<PAGE>
As filed with the Securities and Exchange Commission on
January 16, 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. 36 ( X )
and/or
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 37 ( 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
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)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date)pursuant to paragraph (a)(1)
(X) 75 days after filing pursuant to paragraph(a)(2) of Rule 485
( ) On () pursuant to paragraph (a)(2) of Rule 485
=================================================================
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of its units of beneficial interest under the
Securities Act of 1933. On January 28, 1997, Registrant filed a Rule 24f-2
Notice for its fiscal year ended November 30, 1996. Registrant continues its
election to register an indefinite number of units of beneficial interest
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
This Post-Effective Amendment No.36 has been filed by The Benchmark Funds, a
Delaware business 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, 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.
<PAGE>
THE BENCHMARK FUNDS
Fixed Income and Equity Portfolios
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
Part A Caption
- ------ -------
<S> <C>
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 Units; Other
and History 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 Units
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S>
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 Units
Other Securities
19. Purchase, Redemption and Description of Units;
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
</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
---------------
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 Units; Other
and History 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 Units
<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 Units
Other Securities
19. Purchase, Redemption and Description of Units;
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
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
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 a class of units ("units") 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"). Units are
sold and redeemed without any purchase or redemption charge imposed by the
Trust, although Northern and other institutions may charge their customers for
services provided in connection with their investments.
This Prospectus provides information about the Portfolios that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated April 1, 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.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL 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 6
- --------------------
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 19
TRUST INFORMATION 20
- -----------------
Board of Trustees 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Adviser, Transfer Agent
and Custodian 20
Administrator and Distributor 20
INVESTING 20
- ---------
Purchase of Units 20
Redemption of Units 23
Distributions 25
Taxes 25
NET ASSET VALUE 26
- ---------------
PERFORMANCE INFORMATION 27
- -----------------------
ORGANIZATION 28
- ------------
MISCELLANEOUS 29
- -------------
</TABLE>
2
<PAGE>
HIGHLIGHTS
DESCRIPTION OF TRUST
The Trust is an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). Each Portfolio consists of a
separate pool of assets with separate investment policies, as described below
under "Investment Information." All of the Portfolios are classified as
diversified companies. Northern serves as investment adviser, transfer agent
and custodian. Goldman Sachs serves as distributor and administrator.
Units of the Portfolios are offered exclusively to institutional investors. See
"Investing--Purchase of Units" and "Investing--Redemption of Units" for
information on how to place purchase and redemption orders.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. The
assets of each Portfolio will be invested in dollar-denominated debt securities
with remaining maturities of thirteen months or less as defined by the
Securities and Exchange Commission (the "SEC"), and each Portfolio's dollar-
weighted average portfolio maturity will not exceed 90 days. All securities
acquired by the Portfolios will be determined by Northern, under guidelines
established by the Trust's Board of Trustees, to present minimal credit risks,
and will be "Eligible Securities" as defined by the SEC. There can be no
assurance that the Portfolios will be able to achieve a stable net asset value
on a continuous basis, or that they will achieve their investment objectives.
Investors should note that one or more of the Portfolios may purchase variable
and floating rate instruments, enter into repurchase agreements, reverse
repurchase agreements and securities loans, acquire U.S. dollar-denominated
instruments of foreign issuers and make limited investments in illiquid
securities and securities issued by other investment companies. These
investment practices involve investment risks of varying degrees. None of the
Portfolios will invest in instruments denominated in a foreign currency.
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the annualized
operating expenses the units 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>
Unitholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases....................... None None None None
Sales Charge Imposed on Rein-
vested Distributions............ None None None None
Deferred Sales Load Imposed on
Redemptions..................... None None None None
Redemption Fees.................. None None None None
Exchange Fees.................... None None None None
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT DIVERSIFIED TAX-
SELECT GOVERNMENT ASSETS EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Annual Operating Expenses After
Expense Reimbursements and Fee
Reductions (as a percentage of
average daily net assets)
Management Fees After Fee 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 units, 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..................... $ $ $ $
Government Portfolio............................ $ $ $ $
Diversified Assets Portfolio.................... $ $ $ $
Tax-Exempt Portfolio............................ $ $ $ $
</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 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 net assets) to .10% of each Portfolio's average
net assets. In addition, Goldman Sachs reimbursed expenses for each Portfolio
to the extent that the sum of a Portfolio's expenses (including the fees
payable to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as adviser and certain other expenses) exceeded on an
annualized basis .10% of each other Portfolio's average daily net assets for
such fiscal year. 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 such period Goldman Sachs
reimbursed "Other Expenses" for each Portfolio (including fees payable to
Goldman Sachs as administrator, but excluding fees payable to Northern for its
duties as adviser and transfer agent and certain extraordinary expenses) which
exceeded on an annualized basis .10% of each Portfolio's assets for such
period. 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, the
total annual operating expenses of the Government Select, Government and Tax-
Exempt Portfolios would have been . %, . % and . %, respectively; and other
expenses of the Government Select, Government and Tax-Exempt Portfolios would
have been . %, . % and . %, respectively. For a more complete description of
the Portfolios' expenses, see "Financial Highlights" and "Trust Information" in
this Prospectus and the financial statements and related notes incorporated by
reference into the Additional Statement.
4
<PAGE>
---------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS UNITHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
UNITHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER "INVESTING--
PURCHASE OF UNITS." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES
AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
5
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following data have been audited by Ernst & Young LLP, independent
auditors, as indicated in their report incorporated by reference into the
Additional Statement from the annual report to unitholders for the fiscal year
ended November 30, 1996, and should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Additional Statement.
For the Years Ended November 30,
Government Select Portfolio
(Units)
<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 PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- --------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- --------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------
Total return (b)(c) 5.31% 5.82% 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net
assets of (d):
Expenses, net of waiv-
ers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before waiv-
ers and reimbursements 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and
reimbursements 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and
reimbursements 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on November 7, 1990.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per share
received from Northern Trust Corporation.
(d) Annualized for periods less than a full year.
6
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Government Portfolio
(Units)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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
INCOME FROM IN-
VESTMENT OPERA-
TIONS:
Net investment
income 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07
- --------------------------------------------------------------------------------------------------------------------------------
Total income
from investment
operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07)
- --------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07)
- --------------------------------------------------------------------------------------------------------------------------------
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)(b) 5.20% 5.64% 3.78% 2.91% 3.91% 6.18% 7.89% 8.63% 6.83%
Ratio to average
net assets of:
Expenses, net
of waivers and
reimbursements 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37% 0.50% 0.54%
Expenses,
before waivers
and
reimbursements 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46% 0.50% 0.55%
Net investment
income, net of
waivers and
reimbursements 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88% 8.63% 6.83%
Net investment
income, before
waivers and re-
imbursements 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79% 8.63% 6.82%
Net assets at
end of year (in
thousands) $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517 $335,301
- --------------------------------------------------------------------------------------------------------------------------------
</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
(Units)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.05 0.06 0.04 0.03 0.04 0.06
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.05 0.06 0.04 0.03 0.04 0.06
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 5.30% 5.78% 3.92% 3.00% 3.80% 6.19%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.34% 0.34% 0.35% 0.34% 0.34% 0.35%
Expenses, be-
fore waivers
and
reimbursements 0.34% 0.34% 0.35% 0.36% 0.35% 0.36%
Net investment income, net of waivers
and reimburse-
ments 5.18% 5.63% 3.74% 3.00% 3.79% 6.18%
Net investment income, before waivers
and reimburse-
ments 5.18% 5.63% 3.74% 2.98% 3.78% 6.17%
Net assets at
end of year (in
thousands) $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.08 0.09 0.07
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.08 0.09 0.07
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.08) (0.09) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.08) (0.09) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 8.01% 8.98% 7.15%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.35% 0.37% 0.39%
Expenses, be-
fore waivers
and
reimbursements 0.36% 0.37% 0.39%
Net investment income, net of waivers
and reimburse-
ments 8.01% 8.98% 7.15%
Net investment income, before waivers
and reimburse-
ments 8.00% 8.98% 7.15%
Net assets at
end of year (in
thousands) $2,192,756 $1,871,713 $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 the net asset value at the end of the
year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per
share received from Northern Trust Corporation.
8
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Tax-Exempt Portfolio
(Units)
<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
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05
- -------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 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) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (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
- -------------------------------------------------------------------------------------------------------------------------------
Total return (a) 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% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48%
Expenses, before
waivers and
reimbursements 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 re-
imbursements 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92%
Net investment income,
before waivers and re-
imbursements 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03% 4.92%
Net assets at end of
year (in thousands) $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the end of the year.
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 unitholders, to the extent consistent with the
preservation of capital and prescribed portfolio standards, with a high level
of income exempt from Federal income tax by investing primarily in municipal
instruments. The investment objective of a Portfolio may not be changed without
the vote of the majority of the outstanding units of the particular Portfolio
(as defined below under "Organization"). Except as expressly noted below,
however, a Portfolio's investment policies may be changed without a vote of
unitholders.
All securities acquired by the Portfolios will be determined by Northern, under
guidelines established by the Board of Trustees, to present minimal credit
risks and will be "Eligible Securities" as defined by the SEC. Eligible
Securities consist of (i) securities that either (a) have short-term debt
ratings at the time of purchase in the two highest rating categories by at
least two unaffiliated nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the security is rated by only one NRSRO), or (b)
are comparable in priority and security with a security issued by an issuer
which has such ratings, and (ii) securities that are unrated (including
securities of issuers that have long-term but not short-term ratings) but are
of comparable quality as determined in accordance with guidelines approved by
the Board of Trustees. Securities which are rated or that have been issued by
an issuer that is rated with respect to a class of short-term debt obligations,
or any security within that class, comparable in priority and quality with such
securities in the highest short-term rating category by at least two NRSROs 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, Federal Farm
Credit Banks Funding Corp. and the Student Loan Marketing Association. The
Portfolio intends to limit investments to only the foregoing exempt U.S.
Government securities. However, under extraordinary
10
<PAGE>
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.
GOVERNMENT PORTFOLIO
The Government Portfolio seeks to achieve its investment objective by investing
exclusively in:
(A) Marketable securities issued or guaranteed as to principal and interest
by the U.S. Government or by any of its agencies or instrumentalities
(including the International Bank for Reconstruction and Development) and
custodial receipts with respect thereto; and
(B) Repurchase agreements relating to the above instruments.
DIVERSIFIED ASSETS PORTFOLIO
In pursuing its investment objective, the Diversified Assets Portfolio may
invest in a broad range of government, bank and commercial obligations that are
available in the money markets. In particular, the Portfolio may invest in:
(A) U.S. dollar-denominated obligations of U.S. banks with total assets in
excess of $1 billion (including obligations of foreign branches of such
banks);
(B) U.S. dollar-denominated obligations of foreign commercial banks where
such banks have total assets in excess of $5 billion;
(C) High quality commercial paper and other obligations issued or
guaranteed by U.S. and foreign corporations and other issuers rated (at the
time of purchase) A-2 or higher by Standard & Poor's Ratings Group ("S&P"),
Prime-2 or higher by Moody's Investors Service, Inc. ("Moody's"), Duff 2 or
higher by Duff & Phelps Credit Rating Co. ("D&P"), F-2 or higher by Fitch
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) 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 units of the Tax-Exempt Portfolio, at
least 80% of the Portfolio's annual gross income will be derived from Municipal
Instruments except under extraordinary circumstances, such as when Northern
believes that market conditions indicate that the Portfolio should adopt a
temporary defensive posture by holding uninvested cash or investing in taxable
short-term securities ("Taxable Investments"). Taxable Investments will consist
exclusively of instruments that may be purchased by the Diversified Assets
Portfolio.
DESCRIPTION OF SECURITIES AND COMMON INVESTMENT TECHNIQUES
BANK OBLIGATIONS. Domestic and foreign bank obligations in which the
Diversified Assets Portfolio may invest include certificates of deposit, bank
and deposit notes, bankers' acceptances and fixed time deposits. Such
obligations may be general obligations of the parent bank or may be limited to
the issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Total assets of a bank are determined on the basis of
the bank's most recent annual financial statements.
FOREIGN OBLIGATIONS. In addition to the obligations of foreign commercial banks
and foreign branches of U.S. banks, the Diversified Assets Portfolio may
acquire commercial obligations issued by Canadian corporations and Canadian
counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Diversified Assets
Portfolio may also invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities. Such obligations may include debt obligations of
supranational entities, including international organizations (such as the
European Coal and Steel Community) designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies.
Obligations of foreign issuers acquired by the Diversified Assets Portfolio may
involve risks that are different than those of obligations of domestic issuers.
These risks include unfavorable political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
12
<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 but will, in any
event, permit a Portfolio to demand payment of the principal of the instrument
at least once every 13 months on not more than thirty days' notice (unless the
instrument is issued or guaranteed by the U.S. Government or an agency or
instrumentality thereof). In the case of the Diversified Assets Portfolio, such
instruments may include variable amount master demand notes that permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. Unrated variable and floating rate
instruments will be determined by Northern to be of comparable quality at the
time of the purchase to rated instruments purchasable by the Portfolios. The
absence of an active secondary market with respect to particular variable and
floating rate instruments could, however, make it difficult for a Portfolio to
dispose of 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. Obligations of the International Bank for
Reconstruction and Development (also known as the World Bank) are supported by
subscribed but unpaid commitments of its member countries. There is no
assurance that these commitments will be undertaken or complied with in the
future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations may therefore be regarded as
illiquid.
13
<PAGE>
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolios (other than the
Government Select Portfolio) may also purchase participations in trusts that
hold U.S. Treasury securities (such as TIGRs and CATS) where the trust
participations evidence ownership in either the future interest payments or the
future principal payments on the U.S. Treasury obligations. These
participations are normally issued at a discount to their "face value," and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Investments by the Government Portfolio in such custodial receipts will not
exceed 35% of the value of that Portfolio's total assets.
REPURCHASE AGREEMENTS. Each Portfolio may, in accordance with its investment
objective, policies and guidelines established by the Trust's Board of
Trustees, agree to purchase portfolio securities from financial institutions
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price ("repurchase agreements"). Although the securities subject to a
repurchase agreement may bear maturities exceeding 13 months, settlement for
the repurchase agreement will never be more than one year after a Portfolio's
acquisition of the securities and normally will be within a shorter period of
time. Securities subject to repurchase agreements are held either by the
Trust's custodian or subcustodian (if any), or in the Federal Reserve/Treasury
Book-Entry System. The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement in an amount
exceeding the repurchase price (including accrued interest). Default by the
seller would, however, expose a Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
REVERSE REPURCHASE AGREEMENTS. The Government Select Portfolio, Government
Portfolio and Diversified Assets Portfolio may enter into reverse repurchase
agreements which involve the sale of money market securities held by a
Portfolio, with an agreement to repurchase the securities at an agreed upon
price (including interest) and date. A Portfolio will use the proceeds of
reverse repurchase agreements to purchase other money market securities either
maturing, or under an agreement to resell, at a date simultaneous with or prior
to the expiration of the reverse repurchase agreement. A Portfolio will utilize
reverse repurchase agreements, which may be viewed as borrowings (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 maintain a
segregated account with the Trust's custodian containing 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.
14
<PAGE>
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 hold and
maintain liquid assets in a segregated account with the Portfolio's custodian
until the settlement date, 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, a Portfolio is required to hold the
portfolio securities themselves in a segregated account with the custodian
while the commitment is outstanding. 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"). In addition, the
Portfolios may invest in securities issued by other investment companies
consistent with their 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. To the extent required by the 1940 Act and the regulations and
orders of the SEC thereunder, the Portfolios currently intend to limit their
investments in securities of other money market funds so that, as determined
immediately after a purchase is made, not more than 3% of the total outstanding
stock of any such fund will be owned by the Portfolios, the Trust as a whole
and their affiliated persons (as defined in the 1940 Act). Each Portfolio will
limit its investments in other investment companies 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; and (iii) not more than 3% of
the outstanding voting stock of any one investment company will be owned by the
Portfolio or the Trust as a whole. Notwithstanding the limitations described
above, 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 in the future. 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,
15
<PAGE>
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.
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.
16
<PAGE>
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. The Tax-Exempt Portfolio did not invest 25% or more of its assets
in any of these categories during the year ended November 30, 1996, except for
industrial development obligations.
So long as other suitable Municipal Instruments are available for investment,
the Tax-Exempt Portfolio does not intend to invest in "private activity bonds"
the interest from which may be treated as an item of tax preference to
unitholders under the Federal alternative minimum tax.
The Diversified Assets Portfolio may also invest up to 5% of its net assets
from time to time in municipal instruments or other securities issued by state
and local governmental bodies when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of other permitted short-term taxable investments.
Dividends paid on such investments will be taxable to unitholders.
ISSUER DIVERSIFICATION. In accordance with current SEC regulations, each
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 (limited to repurchase agreements, certificates of
deposit and bankers' acceptances in the case of the Government Select,
Government and Diversified Assets Portfolios) 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 in Rule 2a-7.
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
17
<PAGE>
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, data 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"). In accordance with the current
position of the staff of the SEC, municipal custodial receipts representing
rights only to either future interest or to future principal payments will be
considered illiquid.
If otherwise consistent with its investment objective and policies, the
Portfolios may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and securities that are not registered under the 1933 Act but can be
sold to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as Northern
determines, under guidelines approved by the Trust's Board of Trustees, that an
adequate trading market exists. This practice could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
MISCELLANEOUS. Although the Portfolios will generally not seek profits through
short-term trading, each Portfolio may dispose of any portfolio security prior
to its maturity if, on the basis of a revised credit evaluation of the issuer
or other considerations, Northern believes such disposition is advisable.
Subsequent to its purchase, a portfolio security may be assigned a lower rating
or cease to be rated. Such an event would not necessarily require the
disposition of the security, if the continued holding of the security is
determined to be in the best interest of the Portfolio and its unitholders.
In determining the creditworthiness of the issuers of portfolio securities that
may be purchased and held by the Portfolios, Northern gathers and reviews
historical financial data and, through the use of a proprietary software
computer program, analyzes and attempts to assess the fundamental strengths and
weaknesses of individual issuers, industries and market sectors. Exposure
limits are established by Northern for each security in conformance with the
objectives and policies stated in this Prospectus, and are thereafter adjusted
periodically in response to changes in relevant credit factors.
18
<PAGE>
The Portfolios do not intend to purchase certificates of deposit of Northern or
its affiliate banks, commercial paper issued by Northern's parent holding
company or other securities issued or guaranteed by Northern, its parent
holding company or their subsidiaries or affiliates.
INVESTMENT RESTRICTIONS
The Portfolios are subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
units of a Portfolio. Each Portfolio will limit its investments so that less
than 25% of the Portfolio's total assets will be invested in the securities 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.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for each Portfolio.
As transfer agent, Northern performs various unitholder servicing functions,
and any unitholder inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of December 31, 1997, Northern Trust
Corporation and its subsidiaries had approximately $ billion in assets,
$ billion in deposits and employed over persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $ billion
of assets as of December 31, 1997, including approximately $ billion of
assets for which Northern and its affiliates had investment management
responsibility. Included in managed assets were approximately $ billion of
money market instruments.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolios and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an annual
rate of .25% of the average daily net assets of each Portfolio.
For serving as investment adviser during the fiscal year ended November 30,
1997, Northern earned fees paid by the Government Portfolio, the Diversified
Assets Portfolio and the Tax-Exempt Portfolio at the rate of
19
<PAGE>
.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.
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
all 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 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
stated under "Highlights--Summary of Expenses," Northern intends to voluntarily
reduce its advisory fee for the Government Select Portfolio during the Trust's
current fiscal year. The result of these reimbursement and fee reductions will
be to increase the yields of the Portfolios during the periods for which the
reimbursements and reductions are made.
INVESTING
PURCHASE OF UNITS
Units are offered to Northern, its affiliates and other institutions and
organizations (the "Institutions") acting on behalf of their customers,
clients, employees and others (the "Customers") and for their own account.
Units of the Portfolios are sold on a continuous basis by the Trust's
distributor, Goldman Sachs, to Institutions that either maintain certain
qualified accounts with Northern or its affiliates or invest an aggregate of at
least $5 million in one or more Portfolios of the Trust. Goldman Sachs has
established procedures for purchasing units in order to accommodate different
types of Institutions.
PURCHASE OF UNITS THROUGH QUALIFIED ACCOUNTS. Any Institution maintaining a
qualified account at Northern or an affiliate may make purchases through such
qualified account either by directing automatic investment of cash balances in
excess of certain agreed upon amounts or by directing investments from time to
time on a non-automatic basis. The nature of an Institution's relationship with
Northern or an affiliate will determine whether the Institution maintains a
qualified 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 qualified accounts with Northern or its affiliates.
PURCHASE OF UNITS DIRECTLY FROM THE TRUST. An Institution that purchases units
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 units of a Portfolio
by mail should mail a check or Federal Reserve draft payable to the
specific Portfolio together with a completed and signed new
20
<PAGE>
account application to The Benchmark Funds, c/o The Northern Trust Company,
P.O. Box 75943, Chicago, Illinois 60675-5943. An application will be
incomplete if it does not include a corporate resolution with the corporate
seal and secretary's certification within the preceding 30 days, or other
acceptable evidence of authority. If an Institution desires to purchase the
units of more than one Portfolio, the Institution should send a separate
check for each Portfolio. All checks must be payable in U.S. dollars and
drawn on a bank located in the United States. A $20 charge will be imposed
if a check does not clear. The proceeds of redemptions of units purchased
by check may be delayed up to 15 days to allow the Trust to determine that
the check has cleared and been paid. Cash and third party checks are not
acceptable for the purchase of Trust units.
PURCHASE BY TELEPHONE. An Institution desiring to purchase units of a
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to identify
the name of the Portfolio with respect to which units are to be purchased
and the manner of payment. Please indicate whether a new account is being
established or an additional payment is being made to an existing account.
If an additional payment is being made to an existing account, please
provide the Institution's name and Portfolio Account Number. Purchase
orders are effected upon receipt by the Transfer Agent of Federal funds or
other immediately available funds in accordance with the terms set forth
below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase units
of a Portfolio by wire or ACH Transfer should call the Transfer Agent at 1-
800-637-1380 for instructions if it is not making an additional payment to
an existing account. An Institution that wishes to add to an existing
account should wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Unitholder's Name)
For other information concerning requirements for the purchase of units,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. A purchase order for Portfolio units 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 a qualified 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. Units of a Portfolio are entitled to the
dividends declared by the Portfolio beginning on the Business Day the purchase
order is executed.
21
<PAGE>
MISCELLANEOUS PURCHASE INFORMATION. Units are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more 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 units through them. Depending on the terms governing the particular
account, Institutions may impose account charges such as asset allocation fees,
account maintenance fees, compensating balance requirements or other charges
based upon account transactions, assets or income, which will have the effect
of reducing the net return on an investment in a Portfolio. The exercise of
voting rights and the delivery to Customers of unitholder communications from
the Trust will be governed by the Customers' account agreements with the
Institutions. Customers should read this Prospectus in connection with any
relevant agreement describing the services provided by an Institution and any
related requirements and charges, or contact the Institution at which the
Customer maintains its account for further information.
Institutions that purchase units on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
Federal funds on a timely basis. An Institution will be responsible for all
losses and expenses of a Portfolio as a result of a check that does not clear,
an ACH transfer that is rejected, or any other failure to make payment in the
time and manner described above, and Northern may redeem units from an account
it maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. In those cases in which an
Institution pays for units by check, Federal funds will generally become
available two Business Days after a purchase order is received. Federal
regulations require that the Transfer Agent be furnished with a taxpayer
identification number upon opening or reopening an account. Purchase orders
without such a number or an indication that a number has been applied for will
not be accepted. If a number has been applied for, the number must be provided
and certified within sixty days of the date of the order.
Payment for units 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 units of
the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such institutions may be
required to register as dealers pursuant to state law.
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 units 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 units held by such customers. Such compensation will
not represent an additional expense to the Trust or its unitholders, since it
will be paid from assets of Northern or its affiliates.
22
<PAGE>
REDEMPTION OF UNITS
Institutions may redeem units of a Portfolio through procedures established by
Northern and its affiliates in connection with the requirements of their
qualified accounts or through procedures set forth herein with respect to
Institutions that invest directly.
REDEMPTION OF UNITS THROUGH QUALIFIED ACCOUNTS. Institutions may redeem units
in their qualified accounts at Northern or its affiliates. For Institutions
that participate in an automatic investment service described above under
"Purchase of Units," Northern or its affiliates will calculate on each Business
Day the number of units that need to be redeemed in order to bring the
Institution's account up to any agreed upon minimum amount. Redemption requests
on behalf of 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 qualified 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 a "qualified account" as well as the
procedures available for redemptions. Institutions should contact Northern or
an affiliate for further information in this regard.
REDEMPTION OF UNITS DIRECTLY. Institutions that purchase units directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
units in accordance with the procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem units by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of units or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem units by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, unitholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, units can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange units by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the unitholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent
23
<PAGE>
telephone transactions. The proceeds of redemption orders received by
telephone will be sent by check, by wire or by transfer pursuant to proper
instruments. All checks will be made payable to the unitholder of record
and mailed only to the unitholder's address of record. See "Other
Requirements." Additionally, the Transfer Agent utilizes recorded lines for
telephone transactions and retains such tape recordings for six months, and
will request a form of identification if such identification has been
furnished to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification within the preceding 30 days), (ii) a signature
guarantee by a financial institution that is a participant in the Stock
Transfer Agency Medallion Program ("STAMP") in accordance with rules
promulgated by the SEC (a signature notarized by a notary public is not
acceptable) or (iii) such other means or evidence of authority as may be
acceptable to the Transfer Agent. A redemption request by mail will not be
effective unless signed by a person authorized by the corporate resolution
or other acceptable evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
units of a Portfolio having a value of at least $1,000 for units of certain
other portfolios of the Trust as to which the Institution or Customer maintains
an existing account with an identical title.
Exchanges will be effected by a redemption of units of the portfolio held and
the purchase of units of the portfolio acquired. Customers of Institutions
should contact their Institutions for further information regarding the Trust's
exchange privilege and Institutions should contact the Transfer Agent as
appropriate. Customers and Institutions exercising the exchange privilege
should read the relevant Prospectus prior to making an exchange. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to unitholders of record and to reject any
exchange request. Exchanges are only available in states where an exchange can
legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
units are effected at the net asset value per unit next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or units); and the signature of a duly
authorized person (except for telephone and wire redemptions). See "Investing--
Redemption of Units--Other Requirements." Exchange orders are effected at the
net asset value per unit next determined after receipt in good order by the
Transfer Agent. Payment for redeemed units for which a redemption order is
received by Northern with respect to a qualified 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 unitholder or, if selected, the unitholder's qualified
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 units may not be effected if a unitholder has failed to submit a completed
24
<PAGE>
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 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 units purchased by check may be delayed up to 15
days to allow the Trust to determine that the check has cleared and been paid.
The Trust reserves the right to defer crediting, sending or wiring redemption
proceeds for up to seven days after receiving 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 units are earned through and
including the day prior to the day on which they are redeemed.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his units to the
extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Unitholders of each Portfolio are entitled to dividends and distributions
arising from the net income and capital gains, if any, earned on investments
held by the particular Portfolio. Dividends from each Portfolio's net income
are declared daily as a dividend to unitholders 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 (including dividends with respect to
units redeemed at any time during the month) will be paid as soon as
practicable following the end of the month. All distributions are paid by each
Portfolio in cash or are automatically reinvested (without any sales charge) in
additional units of the same Portfolio. Arrangements may be made for the
crediting of such distributions to a unitholder's account with Northern, its
affiliates or its correspondent banks.
TAXES
Management of the Trust intends that each Portfolio will qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best interest of
the Portfolio's unitholders. Such qualification generally relieves each
Portfolio of liability for Federal income taxes to the extent its earnings are
distributed in accordance with the Code, but unitholders, unless otherwise
exempt, will pay income 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.
25
<PAGE>
The Tax-Exempt Portfolio intends to pay substantially all of its dividends as
"exempt-interest dividends." Investors in the Portfolio should note, however,
that taxpayers are required to report the receipt of tax-exempt interest and
"exempt-interest dividends" on their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
taxable to persons subject to alternative minimum and environmental taxes.
