cash.
(c) Disbursements and liabilities. To make or cause to be made
disbursements for the payment on behalf of the Trust with respect
to such Portfolio of interest, taxes, investment advisory,
agency, professional, custodial and administration fees and all
other operating expenses, including registration and
qualification costs and other expenses of issuing and selling
Units of such Portfolio or changing its capital structure,
whether or not such expenses shall be in whole or in part
capitalized or treated as deferred expenses.
(d) Redemptions of Trust Units. Subject to the Trust Agreement, the
Trust's then current Prospectus and applicable resolutions of the
Trust's Trustees, to make funds available for payment to
Unitholders who have duly requested redemption of their Units by
the Trust pursuant to such Prospectus.
(e) Other Purposes. To make or cause to be made disbursements for any
other purpose which is declared in such instructions to be a
proper trust purpose; provided, however, that before making any
such disbursement Northern shall have received a copy of a
resolution of the Trustees certified by the Secretary of the
Trust specifying the amount of such disbursement, setting forth
the purpose for which such disbursement is to be made, declaring
such purpose to be a proper trust purpose and naming the
person(s) to whom the disbursement is to be made.
5. Release and Delivery of Securities. Northern shall have sole power to
release or deliver any securities of a Portfolio held by it pursuant to this
Agreement. Upon issuance of proper instructions, Northern will transfer,
exchange, or deliver securities held by it hereunder only for the following
purposes:
(a) Sales. Upon receipt of payment therefor, to deliver securities
which have been sold for the Account of such Portfolio.
(b) Securities Loans. Upon receipt of the collateral required by the
Trust's then
-7-
<PAGE>
current Prospectus, to deliver securities which have been lent
for the Account of such Portfolio.
(c) Redemption or Maturity. To deliver securities owned for the
Account of such Portfolio to the issuer thereof or its agent when
such securities are called, redeemed, retired or otherwise become
payable; provided, that in any such case, the cash or other
consideration payable in respect thereof is to be delivered to
Northern.
(d) Changes of Name and Denomination. To deliver securities owned for
the Account of such Portfolio to the issuer thereof or its agent
for transfer into the name of the Trust or Northern or a nominee
of either or a permitted sub-custodian or agent or a nominee of
such sub-custodian or agent, or for exchange for a different
number of bonds, certificates, or other evidence representing the
same aggregate face amount or number of units bearing the same
interest rate, maturity dates and call/put provisions, if any;
provided, that in any such case, the new securities are to be
delivered to Northern.
(e) Street Delivery. To deliver securities owned for the Account of
such Portfolio to the broker or dealer selling the same for
examination in accordance with the then current "street delivery"
custom.
(f) Securities as Collateral. To deliver securities owned for the
Account of such Portfolio for the purpose of pledge or
hypothecation to secure any loan (including a reverse repurchase
agreement) incurred by the Trust; provided that securities shall
be released only upon payment to Northern of the monies borrowed,
except that in cases where additional collateral is required to
secure a borrowing already made, subject to proper prior
authorization, further securities may be delivered for that
purpose. Upon issuance of proper instructions, Northern shall pay
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes, if
any, evidencing the loan.
-8-
<PAGE>
(g) Exchanges. Deposits, Tenders, Etc. To exchange securities or
interim receipts or temporary securities held by it or by any
agent appointed pursuant to Section 8A hereof or any sub-
custodian appointed pursuant to Section 8B hereof for the Account
of such Portfolio for other securities alone or for other
securities and cash, and to expend cash, insofar as cash is
available, in connection with any merger, consolidation,
reorganization, recapitalization, conversion or in connection
with the exercise of subscription or purchase rights, or
otherwise; to deposit any such securities and cash in accordance
with the terms of any reorganization or protective plan or
otherwise, and to deliver securities and Related Documents to the
designated depository or other receiving agent in response to
tender offers or similar offers to purchase received in writing.
(h) Other Purposes. To release or deliver any securities held by it
for the Account of such Portfolio for any other purpose which
such instructions declare to be a proper trust purpose; provided,
however, that before making any such release or delivery Northern
shall have received a copy of the resolution of the Trustees
certified by the Secretary of the Trust specifying the securities
to be delivered, setting forth the purpose for which such release
or delivery is to be made, declaring such purpose to be a proper
trust purpose and naming the person(s) to whom such release or
delivery is to be made.
6. Records; Accounts and Reporting.
(a) Records. Northern shall create, maintain and retain all records
relating to its activities and obligations under this Agreement
in such manner as will enable the Trust and Northern to meet
their respective obligations under: (i) the 1940 Act,
particularly Sections 30 and 31 thereof, and the rules and
regulations thereunder, including the preparation and filing of
all required periodic and other reports, (ii) applicable Federal
and State tax laws, and (iii) any other law or administrative
rule or procedure which may be applicable to the Trust or
Northern. All records maintained by Northern in connection
-9-
<PAGE>
with the performance of its duties under this Agreement will
remain the property of the Trust, shall be returned to the Trust
promptly upon request and, in the event of termination of this
Agreement, will be delivered in accordance with Section 14
hereof.
(b) Accounts and Reporting. Northern shall keep the books of account
for the Trust and each of its Portfolios, including all books
necessary to permit prompt determinations of the Federal and
State tax status and origin of the Trust, each such Portfolio and
the dividends and other distributions declared and/or paid
thereby as and to the extent provided in or contemplated by the
Trust's Current Prospectus as in effect from time to time (such
determination being collectively referred to herein as "Tax
Determinations"). Northern shall render statements or copies
thereof and shall make Tax Determinations from time to time as
contemplated by proper instructions from the Trustees or Officers
of the Trust.
(c) Access to Records. Without limiting Section 3D hereof, subject to
security requirements of Northern applicable to its own employees
having access to similar records within Northern and such
regulations as to the conduct of such matters as may be
reasonably imposed by Northern after prior consultation with an
officer of the Trust or its Administrator, the books and records
of Northern pertaining to its actions under this Agreement shall
be open to inspection and audit at reasonable times by those
persons or classes of persons designated in proper instructions
from the Trustees or Officers of the Trust.
(d) Cooperation with the Trust and its Auditors. Northern shall
cooperate with the Trust and the Trust's independent public
accountants in connection with: (i) the preparation of reports to
Unitholders of the Trust, to the Securities and Exchange
Commission (including all required periodic and other reports),
to State securities commissioners, and to others, (ii) annual and
other audits of the books and records of the Trust (including,
without limitation, such procedures as may be designated in
proper instructions from the
-10-
<PAGE>
Trustees or Officers of the Trust), and (iii) other matters
of a like nature.
7. Additional Duties of Northern.
(a) Valuations; Net Income Computation. Unless otherwise
directed by proper instructions from the Trustees or Officers
of the Trust, Northern shall compute and determine on the
days and at the times specified in the Trust's then Current
Prospectus, the net asset value of a Unit of each Portfolio,
such computation and determination to be made in accordance
with the Trust's then Current Prospectus, and shall promptly
notify the Administrator of the result of such computation
and determination.
Unless advised otherwise by proper instructions from the
Trustees or Officers of the Trust, Northern shall also
calculate at the times specified in the Trust's then Current
Prospectus the net income of each Portfolio and shall
promptly advise the Administrator of the results of such
calculation. Such calculation shall be made in accordance
with the Trust's then Current Prospectus.
8. Appointment of Agents and Sub-Custodians.
(a) Appointment of Agents. Northern, as custodian, may at any
time or times appoint (and may at any time remove) in
accordance with the 1940 Act any other bank, trust company or
responsible commercial agent as its agent to carry out such
of the provisions of this Agreement as Northern may from time
to time direct, provided that the appointment of such agent
shall not relieve Northern of any of its responsibilities
under this Agreement.
(b) Appointment of Sub-Custodian. Northern, as custodian, may
from time to time employ one or more sub-custodians, but only
in accordance with the terms and conditions set forth in a
resolution of the Trustees of the Trust authorizing the
appointment of each particular sub-custodian, it being
understood and agreed that: (i) Northern shall have no more
responsibility or liability to the Trust on account of any
actions or omissions of any sub-custodian so employed that
such sub-
-11-
<PAGE>
custodian has to Northern; and (ii) the responsibility or
liability of the sub-custodian to Northern shall conform to
the resolution of the Trustees of the Trust authorizing the
appointment of the particular sub-custodian.
9. Proper Instructions.
(a) Proper Instructions Generally. Proper instructions shall be
deemed to have been issued upon issuance of written
instructions signed by not less than one officer and one
responsible employee of Northern which in the case of each
such officer and employee Northern's Board of Directors shall
have from time to time authorized to give the particular
class of instructions in question. Different persons may be
authorized to give instructions for different purposes.
(b) Proper Instructions from the Trustees or Officers of the
Trust. Proper instructions from the Trustees or Officers of
the Trust shall be deemed to have been issued upon receipt by
Northern of written instructions (including receipt of
facsimile) signed by a majority of the Trustees of the Trust
or by not less than two of the Officers of the Trust
designated from time to time by resolution of the Trustees.
Such instructions shall be deemed proper instructions as that
term is used in this Agreement in addition to also being
deemed proper instructions from the Trustees or Officers of
the Trust. A certificate executed by the Secretary or
Assistant Secretary of the Trust as to the persons serving as
Trustees and/or who are Officers of the Trust designated as
set forth above may be received and accepted by Northern as
conclusive evidence of those persons who are such Trustees
and/or Officers and may be considered to be accurate until
receipt of written notice (or oral notice followed by written
confirmation within seven days) to the contrary. In the case
of conflict between Instructions under Section 9A and under
this Section 9B, those given pursuant to this Section 9B
shall prevail upon receipt by Northern.
10. Compensation: Reimbursement. The Trust shall pay to
-12-
<PAGE>
Northern, as custodian, the compensation and expense reimbursement set forth in
Exhibit A hereto.
11. Duration and Termination. Insofar as the holders of Units
representing the interests in the Trust's initial Portfolios are affected by
this Agreement, it shall continue, unless sooner terminated as provided herein,
until April 30, 1993, and, insofar as the holders of Units representing the
interests in each additional Portfolio are affected by this Agreement, it shall
continue until April 30 of the year following the year in which the Portfolio
becomes a Portfolio hereunder, and, for each such Portfolio, thereafter shall
continue automatically for periods of one year so long as each such latter
continuance is approved at least annually (a) by the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined by the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust or by a majority of the outstanding Units (as defined with
respect to voting securities in the 1940 Act) representing the interests in such
Portfolio; provided, however, that this Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding Units (as so
defined) of the Trust on 60 days' written notice to Northern, or by Northern at
any time, without the payment of any penalty, on 60 days' written notice to the
Trust.
12. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved by vote of a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party.
13. Interpretative and Additional Provisions. In connection with the
operation of this Agreement, Northern and the Trust may agree from time to time,
by written instrument signed by both parties, on such provisions interpretative
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement, provided that no
such interpretative or additional provisions shall contravene any applicable
Federal or State laws or regulations, or any provision of the Trust Agreement or
the Trust's By-laws, as the same may from time to time be amended. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
14. Successor Custodian.
(a) Appointment of Successor by Trust. If a successor custodian is
appointed by the Trust
-13-
<PAGE>
and a certified copy of the related appointing resolutions
are delivered to Northern, Northern shall, upon termination
of this Agreement or substitution of such successor for
Northern, deliver to such successor custodian at the office
of Northern, duly endorsed and in proper form for transfer,
all securities then held by Northern hereunder (or by any
agent or sub-custodian of Northern) and all funds or other
property of the Trust deposited with or held by Northern
hereunder (or by any agent or sub-custodian of Northern).
(b) Delivery Pursuant to Unitholder Resolution. In the event that
this Agreement is to be terminated but no new custodian can
be found by the Trust, the Trust shall, before authorizing
the delivery of such securities, funds and other property to
anyone other than a successor custodian, submit to its
Unitholders the question of whether the Trust shall be
liquidated or shall function without a custodian. Upon
approval by the Unitholders for the Trust to liquidate or
function without a custodian Northern shall, in like manner
at its office, upon receipt of a certified copy of a
resolution of the Unitholders of the Trust deliver such
securities, funds and other property in accordance with such
resolution.
(c) Selection of Successor by Northern. In the event that this
Agreement is terminated and no successor custodian has been
appointed by the Trust or certified copy of a resolution of
the Unitholders has been delivered to Northern on or before
the date when such termination shall become effective, then
Northern shall have the right to deliver to a bank or trust
company of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last
published report, of not less than $50 million, all
securities, funds, property and instruments of the Trust held
by Northern under this Agreement (or any agent or sub-
custodian of Northern) and all instruments held by Northern
(or such agent or sub-custodian) relative thereto.
Thereafter, such bank or trust company shall be the successor
custodian to Northern under this Agreement.
15. Communications. Notices and other writings delivered
-14-
<PAGE>
or mailed postage prepaid to the Trust in care of The Benchmark Funds, 4900
Sears Tower, Chicago, Illinois 60696, Attention: Shareholder Servicing, or to
The Northern Trust Company at 50 South LaSalle Street, Chicago, Illinois 60675,
Attention: Fund Accounting, Canal Center, or to such other address as the Trust
or Northern may hereafter specify by written notice to the most recent address
specified by the party to whom such notice is addressed, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
16. Miscellaneous. The Trust's Declaration of Trust as amended to date is
on file with the Secretary of The Commonwealth of Massachusetts. The captions in
this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Any provision in this Agreement
requiring compliance with any statute or regulation shall mean such statute or
regulation as amended and in effect from time to time. This Agreement shall be
construed in accordance with the laws of the State of Illinois (except as to
Section 17 hereof which shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
17. Unitholder Liability. This Agreement is executed by or on behalf of
the Trust and the obligations hereunder are not binding upon any of the
Trustees, Officers or Unitholders of the Trust individually but are binding only
upon the Trust and its assets and property. All obligations of the Trust under
this Agreement shall apply only on a Portfolio by Portfolio basis, and the
assets of one Portfolio shall not be liable for the obligations of another
Portfolio.
ATTEST: THE BENCHMARK FUNDS
By ______________________________ By _________________________
As its __________________________ As its _____________________
ATTEST: THE NORTHERN TRUST COMPANY
By ______________________________ By _________________________
As its __________________________ As its _____________________
-15-
<PAGE>
Exhibit A to The Benchmark Funds
Custodian Agreement
-------------------
<TABLE>
<CAPTION>
A. Basic Fee
---------
Each Portfolio Fee
-------------- ---
<S> <C> <C>
First $100 million of average
daily net assets $18,000 (flat fee)
Average Daily Net Assets in
excess of $100 million 1/100th of 1% of
average daily net assets
The Basic Fee is an annual fee which will be billed and payable monthly.
B. Transaction Fee for Portfolio Trades
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Transaction Fee
----------- ---
<S> <C> <C>
Nonbook Entry $12.00
Book Entry $10.00
C. Wire Fees
---------
Type of Wire Fee
------------ ---
Wire Out $ 3.50
Wire In $ 3.65
</TABLE>
D. Out-of-Pocket Expenses Reimbursable by the Trust
------------------------------------------------
The Trust will reimburse Northern monthly for the following outs-pocket
expenses incurred by Northern during such month in the performance of its duties
under the Custodian Agreement: (i) telephone; (ii) postage; (iii) courier fees
of independent courier services; (iv) office supplies used in maintaining the
Trust's records; and (v) duplicating.
E. Adjustment of Certain Fees Based on the Consumer Price Index
------------------------------------------------------------
Effective April 30,1998 and effective each April 30 thereafter during the
term of this Agreement the Transaction Fees for Portfolio Trades and the Wire
Fees shall be adjusted by multiplying each such Fee by a fraction the
denominator of which is the Base Index Number and the numerator of which is the
Corresponding Index Number; provided, however, that (i) in no event shall such
fee be less than stated above in paragraphs B or C, as the case may be, and (ii)
-16-
<PAGE>
Northern shall have the right to permanently or temporarily waive all or any
portion of the Ie~ in any such Fee resulting from such adjustment. For purposes
of this
(A) "Index" means the Consumer Price Index for All Urban Consumers, 1967 =
100, published by the Bureau of Labor Statistics of the United States
Department of Labor;
(B) "Base Index Number" means the index number designated in the Index for
"All Items" for the United States City Average for the month of December
1982, which is acknowledged by the parties as being 292.4;
(C) "Corresponding Index Number" with respect to a March 1 adjustment means
the index number designated in the Index for "All Items" for the United
States City Average for the month of December immediately preceding such
March 1; and
(D) If the publication of the index shall be discontinued so that the Fee
applicable to a year commencing March 1 during the term of the Custodian
Agreement cannot be computed in accordance with the foregoing provisions,
then the Fee for such year shall be determined on the basis of comparable
statistics reflecting changes in the urban cost of living in the United
States, as computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority with such
revisions in the method of computation provided for in this paragraph D as
the circumstances may require in order to provide an inflation adjustment
to such fee.
-17-
<PAGE>
Exhibit 8(e)
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum No. 5, dated as of the 1st day of December, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern have entered into a Custodian Agreement
(the "Agreement") dated June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993, Addendum No. 2 dated July 1, 1993, Addendum No. 3 dated October 8, 1996
and Addendum No. 4 dated April 22, 1997 pursuant to which the Trust has
appointed Northern to act as custodian to the Trust for its Diversified Assets
Portfolio, Government Portfolio, Government Select Portfolio, Tax-Exempt
Portfolio, Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio, U.S.
Government Securities Portfolio, Short-Intermediate Bond Portfolio, Bond
Portfolio, Balanced Portfolio and Intermediate Bond Portfolio (collectively, the
"Portfolios"); and
WHEREAS, the Trust and Northern desire to enter into this Addendum No. 5 to
provide compensation for each Portfolio for uninvested cash balances maintained
with Northern under the Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Cash Balance Compensation. Northern shall compensate each
Portfolio for uninvested cash balances maintained with Northern
at the end of each day ("Cash Balance Compensation") in
accordance with this paragraph. Cash Balance Compensation with
respect to each Portfolio's uninvested cash balance shall be
determined at the end of each day based on an annual rate equal
to 96% of the previous calendar month's average 90-day Treasury
bill interest rate. The amount of each Portfolio's accumulated
Cash Balance Compensation shall be paid monthly in the form of
reductions to the custody fees otherwise allocable to the
Portfolio under the Agreement for such month. In the event that
a Portfolio's Cash Balance Compensation for any month exceeds the
custody fees payable by the Portfolio under the Agreement for
such month, the Portfolio's excess Cash Balance Compensation may
be carried forward and credited against future custody fees,
provided that no excess Cash Balance Compensation may be carried
forward beyond the end of any fiscal year.
2. Miscellaneous. Except to the extent supplemented hereby, the
Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: /s/ Nancy James By: /s/ J.A. Fitzpatrick
----------------------- ---------------------------
Name: James A. Fitzpatrick
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By: /s/ James Snyder
----------------------- ---------------------------
Name: James Snyder
Title: Vice President
<PAGE>
Exhibit 8(f)
THE BENCHMARK FUNDS
ADDENDUM NO. 6 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum No. 6, dated as of the 27th day of January, 1998, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern have entered into a Custodian Agreement
(the "Agreement") dated June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993, Addendum No. 2 dated July 1, 1993, Addendum No. 3 dated October 8,
1996, Addendum No. 4 dated April 22, 1997 and Addendum No. 5 dated December 1,
1997 pursuant to which the Trust has appointed Northern to act as custodian to
the Trust for its Diversified Assets Portfolio, Government Portfolio, Government
Select Portfolio, Tax-Exempt Portfolio, Equity Index Portfolio, Small Company
Index Portfolio, Diversified Growth Portfolio, Focused Growth Portfolio, U.S.
Treasury Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio and Intermediate
Bond Portfolio (collectively, the "Portfolios"); and
WHEREAS, the Trust is establishing the Global Asset Portfolio (the
"Portfolio"), and it desires to retain Northern under the terms of the Agreement
to act as the custodian for the Portfolio, and Northern is willing to so act;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints Northern custodian to the
Trust for the Global Asset Portfolio for the period and on the
terms set forth in the Agreement. Northern hereby accepts such
appointment and agrees to render the services set forth in the
Agreement for the compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Agreement shall be deemed to include
the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio,
Intermediate Bond Portfolio and Global Asset Portfolio.
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: /s/ Nancy James By: /s/ J.A. Fitzpatrick
----------------------- ------------------------
Name: James A. Fitzpatrick
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By: /s/ James Snyder
----------------------- ------------------------
Name: James Snyder
Title: Vice President
<PAGE>
Exhibit 8(g)
THE BENCHMARK FUNDS
FOREIGN CUSTODY AGREEMENT
Agreement dated this 1st day of March 1994 between The Benchmark Funds, a
Massachusetts business trust (the "Trust"), and The Northern Trust Company, an
Illinois state bank ("Northern").
1. Appointment of Custodian. The Trust hereby appoints Northern custodian
of all securities (including repurchase agreements), cash, cash equivalents and
other instruments (collectively, "Property") now owned or hereafter acquired by
the Trust on behalf of its International Growth Portfolio and International Bond
Portfolio, and any other investment portfolios of the Trust which may invest in
the securities of foreign issuers and which are specifically authorized by
resolution of the Trust's Board of Trustees to be added to this Agreement
(collectively, the "Portfolios"), and Northern hereby accepts such appointment,
upon the terms and conditions set forth in this Agreement. The Trust agrees
promptly to deliver and pay, or cause to be delivered and paid, to Northern, as
custodian for the Portfolios, or to an agent appointed pursuant to Section 8(a)
hereof or a sub-custodian appointed pursuant to Section 8(b) or 8(c) hereof, all
securities and cash now owned or hereafter acquired by the Trust on behalf of
the Portfolios.
2. Custody of Cash; Separate Accounts.
----------------------------------
(a) Accounts. Northern will hold all cash and cash equivalents of
each Portfolio, in a separate account or accounts in the name of
such Portfolio, subject only to draft or order by Northern in
accordance with the terms of this Agreement. If and when
authorized by proper instructions of the Trustees or Officers of
the Trust in accordance with a vote of the majority of the
Trustees of the Trust, Northern may open and maintain an
additional account or accounts in such other banks or trust
companies as may be designated by such instructions, provided
that such account or accounts shall be in the name of Northern in
its capacity as custodian and subject only to its draft or order
in accordance with the terms of this Agreement.
It is understood that the Property in such account or accounts
may be held in such countries or other jurisdictions as shall be
specified from time to time in "proper instructions" (as defined
in Section 9 hereof).
<PAGE>
(b) Proceeds of Sale of Shares of Trust. Upon receipt of funds
for the purchase of shares of any Portfolio, Northern shall
promptly deposit the purchase price in the account or
accounts maintained pursuant to Section 2(a) hereof.
(c) Collections. Unless otherwise directed by proper
instructions from the Trustees or Officers of the Trust,
Northern shall collect, receive and deposit in the account
or accounts maintained pursuant to Section 2(a) hereof all
income, principal and other payments in respect of the
Property held by it under this Agreement and, subject to the
other provisions of this Agreement, do all other things
necessary or proper in connection with the collection of
such income, principal and other payments. Without limiting
the generality of the foregoing, Northern shall:
(i) present for payment by the date of payment all
coupons and other income items requiring
presentation;
(ii) present for payment all securities which may mature
or be called, redeemed, retired or otherwise become
payable by the date such securities become payable;
(iii) endorse and deposit for collection, on behalf of the
Trust, checks, drafts or other negotiable instruments
no later than the next business day as received;
(iv) execute ownership and other certificates and
affidavits for all Federal and State tax purposes in
connection with the collection of income; and
(v) notify the Trust as soon as reasonably practicable
whenever income, principal or other payments due on
securities are not collected in due course.