First, tax-exempt interest and "exempt-interest dividends" derived from certain
private activity bonds issued after August 7, 1986 generally will constitute an
item of tax preference for corporate and noncorporate taxpayers in determining
alternative minimum and environmental tax liability. Second, all tax-exempt
interest and "exempt-interest dividends" must be taken into account by
corporate taxpayers in determining certain adjustments for alternative minimum
and environmental tax purposes. Unitholders who are recipients of Social
Security Act or Railroad Retirement Act benefits should note that tax-exempt
interest and "exempt-interest dividends" will be taken into account in
determining the taxability of their benefit payments. To the extent, if any,
that dividends paid by the Tax-Exempt Portfolio to its unitholders are derived
from taxable interest or from capital gains, such dividends will be subject to
Federal income tax, whether received in cash or reinvested in additional units.
The Tax-Exempt Portfolio will determine annually the percentages of its net
investment income which is exempt from the regular Federal income tax, which
constitutes an item of tax preference for purposes of the Federal alternative
minimum tax, and which is fully taxable and will apply such percentages
uniformly to all distributions declared from net investment income during that
year. These percentages may differ significantly from the actual percentages
for any particular day.
The Trust will send written notices to unitholders annually regarding the tax
status of distributions made by each Portfolio. Dividends declared in October,
November or December of any year payable to unitholders of record on a
specified date in those months will be deemed for Federal tax purposes to have
been paid by a Portfolio and to have been received by the unitholders on
December 31 of that year, if the dividends are actually paid during the
following January.
The foregoing discussion is only a brief summary of some of the important tax
considerations generally affecting the Portfolios and their unitholders and is
not intended as a substitute for careful tax planning. Accordingly, investors
should consult their tax advisers with specific reference to their own Federal,
state and local tax situation. In particular, although the Government Select
Portfolio intends to invest primarily in U.S. Government securities the
interest on which is generally exempt from state income taxation, an investor
should consult his or her own tax adviser to determine whether distributions
from the Portfolio are exempt from state income taxation in the investor's own
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.
NET ASSET VALUE
The net asset value per unit of each Portfolio for purposes of purchases and
redemptions is calculated by Northern as of 3:00 p.m., Chicago time,
immediately after the declaration of net income earned by unitholders of
record, on each Business Day (as defined below under "Miscellaneous"), except
for days during which no
26
<PAGE>
units are tendered to the Portfolio for redemption and no orders to purchase
or sell units are received by the Portfolio and except for days on which there
is an insufficient degree of trading in the Portfolio's securities for changes
in the value of such securities to materially affect the net asset value per
unit. Net asset value per unit of each Portfolio is calculated by adding the
value of all securities and other assets belonging to the Portfolio that are
allocated to such class, subtracting the liabilities charged to that class and
dividing by the number of units of the Portfolio outstanding.
In seeking to maintain a net asset value of $1.00 per unit with respect to
each Portfolio for purposes of purchases and redemptions, the Trust values the
portfolio securities held by a Portfolio pursuant to the amortized cost
method. Under this method, investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period of maturity. See "Amortized Cost
Valuation" in the Additional Statement. There can be no assurance that a
Portfolio will be able at all times to maintain a net asset value per unit 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.
27
<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 offers eighteen separate
series of units of beneficial interest representing interests in eighteen
investment portfolios, four of which are described in this prospectus; the
other series of units 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 units into additional series or
subseries within a series. Pursuant to such authority, the Board of Trustees
has classified three subseries of units in each Portfolio, the units, Service
units and Premium units. This Prospectus relates only to units of the
Portfolios described herein.
Each unit of a Portfolio is without par value, represents an equal
proportionate interest in that Portfolio with each other unit 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. Units of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except amounts payable under the Trust's
Servicing Plan. Because of these class-specific expenses, the performance of a
Portfolio's Service units is expected to be higher than the performance of the
Portfolio's Premium units, and the performance of the Portfolio's units and
Service units is expected to be higher than the performance of the Portfolio's
Premium units. The Trust offers various services in connection with the Service
and Premium units in the Portfolios, including an automatic investment plan.
For further information regarding the Trust's service and Premium units,
contact 1-800-621-2550.
The Trust's unitholders are entitled at the discretion of the Board of Trustees
to vote either on the basis of the number of units held or the aggregate net
asset value represented by such units. Each series entitled to vote on a matter
will vote thereon in the aggregate and not by series, except as otherwise
required by law or when the matter to be voted on affects only the interests of
unitholders of a particular series. The Additional Statement gives examples of
situations in which the law requires voting by series. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
units of the Trust may elect all of the Trustees irrespective of the vote of
the other unitholders. In addition, holders of units, Service units and Premium
units representing interests in the same Portfolio have equal voting rights
except that only units of a particular class within the Portfolio will be
entitled to vote on matters submitted to a vote of unitholders (if any)
relating to class-specific expenses that are payable by that class of units.
As of , Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding units of the Trust.
The Trust does not presently intend to hold annual meetings of unitholders
except as required by the 1940 Act or other applicable law. Pursuant to the
Trust Agreement, the Trustees will promptly call a meeting of unitholders to
vote upon the removal of any Trustee when so requested in writing by the record
holders of 10% or more of the outstanding units. To the extent required by law,
the Trust will assist in unitholder communications in connection with such a
meeting.
28
<PAGE>
The Trust Agreement provides that each unitholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is 1-800-621-2550.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, 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. Notice of purchase, redemption or exchange orders to be executed
on Good Friday, or any other day Northern is open for business and the Exchange
is closed must be received by the Transfer Agent no later than 11:00 a.m.
Chicago time on the prior Business Day if the amount of the order is in excess
of $1,000,000. On those days when Northern or the Exchange closes early as a
result of unusual weather or other circumstances, the right is reserved to
advance the time on that day by which purchase, redemption and exchange
requests must be received. In addition, on any Business Day when the Public
Securities Association (PSA) recommends that the securities markets close
early, the Portfolios reserve the right to cease or to advance the deadline for
accepting purchase, redemption and exchange orders for same Business Day credit
up to one hour before the PSA recommended closing time. Purchase, redemption
and exchange requests received after the advanced closing time will be effected
on the next Business Day.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
29
<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 units of the Government Select,
Government, Diversified Assets and Tax-Exempt 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.
------------------
<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 Advisers,
Transfer Agent and Custodian B-19
Administrator and Distributor B-24
Counsel and Auditors B-27
In-Kind Purchases B-27
PERFORMANCE INFORMATION B-28
AMORTIZED COST VALUATION B-29
DESCRIPTION OF UNITS B-31
ADDITIONAL INFORMATION CONCERNING TAXES B-34
General B-34
Special Tax Considerations
Pertaining to the
Tax-Exempt Portfolio B-35
Foreign Investors B-36
Conclusion B-37
OTHER INFORMATION B-37
FINANCIAL STATEMENTS B-39
APPENDIX A (Description of Securities Ratings) 1-A
</TABLE>
----------------
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering made by the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust or its distributor. The Prospectus does not constitute
an offering by the Trust or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. THERE CAN BE NO ASSURANCE THAT ANY
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
[Consider changes required by amendments to Rule 2a-7.]
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 will be 13 months or less. Asset-backed
securities acquired by the Portfolio may include collateralized mortgage
obligations ("CMOs") issued by private companies.
U.S. Government Obligations
Examples of the types of U.S. Government obligations that may be acquired by the
Portfolios include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, and the Maritime Administration.
Custodial Receipts for Treasury Securities
The Portfolios (other than the Government Select Portfolio) may acquire U.S.
Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel
B-4
<PAGE>
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 continuously monitor their financial status and ability to meet
payment on demand. Where necessary to ensure that a variable or floating rate
instrument is of "high quality," the issuer's obligation to pay the principal of
the instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. The Portfolios will invest in variable and
floating rate instruments only when Northern deems the investment to involve
minimal credit risk. In determining weighted average
B-5
<PAGE>
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
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 restrictions as the Portfolio. However, each
Portfolio currently intends to limit its investments in securities issued by
other investment companies to the extent described in the Prospectus. A
Portfolio may adhere to more restrictive limitations with respect to its
investments in securities issued by other investment companies if required by
the SEC or deemed to be in the best interests of the Trust, and will comply with
any fundamental investment restriction than may otherwise be applicable to such
investments.
Unaffiliated money market funds whose securities are purchased by the
Portfolios are not 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.
To the extent required by the 1940 Act, each Portfolio expects to vote the
shares of other investment companies that are held by it in the same proportion
as the vote of all other holders of such securities.
Repurchase Agreements
Each Portfolio may enter into repurchase agreements with financial institutions,
such as banks and broker-dealers, as are deemed creditworthy by Northern under
guidelines approved by the Trust's Board of Trustees. The repurchase price
under the repurchase agreements will generally equal the price paid by a
Portfolio plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the Trust's custodian (or subcustodian), in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. Repurchase
agreements are considered to be loans by a Portfolio under the 1940 Act.
Reverse Repurchase Agreements
Each Portfolio (except the Tax-Exempt Portfolio) may borrow funds for temporary
or emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing
B-6
<PAGE>
to repurchase them at a mutually specified date and price ("reverse repurchase
agreements"). Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Portfolio may decline below the repurchase
price. The Portfolios will pay interest on amounts obtained pursuant to a
reverse repurchase agreement. While reverse repurchase agreements are
outstanding, a Portfolio will maintain in a segregated account liquid assets in
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. Reverse repurchase agreements are considered
to be borrowings by a Portfolio under the 1940 Act.
Securities Lending
Collateral for loans of portfolio securities made by a Portfolio may consist of
cash, securities issued or guaranteed by the U.S. Government or its agencies or
irrevocable bank letters of credit (or any combination thereof). The borrower
of securities will be required to maintain the market value of the collateral at
not less than the market value of the loaned securities, and such value will be
monitored on a daily basis. When a Portfolio lends its securities, it continues
to receive interest on the securities loaned and may simultaneously earn
interest on the investment of the cash collateral which will be invested in
readily marketable, high-quality, short-term obligations. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans will be called so that the securities may be voted by a
Portfolio if a material event affecting the investment is to occur.
Forward Commitments and When-Issued Securities
Each Portfolio may purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the Portfolio to purchase or
sell securities at a future date. The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are normally negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis only with the intention of completing
the transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a Portfolio may dispose
of or negotiate a commitment after entering into it. A Portfolio also may sell
securities it has committed to purchase before those securities are delivered to
the Portfolio on the settlement date. The Portfolio may realize a capital gain
or loss in connection with these transactions. For purposes of determining a
Portfolio's average dollar-weighted maturity, the maturity of when-issued or
forward commitment securities will be calculated from the commitment date.
B-7
<PAGE>
When a Portfolio purchases securities on a when-issued or forward commitment
basis, the Portfolio's custodian (or subcustodian) will maintain in a segregated
account liquid assets having a value (determined daily) at least equal to the
amount of the Portfolio's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the custodian or subcustodian will hold
the portfolio securities themselves in a segregated account while the commitment
is outstanding. These procedures are designed to ensure that the Portfolio will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
Yields and Ratings
The yields on certain obligations, including the money market instruments in
which the Portfolios invest (such as commercial paper and bank obligations), are
dependent on a variety of factors, including general money market conditions,
conditions in the particular market for the obligation, financial condition of
the issuer, size of the offering, maturity of the obligation and ratings of the
issue. The ratings of S&P, Moody's, D&P, Fitch and TBW represent their
respective opinions as to the quality of the obligations they undertake to rate.
Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
Municipal Instruments
Opinions relating to the validity of Municipal Instruments and to the exemption
of interest thereon from regular Federal income tax are rendered by bond counsel
to the respective issuing authorities at the time of issuance. Neither the
Trust nor Northern will review the proceedings relating to the issuance of
Municipal Instruments or the bases for such opinions.
An issuer's obligations under its Municipal Instruments are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Instruments may be
materially adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the purpose
of restricting or eliminating the Federal income tax exemption for interest on
Municipal Instruments. For example, under the Tax Reform Act of 1986 interest
on certain private activity bonds must be included in an investor's Federal
alternative minimum taxable income, and corporate investors must include all
tax-exempt interest
B-8
<PAGE>
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 Portfolio's total assets calculated immediately
after each standby commitment is acquired.
The Portfolio intends to enter into standby commitments only with dealers, banks
and broker-dealers which, in Northern's opinion, present minimal credit risks.
The Portfolio will acquire standby commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a standby commitment will not affect the valuation
or assumed maturity of the underlying Municipal Instrument. The actual standby
commitment will be valued at zero in determining net asset value. Accordingly,
where the Portfolio pays directly or indirectly for a standby commitment, its
cost will be reflected as an unrealized loss for the period during which the
commitment is held by the Portfolio and will be reflected in realized gain or
loss when the commitment is exercised or expires.
B-9
<PAGE>
Investment Restrictions
Each Portfolio is subject to the fundamental investment restrictions enumerated
below which may be changed with respect to a particular Portfolio only by a vote
of the holders of a majority of such Portfolio's outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements for the Diversified Assets, Government and
Government Select Portfolios) except to secure permitted borrowings.
(3) Purchase or sell real estate or securities issued by real estate
investment trusts, but this restriction shall not prevent a Portfolio from
investing directly or indirectly in portfolio instruments secured by real
estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs.
(5) Invest in companies for the purpose of exercising control or
management.
(6) Act as underwriter of securities (except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies), purchase
securities on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance
of transactions), make short sales of securities or maintain a short
position, or write puts, calls or combinations thereof.
(7) The Portfolio may not 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.
B-10
<PAGE>
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
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.
B-11
<PAGE>
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 (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 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.
B-12
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers
Information pertaining to the Trustees and officers of the Trust is set forth
below.
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
<S> <C> <C>
William H. Springer, 68 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications holding
Lake Forest, IL 60045 Trustee company), from February 1987 to
retirement in August 1992; Vice
Chairman, Chief Financial and
Administrative Officer of
Ameritech prior to 1987;
Director, Walgreen Co. (a retail
drug store business); Director
of Baker, Fentress & Co. (a
closed-end, non-diversified
management investment company)
from April 1992 to present;
Trustee, Goldman Sachs Trust
from 1989 to present.
Richard Gordon Cline, 62 Trustee Chairman, Hawthorne Investors,
4200 Commerce Court Inc. (a management advisory
Suite 300 services and private
Lisle, IL 60532 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,
Sears Tower, Suite 9650 Ltd. (a financial advisor)
233 S. Wacker Dr. since July 1993; Vice President
Chicago, IL 60606 and Treasurer of Sears, Roebuck
and Co. (a retail corporation)
from February 1989 to July 1993;
within the last five years he
has served as a Director of:
Sears Roebuck Acceptance
</TABLE>
B-13
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
<S> <C> <C>
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 Pres-
50-H New England Avenue ident and Chief Investment
P.O. Box 640 Officer of The Ford Foundation
Summit, NJ 07902-0640 (a charitable trust) from 1981
until 1993; Trustee: The China
Fund, Inc.; 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
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
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
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
70 West Madison St Partners, Inc. (a privately
Suite 1400 held management services firm)
Chicago, IL 60602 since 1990; President 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 1997);
4900 Sears Tower President Vice President and General Manager,
Chicago, IL 60606 First Data Corporation - Investors
Series Group prior thereto.
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).
John W. Mosior, 58 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of Shareholder Servicing
Chicago, IL 60606 of GSAM (since November 1989).
Scott M. Gilman, 37 Treasurer Director, Mutual Fund Admin-
One New York Plaza istration, GSAM (since April
New York, NY 10004 1994); Assistant Treasurer of
Goldman Sachs Funds Management,
</TABLE>
B-15
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
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
Anderson, LLP (prior thereto).
Michael J. Richman, 36 Secretary Associate General Counsel,
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 (September 1991 to June
1992).
Howard B. Surloff, 32 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 (since November 1993 and May
1994, respectively); Counsel to
the Funds Group, GSAM (since
November 1993); Associate of
Shereff, Friedman, Hoffman &
Goodman, LLP (prior thereto).
Valerie A. Zondorak, 32 Assistant Vice President, Goldman Sachs
85 Broad Street Secretary (since March 1997); Counsel to
New York, NY 10004 the Funds Group, GSAM (since
March 1997); Associate, Shereff,
Friedman, Hoffman & Goodman, LLP
(prior thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (since June
New York, NY 10004 1993); Funds Compliance Officer,
Citibank Global Asset Management
(August 1991 to June 1993).
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.
B-16
<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
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 Unitholders 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 Unitholders, 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 Unitholder 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-17
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1996:
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation from
Aggregate Accrued as Registrant and
Compensation Part of Fund Complex Paid
Name of Trustee from the Registrant Trust's Expenses to Trustees
- --------------- ------------------- ---------------- -----------------
<S> <C> <C> <C>
William H. Springer $45,000 $0 $45,000
Richard G. Cline ***
Edward J. Condon, Jr. $32,500 $0 $32,500
John W. English $31,000 $0 $31,000
James J. Gavin* $35,500 $0 $35,500
Sandra Polk Guthman ***
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $0 $40,500
</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-18
<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 $[ ] billion in assets under management for clients
including public and private retirement funds, endowments, foundations, trusts,
corporations, and individuals. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for each Portfolio and placing purchase and sale orders for
the portfolio transactions of the Portfolios. In connection with portfolio
transactions for the Portfolios, which are generally done at a net price without
a broker's commission, Northern's Advisory Agreement provides that Northern
shall attempt to obtain the best net price and execution. In assessing the best
overall terms available for any transaction, Northern is to consider all factors
it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available and in selecting the broker or dealer to execute a particular
transaction, Northern may consider the brokerage and research services provided
to the Portfolios and/or other accounts over which Northern or an affiliate of
Northern exercises investment discretion. These brokerage and research services
may include industry and company analyses, portfolio services, quantitative
data, market information systems and economic and political consulting and
analytical services.
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
B-19
<PAGE>
concession paid by the issuer to the underwriter, and purchases from dealers
include the spread between the dealer's cost for a given security and the resale
price of the security.
Northern's investment advisory duties for the Trust are carried out through its
Trust Department. On occasions when Northern deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by it (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Agreement provides
that Northern, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for such Portfolio with those
to be sold or purchased for such other accounts in order to obtain best net
price and execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
Northern in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Portfolio and other accounts involved. In some
instances, this procedure may adversely affect the size of the position
obtainable for a Portfolio or the amount of the securities that are able to be
sold for a Portfolio. To the extent that the execution and price available from
more than one broker or dealer are believed to be comparable, the Agreement
permits Northern, at its discretion but subject to applicable law, to select the
executing broker or dealer on the basis of Northern's opinion of the reliability
and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services to
others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, Northern has undertaken to
(1) answer customer inquiries regarding the current yield of, and certain other
matters (e.g. account status 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 units of the Portfolios, and the disbursement of the proceeds of
redemptions, (3) establish and maintain separate omnibus accounts with respect
to unitholders investing through Northern or any of its affiliates and
correspondent banks and act as transfer agent and perform sub-accounting
services with respect to each such account, (4) provide periodic statements
showing account balances, (5) mail reports and proxy materials to unitholders,
(6) provide information in connection with the preparation by the Trust of
various regulatory reports and prepare reports to the Trustees and management,
(7) answer inquiries (including requests for prospectuses and Additional
Statements, and assistance in the completion of new account applications) from
investors and respond
B-20
<PAGE>
to all requests for information regarding the Trust (such as current price,
recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions), (8) respond
to and seek to resolve all complaints of investors with respect to the Trust or
their accounts, (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors,
(10) furnish the Trust all pertinent Blue Sky information, (11) perform all
required tax withholding, (12) preserve records, and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more sub-
transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer Agency
Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate equal to
$18 for each subaccount relating to units of the Trust. This fee is subject to
annual upward adjustments based on increases in the Consumer Price Index for All
Urban Consumers, provided that Northern may permanently or temporarily waive all
or any portion of any upward adjustment. Northern's affiliates and correspondent
banks may receive compensation for performing the services described in the
preceding paragraph that Northern would otherwise receive. Conflict-of-interest
restrictions under state and Federal law (including the Employee Retirement
Income Security Act of 1974) may apply to the receipt by such affiliates or
correspondent banks of such compensation in connection with the investment of
fiduciary funds in Portfolio units.
Under its Custodian Agreement with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's securities
held by Northern under the Agreement, and (6) maintains the accounting records
of the Trust. Northern may employ one or more subcustodians, provided that
Northern shall have no more responsibility or liability to the Trust on account
of any action or omission of any subcustodian so employed than such subcustodian
has to Northern and that the responsibility or liability of the subcustodian to
Northern shall conform to the resolution of the Trustees of the Trust
authorizing the appointment of the particular subcustodian. Northern may also
appoint agents to carry out such of the provisions of the Custodian Agreement as
Northern may from time to time direct, provided that the appointment of an agent
shall not relieve Northern of any of its responsibilities under the Agreement.
As compensation for the services rendered to the Trust by Northern as custodian,
and the assumption by Northern of certain related expenses, Northern is entitled
to payment from the Trust as follows: (i) $18,000 annually for each Portfolio,
plus (ii) 1/100th of 1% annually of each Portfolio's average daily net assets to
the extent they exceed $100 million, plus (iii) a fixed dollar fee for each
B-21
<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.
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 units of such Portfolio (as defined below under
"Other Information"). Each agreement is terminable at any time without penalty
by the Trust (by specified Trustee or unitholder action) on 60 days' written
notice to Northern and by Northern on 60 days' written notice to the Trust.
For the fiscal periods ended November 30, as indicated, the amount of the
Advisory Fee (after fee waivers) incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 772,113 $ 569,065
Government Portfolio 2,617,746 1,938,878
Diversified Assets Portfolio 7,832,358 7,080,710
Tax-Exempt Portfolio 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 to the Government Select Portfolio
in the amounts of $1,157,788, $853,605 and $622,131. Northern waived additional
advisory fees with respect to the Government Portfolio for the period from June
1, 1994 through July 31, 1994 in the amount of $69,721.
For the fiscal 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 $ 22,274 $ 25,000
Government Portfolio 31,048 32,000
Diversified Assets Portfolio 64,579 110,000
Tax-Exempt Portfolio 14,883 32,000
</TABLE>
B-22
<PAGE>
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>
Government Select Portfolio $ 96,787 $ 75,122
Government Portfolio 131,957 101,086
Diversified Assets Portfolio 360,387 317,635
Tax-Exempt Portfolio 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 arrangements with Northern and change its method of operations.
It is not anticipated, however, that any change in the Trust's method of
operations would affect the net asset value per unit of any Portfolio or result
in a financial loss to any unitholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Northern is active as an underwriter of municipal instruments. Under the 1940
Act the Portfolios are precluded, subject to certain exceptions, from purchasing
in the primary market those municipal instruments with respect to which Northern
is serving as a principal underwriter. In the opinion of Northern, this
limitation will not significantly affect the ability of the Portfolios to pursue
their respective investment objectives.
B-23
<PAGE>
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. and
Swiss Bank,] 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:
[Bear Stearns & Co., with an approximate aggregate market value of $270,101,000,
Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate aggregate
market value of $200,000,000, J.P. Morgan Securities, Inc., with an approximate
aggregate market value of $131,063,000, Merrill Lynch & Co., Inc., with an
approximate aggregate market value of $50,000,000 and Swiss Bank, with an
approximate aggregate market value of $10,001,000.]
During the fiscal year ended November 30, 1997, the Government Portfolio
acquired and sold securities of [Bear Stearns & Co., J.P. Morgan Securities,
Inc., Nomura Securities and UBS Securities,] each a regular broker/dealer. At
November 30, 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: [Bear Stearns & Co., with an approximate aggregate
market value of $140,000,000, J.P. Morgan Securities, Inc., with an approximate
aggregate market value of $8,704,000, Nomura Securities, with an approximate
aggregate market value of $200,000,000 and UBS Securities, with an approximate
aggregate market value of $50,000,000.]
Administrator and Distributor
Under its Administration Agreement with the Trust, Goldman Sachs, subject to the
general supervision of the Trust's Board of Trustees, acts as the Trust's
Administrator. In this capacity, Goldman Sachs (1) provides supervision of all
aspects of the Trust's non-investment advisory operations (the parties giving
due recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
B-24
<PAGE>
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to unitholders,
periodic updating of the Prospectus issued by the Trust, and reports filed with
the SEC and other regulatory authorities (including qualification under state
securities or Blue Sky laws of the Trust's units), and (4) provides the Trust,
to the extent not provided pursuant to such agreements, with adequate office
space and equipment and certain related services in Chicago.
For the fiscal periods ended November 30, as indicated, Goldman Sachs received
fees under the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $ 897,049 $ 751,804
Government Portfolio 1,036,172 895,112
Diversified Assets Portfolio 2,079,083 1,928,672
Tax-Exempt Portfolio 885,446 828,163
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Government Select Portfolio $364,826 $346,936
Government Portfolio 305,696 369,546
Diversified Assets Portfolio 0 0
Tax-Exempt Portfolio 382,218 389,481
</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
unitholders. 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 the fees payable to Northern for its duties as investment adviser or
transfer agent, servicing fees and extraordinary expenses) which exceed on an
annualized basis .10% of each Portfolio's average net assets. Prior to May 1,
1997,
B-25
<PAGE>
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, 1996, 1995 and 1994, there were no reductions
in the administration fee.
Unless sooner terminated the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 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 units of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
penalty by the Trust (upon specified Trustee or unitholder action) on 60 days'
written notice to Goldman Sachs and by Goldman Sachs on 60 days' written notice
to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman Sachs,
as agent, sells shares of each Portfolio on a continuous basis. Goldman Sachs
pays the cost of printing and distributing prospectuses to persons who are not
unitholders of Trust shares (excluding preparation and typesetting expenses) and
of all other sales presentations, mailings, advertising and other distribution
efforts. No compensation is payable by the Trust to Goldman Sachs for such
distribution services.
The Administration Agreement and the Distribution Agreement provide that Goldman
Sachs may render similar services to others so long as its services under such
Agreements are not impaired thereby. The Administration Agreement provides that
the Trust will indemnify Goldman Sachs against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Administration Agreement and Distribution Agreement) or, in lieu thereof,
contribute to resulting losses.
B-26
<PAGE>
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 units of a Portfolio may, in the discretion of Northern, be made in
the form of securities that are permissible investments for the Portfolio as
described in the Prospectus. For further information about this form of payment,
contact Northern. In connection with an in-kind securities payment, a Portfolio
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Portfolio and that
the Portfolio receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Portfolio; and that adequate information be
provided concerning the basis and other tax matters relating to the securities.
B-27
<PAGE>
PERFORMANCE INFORMATION
From time to time the Trust may advertise quotations of "yields" and "effective
yields" with respect to each Portfolio's units, and "tax-equivalent yields" with
respect to units of the Government Select Portfolio and Tax-Exempt Portfolio
computed in accordance with a standardized method, based upon the seven-day
period ended on the date of calculation. In arriving at such quotations as to
"yield," the Trust first determines the net change during the period in the
value of a hypothetical pre-existing account having a balance of one unit at the
beginning of the period (such net change being inclusive of the value of any
additional units issued in connection with distributions of net investment
income as well as net investment income accrued on both the original unit and
any such additional units, but exclusive of realized gains and losses from the
sale of securities and unrealized appreciation and depreciation), then divides
such net change by the value of the account at the beginning of the period to
obtain the base period return, and then multiplies the base period return by
365/7.
The "effective yield" with respect to the units of a Portfolio is computed by
adding 1 to the base period return (calculated as above), raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result.
"Tax-equivalent yield" is computed by dividing the tax-exempt portion of the
yield by 1 minus a stated income tax rate, and then adding the product to the
taxable portion of the yield, if any. There may be more than one tax-equivalent
yield, if more than one stated income tax rate is used.
Quotations of yield, effective yield and tax-equivalent yield provided by the
Trust are carried to at least the nearest hundredth of one percent. Any fees
imposed by Northern, its affiliates or correspondent banks on their customers in
connection with investments in units of the Portfolios are not reflected in the
calculation of yields for the Portfolios.
The annualized yield of each Portfolio with respect to units for the seven-day
period ended November 30, 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>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations. See "Additional Trust Information - Administrator and
Distributor" and "-- Investment
B-28
<PAGE>
Adviser, Transfer Agent and Custodian." In the absence of such fee reductions
and expense limitations, the annualized yield of each Portfolio with respect to
units for the same seven-day period would have been as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Government Select
Portfolio 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 yield fluctuates, unlike bank deposits or other investments
which pay a fixed yield for a stated period of time. The annualization of one
week's income is not necessarily 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.
AMORTIZED COST VALUATION
As stated in the Prospectus, each Portfolio seeks to maintain a net asset value
of $1.00 per unit and, in this connection, values its instruments on the basis
of amortized cost pursuant to Rule 2a-7 under the 1940 Act. This method values
a security at its cost on 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.
B-29
<PAGE>
Under Rule 2a-7, the Trust's Board of Trustees, in supervising the Trust's
operations and delegating special responsibilities involving portfolio
management to Northern, has established procedures that are intended, taking
into account current market conditions and the Portfolios' investment
objectives, to stabilize the net asset value of each Portfolio, as computed for
the purposes of purchases and redemptions, at $1.00 per unit. The Trustees'
procedures include periodic monitoring of the difference (the "Market Value
Difference") between the amortized cost value per unit and the net asset value
per unit based upon available indications of market value. Available indications
of market value used by the Trust consist of actual market quotations or
appropriate substitutes which reflect current market conditions and include (a)
quotations or estimates of market value for individual portfolio instruments
and/or (b) values for individual portfolio instruments derived from market
quotations relating to varying maturities of a class of money market
instruments. In the event the Market Value Difference of a given Portfolio
exceeds certain limits or Northern believes that the Market Value Difference may
result in material dilution or other unfair results to investors or existing
unitholders, the Trust will take action in accordance with the 1940 Act and the
Trustees will take such steps as they consider appropriate (e.g., selling
portfolio instruments to shorten average portfolio maturity or to realize
capital gains or losses, reducing or suspending unitholder income accruals,
redeeming units in kind, or utilizing a net asset value per unit based upon
available indications of market value which under such circumstances would vary
from $1.00) to eliminate or reduce to the extent reasonably practicable any
material dilution or other unfair results to investors or existing unitholders
which might arise from Market Value Differences. In particular, if losses were
sustained by a Portfolio, the number of outstanding units might be reduced in
order to maintain a net asset value per unit of $1.00. Such reduction would be
effected by having each unitholder proportionately contribute to the Portfolio's
capital the necessary units to restore such net asset value per unit. Each
unitholder will be deemed to have agreed to such contribution in these
circumstances by investing in the Portfolio.
Rule 2a-7 requires that each Portfolio limit its investments to instruments
which Northern determines (pursuant to guidelines established by the Board of
Trustees) to present minimal credit risks and which are "Eligible Securities" as
defined by the SEC and described in the Prospectus. The Rule also requires that
each Portfolio maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its policy of maintaining a stable net asset value
per unit and precludes the purchase of any instrument deemed under the Rule to
have a remaining maturity of more than 13 months. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Rule requires a Portfolio to invest its available cash in
such a manner as to reduce such maturity to the prescribed limit as soon as
reasonably practicable.
B-30
<PAGE>
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional units of beneficial interest of one or more
separate series representing interests in different investment portfolios. The
Trustees may hereafter create series in addition to the Trust's existing
eighteen series which represent interests in the eighteen respective Portfolios.
The Prospectus and this Additional Statement relate only to the units of the
Government Select, Government, Diversified Assets and Tax-Exempt Portfolios. For
information on the other class of units in the Portfolios and on the Trust's
other investment portfolios call Goldman Sachs at the toll-free number on page
1.
The Trust Agreement further permits the Board of Trustees to classify or
reclassify any unissued Units into additional series or subseries within a
series. Pursuant to such authority, the Trustees have authorized the issuance of
an unlimited number of units of beneficial interest in three separate subseries
(sometimes referred to as "classes") of units in each of the Portfolios: Units,
Service Units and Premium Units. Under the terms of the Trust Agreement, each
unit of each Portfolio is without par value, represents an equal proportionate
interest in the particular Portfolio with each other unit of its class in the
same Portfolio and is entitled to such dividends and distributions out of the
income belonging to the Portfolio as are declared by the Trustees. Upon any
liquidation of a Portfolio, unitholders of each class of a Portfolio are
entitled to share pro rata in the net assets belonging to that class available
for distribution. Units do not have any preemptive or conversion rights. The
right of redemption is described under "Investing-Redemption of Units" in the
Prospectus and under "Amortized Cost Valuation" in this Additional Statement. In
addition, pursuant to the terms of the 1940 Act, the right of a unitholder to
redeem units and the date of payment by a Portfolio may be suspended for more
than seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the unitholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its units upon the occurrence of any of the foregoing conditions. In
addition, units of each Portfolio are redeemable at the unilateral option of the
Trust if the Trustees determine in their sole discretion that failure to so
redeem may have material adverse consequences to the unitholders of the
Portfolio. Units when issued as described in the Prospectus are validly issued,
fully paid and nonassessable, except as stated below.
The proceeds received by each Portfolio for each issue or sale of its units, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will
B-31
<PAGE>
be specifically allocated to and constitute the underlying assets of that
Portfolio. The underlying assets of each Portfolio will be segregated on the
books of account, and will be charged with the liabilities in respect to that
Portfolio and with a share of the general liabilities of the Trust. Expenses
with respect to the Portfolios are normally allocated in proportion to the net
asset value of the respective Portfolios except where allocations of direct
expenses can otherwise be fairly made.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding units of each Portfolio
affected by the matter. A Portfolio is affected by a matter unless it is clear
that the interests of each Portfolio in the matter are substantially identical
or that the matter does not affect any interest of the Portfolio. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
Portfolio only if approved by a majority of the outstanding units of such
Portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Trustees may be effectively acted upon by
unitholders of the Trust voting together in the aggregate without regard to a
particular Portfolio. In addition, unitholders of each of the classes in a
particular investment portfolio have equal voting rights except that only units
of a particular class of an investment portfolio will be entitled to vote on
matters submitted to a vote of unitholders (if any) relating to unitholder
servicing expenses and transfer agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder voting
only for the election or removal of one or more Trustees, if a meeting is called
for that purpose, and for certain other designated matters. Each Trustee serves
until the next meeting of unitholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the unitholders or two-thirds of the Trustees.
Under the Delaware Business Trust Act (the "Delaware Act"), Unitholders are not
personally liable for obligations of the Trust. The Delaware Act entitles a
Unitholder 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 Unitholder liability exists in many
other states. As a result, to the extent that the Trust or a Unitholder is
subject to the jurisdiction of courts in such other states, those courts may not
apply Delaware law and may subject the Unitholders to liability. To offset this
risk, the Trust Agreements (i) contains an express disclaimer of Unitholder
liability for acts or obligations of the Trust and requires that notice of such
B-32
<PAGE>
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 Unitholder held
personally liable for the obligations of the Trust solely by reason of being or
having been a Unitholder and not because of the Unitholder's acts or omissions
or for some other reason. Thus, the risk of a Unitholder incurring financial
loss beyond his or her investment because of Unitholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the 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 Unitholder and that a Trustee will not be liable for
any act as a Trustee. However, nothing in the Trust Agreements protect 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.
Units are held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks who have invested in the
Portfolios. As of December 30, 1997, the trustees and officers of the Trust as a
group owned less than 1% of the outstanding units of beneficial interest of each
Portfolio. Northern has advised the Trust that the following persons (whose
mailing address is: c/o The Northern Trust Company, 50 South LaSalle, Chicago,
IL 60675) beneficially owned five percent or more of the outstanding units of
the Portfolios as of December 30, 1997:
B-33
<PAGE>
<TABLE>
<CAPTION>
Percentage
of
Number of Outstanding
Units Units
----- -----
<S> <C> <C>
GOVERNMENT SELECT PORTFOLIO
Midway National Bank 79,149,010 6.07%
Arcadia Trust, N.A. 75,537,254 5.80%
TAX-EXEMPT PORTFOLIO
Lor, Inc. Pooled Investment
Partnership 36,592,940 5.74%
</TABLE>
ADDITIONAL INFORMATION CONCERNING TAXES
General
Each Portfolio is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to qualify as a
regulated investment company. By following this policy, each Portfolio expects
to eliminate or reduce to a nominal amount the Federal income taxes to which it
may be subject. If for any taxable year a Portfolio does not qualify for the
special Federal tax treatment afforded regulated investment companies, all of
the Portfolio's taxable income would be subject to tax at regular corporate
rates without any deduction for distributions to unitholders. In such event, the
Portfolio's distributions (including amounts derived from interest on Municipal
Instruments in the case of the Tax-Exempt Portfolio) would be taxable as
ordinary income for Federal income tax purposes to the Portfolio's unitholders,
to the extent of its current and accumulated earnings and profits, and would be
eligible for the dividends received deduction in the case of corporate
unitholders.
In order to qualify as a regulated investment company for a taxable year under
the Code, each Portfolio must comply with certain requirements. First, each
Portfolio must distribute to its unitholders an amount equal to at least the sum
of 90% of its investment company taxable income and 90% of its net tax-exempt
interest income (if any) (the "Distribution Requirement"). At least 90% of the
gross income of each Portfolio must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to the Portfolio's business of investing in such
stock, securities or currencies (the "Income Requirement"). 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
B-34
<PAGE>
may be invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which such Portfolio controls and which are engaged in the same or
similar trades or businesses.
Each Portfolio will designate any distribution of the excess of net long-term
capital gain over net short-term capital loss as a capital gain dividend in a
written notice mailed to unitholders within 60 days after the close of the
Portfolio's taxable year.
Ordinary income of individuals (including short-term capital gains) is taxable
at a maximum marginal rate of 39.6%, but because of limitations on itemized
deductions otherwise allowable and the phase-out of personal exemptions, the
maximum effective marginal rate of tax for some taxpayers may be higher. 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 no
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 unitholder
(i) who has provided either an incorrect tax identification number or no number
at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend income
properly, or (iii) who has failed to certify to the Trust, when required to do
so, that he or she is not subject to backup withholding or that he or she is an
"exempt recipient."
Special Tax Considerations Pertaining to the Tax-Exempt Portfolio
As described above and in the Prospectus, the Tax-Exempt Portfolio is designed
to provide investors with current tax-exempt interest income. The Portfolio is
not intended to constitute a balanced investment program and is not designed for
investors seeking capital appreciation or maximum tax-exempt income irrespective
of fluctuations in principal. Units of the Portfolio would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R.10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt and, therefore, would
not gain any additional benefit from the Portfolio's dividends being tax-exempt.
In addition, the Portfolio may not be an appropriate investment for
B-35
<PAGE>
persons or entities that are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt person which
regularly uses a part of such facilities in its trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or which occupies more than 5% of the usable area of such facilities
or for which such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, partnerships and its partners and an S
corporation and its shareholders.
In order for the Tax-Exempt Portfolio to pay Federal exempt-interest dividends
with respect to any taxable year, at the close of each taxable quarter at least
50% of the aggregate value of the Portfolio must consist of tax-exempt
obligations. An exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by the Portfolio and designated as an exempt-
interest dividend in a written notice mailed to unitholders not later than 60
days after the close of the Portfolio's taxable year. However, the aggregate
amount of dividends so designated by the Portfolio cannot exceed the excess of
the amount of interest exempt from tax under Section 103 of the Code received by
the Portfolio during the taxable year over any amounts disallowed as deductions
under Sections 265 and 171(a)(2) of the Code. The percentage of total dividends
paid by the Portfolio with respect to any taxable year which qualifies as
Federal exempt-interest dividends will be the same for all unitholders receiving
dividends from the Portfolio with respect to such year.
Interest on indebtedness incurred by a unitholder to purchase or carry Portfolio
units generally is not deductible for Federal income tax purposes if the
Portfolio's distributions are not subject to Federal income tax.
Foreign Investors
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of units or in respect of capital gain dividends, provided such
unitholder submits a statement, signed under penalties of perjury, attesting to
such unitholder's exempt status. Different tax consequences apply to a foreign
unitholder engaged in a U.S. trade or business. Foreign unitholders should
consult their tax advisers regarding the U.S. and foreign tax consequences of
investing in the Trust.
B-36
<PAGE>
Conclusion
The foregoing discussion is based on tax laws and regulations which are in
effect on the date of this Additional Statement. Such laws and regulations may
be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolios or their
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the Securities
Act of 1933 with respect to the securities offered by the Trust's Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Additional Statement pursuant to the rules and regulations
of the SEC. The Registration Statement including the exhibits filed therewith
may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees and expenses payable to Northern and
Goldman Sachs, brokerage fees and commissions, any portfolio losses, fees for
the registration or qualification of Portfolio units under Federal or state
securities laws, expenses of the organization of the 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, expenses of preparing and
printing prospectuses, statements of additional information, proxy materials,
reports and notices and the printing and distributing of the same to the Trust's
unitholders and regulatory authorities, compensation and expenses of its
Trustees, expenses for industry organizations such as the Investment Company
Institute, miscellaneous expenses and extraordinary expenses incurred by the
Trust.
The term "majority of the outstanding units" of either the Trust or a particular
Portfolio means, with respect to the approval of an investment advisory
agreement or a change in a fundamental investment restriction, the vote of the
lesser of (i) 67% or more of the units of the Trust or such Portfolio present at
a meeting, if the holders of more than 50% or the outstanding units of the Trust
or such Portfolio are present or represented by proxy, or (ii) more than 50% of
the outstanding units of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as to the
contents of any contract or other documents referred to are not necessarily
complete, and in each instance
B-37
<PAGE>
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-38
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the annual report to unitholders for the
fiscal year ended November 30, 1997 (the "Annual Report") will be filed by
amendment.
B-39
<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 in its opinion an extremely strong
capacity to pay interest and repay principal. Bonds rated AA by S&P are judged
by it to have a very strong capacity to pay interest and repay principal, and
differ from AAA issues only in small degree. The AA rating may be modified by
an addition of a plus (+) or minus (-) sign to show relative standing within the
major rating category. S&P may attach the rating "r" to highlight derivative,
hybrid and certain other obligations that S&P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
The two highest ratings of D&P for tax-exempt and corporate fixed-income
securities are AAA and AA. Securities rated AAA are of the highest credit
quality. The risk factors are considered to be negligible, being only slightly
more than for risk-free U.S. Treasury debt. Securities rated AA are of high
credit quality. 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.
1-A
<PAGE>
The two highest ratings of Fitch for tax-exempt and corporate bonds are AAA and
AA. AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor is judged to have an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. AA bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+. Plus (+) and minus (-) signs are used with the AA rating symbol to
indicate relative standing within the rating category.
The two highest ratings of TBW for corporate bonds are AAA and AA. Bonds rated
AAA are of the highest credit quality. The ability of the obligor to repay
principal and interest on a timely basis is considered to be extremely high.
Bonds rated AA indicate a very strong ability on the part of the obligor to
repay principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category. These ratings may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within
the rating categories. TBW does not rate tax-exempt bonds.
Tax-Exempt Note Ratings
Moody's ratings for state and municipal notes and other short-term obligations
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade. MIG-1/VMIG-1
denotes best quality. There is present strong protection by established cash
flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. MIG-2/VMIG-2 denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
S&P describes its SP-1 rating of municipal notes as follows: "Very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus (+)
designation." Municipal notes rated SP-2 are deemed to have satisfactory
capacity to pay principal and interest.
D&P uses the fixed-income ratings described above under "Corporate and Tax-
Exempt Bond Ratings" for tax-exempt notes and other short-term obligations.
Fitch's short-term ratings apply to tax-exempt and corporate debt obligations
that are payable on demand or have original maturities of up to three years,
including commercial paper and municipal and investment notes. The highest
ratings of Fitch for short-term securities are F-1+, F-1 and F-2. F-1+
securities possess exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment. F-1 securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+. F-2 securities
2-A
<PAGE>
possess good credit quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the F-1+ and F-1 ratings.
TBW does not rate tax-exempt notes.
Short-Term Corporate and Tax-Exempt Debt Ratings
Short-term ratings, set forth below (except TBW's), are applied to tax-exempt as
well as taxable debt.
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Issuers rated Prime-1 (or related supporting institutions) in the
opinion of Moody's have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of short-
term promissory obligations.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt considered short-term in the relevant market. The A-1
designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus (+) sign designation. The A-2
designation indicates that capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
The two highest ratings of D&P for commercial paper are D1 and D2. D&P employs
three designations, D1 plus, D1 and D1 minus, within the highest rating
category. D1 plus indicates highest certainty of timely payment. Short-term
liquidity including internal operating factors, and/or ready access to
alternative sources of funds, is judged to be outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations. D1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
strong fundamental protection factors. Risk factors are considered to be minor.
D1 minus indicates high certainty of timely payment. Liquidity factors are
strong and 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
3-A
<PAGE>
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
Fixed
Income and Equity
Portfolios
THE BENCHMARK FUNDS
Investment Advisers:
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Northern Trust Quantitative Advisors, Inc.
One S. LaSalle Street
Chicago, IL 60690
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
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 units of the Trust's other investment
portfolios and in shares of 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.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIOS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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
50 S. LaSalle Street NORTHERN TRUST QUANTITATIVE ADVISORS,
INC.
Chicago, Illinois 60675
One S. LaSalle Street
312-630-6000
Chicago, IL 60690
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"). Units 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 27
- ----------------------
Introduction 27
U.S. Government Securities Portfo-
lio 27
Short-Intermediate Bond Portfolio 27
U.S. Treasury Index Portfolio 28
Bond Portfolio 28
Intermediate Bond Portfolio 29
International Bond Portfolio 29
Balanced Portfolio 30
Global Asset Portfolio 31
Equity Index Portfolio 33
Diversified Growth Portfolio 34
Focused Growth Portfolio 34
Small Company Index Portfolio 34
International Equity Index Portfo-
lio 36
International Growth Portfolio 37
Special Risks and Other Considera-
tions 38
Description of Securities and
Common Investment Techniques 42
Investment Restrictions 54
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TRUST INFORMATION 55
- -----------------
Board of Trustees 55
Investment Advisers, Transfer Agent
and Custodian 55
Portfolio Managers 57
Administrator and Distributor 59
Unitholder Servicing Plan 59
Service Information 60
INVESTING 61
- ---------
Purchase of Units 61
Redemption of Units 64
Distributions 66
Taxes 67
NET ASSET VALUE 69
- ---------------
PERFORMANCE INFORMATION 70
- -----------------------
ORGANIZATION 71
- ------------
MISCELLANEOUS 72
- -------------
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the unitholder
transaction expenses imposed by the Trust and the annualized operating
expenses the 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 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 units of each Portfolio have been classified
into four separate classes, Class A, B, C and D units. Each class is
distinguished by the level of administrative support and transfer agency
services provided. Class A, B, C and D units represent pro rata interests in a
Portfolio except that different unitholder servicing fees and transfer agency
fees are payable by Class A, B, C and D units in a Portfolio. See "Trust
Information--Unitholder 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
unitholder 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
Units Units Units Units Units Units Units Units
------- ------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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
Units Units Units Units Units Units Units Units
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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 Portfolio(7)
-------------------------------
Class A Class B Class C Class D
Units Units Units Units
------- ------- ------- -------
<S> <C> <C> <C> <C>
Unitholder 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................................... N/A N/A N/A N/A
Ten Years.................................... N/A N/A N/A N/A
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
International Bond Balanced
------------------------------- -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Units Units Units Units Units Units Units Units
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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
Units Units Units Units Units Units Units Units
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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 Operting Expenses
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% .10% .10% .10% .10%
---- ----- ----- ----- ---- ---- ---- -----
Total Other Operating
Expenses(3,4,5)...... .12% .26% .36% .51% .11% .25% .35% .50%
---- ----- ----- ----- ---- ---- ---- -----
Total Operating
Expenses(1,2,3,4,5)... .22% .36% .46% .61% .66% .80% .90% 1.05%
==== ===== ===== ===== ==== ==== ==== =====
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 $33
Five Years............. $12 $20 $26 $34 $37 $44 $50 $58
Ten Years.............. $28 $46 $58 $76 $82 $99 $111 $128
</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
Units Units Units Units Units Units Units Units
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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).... .10% .10% .10% .10% .11% .11% .11% .11%
---- ----- ----- ----- ---- ---- ---- ----
Total Other Operating
Expenses(3,4,5)...... .11% .25% .35% .50% .12% .26% .36% .51%
---- ----- ----- ----- ---- ---- ---- ----
Total Operating
Expenses(1,2,3,4,5)... .91% 1.05% 1.15% 1.30% .32% .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 $11 $12 $13 $15
Three Years............ $29 $33 $37 $41 $18 $22 $25 $30
Five Years............. $50 $58 $63 $71 $25 $33 $39 $47
Ten Years.............. $112 $128 $140 $157 $48 $65 $77 $95
</TABLE>
<TABLE>
<CAPTION>
International Equity Index Portfolio(7) International Growth
------------------------------------------ -------------------------------
Class A Class B Class C Class D Class A Class B Class C Class D
Units Units Units Units Units Units Units Units
--------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder 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............ $22 $24 $25 $26 $34 $38 $41 $46
Five Years............. N/A N/A N/A N/A $58 $66 $71 $79
Ten Years.............. N/A N/A N/A N/A $129 $145 $157 $174
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Global Asset(7)
-------------------------------
Class A Class B Class C Class D
Units Units Units Units
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unitholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases.. None None None None
Additional Transaction
Fee (as a percentage
of 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)..... .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 units of other investment portfolios of the Trust (collectively, the
"Benchmark Portfolios"), including the Trust's money market portfolios offered
under a separate prospectus. The total expense ratios of Class A units of the
equity and fixed income Benchmark Portfolios are set forth above. Based on a
hypothetical mix of Benchmark Portfolio units that the Global Asset Portfolio
may hold under current market conditions, the average-weighted expense ratio
associated with the Portfolio's investment in Class A units 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 average-weighted 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
average-weighted expense ratio. Based on the foregoing, the estimated
cumulative total expense ratio of Class A, B, C and D units 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 to
.25%, .25%, .15%, .25%, .25%, .70%, .50%, .10%, .55%, .80%, .20%, .25% and
.80%, respectively, of the Portfolios' respective average daily net assets
(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 Portfolios to .35% of the Portfolios' 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 Unitholder 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 unitholder administrative support services for
7
<PAGE>
their Customers or other Investors who beneficially own Class B, C and D
units 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 units, respectively. The Trust also allocates transfer agency fees,
which are attributable to the Class A, B, C and D units in a Portfolio,
separately to such units, as reflected in the table. For further information,
see "Investment Adviser, Transfer Agent and Custodian" and "Unitholder
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 net daily assets. In
addition, Goldman Sachs reimbursed expenses for each Portfolio to the
extent that the sum of a Portfolio's expenses (including the fees payable
to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as adviser and certain other expenses) exceeded on
an annualized basis .25% of the International Bond, International Equity
Index and International Growth Portfolio's average daily net assets and
.10% of each other Portfolio's average daily net assets for such fiscal
year. 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, Goldman Sachs reimbursed "Other Operating Expenses"
for each Portfolio (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 units 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--.33%; Short-Intermediate Bond Portfolio--
.27%; U.S. Treasury Index Portfolio--.63%; Bond Portfolio--.23%;
International Bond Portfolio--.67%; Balanced Portfolio--.39%; Equity Index
Portfolio--.19%; Diversified Growth Portfolio--.29%; Focused Growth
Portfolio--.32%; Small Company Index Portfolio--.38%; and International
Growth Portfolio--.42%; and the total annual operating expenses would have
been as follows for Class A, B, C and D units, respectively: U.S.
Government Securities Portfolio--.94%, 1.08%, 1.18% and 1.33%; Short-
Intermediate Bond Portfolio--.88%, 1.02%, 1.12% and 1.27%; U.S. Treasury
Index Portfolio--1.04%, 1.18%, 1.28% and 1.43%; Bond Portfolio--.84%, .98%,
1.08% and 1.23%; International Bond Portfolio--1.58%, 1.72%, 1.82% and
1.97%; Balanced Portfolio--1.20%, 1.34%, 1.44% and 1.59%; Equity Index
Portfolio--.50%, .64%, .74% and .89%; Diversified Growth Portfolio--1.10%,
1.24%, 1.34% and 1.49%; Focused Growth Portfolio--1.43%, 1.57%, 1.67% and
1.82%; Small Company Index Portfolio--.79%, .93%, 1.03% and 1.18%; and
International Growth Portfolio--1.43%, 1.57%, 1.67% and 1.82%, 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 .65% for the Intermediate Bond Portfolio,
.43% for the Global Asset Portfolio and .59% 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 units would be 1.26%, 1.40%, 1.50% and 1.65%; 1.04%,
1.18%, 1.28% and 1.43%; and 1.10%, 1.24%, 1.34% and 1.49%, 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 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 units--
.21%, .35%, .45% and .60%, respectively, and Small Company Index Class A,
B, C and D units-- .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. The expenses noted in the table under
"Other Expenses After Expense Reimbursements and Fee Reductions" have been
restated with respect to Class B and C units of the Small Company Index
Portfolios and Class B units of the Equity Index Portfolio to reflect what
such expenses would have been had such classes of units of those Portfolios
been outstanding for the entire fiscal year ended November 30, 1997.
(6) To prevent the Small Company Index Portfolio and International Equity Index
Portfolio from being adversely affected by the transaction costs associated
with unit purchases, the Portfolios will sell units at a price equal to the
net asset value of the units 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
8
<PAGE>
Portfolio for the benefit of all unitholders. (See "Investment Information--
Small Company Index Portfolio," "Investment Information--International
Equity Index Portfolio," "Investing--Purchase of Units" and "Investing--
Redemption of Units"). 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.
--------------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS UNITHOLDER TRANSACTION AND OPERATING EXPENSES OF EACH PORTFOLIO THAT
UNITHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER
"INVESTING--PURCHASE OF UNITS." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN.
ACTUAL EXPENSES AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
9
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following data with respect to a unit (of the class specified) of the
Intermediate Bond Portfolio outstanding for the period ended November 30, 1997
is unaudited. The remaining data 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 unitholders for the
fiscal year ended November 30, 1996 (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 units of the Short-Intermediate Bond,
Intermediate Bond, U.S. Treasury Index, International Bond, Diversified
Growth, Small Company Index, International Growth and International Equity
Index Portfolios, units of any class of the Global Asset Portfolio, and Class
B units of the Portfolios because no such units were outstanding during the
periods presented. 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>
For the Years Ended November 30,
<TABLE>
<CAPTION>
U.S. Government Securities Portfolio
-------------------------------------------
Class A
-------------------------------------------
1997 1996 1995 1994 1993 (a)
<S> <C> <C> <C> <C> <C>
------ ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PE-
RIOD $ 20.08 $ 19.05 $ 20.07 $ 20.00
Income (loss) from investment
operations:
Net investment income 1.02 1.05 0.91 0.55
Net realized and unrealized gain
(loss) (0.01) 1.02 (1.02) 0.05
------- ------- ------- -------
Total income (loss) from investment
operations 1.01 2.07 (0.11) 0.60
------- ------- ------- -------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (1.02) (1.04) (0.91) (0.53)
------- ------- ------- -------
Total distributions to unitholders (1.02) (1.04) (0.91) (0.53)
------- ------- ------- -------
Net increase (decrease) (0.01) 1.03 (1.02) 0.07
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 20.07 $ 20.08 $ 19.05 $ 20.07
======= ======= ======= =======
Total return (b) 5.15% 11.18% (0.57)% 3.00%
Ratio to average net assets of (c):
Expenses, net of waivers and reim-
bursements 0.36% 0.36% 0.36% 0.43%
Expenses, before waivers and
reimbursements 0.94% 1.09% 1.12% 1.18%
Net investment income, net of
waivers and reimbursements 5.22% 5.43% 4.62% 4.18%
Net investment income, before
waivers and reimbursements 4.64% 4.70% 3.86% 3.43%
Portfolio turnover rate 119.75% 141.14% 45.55% 20.59%
Net assets at end of period (in
thousands) $92,351 $56,329 $25,293 $32,479
======= ======= ======= =======
</TABLE>
(a)Commenced investment operations on April 5, 1993.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(c)Annualized for periods less than a full year.
11
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Securities Portfolio
------------------------------------------------
Class C Class D
--------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 (a) 1997 1996 1995 1994 (b)
------ -------- ------ ------ ------ --------
NET ASSET VALUE, BEGINNING OF PERIOD $20.13 $20.04 $19.05 $19.43
Income (loss) from investment operations:
Net investment income 0.91 0.96 0.96 0.22
Net realized and unrealized gain (loss) (0.12) (0.03) 1.00 (0.38)
-------- ------ ------ --------
Total income (loss) from investment
operations 0.79 0.93 1.96 (0.16)
-------- ------ ------ --------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (0.86) (0.94) (0.97) (0.22)
-------- ------ ------ --------
Total distributions to unitholders (0.86) (0.94) (0.97) (0.22)
-------- ------ ------ --------
Net increase (decrease) (0.07) (0.01) 0.99 (0.38)
-------- ------ ------ --------
NET ASSET VALUE, END OF PERIOD $20.06 $20.03 $20.04 $19.05
======== ====== ====== ========
Total return (c) 4.05% 4.77% 10.66% (0.90)%
Ratio to average net assets of (d):
Expenses, net of waivers and
reimbursements 0.60% 0.75% 0.75% 0.75%
Expenses, before waivers and
reimbursements 1.18% 1.33% 1.48% 1.51%
Net investment income, net of waivers and
reimbursements 4.97% 4.83% 5.08% 4.65%
Net investment income, before waivers and
reimbursements 4.39% 4.25% 4.35% 3.89%
Portfolio turnover rate 119.75% 119.75% 141.14% 45.55%
Net assets at end of period (in thousands) $3,535 $ 225 $ 67 $ 13
======== ====== ====== ========
</TABLE>
(a)Class C units were issued on December 29, 1995.