In any case in which Northern does not receive any such due and unpaid
income, principal or other payment within a
-2-
<PAGE>
reasonable time after it has made proper demands for the same, it shall so
notify the Trust in writing, including copies of all demand letters, any written
responses thereto, and memoranda of telephonic demands and oral responses to
written and telephonic demands, and await proper instructions from the Trustees
or Officers of the Trust. Northern shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction.
3. Custody of Securities.
---------------------
(a) Receipt of Securities. Northern will hold in a separate
account, and physically segregated at all times from those
of any other persons, firms, corporations or other
Portfolios, pursuant to the provisions hereof, all
securities received by it for or for the account of a
Portfolio, subject to Sections 3(d), 8(a), 8(b) and 8(c)
hereof, which shall include securities the Portfolio desires
to be held in places within the United States ("domestic
securities") and "foreign securities," as defined in
paragraph (c)(1) of Rule 17f-5 ("Rule 17f-5") under the
Investment Company Act of 1940, as amended (hereinafter
collectively called "Securities"). All Securities shall be
held or disposed of by Northern for the Trust pursuant to
the terms of this Agreement. Northern shall have no power
or authority to assign, hypothecate, pledge or otherwise
dispose of any such Securities, except pursuant to proper
instructions and only for the account of the Trust as set
forth in Section 5 hereof. Any Securities delivered to
Northern other than in bearer form shall be properly
endorsed and in form for transfer or shall be in the name of
Northern, the Trust or a nominee of Northern or the Trust,
subject to Sections 3(d), 8(a), 8(b) and (c) hereof.
(b) Registered Name; Nominees. Northern shall register
Securities of the Trust held by it under this Agreement,
other than those in bearer from, in the name of the Trust or
Northern or a nominee of the Trust or Northern. Securities
held by an agent appointed pursuant to Section 8(a) hereof
or a sub-custodian appointed pursuant to Section 8(b) or
8(c) hereof may be registered in the name of such agent or
sub-custodian or a
-3-
<PAGE>
nominee of such agent or sub-custodian.
(c) Record Keeping and Inventory. Northern shall maintain
records of all receipts, deliveries and locations of
Securities held by it under this Agreement, together with a
current inventory thereof. Without limiting the generality
of the foregoing, Northern shall comply with such proper
instructions from the Trustees or Officers of the Trust as
may be issued from time to time in this regard. With
respect to Securities held by any agent appointed pursuant
to Section 8(a) hereof or any sub-custodian appointed
pursuant to Section 8(b) or 8(c) hereof, Northern may rely
upon certificates of the agent or sub-custodian as to its
holdings, it being understood that such reliance in no way
relieves Northern of its responsibilities under this
Agreement. Northern will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and will take appropriate
action to remedy any such shortages or discrepancies.
(d) Use of Securities Depositories. Northern, each agent
appointed pursuant to Section 8(a) hereof and each sub-
custodian appointed pursuant to Section 8(b) or 8(c) hereof
may deposit all or any part of the Securities held by it
hereunder and eligible therefor in the depository systems
covered by Rule 17f-4(b) under the 1940 Act; provided that
Northern, each such agent and each such sub-custodian shall
comply in all respects with clauses (d)(1) through (d)(4) of
Rule 17f-4 under the 1940 Act and, with respect to foreign
securities depositories, Rule 17f-5 under the 1940 Act; and
provided further, that no such deposit may be made prior to
the approval by the Trust of such depository system, which
approval may be subject to such conditions as the Trust may
from time to time determine; and provided further that with
respect to domestic depository systems, (1) all books and
records maintained by Northern and each such agent and sub-
custodian which relate to the Trust's participation in such
depository systems will at all times during regular business
hours be open to inspection by the Trust's duly authorized
officers,
-4-
<PAGE>
employees, agents and auditors, and the Trust will be
furnished with all the information in respect of the
services rendered to it as it may require, (2) in connection
with the use of such depository systems, Northern will
cooperate with the Trust in enforcing such rights as may
exist against such depository systems with respect to
transactions or Securities of a Portfolio, (3) payment for
Securities purchased for the account of any Portfolio shall
be made only upon (i) receipt of advice from the depository
system that such Securities have been transferred to the
account (the "Account") contemplated by clause (d)(2) of
Rule 17f-4 under the 1940 Act and (ii) the making of an
entry on the records of Northern or such agent or sub-
custodian, as the case may be, to reflect such payment and
transfer for the Account of such Portfolio, and (4) transfer
of Securities sold for the Account of any Portfolio shall be
made only upon (i) receipt of advice from the depository
system that payment for such Securities has been transferred
to the Account, and (ii) the making of an entry on the
records of Northern or such agent or sub-custodian, as the
case may be, to reflect such transfer and payment for the
Account of such Portfolio. Except as may otherwise be agreed
upon in writing by Northern and the Trust, Securities of a
Portfolio shall be maintained in foreign securities
depositories only through arrangements implemented by the
foreign banking institutions serving as sub-custodians
pursuant to Section 8(c) hereof.
(e) Use of Sub-Custodians. With respect to Property which is
maintained by Northern in the custody of a sub-custodian
pursuant to Section 8(b) or 8(c): (1) Northern will
identify on its books as belonging to the particular
Portfolio any Property held by such sub-custodian; (2) any
Property held by a sub-custodian of Northern will be subject
only to the instructions of Northern or its agents, and any
Securities held in an eligible foreign securities depository
(as defined in Section 8(c)) for the account of a sub-
custodian will be subject only to the instructions of such
sub-custodian; (3) any agreement Northern shall enter into
with a
-5-
<PAGE>
foreign sub-custodian shall require that (i) the Property is
not subject to any right, charge, security interest, lien or
claim of any kind in favor of such sub-custodian or its
creditors except for a claim of payment for its safe custody
or administration and (ii) beneficial ownership of such
Property is freely transferable without the payment of money
or value other than for safe custody or administration;
provided, however, that the foregoing shall not apply to the
extent that any of the above-mentioned rights, charges, etc.
result from any compensation or other expenses arising with
respect to the safekeeping of Property pursuant to such
agreement; (4) Northern will supply to the Trust at least
monthly a statement in respect to any Property held by each
sub-custodian, including an identification of the entity
having possession of such Property, and Northern will send
to the Trust an advice or notification of any transfers of
Property indicating, as to Property acquired for a
Portfolio, the identity of the entity having physical
possession of such Property. In the absence of the filing in
writing with Northern by the Trust of exceptions or
objections to any such statement within sixty (60) days of
the Trust's receipt of such statement, or within sixty (60)
days after the date that a material defect is reasonably
discoverable, the Trust shall be deemed to have approved
such statement; and in such case or upon written approval of
the Trust of any such statement Northern shall, to the
extent permitted by law and provided Northern has used
reasonable care with respect to its obligations under this
Agreement, be released, relieved and discharged with respect
to all matters and things set forth in such statement as
though such statement has been settled by the decree of a
court of competent jurisdiction in an action in which the
Trust and all persons having any equity interest in the
Trust were parties; and (5) Northern hereby warrants to the
Trust that in its opinion, after due inquiry, the
established procedures to be followed by each of its
branches, each branch of a "qualified U.S. bank" and each
eligible "foreign custodian" (as defined in Section 8(c))
holding Property of the Trust pursuant to
-6-
<PAGE>
this Agreement afford protection for such Property at least
equal to that afforded by Northern's established procedures
with respect to similar Property held by Northern (and its
securities depositories) in Chicago, Illinois.
(f) Distributions, Rights, Etc. Northern shall receive and
collect all distributions, rights and other items of like
nature in respect of Property held by it or by an agent
appointed pursuant to Section 8(a) or a sub-custodian
appointed pursuant to Section 8(b) or 8(c) of this Agreement
and deal with the same in accordance with this Agreement and
its other obligations to the Trust.
(g) Proxies, Notices, Voting, Etc. Northern shall arrange for
the receipt by it of all forms of proxies and all notices of
meetings, calls, maturities, tender offers, exchange offers
and expirations of rights and any other notices, consents,
or announcements affecting or relating to Property held by
Northern, its agents appointed pursuant to Section 8(a)
hereof and all sub-custodians appointed pursuant to Section
8(b) and 8(c) hereof, and upon issuance of proper
instructions, Northern shall execute and deliver or cause
its nominee to execute and deliver such proxies or other
authorizations as may be necessary or appropriate.
(h) Nondiscretionary Details. In general, Northern shall attend
to all nondiscretionary details in connection with the sale,
exchange, substitution, purchase, transfer or other dealing
with Property of the Trust except as otherwise from time to
time directed by proper instructions from the Trustees or
Officers of the Trust.
4. Disbursements of Cash. Upon the issuance of proper instructions,
Northern shall make payments or disbursements of cash of each Portfolio held by
it or subject to its draft or order under this Agreement, insofar as such cash
is available, only for the following purposes:
(a) Purchases Generally. To pay for and receive Property
purchased for the account of such Portfolio, payment to be
made only (1) in accordance with the customary or
established
-7-
<PAGE>
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the
transaction occurs, (2) in the case of a purchase effected
through a depository system, in accordance with the
conditions set forth in Section 3(d) hereof, or (3) in the
case of repurchase agreements, against delivery of the
Securities which are the subject of such repurchase
agreement in certificate form or receipt of advice from a
depository system that such Securities have been transferred
to the Portfolio's Account (except that in the case of a
repurchase agreement Northern may transfer funds to the
Account of the other party to the repurchase agreement
(i.e., the seller of the Securities) prior to the receipt of
written evidence that the Securities subject to such
repurchase agreement have been transferred by book-entry
into the Portfolio's Account, provided that Northern shall
be responsible to the Trust in the event that such
Securities are not so transferred by book-entry), the making
of an entry on the records of Northern reflecting such
transfer, and receipt of written evidence of the agreement
by such person to repurchase such Securities from such
Portfolio. All Securities accepted by Northern either shall
be accompanied by payment of, or a "due bill" for, any
dividends, interest or other distributions of the issuer,
due the purchaser or Northern shall take such action as may
be necessary to obtain the same.
(b) Dividends and Distributions. To release or otherwise apply
cash for the payment of dividends or other distributions to
shareholders of such Portfolio which are payable in cash.
(c) Disbursements and Liabilities. To make or cause to be made
disbursements for the payment on behalf of the Trust with
respect to such Portfolio of interest, taxes, investment
advisory, agency, professional, custodial and administration
fees and all other operating expenses, including
registration and qualification costs and other expenses of
issuing and selling shares of such Portfolio or changing its
capital
-8-
<PAGE>
structure, whether or not such expenses shall be in whole or
in part capitalized or treated as deferred expenses.
(d) Redemptions of Trust Shares. Subject to the Trust Agreement,
the Trust's then current Prospectus and applicable
resolutions of the Trust's Trustees, to make funds available
for payment to shareholders who have duly requested
redemption of their shares by the Trust pursuant to such
Prospectus.
(e) Conversions. To convert monies received with respect to
Securities of foreign issue into United States dollars or
any other currency necessary to effect any transaction
involving the Securities whenever it is practicable to do so
through customary banking channels, using any method or
agency available, including, but not limited to, the
facilities of Northern, its subsidiaries, affiliates or sub-
custodians.
(f) Other Purposes. To make or cause to be made disbursements
for any other purpose which is declared in such instructions
to be a proper trust purpose; provided, however, that before
making any such disbursement Northern shall have received a
copy of a resolution of the Trustees certified by the
Secretary of the Trust specifying the amount of such
disbursement, setting forth the purpose for which such
disbursement is to be made, declaring such purpose to be a
proper trust purpose and naming the person(s) to whom the
disbursement is to be made.
5. Release and Delivery of Securities. Northern shall have sole
power to release or deliver any Securities of a Portfolio held by it pursuant to
this Agreement. Upon issuance of proper instructions, Northern will transfer,
exchange, or deliver Securities held by it hereunder only for the following
purposes:
(a) Sales. To deliver Securities which have been sold for the
account of such Portfolio in accordance with the customary
or established securities trading or securities processing
practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a
-9-
<PAGE>
dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such Securities from such purchaser or dealer.
(b) Securities Loans. Upon receipt of the collateral required by
the Trust's then current Prospectus, to deliver Securities
which have been lent for the account of such Portfolio.
(c) Redemption or Maturity. To deliver Securities owned for the
account of such Portfolio to the issuer thereof or its agent
when such Securities are called, redeemed, retired or
otherwise become payable; provided, that in any such case,
the cash or other consideration payable in respect thereof
is to be delivered to Northern.
(d) Changes of Name and Denomination. To deliver Securities
owned for the account of such Portfolio to the issuer
thereof or its agent for transfer into the name of the Trust
or Northern or a nominee of either or a permitted sub-
custodian or agent or a nominee of such sub-custodian or
agent, or for exchange for a different number of bonds,
certificates, or other evidence representing the same
aggregate face amount or number of units bearing the same
interest rate, maturity dates and call/put provisions, if
any; provided, that in any such case, the new Securities are
to be delivered to Northern.
(e) Street Delivery. To deliver Securities owned for the account
of such Portfolio to the broker or dealer selling the same
for examination in accordance with the then current "street
delivery" custom.
(f) Securities as Collateral. To deliver Securities owned for
the account of such Portfolio for the purpose of pledge or
hypothecation to secure any loan (including a reverse
repurchase agreement) incurred by the Trust; provided that
Securities shall be released only upon payment to Northern
of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, subject to proper
-10-
<PAGE>
prior authorization, further Securities may be delivered for
that purpose. Upon issuance of proper instructions, Northern
shall pay such loan upon redelivery to it of the Securities
pledged or hypothecated therefor and upon surrender of the
note or notes, if any, evidencing the loan.
(g) Exchanges, Deposits, Tenders, Etc. To exchange Securities or
interim receipts or temporary Securities held by it or by
any agent appointed pursuant to Section 8(a) hereof or any
sub-custodian appointed pursuant to Section 8(b) or 8(c)
hereof for the account of such Portfolio for other
Securities alone or for other Securities and cash, and to
expend cash, insofar as cash is available, in connection
with any merger, consolidation, reorganization,
recapitalization, conversion or in connection with the
exercise of subscription or purchase rights, or otherwise;
to deposit any such Securities and cash in accordance with
the terms of any reorganization or protective plan or
otherwise, and to deliver Securities and related documents
to the designated depository or other receiving agent in
response to tender offers or similar offers to purchase
received in writing.
(h) Other Purposes. To release or deliver any Securities held by
it for the account of such Portfolio for any other purpose
which such instructions declare to be a proper trust
purpose; provided, however, that before making any such
release or delivery Northern shall have received a copy of
the resolution of the Trustees certified by the Secretary of
the Trust specifying the Securities to be delivered, setting
forth the purpose for which such release or delivery is to
be made, declaring such purpose to be a proper trust purpose
and naming the person(s) to whom such release or delivery is
to be made.
6. Records; Accounts and Reporting.
-------------------------------
(a) Records. Northern shall create, maintain and retain all
records relating to its activities and obligations under
this Agreement in such manner as will enable the Trust and
Northern to meet their respective obligations under:
-11-
<PAGE>
(i) the 1940 Act, particularly Sections 30 and 31 thereof,
and the rules and regulations thereunder including the
preparation and filing of all required periodic and other
reports, (ii) applicable Federal and State tax laws, and
(iii) any other law or administrative rule or procedure
which may be applicable to the Trust or Northern. All
records maintained by Northern in connection with the
performance of its duties under this Agreement will remain
the property of the Trust, shall be returned to the Trust
promptly upon request and, in the event of termination of
this Agreement, will be delivered in accordance with Section
16 hereof.
(b) Accounts and Reporting. Northern shall keep the books of
account for the Trust and each of its Portfolios, including
all books necessary to permit prompt determinations of the
Federal and State tax status and origin of the Trust, each
such Portfolio and the dividends and other distributions
declared and/or paid thereby as and to the extent provided
in or contemplated by the Trust's current Prospectus as in
effect from time to time (such determination being
collectively referred to herein as "Tax Determinations").
Northern shall render statements or copies thereof and shall
make Tax Determinations from time to time as contemplated by
proper instructions from the Trustees or Officers of the
Trust.
(c) Access to Records. Without limiting Section 3(d) hereof,
subject to security requirements of Northern applicable to
its own employees having access to similar records within
Northern and such regulations as to the conduct of such
matters as may be reasonably imposed by Northern after prior
consultation with an officer of the Trust or its
administrator, the books and records of Northern pertaining
to its actions under this Agreement shall be open to
inspection and audit at reasonable times by those persons or
classes of persons designated in proper instructions from
the Trustees or Officers of the Trust.
(d) Cooperation with the Trust and its Auditors.
-12-
<PAGE>
Northern shall cooperate with the Trust and the Trust's
independent public accountants in connection with: (1) the
preparation of reports to shareholders of the Trust, to the
Securities and Exchange Commission (including all required
periodic and other reports), to State securities
commissioners, and to others, (2) annual and other audits of
the books and records of the Trust (including, without
limitation, such procedures as may be designated in proper
instructions from the Trustees or Officers of the Trust),
and (3) other matters of a like nature. Northern shall,
subject to restrictions under applicable law, obtain from
any sub-custodian appointed pursuant to Section 8(c) hereof
an undertaking to permit independent public accountants of
the Trust such reasonable access to the records of such sub-
custodian as may be required in connection with their
examination of the books and records pertaining to the
affairs of the Trust or to supply a verifiable confirmation
of the contents of such records.
7. Additional Duties of Northern.
(a) Valuations; Net Income Computation. Unless otherwise
directed by proper instructions from the Trustees or
Officers of the Trust, Northern shall compute and determine
on the days and at the times specified in the Trust's then
current Prospectus, the net asset value of a share of each
Portfolio, such computation and determination to be made in
accordance with the Trust's then current Prospectus, and
shall promptly notify the Administrator of the Trust of the
result of such computation and determination.
Unless advised otherwise by proper instructions from the
Trustees or Officers of the Trust, Northern shall also
calculate at the times specified in the Trust's then current
Prospectus the net income of each Portfolio and shall
promptly advise the Administrator of the Trust of the
results of such calculation. Such calculation shall be made
in accordance with the Trust's then current Prospectus.
-13-
<PAGE>
8. Appointment of Agents and Sub-Custodians.
(a) Appointment of Agents. Northern, as custodian, may at any
time or times appoint (and may at any time remove) in
accordance with the 1940 Act any other bank, trust company
or responsible commercial agent as its agent to carry out
such of the provisions of this Agreement as Northern may
from time to time direct, provided that the appointment of
such agent shall not relieve Northern of any of its
responsibilities under this Agreement.
(b) Appointment of Sub-Custodians Generally.
Northern, as custodian, may from time to time employ one or
more sub-custodians, but only in accordance with the terms
and conditions set forth in a resolution of the Trustees of
the Trust authorizing the appointment of each particular
sub-custodian, it being understood and agreed that: (1)
Northern shall have no more responsibility or liability to
the Trust on account of any actions or omissions of any sub-
custodian so employed than such sub-custodian has to
Northern; (2) the responsibility or liability of the sub-
custodian to Northern shall conform to any resolution of the
Trustees of the Trust authorizing the appointment of the
particular sub-custodian or to the terms of any agreement
entered into between Northern and such sub-custodian to
which such resolution relates; provided, that Northern shall
not be responsible for the solvency of any sub-custodian
appointed by it with reasonable care; and (3) in no event
shall Northern be responsible for any act, omission, default
or for the solvency of any eligible foreign securities
depository approved by the Board of Trustees pursuant to
Section 3(d) hereof. Any determination of whether Northern
or a sub-custodian has exercised reasonable care under the
terms of any such agreement or otherwise shall be made in
light of prevailing standards applicable to professional
custodians in the jurisdiction in which such custodial
services are performed.
Northern shall be liable for the acts or omissions of a
foreign banking institution to
-14-
<PAGE>
the same extent as set forth above with respect to sub-
custodians generally and, regardless of whether assets are
maintained in the custody of a foreign banking institution,
a foreign securities depository or a branch of Northern or
another U.S. bank, Northern shall not be 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 sub-
custodian has otherwise exercised reasonable care.
Northern may only deposit Securities in an account with a
sub-custodian which includes exclusively the assets held by
Northern for its customers, and Northern will cause such
account to be designated by such sub-custodian as a special
custody account for the exclusive benefit of customers of
Northern.
(c) Appointment of Foreign Sub-Custodians.
Northern may hold the Portfolios' foreign securities and
cash and cash equivalents in such amounts as Northern may
determine to be reasonably necessary to effect a Portfolio's
foreign securities transactions in accounts established by
Northern with one of its branches, a branch of a qualified
U.S. bank, an eligible foreign custodian or an eligible
foreign securities depository; provided, however, that the
Board of Trustees of the Trust has approved the use of such
eligible foreign custodian (and Northern's contract with
such custodian) or eligible foreign securities depository by
resolution, and proper instructions to such effect have been
provided to Northern. Furthermore, if a branch of Northern,
a branch of a qualified U.S. bank or an eligible foreign
custodian is selected to act as Northern's sub-custodian to
hold any Property, such entity is authorized to hold such in
its Account with any eligible foreign securities depository
in which it participates so long as such foreign securities
depository has been approved by the Board of Trustees of the
Trust. For purposes of this Agreement (1) "qualified U.S.
bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the 1940 Act
-15-
<PAGE>
("Rule 17f-5"); (2) "eligible foreign custodian" shall mean
an eligible foreign custodian as defined in Rule 17f-5; and
(3) "eligible foreign securities depository" shall mean a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates (i) the central system for handling
of securities or equivalent book-entries in that country or
(ii) a transnational system for the central handling of
securities or equivalent book-entries, or is otherwise
authorized by the Securities and Exchange Commission to hold
the portfolio securities of registered investment companies.
For purposes of this Section 8(c), the term "sub-custodian" will refer
to (i) any branch of Northern, (ii) any branch of a qualified U.S. bank or any
eligible foreign custodian with which Northern has entered into an agreement of
the type contemplated hereunder or (iii) any eligible foreign securities
depository.
If, after the initial approval of the sub-custodians by the Board of
Trustees of the Trust in connection with this Agreement, Northern wishes to
appoint other sub-custodians to hold Property of the Portfolios, it will so
notify the Trust and will provide it with information reasonably necessary to
determine any such new sub-custodian's eligibility under Rule 17f-5, including a
copy of the proposed agreement with such sub-custodian. The Trust shall within
30 days after receipt of such notice give a written approval or disapproval of
the proposed action.
If Northern intends to remove any sub-custodian previously approved,
it shall so notify the Trust and shall move the Property deposited with such
sub-custodian to another sub-custodian previously approved or to a new sub-
custodian, provided that the appointment of any new sub-custodian will be
subject to the requirements set forth in the preceding paragraph. Northern shall
take steps as may be required to remove any sub-custodian which has ceased to
meet the requirements of Rule 17f-5.
Northern shall provide to the Trust on at least an annual basis, a
report confirming that its arrangements hereunder with respect to foreign sub-
custodians remain in compliance with the rules of the Securities and Exchange
Commission governing such arrangements.