(b)Class D units were issued on September 15, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d)Annualized for periods less than a full year.
12
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Short-Intermediate Bond Portfolio
-------------------------------------------------------------------------------
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 PERIOD $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.71 $19.53 $19.82
Income (loss) from in-
vestment operations:
Net investment income 1.14 1.02 0.97 0.85 1.07 0.94 0.23
Net realized and
unrealized gain (loss) (0.01) 1.19 (0.80) 0.31 (0.02) 1.18 (0.29)
-------- -------- ------- -------- ------ ------ ------
Total income (loss) from
investment operations 1.13 2.21 0.17 1.16 1.05 2.12 (0.06)
-------- -------- ------- -------- ------ ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
Net realized gain -- -- -- -- -- -- --
-------- -------- ------- -------- ------ ------ ------
Total distributions to
unitholders (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
-------- -------- ------- -------- ------ ------ ------
Net increase (decrease) (0.03) 1.20 (0.80) 0.33 (0.05) 1.18 (0.29)
-------- -------- ------- -------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.66 $20.71 $19.53
======== ======== ======= ======== ====== ====== ======
Total return (c) 5.68% 11.58% 0.84% 5.90% 5.22% 11.09% (0.30)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.88% 0.91% 0.95% 1.00% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and
reimbursements 5.83% 5.14% 4.84% 4.79% 4.96% 4.85% 4.42%
Net investment income,
before waivers and
reimbursements 5.31% 4.59% 4.25% 4.15% 4.44% 4.30% 3.83%
Portfolio turnover rate 47.68% 54.68% 48.67% 19.48% 47.68% 54.68% 48.67%
Net assets at end of pe-
riod (in thousands) $153,675 $158,678 $96,209 $107,550 $ 343 $ 13 $ 1
======== ======== ======= ======== ====== ====== ======
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
13
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
U.S. Treasury Index Portfolio
-----------------------------------------------------------------------------
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 PERIOD $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.19 1.11 1.15 0.95 1.17 1.00 0.09
Net realized and
unrealized gain (loss) (0.18) 2.01 (1.93) 1.02 (0.24) 2.03 (0.03)
------- ------- ------- ------- ------ ------ ------
Total income (loss) from
investment operations 1.01 3.12 (0.78) 1.97 0.93 3.03 0.06
------- ------- ------- ------- ------ ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.19) (1.11) (1.14) (0.92) (1.11) (1.05) (0.09)
Net realized gain -- -- (0.36) -- -- -- --
------- ------- ------- ------- ------ ------ ------
Total distributions to
unitholders (1.19) (1.11) (1.50) (0.92) (1.11) (1.05) (0.09)
------- ------- ------- ------- ------ ------ ------
Net increase (decrease) (0.18) 2.01 (2.28) 1.05 (0.18) 1.98 (0.03)
------- ------- ------- ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.57 $20.75 $18.77
======= ======= ======= ======= ====== ====== ======
Total return (c) 5.10% 16.95% (3.80)% 9.94% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 0.26% 0.26% 0.26% 0.26% 0.65% 0.65% 0.65%
Expenses, before
waivers and
reimbursements 1.04% 0.89% 0.79% 0.83% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and
reimbursements 5.93% 5.09% 5.60% 5.11% 5.57% 5.41% 6.05%
Net investment income,
before waivers and
reimbursements 5.15% 4.46% 5.07% 4.54% 4.79% 4.78% 5.52%
Portfolio turnover rate 42.49% 80.36% 52.80% 77.75% 42.49% 80.36% 52.80%
Net assets at end of
period (in thousands) $26,273 $17,674 $37,305 $71,456 $ 848 $ 286 $ --
======= ======= ======= ======= ====== ====== ======
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
14
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Bond Portfolio
------------------------------------------------
Class A
------------------------------------------------
1997 1996 1995 1994 1993 (a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 20.96 $ 18.29 $ 20.70 $ 20.00
Income (loss) from investment
operations:
Net investment income 1.29 1.17 1.42 1.42
Net realized and unrealized
gain (loss) (0.19) 2.66 (2.21) 0.66
-------- -------- -------- --------
Total income (loss) from
investment operations 1.10 3.83 (0.79) 2.08
-------- -------- -------- --------
DISTRIBUTIONS TO UNITHOLDERS
FROM:
Net investment income (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 (1.29) (1.16) (1.62) (1.38)
-------- -------- -------- --------
Net increase (decrease) (0.19) 2.67 (2.41) 0.70
-------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 20.77 $ 20.96 $ 18.29 $ 20.70
======== ======== ======== ========
Total return (b) 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%
Expenses, before waivers and
reimbursements 0.84% 0.84% 0.87% 0.92%
Net investment income, net
of waivers and
reimbursements 6.39% 5.94% 7.31% 7.84%
Net investment income, be-
fore waivers and
reimbursements 5.91% 5.46% 6.80% 7.28%
Portfolio turnover rate 101.38% 74.19% 103.09% 89.06%
Net assets at end of period
(in thousands) $366,850 $286,301 $257,391 $245,112
======== ======== ======== ========
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(c) Annualized for periods less than a full year.
15
<PAGE>
<TABLE>
<CAPTION>
Bond Portfolio
----------------------------------------------------------
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 PERIOD $ 20.96 $20.21 $ 20.94 $18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.25 0.47 1.22 1.08 0.28
Net realized and
unrealized gain (loss) (0.18) 0.74 (0.18) 2.66 (0.45)
------- ------ ------- ------ ------
Total income (loss) from
investment operations 1.07 1.21 1.04 3.74 (0.17)
------- ------ ------- ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.22) (0.45) (1.19) (1.09) (0.28)
Return of capital (0.03) (0.01) (0.03) -- --
------- ------ ------- ------ ------
Total distributions to
unitholders (1.25) (0.46) (1.22) (1.09) (0.28)
------- ------ ------- ------ ------
Net increase (decrease) (0.18) 0.75 (0.18) 2.65 (0.45)
------- ------ ------- ------ ------
Net asset value, end of
period $ 20.78 $20.96 $ 20.76 $20.94 $18.29
======= ====== ======= ====== ======
Total return (c) 5.33% 6.08% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 0.60% 0.60% 0.75% 0.75% 0.75%
Expenses, before
waivers and
reimbursements 1.08% 1.08% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and
reimbursements 6.09% 5.59% 5.99% 5.48% 6.31%
Net investment income,
before waivers and
reimbursements 5.61% 5.11% 5.51% 5.00% 5.80%
Portfolio turnover rate 101.38% 74.19% 101.38% 74.19% 103.09%
Net assets at end of pe-
riod (in thousands) $ 7,342 $3,704 $ 220 $ 120 $ 15
======= ====== ======= ====== ======
</TABLE>
(a) Class C units were issued on July 3, 1995.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
16
<PAGE>
FINANCIAL HIGHLIGHTS
For the Period Ended November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Intermediate
Bond
Portfolio
------------
Class A
------------
1997 (a)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.00
Income (loss) from investment operations:
Net investment income 0.38
Net realized and unrealized gain (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 increase (0.11)
-------
NET ASSET VALUE, END OF PERIOD $ 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 5.88%
Net investment income, before waivers and reimbursements 3.96%
Portfolio turnover rate 56.99%
Net assets at end of period (in thousands) 11,997
=======
</TABLE>
(a) Commenced investment operations on August 1, 1997.
(b) Assumes investment at net asset value at beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(c) Annualized.
17
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
International Bond Portfolio
----------------------------------------------------------
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 PERIOD $ 21.74 $ 19.93 $ 20.00 $21.74 $22.17
Income (loss) from in-
vestment operations:
Net investment income 1.54 1.26 0.79 1.37 0.02
Net realized and
unrealized gain (loss) 0.43 2.28 0.01 0.51 (0.08)
------- ------- ------- ------ ------
Total income (loss) from
investment operations 1.97 3.54 0.80 1.88 (0.06)
------- ------- ------- ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
(c) (1.55) (1.73) (0.87) (1.48) (0.37)
Net realized gain -- -- -- -- --
------- ------- ------- ------ ------
Total distributions to
unitholders (1.55) (1.73) (0.87) (1.48) (0.37)
------- ------- ------- ------ ------
Net increase (decrease) 0.42 1.81 (0.07) 0.40 (0.43)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD $ 22.16 $ 21.74 $ 19.93 $22.14 $21.74
======= ======= ======= ====== ======
Total return (d) 9.47% 18.20% 4.03% 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% 1.35% 1.35%
Expenses, before waiv-
ers and reimbursements 1.58% 1.47% 1.49% 1.97% 1.86%
Net investment income,
net of waivers and re-
imbursements 5.91% 5.92% 5.93% 5.67% 3.26%
Net investment income,
before waivers and re-
imbursements 5.29% 5.41% 5.40% 5.05% 2.75%
Portfolio turnover rate 33.89% 54.46% 88.65% 33.89% 54.46%
Net assets at end of pe-
riod (in thousands) $34,183 $32,673 $26,947 $ 52 $ 9
======= ======= ======= ====== ======
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 20, 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 period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
18
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Balanced Portfolio
-----------------------------------------------------------------------------
Class A Class C Class D
------------------------------------------- --------------- ---------------
1997 1996 1995 1994 1993 (a) 1997 1996 (b) 1997 1996 (c)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------ ------- ------- ------- ------- ------ ------- ------ -------
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 11.05 $ 9.50 $ 10.22 $ 10.00 $ 11.12 $ 11.34
Income (loss) from in-
vestment operations:
Net investment income 0.34 0.34 0.24 0.09 0.29 0.22
Net realized and
unrealized gain (loss) 1.19 1.55 (0.72) 0.22 1.12 0.96
------- ------- ------- ------- ------- -------
Total income (loss) from
investment operations 1.53 1.89 (0.48) 0.31 1.41 1.18
------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.34) (0.34) (0.22) (0.09) (0.29) (0.29)
Net realized gain -- -- (0.02) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
unitholders (0.34) (0.34) (0.24) (0.09) (0.29) (0.29)
------- ------- ------- ------- ------- -------
Net increase (decrease) 1.19 1.55 (0.72) 0.22 1.12 0.89
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 12.24 $ 11.05 $ 9.50 $ 10.22 $ 12.24 $ 12.23
======= ======= ======= ======= ======= =======
Total return (d) 14.07% 20.22% (4.76)% 3.12% 12.72% 10.55%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.61% 0.61% 0.61% 0.61% 0.85% 1.00%
Expenses, before waiv-
ers and reimbursements 1.20% 1.28% 1.50% 1.62% 1.44% 1.59%
Net investment income,
net of waivers and re-
imbursements 3.03% 3.36% 2.56% 2.20% 2.80% 2.78%
Net investment income,
before waivers and re-
imbursements 2.44% 2.69% 1.68% 1.19% 2.21% 2.19%
Portfolio turnover rate 104.76% 93.39% 75.69% 35.03% 104.76% 104.76%
Average commission rate
per share $0.0718 NA NA NA $0.0718 $0.0718
Net assets at end of pe-
riod (in thousands) $45,157 $38,897 $31,462 $15,928 $ 5,997 $ 232
======= ======= ======= ======= ======= =======
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on February 20, 1996.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
19
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Equity Index Portfolio
-------------------------------------------------------
Class A
----------------------------------------------
1997 1996 1995 1994 1993 (a)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.86 $ 10.60 $ 10.78 $ 10.00
Income (loss) from
investment operations:
Net investment income 0.31 0.30 0.27 0.22
Net realized and
unrealized gain (loss) 3.36 3.47 (0.18) 0.78
-------- -------- -------- --------
Total income from
investment operations 3.67 3.77 0.09 1.00
-------- -------- -------- --------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.31) (0.30) (0.27) (0.22)
Net realized gain (0.43) (0.21) -- --
-------- -------- -------- --------
Total distributions to
unitholders (0.74) (0.51) (0.27) (0.22)
-------- -------- -------- --------
Net increase (decrease) 2.93 3.26 (0.18) 0.78
-------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 16.79 $ 13.86 $ 10.60 $ 10.78
======== ======== ======== ========
Total return (b) 27.53% 36.60% 0.87% 10.08%
Ratio to average net
assets of (c):
Expenses, net of
waivers and
reimbursements 0.22% 0.22% 0.23% 0.21%
Expenses, before
waivers and
reimbursements 0.50% 0.54% 0.59% 0.66%
Net investment income,
net of waivers and
reimbursements 2.12% 2.54% 2.62% 2.62%
Net investment income,
before waivers and
reimbursements 1.84% 2.22% 2.25% 2.17%
Portfolio turnover rate 18.02% 15.27% 71.98% 2.06%
Average commission rate
per share $ 0.0228 NA NA NA
Net assets at end of
period (in thousands) $675,804 $479,763 $281,817 $219,282
======== ======== ======== ========
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. 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.
20
<PAGE>
<TABLE>
<CAPTION>
Equity Index Portfolio
-----------------------------------------------------------
Class C Class D
------------------------- --------------------------------
1997 1996 1995 (a) 1997 1996 1995 1994 (b)
------- ------- -------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.86 $ 13.43 $ 13.83 $10.60 $10.96
Income (loss) from
investment operations:
Net investment income 0.28 0.05 0.27 0.25 0.02
Net realized and
unrealized gain (loss) 3.35 0.45 3.36 3.47 (0.31)
------- ------- ------- ------ ------
Total income (loss)
from investment
operations 3.63 0.50 3.63 3.72 (0.29)
------- ------- ------- ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.27) (0.07) (0.26) (0.28) (0.07)
Net realized gain (0.43) -- (0.43) (0.21) --
------- ------- ------- ------ ------
Total distributions to
unitholders (0.70) (0.07) (0.69) (0.49) (0.07)
------- ------- ------- ------ ------
Net increase (decrease) 2.93 0.43 2.94 3.23 (0.36)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD $ 16.79 $ 13.86 $ 16.77 $13.83 $10.60
======= ======= ======= ====== ======
Total return (c) 27.24% 3.94% 27.20% 36.20% (2.68)%
Ratio to average net
assets of (d):
Expenses, net of
waivers and
reimbursements 0.46% 0.46% 0.61% 0.61% 0.60%
Expenses, before
waivers and
reimbursements 0.74% 0.78% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and
reimbursements 1.89% 2.29% 1.78% 2.07% 2.67%
Net investment income,
before waivers and
reimbursements 1.61% 1.97% 1.50% 1.75% 2.31%
Portfolio turnover rate 18.02% 15.27% 18.02% 15.27% 71.98%
Average commission rate
per share $0.0228 NA $0.0228 NA NA
Net assets at end of
period (in thousands) $53,929 $18,390 $ 8,005 $ 810 $ 3
======= ======= ======= ====== ======
</TABLE>
(a) Class C units were issued on September 28, 1995.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
21
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Diversified Growth Portfolio
----------------------------------------------------------------------------------
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,
BEGINNING OF PERIOD $ 12.20 $ 9.88 $ 10.65 $ 10.00 $ 12.16 $ 9.88 $10.41
Income (loss) from
investment operations:
Net investment income 0.14 0.15 0.09 0.09 0.11 0.11 0.01
Net realized and
unrealized gain (loss) 2.33 2.26 (0.83) 0.65 2.29 2.25 (0.54)
-------- -------- -------- -------- ------- ------ ------
Total income (loss) from
investment operations 2.47 2.41 (0.74) 0.74 2.40 2.36 (0.53)
-------- -------- -------- -------- ------- ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.15) (0.09) (0.01) (0.09) (0.14) (0.08) --
Net realized gain (0.16) -- (0.02) -- (0.16) -- --
-------- -------- -------- -------- ------- ------ ------
Total distributions to
unitholders (0.31) (0.09) (0.03) (0.09) (0.30) (0.08) --
-------- -------- -------- -------- ------- ------ ------
Net increase (decrease) 2.16 2.32 (0.77) 0.65 2.10 2.28 (0.53)
-------- -------- -------- -------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD $ 14.36 $ 12.20 $ 9.88 $ 10.65 $ 14.26 $12.16 $ 9.88
======== ======== ======== ======== ======= ====== ======
Total return (c) 20.83% 24.55% (6.98)% 7.38% 20.39% 24.19% (5.14)%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 0.66% 0.69% 0.67% 0.71% 1.05% 1.08% 1.05%
Expenses, before
waivers and
reimbursements 1.10% 1.12% 1.08% 1.13% 1.49% 1.51% 1.46%
Net investment income,
net of waivers and
reimbursements 0.98% 1.16% 0.77% 1.04% 0.59% 0.73% 0.94%
Net investment income,
before waivers and
reimbursements 0.54% 0.73% 0.35% 0.62% 0.15% 0.30% 0.53%
Portfolio turnover rate 59.99% 81.65% 78.94% 140.88% 59.99% 81.65% 78.94%
Average commission rate
per share $ 0.0655 NA NA NA $0.0655 NA NA
Net assets at end of pe-
riod
(in thousands) $142,055 $146,731 $164,963 $199,053 $ 433 $ 221 $ 40
======== ======== ======== ======== ======= ====== ======
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
22
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Focused Growth Portfolio
-----------------------------------------------------------------------------------------------
Class A Class C Class D
----------------------------------------------- ---------------- --------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 (b) 1997 1996 1995 (c)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------- -------- ------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.53 $ 9.79 $ 10.43 $ 10.00 $ 13.46 $ 12.48 $ 9.55
Income (loss) from
investment operations:
Net investment income
(loss) 0.02 0.05 0.02 0.01 (0.01) (0.03) 0.02
Net realized and
unrealized gain (loss) 2.17 2.71 (0.66) 0.43 1.02 2.15 2.93
-------- ------- ------- ------- ------- ------- ------
Total income (loss) from
investment operations 2.19 2.76 (0.64) 0.44 1.01 2.12 2.95
-------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.02) -- (0.01) -- (0.04) (0.02)
Net realized gain (0.19) -- -- -- -- (0.19) --
-------- ------- ------- ------- ------- ------- ------
Total distributions to
unitholders (0.24) (0.02) -- (0.01) -- (0.23) (0.02)
-------- ------- ------- ------- ------- ------- ------
Net increase (decrease) 1.95 2.74 (0.64) 0.43 1.01 1.89 2.93
-------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD $ 14.48 $ 12.53 $ 9.79 $ 10.43 $ 14.47 $ 14.37 $12.48
======== ======= ======= ======= ======= ======= ======
Total return (d) 17.82% 28.38% (6.15)% 4.33% 7.51% 17.42% 30.97%
Ratio to average net as-
sets of (e):
Expenses, net of waivers
and reimbursements 0.91% 0.91% 0.91% 0.91% 1.15% 1.30% 1.30%
Expenses, before waivers
and reimbursements 1.43% 1.47% 1.55% 1.88% 1.67% 1.82% 1.86%
Net investment income
(loss), net of waivers
and reimbursements 0.12% 0.46% 0.24% 0.14% (0.12)% (0.28)% (0.11)%
Net investment income
(loss), before waivers
and reimbursements (0.40)% (0.10)% (0.39)% (0.83)% (0.64)% (0.80)% (0.67)%
Portfolio turnover rate 116.78% 85.93% 74.28% 27.48% 116.78% 116.78% 85.93%
Average commission rate
per share $ 0.0730 NA NA NA $0.0730 $0.0730 NA
Net assets at end of
period (in thousands) $106,250 $86,099 $57,801 $32,099 $ 6,993 $ 656 $ 489
======== ======= ======= ======= ======= ======= ======
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on June 14, 1996.
(c) Class D units were issued on December 8, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
23
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Small Company Index Portfolio
-------------------------------------------------------------------------
Class A Class D
---------------------------------------------- -------------------------
1997 1996 1995 1994 1993 (a) 1997 1996 1995 (b)
------- -------- ------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 12.98 $ 10.86 $ 11.29 $ 10.00 $ 12.95 $10.51
Income (loss) from in-
vestment operations:
Net investment income 0.19 0.16 0.14 0.11 0.13 0.18
Net realized and
unrealized gain (loss) 1.75 2.67 (0.30) 1.29 1.83 2.96
-------- ------- -------- ------- ------- ------
Total income (loss) from
investment operations 1.94 2.83 (0.16) 1.40 1.96 3.14
-------- ------- -------- ------- ------- ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.14) (0.15) (0.02) (0.11) (0.14) (0.14)
Net realized gain (0.81) (0.56) (0.25) -- (0.81) (0.56)
-------- ------- -------- ------- ------- ------
Total distributions to
unitholders (0.95) (0.71) (0.27) (0.11) (0.95) (0.70)
-------- ------- -------- ------- ------- ------
Net increase (decrease) 0.99 2.12 (0.43) 1.29 1.01 2.44
-------- ------- -------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD $ 13.97 $ 12.98 $ 10.86 $ 11.29 $ 13.96 $12.95
======== ======= ======== ======= ======= ======
Total return (c) 15.96% 27.76% (1.54)% 14.09% 16.20% 31.62%
Ratio to average net as-
sets of (d):
Expenses, net of
waivers and
reimbursements 0.32% 0.32% 0.33% 0.31% 0.71% 0.71%
Expenses, before
waivers and
reimbursements 0.79% 0.81% 0.86% 1.02% 1.18% 1.20%
Net investment income,
net of waivers and
reimbursements 1.36% 1.31% 1.27% 1.25% 1.02% 0.90%
Net investment income,
before waivers and
reimbursements 0.89% 0.82% 0.74% 0.54% 0.55% 0.41%
Portfolio turnover rate 46.26% 38.46% 98.43% 26.31% 46.26% 38.46%
Average commission rate
per share $ 0.0257 NA NA NA $0.0257 NA
Net assets at end of pe-
riod (in thousands) $112,856 $94,899 $ 77,120 $54,763 $ 269 $ 44
======== ======= ======== ======= ======= ======
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on December 8, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
24
<PAGE>
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
International Growth Portfolio
------------------------------------------------------------------------
Class A Class D
-------------------------------------- --------------------------------
1997 1996 1995 1994(a) 1997 1996 1995 1994(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- -------- -------- -------- ------ ------- ------ ------
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 9.88 $ 10.21 $ 10.00 $ 9.83 $10.21 $10.47
Income (loss) from in-
vestment operations:
Net investment income 0.10 0.12 0.05 0.01 0.19 --
Net realized and
unrealized gain (loss) 0.87 (0.36) 0.16 0.92 (0.48) (0.26)
-------- -------- -------- ------- ------ ------
Total income (loss) from
investment operations 0.97 (0.24) 0.21 0.93 (0.29) (0.26)
-------- -------- -------- ------- ------ ------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.22) (0.05) -- (0.22) (0.05) --
Net realized gain -- (0.04) -- -- (0.04) --
-------- -------- -------- ------- ------ ------
Total distributions to
unitholders (0.22) (0.09) -- (0.22) (0.09) --
-------- -------- -------- ------- ------ ------
Net increase (decrease) 0.75 (0.33) 0.21 0.71 (0.38) (0.26)
-------- -------- -------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD $ 10.63 $ 9.88 $ 10.21 $ 10.54 $ 9.83 $10.21
======== ======== ======== ======= ====== ======
Total return (c) 9.96% (2.32)% 2.11% 9.59% (2.78)% (2.56)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 1.06% 1.06% 1.04% 1.45% 1.45% 1.35%
Expenses, before waiv-
ers and reimbursements 1.43% 1.38% 1.47% 1.82% 1.77% 1.78%
Net investment income,
net of waivers and
reimbursements 0.73% 1.22% 0.76% 0.44% 2.01% --
Net investment income,
before waivers and
reimbursements 0.36% 0.90% 0.33% 0.07% 1.69% (0.43)%
Portfolio turnover rate 202.47% 215.31% 77.79% 202.47% 215.31% 77.79%
Average commission rate
per share $ 0.0292 NA NA $0.0292 NA NA
Net assets at end of pe-
riod (in thousands) $138,182 $148,704 $133,212 $ 94 $ 20 --
======== ======== ======== ======= ====== ======
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to these periods.
25
<PAGE>
FINANCIAL HIGHLIGHTS
For the Period Ended November 30, 1997
<TABLE>
<CAPTION>
International
Equity Index
Portfolio
-------------
Class A
-------------
1997 (a)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD
Income (loss) from investment operations:
Net investment income
Net realized and unrealized gain
Total income from investment operations
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income
Total distributions to unitholders
Net increase
NET ASSET VALUE, END OF PERIOD
Total return (b)
Ratio to average net assets of (c):
Expenses, net of waivers and reimbursements
Expenses, before waivers and reimbursements
Net investment income, net of waivers and reimbursements
Net investment income, before waivers and reimbursements
Portfolio turnover rate
Average commission rate per share
Net assets at end of period (in thousands)
</TABLE>
(a) Commenced investment operations on April 1, 1997.
(b) Assumes investment at net asset value at beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at net asset value at the end of the period. Total return
is not annualized for periods less than one year.
(c) Annualized.
26
<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. Units of each
Portfolio have been classified into four classes--Class A units, Class B
units, Class C units and Class D units. 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 units of the particular Portfolio. Except as expressly
noted below, however, each Portfolio's investment policies may be changed
without a vote of unitholders. 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 rated 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
27
<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. NTQA
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, NTQA 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 rated 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
28
<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 rated 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,
29
<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 rated 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 and securities
convertible into common stock ("equity securities"). The Portfolio selects
equity securities based on such factors as growth of sales, return on equity,
30
<PAGE>
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 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 rated 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 valid 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 units of one or more other investment portfolios of the
Trust ("Benchmark Portfolios") which invest in such segments. By investing in
units of the Benchmark Portfolios, the Global Asset Portfolio will 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 so that not more than 3% of the total outstanding
stock of any unaffiliated investment company will be owned by the Portfolio,
the Trust as a whole and their affiliated persons (as defined in 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.
31
<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 Portfoiio
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 unitholders. 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 common and preferred stocks and securities
convertible into common stock ("equity securities"). The Portfolio selects
equity securities based on such factors as growth of sales, return on equity,
growth and consistency of
32
<PAGE>
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 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 rated 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
stocks at a specified price valid 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 also 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.
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 units 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, NTQA 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
33
<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. 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. Under normal
market conditions, the Portfolio will invest directly or indirectly at least
80% of its total assets in
34
<PAGE>
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 units 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, for this Portfolio, NTQA 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 units equal to 0.50% of the dollar amount invested. See
"Investing--Purchase of Units" and "Investing--Redemption of Units" below for
more information.
35
<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 comprised 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, NTQA 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, during the current fiscal year, invest a substantial portion 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. 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, Northern 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 until the Portfolio gains sufficient assets to economically
invest directly in the securities included in the EAFE Index.
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 the
36
<PAGE>
Portfolio's units could also be substantially and adversely affected, and the
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.
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.
The Portfolio requires the payment of an additional transaction fee on the
purchase of units equal to 1.00% of the dollar amount invested. See
"Investing--Purchase of Units" and "Investing--Redemption of Units" 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
37
<PAGE>
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, and the Global
Asset, International Bond, International Equity Index and International Growth
Portfolios will, invest 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 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
38
<PAGE>
at times nationalized or expropriated the assets of private companies. As a
result, the risks described above, including the risks of nationalization or
expropriation of assets, may be 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.
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, efforts by the member countries of the European Union to move toward
monetary union and a single currency have encountered opposition arising from
the conflicting economic, political and cultural interests and traditions of
the member countries and their citizens. 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
39
<PAGE>
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.
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 those 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. NTQA 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
unitholder purchases and redemptions of units 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 NTQA 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
unitholders 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
40
<PAGE>
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 units 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 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. In addition, the servicing fees relating to
the Class B, C, and D units of the Portfolio, when aggregated with any
servicing fees paid by (a) the Portfolio in connection with its investments in
unaffiliated investment companies, and (b) the Benchmark Portfolios in
connection with their investments in exchange-traded funds and money market
funds will not exceed applicable NASD limits.
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. These transactions
may have a material effect on the underlying Benchmark Portfolios, since
Benchmark Portfolios that experience redemptions as a result of reallocations
may have to sell portfolio securities and because Benchmark Portfolios that
receive additional cash will have to invest it. 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
41
<PAGE>
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 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
42
<PAGE>
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. 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. Northern 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 Northern 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)
43
<PAGE>
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 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 create a segregated account of liquid assets in
accordance with applicable requirements of the Securities and Exchange
Commission (the "SEC").