-16-
<PAGE>
9. Proper Instructions.
(a) Proper Instructions Generally. Proper instructions shall be
deemed to have been issued upon issuance of written
instructions signed by not less than one officer and one
responsible employee of Northern which in the case of each
such officer and employee Northern's Board of Directors
shall have from time to time authorized to give the
particular class of instructions in question. Different
persons may be authorized to give instructions for different
purposes.
(b) Proper Instructions from the Trustees or Officers of the
Trust. Proper instructions from the Trustees or Officers of
the Trust shall be deemed to have been issued upon receipt
by Northern of written instructions (including receipt of
facsimile) signed by a majority of the Trustees of the Trust
or by not less than two of the Officers or Trustees of the
Trust designated from time to time by resolution of the
Trustees. Such instructions shall be deemed proper
instructions as that term is used in this Agreement in
addition to also being deemed proper instructions from the
Trustees or Officers of the Trust. A certificate executed by
the Secretary or Assistant Secretary of the Trust as to the
persons serving as Trustees and/or who are Officers of the
Trust designated as set forth above may be received and
accepted by Northern as conclusive evidence of those persons
who are such Trustees and/or Officers and may be considered
to be accurate until receipt of written notice (or oral
notice followed by written confirmation within seven days)
to the contrary. In the case of conflict between
instructions under Section 9(a) and under this Section 9(b),
those given pursuant to this Section 9(b) shall prevail upon
receipt by Northern.
10. Delivery of Documents. The Trust has furnished Northern with
copies, properly certified or authenticated, of the following: before any
Portfolio engages in any transactions regulated by the Commodity Futures Trading
Commission ("CFTC"), a copy of either (i) a filed notice of eligibility to claim
the exclusion from the definition of "commodity pool operator" contained in
Section 2(a)(1)(A) of the Commodity Exchange Act
-17-
<PAGE>
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the CFTC, or (ii) a letter which has been granted
the Trust by the CFTC which states that the Trust will not be treated as a
"pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or (iii)
a letter which has been granted the Trust by the CFTC which states that the CFTC
will not take any enforcement action if the Trust does not register as a
"commodity pool operator."
The Trust will furnish Northern from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
11. Segregated Accounts.
(a) Northern shall upon receipt of proper instructions
establish and maintain a segregated account or accounts on its
records for and on behalf of each Portfolio of the Trust, into
which account or accounts may be transferred cash and/or
Securities, including securities in a depository system (i) for
the purposes of compliance by the Trust with the procedures
required by a securities or option exchange, providing such
procedures comply with the 1940 Act and Release No. 10666 or any
subsequent release or releases of the Securities and Exchange
Commission ("SEC") relating to the maintenance of segregated
accounts by registered investment companies, and (ii) for other
proper corporate purposes, but only, in the case of clause (ii),
upon receipt of proper instructions.
(b) Northern may enter into separate procedural, safekeeping
or other agreements with various futures commission merchants
("FCMs") and banks that are unaffiliated with the Trust (each a
"Safekeeping Arrangement"), pursuant to which the banks will act
as the Trust's custodian with respect to the Trust's margin
deposits in transactions involving futures contracts and options
on futures contracts. Such margin deposits will be held in
segregated accounts (each an "FCM Account") subject to the
disposition by the FCM involved in accordance with the customer
contract between FCM and the Trust ("FCM Contract"), SEC rules
governing such segregated accounts, CFTC rules and the rules of
the applicable commodities exchange. Transfers of initial and
variation margin and premiums shall be made from the Trust's
custodial accounts under the Custodian Agreement upon proper
instructions.
-18-
<PAGE>
12. Compensation; Reimbursement. The Trust shall pay to Northern, as
custodian, the compensation and expense reimbursement set forth in Exhibit A
hereto.
13. Duration and Termination. This Agreement shall continue, unless
sooner terminated as provided herein, until February 29, 1996, and for each
Portfolio thereafter shall continue automatically for periods of one year so
long as each such latter continuance is approved at least annually (a) by the
vote of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Trustees of the Trust or by a majority of the outstanding Shares
(as defined with respect to voting securities in the 1940 Act) representing the
interests in such Portfolio; provided, however, that this Agreement may be
terminated by the Trust at any time, without the payment of any penalty, by vote
of a majority of the Trustees of the Trust or by vote of a majority of the
outstanding Shares (as so defined) of the Trust on 60 days' written notice to
Northern, or by Northern at any time, without the payment of any penalty, on 60
days' written notice to the Trust.
14. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved by vote of a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party.
15. Interpretative and Additional Provisions. In connection with the
operation of this Agreement, Northern and the Trust may agree from time to time,
by written instrument signed by both parties, on such provisions interpretative
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement, provided that no
such interpretative or additional provisions shall contravene any applicable
Federal or State laws or regulations, or any provision of the Trust Agreement or
the Trust's By-laws, as the same may from time to time be amended. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
16. Successor Custodian.
(a) Appointment of Successor by Trust. If a successor custodian
is appointed by the Trust and a certified copy of the
related appointing resolutions is delivered to Northern,
Northern shall, upon termination of this Agreement or
substitution of such
-19-
<PAGE>
successor for Northern, deliver to such successor custodian,
duly endorsed and in proper form for transfer, all
Securities then held by Northern hereunder (or by any agent
or sub-custodian of Northern) and all funds or other
Property of the Trust deposited with or held by Northern
hereunder (or by any agent or sub-custodian of Northern).
(b) Delivery Pursuant to Shareholder Resolution. In the event
that this Agreement is to be terminated but no new custodian
can be found by the Trust, the Trust shall, before
authorizing the delivery of the Securities, funds and other
Property to anyone other than a successor custodian, submit
to its Shareholders the question of whether the Trust shall
be liquidated or shall function without a custodian. Upon
approval by the Shareholders for the Trust to liquidate or
function without a custodian Northern shall, in like manner,
upon receipt of a certified copy of a resolution of the
Shareholders of the Trust deliver such Securities, funds and
other Property in accordance with such resolution.
(c) Selection of Successor by Northern. In the event that this
Agreement is terminated and no successor custodian has been
appointed by the Trust or certified copy of a resolution of
the Shareholders has been delivered to Northern on or before
the date when such termination shall become effective, then
Northern shall have the right to deliver to a bank or trust
company of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last
published report, of not less than $200 million, all
Securities, funds, property and instruments of the Trust
held by Northern under this Agreement (or any agent or sub-
custodian of Northern) and all instruments held by Northern
(or such agent or sub-custodian) relative thereto.
Thereafter, such bank or trust company shall be the
successor custodian to Northern under this Agreement.
17. Communications. Notices and other writings delivered or mailed
postage prepaid to the Trust in care of The Benchmark Funds, 4900 Sears Tower,
Chicago, Illinois, 60606, or
-20-
<PAGE>
to The Northern Trust Company at 50 South LaSalle Street, Chicago, Illinois
60675, Attention: Fund Accounting, Canal Center, or to such other address as the
Trust or Northern may hereafter specify by written notice to the most recent
address specified by the party to whom such notice is addressed, shall be deemed
to have been properly delivered or given hereunder to the respective addressee.
18. Miscellaneous. The Trust's Declaration of Trust as amended to date
is on file with the Secretary of The Commonwealth of Massachusetts. The captions
in this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Any provision in this Agreement
requiring compliance with any statute or regulation shall mean such statute or
regulation as amended and in effect from time to time. This Agreement shall be
construed in accordance with the laws of the State of Illinois (except as to
Section 19 hereof which shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
19. Shareholder Liability. This Agreement is executed by or on behalf
of the Trust and the obligations hereunder are not binding upon any of the
Trustees, Officers or Shareholders of the Trust individually but are binding
only upon the Trust and its assets and property. All obligations of the Trust
under this Agreement shall apply only on a Portfolio by Portfolio basis, and the
assets of one Portfolio shall not be liable for the obligations of another
Portfolio.
THE BENCHMARK FUNDS
By /s/ Nancy L. Mucker
---------------------------------
As its
-----------------------------
THE NORTHERN TRUST COMPANY
By /s/ Jen Sheridi
---------------------------------
As its
-----------------------------
-21-
<PAGE>
benchmar/agrmts/intcust.agr
-22-
<PAGE>
EXHIBIT A
---------
A. Basic Fee
---------
Each Portfolio:
--------------
Flat Fee of $35,000
- plus -
9/100th of 1% of the Portfolio's average daily net assets
The basic fee is an annual fee which will be billed and payable monthly.
B. Out-of-Pocket Expenses Reimbursable by the Trust
------------------------------------------------
The Trust will reimburse Northern monthly for the following out-of-pocket
expenses incurred by Northern during such month in the performance of its duties
under this Foreign Custody Agreement: (i) telephone; (ii) postage; (iii) courier
fees of independent courier services; (iv) office supplies used in maintaining
the Trust's records; and (v) duplicating.
-23-
<PAGE>
Exhibit 8(i)
THE BENCHMARK FUNDS
ADDENDUM NO. 2 TO THE FOREIGN CUSTODY AGREEMENT
This Addendum No. 2, dated as of the 27th day of January, 1998, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern have entered into a Foreign Custody
Agreement dated March 1, 1994 (the "Agreement"), pursuant to which the Trust has
appointed Northern to act as custodian to the Trust for its International Growth
Portfolio, International Bond Portfolio and International Equity Index Portfolio
(collectively, the "Portfolios"); and
WHEREAS, the Trust and Northern desire to enter into this Addendum No. 2 to
provide compensation for each Portfolio for uninvested cash balances maintained
with Northern under the Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Cash Balance Compensation. Northern shall compensate each
Portfolio for uninvested cash balances maintained with Northern
at the end of each day ("Cash Balance Compensation") in
accordance with this paragraph. Cash Balance Compensation with
respect to each Portfolio's uninvested cash balance shall be
determined at the end of each day based on an annual rate equal
to 96% of the previous calendar month's average 90-day Treasury
bill interest rate. The amount of each Portfolio's accumulated
Cash Balance Compensation shall be paid monthly in the form of
reductions to the custody fees otherwise allocable to the
Portfolio under the Agreement for such month. In the event that a
Portfolio's Cash Balance Compensation for any month exceeds the
custody fees payable by the Portfolio under the Agreement for
such month, the Portfolio's excess Cash Balance Compensation may
be carried forward and credited against future custody fees,
provided that no excess Cash Balance Compensation may be carried
forward beyond the end of any fiscal year.
<PAGE>
2. Miscellaneous. Except to the extent supplemented hereby, the
Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
/s/ J.A. Fitzpatrick
Attest: Nancy James By:_________________________
_____________ Name: James A. Fitzpatrick
Title: Vice President
THE NORTHERN TRUST COMPANY
/s/ James Snyder
Attest:_____________ By: ________________________
Name: James Snyder
Title: Vice President
<PAGE>
Exhibit 8(j)
FOREIGN CUSTODY MONITORING AGREEMENT
AGREEMENT made as of January 27, 1998 between THE BENCHMARK FUNDS, a
Massachusetts business trust (the "Trust"), and THE NORTHERN TRUST COMPANY, an
Illinois state bank ("Northern").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained Northern to furnish investment advisory,
custodial and other services;
WHEREAS, the Board of Trustees of the Trust wishes to delegate to Northern
the responsibility of monitoring the Trust's foreign custody arrangements as
provided in Rule 17f-5 under the 1940 Act, and Northern is willing to undertake
such responsibility;
WHEREAS, the Board of Trustees of the Trust has determined that it is
reasonable to rely on Northern to perform the responsibilities delegated to it
under this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and intending to be legally bound, the parties hereto agree as follows:
1. The Trust hereby delegates to Northern the responsibility of
monitoring foreign custody arrangements for the Trust's existing and future
investment portfolios in accordance with Rule 17f-5 under the 1940 Act, and
Northern accepts such delegation and agrees to furnish the services set forth
herein.
2. With respect to each foreign sub-custodian that holds assets of any
investment portfolio of the Trust, Northern shall:
(a) determine that the Trust's assets will be subject to reasonable
care, based on the standards applicable to custodians in the relevant
market, if maintained with such foreign sub-custodian, after
considering all factors relevant to the safekeeping of such assets,
including, without limitation:
(i) the foreign sub-custodian's practices, procedures and
internal controls, including but not limited to, the physical
protections available for certificated securities (if
applicable), the method of keeping custodial records and the
security and data protection practices;
(ii) whether the foreign sub-custodian has the requisite
financial strength to provide reasonable care for the Trust's
assets;
(iii) the foreign sub-custodian's general reputation and standing
and, in the case of a foreign securities depository, the
depository's operating history and number of participants; and
(iv) whether the Trust will have jurisdiction over and be able to
enforce judgments against the foreign sub-custodian, such as by
virtue of the existence of any offices of the foreign sub-
custodian in the United States or the foreign sub-custodian's
consent to service of process in the United States.
<PAGE>
(b) determine that the written contract with such foreign sub-
custodian governing the foreign custody arrangements (or, in the case
of a foreign securities depository, that a written contract, the rules
or established practices or procedures of the depository or any
combination of the foregoing) will provide reasonable care for the
Trust's assets based on the standards specified in paragraph 2(a)
above, and that such contract includes provisions that at least
provide the following; provided, however, that such contract may
contain, in lieu of any or all of the provisions specified in (b)(i)
through (b)(v), such other provisions that Northern determines will
provide, in their entirety, the same or a greater level of care and
protection for the Trust's assets as those provided in (b)(i) through
(b)(v) in their entirety:
(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the Trust will be
adequately protected against the risk of loss of assets held in
accordance with such contract;
(ii) that the Trust's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
the foreign sub-custodian or its creditors except a claim of
payment for their safe custody or administration or, in the case
of cash deposits, liens or rights in favor of creditors of the
sub-custodian arising under bankruptcy, insolvency, or similar
laws;
(iii) that beneficial ownership for the Trust's assets will be
freely transferable without the payment of money or value other
than for safe custody or administration;
(iv) that adequate records will be maintained identifying the
assets as belonging to the Trust or as being held by a third
party for the benefit of the Trust and that the Trust's
independent public accountants will be given access to those
records or confirmation of the contents of those records; and
(v) that the Trust will receive periodic reports with respect to
the safekeeping of the Trust's assets, including, but not limited
to, notification of any transfer to or from the Trust's account
or a third party account containing assets held for the benefit
of the Trust.
(c) establish a system to monitor the appropriateness of maintaining
the Trust's assets with such foreign sub-custodian and the contract
governing the Trust's foreign custody arrangements;
(d) provide to the Trust's Board of Trustees, at least annually,
written reports notifying the Board of the placement of the Trust's
assets with a particular foreign sub-custodian and quarterly reports
on any material changes to the Trust's foreign custody arrangements;
and
(e) withdraw the Trust's assets from any foreign sub-custodian as soon
as reasonably practicable, if the foreign custody arrangement no
longer meets the requirement of Rule 17f-5.
3. In providing the services set forth above, Northern agrees to exercise
reasonable care, prudence and diligence such as a person having responsibility
for the safekeeping of the Trust's assets would exercise.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written
THE BENCHMARK FUNDS
By /s/ J.A. Fitzpatrick
---------------------------
(Authorized Officer)
James A. Fitzpatrick
Vice President
THE NORTHERN TRUST COMPANY
By /s/ James Snyder
---------------------------
(Authorized Officer)
James Snyder
Vice President
-3-
<PAGE>
Exhibit 9
---------
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION made this 15th day of
August, 1990, by and between The Benchmark Tax-Exempt Fund (the "Trust"), a
Massachusetts business trust established under an Agreement and Declaration of
Trust dated July 15, 1982, as amended, on behalf of the Short-Term Diversified
Portfolio, a series of the Trust (the "Trust Portfolio"), and The Benchmark
Money Market Fund Diversified Assets and Government Portfolios ("TBF"), a
Massachusetts business trust established under an Agreement and Declaration of
Trust dated July 15, 1982, as amended, on behalf of the Tax-Exempt Portfolio, a
Portfolio of TBF (the "TEP").
WHEREAS, the Trust and TBF are diversified, open-end registered
investment companies of the management type; and
WHEREAS, the Trust and TBF are authorized to issue their units of
beneficial interest in separate series, each of which maintains a separate and
distinct portfolio of assets;
WHEREAS, the Trust Portfolio is one series of the Trust and the TEP is
one Portfolio of TBF;
WHEREAS, the Trust Portfolio owns securities which are assets of the
character in which the TEP is permitted to invest;
WHEREAS, the Board of Trustees of the Trust and TBF have determined
that the transfer of all of the assets and liabilities of the Trust Portfolio to
the TEP is in the best interest of the Trust and TBF because it would provide
more efficient management and administration of those assets and that the
interests of the existing unitholders of the Trust and TBF would not be diluted
as a result of this transaction;
WHEREAS, the parties hereto intend to provide for the reorganization
of the Trust Portfolio through the acquisition by the TEP of all of the assets,
subject to all of the liabilities, of the Trust Portfolio in exchange for units
of beneficial interest, no par value, of the TEP (the "TEP Units"), the
termination of the Trust Portfolio and the distribution to its unitholders of
such TEP Units, all pursuant to the provisions of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
<PAGE>
1. Plan of Reorganization and Liquidation.
(a) The Trust, on behalf of the Trust Portfolio, shall assign,
sell, convey, transfer and deliver to the TEP at the closing provided for in
Section 2 (hereinafter called the "Closing") all of the then existing assets of
the Trust Portfolio of every kind and nature. In consideration therefor, the TEP
shall at the Closing (i) assume all of the Trust Portfolio's obligations and
liabilities then existing, whether absolute, accrued, contingent or otherwise,
including without limitation all fees and expenses in connection with the
transactions contemplated hereby and (ii) deliver to the Trust Portfolio a
number of full and fractional TEP Units equal to the number of full and
fractional units of the Trust Portfolio then outstanding. The number of units of
the Trust Portfolio issued and outstanding and the number of TEP Units to be
issued to the Trust Portfolio shall in each case be determined by the Custodian
to both the Trust and TBF as of 3:30 p.m., Chicago time, on the Closing Date (as
defined in Section 2). The determination of said Custodian shall be conclusive
and binding on the Trust Portfolio, the TEP and their respective unitholders.
(b) Upon consummation of the transactions described in paragraph
(a) of this Section 1, the Trust Portfolio shall distribute in complete
liquidation pro rata to its unitholders of record as of the Closing Date the TEP
Units received by the Trust Portfolio. Such distribution shall be accomplished
by the establishment of an open account on the unit records of the TEP in the
name of each unitholder of the Trust Portfolio representing a number of TEP
Units equal to the number of units of the Trust Portfolio owned of record by the
unitholder at the Closing Date. Certificates for units of the Trust Portfolio
issued prior to the reorganization, if any, shall represent outstanding units of
the TEP following the reorganization. In the interest of economy and
convenience, certificates representing the TEP will not be physically issued.
(c) As promptly as practicable after the Closing Date, the Trust
Portfolio and the Trust shall be terminated pursuant to the provisions of the
laws of the Commonwealth of Massachusetts and the Trust's Agreement and
Declaration of Trust and an application prepared, executed and filed with the
Securities and Exchange Commission (the "SEC") seeking, and the Trust shall use
its best efforts to obtain, an SEC order declaring that the Trust has ceased to
be a registered investment company. After the Closing Date, the Trust shall not
conduct any business except in connection with its liquidation, termination and
deregistration.
2. Closing and Closing Date. The Closing shall occur at the offices
of the Distributor at 3:30 p.m., Chicago time, on
-2-
<PAGE>
October 5, 1990 or at such later time and date, or at such other location, as
the parties may mutually agree (the "Closing Date"). All acts taking place at
the Closing shall be deemed to take place simultaneously on the Closing Date
unless otherwise provided.
3. Conditions Precedent. The obligation of the Trust and TBF to
effect the transactions contemplated hereunder shall be subject to the
satisfaction of each of the following conditions:
(a) All filings shall have been made with, and all authority and
orders shall have been received from, the SEC and state securities commissions
as may be necessary in the opinion of Drinker Biddle & Reath to permit the
parties to carry out the transactions contemplated by this Agreement.
(b) The Trust and TBF shall have received an opinion of Drinker
Biddle & Reath substantially to the effect that for federal income tax purposes:
(i) the acquisition of the assets and assumption of the liabilities of the Trust
Portfolio by the TEP in return for TEP Units followed by the distribution of
such units to Trust Portfolio unitholders will constitute a "reorganization"
within the meaning of Section 368(a)(1)(F) of the Code and the TEP and the Trust
Portfolio will each be "a party to the reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by the Trust
Portfolio upon the transfer of its assets and liabilities to the TEP; (iii) the
tax basis of the assets of the Trust Portfolio in the hands of the TEP will be
the same as the tax basis of such assets in the hands of the Trust Portfolio
immediately prior to the transfer; (iv) the TEP's holding period for the assets
of the Trust Portfolio transferred to TEP will include the period during which
such assets were held by the Trust Portfolio; (v) no gain or loss will be
recognized by the TEP upon the receipt of the assets of the Trust Portfolio in
exchange for TEP Units and the assumption by the TEP of the liabilities of the
Trust Portfolio; (vi) no gain or loss will be recognized by the unitholders of
the Trust Portfolio upon the receipt of TEP units in exchange for their units in
the Trust Portfolio; (vii) the basis of the TEP Units received by the
unitholders of the Trust Portfolio will be the same as the basis of the units of
the Trust Portfolio exchanged therefor; and (viii) the holding period of the TEP
Units received by the unitholders of the Trust Portfolio will include the
holding period of the units of the Trust Portfolio exchanged therefor, provided
that at the time of the exchange the units of the Trust Portfolio were held as
capital assets; and as to such other matters as they may reasonably request;
(c) This Agreement and Plan of Reorganization and the
reorganization contemplated hereby shall have been approved
-3-
<PAGE>
by the Board of Trustees of the Trust and of TBF and shall have been recommended
for approval to the unitholders of the Trust Portfolio by the Trust's Board of
Trustees;
(d) This Agreement and Plan of Reorganization and the
reorganization contemplated hereby shall have been approved by the affirmative
vote of the holders of a majority of the outstanding units of beneficial
interest of the Trust Portfolio (as defined in the Trust's Agreement and
Declaration of Trust) entitled to vote thereon;
(e) TBF on behalf of the TEP shall have entered into an
Investment Advisory Agreement with The Northern Trust Company, such Agreement to
be substantially identical in form and substance as to the TEP to the Investment
Advisory Agreement in effect at the Closing Date between the Trust and said
other party, and such Agreement shall have been approved by the Trustees of TBF
and, to the extent required by law, by the Trustees of TBF who are not
"interested persons" of TBF as defined in the Investment Company Act of 1940
(the "1940 Act") as well as by the unitholders of the TEP (it being understood
that the Trust, as sole unitholder of the TEP prior to the consummation of the
reorganization, hereby agrees and is authorized to vote for such approval); and
(f) The Trustees of TBF who are not "interested persons" of TBF
as defined in the 1940 Act shall have selected as auditors for TBF such auditors
as shall have been selected and ratified for the Trust and such selection shall
have been ratified by the unitholders of TEP (it being understood that the
Trust, as sole unitholder of the TEP prior to the consummation of the
reorganization, hereby agrees and is authorized to vote for such ratification).
(g) The Trust agrees to file with the SEC proxy materials (the
"Proxy Statement") complying in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended, the 1940 Act, and applicable
rules and regulations thereunder, relating to a meeting of its unitholders to be
called to consider and act upon the transactions contemplated herein. TBF agrees
to provide the Trust with information applicable to TBF required under said Acts
and such rules and regulations for inclusion in the Proxy Statement.
4. Amendment. This Agreement may be amended at any time by action of
the Trustees of the Trust and the Trustees of TBF, notwithstanding approval
thereof by the unitholders of the Trust, provided that no amendment shall have a
material adverse effect on the interests of the unitholders of the Trust and
TBF.
5. Termination. The Trustees of the Trust and the
-4-
<PAGE>
Trustees of TBF may terminate this Agreement and abandon the reorganization
contemplated hereby, notwithstanding approval thereof by the unitholders of the
Trust, at any time prior to the Closing, if circumstances should develop that,
in their judgment, make proceeding with the Agreement inadvisable.
6. No Broker's or Finder's Fee. The Trust and TBF each represent
that there is no person who has dealt with it, who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission arising
out of the transactions contemplated by this Agreement and Plan of
Reorganization.
7. No Survival of Representations, etc. The representations,
warranties, covenants and agreements of the parties contained herein shall not
survive the Closing Date, except for the provisions of Section 1(c).
8. Waiver. The Trust or TBF, after consultation with their
respective counsel and by consent of their respective Boards of Trustees,
Executive Committees or an officer authorized by such Boards of Trustees, may
waive any condition to their respective obligations hereunder if, in their or
such officer's judgment, such waiver will not have a material adverse effect on
the interests of the unitholders of the Trust and TBF.
9. Reliance. All covenants, agreements, representations and
warranties made under this Agreement and Plan of Reorganization shall be deemed
to have been material and relied upon by each of the parties notwithstanding any
investigation made by such party or on its behalf.
10. Notices. All notices required or permitted under this Agreement
and Plan of Reorganization shall be given in writing (i) to the Trust at 4900
Sears Tower, Chicago, Illinois 60606 and 50 S. LaSalle Street, Chicago, Illinois
60675; and (ii) to TBF at 4900 Sears Tower, Chicago, Illinois 60606 and 50 S.
LaSalle Street, Chicago, Illinois 60675 or at any such other place as shall be
specified in a written notice given by either party to the other party to this
Agreement and Plan of Reorganization, and shall be validly given if mailed by
first class mail, postage prepaid.
11. Miscellaneous Provisions. This Agreement and Plan of
Reorganization shall bind and inure to the benefit of the parties and their
respective successors and assigns. It shall be governed by and carried out in
accordance with the laws of the Commonwealth of Massachusetts. It is executed in
several counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one agreement.
-5-
<PAGE>
The name "The Benchmark Money Market Fund Diversified Assets and
Government Portfolios" is the designation of the Trustees for the time being
under an Agreement and Declaration of Trust dated July 15, 1982, as amended, and
all persons dealing with TBF must look solely to the TBF property for the
enforcement of any claims against TBF, as neither the Trustees, officers, agents
or unitholders assume any personal liability for obligations entered into on
behalf of TBF. No series of TBF shall be liable for claims against any other
series of TBF. The said Agreement and Declaration of Trust is on file with the
SEC and the Commonwealth of Massachusetts.
The name "The Benchmark Tax-Exempt Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated July 15, 1982, as
amended, and all persons dealing with the Trust must look solely to the Trust
property for the enforcement of any claims against the Trust, as neither the
Trustees, officers, agents or unitholders assume any personal liability for
obligations entered into on behalf of the Trust. The said Agreement and
Declaration of Trust is on file with the SEC and the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement
and Plan of Reorganization to be executed and delivered by their duly authorized
officers as of the day and year first written above.
THE BENCHMARK MONEY MARKET FUND
DIVERSIFIED ASSETS AND GOVERNMENT
PORTFOLIOS (on behalf of its Tax-Exempt
Portfolio)
By [Signature Illegible]
---------------------
President
ATTEST:
(SEAL)
_________________________
Secretary
THE BENCHMARK TAX-EXEMPT FUND (on behalf
of its Short-Term Diversified Portfolio)
By [Signature Illegible]
---------------------
President
ATTEST:
-6-
<PAGE>
(SEAL)
_________________________
Secretary
-7-
<PAGE>
Exhibit 9(a)
------------
THE BENCHMARK FUNDS
REVISED AND RESTATED
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 8th day of January, 1993 by and between The
Benchmark Funds, a Massachusetts business trust (the "Trust"), and The Northern
Trust Company, an Illinois state bank ("Northern").
WITNESSETH
----------
WHEREAS, the Trust is an open-end, management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust is empowered to issue units of beneficial interest
("Units") in separate series ("Series"), each such Series, pursuant to Section
18(f)(2) of the 1940 Act, being preferred over all other Series in respect of
the assets specifically allocated to such Series;
WHEREAS, the Trust presently intends to offer fourteen Series, known
as the Diversified Assets Portfolio, Government Portfolio, Government Select
Portfolio, Tax-Exempt Portfolio, California Municipal Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio, U.S.
Government Securities Portfolio, Short-Intermediate Bond Portfolio and Bond
Portfolio (the "Current Portfolios"), but may create additional Series from time
to time;
WHEREAS, the Trust is also empowered to classify or reclassify any
unissued Units of a Series into one or more Subseries (referred to herein
collectively as "Classes" and individually as "Class") of Units in each such
Series, each Unit of a Class representing an equal proportionate interest in
that Class of the Series;
WHEREAS, the Trust presently intends to offer four Classes of Units,
currently known as Class A, Class B, Class C and Class D, in the Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth Portfolio, Focused
Growth Portfolio, U.S. Treasury Index Portfolio, U.S. Government Securities
Portfolio, Short-Intermediate Bond Portfolio and Bond Portfolio (the "Non-Money
Market Portfolios"), but may create additional Classes from time to time;
WHEREAS, Class A, Class B, Class C and Class D Units are currently
intended to be offered to Northern, its affiliates and other institutions and
organizations (the "Institutions")
<PAGE>
acting on behalf of their customers, clients, employees and others (the
"Customers"), and other investors (the "Investors"), the level of administrative
support services and transfer agency services required by an Institution and its
Customers and Investors generally determining whether they purchase Units of
Class A, B, C or D; and
WHEREAS, the Trust desires to retain Northern to render the transfer
agency and other services contemplated hereby with respect to each Series of
Units and Class within each Series and the record and/or beneficial owners
thereof ("Unitholders") and Northern is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints Northern to provide the
transfer agency and other services contemplated hereby with respect to each
Series and Class of Units and the Unitholders for the periods and on the terms
herein set forth. Northern accepts such appointment and agrees to render such
transfer agency and other services for the compensation herein provided.
Notwithstanding the foregoing, the Trust agrees that during the term of this
Agreement it will not establish any Series of Units other than the Current
Portfolios or any Class within a Series of Units other than Class A, B, C and D
without the consent of Northern.
2. Duties of Northern Generally.
a. Northern will act as transfer agent with respect to each Series
of Units, serve as servicing agent for the beneficial owners of the Series known
as Diversified Assets Portfolio, Government Portfolio, Tax-Exempt Portfolio,
California Municipal Portfolio and Short Duration Portfolio (the "Money Market
Portfolios") thereof, provide information in connection with the preparation by
the Trust of various regulatory reports and prepare reports to the Trustees and
management.
b. With respect to the Money Market Portfolios, Northern, subject
to paragraph 4, shall:
(i) answer customer inquiries regarding the current yield of,
and certain other matters (e.g., account status
information) pertaining to, the Trust;
(ii) process purchase and redemption transactions, including
transactions generated by any service provided
-2-
<PAGE>
outside of this Agreement by Northern, its affiliates or
correspondent banks whereby customer account cash balances
are automatically invested in Units, and the disbursement
of the proceeds of redemptions, all on a timely basis and
as described in the Trust's then current Prospectus and
Statement of Additional Information (the "Current
Prospectus") and this Agreement;
(iii) establish and maintain separate omnibus accounts with
respect to Unitholders investing through Northern and any
of its affiliates and correspondent banks, act as transfer
agent with respect to each such account, and perform
subaccounting services with respect to each such account,
all as more fully described or referred to in paragraph 3;
(iv) provide periodic statements to each Unitholder showing
account balances and all transactions since the last
statement, all on a timely basis and as described in the
Current Prospectus and this Agreement;
(v) mail reports and proxy materials to Unitholders; and
(vi) make arrangements for such office space, equipment,
telephone facilities and personnel as may be necessary or
desirable for performance of its services hereunder.
c. With respect to Units of the Non-Money Market Portfolios held by
Institutions for their Customers, Northern shall perform some or all of the
following services:
(i) establish and maintain an omnibus account in the name of
each Institution;
(ii) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption
proceeds;
(iii) act as the income disbursing agent of
-3-
<PAGE>
the Trust;
(iv) answer inquiries from Institutions;
(v) provide periodic statements of account to each
Institution;
(vi) process and record the issuance and redemption of Units in
accordance with Instructions from the Trust or its
Administrator;
(vii) if required by law, prepare and forward to Institution's
unitholders communications (such as proxy statements and
proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices);
(viii) preserve all records; and
(ix) furnish necessary office space, facilities and personnel.
d. With respect to the Units of the Non-Money Market Portfolios
held by Investors, Northern shall perform some or all of the following services:
(i) establish and maintain a separate account in the name of
each Investor;
(ii) process purchase orders and redemption requests, and
furnish confirmations in accordance with applicable law;
(iii) disburse redemption proceeds;
(iv) process and record the issuance and redemption of Units in
accordance with instructions from the Trust or its
Administrator;
(v) act as income disbursing agent of the Trust in accordance
with the terms of the prospectus and Instructions from the
Trust or its Administrator;
(vi) provide periodic statements of account;
(vii) answer inquiries (including requests
-4-
<PAGE>
for prospectuses and Statements of Additional Information,
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, yield, etc.) and questions
relating to accounts of Investors (such as possible errors
in statements, transactions, etc);
(viii) respond to and seek to resolve all complaints of Investors
with respect to the Trust or their account;
(ix) furnish proxy statements and proxies, annual and semi-
annual financial statements, and dividend, distribution
and tax notices to Investors;
(x) furnish the Trust all pertinent Blue Sky information;
(xi) perform all required tax withholding;
(xii) preserve records; and
(xiii) furnish necessary office space, facilities and personnel.
e. Northern shall render to the Trust and its Administrator such
periodic and special reports as either of them may reasonably request.
3. Processing, Transfer Agency and Subaccounting Duties. With respect
to the Money Market Portfolios:
a. Northern shall process and record the issuance of Units in
accordance with Instructions from the Trust or its Administrator.
b. Northern shall process and record the redemption of Units in
accordance with Instructions from the Trust or its Administrator.
c. Northern shall, as income disbursing agent for the Trust and in
accordance with Instructions, if any, from the Trust or its Administrator and
the Current Prospectus, prepare and mail or credit income and capital gain
dividends or distributions on the Units to each of the Unitholders at the time
and in the manner contemplated by the Current Prospectus.
-5-
<PAGE>
d. Northern shall maintain individual account records with respect
to each Unitholder and the related omnibus account, if any, in accordance with
Instructions from the Trust or its Administrator. Northern shall maintain all
records relating to its activities and obligations under this Agreement in such
manner as will enable the Trust and Northern to meet their respective
obligations under: (i) the Current Prospectus; (ii) the 1940 Act, particularly
Sections 30 and 31 thereof, and the rules and regulations thereunder; (iii)
applicable Federal and state tax laws; and (iv) any other law or administrative
rule or procedure which may be applicable to the Trust or Northern. Northern
shall preserve all records and other data created and maintained pursuant to
this Agreement in accordance with Instructions from the Trust or its
Administrator.
e. Northern shall furnish to the Trust and its Administrator: (i)
information as to the Units distributed to and redeemed by the Unitholders in
each state or other jurisdiction for "Blue Sky" purposes, as determined in
accordance with Instructions delivered from time to time by the Trust or its
Administrator and (ii) other information and statistical data as may be
requested and at such times as specified in Instructions, if any, from the Trust
or its Administrator.
f. Northern shall be responsible for carrying out all tax
withholding and related remittance obligations applicable to dividends and
distributions on the Units. Northern shall prepare and file with the Internal
Revenue Service and with the appropriate state agencies, and mail to the
Unitholders, such returns for reporting, and information as to the Federal
income tax consequences of, dividends and distributions paid, credited or
withheld as are required on the part of the Trust, Northern, its affiliates or
correspondent banks by the Current Prospectus or applicable law or regulation to
be so filed and mailed. Without limiting the generality of the foregoing, such
returns and information shall be prepared in conformity with such Instructions,
if any, from the Trust or its Administrator as may be given to Northern from
time to time.
g. Northern shall promptly inform the Trust and its Administrator
of all written complaints received by Northern from Unitholders relating to the
maintenance of their accounts. Northern shall promptly answer such complaints or
other correspondence from the Unitholders relating to the maintenance of their
accounts, as well as similar correspondence directed by the Trust or its
Administrator to Northern's attention, all as the Trust or its Administrator
shall request. Northern shall provide the Trust and its Administrator on a
timely basis with information in this regard in accordance with Instructions
from the Trust or its Administrator.
h. Northern shall receive, examine and tabulate
-6-
<PAGE>
returned proxies and certify the vote to the Trust, all as and to the extent
requested by the Trust.
4. Affiliates and Correspondent Banks. It is understood that Units of
the Money Market Portfolios may be offered to customers of affiliates or
correspondent banks of Northern, that such banks may maintain omnibus accounts
at Northern and that, in such event, such affiliates or correspondent banks may
perform for Northern some or all of the services which Northern has undertaken
to perform under this Agreement. It also is understood that Northern may retain
Goldman, Sachs & Co. to determine, based on information provided by Northern,
the amounts in the accounts of Northern's demand deposit account customers that
are to be automatically invested in Units and to maintain certain subaccounting
records with respect thereto. Notwithstanding the fact that such services may
actually be performed by such affiliates, correspondent banks or Goldman, Sachs
& Co.:
a. Northern shall remain responsible on a primary basis to the
Trust for the timely and proper performance of such services in accordance with
the terms of this Agreement and for compliance with all provisions of, and the
accuracy of all representations and warranties contained in, this Agreement
which, as to such services, would be applicable to such affiliates,
correspondent banks or Goldman, Sachs & Co. if they were included within the
term "Northern" hereunder.
b. For purposes of administering (including giving Instructions and
notices and making requests and fee payments) and enforcing this Agreement, the
Trust shall be entitled (but not obligated) to deal solely with Northern.
c. To the extent that a correspondent bank shall perform for
Northern services which Northern has undertaken to perform hereunder, Northern
shall enter into a written agreement with such correspondent bank. Such
agreement shall provide, among other things, for: (i) accurate reporting by
means of a certificate of the number of subaccounts for which a fee is due and
(ii) the right on the part of the Trust to recover any excess payments. Northern
shall be entitled to rely on the accuracy of such certificates, provided that
its reliance is reasonable.
5. Expenses. During the term of this Agreement, Northern will pay all
expenses incurred by it in connection with the performance of its duties under
this Agreement.
6. Compensation With Respect to Money Market Portfolios.
a. For the services provided and the expenses assumed by Northern
pursuant to this Agreement with respect to
-7-
<PAGE>
the Money Market Portfolios, the Trust will pay to Northern as full compensation
therefor a fee at the rate of $18.00 per annum for each Unitholder subaccount
that is either (i) maintained by Northern or its affiliates or (ii) maintained
by a correspondent bank of Northern and as to which Northern pays such
correspondent $18.00 per annum. Such fee shall be computed and paid monthly. The
fee with respect to a given month shall be computed by multiplying one-twelfth
of the annual fee by the number of such subaccounts as to which a purchase or
redemption of Units transaction occurred during, or which contained a Unit
balance at the end of, such month.
b. Effective April 30, 1993 and effective each April 30 thereafter
during the term of this Agreement the fee of $18.00 per annum referred to in
paragraph (a) above shall be adjusted by multiplying such fee by a fraction the
denominator of which is the Base Index Number and the numerator of which is the
Corresponding Index Number; provided, however that (i) in no event shall such
fee be less than $18.00 per annum and (ii) Northern shall have the right to
permanently or temporarily waive all or any portion of the increase in its fee
resulting from such adjustment. For purposes of this paragraph (b):
(A) "Index" means the Consumer Price Index for All Urban Consumers,
1967 = 100, published by the Bureau of Labor Statistics of the
United States Department of Labor;
(B) "Base Index Number" means the index number designated in the
Index for "All Items" for the United States City Average for the
month of December, 1982, which is acknowledged by the parties as
being 292.4;
(C) "Corresponding Index Number" with respect to a March 1
adjustment means the index number designated in the Index for "All
Items" for the United States City Average for the month of December
immediately preceding such March 1; and
(D) If the publication of the Index shall be discontinued so that
the fee applicable to a year commencing March 1 during the term of
this Agreement cannot be computed in accordance with the foregoing
provisions, then the fee for such year shall be determined on the
basis of comparable statistics reflecting changes in the urban cost
of living in the United States, as computed and published by an
agency of the United States or by a responsible financial
periodical of recognized authority with such revisions in the
method of computation provided for in this
-8-
<PAGE>
paragraph (b) as the circumstances may require in order to provide
an inflation adjustment to such fee.
7. Compensation With Respect to Non-Money Market Portfolios. For the
services provided and the expenses assumed by Northern pursuant to this
Agreement with respect to the Non-Money Market Portfolios, the Trust will pay to
Northern as full compensation therefore a fee payable monthly at an annual rate
of .01%, .05%, .10% and .15% of the average daily net asset value of each
Portfolio's Class A, B, C and D Units, respectively.
8. Duration and Termination. Insofar as the holders of Units
representing the interests in the Series known as the Current Portfolios are
affected by this Agreement, it shall continue, unless sooner terminated as
provided herein, until April 30, 1994, and, insofar as the holders of Units
representing the interests in each of the other Series are affected by this
Agreement, it shall continue until April 30 of the year following the year in
which the Series commences investment operations, and as to each Series
thereafter shall continue automatically for periods of one year so long as each
such latter continuance is approved at least annually (a) by the vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined by the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust; provided, however, that this Agreement may be
terminated by the Trust at any time with respect to any Class of Units, without
the payment of any penalty, by vote of a majority of the Trustees of the Trust
or by vote of a majority of the outstanding Units (as so defined) of such Class
on 60 days' written notice to Northern, or by Northern at any time, without the
payment of any penalty, on 60 days' written notice to the Trust. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined by the 1940 Act).
9. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved by vote of a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party.
10. Interpretative and Additional Provisions. In connection with the
operation of this Agreement, Northern and the Trust may agree from time to time,
by written Instrument signed by both parties, on such provisions interpretative
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement, provided that no
such interpretative or additional provisions shall contravene any applicable
Federal or State laws or regulations, or any provision of the Trust's Agreement
and
-9-
<PAGE>
Declaration of Trust or By-laws, as the same may from time to time be amended.
No interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
11. Instructions.
a. Northern shall be deemed to have received Instructions (as that
term is used herein) upon receipt of written instructions (including receipt by
facsimile), which may be continuing instructions, signed by not less than two of
the persons the Trustees shall have from time to time authorized to give the
particular class of Instructions in question. Different persons may be
authorized to give Instructions for different purposes, and Instructions may be
general or specific in terms. A certified copy of a by-law, resolution or action
of the Trustees of the Trust may be received and accepted by Northern as
conclusive evidence of the authority of any such persons to act and may be
considered to be in full force and effect until receipt of written notice (or
oral notice followed by written confirmation within seven days) to the contrary.
b. One or more designated persons may be authorized to issue oral
(such term as used herein including, without limitation, telephoned)
instructions, specifying the type or types of instructions that may be so
issued, in which case the Trust shall deliver to Northern resolutions of the
Trustees to such effect. Two or more of the persons designated by the Trustees
to give oral instructions shall promptly confirm such oral instructions in
writing to Northern. Such instructions when given in accordance with the
provisions hereof and with such resolutions shall be deemed Instructions
hereunder. In the case of conflict between oral Instructions given by a person
designated in the resolution of the Trustees referred to in the first sentence
of this subparagraph (b) and any written Instructions, the Instructions most
recently received by Northern shall prevail following such receipt, and in case
of conflict between oral Instructions given by a person designated in such
resolution and any written confirmation or purported confirmation of oral
Instructions, such written confirmation or purported confirmation shall prevail
following receipt thereof by Northern; provided that any transaction initiated
by Northern pursuant to such oral Instructions, may, but need not, be completed
by Northern notwithstanding Northern's receipt of conflicting subsequent
Instructions hereunder or written confirmation or purported confirmation of oral
Instructions hereunder subsequent to Northern's initiation of such transaction.
12. Audit, Inspection and Visitation. In addition to its other duties
hereunder, Northern shall cooperate with the Trust and the Trust's independent
public accountants in connection with (a) the preparation of reports to the
-10-
<PAGE>
Unitholders, to the Securities and Exchange Commission (the "Commission")
(including all required periodic and other reports), to state securities
commissioners and to others, (b) annual and other audits of the books and
records of the Trust, and (c) other matters of a like nature. Northern shall
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit, inspection and
copying by the Trust, its Administrator, the Trust's independent public
accountants, or any other person retained by the Trust or its Administrator, or
by agents of the Commission. Upon reasonable notice by the Trust or its
Administrator, Northern shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable visitation by any of the persons referred to in the
preceding sentence.
13. Opinion and Reports of Trust's Independent Accountants.
a. Northern shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions from the
Trust's independent accountants in connection with the preparation of the
Trust's Form N-1A and Form N-SAR or other reports to the Commission and with
respect to any other requirements of the Commission.
b. Northern shall provide the Trust or its Administrator, at such
times as the Trust or its Administrator may reasonably require, with reports by
independent public accountants on the accounting system and internal accounting
controls relating to the services provided by Northern under this Agreement.
Such reports shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Trust, its Administrator or its independent public
accountants, to provide reasonable assurance that any material weaknesses with
respect to such accounting system and such internal accounting controls would be
disclosed by such examination, and, if there are no such weaknesses, shall so
state.
14. Systems. Northern represents that it has, and it agrees to
maintain, sufficient systems capability to perform its obligations under this
Agreement and the Current Prospectus.
15. Security. Northern represents and warrants that the various
procedures and systems which it has implemented with regard to safeguarding from
loss or damage attributable to fire, theft or any other cause the Trust's
records and other data and Northern's records, data, equipment, facilities and
other property used in the performance of its obligations hereunder are adequate
and that it will make such changes therein from time to time as in its judgment
are required for the secure performance of its obligations hereunder.
-11-
<PAGE>
16. Status of Northern as Independent Contractor. Northern shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Trustees of the Trust
or its Administrator, respectively, from time to time, have no authority to act
for or represent the Trust or the Administrator in any way or otherwise be
deemed an agent of the Trust or its Administrator. The services of Northern
hereunder are not deemed exclusive and Northern shall be free to render similar
services to others so long as its services under this Agreement are not impaired
thereby.
17. Unitholder Liability. This Agreement is executed by or on behalf
of the Trust and the obligations hereunder are not binding upon any of the
Trustees, Officers or holders of Units of the Trust individually but are binding
only upon the Trust and its assets and property. All obligations of the Trust
under this Agreement shall apply only on a Class by Class basis, and the assets
of one Class shall not be liable for the obligations of another Class.