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
44
<PAGE>
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.
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 unitholder redemptions, invest cash balances or dividends or
minimize trading costs. The value of a Portfolio's contracts may equal or
exceed 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.
45
<PAGE>
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 create a segregated
account of liquid assets, in accordance with applicable requirements of the
SEC.
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) possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures contract when desired; (iii) losses due
to unanticipated market movements which are potentially unlimited; and (iv)
Northern's ability to predict correctly the 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 and International Equity Index 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 an amount of liquid assets having an aggregate
net asset value at least equal to such accrued excess will be maintained in a
segregated account by the Portfolio's custodian. 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.
46
<PAGE>
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 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 hold and
maintain liquid assets in a segregated account with the Portfolio's custodian
until the settlement date 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, a Portfolio is required to hold the
portfolio securities themselves in a segregated account with the custodian
while the commitment is outstanding. 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 units 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.
47
<PAGE>
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.
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 maintain a segregated account with the Trust's custodian
containing 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. 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
48
<PAGE>
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 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 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.
With respect to (i) the Global Asset Portfolio's investments in securities
issued by unaffiliated investment companies and (ii) each other Portfolio's
investments in (a) unaffiliated money market funds and (b) other unaffiliated
investment companies issuing shares which, like WEBs, are traded like
traditional equity securities on a national stock exchange or the NASDAQ
National Market System ("Exchange-Traded Funds"), each Portfolio will limit
its investment so that, as determined after a purchase is made, 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). Each Portfolio other than the Global Asset Portfolio will
limit its investments in other investment companies 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 and the Trust as a whole.
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 unitholders; and (c) not invest in other investment
companies structured as "funds of funds." An exemptive order issued by the SEC
permits: (a) the Global Asset Portfolio to hold investments other than those
identified above, including domestic and foreign equity and fixed
49
<PAGE>
income securities and shares of unaffiliated investment companies; and (b) the
Benchmark Portfolios to invest in the securities of Exchange-Traded Funds and
money market funds to the full extent described above.
Notwithstanding the limitations described above, each Portfolio other than the
Global Asset Portfolio is authorized to invest substantially all of its assets
in the future 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 units 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 unit 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
unit 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, 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"), interest rate and currency swaps and stripped mortgage-backed
securities ("SMBS") issued by private issuers.
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 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 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.
50
<PAGE>
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 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.
51
<PAGE>
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 of 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 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
52
<PAGE>
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 unitholder
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.
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
53
<PAGE>
Investment Advisers only as indicators of investment quality. For a more
complete discussion of ratings, see Appendix A to the Additional Statement.
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 Portfolios do not intend to purchase certificates of
deposit of Northern or its affiliate banks, commercial paper issued by
Northern's parent holding company or other securities issued or guaranteed by
Northern, its parent holding company or their subsidiaries or affiliates.
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.
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
units 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
unitholder approval, the International Bond Portfolio may not, at the end of
any tax quarter, invest more than 5% of the total value of its assets in the
54
<PAGE>
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 with offices at One S. LaSalle Street, Chicago, IL 60690, 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 unitholder
inquiries should be directed to it.
Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. 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 $
billion in assets, $ billion in deposits and employed over persons.
Northern and its affiliates administered in various capacities (including as
master trustee, investment manager or custodian) approximately $ billion of
assets as of December 31, 1997, including approximately $ 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
55
<PAGE>
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>
- --------
* 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.
Prior to , 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 Northern or NTQA, as the case
may be, 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" and in
the Additional Statement. Different transfer agency fees are payable with
respect to the Class A, B, C and D units in the Portfolios.
On September 2, 1997, the unitholders of the International Growth Portfolio
approved a new investment advisory agreement which would allow this Portfolio
to implement a "manager of managers" structure and 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 unitholder 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.
56
<PAGE>
PORTFOLIO MANAGERS
The table below sets forth information on the persons primarily responsible for
the day-to-day management of the following 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 Hartline
Global Asset Since 1998 Investment Corp. where his
primary responsibilities
included portfolio
management, investment
research, sales and trading.
Andrew C. Buchner International Equity Index Since 1997 Mr. Buchner joined NTQA in
Investment Officer, 1998 and prior thereto was
NTQA with Northern since 1992.
During the past five years,
Mr. Buchner has managed
equity index funds including
common and collective trust
funds. In addition, Mr.
Buchner served as a credit
analyst at Northern
following both
telecommunication companies
and public utilities prior
thereto.
Robert Bergson Small Company Index Since 1997 Mr. Bergson joined NTQA in
Second Vice President, 1998 and prior thereto was
NTQA with Northern since 1997.
From 1995 to 1997 he was the
director of investment
research at Real Estate
Research Corp. In addition,
Mr. Bergson was a practicing
architect with firms in
Chicago and Cleveland from
1988-1995.
Susan J. French Equity Index Since 1996 Ms. French joined NTQA in
Vice President, 1998, and prior thereto was
NTQA with Northern since 1986.
During the
past five years, Ms. French
has managed short-term
investment funds and equity
index funds including common
and collective trust funds
and a mutual fund for
another investment company.
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY FIVE YEAR
NAME AND TITLE PORTFOLIO RESPONSIBLE EMPLOYMENT HISTORY
- ---------------------- -------------------------- --------------- ------------------
<S> <C> <C> <C>
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.
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.
Richard Steck U.S. Treasury Index Since 1993 Mr. Steck joined NTQA in
Vice President, 1998 and prior thereto was
NTQA with Northern since 1985.
During the past five years,
Mr. Steck has managed
various fixed income
portfolios, including common
and collective trust funds.
He is also
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY FIVE YEAR
NAME AND TITLE PORTFOLIO RESPONSIBLE EMPLOYMENT HISTORY
- ---------------------- ----------------------- --------------- ------------------
<S> <C> <C> <C>
involved in the underlying
analytical systems and
technology of investment
management.
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>
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 all 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, 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
U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury Index,
Bond, Intermediate Bond, International Bond, Balanced, Global Asset, Equity
Index, Diversified Growth, Focused Growth, Small Company Index, International
Equity Index and International Growth 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.
UNITHOLDER SERVICING PLAN
Pursuant to a Unitholder 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 units of each Portfolio. Beneficial owners of Class C and
D units require extensive administrative support services while beneficial
owners of Class B units 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
59
<PAGE>
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
units.
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 units, Class C units and Class D units, respectively, held or
serviced by such Servicing Agents for beneficial unitholders ("Servicing
Fees"). Servicing Agents are required to provide investors with a schedule of
any credits, fees or other conditions that may be applicable to the investment
of their assets in Portfolio units.
Conflict of interest restrictions may apply to the receipt of compensation
paid by the Trust to a Servicing Agent in connection with the investment of
fiduciary funds in Portfolio units. 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 units are designed to be purchased by institutional investors or
others who can obtain information about their unitholder accounts and who do
not require the Transfer Agent or Servicing Agent services that are provided
for Class B, C and D unitholders.
Class B units 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 units 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 units.
Class D units 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 units of
a Portfolio may receive different compensation with respect to one particular
class of units 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 units under Federal or
state securities laws, expenses of the organization of the Portfolio, taxes,
interest, costs of liability insurance, fidelity bonds, indemnification or
contribution, any costs, expenses or losses arising out of any liability of,
or claim for damages or other relief asserted against, the Trust for violation
of any law, legal, tax and auditing fees and expenses, Servicing Fees,
expenses of preparing and
60
<PAGE>
printing prospectuses, statements of additional information, proxy materials,
reports and notices and the printing and distributing of the same to the
Trust's unitholders and regulatory authorities, compensation and expenses of
its Trustees, expenses of industry organizations such as the Investment
Company Institute, miscellaneous expenses and extraordinary expenses incurred
by the Trust.
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.
INVESTING
PURCHASE OF UNITS
Units of the Portfolios are sold on a continuous basis by the Trust's
distributor, Goldman Sachs, to institutional investors that either maintain
certain qualified accounts 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
units in order to accommodate different types of institutional investors.
PURCHASE OF UNITS THROUGH QUALIFIED ACCOUNTS. Class A, B, C and D units of
each Portfolio are offered to Northern, its affiliates and other institutions
and organizations (the "Institutions") acting on behalf of their customers,
clients, employees and others (the "Customers") and for their own account.
Institutions may purchase units of a Portfolio through procedures established
in connection with the requirements of their qualified 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 qualified accounts. There is no minimum initial
investment for Institutions that maintain qualified accounts with Northern or
its affiliates.
PURCHASE OF UNITS DIRECTLY FROM THE TRUST. An Institution that purchases units
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 units of a Portfolio
by mail should mail a check or Federal Reserve draft payable to the
specific Portfolio together with a completed and signed new account
application to The Benchmark Funds, c/o The Northern Trust Company, P.O.
Box 75943, Chicago, Illinois 60675-5943. An application will be incomplete
if it does not include a corporate resolution with the corporate seal and
secretary's certification within the preceding 30 days, or other acceptable
evidence of authority. If an Institution desires to purchase the units of
more than one Portfolio, the Institution should send a separate check for
each Portfolio. All checks must be payable in U.S. dollars and drawn on a
bank located in the United States. A $20 charge will be imposed if a check
does not clear. The Trust may delay transmittal of redemption proceeds for
units recently purchased by check until such time as it has assured itself
that good funds have been collected for the purchase of such units. This
may take up to fifteen (15) days. Cash and third party checks are not
acceptable for the purchase of Trust units.
PURCHASE BY TELEPHONE. An Institution desiring to purchase units of a
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to
61
<PAGE>
identify the name of the Portfolio with respect to which units are to be
purchased and the manner of payment. Please indicate whether a new account
is being established or an additional payment is being made to an existing
account. If an additional payment is being made to an existing account,
please provide the Institution's name and Portfolio Account Number.
Purchase orders are effected upon receipt by the Transfer Agent of Federal
funds or other immediately available funds in accordance with the terms set
forth below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase units
of a Portfolio by wire or ACH Transfer should call the Transfer Agent at 1-
800-637-1380 for instructions if it is not making an additional payment to
an existing account. An Institution that wishes to add to an existing
account should wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Unitholder's Name)
For more information concerning requirements for the purchase of units,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. A purchase order for Portfolio units received by
the Transfer Agent by 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 a qualified 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. Units are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more 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 units 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 Northern. It is not a sales charge. The amount applies to
initial investments in the Portfolios and all 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
62
<PAGE>
associated with new purchases to investors making those purchases, thus
protecting existing unitholders. 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 Northern'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 companies. Without the additional transaction
fee, the Portfolios would generally be selling their units 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 unitholders in the Portfolios. With the
additional transaction fee, the transaction costs of acquiring additional
stocks are not borne by all existing unitholders, but are defrayed by the
transaction fees paid by those investors making additional purchases of units.
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 units through them. Depending on the terms governing the
particular account, Institutions may impose account charges such as asset
allocation fees, account maintenance fees, compensating balance requirements
or other charges based upon account transactions, assets or income which will
have the effect of reducing the net return on an investment in a Portfolio. 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 units 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 units, respectively. See "Trust Information--Unitholder 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 units of Class A, B, C or D. The exercise of voting rights and
the delivery to Customers of unitholder communications from the Trust will be
governed by the Customers' account agreements with the Institutions. Customers
should read this Prospectus in connection with any relevant agreement
describing the services provided by an Institution and any related
requirements and charges, or contact the Institution at which the Customer
maintains its account for further information.
Institutions that purchase units 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 units 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.
63
<PAGE>
Payment for units of a Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing units
of the Portfolios are not issued.
Institutions investing in the Portfolios on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such Institutions may be
required to register as dealers pursuant to state law.
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 units 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 units held by such customers. Such
compensation will not represent an additional expense to the Trust or its
unitholders, since it will be paid from assets of Northern, NTQA or their
affiliates.
REDEMPTION OF UNITS
REDEMPTION OF UNITS THROUGH QUALIFIED ACCOUNTS. Institutions may redeem units
of a class through procedures established by Northern and its affiliates in
connection with the requirements of their qualified accounts. Institutions
should contact Northern or an affiliate for further information regarding
redemptions through qualified accounts.
REDEMPTION OF UNITS DIRECTLY. Institutions that purchase units directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
units in accordance with procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem units by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of units or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem units by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, unitholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, units can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
64
<PAGE>
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange units by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the unitholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instructions.
All checks will be made payable to the unitholder of record and mailed only
to the unitholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape recordings for six months, and will
request a form of identification if such identification has been furnished
to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification within the preceding 30 days), (ii) a signature
guarantee by a financial institution that is a participant in the Stock
Transfer Agency Medallion Program ("STAMP") in accordance with rules
promulgated by the SEC (a signature notarized by a notary public is not
acceptable) or (iii) such other 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 units of a Portfolio having a value of at least $1,000 for
Class A, B, C or D units, 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 units of the
Portfolio held and the purchase of units of the Portfolio acquired. Customers
of Institutions should contact their Institutions for further information
regarding the Trust's exchange privilege and Institutions should contact the
Transfer Agent as appropriate. The Trust reserves the right to modify or
terminate the exchange privilege at any time upon 60 days written notice to
unitholders and to reject any exchange request. Exchanges are only available
in states where an exchange can legally be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
units are effected at the net asset value per unit next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or units); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Units--Other Requirements." Exchange orders
involving the purchase of units of the Small Company Index Portfolio and
International Equity Index Portfolio are effected at the net asset value per
unit 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 Units--Miscellaneous
65
<PAGE>
Purchase Information" above. Exchange orders of the other Portfolios are
effected at the net asset value per unit next determined after receipt in good
order by the Transfer Agent. If received by Northern with respect to a
qualified account it maintains or the Transfer Agent by 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 or the Transfer Agent is directed
otherwise. The ACH system may be utilized for payment of redemption proceeds.
Redemption of units may not be effected if a unitholder has failed to submit a
completed and properly executed (with corporate resolution or other acceptable
evidence of authority) new account application. If units 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 units. 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.
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 units to
the extent necessary to maintain the required minimum balance. The Trust also
reserves the right to redeem units held by any unitholder who provides
incorrect or incomplete account information or when such involuntary
redemptions are necessary to avoid adverse consequences to the Trust and its
unitholders.
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
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INCOME
DIVIDENDS CAPITAL
------------------- GAINS
DECLARED PAID DISTRIBUTION
--------- --------- ------------
<S> <C> <C> <C>
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 units of the same Portfolio at their net asset
value per unit 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
units of another Portfolio at their net asset value per unit (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). Unitholders 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.
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 unitholder's tax basis in his units.
Because of the different servicing fees and transfer agency fees payable with
respect to the Class A, B, C and D units in a Portfolio, the amount of such
Portfolio's net investment income available for distribution to the holders of
such units will be effectively reduced by the amount of such fees. See
"Unitholder 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
unitholders 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,
67
<PAGE>
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 unitholders
who are not currently exempt from Federal income taxes whether they are
received in cash or reinvested in additional units. (Federal income taxes for
distributions to an IRA or other qualified retirement plan are deferred 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 mid-term gains) will be distributed at least annually to its
unitholders. The Portfolios generally will have no tax liability with respect
to such gains and the distributions will be taxable to Portfolio unitholders
who are not currently exempt from Federal income taxes as long-term or mid-
term capital gains, as the case may be, regardless of how long the unitholders
have held the units and whether such gains are received in cash or reinvested
in additional units. Unitholders should note that, upon sale or exchange of
Portfolio units, if the unitholder has not held such units for more than six
months, any loss on the sale or exchange of those units will be treated as
long term capital loss to the extent of the capital gain dividends received
with respect to the units.
Dividends declared in October, November or December of any year payable to
unitholders 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
unitholders on December 31 of such year if such dividends are paid during
January of the following year.
An investor considering buying units 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 unitholder upon the redemption,
transfer or exchange of units 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 unitholders. Should the Portfolios make this election, the
amount of such foreign taxes paid by the Portfolios will be included in their
unitholders' income pro rata (in addition to taxable distributions actually
received by them), and such unitholders 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 unitholders. Accordingly, the
68
<PAGE>
unitholders 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 unitholders. 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.
Unitholders 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 unitholders 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.
NET ASSET VALUE
The net asset value per unit 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. Net asset value per unit 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 units
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 unit 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,
69
<PAGE>
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. Short-term investments are
valued at amortized cost which Northern 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 units 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 units 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 units of a Portfolio.
The Portfolios calculate their total returns for each class of units 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 units 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 units 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 units 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 units 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 units 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 units is computed by dividing
the per unit net income for the class during a 30-day (or one month) period by
the net asset value per unit 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, respectively, if, in accordance with the rules of the SEC,
70
<PAGE>
they are accompanied by average annual total return data reflecting this fee.
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 units in a Portfolio, the performance of
such units will be effectively reduced by the amount of such fees. For
example, because Class A units bear the lowest servicing and transfer agency
fees, the return of Class A units will be more than the return of other
classes of units of the same Portfolio. See "Unitholder Servicing Plan" and
"Investment Adviser, Transfer Agent and Custodian" under the heading "Trust
Information" in this Prospectus.
The performance of each class of units 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 a unitholder's units, when redeemed, 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.
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 offers eighteen
separate series of units of beneficial interest representing interests in
eighteen investment portfolios, fourteen of which are described in this
Prospectus; the other series of units 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 units of beneficial interest in
separate series, without further action by unitholders. Additional series may
be added in the future. The Trustees also have authority to classify or
reclassify any unissued units into additional series or subseries within a
series. Pursuant to such authority, the Board of Trustees has classified four
subseries (sometimes referred to as "Classes") of units in each Portfolio: the
Class A units, Class B units, Class C units and Class D units. Each unit of a
Portfolio is without par value, represents an equal proportionate interest in
that Portfolio with each other unit 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 unitholders are entitled at the discretion of the Board of
Trustees to vote either on the basis of the number of units held or the
aggregate net asset value represented by such units. Each series entitled to
vote on a matter will vote thereon in the aggregate and not by series, except
as otherwise required by law or when the matter to be voted on affects only
the interests of unitholders of a particular series. The Additional Statement
gives examples of situations in which the law requires voting by series.
Voting rights are not cumulative and, accordingly, the persons holding more
than 50% of the aggregate voting power of the Trust may elect all of the
71
<PAGE>
Trustees irrespective of the vote of the other unitholders. In addition,
holders of each of the Class A, B, C and D units representing interests in the
same Portfolio have equal voting rights except that only units of a particular
class within the Portfolio will be entitled to vote on matters submitted to a
vote of unitholders (if any) relating to unitholder servicing expenses and
transfer agency fees that are payable by that class.
As of , Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding units of the Trust.
The Trust does not presently intend to hold annual meetings of unitholders
except as required by the 1940 Act or other applicable law. Pursuant to the
Trust Agreement, the Trustees will promptly call a meeting of unitholders to
vote upon the removal of any Trustee when so requested in writing by the
record holders of 10% or more of the outstanding units. To the extent required
by law, the Trust will assist in unitholder communications in connection with
such a meeting.
The Trust Agreement provides that each unitholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is (800) 621-2550.
As used in this Prospectus, the term "Business Day" refers to each day when
the Investment Advisers and the New York Stock Exchange are open, which is
Monday through Friday, except for holidays observed by Northern and/or the
Exchange. For 1998 the holidays of the Investment Advisers and/or the Exchange
are: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's
Day, Thanksgiving and Christmas Day. On those days when the Investment
Advisers or the Exchange close early as a result of unusual weather or other
circumstances, the right is reserved 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 Public Securities Association (PSA) recommends that
the securities markets close early, the Portfolios reserve the right to cease
or to advance the deadline for accepting purchase, redemption and exchange
orders for same Business Day credit up to one hour before the PSA recommended
closing time. Purchase, redemption and exchange requests received after the
advanced closing time will be effected on the next Business Day.
---------------------
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
72
<PAGE>
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 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.
73
<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
<TABLE>
<CAPTION>
<S> <C>
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-17
ADDITIONAL TRUST INFORMATION B-21
Trustees and Officers B-21
Investment Advisers, Transfer Agent and Custodian B-28
Administrator and Distributor B-36
Unitholder Servicing Plan B-40
Counsel and Auditors B-42
In-Kind Purchases B-42
PERFORMANCE INFORMATION B-43
TAXES B-52
General B-52
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Taxation of Certain Financial Instruments B-54
Foreign Investors B-57
Conclusion B-57
DESCRIPTION OF UNITS B-58
OTHER INFORMATION B-62
FINANCIAL STATEMENTS B-63
APPENDIX A (Description of Bond Ratings) 1-A
APPENDIX B (Futures Contracts) 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.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIOS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Investment Objectives and Policies
The following supplements the investment objectives and policies of the U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
Intermediate Bond and International Bond Portfolios of The Benchmark Funds (the
"Trust") as set forth in the Prospectus.
U.S. Government Obligations. Examples of other types of U.S. Government
obligations that may be acquired by the Portfolios include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, and the Maritime
Administration.
Supranational Bank Obligations. Each Portfolio (other than the U.S. Treasury
Index Portfolio) may invest in obligations of supranational banks.
Supranational banks are international banking institutions designed or supported
by national governments to promote economic reconstruction, development or trade
between nations (e.g., the World Bank). Obligations of supranational banks may
be supported by appropriated but unpaid commitments of their member countries
and there is no assurance that these commitments will be undertaken or met in
the future.
Stripped Securities. The Treasury Department has facilitated transfers of
ownership of zero coupon securities by accounting separately for the beneficial
ownership of particular interest coupon and principal payments on Treasury
securities through the Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Each Portfolio may purchase securities registered in the STRIPS
program. Under the STRIPS program, a Portfolio will be able to have its
beneficial ownership of zero coupon securities recorded directly in the book-
entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying U.S. Treasury securities.
In addition, each Portfolio (other than the U.S. Treasury Index Portfolio) may
acquire U.S. Government obligations and their unmatured interest coupons that
have been separated ("stripped") by
B-3
<PAGE>
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.
To the extent consistent with its investment objectives, each Portfolio may
purchase stripped mortgage-backed securities ("SMBS"). SMBS are usually
structured with two or more classes that receive different proportions of the
interest and principal distributions from a pool of mortgage-backed obligations.
A common type of SMBS will have one class receiving all of the interest, while
the other class receives all of the principal. However, in some instances, one
class will receive some of the interest and most of the principal while the
other class will receive most of the interest and the remainder of the
principal. If the underlying obligations experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on other
mortgage-backed obligations because their cash flow patterns are also volatile
and there is a risk that the initial investment will not be fully recouped.
SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Trust's Board of Trustees if they can be disposed of promptly in the ordinary
course of business at a value reasonably close to that used in the calculation
of the net asset value per unit.
B-4
<PAGE>
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 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
B-5
<PAGE>
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.
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
B-6
<PAGE>
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 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
B-7
<PAGE>
Portfolio may also incur costs in connection with forward foreign currency
exchange contracts and conversions of foreign currencies and U.S. dollars.
In addition, with respect to the International Bond Portfolio, Northern may
purchase or sell forward foreign currency exchange contracts to seek to increase
total return.
A separate account consisting of liquid assets equal to the amount of a
Portfolio's assets that could be required to consummate forward contracts will
be established with the Portfolios' custodian except to the extent the contracts
are otherwise "covered." For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market or
fair value. If the market or fair value of such securities declines, additional
liquid securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by the Portfolio. A forward
contract to sell a foreign currency is "covered" if a Portfolio owns the
currency (or securities denominated in the currency) underlying the contract, or
holds a forward contract (or call option) permitting the Portfolio to buy the
same currency at a price that is (i) no higher than the Portfolio's price to
sell the currency or (ii) greater than the Portfolio's price to sell the
currency provided the difference is maintained by the Portfolio in liquid assets
in a segregated account with its custodian. A forward contract to buy a foreign
currency is "covered" if a Portfolio holds a forward contract (or call option)
permitting the Portfolio to sell the same currency at a price that is (i) as
high as or higher than the Portfolio's price to buy the currency or (ii) lower
than the Portfolio's price to buy the currency provided the difference in
maintained by the Portfolio in liquid assets in a segregated account with its
custodian.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Portfolios (other
than the U.S. Treasury Index Portfolio) may enter into interest rate swaps,
floors and caps for hedging purposes and not for speculation. Interest rate
swaps involve the exchange by a Portfolio with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. A Portfolio will typically use interest
rate swaps to preserve a return on a particular investment or portion of its
portfolio or to shorten the effective duration of its portfolio investments. The
purchase of an interest rate floor or cap entitles the purchaser to receive
payments of interest on a notional principal amount from the seller, to the
extent the specified index falls below (floor) or exceeds (cap) a predetermined
interest rate. The Portfolios will only enter into interest rate swaps or
interest rate floor or cap transactions on a
B-8
<PAGE>
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 maintained in a segregated account
by the Portfolio's custodian.
The Portfolios will not enter into an interest rate or currency swap or interest
rate floor or cap transaction unless the unsecured commercial paper, senior debt
or the claims-paying ability of the other party thereto is rated either A or A-1
or better by S&P, Duff or Fitch, or A or P-1 or better by Moody's. If there is
a default by the other party to such transaction, the Portfolios will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with markets for other similar instruments which
are traded in the interbank market.
Options. Each Portfolio may buy put options and call options and write covered
call and secured put options. Such options may relate to particular securities,
financial instruments, foreign currencies, foreign or domestic securities
indices or (in the case of the International Bond Portfolio) the yield
differential between two securities ("yield curve options") and may or may not
be listed on a domestic or foreign securities exchange (an "Exchange") or issued
by the Options Clearing Corporation. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options on
particular securities may be more volatile than the underlying instruments and,
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying
B-9
<PAGE>
instruments themselves.
The Portfolios will write call options only if they are "covered." In the case
of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities or instruments held by it. For a
call option on an index, the option is covered if a Portfolio maintains with its
custodian, a portfolio of securities substantially replicating the movement of
the index, or liquid assets equal to the contract value. A call option is also
covered if a Portfolio holds a call on the same security, currency or index as
the call written where the exercise price of the call held is (i) equal to or
less than the exercise price of the call written, or (ii) greater than the
exercise price of the call written provided the difference is maintained by the
Portfolio in liquid assets in a segregated account with its custodian. The
Portfolios will write put options only if they are "secured" by liquid assets
maintained in a segregated account by the Portfolios' custodian in an amount not
less than the exercise price of the option at all times during the option
period.
With respect to yield curve options, a call (or put) option is covered if the
International Bond Portfolio holds another call (or put) option on the spread
between the same two securities and maintains in a segregated account with its
custodian liquid assets sufficient to cover the Portfolio's net liability under
the two options. Therefore, the Portfolio's liability for such a covered option
is generally limited to the difference between the amount of the Portfolio's
liability under the option written by the Portfolio less the value of the option
held by the Portfolio. Yield curve options may also be covered in such other
manner as may be in accordance with the requirements of the counterparty with
which the option is traded and applicable laws and regulations. Yield curve
options are traded over-the-counter, and because they have been only recently
introduced, established trading markets for these securities have not yet
developed.
A Portfolio's obligation to sell a security or currency subject to a covered
call option written by it, or to purchase a security or currency subject to a
secured put option written by it, may be terminated prior to the expiration date
of the option by the Portfolio's execution of a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series
(i.e., same underlying security or currency, exercise price and expiration date)
as the option previously written. Such a purchase
B-10
<PAGE>
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security or currency from being called, to permit the sale
of the underlying security or currency or to permit the writing of a new option
containing different terms on such underlying security. The cost of such a
liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Portfolio will have
incurred a loss in the transaction. There is no assurance that a liquid
secondary market will exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able to sell the
underlying security or currency (in the case of a covered call option) or
liquidate the segregated account (in the case of a secured put option) until the
option expires or the optioned security or currency is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline or appreciation in the security or currency during such
period.
When a Portfolio purchases an option, the premium paid by it is recorded as an
asset of the Portfolio. When the Portfolio writes an option, an amount equal to
the net premium (the premium less the commission) received by the Portfolio is
included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by the Portfolio expires unexercised the Portfolio realizes a loss
equal to the premium paid. If the Portfolio enters into a closing sale
transaction on an option purchased by it, the Portfolio will realize a gain if
the premium received by the Portfolio on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is less. If an option
written by the Portfolio expires on the stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option written by the Portfolio is exercised, the
proceeds of the sale will be increased by the net premium originally received
and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain options. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a
liquid
B-11
<PAGE>
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 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's custodian (or subcustodian) will
maintain in a
B-12
<PAGE>
segregated account liquid assets having a value (determined daily) at least
equal to the amount of the Portfolio's purchase commitments. In the case of a
forward commitment to sell portfolio securities, the custodian or subcustodian
will hold the portfolio securities themselves in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that the
Portfolio will maintain sufficient assets at all times to cover its obligations
under when-issued purchases, forward commitments and delayed delivery
transactions. For purposes of determining a Portfolios 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"
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
B-13
<PAGE>
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 Quanitative 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. 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 restrictions as the
Portfolio. However, each Portfolio currently intends to limit its investments
in securities issued by other investment companies to the extent described in
the Prospectus. A Portfolio may adhere to more restrictive limitations with
respect to its investments in securities issued by other investment companies if
required by the SEC or deemed to be in the best interests of the Trust and will
comply with any fundamental investment restriction that may otherwise be
applicable to such investments.