18. Notices. Without limiting the other provisions hereof, notices and
other writings delivered or mailed postage prepaid to the Trust or the
Administrator, 4900 Sears Tower, Chicago, Illinois 60606, Attention: Shareholder
Services, or to The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, Attention: Fund Accounting, Canal Center, or to such other
address as the Trust, the Administrator or Northern may hereafter specify by
written notice to the most recent address specified by the party to whom such
notice is addressed, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
19. Miscellaneous. The Trust's Declaration of Trust as amended is on
file with the Secretary of the Commonwealth of Massachusetts. The captions in
this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Any provision in this Agreement
requiring compliance with any statute or regulation shall mean such statute or
regulation as amended and in effect from time to time. This Agreement shall be
construed in accordance with the laws of the State of Illinois (except as to
paragraph 17 hereof which shall be construed in accordance with the laws of the
Commonwealth of Massachusetts) and, subject to the other provisions hereof,
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed as of the day and year first above written.
ATTEST: THE BENCHMARK FUNDS
By [Signature Illegible]
- ---------------------------- -------------------------------
As its President
---------------------------
ATTEST: THE NORTHERN TRUST COMPANY
By [Signature Illegible]
- ---------------------------- -------------------------------
As its Vice President
---------------------------
-13-
<PAGE>
Exhibit 9(f)
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE REVISED
AND RESTATED TRANSFER AGENCY AGREEMENT
--------------------------------------
This Addendum, dated as of the 27th day of January, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY, an Illinois state bank (the "Transfer Agent").
WHEREAS, the Trust and the Transfer Agent have entered into a Revised and
Restated Transfer Agency Agreement dated as of January 8, 1993, Addendum No. 1
dated July 1, 1993, Addendum No. 2 dated March 25, 1994, Addendum No. 3 dated
January 22, 1997 and Addendum No. 4 dated April 22, 1997 (the "Transfer Agency
Agreement"), pursuant to which the Trust appointed the Transfer Agent to act as
transfer agent with respect to each Class of Units in the Diversified Assets
Portfolio, Government Portfolio, Tax-Exempt Portfolio, Government Select
Portfolio, Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio, U.S.
Government Securities Portfolio, Short-Intermediate Bond Portfolio, Bond
Portfolio, Intermediate Bond Portfolio, Balanced Portfolio, International Growth
Portfolio, International Bond Portfolio and International Equity Index
Portfolio;
WHEREAS, the Trust is establishing the Global Asset Portfolio (the
"Portfolio"), and it desires to retain the Transfer Agent to render transfer
agency and other services with respect to the Portfolio and each Class of Units
within the Portfolio and the record and/or beneficial owners thereof, and the
Transfer Agent is willing to render such services; and
WHEREAS, the Trust is establishing two additional classes of units in each
of the Diversified Assets Portfolio, the Government Portfolio, the Government
Select Portfolio and the Tax-Exempt Portfolio (collectively, the "Money Market
Portfolios"), currently known as the Service Class and the Premium Class (the
"New Classes"), and the Trust desires to retain the Transfer Agent to render
transfer agency and other services with respect to the New Classes and the
record and/or beneficial owners of Units of the New Classes, and the Transfer
Agent is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Transfer Agent as transfer
agent with respect to the Portfolio and each Class of Units thereof
and with respect to the New Classes of the Money Market Portfolio on
the terms and for the periods set forth in the Transfer Agency
1
<PAGE>
Agreement. The Transfer Agent hereby accepts such appointment and
agrees to render the services and perform the duties set forth in the
Transfer Agency Agreement for the compensation therein provided.
2. Compensation with Respect to the New Classes of the Money Market
Portfolios. For the services provided and the expenses assumed by
Northern in respect of each New Class, the Trust will pay Northern
transfer agency fees at the rate currently applicable to the initial
class of Units in the Money Market Portfolios, provided that such fees
shall be subject to the annual adjustments contemplated under Section
6(b) of the Transfer Agency Agreement.
3. Capitalized Terms. From and after the date hereof, the term "Current
Portfolios" as used in the Transfer Agency Agreement shall be deemed
to include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio,
U.S. Government Securities Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Intermediate Bond Portfolio, Balanced
Portfolio, International Growth Portfolio, International Bond
Portfolio, International Equity Index Portfolio and Global Asset
Portfolio; and the term "Non-Money Market Portfolios" as used in the
Transfer Agency Agreement shall be deemed to include the Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio,
U.S. Government Securities Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Intermediate Bond Portfolio, Balanced
Portfolio, International Growth Portfolio, International Bond
Portfolio, International Equity Index Portfolio and Global Asset
Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Transfer Agency
Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the Transfer
Agency Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as supplemented
hereby.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: By:/s/ Nancy L. Mucker
--------------------------- ---------------------------
Name: Nancy L. Mucker
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By:/s/ Thomas L. Mallman
--------------------------- ---------------------------
Name: Thomas L. Mallman
[SEAL] Title: Senior Vice President
3
<PAGE>
Exhibit 9(g)
THE BENCHMARK FUNDS
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
AGREEMENT made this 8th day of June, 1992, as amended and restated on May
1, 1997 between THE BENCHMARK FUNDS, a Massachusetts business trust (the
"Trust"), and GOLDMAN, SACHS & CO., a New York limited partnership (the
"Administrator").
WITNESSETH:
WHEREAS, the Trust is an open-end, management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Trust currently intends to offer units of beneficial interest
in eighteen portfolios, known as the Diversified Assets Portfolio, Government
Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, U.S. Treasury
Index Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio, Intermediate
Bond Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, U.S. Government Securities Portfolio, Short
Duration Portfolio, Focused Growth Portfolio, Balanced Portfolio, International
Growth Portfolio, International Bond Portfolio and International Equity Index
Portfolio; such Portfolios (the "Current Portfolios") together with all other
portfolios subsequently established by the Trust and made subject to this
Agreement being herein collectively referred to as the "Portfolios"; and
WHEREAS, the Trust desires to retain the Administrator to act as
administrator of the Trust and the Administrator is willing to so act;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Administrator. The Trust hereby appoints the
Administrator to act as administrator of the Trust for the periods and on the
terms herein set forth. The Administrator accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has delivered (or will deliver as
soon as is possible) to the Administrator copies of each of the following
documents:
(a) Agreement and Declaration of Trust of the Trust dated as of July
15, 1982, together with all Amendments thereto (such Agreement
and Declaration of Trust, as currently in effect and as amended
from time to time, is herein called the "Trust Agreement"),
copies of which are also on file with the Secretary of The
Commonwealth of Massachusetts;
(b) By-Laws of the Trust (such By-Laws, as currently in effect and as
amended from time to time, are herein called the "By-Laws");
(c) Advisory Agreement between the Trust and The Northern Trust
Company ("Northern") (such Agreement, as currently in effect and
as amended and/or superseded from time to time, is herein called
the "Advisory Agreement");
(d) Custodian Agreement between the Trust and Northern;
-1-
<PAGE>
(e) Transfer Agency Agreement between the Trust and Northern;
(f) Prospectus and Statement of Additional Information of the Trust
(such Prospectus and Statement of Additional Information, as
presently in effect and as amended, supplemented and/or
superseded from time to time, is herein called the "Prospectus"
and "Statement of Additional Information", respectively);
(g) Post Effective Amendment No. 34 to the Trust's Registration
Statement on Form N-1A (No. 2-80543) under the Securities Act of
1933 (the "1933 Act") and Amendment No. 35 to the Trust's
Registration Statement on such form (No. 811-3605) under the 1940
Act filed as a single document with the Securities and Exchange
Commission (the "Commission") (such Registration Statement, as
presently in effect and as amended from time to time, is herein
called the "Registration Statement");
The Trust agrees to promptly furnish the Administrator from time to time
with copies of all amendments of or supplements to or otherwise current versions
of any of the foregoing documents not heretofore furnished.
3. Duties of Administrator.
(a) Subject to the general supervision of the Trustees of the Trust,
the Administrator:
(i) shall provide supervision of all aspects of the Trust's
operations (other than those referred to in paragraph 3(a) of
the Advisory Agreement) (the parties giving due recognition to
the fact that certain of such operations to be supervised are
performed by Northern pursuant to the Trust's agreements with
Northern referred to in paragraph 2 hereof);
(ii) shall, to the extent not provided pursuant to the Trust's
agreements with Northern referred to in paragraph 2 hereof,
provide the Trust with such personnel as are reasonably
necessary for the conduct of the Trust's affairs;
(iii) shall, to the extent not provided pursuant to the Trust's
agreements with Northern referred to in paragraph 2 hereof,
arrange for (A) the preparation for the Trust of all required
tax returns, (B) the preparation and submission of reports to
existing Unitholders, and (C) the periodic updating of the
Prospectus and the preparation of reports filed with the
Commission and other regulatory authorities (including
qualification under state securities or Blue Sky laws of the
Trust's Units);
(iv) shall, to the extent not provided pursuant to the Trust's
agreements with Northern referred to in paragraph 2 hereof,
provide the Trust with adequate office space and all necessary
office equipment and services, including telephone service,
heat, utilities, stationery supplies and similar items, in
Chicago, Illinois;
-2-
<PAGE>
(v) and shall prepare the Trust's expense budgets and arrange for the
payment of the Trust's bills.
(b) The Administrator, in the performance of its duties hereunder, shall
act in conformity with the Trust Agreement, By-Laws, Registration
Statement and Prospectus and Statement of Additional Information and
with the instructions and directions of the Trustees of the Trust, and
will use its best efforts to conform to the requirements of the 1940
Act and all other applicable federal and state laws, regulations and
rulings.
(c) The Administrator shall render to the Trustees of the Trust such
periodic and special reports as the Trustees may reasonably request.
(d) The services of the Administrator hereunder are not deemed exclusive
and the Administrator shall be free to render similar services to
others so long as its services under this Agreement are not impaired
thereby.
(e) Provide officers to the Trust.
4. Expenses.
(a) During the term of this Agreement, the Administrator will pay all
expenses incurred by it in connection with the performance of its
duties under paragraph 3 hereof, other than the out-of-pocket cost of
the preparations, submissions, updatings and filings referred to in
paragraph 3(a)(iii).
(b) If, in any fiscal year, the sum of a Portfolio's expenses (including
the fee payable pursuant to paragraph 5 hereof, but excluding the
investment advisory fee and transfer agency fee payable to Northern
pursuant to its agreements with the Trust referred to in paragraph 2
hereof and servicing fees, and extraordinary expenses such as taxes,
interest, and indemnification expenses) exceeds on an annualized basis
.10% of a Portfolio's average net assets (0.25% for each International
Portfolio, including the International Growth Portfolio, International
Bond Portfolio and International Equity Index Portfolio) for such
fiscal year, the Administrator will reimburse each Portfolio for the
amount of such excess in accordance with the following timetable.
Expense reimbursements, if any, will be calculated and paid monthly.
The amount of the reimbursement paid by the Administrator to each
Portfolio will be computed as of the end of each month by (1)
determining the difference between the Portfolio's accrued annualized
expense ratio and the above percentage limitation; (2) multiplying
this percentage by the Portfolio's year to date average net asset
value for such month to obtain the cumulative dollar amount of such
excess; and (3) subtracting from the cumulative dollar amount of such
excess the cumulative amount of reimbursements made to such Portfolio
by the Administrator since the beginning of the fiscal year. A
positive remainder represents the amount to be paid by the
Administrator to the Portfolio; a negative remainder represents the
amount to be paid by the Portfolio to the Administrator.
(c) In the event that the reimbursements described in paragraph (b) to the
Portfolios cause the aggregate net administration fees actually earned
by Goldman Sachs on behalf of all the Fund's Portfolios during any
fiscal year pursuant to the Administration Agreement to be less than
the sum of (a) $1 million for the first 12 Portfolios that were
actively engaged in operations during any part of such fiscal year
plus (b) $50,000 for each additional Portfolio that was actively
engaged in operations during any part of such fiscal year (the
"Minimum Fee"), Northern agrees to pay to Goldman Sachs, promptly
following the close of each fiscal year of the Fund, an amount equal
to the difference between such earned net administration fees and the
Minimum Fee.
-3-
<PAGE>
5. Compensation.
(a) For the services provided and the expenses assumed by the
Administrator for each non-international portfolio (which include
supervision with respect to the Trust's non-investment advisory
operations) pursuant to the Agreement, the Trust will pay to the
Administrator as full compensation therefor a fee at an annual rate of
.10% of each Portfolio's average daily net assets.
For the services provided and the expenses assumed by the
Administrator for an International Portfolio, including the
International Growth Portfolio, International Bond Portfolio and
International Equity Index Portfolio (which include supervision with
respect to the Trust's non-investment advisory operations) pursuant to
the Agreement, the Trust will pay to the Administrator as full
compensation therefor a fee at an annual rate of .15% of each
Portfolio's average daily net assets.
(b) The fee will be computed based on net assets on each day and will be
paid to the Administrator monthly.
6. Books and Records. The Administrator agrees to maintain such records
with respect to its activities hereunder as may be required or as are
appropriate. The Administrator further agrees that all records which it
maintains for the Trust are the property of the Trust and it will surrender
promptly to the Trust any of such records upon the Trust's request.
7. Indemnification.
(a) The Trust hereby agrees to indemnify and hold harmless the
Administrator, its officers, partners and employees and each person,
if any, who controls the Administrator (collectively the "Indemnified
Parties") against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject
under the 1933 Act, the Securities Exchange Act of 1934, the 1940 Act
or other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact
required to be stated or necessary to make the statements made
not misleading in the Registration Statement, the Prospectus or
the Statement of Additional Information, or any application or
other document filed in connection with the qualification of the
Trust or Units of any Portfolio under the Blue Sky or securities
laws of any jurisdiction ("Application"), except insofar as such
losses, claims, damages or liabilities (or actions in respect
there of) arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission
either pertaining to a breach of the Administrator's duties in
connection with this Agreement or the Distribution Agreement of
even date herewith between the Administrator and the Trust, made
in reliance upon and in conformity with information furnished by
or on behalf of the Administrator for use in connection with the
Registration Statement, the Prospectus and Statement of
Additional Information or any Application, or
(ii) subject to clause (i) above, the Administrator acting hereunder
or under the Distribution Agreement of even date herewith between
the
-4-
<PAGE>
Administrator and the Trust;
and the Trust will reimburse each Indemnified Party for any legal or other
incurred by such Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action.
(b) If the indemnification provided for in paragraph 7(a) is due in
accordance with the terms of such paragraph but is for any reason held
by a court to be unavailable from the Trust, then the Trust shall
contribute to the aggregate amount paid or payable by the Trust and
the Indemnified Parties as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the Trust
and such Indemnified Parties in connection with the operations of the
Trust, (ii) the relative fault of the Trust and such Indemnified
Parties, and (iii) any other relevant equitable considerations. The
Trust and the Administrator agree that it would not be just and
equitable if contribution pursuant to this subparagraph (b) were
determined by pro rata allocation or any other method of allocation
which does not take account of the equitable considerations referred
to above in this subparagraph (b). The amount paid or payable as a
result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subparagraph (b) shall be
deemed to include any legal or other expense incurred by the Trust and
the Indemnified Parties in connection with investigating or defending
any such loss, claim, damage, liability or action. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(c) It is understood, however, that nothing in this paragraph 7 shall
protect any Indemnified Party against, or entitle any Indemnified
Party to indemnification against, or contribution with respect to, any
liability to the Trust or its Unit-holders to which such Indemnified
Party is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of any
reckless disregard of its obligations and duties, under this Agreement
or the Distribution Agreement, or otherwise to an extent or in a
manner inconsistent with Section 17 of the 1940 Act.
8. Duration and Termination. Insofar as the holders of Units representing
the interests in the Current Portfolios are affected by this Agreement, it shall
continue, unless sooner terminated as provided herein, until April 30, 1998,
and, insofar as the holders of Units representing the interests in each of the
other Portfolios are affected by this Agreement, it shall continue until April
30 of the year following the year in which the Portfolio becomes a Portfolio
hereunder, and thereafter shall continue automatically for periods of one year
so long as each such latter continuance is approved at least annually (a) by the
vote of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Trustees of the Trust or by vote of a majority of the outstanding
Units (as defined with respect to voting securities in the 1940 Act)
representing the interests in such Portfolio. This Agreement may be terminated
by the Trust as to any Portfolio at any time, without the payment of any
penalty, by vote of a majority of the Trustees of the Trust or by vote of a
majority of the outstanding Units (as so defined) representing the interests in
the Portfolio affected thereby on 60 days' written notice to the Administrator,
or by the Administrator at any time, without the payment of any penalty, on 60
days' written notice to the Trust. This Agreement will automatically and
immediately terminate in the event of its assignment (as defined by the 1940
Act).
9. Status of Administrator as Independent Contractor. The Administrator
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Trustees
of the Trust from time to time, have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust. The
Administrator represents and warrants to the Trust that it is duly organized as
a New York limited partnership and is and at all times will remain duly
authorized and licensed to carry out its services as contemplated herein.
-5-
<PAGE>
10. Amendment of Agreement. This Agreement may be amended by mutual
consent provided that such amendment is approved by vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment.
11. Unitholder Liability. This Agreement is executed by or on behalf of
the Trust with respect to each of its Portfolios and the obligations hereunder
are not binding upon any of the Trustees, officers or Unitholders of the Trust
individually but are binding only upon the Portfolio to which such obligations
pertain and the assets and property of such Portfolio.
12. Miscellaneous. The Trust's Declaration of Trust as amended to date is
on file with the Secretary of The Commonwealth of Massachusetts. The captions in
this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be construed
in accordance with applicable federal law and (except as to paragraph 11 hereof
which shall be construed in accordance with the laws of The Commonwealth of
Massachusetts) the laws of the State of Illinois and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
(subject to the last sentence of paragraph 8) and, to the extent provided in
paragraph 7 hereof, each Indemnified Party. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to impose
any duty upon, either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE BENCHMARK FUNDS
Attest: By:
/s/ Nancy L. Mucker
-----------------------------------
As its:
Attest: GOLDMAN, SACHS & CO.
/s/ Scott Gilman
-----------------------------------
As its:
THE NORTHERN TRUST
for purposes of paragraph 4(c) only
/s/ Jon C. Hunt
-----------------------------------
As its: Senior Vice President
<PAGE>
Exhibit 9(h)
THE BENCHMARK FUNDS
ADDENDUM NO. 1 TO THE AMENDED AND RESTATED ADMINISTRATION AGREEMENT
-------------------------------------------------------------------
This Addendum, dated as of the 27th day of January, 1998 is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York Partnership (the "Administrator").
WHEREAS, the Trust and the Administrator have entered into an Amended and
Restated Administration Agreement dated as of May 1, 1997 (the "Administration
Agreement"), pursuant to which the Trust appointed the Administrator to act as
administrator to the Trust for the Diversified Assets Portfolio, Government
Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, U.S. Treasury
Index Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio, Intermediate
Bond Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, U.S. Government Securities Portfolio, Focused
Growth Portfolio, Balanced Portfolio, International Growth Portfolio,
International Bond Portfolio and International Equity Index Portfolio;
WHEREAS, the Trust is establishing the Global Asset Portfolio (the
"Portfolio"), and it desires to retain the Administrator to act as administrator
of the Trust for the Portfolio and the Administrator is willing to so act;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment The Trust hereby appoints the Administrator as
administrator of the Trust for the Portfolio on the terms and for the
periods set forth in the Administration Agreement. The Administrator
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Administration Agreement for the
compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Administration Agreement shall be deemed
to include the Global Asset Portfolio. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in
the Administration Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: By:/s/ Nancy L. Mucker
------------------- --------------------------------
Name: Nancy L. Mucker
Title: Vice President
GOLDMAN, SACHS & CO.
Attest: By:/s/ John P. McNulty
------------------- --------------------------------
Name: John P. McNulty
Title: Managing Director
<PAGE>
Exhibit 10
DRINKER, BIDDLE & REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
March 25, 1998
The Benchmark Funds
4900 Sears Tower
Chicago, IL 60606
Re: Registration Statement on Form N-1A/Issuance of Shares
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to The Benchmark Funds, a Delaware business trust
(the "Trust") organized under an Agreement and Declaration of Trust dated July
1, 1997 (the "Declaration of Trust"), in connection with the registration under
the Securities Act of 1933, as amended, pursuant to a Registration Statement on
Form N-1A (File Nos. 2-80543 and 811-3605) (the "Registration Statement"), of:
(a) four separate classes of shares of beneficial interest (known as Class A
Shares, Class B Shares, Class C Shares and Class D Shares) in each of the
following fourteen series, or portfolios, of the Trust - U.S. Government
Securities Portfolio, Short-Intermediate Bond Portfolio, U.S. Treasury Index
Portfolio, Bond Portfolio, Intermediate Bond Portfolio, International Bond
Portfolio, Balanced Portfolio, Equity Index Portfolio, Diversified Growth
Portfolio, Focused Growth Portfolio, Small Company Index Portfolio,
International Equity Index Portfolio, International Growth Portfolio and Global
Asset Portfolio; and (b) three separate classes of shares of beneficial interest
(known as Shares, Service Shares and Premier Shares) in each of the following
four series, or portfolios, of the Trust - Government Select Portfolio,
Government Portfolio, Diversified Assets Portfolio and Tax-Exempt Portfolio.
Shares of the aforesaid classes of shares of beneficial interest are referred to
hereinafter as "Shares." The Trust is authorized to issue an unlimited number of
Shares in each of the aforesaid classes and series.
We have reviewed the Registration Statement and the Trust's Declaration of
Trust, its by-laws and certain resolutions adopted by its Trustees, and have
considered such other legal and factual matters as we have deemed appropriate.
<PAGE>
-2-
This opinion is based exclusively on the Delaware Business Trust Act and
the federal law of the United States of America.
Based on the foregoing, we are of the opinion that the Shares registered
under the Registration Statement will be, when issued against payment therefor
as described therein, legally issued, fully paid and non-assessable by the
Trust, and that the holders of the Shares will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the general corporation law of the State
of Delaware (except that we express no opinion as to such holders who are also
Trustees of the Trust). Pursuant to Section 2 of Article VIII of the Declaration
of Trust, the Trustees have the power to cause shareholders, or shareholders of
a particular series or class of Shares, to pay certain custodian, transfer,
servicing or similar agent charges by setting off the same against declared but
unpaid dividends or by reducing Share ownership (or by both means).
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as part of Post-Effective Amendment No. 38 to the Trust's
Registration Statement on Form N-1A. Except as provided in this paragraph, the
opinion set forth above is expressed solely for the benefit of the addressee
hereof in connection with the matters contemplated hereby and may not be relied
upon by, or filed with, any other person or entity or for any other purpose
without our prior written consent.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
Exhibit 11(a)
-------------
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Additional Trust Information - Counsel and Auditors" in the
Statement of Additional Information included in Post-Effective Amendment No. 38
to the Registration Statement (1933 Act No. 2-80543; 1940 Act No. 811-3605) on
Form N-1A under the Securities Act of 1933, as amended, of The Benchmark Funds.
This consent does not constitute a consent under section 7 of the Securities Act
of 1933, nd in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP
------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
March 25, 1998
<PAGE>
Exhibit 11(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights," "Counsel and Auditors" and "Financial Statements" in the
Registration Statement (Form N-1A) of the Benchmark Funds filed with the
Securities and Exchange Commission and to the incorporation by reference
therein and in the related Prospectus of our reports dated January 16, 1998 in
this Post-Effective Amendment No. 38 to the Registration Statement under the
Securities Act of 1933 (Registration No. 2-80543) and in this Amendment No. 39
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-3605).
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1998
<PAGE>
Exhibit 13
SUBSCRIPTION TO UNITS OF
COMPASS FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS
---------------------------------------------------
The undersigned has been advised that (i) a trust known as Compass
Fund Money Market and Government Portfolios (the "Trust") has been established
under the laws of the Commonwealth of Massachusetts, (ii) the beneficial
interest in the Trust shall be divided into units, all without par value, (iii)
the number of authorized units that may be issued is unlimited, and (iv)
pursuant to the Trust's Agreement and Declaration of Trust dated July 15, 1982,
the trustees of the Trust have established and designated two series of units:
"Money Market Portfolio Units" and "Government Portfolio Units." The undersigned
hereby subscribes for and promises to pay for and acquire 50,000 of such Money
Market Portfolio Units and 50,000 of such Government Portfolio Units, subject to
the following terms and conditions:
1. The undersigned promises to pay to the Trust, as the total
consideration for such units, the sum of $1.00 per unit or an
aggregate of $100,000, which sum shall be payable in cash.
2. The undersigned represents and warrants to the Trust that:
(a) this subscription is made and such units will be acquired by
the undersigned solely for investment purposes and with no
present intention to sell, redeem or otherwise dispose of
the same or any part thereof; and
(b) this subscription is made and such units will be accepted by
the undersigned with the understanding that such units will
not have been registered under the Securities Act of 1933 or
the securities laws of any State or other jurisdiction and
the Trust has no present intention to register the same
under any such Act or laws.
3. This subscription and the rights, benefits and privileges
hereunder may not be transferred or assigned.
4. It is understood that the aforesaid $100,000 will be paid into
the Trust before subscriptions for units will be accepted from
any other persons.
Should the undersigned redeem any of the units referred to above
of a Portfolio before the deferred organization expenses with
respect to
<PAGE>
such Portfolio have been completely amortized, there shall be
deducted from the redemption price payable to the undersigned the
pro-rata unamortized portion of such expenses attributable to the
redeemed units.
5. If the registration statement filed under the Securities Act of
1933 with respect to the Trust's units does not become effective
prior to March 31, 1983, this subscription shall become null and
void and the full amount paid in by the undersigned will be
refunded to the undersigned on demand without any deduction.
Executed this 8th day of December, 1982.
GOLDMAN, SACHS & CO.
By [Signature Illegible]
--------------------------
As Its:
----------------------
SUBSCRIPTION accepted this
8th day of December, 1982.
COMPASS FUND MONEY MARKET AND
GOVERNMENT PORTFOLIOS
By /s/ Frederick T. Kelsey
---------------------------
As Its:
----------------------
2
<PAGE>
Exhibit 13(a)
AMENDMENT NO. 1 TO SUBSCRIPTION TO UNITS OF
THE BENCHMARK FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS
(F/K/A COMPASS FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS)
---------------------------------------------------------
Reference is made to that certain Subscription to Units of Compass
Fund Money Market and Government Portfolios entered into under date of December
8, 1982 by Goldman, Sachs & Co. Subsequent to the execution of such
Subscription, the name of Compass Fund Money Market and Government Portfolios
was changed to The Benchmark Fund Money Market and Government Portfolios.
Paragraph 5 of such Subscription is hereby amended by changing the
"March 31, 1983" date appearing therein to July 31, 1983.
Executed this 16th day of May, 1983.
GOLDMAN, SACHS & CO.
By [Signature Illegible]
---------------------
As Its: ____________________
AGREED this 16th day of May, 1983.
THE BENCHMARK FUND MONEY MARKET
AND GOVERNMENT PORTFOLIOS
By /s/ Frederick T. Kelsey
______________________________
As Its: ________________________
<PAGE>
Exhibit 13(b)
AMENDMENT NO. 2 TO SUBSCRIPTION TO UNITS OF
THE BENCHMARK FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS
(F/K/A COMPASS FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS)
---------------------------------------------------------
Reference is made to that certain Subscription to Units of Compass
Fund Money Market and Government Portfolios entered into under date of December
8, 1982 by Goldman, Sachs & Co., as amended. Subsequent to the execution of such
Subscription, the name of Compass Fund Money Market and Government Portfolios
was changed to The Benchmark Fund Money Market and Government Portfolios.
Paragraph 4 of such Subscription is hereby amended to read in its
entirety as follows:
"4. It is understood that the aforesaid $100,000 will be paid into
the Trust before subscriptions for units will be accepted from
any other persons. Should the undersigned redeem any of the units
referred to above ("Initial Units") of such Portfolio held by it
as of May 11, 1983 before the deferred organization expenses with
respect to such Portfolio have been completely amortized, there
shall be deducted from the redemption price payable to the
undersigned the pro rata unamortized portion of such expenses
attributable to the redeemed units (based on the ratio that the
number of such units bears to the number of Initial Units then
outstanding)."
Executed this 19th day of May, 1983.
GOLDMAN, SACHS & CO.
By [Signature Illegible]
---------------------
As Its: ____________________
AGREED this 19th day of May, 1983.
THE BENCHMARK FUND MONEY MARKET
AND GOVERNMENT PORTFOLIOS
By /s/ Frederick T. Kelsey
______________________________
As Its: ________________________
<PAGE>
Exhibit 13(c)
AMENDMENT NO. 3 TO SUBSCRIPTION
TO UNITS OF THE BENCHMARK MONEY MARKET FUND
DIVERSIFIED ASSETS AND GOVERNMENT PORTFOLIOS
(F/K/A COMPASS FUND MONEY MARKET AND GOVERNMENT PORTFOLIOS)
-----------------------------------------------------------
Reference is made to that certain Subscription Agreement to Units of
Compass Fund Money Market and Government Portfolios (the "Fund") entered into
under date of December 8, 1982 by the Fund and Goldman, Sachs & Co., as amended.
Subsequent to the execution of such Subscription, the name of Compass Fund Money
Market and Government Portfolios was changed to The Benchmark Money Market Fund
Diversified Assets and Government Portfolios, and the name of the Money Market
Portfolio was changed to the Diversified Assets Portfolio.
WHEREAS, the undersigned redeemed all of its 50,000 Units in the Government
Portfolio on December 14, 1983 in exchange for its initial consideration of
$50,000, less the unamortized deferred organizational costs;
WHEREAS, the undersigned then purchased an additional 50,000 Units of the
Diversified Assets Portfolio;
WHEREAS, the Trust desires to commence the sale of the Units of the
Government Portfolio;
THEREFORE, it is agreed that the undersigned hereby subscribes for and
promises to pay for and acquire 50,000 of such Government Portfolio Units,
subject to the terms and conditions as set forth in the original Subscription,
as follows:
1. The aggregate amount payable in cash shall be $50,000.
2. It is understood that the undersigned intends to redeem 50,000 Units
of the Diversified Assets Portfolio.
3. This Amendment shall be null and void if the post-effective amendment
to registrant's registration statement filed under the Securities Act
with respect to the Government Portfolio Units does not become
effective prior to December 1, 1985.
<PAGE>
Executed this 25th day of October, 1985.
GOLDMAN, SACHS & CO.
By /s/ Robert C. Fund
__________________________
As Its: General Partner
SUBSCRIPTION accepted this
25th day of October, 1985.
THE BENCHMARK MONEY MARKET FUND
DIVERSIFIED ASSETS
AND GOVERNMENT PORTFOLIOS
By /s/ E. J. Whitman, Jr.
_________________________________
E. J. Whitman, Jr.
As Its: President
<PAGE>
Exhibit 16
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
- -------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P)*1/n - 1
<S> <C>
Where:
P= a hypothetical initial payment of $1,000
made on January 11, 1993, the date of the
commencement of the fund
T= Average annual total return
n= Number of years
ERV= Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows
for the Diversified Growth Portfolio:
P = $1,000.00
141 Days
n = ___ ____ = 0.386301
365 Days
ERV = $1,032.22
AVERAGE ANNUAL TOTAL RETURN = 8.55%
====
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
- ---------------------------------------------------------------------
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
- ----------------------------------------------------------------------
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P= a hypothetical initial payment of $1,000
made on January 11, 1993, the date of the
commencement of the fund
T= Aggregate total return
ERV= Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows
for the Diversified Growth Portfolio:
P = $1,000.00
ERV = $1,032.22
AGGREGATE TOTAL RETURN = 3.22%
=========
</TABLE>
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Equity Index Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,059.55
AVERAGE ANNUAL TOTAL RETURN = 16.14%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Equity Index Portfolio:
P = $1,000.00
ERV = $1,059.55
AGGREGATE TOTAL RETURN = 5.95%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Small Company Index Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,058.89
AVERAGE ANNUAL TOTAL RETURN = 15.97%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Small Company Index Portfolio:
P = $1,000.00
ERV = $1,058.89
AGGREGATE TOTAL RETURN = 5.89%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Bond Portfolio:
P = $1,000.00
141 Days
n = _________ = 0.386301
365 Days
ERV = $1,054.75
AVERAGE ANNUAL TOTAL RETURN = 14.78%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Bond Portfolio:
P = $1,000.00
ERV = $1,054.75
AGRREGATE TOTAL RETURN = 5.47%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SHORT-INTERMEDIATE BOND PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Short-Intermediate Bond Portfolio:
P = $1,000.00
141 Days
n = ___ _____ = 0.386301
365 Days
ERV = $1,030.78
AVERAGE ANNUAL TOTAL RETURN = 8.17%
========
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SHORT-INTERMEDIATE BOND PORTFOLIO)
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Short-Intermediate Bond Portfolio:
P = $1,000.00
ERV = $1,030.78
AGRREGATE TOTAL RETURN = 3.08%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (U.S. TREASURY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the U.S. Treasury Index Portfolio:
P = $1,000.00
141 Days
n = ___ ____ = 0.386301
365 Days
ERV = $1,049.64
AVERAGE ANNUAL TOTAL RETURN = 13.36%
========
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (U.S. TREASURY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - January 11, 1993 (Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the U.S. Treasury Index Portfolio:
P = $1,000.00
ERV = $1,049.64
AGRREGATE TOTAL RETURN = 4.96%
=====
<PAGE>
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (U.S. TREASURY INDEX PORTFOLIO)
SEC 30-DAY YIELD - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the U.S. Treasury Index
Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
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 May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the U.S. Treasury Index Portfolio:
a = 303,973.00
b = 20,299.00
c = 3,401,565.00
d = 20.60
Thus, the 30-Day Yield computed to 4.91%
======
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (U.S. TREASURY INDEX PORTFOLIO)
SEC 30-DAY YIELD (Assuming no fee waivers) - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the U.S. Treasury Index
Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of units outstanding during May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the U.S. Treasury Index Portfolio:
a = 303,973.00
b = 53,116.00
c = 3,401,565.00
d = 20.60
Thus, the 30-Day Yield computed to 4.33%
======
<PAGE>
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (SHORT-INTERMEDIATE BOND PORTFOLIO)
SEC 30-DAY YIELD - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the Short-Intermediate
Bond Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
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 May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the Short-Intermediate Bond Portfolio:
a = 358,128.00
b = 26,500.00
c = 4,397,345.00
d = 20.26
Thus, the 30-Day Yield computed to 4.51%
==========
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (SHORT-INTERMEDIATE BOND PORTFOLIO)
SEC 30-DAY YIELD (Assuming no fee waivers) - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the Short-Intermediate
Bond Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of units outstanding during May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the Short-Intermediate Bond Portfolio:
a = 358,128.00
b = 74,778.00
c = 4,397,345.00
d = 20.26
Thus, the 30-Day Yield computed to 3.85%
======
<PAGE>
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
SEC 30-DAY YIELD - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the Bond Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
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 May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the Bond Portfolio:
a = 1,124,345.00
b = 47,464.80
c = 7,782,475.00
d = 20.48
Thus, the 30-Day Yield computed to 8.25%
==========
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
SEC 30-DAY YIELD (Assuming no fee waivers) - Period ending May 31, 1993
Formula used in calculating SEC 30-day yield for the Bond Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of units outstanding during May 2 - 31, 1993
d = the maximum offering price per unit on May 31, 1993
For the 30-day period ending May 31, 1993, these variables were as follows
for the Bond Portfolio:
a = 1,124,345.00
b = 123,513.00
c = 7,782,475.00
d = 20.48
Thus, the 30-Day Yield computed to 7.65%
=======
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows the Diversified Growth Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,030.58
AVERAGE ANNUAL TOTAL RETURN = 8.11%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows for the Diversified Growth Portfolio:
P = $1,000.00
ERV = $1,030.58
AGGREGATE TOTAL RETURN = 3.06%
=====
<PAGE>
EXHIBIT 16 FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows for the Equity Index Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,057.31
AVERAGE ANNUAL TOTAL RETURN = 15.52%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows for the Equity Index Portfolio:
P = $1,000.00
ERV = $1,057.31
AGGREGATE TOTAL RETURN = 5.73%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows the Small Company Index Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,056.04
AVERAGE ANNUAL TOTAL RETURN = 15.16%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows for the Small Company Index Portfolio:
P = $1,000.00
ERV = $1,056.04
AGGREGATE TOTAL RETURN = 5.60%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (U.S. TREASURY INDEX PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows the Small Company Index Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,047.18
AVERAGE ANNUAL TOTAL RETURN = 12.68%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables would have been as
follows for the Small Company Index Portfolio:
P = $1,000.00
ERV = $1,047.18
AGGREGATE TOTAL RETURN = 4.72%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Bond Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,052.24
AVERAGE ANNUAL TOTAL RETURN = 14.08%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
January 11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Bond Portfolio:
P = $1,000.00
ERV = $1,052.24
AGGREGATE TOTAL RETURN = 5.22%
=====
<PAGE>
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (SHORT-INTERMEDIATE BOND PORTFOLIO)
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - January 11,1993
(Inception) to May 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Short-Intermediate Bond Portfolio:
P = $1,000.00
141 Days
n = = 0.386301
---------
365 Days
ERV = $1,028.08
AVERAGE ANNUAL TOTAL RETURN = 7.43%
======
EXHIBIT 16(b) FOR THE BENCHMARK FUNDS (BOND PORTFOLIO)
AGGREGATE TOTAL RETURN (Assuming no fee waivers) - January 11, 1993
(Inception) to May 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on January
11, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending May 31, 1993 these variables were as follows for
the Short-Intermediate Bond Portfolio:
P = $1,000.00
ERV = $1,030.78
AGGREGATE TOTAL RETURN = 2.81%
=====
<PAGE>
Exhibit 16(a)
EXHIBIT 16 (a) FOR THE BENCHMARK FUNDS (BALANCED PORTFOLIO)
- ----------------------------------------------------------
SEC 30-DAY YIELD - Period ending November 30, 1993
- ---------------------------------------------------
Formula: YIELD = 2*[((a-b)/(c*d)+1) 6-1]
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
November 1, 1993 through November 30, 1993
d = the maximum offering price per unit on November 30, 1993
For the 30 day period ending November 30, 1993, these variables were
as follows for the Balanced Portfolio:
a = 48,041.94
b = 8,035.98
c = 1,557,090.01
d = 10.22
Thus, the 30-Day Yield computed to 3.04%
=====
EXHIBIT 16 (a) FOR THE BENCHMARK FUNDS (BALANCED PORTFOLIO)
- -----------------------------------------------------------
SEC 30-DAY YIELD (assuming no fee waivers) - Period ending November 30, 1993
- ----------------------------------------------------------------------------
Formula: YIELD = 2*[((a-b)/(c*d)+1) 6-1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of units outstanding during
November 1, 1993 through November 30, 1993
d = the maximum offering price per unit on November 30, 1993
For the 30 day period ending November 30, 1993, these variables were as
follows for the Balanced Portfolio:
a = 48,041.94
b = 21,074.98
c = 1,557,090.01
d = 10.22
Thus, the 30-Day Yield computed to 2.04%
=====
1
<PAGE>
EXHIBIT 16 (e) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
- ----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) 1/n - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Small Company Index Portfolio:
P = $1,000.00
n = 324 = 0.887671
---
365
ERV = $1,140.91
AVERAGE ANNUAL TOTAL RETURN = 16.01%
=========
EXHIBIT 16 (e) FOR THE BENCHMARK FUNDS (SMALL COMPANY INDEX PORTFOLIO)
- ----------------------------------------------------------------------
AGGREGATE TOTAL RETURN
- ----------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Small Company Index Portfolio:
P = $1,000.00
ERV = $1,140,91
AGGREGATE TOTAL RETURN = 14.09%
=========
2
<PAGE>
EXHIBIT 16 (d) FOR THE BENCHMARK FUNDS (FOCUSED GROWTH PORTFOLIO)
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
Period July 1, 1993 (Inception) to November 30, 1993
- ----------------------------------------------------
Formula: T = (ERV/P) 1/n - 1
Where: P = a hypothetical initial investment of $1,000 made on
July 1, 1993 (commencement date)
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Focused Growth Portfolio:
P = $1,000.00
n = 153 = 0.419178
---
365
ERV = $1,043.30
AVERAGE ANNUAL TOTAL RETURN = 10.64%
=========
EXHIBIT 16 (d) FOR THE BENCHMARK FUNDS (FOCUSED GROWTH PORTFOLIO)
- -----------------------------------------------------------------
AGGREGATE TOTAL RETURN
- ----------------------
Period July 1, 1993 (Inception) to November 30, 1993
- ----------------------------------------------------
Formula: T = (ERV/P) - 1
Where: P = a hypothetical initial investment of $1,000 made on
July 1, 1993 (commencement date)
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Focused Growth Portfolio:
P = $1,000.00
ERV = $1,043.30
AGGREGATE TOTAL RETURN = 4.33%
=========
3
<PAGE>
EXHIBIT 16 (c) FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO) AVERAGE
- -----------------------------------------------------------------------
ANNUAL TOTAL RETURN
- -------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) 1/n - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Equity Index Portfolio:
P = $1,000.00
n = 324 = 0.887671
---
365
ERV = $1,100.85
AVERAGE ANNUAL TOTAL RETURN = 11.43%
=========
EXHIBIT 16 (c) FOR THE BENCHMARK FUNDS (EQUITY INDEX PORTFOLIO)
- ---------------------------------------------------------------
AGGREGATE OF TOTAL RETURN
- -------------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Equity Index Portfolio:
P = $1,000.00
ERV = $1,100.85
AGGREGATE TOTAL RETURN = 10.09%
=========
4
<PAGE>
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
- ---------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) 1/n - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Diversified Growth Portfolio:
P = $1,000.00
n = 324 = 0.887671
---
365
ERV = $1,073.88
AVERAGE ANNUAL TOTAL RETURN = 8.36%
=========
EXHIBIT 16 (b) FOR THE BENCHMARK FUNDS (DIVERSIFIED GROWTH PORTFOLIO)
- ---------------------------------------------------------------------
AGGREGATE OF TOTAL RETURN
- -------------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) - 1
Where: P = a hypothetical initial investment of $1,000 made on
January 11, 1993 (commencement date)
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Diversified Growth Portfolio:
P = $1,000.00
ERV = $1,073.88
AGGREGATE TOTAL RETURN = 7.39%
=========
5
<PAGE>
EXHIBIT 16 (a) FOR THE BENCHMARK FUNDS (BALANCED PORTFOLIO) AVERAGE
- -------------------------------------------------------------------
ANNUAL TOTAL RETURN
- -------------------
Period January 11, 1993 (Inception) to November 30, 1993
- --------------------------------------------------------
Formula: T = (ERV/P) 1/n - 1
Where: P = a hypothetical initial investment of $1,000 made on
July 1, 1993 (commencement date)
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Balanced Portfolio:
P = $1,000.00
n = 153 = 0.419178
---
365
ERV = $1,031.20
AVERAGE ANNUAL TOTAL RETURN = 7.61%
=========
EXHIBIT 16 (a) FOR THE BENCHMARK FUNDS (BALANCED PORTFOLIO) AGGREGATE
- ---------------------------------------------------------------------
TOTAL RETURN
- ------------
Period July 1, 1993 (Inception) to November 30, 1993
- ----------------------------------------------------
Formula: T = (ERV/P) - 1
Where: P = a hypothetical initial investment of $1,000 made on
July 1, 1993 (commencement date)
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending November 30, 1993, these variables were as follows
for the Balanced Portfolio:
P = $1,000.00
ERV = $1,031.20
AGGREGATE TOTAL RETURN = 3.12%
=========
6
<PAGE>
Exhibit 16(b)
EXHIBIT 16(d) FOR THE BENCHMARK FUNDS U.S. GOVERNMENT SECURITIES PORTFOLIO
AVERAGE ANNUAL TOTAL RETURN - April 5, 1993 (Inception) to August 31, 1993
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on
April 5, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending August 31, 1993 these variables were as follows
for the U.S. Government Securities Portfolio:
P = $1,000.00
149 Days
n = = 0.408219
---------
365 Days
ERV = $1,027.40
AVERAGE ANNUAL TOTAL RETURN = 6.85%
========
AGGREGATE TOTAL RETURN - April 5, 1993 (Inception) to August 31, 1993
AGGREGATE TOTAL RETURN
----------------------
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on
April 5, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period
For the period ending August 31, 1993 these variables were as follows
for the U.S. Government Securities Portfolio:
P = $1,000.00
ERV = $1,027.40
AGGREGATE TOTAL RETURN = 2.74%
=====
<PAGE>
EXHIBIT 16(d) FOR THE BENCHMARK FUNDS U.S. GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (Assuming no fee waivers) - April 5, 1993
- ---------------------------------------------------------------------
(Inception) to August 31, 1993
- ------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
<S> <C> <C> <C>
Formula: T = (ERV/P) 1/n - 1
Where:
P = a hypothetical initial payment of $1,000 made on April
5, 1993, the date of the commencement of the fund
T = Average annual total return
n = Number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending August 31, 1993 these variables would have been
as follows for the U.S. Government Securities Portfolio:
P = $1,000.00
149 Days
n = _________ = 0.408219
365 Days
ERV = $1,025.80
AVERAGE ANNUAL TOTAL RETURN = 6.45%
=====
</TABLE>
AGGREGATE TOTAL RETURN - (Assuming no fee waivers) - April 5, 1993 (Inception)
- ------------------------------------------------------------------------------
to August 31, 1993
- ------------------
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN
<S> <C> <C> <C>
Formula: T = (ERV/P) - 1
Where:
P = a hypothetical initial payment of $1,000 made on April
5, 1993, the date of the commencement of the fund
T = Aggregate total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period
For the period ending August 31, 1993 these variables would have been
as follows for the U.S. Government Securities Portfolio:
P = $1,000.00
ERV = $1,025.80
AGRREGATE TOTAL RETURN = 2.58%
=====
</TABLE>
<PAGE>
EXHIBIT 16(d) FOR THE BENCHMARK FUNDS U.S. GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------------------------
SEC 30-DAY YIELD - Period ending August 31, 1993
- ------------------------------------------------
<TABLE>
<CAPTION>
Formula used in calculating SEC 30-day yield for the U.S. Treasury Index
Portfolio:
<S> <C> <C>
YIELD = 2* [((a - b)/(c * d) + 1)6 - 1]
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 August 2-31,
1993
d = the maximum offering price per unit on August 31, 1993
For the 30-day period ending August 31, 1993, these variables were as follows
for the U.S. Goverment Securities Portfolio:
a = 121,695.55
b = 9,380.69
c = 1,571,943.00
d = 20.22
Thus, the 30-Day Yield computed to 4.28%
======
SEC 30-DAY YIELD (Assuming no fee waivers) - Period ending August 31, 1993
- --------------------------------------------------------------------------
Formula used in calculating SEC 30-day yield for the U.S. Government
Securities Portfolio:
YIELD = 2* [((a - b)/(c * d) + 1) 6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period
C = the average daily number of units outstanding during August 2-31,
1993
d = the maximum offering price per unit on August 31, 1993
For the 30-day period ending August 31, 1993, these variables were as follows
for the U.S. Treasury Index Portfolio:
a = 121,695.55
b = 32,682.00
c = 1,571,943.00
d = 20.22
Thus, the 30-Day Yield computed to 3.38%
======
</TABLE>
<PAGE>
Exhibit 16(c)
BENCHMARK FUNDS - CALCULATION OF ANNUALIZED 7 DAY YIELD AND ANNUALIZED EFFECTIVE
7 DAY YIELD IN THE ABSENCE OF ALL FEE REDUCTIONS AND EXPENSE
LIMITATIONS.