Certain investment companies, i.e., unaffiliated money market funds and Exchange
Traded Funds (as defined in the Prospectus) whose securities are purchased by
the Portfolios are not obligated to redeem such securities in an amount
exceeding 1% of the investment company's total outstanding securities during any
period of less
B-14
<PAGE>
than 30 days. Therefore, such securities that exceed this amount may be
illiquid.
To the extent required by the 1940 Act, each Portfolio expects to vote the
shares of other investment companies that are held by it in the same proportion
as the vote of all other holders of such securities.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by 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 maintain in a
segregated account liquid assets in an amount at least equal to the market value
of the securities, plus accrued interest, subject to the agreement. Reverse
repurchase agreements are considered to be borrowings by a Portfolio under the
1940 Act.
Risks Related to Lower-Rated Securities. While any investment carries some
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of
these securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per unit.
B-15
<PAGE>
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 agencies may not always reflect current
conditions and events, in addition to using recognized rating agencies and other
sources, Northern performs its own analysis of the issuers whose lower-rated
securities the Portfolios hold. Because of this, the Portfolios'
B-16
<PAGE>
performance may depend more on Northern's own credit analysis than in the case
of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, Northern considers factors such as those
relating to the creditworthiness of issuers, the ratings and performance of the
securities, the protections afforded the securities and the diversity of a
Portfolio's investment portfolio. Northern monitors the issuers of lower-rated
securities held by a Portfolio for their ability to make required principal and
interest payments, as well as in an effort to control the liquidity of the
Portfolio so that it can meet redemption requests.
Yields and Ratings. The yields on certain obligations, including the
instruments in which the Portfolios may invest, are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, Duff, Fitch and TBW represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
Subject to the limitations stated in the Prospectus, if a Portfolio security
undergoes a rating revision, a Portfolio may continue to hold the security if
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 units 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
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
B-17
<PAGE>
particular Portfolios only by a vote of the holders of a majority of a
Portfolio's outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to reverse
repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent a
Portfolio from investing directly or indirectly in portfolio instruments secured
by real estate or interests therein or acquiring securities of real estate
investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or other
mineral exploration or development programs, except that each Portfolio may, to
the extent appropriate to its investment policies, purchase securities of
companies engaging in whole or in part in such activities, enter into futures
contracts and related options, and enter into forward currency contracts in
accordance with its investment objective and policies.
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be deemed to
be an underwriter under the Securities Act of 1933 in connection with the
purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial instruments, currencies and indices of
securities (and in the case of the International Bond Portfolio, yield curve
options); futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps (and
in the case of the International Bond Portfolio, currency swaps); and pair-off
transactions (except in the case of the International Bond Portfolio).
(8) Purchase securities (other than obligations issued or
B-18
<PAGE>
guaranteed by the U.S. Government, its agencies or instrumentalities) if such
purchase would cause more than 25% in the aggregate of the market value of the
total assets of a Portfolio to be invested in the securities of one or more
issuers having their principal business activities in the same industry. For the
purposes of this restriction, as to utility companies, the gas, electric, water
and telephone businesses are considered separate industries; personal credit
finance companies and business credit finance companies are deemed to be
separate industries; and wholly-owned finance companies are considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
(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 (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
unitholder approval, the International Bond Portfolio may not, at the end of any
tax quarter, invest more than 5% of the total value of its assets in the
securities of any one issuer (except U.S. Government securities), except that up
to 50% of the total value of the Portfolio's assets may be invested in any
securities without regard to this 5% limitation so long as no more than 25% of
the total value of its assets is invested in the securities of any 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.
<TABLE>
<CAPTION>
<S> <C> <C>
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
60045 holding Lake Forest, IL
Trustee company), February 1987
to retirement in August 1992;
Vice Chairman, Chief Financial
and Administrative Officer of
Ameritech prior to 1987;
Director, Walgreen Co. (a
retail drug store business);
and Director of Baker, Fentress
& Co. (a closed-end, non-
diversified management
investment company) from April
1992 to present; Trustee,
Goldman Sachs Trust from 1989
to present.
Richard Gordon Cline, 62 Trustee Chairman, Hawthorne Investors,
4200 Commerce Court Inc. (a management advisory
Suite 300 services and private investment
Lisle, IL 60532 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
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 years
- ----------- ---------- -------------------
<S> <C> <C>
of Sears, Roebuck and Co. (a
retail corporation) from
February 1989 to July 1993;
within the last five years
he has served as a Director of:
Sears Roebuck Acceptance
Corp.; Discover Credit Corp.;
Sears Receivables Financing
Group, Inc.; Sears Credit
Corp.; and Sears Overseas
Finance N.V.; 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
P.O. Box 640 Officer of The Ford Foundation
Summit, NJ 07902-0640 (a charitable trust) from 1981
until 1993; Trustee: The
China Fund, Inc.; 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;
</TABLE>
B-22
<PAGE>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
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
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 1984, Trustee,
various management investment companies
affiliated with Zurich Kemper
Investments.
Richard P. Strubel, 58 Trustee Managing Director, Tandem Partners, Inc.
70 West Madison St (a privately held management services
Suite 1400 firm) since 1990; President and Chief
Chicago, IL 60602 Executive Officer, Microdot, Inc. (a
privately held manufacturing firm) from
1984 to 1994; Trustee, Goldman Sachs
Trust from 1987 to present; Director of
Kaynar Tech-nologies, 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 Sales
and Marketing of Goldman 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 1997);
4900 Sears Tower President Vice President and General Manager) First
Chicago, IL 60606 Data Corporation -- Investor Services
Group prior thereto.
B-23
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Nancy L. Mucker, 47 Vice President Vice Pres., Goldman Sachs
4900 Sears Tower (since April 1985);
Manager, Chicago, IL 60606 Shareholder Servicing of
GSAM (since November 1989).
John W. Mosior, 58 Vice President Vice President, Goldman
4900 Sears Tower Sachs; Manager, Shareholder
Chicago, IL 60606 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 Treasurer Vice President, Goldman
One New York Plaza Sachs (since July 1995);
New York, NY 10004 Director, Investors Bank and
Trust Company (November 1993
to July 1995); Audit Manager
of Arthur Anderson, 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,
GSAM (since June 1992);
Partner of Hale and Dorr from
September 1991 to June 1992.
Howard B. Surloff, 32 Assistant Secretary Vice President & Assistant
85 Broad Street 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
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Shereff Friedman, Hoffman
& Goodman, LLP prior
thereto.
Valerie A. Zondorak, 31 Assistant Vice President, Goldman
85 Broad Street Secretary Sachs (since March 1997);
New York, NY 10004 Counsel to the Funds Group, GSAM
(since March 1997); Associate of
Shereff Friedman, Hoffman &
Goodman, LLP (prior thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (since June
New York, NY 10004 1993); Funds Compliance
Officer, Citibank Global
Asset Management (August
1991 to June 1993).
Deborah A. Farrell, 26 Assistant Legal Assistant, Goldman
85 Broad Street Secretary Sachs (since January 1994);
New York, NY 10004 Formerly at Cleary,
Gottlieb, Steen & Hamilton.
</TABLE>
Certain of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
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.
B-25
<PAGE>
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 Unitholders 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 Unitholders, 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 Unitholder 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, 1996:
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total Compensation
Aggregate Accrued as from Registrant and
Compensation Part of Fund Complex Paid to
Name of Trustee from Registrant Trust's Expenses Trustees
- ----------------------- --------------- ---------------- --------------------
<S> <C> <C> <C>
William H. Springer $45,000 $0 $45,000
Richard G. Cline ***
Edward J. Condon, Jr. $32,500 $0 $32,500
John W. English $31,000 $0 $31,000
James J. Gavin* $35,000 $0 $35,500
Sandra Polk Guthman ***
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $0 $40,500
</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 define benefit and define contribution plans and manages
over 70 equity and bond index comingled and common trust funds. As of December
31, 1997, Northern and its affiliates had approximately $______ 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 Investment 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. 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
B-28
<PAGE>
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
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
B-29
<PAGE>
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.
Under its Transfer Agency Agreement with the Trust, with respect to units held
by Institutions, Northern has undertaken to perform some or all of the following
services: (1) establish and maintain an omnibus account in the name of each
Institution; (2) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption proceeds; (3) act as
the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of units in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions unitholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to units held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of units in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for Prospectuses and Additional Statements, and
assistance in the completion of new account applications) from investors and
respond to all requests for information regarding the Trust (such as current
price, recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions); (8) respond
to and seek to resolve all complaints of investors with respect to
B-30
<PAGE>
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 units, respectively, in the Portfolios.
Under its Custodian Agreement (and in the case of the International Bond
Portfolio its Foreign Custody Agreement) with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's investments
held by Northern under the Agreement, and (6) maintains the accounting records
of the Trust. Northern may employ one or more subcustodians, provided that
Northern shall have no more responsibility or liability to the Trust on account
of any action or omission of any subcustodian so employed than such subcustodian
has to Northern and that the responsibility or liability of the subcustodian to
Northern shall conform to the resolution of the Trustees of the Trust
authorizing the appointment of the particular subcustodian (or, in the case of
foreign securities, to the terms of any agreement entered into between Northern
and such subcustodian to which such resolution relates). In addition, the
Trust's custodial arrangements provide, with respect to foreign securities, that
Northern shall not be: (i) responsible for the solvency of any subcustodian
appointed by it with reasonable care; (ii) responsible for any act, omission,
default or for the solvency of any eligible foreign securities depository; or
(iii) liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the subcustodian has otherwise exercised reasonable
care. Northern may also appoint agents to carry out such of the provisions of
the Custodian Agreement and the Foreign Custody Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under either Agreement. Northern has
entered into agreements with
B-31
<PAGE>
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 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.
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
units of such Portfolio (as defined below under "Other Information"). Each
agreement is terminable at any time without penalty by the Trust (by specified
Trustee or unitholder action) on 60 days' written notice to Northern or NTQA and
by Northern or NTQA on 60 days' written notice to the Trust.
B-32
<PAGE>
Prior to ______, 1998, Northern served as investment adviser to the U.S.
Treasury Index 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>
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 (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
additional advisory fees as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) 307,297 108,759
Short-Intermediate Bond
Portfolio (2) 589,702 427,217
U.S. Treasury 43,719 82,333
Bond Portfolio (2) 1,162,601 928,746
Intermediate Bond (3) N/A N/A
International Bond Portfolio (4) 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:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Government Securities
Portfolio (1) 12,058 3,163
Short-Intermediate Bond
Portfolio (2) 16,929 12,216
U.S. Treasury Index Portfolio (2) 2,414 3,366
</TABLE>
B-33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Bond Portfolio (2) 39,420 28,014
Intermediate Bond (3) N/A N/A
International Bond Portfolio (4) 3,220 3,220
</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) 19,709 23,744
Short-Intermediate Bond
Portfolio (2) 28,060 24,834
U.S. Treasury Index Portfolio (2) 20,242 22,734
Bond Portfolio (2) 46,249 35,344
Intermediate Bond (3) N/A N/A
International Bond Portfolio (4) 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 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
B-34
<PAGE>
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 unit of any Portfolio
or result in a financial loss to any unitholder. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
In the Advisory 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 provides 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
unitholders 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
B-35
<PAGE>
[Salomon Brothers, Inc. and Donaldson, Lufkin & Jenrette Securities, Inc.] each
a regular broker/dealer. 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 $4,982,000 and
Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate aggregate
market value of $8,826,000.]
During the fiscal year ended November 30, 1997, the Bond Portfolio acquired and
sold securities of [Salomon Brothers, Inc. and Donaldson, Lufkin & Jenrette
Securities, Inc.,] each a regular broker/dealer. At November 30, 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:
[Salomon Brothers, Inc., with an approximate aggregate market value of
$9,515,000 and Donaldson, Lufkin & Jenrette Securities, Inc., with an
approximate aggregate market value of $7,450,000.]
During the fiscal year ended November 30, 1997, the Intermediate Bond Portfolio
acquired and sold securities of [ ], each a regular broker/dealer. At November
30, 1997, the Intermediate Bond Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940 Act, or their parents: [ ], with an approximate aggregate market value of
[$ ].
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 Advisery operations (the parties
giving recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to unitholders,
periodic updating of the Prospectus issued by the Trust, and reports filed with
the SEC and other regulatory authorities (including qualification under state
securities or Blue Sky laws of the Trust's units), and (4) provides the Trust,
to the extent not provided pursuant to such agreements, with adequate office
space and equipment and certain related services in Chicago.
B-36
<PAGE>
For the fiscal periods ended November 30 as indicated, Goldman Sachs received
fees under the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C>
U.S. Government Securities
Portfolio (1) 87,782 31,074
Short-Intermediate Bond
Portfolio (2) 168,616 122,062
U.S. Treasury Index Portfolio (2) 17,448 32,933
Bond Portfolio (2) 332,084 265,356
Intermediate Bond Portfolio (3) N/A N/A
International Bond Portfolio (4) 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
---- ---- ----
U.S. Government Securities <S> <C> <C>
Portfolio (1) 131,975 $ 46,611
Short-Intermediate Bond
Portfolio (2) 185,161 161,031
U.S. Treasury Index Portfolio (2) 26,353 49,400
Bond Portfolio (2) 243,306 232,678
Intermediate Bond Portfolio (3) N/A N/A
International Bond Portfolio (4) 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-
B-37
<PAGE>
ment portfolios plus $50,000 for each additional portfolio) during the current
fiscal year, Goldman Sachs will waive a portion of its administration fees
during the following fiscal year. This undertaking may be terminated by Goldman
Sachs at any time without the consent of the Trust or the unitholders. There
have been no waivers pursuant to this agreement during the last three fiscal
periods.
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, tranfer 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) 68,799 72,798
Short-Intermediate Bond
Portfolio (2) 97,056 87,069
U.S. Treasury Index Portfolio (2) 67,218 76,730
Bond Portfolio (2) 142,673 112,995
Intermediate Bond Portfolio (3) N/A N/A
International Bond Portfolio (4) 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 units of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
penalty by the Trust (upon specified Trustee or unitholder action) on 60 days'
written notice to Goldman Sachs and by
B-38
<PAGE>
Goldman Sachs on 60 days' written notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman Sachs,
as agent, sells units of each Portfolio on a continuous basis. Goldman Sachs
pays the cost of printing and distributing prospectuses to persons who are not
unitholders of the Trust (excluding preparation and typesetting expenses) and of
certain other distribution efforts. No compensation is payable by the Trust to
Goldman Sachs for such distribution services.
The Administration Agreement and the Distribution Agreement provide that Goldman
Sachs may render similar services to others so long as its services under such
Agreements are not impaired thereby. The Administration Agreement provides that
the Trust will indemnify Goldman Sachs against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Administration Agreement and Distribution Agreement) or, in lieu thereof,
contribute to resulting losses.
B-39
<PAGE>
Unitholder Servicing Plan
As stated in the Portfolios' Prospectus, Institutions may enter into Servicing
Agreements with the Trust under which they provide (or arrange to have provided)
support services to their Customers or other investors who beneficially own such
units in consideration of the Portfolios' payment of not more than .10%, .15%
and .25% (on an annualized basis) of the average daily net asset value of the
Class B, C and D units, respectively, 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 Unitholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities Portfolio
Class B N/A N/A
Class C (6) $5,040.82 N/A
Class D (1) 451.87 $97.59
Short-Intermediate Bond Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (2) 126.73 16.96
U.S. Treasury Index Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (3) 1,198.29 129.80
Bond Portfolio
Class B N/A N/A
Class C (4) 6,685.99 2,292.16
Class D (2) 396.78 180.56
Intermediate Bond Portfolio
Class B N/A N/A
Class C N/A N/A
Class D N/A N/A
International Bond Portfolio
Class B N/A N/A N/A
Class C (7) N/A N/A
Class D (8) N/A N/A
International Bond Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (5) 29.96 0.48
</TABLE>
B-40
<PAGE>
(1) Class D Units were issued on September 15, 1994.
(2) Class D Units were issued on September 14, 1994.
(3) Class D Units were issued on November 16, 1994.
(4) Class C Units were issued on July 3, 1995.
(5) Class D Units were issued on November 20, 1995.
(6) Class C Units were issued on December 29, 1995.
(7) Class C Units were issued on
(8) Class D Units were issued on
Services provided by or arranged to be provided by Institutions under their
Servicing Agreements may include: (1) establishing and maintaining separate
account records of Customers or other investors; (2) providing Customers or
other investors with a service that invests their assets in units of certain
classes pursuant to specific or pre-authorized instructions, and assistance with
new account applications; (3) aggregating and processing purchase and redemption
requests for units of certain classes from Customers or other investors, and
placing purchase and redemption orders with the Transfer Agent; (4) issuing,
confirmations to Customers or other investors in accordance with applicable law;
(5) arranging for the timely transmission of funds representing the net purchase
price or redemption proceeds; (6) processing dividend payments on behalf of
Customers or other investors; (7) providing information periodically to
Customers or other investors showing their positions in units; (8) responding to
Customer or other investor inquiries (including requests for prospectuses), and
complaints relating to the services performed by the Institutions; (9) acting as
liaison with respect to all inquiries and complaints from Customers and other
investors relating to errors committed by the Trust or its agents, and other
matters pertaining to the Trust; (10) providing or arranging for another person
to provide subaccounting with respect to units of certain classes beneficially
owned by Customers or other investors; (11) if required by law, forwarding
unitholder communications from the Trust (such as proxy statements and proxies,
unitholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers and other investors; (12) providing
such office space, facilities and personnel as may be required to perform its
services under the Servicing Agreements; (13) maintaining appropriate management
reporting and statistical information; (14) paying expenses related to the
preparation of educational and other explanatory materials in connection with
the development of investor services; (15) developing and monitoring investment
programs; and (16) providing such other similar services as the Trust may
reasonably request to the extent the Institutions are permitted to do so under
applicable statutes, rules and regulations.
The Trust's agreements with Institutions are governed by a Plan
B-41
<PAGE>
(called the "Unitholder Servicing Plan") which has been adopted by the Board of
Trustees. Pursuant to the Unitholder Servicing Plan, the Board of Trustees will
review, at least quarterly, a written report of the amounts expended under the
Trust's agreements with Institutions and the purposes for which the expenditures
were made. In addition, the arrangements with Institutions must be approved
annually by a majority of the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust, as defined in the 1940
Act, and have no direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Institutions based on
information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their unitholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their units in an
efficient manner.
Counsel and Auditors
Drinker Biddle & Reath 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 units of a Portfolio may, in the discretion of Northern, be made in
the form of securities that are permissible investments for the Portfolio as
described in the Prospectus. For further information about this form of payment,
contact Northern. In connection with an in-kind securities payment, a Portfolio
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Portfolio and that
the Portfolio receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Portfolio; and that adequate information be
provided concerning the basis and other tax matters relating to the securities.
B-42
<PAGE>
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a class of
units computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to the
ending redeemable value of such investment according to the following formula:
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 years.
------
Each Portfolio that advertises an "aggregate total return" for a class of units
computes such return by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T =[(ERV)]
--- -1
P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per unit
existing on the reinvestment date and (2) all recurring fees charged to all
unitholder accounts are included. The ending redeemable value (variable "ERV" in
the formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
The average annual total returns and aggregate total returns shown below for the
Short-Intermediate Bond, U.S. Treasury Index and Bond Portfolios include, for
periods prior to the commencement of the Portfolios' operations, the performance
of a
B-43
<PAGE>
predecessor collective fund adjusted to reflect the higher estimated fees
and expenses applicable to such Portfolios' Class A Units at the time of their
inception. Although all such predecessor collective funds were managed by
Northern for the periods stated in a manner and pursuant to investment
objectives that were equivalent in all material respects to the management and
investment objectives of the corresponding Portfolios, such predecessor
collective funds were not registered under the 1940 Act and were not subject to
certain investment restrictions imposed by the 1940 Act. If they had been
registered under the 1940 Act, performance might have been adversely affected.
The average annual total returns and aggregate total returns shown for the
Portfolios for their Class C and/or Class D Units also include, for the periods
prior to the inception of such classes, the performance of the Portfolios' Class
A Units. Because the fees and expenses of Class C and Class D Units are,
respectively, 0.24% and 0.39% higher than those of Class A Units, actual
performance for periods prior to the inception of Class C and Class D Units
would have been lower if such higher fees and expenses had been taken into
account.
Following commencement of operations of the Portfolios, Goldman Sachs reimbursed
expenses to the Portfolios and voluntarily agreed to reduce a portion of its
administration fee for each Portfolio pursuant to the undertaking described
above under "Additional Trust Information - Administrator and Distributor" and
"-Investment Adviser, Transfer Agent and Custodian," and Northern waived a
portion of its Investment Advisery fees with respect to the Portfolios. The
average annual total returns and aggregate total returns of each Portfolio with
respect to Class A, Class C and Class D Units, as applicable, are shown below
with and without such fee waivers and expense reimbursements.
B-44
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns(%) Aggregate Total Returns(%)
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond/1/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class C
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Intermediate Bond
Class A
with fee waivers and
expense reimbursements - - - - - - - 1.17
w/o fee waivers and
expense reimbursements - - - - - - - 0.52
Short-Intermediate Bond /2/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
</TABLE>
B-45
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns(%) Aggregate Total Returns(%)
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
U.S. Treasury Index/3/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
U.S. Government Securities/4/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class C
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
For Periods Ended November 30, 1997
Average Annual Total Returns(%) Aggregate Total Returns(%)
1 Year 5 Year 10 Year Since 1 Year 5 Year 10 Year Since
------ ------ ------- Inception ------ ------ ------- Inception
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
International Bond /5/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
- ----------------------
</TABLE>
B-47
<PAGE>
1. For Class A, C and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class C and D Units, performance data from January 11, 1993 to July 3, 1995
(commencement of Class C Units) and September 14, 1994 (commencement of
Class D Units), respectively, is that of Class A Units. Because the fees
and expenses of Class C and Class D Units are .24% and .39%, respectively,
higher than those of Class A Units, actual performance would have been
lower had such fees and expenses been taken into account. The predecessor
collective fund has been managed in a manner and pursuant to investment
objectives equivalent in all material respects to the management and
investment objective of the Portfolio for the periods shown. The
performance data of the predecessor collective fund is adjusted to reflect
the higher fees and expenses applicable to Class A Units at the time of
their inception.
2. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to September 14, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. The predecessor collective fund has been managed
in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio for the periods shown. The performance data of the predecessor
collective fund is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
3. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to November 16, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. 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 Units at the time of their inception.
4. For Class C and D Units, performance data prior to December 29, 1995
(commencement of Class C Units), and September 15, 1994 (commencement of
Class D Units), respectively,
B-48
<PAGE>
is that of Class A Units. Class A Units commenced operations April 5, 1993.
Because fees and expenses of Class C and D Units are .24% and .39%,
respectively, higher than those of Class A Units, actual performance would
have been lower had such higher fees and expenses been taken into account.
5. For Class D Units, performance data prior to November 20, 1995
(commencement of Class D Units) is that of Class A Units. Class A Units
commenced operations on March 28, 1994. Because the fees and expenses of
Class D Units are .39% higher than those of Class A Units, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-49
<PAGE>
The Portfolios' 30-day (or one month) standard yield described in the Prospectus
is calculated for each class of the Portfolios in accordance with the method
prescribed by the SEC for mutual funds:
a-b
Yield = 2[(-- + 1)/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 units outstanding during the period
entitled to receive dividends; and
d = net asset value per unit on the last day of the period.
For the 30 day period ended November 30, 1997, the annualized yields for the
Class A, Class B, Class C and Class D units of the Portfolios were as follows:
<TABLE>
<CAPTION>
30-Day Yield
-------------
<S> <C>
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-50
<PAGE>
<TABLE>
<CAPTION>
30-Day Yield
------------
<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 units 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
Intermediate Bond Portfolio
Class A 4.30
Class B N/A
Class C N/A
Class D N/A
</TABLE>
B-51
<PAGE>
International Bond Portfolio
Class A 3.9
Class B N/A
Class C N/A
Class D 3.58
The performance of any investment is generally a function of portfolio quality
and maturity, type of investment and operating expenses.
Because of the different Servicing Fees and transfer agency fees payable with
respect to Class A, B, C and D units in a Portfolio, performance quotations for
units of Class B, C and D of the Portfolio will be lower than the quotations for
Class A units of the Portfolio, which will not bear any fees for unitholder
support services and will bear minimal transfer agency fees.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their unitholders that are not described in the
Portfolios' Prospectuses. No attempt is made to present a detailed explanation
of the tax treatment of the Portfolios or their unitholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers
with specific reference to their own tax situations.
General
Each Portfolio will elect to be taxed separately as a regulated investment
company under Part I of Subchapter M of Subtitle A, Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, each Portfolio generally is exempt from Federal income tax on its net
investment income and realized capital gains which it distributes to
unitholders, provided that it distributes an amount equal to at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code that are described below.
In addition to satisfying the Distribution Requirement, each Portfolio must
derive with respect to a taxable year at least 90%
B-52
<PAGE>
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 a
Portfolio has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Portfolio does not hold more than
10% of the outstanding voting securities of such issuer) and no more than 25% of
the value of each Portfolio's total assets may be invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses.
Each Portfolio intends to distribute to unitholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is taxable
to unitholders as long-term capital gain regardless of the length of time the
unitholder has held the units, whether such gain was recognized by the Portfolio
prior to the date on which a unitholder acquired units of the Portfolio and
whether the distribution was paid in cash or reinvested in units. In addition,
investors should be aware that any loss realized upon the sale, exchange or
redemption of units held for six months or less will be treated as a long-term
capital loss to the extent of the capital gain dividends the unitholder has
received with respect to such units. It is not expected that any distributions
will qualify for the dividends received deduction for corporations.
Ordinary income of individuals is taxable at a maximum marginal rate of 39.6%,
but because of limitations on itemized deductions otherwise allowable and the
phase-out of personal exemptions, the maximum effective marginal rate of tax for
some taxpayers may be higher. 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 (A "long-term");
for property held for more than 12 months, but no longer than 18 months, the
maximum tax rate on capital gains continues to be 28%. Capital gains and
B-53
<PAGE>
ordinary income of corporate taxpayers are both taxed at a nominal maximum rate
of 35%.
If for any taxable year any Portfolio does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to unitholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income, to the extent of such Portfolio's current and
accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate unitholders.
Unitholders will be advised annually as to the Federal income tax consequences
of distributions made by the Portfolios each year.
The Code imposes a non-deductible 4% excise tax on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). Each Portfolio intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
The Trust will be required in certain cases to withhold and remit to the United
States Treasury 31% of taxable dividends or 31% of gross sale proceeds paid to
any unitholder (i) who has provided either an incorrect tax identification
number or no number at all, (ii) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) who has failed to certify to the Trust to
do so, that he is not subject to backup withholding or that he is an "exempt
recipient."
Taxation of Certain Financial Instruments
Special rules govern the Federal income tax treatment of financial instruments
that may be held by the Portfolios. These rules may have a particular impact on
the amount of income or gain that a Portfolio must distribute to its respective
unitholders to comply with the Distribution Requirement, and on the income or
gain qualifying under the Income 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
B-54
<PAGE>
process known as "mark-to-market." Forty percent of any gain or loss resulting
from such constructive sales will be treated as short-term capital gain or loss
and 60% of such gain or loss will be treated as long-term capital gain or loss
without regard to the period a Portfolio has held the Instruments ("the 40%-60%
rule"). The amount of any capital gain or loss actually realized by a Portfolio
in a subsequent sale or other disposition of those Instruments is adjusted to
reflect any capital gain or loss taken into account by the Portfolio in a prior
year as a result of the constructive sale of the Instruments. Losses with
respect to futures contracts to sell related options and certain foreign
currency contracts, which are regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Portfolios, are subject to certain loss deferral rules which limit the
amount of loss currently deductible on either part of the straddle to the amount
thereof which exceeds the unrecognized gain (if any) with respect to the other
part of the straddle, and to certain wash sales regulations. Under short sales
rules, which are also applicable, the holding period of the securities forming
part of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain Instruments, deductions for interest and carrying charges may
not be allowed. Notwithstanding the rules described above, with respect to
futures contracts which are part of a "mixed straddle" to sell related options
and certain foreign currency contracts which are properly identified as such, a
Portfolio may make an election which will exempt (in whole or in part) those
identified futures contracts, options and foreign currency contracts from the
rules of Section 1256 of the Code including "the 40%-60% rule" and the mark-to-
market on gains and losses being treated for Federal income tax purposes as sold
on the last business day of each Portfolio's taxable year, but gains and losses
will be subject to such short sales, wash sales and loss deferral rules and the
requirement to capitalize interest and carrying charges. Under Temporary
Regulations, each Portfolio would be allowed (in lieu of the foregoing) to elect
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and losses
would be recognized and offset on a periodic basis during the taxable year.