=============================================
FOR THE 7 DAY PERIOD ENDING MAY 31, 1993
=============================================
<TABLE>
<CAPTION>
DIVERSIFIED GOVERNMENT CALIFORNIA
ASSETS GOVERNMENT TAX-EXEMPT SELECT MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <S>
INVESTMENT ADVISOR FEE WAIVER -- -- -- $ 247,370 $ 4,691
EXPENSE LIMITATION REIMBURSEMENT $ 0 $ 214,516 $ 157,307 $ 218,934 $ 19,126
ADMINISTRATOR WAIVERS $ 114,027 $ 37,044 $ 40,441 $ 8,737 $ 0
AVERAGE NET ASSETS 3,156,421,528 1,191,587,368 1,293,899,142 330,912,618 15,150,207
===================================================================================================================================
PER CENT OF ADVISOR FEE WAIVER TO ASSETS -- -- -- 0.15% 0.10%
PER CENT OF EXP. LIMIT. REIMBMENT TO ASSETS 0.00% 0.04% 0.02% 0.13% 0.50%
PER CENT OF ADMIN. FEE WAIVER TO ASSETS 0.01% 0.01% 0.01% 0.01% 0.00%
----------------------------------------------------------------------------------------
TOTAL PER CENT OF WAIVER/REIMBURSEMENT 0.01% 0.04% 0.03% 0.29% 0.60%
===================================================================================================================================
ANNUALIZED 7 DAY YIELD (WITH REIMBURSEMENT) 2.89% 2.89% 2.54% 2.91% 2.49%
LESS: INVESTMENT ADVISOR FEE WAIVER -- -- -- 0.15% 0.10%
-----------------------------------------------------------------------------------------
SUB-TOTAL 2.89% 2.89% 2.54% 2.76% 2.39%
LESS: TOTAL EXPENSE WAIVERS/REIMBURSEMENT 0.00% 0.04% 0.02% 0.13% 0.50%
----------------------------------------------------------------------------------------
SUB-TOTAL 2.89% 2.85% 2.52% 2.63% 2.39%
LESS: ADMINISTRATOR FEE WAIVER 0.01% 0.01% 0.01% 0.01% 0.00%
----------------------------------------------------------------------------------------
EQUALS: PRO FORMA YIELD (NO REIMBURSEMENTS) 2.88% 2.85% 2.51% 2.62% 1.89%
ANNUALIZED EFFECTIVE YIELD 2.92% 2.89% 2.54% 2.65% 1.91%
===================================================================================================================================
TAX EQUIVALENT YIELD
Annualized Pro Forma Seven Day Yield/(1-28)
NOTE: Assumes tax bracket of 28% NA NA 3.49% NA 2.63%
===================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BENCHMARK FUND
PEA FOR MAY 1993
Daily Income Daily Income Daily Income Daily Income Daily Income
EXHIBIT 16 Factor Factor Factor Factor Factor
Per Unit Per Unit Per Unit Per Unit Per Unit
Diversified Government California
Day Date Assets Government Tax-Exempt Select Municipal
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
Value of one unit at the
beginning of the seven
day period 1.000000000 1.000000000 1.000000000 1.000000000 1.000000000
Tuesday 05/25/93 0.000079615 0.000080136 0.000067371 0.000079549 0.000067146501
Wednesday 05/26/93 0.000080318 0.000083693 0.000069941 0.000079546 0.000066098880
Thursday 05/27/93 0.000078846 0.000079276 0.000070227 0.000079568 0.000066174553
Friday 05/28/93 0.000078857 0.000077920 0.000069895 0.000079654 0.000066577400
Saturday 05/29/93 0.000078861 0.000077920 0.000069895 0.000079653 0.000068576900
Sunday 05/30/93 0.000078861 0.000077919 0.000069894 0.000079653 0.000068576900
Monday 05/31/93 0.000078586 0.000077911 0.000069895 0.000079654 0.000068579323
Value of one unit at the end of the
seven day period Less 1.000553944 1.000554777 1.000487117 1.000557298 1.000477734
Value of one unit at the beginning
of the seven day period 1.000000000 1.000000000 1.000000000 1.000000000 1.000000000
----------- ----------- ----------- ----------- -----------
Change in value of account 0.0005539444 0.000554777 0.000487117 0.000557297 0.0004777345
Divided by the value of one unit at the
beginning of the seven day period 1.000000000 1.000000000 1.000000000 1.000000000 1.000000000
----------- ----------- ----------- ----------- -----------
BASE PERIOD RETURN = Net change in the
value of one unit over 7 days 0.000553944 0.000554777 0.000487117 0.000557298 0.000477734
- --------------------------------------
ANNUALIZED SEVEN DAY YIELD = (Base Period
Return) X 36517 ANNUALIZED SEVEN 2.89% 2.89% 2.54% 2.91% 2.49%
YIELD
ANNUALIZED EFFECTIVE YIELD = (((Base Period
Return) + 1).36517)-1) ANNUALIZED EFFECTIVE 2.93% 2.93% 2.57% 2.95% 2.52%
YIELD
TAX EQUIVALENT YIELD = Annualized Seven Day
Yield/(1-26)
NOTE: Assumes tax bracket of 28%
NOTE: Taxable portion of Annualized Seven
Day Yield is immaterial TAX EQUIVALENT
YIELD NOT APPLICABLE NOT APPLICABLE 3.53% NOT APPLICABLE 3.46%
- --------------------------------------
ANNUALIZED PRO FORMA YIELD (NO FEE WAIVERS
OR EXPENSE REIMBURSEMENTS) 2.86% 2.85% 2.51% 2.62% 1.89%
ANNUALIZED PRO FORMA EFFECTIVE YIELD 2.92% 2.89% 2.54% 2.65% 1.91%
TAX EQUIVALENT YIELD = Annualized Seven Day
Yield/(1-26)
Note: Assumes tax bracket of 28%
Note: Taxable portion of Annualized Seven
Day Yield is immaterial NOT APPLICABLE NOT APPLICABLE 3.49% NOT APPLICABLE 2.63%
- --------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> Diversified Assets Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 4,010,939
<INVESTMENTS-AT-VALUE> 4,010,939
<RECEIVABLES> 317,309
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,328,298
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 386,712
<TOTAL-LIABILITIES> 386,712
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,942,953
<SHARES-COMMON-STOCK> 3,942,953
<SHARES-COMMON-PRIOR> 3,181,103
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,367)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,941,586
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 202,224
<OTHER-INCOME> 0
<EXPENSES-NET> 12,548
<NET-INVESTMENT-INCOME> 189,676
<REALIZED-GAINS-CURRENT> 207
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 189,883
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (189,676)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,976,344
<NUMBER-OF-SHARES-REDEEMED> (49,216,663)
<SHARES-REINVESTED> 2,169
<NET-CHANGE-IN-ASSETS> 762,057
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,574)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,945
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,026
<AVERAGE-NET-ASSETS> 3,578,830
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report Dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> Government Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,061,633
<INVESTMENTS-AT-VALUE> 1,061,633
<RECEIVABLES> 28,237
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,089,901
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,500
<TOTAL-LIABILITIES> 38,500
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,051,494
<SHARES-COMMON-STOCK> 1,051,494
<SHARES-COMMON-PRIOR> 1,268,820
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (93)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,051,401
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 71,708
<OTHER-INCOME> 0
<EXPENSES-NET> 4,548
<NET-INVESTMENT-INCOME> 67,160
<REALIZED-GAINS-CURRENT> 212
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 67,372
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67,170)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,517,258
<NUMBER-OF-SHARES-REDEEMED> (16,735,164)
<SHARES-REINVESTED> 580
<NET-CHANGE-IN-ASSETS> (217,114)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (305)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,243
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,811
<AVERAGE-NET-ASSETS> 1,297,374
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> GOVERNMENT SELECT PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,243,104
<INVESTMENTS-AT-VALUE> 1,243,104
<RECEIVABLES> 12,971
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,256,090
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,697
<TOTAL-LIABILITIES> 16,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,239,391
<SHARES-COMMON-STOCK> 1,239,391
<SHARES-COMMON-PRIOR> 836,425
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,239,393
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 56,010
<OTHER-INCOME> 0
<EXPENSES-NET> 2,043
<NET-INVESTMENT-INCOME> 53,967
<REALIZED-GAINS-CURRENT> 78
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 54,045
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (53,967)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,143,005
<NUMBER-OF-SHARES-REDEEMED> (5,744,991)
<SHARES-REINVESTED> 4,952
<NET-CHANGE-IN-ASSETS> 403,044
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (76)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,931
<AVERAGE-NET-ASSETS> 1,018,467
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 041
<NAME> TAX-EXEMPT PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 552,080
<INVESTMENTS-AT-VALUE> 552,080
<RECEIVABLES> 42,040
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 594,134
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,975
<TOTAL-LIABILITIES> 8,975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 584,991
<SHARES-COMMON-STOCK> 584,991
<SHARES-COMMON-PRIOR> 638,366
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 168
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 585,159
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,872
<OTHER-INCOME> 0
<EXPENSES-NET> 2,429
<NET-INVESTMENT-INCOME> 23,443
<REALIZED-GAINS-CURRENT> 27
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,470
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,443)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,626,217
<NUMBER-OF-SHARES-REDEEMED> (5,679,764)
<SHARES-REINVESTED> 172
<NET-CHANGE-IN-ASSETS> (53,348)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 141
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,731
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,735
<AVERAGE-NET-ASSETS> 692,735
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 061
<NAME> DIVERSIFIED GROWTH PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 109,657
<INVESTMENTS-AT-VALUE> 160,828
<RECEIVABLES> 2,428
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163,259
<PAYABLE-FOR-SECURITIES> 3,948
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232
<TOTAL-LIABILITIES> 4,180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88,814
<SHARES-COMMON-STOCK> 9,774
<SHARES-COMMON-PRIOR> 9,892
<ACCUMULATED-NII-CURRENT> 1,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,088
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,105
<NET-ASSETS> 159,079
<DIVIDEND-INCOME> 1,906
<INTEREST-INCOME> 150
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 1,090
<REALIZED-GAINS-CURRENT> 18,135
<APPREC-INCREASE-CURRENT> 14,940
<NET-CHANGE-FROM-OPS> 34,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,369)
<DISTRIBUTIONS-OF-GAINS> (14,420)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,555
<NUMBER-OF-SHARES-REDEEMED> (29,982)
<SHARES-REINVESTED> 14,520
<NET-CHANGE-IN-ASSETS> 16,591
<ACCUMULATED-NII-PRIOR> 1,355
<ACCUMULATED-GAINS-PRIOR> 14,418
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,157
<INTEREST-EXPENSE> 9
<GROSS-EXPENSE> 1,485
<AVERAGE-NET-ASSETS> 144,022
<PER-SHARE-NAV-BEGIN> 14.36
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 3.33
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> (1.46)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> 0.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 064
<NAME> DIVERSIFIED GROWTH PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 109,657
<INVESTMENTS-AT-VALUE> 160,828
<RECEIVABLES> 2,428
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163,259
<PAYABLE-FOR-SECURITIES> 3,948
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232
<TOTAL-LIABILITIES> 4,180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88,814
<SHARES-COMMON-STOCK> 44
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 1,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,088
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,105
<NET-ASSETS> 159,079
<DIVIDEND-INCOME> 1,906
<INTEREST-INCOME> 150
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 1,090
<REALIZED-GAINS-CURRENT> 18,135
<APPREC-INCREASE-CURRENT> 14,940
<NET-CHANGE-FROM-OPS> 34,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4)
<DISTRIBUTIONS-OF-GAINS> (45)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 215
<NUMBER-OF-SHARES-REDEEMED> (93)
<SHARES-REINVESTED> 49
<NET-CHANGE-IN-ASSETS> 16,591
<ACCUMULATED-NII-PRIOR> 1,355
<ACCUMULATED-GAINS-PRIOR> 14,418
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,157
<INTEREST-EXPENSE> 9
<GROSS-EXPENSE> 1,485
<AVERAGE-NET-ASSETS> 586
<PER-SHARE-NAV-BEGIN> 14.26
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 3.27
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (1.46)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.03
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 071
<NAME> Equity Index Portfolio - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 642,104
<INVESTMENTS-AT-VALUE> 957,613
<RECEIVABLES> 1,936
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 959,607
<PAYABLE-FOR-SECURITIES> 704
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,206
<TOTAL-LIABILITIES> 1,910
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 572,024
<SHARES-COMMON-STOCK> 42,022
<SHARES-COMMON-PRIOR> 40,255
<ACCUMULATED-NII-CURRENT> 465
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69,498
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,710
<NET-ASSETS> 957,697
<DIVIDEND-INCOME> 14,703
<INTEREST-INCOME> 952
<OTHER-INCOME> 0
<EXPENSES-NET> 2,081
<NET-INVESTMENT-INCOME> 13,574
<REALIZED-GAINS-CURRENT> 72,933
<APPREC-INCREASE-CURRENT> 119,879
<NET-CHANGE-FROM-OPS> 206,386
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,212)
<DISTRIBUTIONS-OF-GAINS> (32,814)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 340,805
<NUMBER-OF-SHARES-REDEEMED> (354,580)
<SHARES-REINVESTED> 41,881
<NET-CHANGE-IN-ASSETS> 219,959
<ACCUMULATED-NII-PRIOR> 468
<ACCUMULATED-GAINS-PRIOR> 32,457
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,493
<INTEREST-EXPENSE> 90
<GROSS-EXPENSE> 4,099
<AVERAGE-NET-ASSETS> 743,378
<PER-SHARE-NAV-BEGIN> 16.79
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 4.13
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> (0.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.09
<EXPENSE-RATIO> 0.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> Equity Index Portfolio - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 642,104
<INVESTMENTS-AT-VALUE> 957,613
<RECEIVABLES> 1,936
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 959,607
<PAYABLE-FOR-SECURITIES> 704
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,206
<TOTAL-LIABILITIES> 1,910
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 572,024
<SHARES-COMMON-STOCK> 4,139
<SHARES-COMMON-PRIOR> 3,213
<ACCUMULATED-NII-CURRENT> 465
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69,498
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,710
<NET-ASSETS> 957,697
<DIVIDEND-INCOME> 14,703
<INTEREST-INCOME> 952
<OTHER-INCOME> 0
<EXPENSES-NET> 2,081
<NET-INVESTMENT-INCOME> 13,574
<REALIZED-GAINS-CURRENT> 72,933
<APPREC-INCREASE-CURRENT> 119,879
<NET-CHANGE-FROM-OPS> 206,386
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,052)
<DISTRIBUTIONS-OF-GAINS> (2,679)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,164
<NUMBER-OF-SHARES-REDEEMED> (28,213)
<SHARES-REINVESTED> 3,733
<NET-CHANGE-IN-ASSETS> 219,959
<ACCUMULATED-NII-PRIOR> 468
<ACCUMULATED-GAINS-PRIOR> 32,457
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,493
<INTEREST-EXPENSE> 90
<GROSS-EXPENSE> 4,099
<AVERAGE-NET-ASSETS> 66,628
<PER-SHARE-NAV-BEGIN> 16.79
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 4.11
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (0.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.05
<EXPENSE-RATIO> 0.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 074
<NAME> Equity Index Portfolio - Class D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 642,104
<INVESTMENTS-AT-VALUE> 957,613
<RECEIVABLES> 1,936
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 959,607
<PAYABLE-FOR-SECURITIES> 704
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,206
<TOTAL-LIABILITIES> 1,910
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 572,024
<SHARES-COMMON-STOCK> 1,532
<SHARES-COMMON-PRIOR> 477
<ACCUMULATED-NII-CURRENT> 465
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69,498
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,710
<NET-ASSETS> 957,697
<DIVIDEND-INCOME> 14,703
<INTEREST-INCOME> 952
<OTHER-INCOME> 0
<EXPENSES-NET> 2,081
<NET-INVESTMENT-INCOME> 13,574
<REALIZED-GAINS-CURRENT> 72,933
<APPREC-INCREASE-CURRENT> 119,879
<NET-CHANGE-FROM-OPS> 206,386
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (313)
<DISTRIBUTIONS-OF-GAINS> (399)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,852
<NUMBER-OF-SHARES-REDEEMED> (5,161)
<SHARES-REINVESTED> 561
<NET-CHANGE-IN-ASSETS> 219,959
<ACCUMULATED-NII-PRIOR> 468
<ACCUMULATED-GAINS-PRIOR> 32,457
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,493
<INTEREST-EXPENSE> 90
<GROSS-EXPENSE> 4,099
<AVERAGE-NET-ASSETS> 20,946
<PER-SHARE-NAV-BEGIN> 16.77
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 4.07
<PER-SHARE-DIVIDEND> (0.27)
<PER-SHARE-DISTRIBUTIONS> (0.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 081
<NAME> Focused Growth Portfolio - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 101,687
<INVESTMENTS-AT-VALUE> 125,716
<RECEIVABLES> 1,306
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,034
<PAYABLE-FOR-SECURITIES> 1,535
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 1,701
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,032
<SHARES-COMMON-STOCK> 7,148
<SHARES-COMMON-PRIOR> 7,337
<ACCUMULATED-NII-CURRENT> 304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,015
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,982
<NET-ASSETS> 125,333
<DIVIDEND-INCOME> 1,319
<INTEREST-INCOME> 99
<OTHER-INCOME> 0
<EXPENSES-NET> 1,091
<NET-INVESTMENT-INCOME> 327
<REALIZED-GAINS-CURRENT> 23,396
<APPREC-INCREASE-CURRENT> 4,216
<NET-CHANGE-FROM-OPS> 27,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (130)
<DISTRIBUTIONS-OF-GAINS> (12,039)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,470
<NUMBER-OF-SHARES-REDEEMED> (37,017)
<SHARES-REINVESTED> 11,306
<NET-CHANGE-IN-ASSETS> 11,434
<ACCUMULATED-NII-PRIOR> 111
<ACCUMULATED-GAINS-PRIOR> 11,548
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,284
<INTEREST-EXPENSE> 7
<GROSS-EXPENSE> 1,584
<AVERAGE-NET-ASSETS> 108,459
<PER-SHARE-NAV-BEGIN> 14.48
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 3.37
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (1.68)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.20
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 083
<NAME> Focused Growth Portfolio - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 101,687
<INVESTMENTS-AT-VALUE> 125,716
<RECEIVABLES> 1,306
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,034
<PAYABLE-FOR-SECURITIES> 1,535
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 1,701
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,032
<SHARES-COMMON-STOCK> 515
<SHARES-COMMON-PRIOR> 483
<ACCUMULATED-NII-CURRENT> 304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,015
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,982
<NET-ASSETS> 125,333
<DIVIDEND-INCOME> 1,319
<INTEREST-INCOME> 99
<OTHER-INCOME> 0
<EXPENSES-NET> 1,091
<NET-INVESTMENT-INCOME> 327
<REALIZED-GAINS-CURRENT> 23,396
<APPREC-INCREASE-CURRENT> 4,216
<NET-CHANGE-FROM-OPS> 27,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4)
<DISTRIBUTIONS-OF-GAINS> (811)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 171
<NUMBER-OF-SHARES-REDEEMED> (623)
<SHARES-REINVESTED> 814
<NET-CHANGE-IN-ASSETS> 11,434
<ACCUMULATED-NII-PRIOR> 111
<ACCUMULATED-GAINS-PRIOR> 11,548
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,284
<INTEREST-EXPENSE> 7
<GROSS-EXPENSE> 1,584
<AVERAGE-NET-ASSETS> 7,483
<PER-SHARE-NAV-BEGIN> 14.47
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 3.37
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (1.68)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.16
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Benchmark Funds Annual Report dated November 30, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 084
<NAME> Focused Growth Portfolio - Class D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 101,687
<INVESTMENTS-AT-VALUE> 125,716
<RECEIVABLES> 1,306
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,034
<PAYABLE-FOR-SECURITIES> 1,535
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 1,701
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,032
<SHARES-COMMON-STOCK> 75
<SHARES-COMMON-PRIOR> 46
<ACCUMULATED-NII-CURRENT> 304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,015
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,982
<NET-ASSETS> 125,333
<DIVIDEND-INCOME> 1,319
<INTEREST-INCOME> 99
<OTHER-INCOME> 0
<EXPENSES-NET> 1,091
<NET-INVESTMENT-INCOME> 327
<REALIZED-GAINS-CURRENT> 23,396
<APPREC-INCREASE-CURRENT> 4,216
<NET-CHANGE-FROM-OPS> 27,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (79)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 491
<NUMBER-OF-SHARES-REDEEMED> (133)
<SHARES-REINVESTED> 79
<NET-CHANGE-IN-ASSETS> 11,434
<ACCUMULATED-NII-PRIOR> 111
<ACCUMULATED-GAINS-PRIOR> 11,548
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,284
<INTEREST-EXPENSE> 7
<GROSS-EXPENSE> 1,584
<AVERAGE-NET-ASSETS> 815
<PER-SHARE-NAV-BEGIN> 14.37
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 3.30
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (1.68)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.01
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
the Benchmark Funds Annual Report dated November 30, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 091
<NAME> Small Company Index Portfolio - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 121,318
<INVESTMENTS-AT-VALUE> 147,594
<RECEIVABLES> 2,630
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150,274
<PAYABLE-FOR-SECURITIES> 1,632
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65
<TOTAL-LIABILITIES> 1,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,888
<SHARES-COMMON-STOCK> 9,827
<SHARES-COMMON-PRIOR> 8,081
<ACCUMULATED-NII-CURRENT> 1,272
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,300
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,117
<NET-ASSETS> 148,577
<DIVIDEND-INCOME> 1,666
<INTEREST-INCOME> 200
<OTHER-INCOME> 0
<EXPENSES-NET> 388
<NET-INVESTMENT-INCOME> 1,478
<REALIZED-GAINS-CURRENT> 9,968
<APPREC-INCREASE-CURRENT> 13,285
<NET-CHANGE-FROM-OPS> 24,731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,364)
<DISTRIBUTIONS-OF-GAINS> (13,019)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,673
<NUMBER-OF-SHARES-REDEEMED> (35,376)
<SHARES-REINVESTED> 13,462
<NET-CHANGE-IN-ASSETS> 35,452
<ACCUMULATED-NII-PRIOR> 1,159
<ACCUMULATED-GAINS-PRIOR> 12,364
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 824
<AVERAGE-NET-ASSETS> 120,813
<PER-SHARE-NAV-BEGIN> 13.97
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (1.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.05
<EXPENSE-RATIO> 0.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 094
<NAME> SMALL COMPANY INDEX PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 121,318
<INVESTMENTS-AT-VALUE> 147,594
<RECEIVABLES> 2,630
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150,274
<PAYABLE-FOR-SECURITIES> 1,632
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65
<TOTAL-LIABILITIES> 1,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,888
<SHARES-COMMON-STOCK> 46
<SHARES-COMMON-PRIOR> 19
<ACCUMULATED-NII-CURRENT> 1,272
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,300
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,117
<NET-ASSETS> 148,577
<DIVIDEND-INCOME> 1,666
<INTEREST-INCOME> 200
<OTHER-INCOME> 0
<EXPENSES-NET> 388
<NET-INVESTMENT-INCOME> 1,478
<REALIZED-GAINS-CURRENT> 9,968
<APPREC-INCREASE-CURRENT> 13,285
<NET-CHANGE-FROM-OPS> 24,731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> (13)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 583
<NUMBER-OF-SHARES-REDEEMED> (238)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 35,452
<ACCUMULATED-NII-PRIOR> 1,159
<ACCUMULATED-GAINS-PRIOR> 12,364
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 824
<AVERAGE-NET-ASSETS> 397
<PER-SHARE-NAV-BEGIN> 13.96
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 2.62
<PER-SHARE-DIVIDEND> (0.15)
<PER-SHARE-DISTRIBUTIONS> (1.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.01
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report Dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> BOND PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 488,565
<INVESTMENTS-AT-VALUE> 503,510
<RECEIVABLES> 7,545
<ASSETS-OTHER> 1,262
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 512,317
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 648
<TOTAL-LIABILITIES> 648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,296
<SHARES-COMMON-STOCK> 21,851