Under either election, "the 40%-60% rule" will apply to the net gain or loss
attributable to the Instruments, but in the case of a mixed straddle account
election, not more than 50% of any net gain may be treated as long-term and no
more than 40% of any net loss may be treated as short-term.
B-55
<PAGE>
A foreign currency contract must meet the following conditions in order to be
subject to the mark-to-market rules described above: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
As of the date of this Additional Statement, the Treasury Department has not
issued any such regulations. Other foreign currency contracts entered into by a
Portfolio may result in the creation of one or more straddles for Federal income
tax purposes, in which case certain loss deferral, short sales, and wash sales
rules and the requirement to capitalize interest and carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the Portfolios may
make, such as foreign debt securities and foreign currency contracts, may be
subject to provisions of the Code which govern the Federal income tax treatment
of certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S. dollar. The types of transactions covered by these provisions
include the following: (1) the acquisition of, or becoming the obligor under, a
bond or 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
B-56
<PAGE>
Treasury regulations) may be integrated and treated as a single transaction or
otherwise treated consistently for purposes of the Code. "Section 988 hedging
transactions" are not subject to the mark-to-market or loss deferral rules under
the Code. Gain or loss attributable to the foreign currency component of
transactions engaged in by the Portfolios which are not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) is treated as capital gain or loss and is not segregated from the gain
or loss on the underlying transaction.
Foreign Investors
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain on
the redemption of units or in respect of capital gain dividends, provided such
unitholder submits a statement, signed under penalties of perjury, attesting to
such unitholder's exempt status. Different tax consequences apply to a foreign
unitholder engaged in a U.S. trade or business. Foreign unitholders should
consult their tax advisers regarding the U.S. and foreign tax consequences of
investing in a Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Additional Statement. Such laws and regulations
may be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolio or its
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
Although each Portfolio expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are
B-57
<PAGE>
maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, each Portfolio may be
subject to the tax laws of such states or localities.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional units of beneficial interest of one or more
separate series representing interests in one or more investment portfolios.
The Trust may hereafter create series in addition to the Trust's 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 units into additional series or subseries within a series. Pursuant to
such authority, the Trustees have authorized the issuance of an unlimited number
of units of beneficial interest in four separate subseries (sometimes referred
to as "classes") of units in each of its non-money market portfolios: Class A,
B, C and D units. Under the terms of the Trust Agreement, each unit of each
Portfolio is without par value, represents an equal proportionate interest in
the particular Portfolio with each other unit of its class in the same Portfolio
and is entitled to such dividends and distributions out of the income belonging
to the Portfolio as are declared by the Trustees. Upon any liquidation of a
Portfolio, unitholders of each class of a Portfolio are entitled to share pro
rata in the net assets belonging to that class available for distribution.
Units do not have any preemptive or conversion rights. The right of redemption
is described under "Investing-Redemption of Units" in the Prospectus. In
addition, pursuant to the terms of the 1940 Act, the right of a unitholder to
redeem units and the date of payment by a Portfolio may be suspended for more
than seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the unitholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its units upon the occurrence of any of the foregoing conditions.
In addition, units of each Portfolio are redeemable at the
B-58
<PAGE>
unilateral option of the Trust if the Trustees determine in their sole
discretion that failure to so redeem may have material adverse consequences to
the unitholders of the Portfolio. Units when issued as described in the
Prospectus are validly issued, fully paid and nonassessable, except as stated
below.
The proceeds received by each Portfolio for each issue or sale of its units, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to and
constitute the underlying assets of that Portfolio. The underlying assets of
each Portfolio will be segregated on the books of account, and will be charged
with the liabilities in respect to that Portfolio and with a share of the
general liabilities of the Trust. Expenses with respect to the Portfolios are
normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding units of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an Investment Advisery agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding units of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees may be
effectively acted upon by unitholders of the Trust voting together in the
aggregate without regard to a particular investment portfolio. In addition,
unitholders of each of the classes in a particular investment portfolio have
equal voting rights except that only units of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
unitholders (if any) relating to unitholder servicing expenses and transfer
agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other
B-59
<PAGE>
meetings of unitholders. This is because the Trust Agreement provides for
unitholder voting only for the election or removal of one or more Trustees, if a
meeting is called for that purpose, and for certain other designated matters.
Each Trustee serves until the next meeting of unitholders, if any, called for
the purpose of considering the election or reelection of such Trustee or of a
successor to such Trustee, and until the election and qualification of his
successor, if any, elected at such meeting, or until such Trustee sooner dies,
resigns, retires or is removed by the unitholders or two-thirds of the Trustees.
Under the Delaware Business Trust Act (the "Delaware Act"), Unitholders 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 Unitholder liability exists in many other
states. As a result, to the extent that the Trust or a Unitholder is subject
to the jurisdiction of courts in such other states, those courts may not apply
Delaware law and may subject the Unitholders to liability. To offset this risk,
the Trust Agreements (i) contains an express disclaimer of Unitholder 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 Unitholder held personally
liable for the obligations of the Trust solely by reason of being or having been
a Unitholder and not because of the Unitholder's acts or omissions or for some
other reason. Thus, the risk of a Unitholder incurring financial loss beyond
his or her investment because of Unitholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the 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 Unitholder and that a Trustee will not be liable for
any act as a Trustee. However, nothing in the Trust Agreements 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.
As of December 30, 1997 substantially all of the Portfolios'
B-60
<PAGE>
outstanding units were held of record by Northern for the benefit of its
customers and the customers of its affiliates and correspondent banks that have
invested in the Portfolios. As of the same date, the Trust's Trustees and
officers owned beneficially less than 1% of the outstanding units of each
Portfolio. Northern has advised the Trust that the following persons (whose
mailing address is: c/o The Northern Trust Company, 50 South LaSalle, Chicago,
IL 60675) beneficially owned five percent or more of the outstanding units of
the following Portfolios as of December 30, 1997:
<TABLE>
<CAPTION>
Number Percentage
of Units of Units
------------ ---------------
<S> <C> <C>
International Bond Portfolio
The Northern Trust Company Pension Plan 877,095 66.25%
Doe Run Resources Corporation
Retirement Plan 178,079 13.45%
U.S. Treasury Index Portfolio
Moody Bible Institute/General 501,811 27.88%
Liberty Healthcare System Inc.
Pension Plan 218,121 12.12%
Purina Mills Inc. Master Retirement Trust 150,812 8.38%
Moody Bible Institute/Annuity 145,744 8.10%
Herget National Bank 111,261 6.18%
Old Second National Bank 90,438 5.03%
Short Intermediate Bond Portfolio
Local 393 Health & Welfare Trust 547,666 5.64%
Bond Fund Portfolio
The Northern Trust Company Pension Plan 1,980,238 7.99%
The Northern Trust Company Thrift Incentive Plan 1,589,859 6.42%
Phycor, Inc. Savings and Profit Sharing Plan 1,972,973 7.96%
U.S. Government Securities Portfolio
Electrical Insurance Trust
Supplemental Unemployment Benefit Fund 555,312 23.72%
Sheet Metal Workers Local 265 Health & Welfare Plan 391,197 6.71%
Mafco Rabbi 367,336 15.69%
Illinois State Painters Welfare Fund 235,764 10.07%
Jordan Industries, Inc. 154,307 6.59%
La Porte, The Retirement Plus Plan 156,715 6.69%
</TABLE>
B-61
<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 units under Federal or state securities laws,
expenses of the organization of the Portfolio, taxes, interest, costs of
liability insurance, fidelity bonds, indemnification or contribution, any costs,
expenses or losses arising out of any liability of, or claim for damages or
other relief asserted against, the Trust for violation of any law, legal, tax
and auditing fees and expenses, Servicing Fees, expenses of preparing and
printing prospectuses, statements of additional information, proxy materials,
reports and notices and the printing and distributing of the same to the Trust's
unitholders and regulatory authorities, compensation and expenses of its
Trustees, expenses of industry organizations such as the Investment Company
Institute, miscellaneous expenses and extraordinary expenses incurred by the
Trust.
The term "majority of the outstanding units" of either the Trust or a particular
Portfolio means, with respect to the approval of an Investment Advisery
agreement or a change in a fundamental investment policy, the vote of the lesser
of (i) 67% or more of the units of the Trust or such Portfolio present at a
meeting, if the holders of more than 50% of the outstanding units of the Trust
or such Portfolio are present or represented by proxy, or (ii) more than 50% of
the outstanding units of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as to the
contents of any contract or other documents referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement of which the
Prospectus and this Additional Statement form a part, each such statement being
qualified in all respects by such reference.
B-62
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, for the U.S. Treasury Index Portfolio, U.S. Government
Securities Portfolio, Short Intermediate Bond Portfolio, Bond Portfolio,
Intermediate Bond Portfolio and International Bond Portfolio contained in the
Annual Report for the fiscal year ended November 30, 1997 will be filed by
amendment.
Unaudited financial statements for the Intermediate Bond Portfolio for the
period from August 1, 1997 (commencement of operations) to November 30, 1997 are
attached hereto and incorporated by reference into this Additional
Statement.
B-63
<PAGE>
APPENDIX A
Description of Bond Ratings
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from AAA issues only in
a small degree.
A: Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas such
issues normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than for those in higher rated
categories.
BB and B: Debt rated BB and B is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. Debt
rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB- rating.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
1-A
<PAGE>
S&P may attach the rating "r" to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to 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.
2-A
<PAGE>
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
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. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
3-A
<PAGE>
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because
bonds related in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an
adverse impact on these bonds, and therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified, which could assist the obligor in satisfying its debt
service requirements.
B: Bonds are considered highly speculative. While securities in this
class are currently meeting debt service requirements, the probability
of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the instrument.
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.
4-A
<PAGE>
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1: Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2: Obligations bearing these designations are of high
quality with margins of protection ample although not as large as in
the preceding group.
The two highest rating categories of D&P for short-term debt are D 1 and D 2.
D&P employs three designations, D 1+, D 1 and D 1-, within the highest rating
category. D 1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D 1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D 2 indicates good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of Bond
Ratings" for tax-exempt notes and other short-term obligations. Fitch uses the
short-term ratings described below under "Description of Commercial Paper
Ratings" for municipal notes.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted in A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers or related supporting institutions rated Prime-1 are considered to have
a superior capacity for
5-A
<PAGE>
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. Issuers or related
supporting institutions rated Prime-2 are considered to have strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the F-1+ and F-1 categories.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
6-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within three business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Portfolio could use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this could include the use of futures contract sales to protect
against expected increases in interest rates and the use of futures contract
purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures contracts.
Interest rate futures contracts can also be used by a Portfolio for
nonhedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or
1-B
<PAGE>
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.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Portfolio
would deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. A Portfolio may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
II. Index Futures Contracts
General. A bond index assigns relative values to the bonds included in the
index which fluctuates with changes in the market values of the bonds included.
A Portfolio may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio
2-B
<PAGE>
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.
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
3-B
<PAGE>
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 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
4-B
<PAGE>
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.
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
5-B
<PAGE>
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 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
6-B
<PAGE>
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 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,
7-B
<PAGE>
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 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
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-21
Trustees and Officers B-21
Investment Advisers, Transfer Agent and Custodian B-28
Portfolio Transactions B-36
Administrator and Distributor B-40
Unitholder Servicing Plan B-43
Counsel and Auditors B-46
In-Kind Purchases B-46
PERFORMANCE INFORMATION B-47
TAXES B-55
General B-55
Taxation of Certain Financial Instruments B-57
Foreign Investors B-60
Conclusion B-60
DESCRIPTION OF UNITS B-60
OTHER INFORMATION B-66
FINANCIAL STATEMENTS B-67
APPENDIX A (Description of Bond Ratings) 1-A
APPENDIX B (Futures Contracts) 1-B
</TABLE>
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Additional Statement or in the Prospectus
in connection with the offering made by the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust or its distributor. The Prospectus does not constitute
an offering by the Trust or by the distributor in any jurisdiction in which such
offering may not lawfully be made.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. 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
Balanced, Global Asset, Equity Index, Diversified Growth, Focused Growth, Small
Company Index, International Equity Index, and International Growth Portfolios
of The Benchmark Funds (the "Trust") as set forth in the Prospectus.
Warrants. The Balanced, 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 units or attached to other securities are not subject
to this restriction.
U.S. Government Obligations. Examples of types of U.S. Government
obligations that may be acquired by the Portfolios includes U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, and the Maritime
Administration.
Foreign Securities. Unanticipated political or social developments may
also affect the value of a Portfolio's investments in emerging market countries
and the availability to a Portfolio of additional investments in those
countries. The small size and inexperience of the securities markets in certain
of such countries and the limited volume of trading in securities in those
countries may make a Portfolio's investments in such countries illiquid and more
volatile than investments in Japan or most Western European countries, and a
Portfolio may be required to establish special custodial or other arrangements
before
B-3
<PAGE>
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
such countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers.
Investors should understand that the expense ratios of the International Equity
Index and International Growth Portfolios can be expected to be higher than
those funds investing primarily in domestic securities. The costs attributable
to investing abroad are usually higher for several reasons, such as the higher
cost of investment research, higher cost of custody of foreign securities,
higher commissions paid on comparable transactions on foreign markets and
additional costs arising from delays in settlements of transactions involving
foreign securities.
Foreign Currency Transactions. In order to protect against a possible 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 Northern anticipates that a particular foreign currency may decline
substantially relative to the U.S. dollar or other leading currencies, in order
to reduce risk, a Portfolio may enter into a forward contract to sell, for a
fixed amount, the amount of foreign currency approximating the value of some or
all of the Portfolio's securities denominated in such foreign currency.
Similarly, when the securities held by a Portfolio create a short position in a
foreign currency, the Portfolio may enter into a forward contract to buy, for a
fixed amount, an amount of foreign currency approximating the short position.
With respect to any forward foreign currency contract, it will not generally be
possible to match precisely the amount covered by that contract and the value of
the securities involved due to
B-4
<PAGE>
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 Global Asset and International Growth
Portfolios, Northern may purchase or sell forward foreign currency exchange
contracts to seek to increase total return.
A separate account consisting of liquid assets equal to the amount of a
Portfolio's assets that could be required to consummate forward contracts will
be established with the Portfolios' custodian except to the extent the contracts
are otherwise "covered." For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market or
fair value. If the market or fair value of such securities declines, additional
cash or securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by the Portfolio. A forward
contract to sell a foreign currency is "covered" if a Portfolio owns the
currency (or securities denominated in the currency) underlying the contract, or
holds a forward contract (or call option) permitting the Portfolio to buy the
same currency at a price that is (i) no higher than the Portfolio's price to
sell the currency or (ii) greater than the Portfolio's price to sell the
currency provided the difference is maintained by the Portfolio in liquid assets
in a segregated account with its custodian. A forward contract to buy a foreign
currency is "covered" if a Portfolio holds a forward contract (or call option)
permitting the Portfolio to sell the same currency at a price that is (i) as
high as or higher than the Portfolio's price to buy the currency or (ii) lower
than the Portfolio's price to buy the currency provided the difference is
maintained by the Portfolio in liquid assets in a segregated account with its
custodian.
Options. Each Portfolio may buy put options and buy call options and 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
B-5
<PAGE>
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying instruments themselves.
The Portfolios will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities held by it. For a call option on an
index, the option is covered if a Portfolio maintains with its custodian a
portfolio of securities substantially replicating the movement of the index, or
liquid assets equal to the contract value. A call option is also covered if a
Portfolio holds a call on the same security, currency or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written provided the difference is maintained by the Portfolio in
liquid assets in a segregated account with its custodian. The Portfolios will
write put options only if they are "secured" by liquid assets maintained in a
segregated account by the Portfolios' custodian in an amount not less than the
exercise price of the option at all times during the option period.
A Portfolio's obligation to sell a security subject to a covered call
option written by it, or to purchase a security or currency subject to a secured
put option written by it, may be terminated prior to the expiration date of the
option by the Portfolio's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying security or currency, exercise price and expiration date) as the
option previously written. Such a purchase does not result in the ownership of
an option. A closing purchase transaction will ordinarily be effected to
realize a profit on an outstanding option, to prevent an underlying security or
currency from being called, to permit the sale of the underlying security or
currency or to permit the writing of a new option containing different terms on
such underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the original
option, in which event the Portfolio will have incurred a loss in the
transaction. There is no assurance that a liquid secondary market will exist
for any particular option. An option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security or
currency (in the case of a covered call option) or liquidate the segregated
account (in the case of a secured put option) until the option
B-6
<PAGE>
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 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
B-7
<PAGE>
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 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
B-8
<PAGE>
ownership of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed the beneficial
holders of the underlying U.S. Government obligations for Federal tax purposes.
The Trust is not aware of any binding legislative, judicial or administrative
authority on this issue.
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 of the class
consisting entirely of principal payments generally is extremely volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest are generally higher than prevailing market
yields on other mortgage-backed obligations because their cash flow patterns are
also volatile and there is a risk that the initial investment will not be fully
recouped. SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Trust's Board of Trustees if they can be disposed of promptly in the ordinary
course of business at a value reasonably close to that used in the calculation
of the net asset value per unit.
Asset-Backed Securities. The Balanced 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
B-9
<PAGE>
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 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
B-10
<PAGE>
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. The Portfolio will typically use interest rate swaps to preserve
a return on a particular investment or portion of its portfolio or to shorten
the effective duration of its portfolio investments. The purchase of an
interest rate floor or cap entitles the purchaser to receive payments of
interest on a notional principal amount from the seller, to the extent the
specified index falls below (floor) or exceeds (cap) a predetermined interest
rate. The Portfolio will only enter into interest rate swaps or interest rate
floor or cap transactions on a net basis, i.e. the two payment streams are
netted out, with the Portfolio receiving or paying, as the case may be, only the
net amount of the two payments.
The International Equity Index and International Growth Portfolios may
enter into currency swaps, which involve the exchange of the rights of a
Portfolio and another party to make or receive payments in specified currencies.
Currency swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency.
B-11
<PAGE>
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 Quanitative 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 maintained in a segregated account
by the Portfolio's custodian.
The Balanced Portfolio will not enter into an interest rate swap, floor or
cap transaction, and the International Equity Index and International Growth
Portfolios will not enter into currency swap transactions unless the unsecured
commercial paper, senior debt or the claims-paying ability of the other party
thereto is rated either A or A-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.
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.
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
B-12
<PAGE>
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's custodian (or
subcustodian) will maintain in a segregated account liquid assets having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the custodian or subcustodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These procedures are
designed to ensure that the Portfolio will maintain sufficient assets at all
times to cover its obligations under when-issued purchases, forward commitments
and delayed delivery transactions.
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.
B-13
<PAGE>
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.
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
B-14
<PAGE>
or by another authorized securities depository. Repurchase agreements are
considered to be loans by a Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds for
temporary or emergency purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price ("reverse repurchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Portfolio may decline below the repurchase price. The Portfolio will
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
While reverse repurchase agreements are outstanding, a Portfolio will maintain
in a segregated account liquid assets in an amount at least equal to the market
value of the securities, plus accrued interest, subject to the agreement.
Reverse repurchase agreements are considered to be borrowings by a Portfolio
under the 1940 Act.
Investment Companies. 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, 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 in
the prospectus. A Portfolio may adhere to more restrictive limitations with
respect to its investments in securities issued by other investment companies if
required by the SEC or deemed to be in the best interests of the Trust and will
comply with any fundamental investment restriction that may otherwise be
applicable to such investments.
Certain investment companies, i.e., unaffiliated investment companies whose
securities are purchased by the Global Asset Portfolio and unaffiliated money
market funds and Exchange Traded Funds (as defined in the Prospectus) whose
securities are purchased by any of the other Portfolios, or the Trust are not
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.
To the extent required by the 1940 Act, each Portfolio expects to vote the
shares of other investment companies that are held by it in the same proportion
as the vote of all other holders of such securities.
B-15
<PAGE>
Risks Related to Lower-Rated Securities. While any investment carries some
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of
these securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per unit.
There remains some uncertainty about the performance level of the market
for lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the market for lower-rated securities (resulting in a greater number of
bond defaults) and the value of lower-rated securities held in the portfolio of
investments.
The economy and interest rates can affect lower-rated securities
differently than other securities. For example, the prices of lower-rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher-rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security defaults, a Portfolio may incur additional
expenses to seek recovery. In addition, periods of economic uncertainty would
likely result in increased volatility for the market prices of lower-rated
securities as well as a Portfolio's net asset value. In general, both the
prices and yields of lower-rated securities will fluctuate.
In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
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
B-16
<PAGE>
responsibilities, liabilities and costs, and could involve other liquidity and
valuation difficulties.
The ratings of S&P, Moody's, Duff and Fitch evaluate the safety of a
lower-rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, Northern performs its own analysis of the issuers
whose lower-rated securities the Portfolio purchases. Because of this, the
Portfolio's performance may depend more on its own credit analysis than is the
case of mutual funds investing in higher-rated securities.
In selecting lower-rated securities, 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 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
B-17
<PAGE>
within a particular year, and may be affected by cash requirements for
redemption of units and by requirements which enable the Portfolios to receive
favorable tax treatment.
Investment Restrictions
In addition to the fundamental investment restrictions disclosed in the
Prospectus, each Portfolio is subject to the fundamental investment restrictions
enumerated below which may be changed with respect to a particular Portfolio
only by a vote of the holders of a majority of such Portfolio's outstanding
units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent a
Portfolio from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or acquiring securities of real
estate investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that each
Portfolio may, to the extent appropriate to its investment policies,
purchase securities of companies engaging in whole or in part in such
activities, enter into futures contracts and related options, and enter
into forward currency contracts in accordance with its investment objective
and policies.
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with
the purchase and sale of portfolio instruments in accordance with its
investment objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial
B-18
<PAGE>
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 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.
B-19
<PAGE>
(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 other the Global Asset 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 (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 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 acquisiton 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.
<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
701 Morningside Drive and (a telecommunications holding
Lake Forest, IL 60045 Trustee company), from February 1987 to retirement
in August 1992; Vice Chairman, Chief
Financial and Administrative Officer of Ameritech
prior to 1987; Director, Walgreen Co. (a
retail drug store business); Director of
Baker, Fentress & Co. (a closed-end, non-
diversified management investment company)
from April 1992 to present; Trustee, Goldman
Sachs Trust from 1989 to present.
Richard Gordon Cline, 62 Trustee Chairman, Hawthorne Investors,
4200 Commerce Court Inc. (a management advisory
Suite 300 services and private
Lisle, IL 60532 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,
Sears Tower, Suite 9650 Ltd. (a financial advisor)
233 S. Wacker Drive since July 1993; Vice
Chicago, IL 60606 President and Treasurer of
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
Sears, Roebuck and Co. (a retail
corporation) from February 1989 to July
1993; within the last five years he has
served as a Director of: Sears Roebuck
Acceptance Corp.; Discover Credit Corp.;
Sears Receivables Financing Group, Inc.;
Sears Credit Corp.; and Sears Overseas
Finance N.V; 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 Chief
50-H New England Avenue Investment Officer of The Ford Foundation
P.O. Box 640 (a 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.
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
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -------------------
<S> <C> <C>
holding company) since 1994 and Avondale
Financial 1988-1992, IBM Corporation;
Director: MBIA Insurance Corporation of
Illinois (bank 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
Northbrook, 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 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
70 West Madison St Partners, Inc. (a privately
Suite 1400 held management services firm)
Chicago, IL 60602 since 1990; President 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.
</TABLE>
B-23
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- -----------------------
<S> <C> <C>
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--
Investor Services Group prior
thereto.
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).
John W. Mosior, 58 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of 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,
New York, NY 10004 Investors Bank and Trust Company, (November
1993 to July 1995); Audit Manager of Arthur
Anderson, LLP (prior thereto).
Michael J. Richman, 36 Secretary Associate General Counsel,
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 (September
1991 to June 1992).
Howard B. Surloff, 32 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 (since November 1993 and May 1994, respectively;
Counsel to the Funds Group, GSAM since
November 1993); Associate of Shereff, Friedman,
Hoffman & Goodman, LLP (prior thereto).
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------- ---------- --------------------
<S> <C> <C>
Valerie A. Zondorak, 31 Assistant Vice President, Goldman Sachs
85 Broad Street Secretary (since March 1997); Counsel to
New York, NY 10004 the Funds Group, GSAM (since March 1997);
Associate, Shereff, Friedman, Hoffman &
Goodman, LLP (prior thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (since June
New York, NY 10004 1993); Funds Compliance
Officer, Citibank Global Asset Management
(August 1991 to June 1993).
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.
</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
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.
B-25
<PAGE>
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 Unitholders 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 Unitholders, 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 Unitholder 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, 1996:
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total Compensation
Aggregate Accrued as from Registrant and
Compensation Part of Fund Complex Paid to
Name of Trustee from Registrant Trust's Expenses Trustees
- --------------- --------------- ---------------- --------------------
<S> <C> <C> <C>
William H. Springer $45,000 $0 $45,000
Richard G. Cline ***
Edward J. Condon, Jr. $32,500 $0 $32,500
John W. English $31,000 $0 $31,000
James J. Gavin* $35,500 $0 $35,500
Sandra Polk Guthman ***
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $0 $40,500
</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 define benefit and define contribution plans and manages
over 70 equity and bond index comingled and common trust funds. As of December
31, 1997, Northern and its affiliates had approximately $______ 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
B-28
<PAGE>
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
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
B-29
<PAGE>
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.
Under its Transfer Agency Agreement with the Trust, with respect to units
held by Institutions, Northern has undertaken to perform some or all of the
following services: (1) establish and maintain an omnibus account in the name of
each Institution; (2) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption proceeds; (3) act as
the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of units in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions unitholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to units held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of units in accordance with instructions from the Trust
or its administrator; (5) act as
B-30
<PAGE>
income disbursing agent of the Trust in accordance with the terms of the
Prospectus and instructions from the Trust or its administrator; (6) provide
periodic statements of account; (7) answer inquiries (including requests for
Prospectuses and Additional Statements, and assistance in the completion of new
account applications) from investors and respond to all requests for information
regarding the Trust (such as current price, recent performance, and yield data)
and questions relating to accounts of investors (such as possible errors in
statements, and transactions); (8) respond to and seek to resolve all complaints
of investors with respect to the Trust or their accounts; (9) furnish proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices to investors; (10) furnish the Trust all
pertinent Blue Sky information; (11) perform all required tax withholding; (12)
preserve records; and (13) furnish necessary office space, facilities and
personnel. Northern may appoint one or more sub-transfer agents in the
performance of its services.
As compensation for the services rendered by Northern under the Transfer
Agency Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.05%, .10% and .15% of the average daily net asset value of the Class A, B, C
and D units, respectively, in the Portfolios.
Under its Custodian Agreement (and in the case of the International Growth
Portfolio and International Equity Index Portfolio, its Foreign Custody
Agreement) with the Trust, Northern (1) holds each Portfolio's cash and
securities, (2) maintains such cash and securities in separate accounts in the
name of the Portfolio, (3) makes receipts and disbursements of funds on behalf
of the Portfolio, (4) receives, delivers and releases securities on behalf of
the Portfolio, (5) collects and receives all income, principal and other
payments in respect of the Portfolio's investments held by Northern under the
Agreement, and (6) maintains the accounting records of the Trust. Northern may
employ one or more subcustodians, provided that Northern shall have no more
responsibility or liability to the Trust on account of any action or omission of
any subcustodian so employed than such subcustodian has to Northern and that the
responsibility or liability of the subcustodian to Northern shall conform to the
resolution of the Trustees of the Trust authorizing the appointment of the
particular subcustodian (or, in the case of foreign securities, to the terms of
any agreement entered into between Northern and such subcustodian to which such
resolution relates). In addition, the Trust's custodial arrangements provide,
with respect to foreign securities, that Northern shall not be: (i)
B-31
<PAGE>
responsible for the solvency of any subcustodian appointed by it with reasonable
care; (ii) responsible for any act, omission, default or for the solvency of any
eligible foreign securities depository; and (iii) liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
subcustodian has otherwise exercised reasonable care. Northern may also appoint
agents to carry out such of the provisions of the Custodian Agreement and the
Foreign Custody Agreement as Northern may from time to time direct, provided
that the appointment of an agent shall not relieve Northern of any of its
responsibilities under either Agreement. Northern has entered into agreements
with financial institutions and depositories located in foreign countries with
respect to the custody of the Portfolio's foreign securities.