<SHARES-COMMON-PRIOR> 17,661
<ACCUMULATED-NII-CURRENT> 338
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,945
<NET-ASSETS> 511,669
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,512
<OTHER-INCOME> 0
<EXPENSES-NET> 1,651
<NET-INVESTMENT-INCOME> 28,861
<REALIZED-GAINS-CURRENT> 3,869
<APPREC-INCREASE-CURRENT> 4,710
<NET-CHANGE-FROM-OPS> 37,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (25,700)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155,583
<NUMBER-OF-SHARES-REDEEMED> (92,369)
<SHARES-REINVESTED> 22,888
<NET-CHANGE-IN-ASSETS> 137,257
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,439)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,607
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,432
<AVERAGE-NET-ASSETS> 399,652
<PER-SHARE-NAV-BEGIN> 20.77
<PER-SHARE-NII> 1.34
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (1.32)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.08
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> BOND PORTFOLIO - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 488,565
<INVESTMENTS-AT-VALUE> 503,510
<RECEIVABLES> 7,545
<ASSETS-OTHER> 1,262
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 512,317
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 648
<TOTAL-LIABILITIES> 648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,296
<SHARES-COMMON-STOCK> 2,400
<SHARES-COMMON-PRIOR> 353
<ACCUMULATED-NII-CURRENT> 338
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,945
<NET-ASSETS> 511,669
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,512
<OTHER-INCOME> 0
<EXPENSES-NET> 1,651
<NET-INVESTMENT-INCOME> 28,861
<REALIZED-GAINS-CURRENT> 3,869
<APPREC-INCREASE-CURRENT> 4,710
<NET-CHANGE-FROM-OPS> 37,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,140)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,626
<NUMBER-OF-SHARES-REDEEMED> (21,561)
<SHARES-REINVESTED> 2,140
<NET-CHANGE-IN-ASSETS> 137,257
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,439)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,607
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,432
<AVERAGE-NET-ASSETS> 34,481
<PER-SHARE-NAV-BEGIN> 20.78
<PER-SHARE-NII> 1.29
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> (1.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.07
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 104
<NAME> BOND PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 488,565
<INVESTMENTS-AT-VALUE> 503,510
<RECEIVABLES> 7,545
<ASSETS-OTHER> 1,262
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 512,317
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 648
<TOTAL-LIABILITIES> 648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,296
<SHARES-COMMON-STOCK> 29
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 338
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,945
<NET-ASSETS> 511,669
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,512
<OTHER-INCOME> 0
<EXPENSES-NET> 1,651
<NET-INVESTMENT-INCOME> 28,861
<REALIZED-GAINS-CURRENT> 3,869
<APPREC-INCREASE-CURRENT> 4,710
<NET-CHANGE-FROM-OPS> 37,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 657
<NUMBER-OF-SHARES-REDEEMED> (306)
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> 137,257
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,439)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,607
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,432
<AVERAGE-NET-ASSETS> 355
<PER-SHARE-NAV-BEGIN> 20.76
<PER-SHARE-NII> 1.24
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (1.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.05
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 121
<NAME> SHORT INTERMEDIATE BOND PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 206,201
<INVESTMENTS-AT-VALUE> 206,258
<RECEIVABLES> 3,663
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 209,946
<PAYABLE-FOR-SECURITIES> 7,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 349
<TOTAL-LIABILITIES> 7,598
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 202,009
<SHARES-COMMON-STOCK> 9,892
<SHARES-COMMON-PRIOR> 7,423
<ACCUMULATED-NII-CURRENT> 56
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57
<NET-ASSETS> 202,348
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,800
<OTHER-INCOME> 0
<EXPENSES-NET> 620
<NET-INVESTMENT-INCOME> 13,180
<REALIZED-GAINS-CURRENT> (623)
<APPREC-INCREASE-CURRENT> (2,110)
<NET-CHANGE-FROM-OPS> 10,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,516)
<DISTRIBUTIONS-OF-GAINS> (414)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121,515
<NUMBER-OF-SHARES-REDEEMED> (82,865)
<SHARES-REINVESTED> 11,648
<NET-CHANGE-IN-ASSETS> 48,330
<ACCUMULATED-NII-PRIOR> 45
<ACCUMULATED-GAINS-PRIOR> 650
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1029
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,394
<AVERAGE-NET-ASSETS> 171,011
<PER-SHARE-NAV-BEGIN> 20.70
<PER-SHARE-NII> 1.46
<PER-SHARE-GAIN-APPREC> (0.29)
<PER-SHARE-DIVIDEND> (1.46)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.36
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Benchmark Funds Annual Report dated November 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 124
<NAME> SHORT INTERMEDIATE BOND PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 206,201
<INVESTMENTS-AT-VALUE> 206,258
<RECEIVABLES> 3,663
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 209,946
<PAYABLE-FOR-SECURITIES> 7,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 349
<TOTAL-LIABILITIES> 7,598
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 202,009
<SHARES-COMMON-STOCK> 44
<SHARES-COMMON-PRIOR> 17
<ACCUMULATED-NII-CURRENT> 56
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57
<NET-ASSETS> 202,348
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,800
<OTHER-INCOME> 0
<EXPENSES-NET> 620
<NET-INVESTMENT-INCOME> 13,180
<REALIZED-GAINS-CURRENT> (623)
<APPREC-INCREASE-CURRENT> (2,110)
<NET-CHANGE-FROM-OPS> 10,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (39)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 638
<NUMBER-OF-SHARES-REDEEMED> (110)
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 48,330
<ACCUMULATED-NII-PRIOR> 45
<ACCUMULATED-GAINS-PRIOR> 650
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1029
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,394
<AVERAGE-NET-ASSETS> 540
<PER-SHARE-NAV-BEGIN> 20.66
<PER-SHARE-NII> 1.43
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> (1.39)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.31
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 131
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 49,491
<INVESTMENTS-AT-VALUE> 49,794
<RECEIVABLES> 486
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,308
<PAYABLE-FOR-SECURITIES> 3,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78
<TOTAL-LIABILITIES> 3,805
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,371
<SHARES-COMMON-STOCK> 2,154
<SHARES-COMMON-PRIOR> 4,602
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (171)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 303
<NET-ASSETS> 46,503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,345
<OTHER-INCOME> 0
<EXPENSES-NET> 319
<NET-INVESTMENT-INCOME> 5,026
<REALIZED-GAINS-CURRENT> 76
<APPREC-INCREASE-CURRENT> (46)
<NET-CHANGE-FROM-OPS> 5,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,820)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,991
<NUMBER-OF-SHARES-REDEEMED> (122,819)
<SHARES-REINVESTED> 4,525
<NET-CHANGE-IN-ASSETS> (49,608)
<ACCUMULATED-NII-PRIOR> 75
<ACCUMULATED-GAINS-PRIOR> (307)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 515
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743
<AVERAGE-NET-ASSETS> 82,086
<PER-SHARE-NAV-BEGIN> 20.07
<PER-SHARE-NII> 1.21
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> (1.22)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.99
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 133
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 49,491
<INVESTMENTS-AT-VALUE> 49,794
<RECEIVABLES> 486
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,308
<PAYABLE-FOR-SECURITIES> 3,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78
<TOTAL-LIABILITIES> 3,805
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,371
<SHARES-COMMON-STOCK> 156
<SHARES-COMMON-PRIOR> 176
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (171)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 303
<NET-ASSETS> 46,503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,345
<OTHER-INCOME> 0
<EXPENSES-NET> 319
<NET-INVESTMENT-INCOME> 5,026
<REALIZED-GAINS-CURRENT> 76
<APPREC-INCREASE-CURRENT> (46)
<NET-CHANGE-FROM-OPS> 5,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (204)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,328
<NUMBER-OF-SHARES-REDEEMED> (1,940)
<SHARES-REINVESTED> 204
<NET-CHANGE-IN-ASSETS> (49,608)
<ACCUMULATED-NII-PRIOR> 75
<ACCUMULATED-GAINS-PRIOR> (307)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 515
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743
<AVERAGE-NET-ASSETS> 3,484
<PER-SHARE-NAV-BEGIN> 20.06
<PER-SHARE-NII> 1.14
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> (1.18)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.98
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 134
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 49,491
<INVESTMENTS-AT-VALUE> 49,794
<RECEIVABLES> 486
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,308
<PAYABLE-FOR-SECURITIES> 3,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78
<TOTAL-LIABILITIES> 3,805
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,371
<SHARES-COMMON-STOCK> 16
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (171)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 303
<NET-ASSETS> 46,503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,345
<OTHER-INCOME> 0
<EXPENSES-NET> 319
<NET-INVESTMENT-INCOME> 5,026
<REALIZED-GAINS-CURRENT> 76
<APPREC-INCREASE-CURRENT> (46)
<NET-CHANGE-FROM-OPS> 5,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111
<NUMBER-OF-SHARES-REDEEMED> (29)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> (49,608)
<ACCUMULATED-NII-PRIOR> 75
<ACCUMULATED-GAINS-PRIOR> (307)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 515
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743
<AVERAGE-NET-ASSETS> 284
<PER-SHARE-NAV-BEGIN> 20.03
<PER-SHARE-NII> 1.16
<PER-SHARE-GAIN-APPREC> (0.10)
<PER-SHARE-DIVIDEND> (1.15)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.94
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 141
<NAME> U.S. TREASURY INDEX PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 34,165
<INVESTMENTS-AT-VALUE> 35,104
<RECEIVABLES> 344
<ASSETS-OTHER> 141
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,589
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43
<TOTAL-LIABILITIES> 43
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,606
<SHARES-COMMON-STOCK> 1,626
<SHARES-COMMON-PRIOR> 1,276
<ACCUMULATED-NII-CURRENT> 56
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,055)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 939
<NET-ASSETS> 35,546
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,937
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 1,856
<REALIZED-GAINS-CURRENT> (56)
<APPREC-INCREASE-CURRENT> 382
<NET-CHANGE-FROM-OPS> 2,182
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,746)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,990
<NUMBER-OF-SHARES-REDEEMED> (14,944)
<SHARES-REINVESTED> 1,197
<NET-CHANGE-IN-ASSETS> 8,425
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> (999)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 243
<AVERAGE-NET-ASSETS> 27,912
<PER-SHARE-NAV-BEGIN> 20.60
<PER-SHARE-NII> 1.26
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (1.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.81
<EXPENSE-RATIO> 0.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 144
<NAME> U.S. TREASURY INDEX PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 34,165
<INVESTMENTS-AT-VALUE> 35,104
<RECEIVABLES> 344
<ASSETS-OTHER> 141
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,589
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43
<TOTAL-LIABILITIES> 43
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,606
<SHARES-COMMON-STOCK> 82
<SHARES-COMMON-PRIOR> 41
<ACCUMULATED-NII-CURRENT> 56
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,055)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 939
<NET-ASSETS> 35,546
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,937
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 1,856
<REALIZED-GAINS-CURRENT> (56)
<APPREC-INCREASE-CURRENT> 382
<NET-CHANGE-FROM-OPS> 2,182
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (79)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,106
<NUMBER-OF-SHARES-REDEEMED> (321)
<SHARES-REINVESTED> 40
<NET-CHANGE-IN-ASSETS> 8,425
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> (999)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 243
<AVERAGE-NET-ASSETS> 1,341
<PER-SHARE-NAV-BEGIN> 20.57
<PER-SHARE-NII> 1.20
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (1.18)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.77
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 151
<NAME> BALANCED PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 43,966
<INVESTMENTS-AT-VALUE> 56,033
<RECEIVABLES> 383
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,479
<PAYABLE-FOR-SECURITIES> 55
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,065
<SHARES-COMMON-STOCK> 3,787
<SHARES-COMMON-PRIOR> 3,690
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,192
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,067
<NET-ASSETS> 56,384
<DIVIDEND-INCOME> 390
<INTEREST-INCOME> 1,561
<OTHER-INCOME> 0
<EXPENSES-NET> 345
<NET-INVESTMENT-INCOME> 1,606
<REALIZED-GAINS-CURRENT> 2,227
<APPREC-INCREASE-CURRENT> 4,839
<NET-CHANGE-FROM-OPS> 8,672
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,436)
<DISTRIBUTIONS-OF-GAINS> (1,132)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,638
<NUMBER-OF-SHARES-REDEEMED> (9,103)
<SHARES-REINVESTED> 2,538
<NET-CHANGE-IN-ASSETS> 4,998
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> 1,255
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 433
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 614
<AVERAGE-NET-ASSETS> 48,471
<PER-SHARE-NAV-BEGIN> 12.24
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 1.66
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.59
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 153
<NAME> BALANCED PORTFOLIO - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 43,966
<INVESTMENTS-AT-VALUE> 56,033
<RECEIVABLES> 383
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,479
<PAYABLE-FOR-SECURITIES> 55
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,065
<SHARES-COMMON-STOCK> 338
<SHARES-COMMON-PRIOR> 490
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,192
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,067
<NET-ASSETS> 56,384
<DIVIDEND-INCOME> 390
<INTEREST-INCOME> 1,561
<OTHER-INCOME> 0
<EXPENSES-NET> 345
<NET-INVESTMENT-INCOME> 1,606
<REALIZED-GAINS-CURRENT> 2,227
<APPREC-INCREASE-CURRENT> 4,839
<NET-CHANGE-FROM-OPS> 8,672
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (151)
<DISTRIBUTIONS-OF-GAINS> (152)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,106
<NUMBER-OF-SHARES-REDEEMED> (3,329)
<SHARES-REINVESTED> 303
<NET-CHANGE-IN-ASSETS> 4,998
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> 1,255
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 433
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 614
<AVERAGE-NET-ASSETS> 5,352
<PER-SHARE-NAV-BEGIN> 12.24
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.64
<PER-SHARE-DIVIDEND> (0.37)
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.56
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 154
<NAME> BALANCED PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 43,966
<INVESTMENTS-AT-VALUE> 56,033
<RECEIVABLES> 383
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,479
<PAYABLE-FOR-SECURITIES> 55
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,065
<SHARES-COMMON-STOCK> 24
<SHARES-COMMON-PRIOR> 19
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,192
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,067
<NET-ASSETS> 56,384
<DIVIDEND-INCOME> 390
<INTEREST-INCOME> 1,561
<OTHER-INCOME> 0
<EXPENSES-NET> 345
<NET-INVESTMENT-INCOME> 1,606
<REALIZED-GAINS-CURRENT> 2,227
<APPREC-INCREASE-CURRENT> 4,839
<NET-CHANGE-FROM-OPS> 8,672
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 140
<NUMBER-OF-SHARES-REDEEMED> (96)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 4,998
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> 1,255
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 433
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 614
<AVERAGE-NET-ASSETS> 284
<PER-SHARE-NAV-BEGIN> 12.23
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.64
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.54
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 161
<NAME> INTERNATIONAL BOND PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 25,752
<INVESTMENTS-AT-VALUE> 25,533
<RECEIVABLES> 918
<ASSETS-OTHER> 69
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 46
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,344
<SHARES-COMMON-STOCK> 1,310
<SHARES-COMMON-PRIOR> 1,543
<ACCUMULATED-NII-CURRENT> 38
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 313
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (221)
<NET-ASSETS> 26,474
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,886
<OTHER-INCOME> 0
<EXPENSES-NET> 278
<NET-INVESTMENT-INCOME> 1,608
<REALIZED-GAINS-CURRENT> 97
<APPREC-INCREASE-CURRENT> (2,824)
<NET-CHANGE-FROM-OPS> (1,119)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,390)
<DISTRIBUTIONS-OF-GAINS> (520)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,168
<NUMBER-OF-SHARES-REDEEMED> (7,465)
<SHARES-REINVESTED> 1,525
<NET-CHANGE-IN-ASSETS> (7,761)
<ACCUMULATED-NII-PRIOR> 31
<ACCUMULATED-GAINS-PRIOR> 529
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 258
<INTEREST-EXPENSE> 1
<GROSS-EXPENSE> 436
<AVERAGE-NET-ASSETS> 28,649
<PER-SHARE-NAV-BEGIN> 22.16
<PER-SHARE-NII> 1.02
<PER-SHARE-GAIN-APPREC> (1.70)
<PER-SHARE-DIVIDEND> (1.01)
<PER-SHARE-DISTRIBUTIONS> (0.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.13
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 164
<NAME> INTERNATIONAL BOND PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 25,752
<INVESTMENTS-AT-VALUE> 25,533
<RECEIVABLES> 918
<ASSETS-OTHER> 69
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 46
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,344
<SHARES-COMMON-STOCK> 5
<SHARES-COMMON-PRIOR> 2
<ACCUMULATED-NII-CURRENT> 38
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 313
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (221)
<NET-ASSETS> 26,474
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,886
<OTHER-INCOME> 0
<EXPENSES-NET> 278
<NET-INVESTMENT-INCOME> 1,608
<REALIZED-GAINS-CURRENT> 97
<APPREC-INCREASE-CURRENT> (2,824)
<NET-CHANGE-FROM-OPS> (1,119)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47
<NUMBER-OF-SHARES-REDEEMED> (7)
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (7,761)
<ACCUMULATED-NII-PRIOR> 31
<ACCUMULATED-GAINS-PRIOR> 529
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 258
<INTEREST-EXPENSE> 1
<GROSS-EXPENSE> 436
<AVERAGE-NET-ASSETS> 62
<PER-SHARE-NAV-BEGIN> 22.14
<PER-SHARE-NII> 0.97
<PER-SHARE-GAIN-APPREC> (1.72)
<PER-SHARE-DIVIDEND> (0.99)
<PER-SHARE-DISTRIBUTIONS> (0.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.06
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 171
<NAME> INTERNATIONAL GROWTH PORTFOLIO - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 103,135
<INVESTMENTS-AT-VALUE> 107,496
<RECEIVABLES> 2,178
<ASSETS-OTHER> 108
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109,782
<PAYABLE-FOR-SECURITIES> 2,639
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 135
<TOTAL-LIABILITIES> 2,774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,142
<SHARES-COMMON-STOCK> 10,154
<SHARES-COMMON-PRIOR> 12,998
<ACCUMULATED-NII-CURRENT> 880
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,631
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,355
<NET-ASSETS> 107,008
<DIVIDEND-INCOME> 2,211
<INTEREST-INCOME> 313
<OTHER-INCOME> 0
<EXPENSES-NET> 1,318
<NET-INVESTMENT-INCOME> 1,206
<REALIZED-GAINS-CURRENT> 4,368
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 5,691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,022)
<DISTRIBUTIONS-OF-GAINS> (5,790)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,482
<NUMBER-OF-SHARES-REDEEMED> (47,748)
<SHARES-REINVESTED> 5,984
<NET-CHANGE-IN-ASSETS> (31,268)
<ACCUMULATED-NII-PRIOR> 720
<ACCUMULATED-GAINS-PRIOR> 3,034
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,241
<INTEREST-EXPENSE> 2
<GROSS-EXPENSE> 1,702
<AVERAGE-NET-ASSETS> 123,988
<PER-SHARE-NAV-BEGIN> 10.63
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.45)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 174
<NAME> INTERNATIONAL GROWTH PORTFOLIO - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 103,135
<INVESTMENTS-AT-VALUE> 107,496
<RECEIVABLES> 2,178
<ASSETS-OTHER> 108
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109,782
<PAYABLE-FOR-SECURITIES> 2,639
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 135
<TOTAL-LIABILITIES> 2,774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,142
<SHARES-COMMON-STOCK> 23
<SHARES-COMMON-PRIOR> 9
<ACCUMULATED-NII-CURRENT> 880
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,631
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,355
<NET-ASSETS> 107,008
<DIVIDEND-INCOME> 2,211
<INTEREST-INCOME> 313
<OTHER-INCOME> 0
<EXPENSES-NET> 1,318
<NET-INVESTMENT-INCOME> 1,206
<REALIZED-GAINS-CURRENT> 4,368
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 5,691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> (4)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 200
<NUMBER-OF-SHARES-REDEEMED> (64)
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (31,268)
<ACCUMULATED-NII-PRIOR> 720
<ACCUMULATED-GAINS-PRIOR> 3,034
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,241
<INTEREST-EXPENSE> 2
<GROSS-EXPENSE> 1,702
<AVERAGE-NET-ASSETS> 152
<PER-SHARE-NAV-BEGIN> 10.54
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.45)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.39
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 181
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 32,804
<INVESTMENTS-AT-VALUE> 31,556
<RECEIVABLES> 2,566
<ASSETS-OTHER> 313
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,435
<PAYABLE-FOR-SECURITIES> 100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91
<TOTAL-LIABILITIES> 191
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,186
<SHARES-COMMON-STOCK> 3,245
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 314
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,251)
<NET-ASSETS> 34,244
<DIVIDEND-INCOME> 374
<INTEREST-INCOME> 28
<OTHER-INCOME> 0
<EXPENSES-NET> 90
<NET-INVESTMENT-INCOME> 312
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> (1,251)
<NET-CHANGE-FROM-OPS> (942)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,436
<NUMBER-OF-SHARES-REDEEMED> (1,250)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,244
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 89
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192
<AVERAGE-NET-ASSETS> 26,624
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.55
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BENCHMARK FUNDS ANNUAL REPORT DATED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 191
<NAME> INTERMEDIATE BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 11,885
<INVESTMENTS-AT-VALUE> 11,824
<RECEIVABLES> 163
<ASSETS-OTHER> 72
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,059
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62
<TOTAL-LIABILITIES> 62
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,060
<SHARES-COMMON-STOCK> 603
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (21)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (61)
<NET-ASSETS> 11,997
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 216
<OTHER-INCOME> 0
<EXPENSES-NET> 12
<NET-INVESTMENT-INCOME> 204
<REALIZED-GAINS-CURRENT> (21)
<APPREC-INCREASE-CURRENT> (61)
<NET-CHANGE-FROM-OPS> 122
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (185)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,875
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 185
<NET-CHANGE-IN-ASSETS> 11,997
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78
<AVERAGE-NET-ASSETS> 10,381
<PER-SHARE-NAV-BEGIN> 20.00
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> (0.15)
<PER-SHARE-DIVIDEND> (0.34)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.89
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