As compensation for the services rendered to the Trust by Northern as
custodian with respect to each Portfolio except the International Growth
Portfolio and International Equity Index Portfolio, and the assumption by
Northern of certain related expenses, Northern is entitled to payment from the
Trust as follows: (i) $18,000 annually for each Portfolio, plus (ii) 1/100th of
1% annually of each Portfolio's average daily net assets to the extent they
exceed $100 million, plus (iii) a fixed dollar fee for each trade in portfolio
securities, plus (iv) a fixed dollar fee for each time that Northern as
Custodian receives or transmits funds via wire, plus (v) reimbursement of
expenses incurred by Northern as custodian for telephone, postage, courier fees,
office supplies and duplicating. The fees referred to in clauses (iii) and (iv)
are subject to annual upward adjustments based on increases in the Consumer
Price Index for All Urban Consumers, provided that Northern may permanently or
temporarily waive all or any portion of any upward adjustment.
As compensation for the services rendered to the Trust under the Foreign
Custody Agreement with respect to the International Growth Portfolio and
International Equity Index Portfolio, and the assumption by Northern of certain
related expenses, Northern is entitled to payment from the Trust as follows: (i)
$35,000 annually for the International Growth Portfolio and International Equity
Index Portfolio, plus (ii) 9/100th of 1% annually of the Portfolios' average
daily net assets, plus (iii) reimbursement for fees incurred by Northern as
foreign custodian for telephone, postage, courier fees, office supplies and
duplicating.
Unless sooner terminated, the Advisory Agreements, the Custodian Agreement (or
in the case of the International Growth
B-32
<PAGE>
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 units of such Portfolio (as defined below under "Other
Information"). Each agreement is terminable at any time without penalty by the
Trust (by specified Trustee or unitholder action) on 60 days' written notice to
Northern or NTQA and by Northern or NTQA on 60 days' written notice to the
Trust.
Prior to _______, 1998, Northern served as investment adviser to the Equity
Index, Small Company Index and International Equity Index Portfolios.
For the fiscal periods ended November 30 as indicated, the amount of the
Advisory Fee incurred by each Portfolio (after fee waivers) was:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 226,872 $ 81,249
Equity Index Portfolio (2) 603,016 380,061
Diversified Growth Portfolio (2) 768,689 845,029
Focused Growth Portfolio (1) 811,643 609,180
Small Company Index Portfolio (2) 212,150 172,085
International Growth Portfolio (3) 1,089,874 1,180,413
International Equity index Portfolio (4) 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) $ 136,185 $ 108,249
Equity Index Portfolio (2) 1,206,801 760,122
Diversified Growth Portfolio (2) 349,197 384,104
Focused Growth Portfolio (1) 304,447 228,443
</TABLE>
B-33
<PAGE>
Small Company Index Portfolio (2) 212,148 172,085
International Growth Portfolio (3) 272,159 295,103
International Equity Index Portfolio (4) N/A N/A
- ----------------------
(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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C>
Balanced Portfolio (1) $ 8,853 $ 3,624
Equity Index Portfolio (2) 92,186 40,881
Diversified Growth Portfolio (2) 14,368 15,548
Focused Growth Portfolio (1) 12,738 7,810
Small Company Index Portfolio (2) 11,706 8,647
International Growth Portfolio (3) 13,559 14,784
International Equity Index Portfolio (4) 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>
Balanced Portfolio (1) $ 21,294 $ 25,924
Equity Index Portfolio (2) 154,259 126,649
Diversified Growth Portfolio (2) 26,634 34,074
Focused Growth Portfolio (1) 21,498 25,698
Small Company Index Portfolio (2) 67,319 65,810
International Growth Portfolio (3) 170,117 160,492
International Equity Index Portfolio (4) 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
B-34
<PAGE>
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 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 unit of any Portfolio
or result in a financial loss to any unitholder. Moreover, if current
restrictions preventing a bank from legally sponsoring, organizing, controlling
or distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
In the Advisory 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
B-35
<PAGE>
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.)
B-36
<PAGE>
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
unitholders of the Portfolio.
During the fiscal year ended November 30, 1997, the Equity Index Portfolio
acquired and sold securities of [Merrill Lynch & Co., Inc., Salomon Brothers,
Inc., Morgan Stanley Group, Inc. and J.P. Morgan & Co., Inc.,] each a regular
broker/dealer. At November 30, 1997, the Equity Index Portfolio owned the
following amounts of securities of its regular broker/dealers, as defined in
Rule 10b-1 under the 1940 Act, or their parents: [Merrill Lynch, with an
approximate aggregate value of $1,709,000, Salomon Brothers, with an approximate
aggregate value of $607,000, Morgan Stanley, with an approximate aggregate value
of $1,148,000 and J.P. Morgan, with an approximate aggregate value of
$2,218,000.]
During the fiscal year ended November 30, 1997, the International Growth
Portfolio acquired and sold securities of [Nomura Securities Co., Ltd.,] 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: [Nomura Securities,
with an approximate aggregate value of $422,000.]
During the fiscal year ended November 30, 1997, the Balanced Portfolio
acquired and sold securities of [Lehman Brothers, Inc. and Salomon Brothers,
Inc.,] each a regular broker/dealer. At November 30, 1997, the Balanced
Portfolio owned the following amounts of securities of its regular/dealers, as
defined in Rule 10b-1 under the 1940 Act, or their parents: [Lehman Brothers,
with an approximate aggregate value of $480,000 and Salomon Brothers, with an
approximate aggregate value of $498,000.]
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 $ $ $ $
Equity
Index
Portfolio
Focused
Growth
Portfolio
Diversified
Growth
Portfolio
Small
Company
Index
Portfolio
International
Growth
Portfolio
International Equity Index Portfolio
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-38
<PAGE>
For the fiscal periods ended November 30 as indicated each Portfolio paid
brokerage commissions as follows:
<TABLE>
<CAPTION>
Total Total Brokerage
Fiscal Brokerage Amount of Commissions
Year Total Commissions Transactions Paid
Ended Brokerage Paid to On Which to Brokers
November Commissions Affiliated Commissions Providing
30, 1996: Paid Persons Paid Research
- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 53,002 $0 $ 33,133,354 $ 34,545
Equity
Index
Portfolio 86,325 0 176,685,003 71,053
Focused
Growth
Portfolio 325,022 5.607 189,320,203 248,133
(1.73)* (1.10%)**
Diversified
Growth
Portfolio 266,884 0 170,853,039 228,062
Small
Company
Index
Portfolio 90,057 0 74,698,179 44,761
International
Growth
Portfolio 1,797,065 0 531,192,806 636,028
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-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, 1995: Paid Persons Paid Research
- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balanced
Portfolio $ 45,837 $ 0 $ 24,906,175 $ 39,287
Equity
Index
Portfolio 112,575 0 152,546,455 112,575
Focused
Growth
Portfolio 192,628 0 111,053,831 146,993
Diversified
Growth
Portfolio 438,884 3,360 248,311,354 367,010
(.76%)* (.51%)**
Small
Company
Index
Portfolio 102,688 0 58,429,480 51,692
International
Growth
Portfolio 2,121,410 4,425 575,340,692 787,039
(.21%)* (.36%)**
</TABLE>
(*) Percentage of total commissions paid.
(**) Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
B-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 Advisery operations (the parties
giving due recognition to the fact that certain of such operations are performed
by Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to unitholders,
periodic updating of the Prospectus issued by the Trust, and reports filed with
the SEC and other regulatory authorities (including qualification under state
securities or Blue Sky laws of the Trust's units), and (4) provides the Trust,
to the extent not provided pursuant to such agreements, with adequate office
space and equipment and certain related services in Chicago.
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) $ 45,373 36,250
Equity Index Portfolio (2) 603,816 380,061
Diversified Growth Portfolio (2) 139,259 153,642
Focused Growth Portfolio (1) 101,553 76,148
Small Company Index Portfolio (2) 106,073 86,043
International Growth Portfolio (3) 136,235 147,552
International Equity Index Portfolio 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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio (1) $ 68,595 $ 54,375
Equity Index Portfolio (2) 176,462 229,985
</TABLE>
B-41
<PAGE>
<TABLE>
<S> <C> <C>
Diversified Growth Portfolio (2) 170,691 176,821
Focused Growth Portfolio (1) 148,402 114,221
Small Company Index Portfolio (2) 152,457 129,064
International Growth Portfolio (3) 168,984 173,776
International Equity Index Portfolio (4) 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 unitholders. 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:
1997 1996 1995
---- ---- ----
Balanced Portfolio (1) $ 65,547 $ 79,928
Equity Index Portfolio (2) 306,865 194,615
Diversified Growth Portfolio (2) 98,425 100,038
Focused Growth Portfolio (1) 80,020 87,261
Small Company Index Portfolio (2) 134,838 116,594
International Growth Portfolio (3) 55,347 N/A
International Equity Index Portfolio (4) N/A N/A
B-42
<PAGE>
________
(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, 1998, and
thereafter for successive 12-month periods, provided that the agreement is
approved annually (1) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" (as such term is defined by the
1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the Trustees or by the vote of a
majority of the outstanding units of such Portfolio (as defined below under
"Other Information"). The Administration Agreement is terminable at any time
without penalty by the Trust (upon specified Trustee or unitholder action) on 60
days' written notice to Goldman Sachs and by Goldman Sachs on 60 days' written
notice to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman
Sachs, as agent, sells units of each Portfolio on a continuous basis. Goldman
Sachs pays the cost of printing and distributing prospectuses to persons who are
not unitholders of the Trust (excluding preparation and typesetting expenses)
and of certain other distribution efforts. No compensation is payable by the
Trust to Goldman Sachs for such distribution services.
The Administration Agreement and the Distribution Agreement provide that
Goldman Sachs may render similar services to others so long as its services
under such Agreements are not impaired thereby. The Administration Agreement
provides that the Trust will indemnify Goldman Sachs against certain liabilities
(including liabilities under the Federal securities laws relating to untrue
statements or omissions of material fact and actions that are in accordance with
the terms of the Administration Agreement and Distribution Agreement) or, in
lieu thereof, contribute to resulting losses.
B-43
<PAGE>
Unitholder Servicing Plan
As stated in the Portfolios' Prospectus, Institutions may enter into
Servicing Agreements with the Trust under which they provide (or arrange to have
provided) support services to their Customers or other investors who
beneficially own such units in consideration of the Portfolios' payment of not
more than .10%, .15% and .25% (on an annualized basis) of the average daily net
asset value of the Class B, C and D units, respectively, beneficially owned by
such Customers or investors.
For the fiscal periods ended November 30 as indicated, the aggregate amount
of the Unitholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balanced Portfolio
Class B N/A N/A
Class C (1) $ 7,122.84 N/A
Class D (2) 61.37 N/A
Equity Index Portfolio
Class B N/A N/A
Class C (3) 46,497.48 $4,339.08
Class D (4) 7,257.26 479.72
Diversified Growth Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (4) 703.37 326.04
Focused Growth Portfolio
Class B N/A N/A
Class C (5) 3,027.51 N/A
Class D (6) 1,223.71 436.94
Small Company Index Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (6) 251.66 44.71
International Growth Portfolio
Class B N/A N/A
Class C N/A N/A
Class D (7) 200.72 4.25
</TABLE>
(1) Class C Units were issued on December 29, 1995.
(2) Class D Units were issued on February 20, 1996.
(3) Class C Units were issued on September 28, 1995.
(4) Class D Units were issued on September 14, 1994.
(5) Class C Units were issued on June 14, 1996.
(6) Class D Units were issued on December 8, 1994.
(7) Class D Units were issued on November 16, 1994.
Services provided by or arranged to be provided by
B-44
<PAGE>
Institutions under their Servicing Agreements may include: (1) establishing and
maintaining separate account records of Customers or other investors; (2)
providing Customers or other investors with a service that invests their assets
in units of certain classes pursuant to specific or pre-authorized instructions,
and assistance with new account applications; (3) aggregating and processing
purchase and redemption requests for units of certain classes from Customers or
other investors, and placing purchase and redemption orders with the Transfer
Agent; (4) issuing confirmations to Customers or other investors in accordance
with applicable law; (5) arranging for the timely transmission of funds
representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other investors; (7) providing
information periodically to Customers or other investors showing their positions
in units; (8) responding to Customer or other investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the Institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to units of certain classes beneficially owned by Customers or other investors;
(11) if required by law, forwarding unitholder communications from the Trust
(such as proxy statements and proxies, unitholder reports, annual and semi-
annual financial statements and dividend, distribution and tax notices) to
Customers and other investors; (12) providing such office space, facilities and
personnel as may be required to perform its services under the Servicing
Agreement; (13) maintaining appropriate management reporting and statistical
information; (14) paying expenses related to the preparation of educational and
other explanatory materials in connection with the development of investor
services; (15) developing and monitoring investment programs; and (16) providing
such other similar services as the Trust may reasonably request to the extent
the Institutions are permitted to do so under applicable statutes, rules and
regulations.
The Trust's agreements with Institutions are governed by a Plan (called the
"Unitholder Servicing Plan"), which has been adopted by the Board of Trustees.
Pursuant to the Unitholder Servicing Plan, the Board of Trustees will review, at
least quarterly, a written report of the amounts expended under the Trust's
agreements with Institutions and the purposes for which the expenditures were
made. In addition, the arrangements with Institutions must be approved annually
by a majority of the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust, as defined in the 1940 Act, and have
no direct or indirect financial interest in such arrangements.
B-45
<PAGE>
The Board of Trustees has approved the arrangements with Institutions based
on information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their unitholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their units in an
efficient manner.
B-46
<PAGE>
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, Sears Tower, 233 S. Wacker Drive,
Chicago, Illinois 60606-6301, have been selected as auditors of the Trust. In
addition to audit services, Ernst & Young LLP reviews the Trust's Federal and
state tax returns, and provides consultation and assistance on accounting,
internal control and related matters.
In-Kind Purchases
Payment for units of a Portfolio may, in the discretion of Northern, be
made in the form of securities that are permissible investments for the
Portfolio as described in the Prospectus. For further information about this
form of payment, contact Northern. In connection with an in-kind securities
payment, a Portfolio will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Portfolio and that the Portfolio receive satisfactory assurances that it will
have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Portfolio; and that adequate
information be provided concerning the basis and other tax matters relating to
the securities.
The additional transaction fee described in the Prospectus with respect to
the Global Asset Portfolio, the Small Company Index Portfolio and the
International Equity Index Portfolio does not apply to in-kind purchases of
units that are structured to minimize the related brokerage, market impact costs
and other transaction costs to such Portfolios as described in the Prospectus.
B-47
<PAGE>
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a class
of units computes such return by determining the average annual compounded rate
of return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T=(ERV) 1/n-1
---
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
Each Portfolio that advertises an "aggregate total return" for a class of
units computes such return by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T=[(ERV)]-1
---
P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per unit
existing on the reinvestment date, (2) all recurring fees charged to all
unitholder accounts are included, and (3) the portfolio transaction fee is taken
into account for purchases of units of the Global Asset Portfolio, 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
B-48
<PAGE>
performance of predecessor collective funds adjusted to reflect the higher
estimated fees and expenses applicable to such Portfolios' Class A Units at the
time of their commencement. Although all such predecessor collective funds were
managed by Northern for the periods stated in a manner and pursuant to
investment objectives that were equivalent in all material respects to the
management and investment objectives of the corresponding Portfolios, such
predecessor collective funds were not registered under the 1940 Act and were not
subject to certain investment restrictions imposed by the 1940 Act. If they had
been registered under the 1940 Act, performance might have been adversely
affected. The average annual total returns and aggregate total returns shown for
the Portfolios for their Class C and/or Class D units also include, for the
periods prior to the inception of such classes, the performance of the
Portfolios' Class A Units. Because the fees and expenses of Class C and Class D
Units are, respectively, 0.24% and 0.39% higher than those of Class A Units,
actual performance for periods prior to the inception of Class C and Class D
Units would have been lower if such higher fees and expenses had been taken into
account.
Following commencement of operations of the Portfolios, Goldman Sachs reimbursed
expenses to the Portfolios and voluntarily agreed to reduce a portion of its
administration fee for each Portfolio pursuant to the undertaking described
above under "Additional Trust Information - Administrator and Distributor" and
"-Investment Advisers, Transfer Agent and Custodian," and Northern waived a
portion of its Investment Advisery fees with respect to the Portfolios. The
average annual total returns and aggregate total returns of each Portfolio with
respect to Class A, Class C and Class D Units, as applicable, are shown below
with and without such fee waivers and expense reimbursements.
B-49
<PAGE>
For Periods Ended November 30, 1997
<TABLE>
<CAPTION>
Total Returns(%) Aggregate Total Returns(%) Average Annual Total%
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
expense reimbursements - -
w/o fee waivers and
expense reimbursements -
Class D
with fee waivers and
expense reimbursements - -
w/o fee waivers and
expense reimbursements -
Focused Growth/2/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class C
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
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>
Equity Index/3/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements -
Class C
with fee waivers and
expense reimbursements -
w/o fee waivers and
expense reimbursements -
Class D
with fee waivers and
expense reimbursements -
w/o fee waivers and
expense reimbursements -
Small Company Index/4/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
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 Growth/5/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Balanced/6/
Class A
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class C
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
Class D
with fee waivers and
expense reimbursements
w/o fee waivers and
expense reimbursements
</TABLE>
B-52
<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
expense reimbursements - - -
w/o fee waivers and
expense reimbursements - - -
</TABLE>
- ----------------------
1. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to September 14, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. The predecessor collective fund has been managed
in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio for the periods shown. The performance data of the predecessor
collective fund is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
2. For Class C and Class D Units, performance from July 1, 1993 to June 14,
1996 (commencement of Class C Units) and December 8, 1994 (commencement of
Class D Units), respectively, is that of Class A Units. Class A Units
commenced operations on July 1, 1993. Because fees and expenses of Class C
and Class D Units are .24% and .39%, respectively, higher than those of
Class A Units, actual performance would have been lower had such higher
expenses been taken into account.
3. For Class A, C and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class C and D Units, performance data from January 11, 1993 to September
28, 1995 (commencement of Class C Units) and September 14, 1994
(commencement of Class D Units), respectively, is that of Class A Units.
Because fees and expenses of Class C and Class D Units are .24% and .39%,
respectively, higher than those of Class A Units, actual performance would
have been lower had such higher fees and expenses been taken into account.
The predecessor collective fund has been managed in a manner and pursuant
to investment objectives equivalent in all material respects to the
management and investment objective of the Portfolio for the periods shown.
The performance data of the predecessor collective fund is adjusted to
reflect the higher fees and
B-53
<PAGE>
expenses applicable to Class A Units at the time of their inception.
4. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to December 8, 1994,
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. Performance data of the predecessor collective
fund is shown from August 1, 1988 (the date such collective fund was first
managed in a manner and pursuant to investment objectives equivalent in all
material respects to the management and investment objective of the
Portfolio) and is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
5. For Class A and Class D Units, performance data prior to March 28, 1994
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from March 28, 1994 to November 16, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. Performance data of the predecessor collective
fund is shown from July 1, 1990 (the date such fund was first managed in a
manner and pursuant to investment objectives equivalent in all material
respects to the management and investment objective of the Portfolio) and
is adjusted to reflect the higher fees and expenses applicable to Class A
Units at the time of their inception.
6. For Class C and Class D Units, performance from July 1, 1993 to December
29, 1995 (commencement of Class C Units) and February 20, 1996
(commencement of Class D Units), respectively, is that of Class A Units.
Class A Units commenced operations on July 1, 1993. Because fees and
expenses of Class C and Class D Units are .24% and .39%, respectively,
higher than those of Class A Units, actual performance would have been
lower had such higher expenses been taken into account.
7. Commenced operations on April 1, 1997.
B-54
<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
units in accordance with the method prescribed by the SEC for mutual funds:
a-b
---
Yield = 2[(cd + 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 the period
that were entitled to receive dividends.
d = maximum offering price per unit on the last day of the period.
For the 30 day period ended November 30, 1997, the annualized yields of the
Class A, Class C and Class D units 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 Advisery fees with
respect to the Portfolio. In the absence of such advisory and administration
fee reductions and expense limitations, the 30-day yield for Class A, Class C
and Class D units would have been 2.54%, 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 units in a Portfolio, performance quotations
for units of Class B, C and D of the Portfolio will be lower than the quotations
for Class A units of the Portfolio, which will not bear any fees for unitholder
support services and will bear minimal transfer agency fees.
B-55
<PAGE>
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their unitholders that are not described in the
Portfolios' Prospectuses. No attempt is made to present a detailed explanation
of the tax treatment of the Portfolios or their unitholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers
with specific reference to their own tax situations.
General
Each Portfolio will elect to be taxed separately as a regulated investment
company under Part I of Subchapter M of Subtitle A, Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, each Portfolio generally is exempt from Federal income tax on its net
investment income and realized capital gains which it distributes to
unitholders, provided that it distributes an amount equal to at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code that are described below.
In addition to satisfying the Distribution Requirement, each Portfolio must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement").
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of each Portfolio's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Portfolio has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Portfolio does not hold more than
10% of the outstanding voting securities of such issuer) and no more than 25% of
the value of each Portfolio's total assets may be invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses.
Each Portfolio intends to distribute to unitholders any
B-56
<PAGE>
excess of net long-term capital gain over net short-term capital loss ("net
capital gain") for each taxable year. Such gain is distributed as a capital gain
dividend and is taxable to unitholders as long-term or capital gain regardless
of the length of time the unitholder has held the units, whether such gain was
recognized by the Portfolio prior to the date on which a unitholder acquired
units of the Portfolio and whether the distribution was paid in cash or
reinvested in units. In addition, investors should be aware that any loss
realized upon the sale, exchange or redemption of units held for six months or
less will be treated as a long-term capital loss to the extent of the capital
gain dividends the unitholder has received with respect to such units.
In the case of corporate unitholders, distributions of a Portfolio for any
taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by such Portfolio
for the year. Generally, a dividend will be treated as a "qualifying dividend"
if it has been received from a domestic corporation.
Ordinary income of individuals is taxable at a maximum marginal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. 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 (a "long-
term"); for property held for more than 12 months, but no longer than 18 months
the maximum tax rate on capital gains continues to be 28%. Capital gains and
ordinary income of corporate taxpayers are both taxed at a nominal maximum rate
of 35%.
If for any taxable year any Portfolio does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to unitholders. In such
event, all distributions (whether or not derived from exempt-interest income)
would be taxable as ordinary income, to the extent of such Portfolio's current
and accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate unitholders.
Unitholders will be advised annually as to the Federal income tax
consequences of distributions made by the Portfolios each year.
B-57
<PAGE>
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 unitholder (i) who has provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt of
taxable interest or dividend income properly, or (iii) who has failed to certify
to the Trust, when required to do so, that he is not subject to backup
withholding or that he is an "exempt recipient."
Taxation of Certain Financial Instruments
Special rules govern the Federal income tax treatment of financial
instruments that may be held by the Portfolios. These rules may have a
particular impact on the amount of income or gain that the Portfolios must
distribute to their respective unitholders to comply with the Distribution
Requirement 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
B-58
<PAGE>
thereof which exceeds the unrecognized gain (if any) with respect to the other
part of the straddle, and to certain wash sales regulations. Under short sales
rules, which are also applicable, the holding period of the securities forming
part of the straddle (if they have not been held for the long-term holding
period) will be deemed not to begin prior to termination of the straddle. With
respect to certain Instruments, deductions for interest and carrying charges may
not be allowed. Notwithstanding the rules described above, with respect to
futures contracts which are part of a "mixed straddle" to sell related options
and certain foreign currency contracts which are properly identified as such, a
Portfolio may make an election which will exempt (in whole or in part) those
identified futures contracts, options and foreign currency contracts from the
Rules of Section 1256 of the Code including "the 40%-60% rule" and the mark-to-
market on gains and losses being treated for Federal income tax purposes as sold
on the last business day of the Portfolio's taxable year, but gains and losses
will be subject to such short sales, wash sales and loss deferral rules and the
requirement to capitalize interest and carrying charges. Under Temporary
Regulations, each Portfolio would be allowed (in lieu of the foregoing) to elect
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and losses
would be recognized and offset on a periodic basis during the taxable year.
Under either election, "the 40%-60% rule" will apply to the net gain or loss
attributable to the Instruments, but, in the case of a mixed straddle account
election, not more than 50% of any net gain may be treated as long-term and no
more than 40% of any net loss may be treated as short-term.
A foreign currency contract must meet the following conditions in order to
be subject to the mark-to-market rules described above: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
As of the date of this Additional Statement, the Treasury Department has not
issued any such regulations. Other foreign currency contracts entered into by a
Portfolio may result in the creation of one or more straddles for Federal income
tax purposes, in which case certain loss deferral, short sales, and wash sales
rules and the requirement to capitalize interest and carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the Portfolios may
make, such as foreign debt securities and foreign
B-59
<PAGE>
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.
B-60
<PAGE>
Foreign Investors
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain
on the redemption of units or in respect of capital gain dividends, provided
such unitholder submits a statement, signed under penalties of perjury,
attesting to such unitholder's exempt status. Different tax consequences apply
to a foreign unitholder engaged in a U.S. trade or business. Foreign
unitholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of investing in a Portfolio.
Conclusion
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Additional Statement. Such laws and regulations
may be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolio or its
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
Although each Portfolio expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, each
Portfolio may be subject to the tax laws of such states or localities.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an
unlimited number of full and fractional units of beneficial interest of one or
more separate series representing interests in one or more investment
portfolios. The Trust may hereafter create series in addition to the Trust's
eighteen existing series, which represent interests in the Trust's eighteen
respective portfolios, seven of which are discussed in
B-61
<PAGE>
this Additional Statement. The Trust Agreement further permits the Board of
Trustees to classify or reclassify any unissued units into additional series or
subseries within a series. Pursuant to such authority, the Trustees have
authorized the issuance of an unlimited number of units of beneficial interest
in four separate subseries (sometimes referred to as "classes") of units in each
of the Trust's non-money market portfolios: Class A, B, C and D units. Under the
terms of the Trust Agreement, each unit of each Portfolio is without par value,
represents an equal proportionate interest in the particular Portfolio with each
other unit of its class in the same Portfolio and is entitled to such dividends
and distributions out of the income belonging to the Portfolio as are declared
by the Trustees. Upon any liquidation of a Portfolio, unitholders of each class
of a Portfolio are entitled to share pro rata in the net assets belonging to
that class available for distribution. Units do not have any preemptive or
conversion rights. The right of redemption is described under "Investing-
Redemption of Units" in the Prospectus. In addition, pursuant to the terms of
the 1940 Act, the right of a unitholder to redeem units and the date of payment
by a Portfolio may be suspended for more than seven days (a) for any period
during which the New York Stock Exchange is closed, other than the customary
weekends or holidays, or trading in the markets the Portfolio normally utilizes
is closed or is restricted as determined by the SEC, (b) during any emergency,
as determined by the SEC, as a result of which it is not reasonably practicable
for the Portfolio to dispose of instruments owned by it or fairly to determine
the value of its net assets, or (c) for such other period as the SEC may by
order permit for the protection of the unitholders of the Portfolio. The Trust
may also suspend or postpone the recordation of the transfer of its units upon
the occurrence of any of the foregoing conditions. In addition, units of each
Portfolio are redeemable at the unilateral option of the Trust if the Trustees
determine in their sole discretion that failure to so redeem may have material
adverse consequences to the unitholders of the Portfolio. Units when issued as
described in the Prospectus are validly issued, fully paid and nonassessable,
except as stated below.
The proceeds received by each Portfolio for each issue or sale of its
units, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Portfolio. The underlying assets
of each Portfolio will be segregated on the books of account, and will be
charged with the liabilities in respect to that Portfolio and with a share of
the general liabilities of the Trust. Expenses with respect to the Portfolios
are normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be
B-62
<PAGE>
fairly made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding units of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an Investment Advisery agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding units of such investment portfolio. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees may be
effectively acted upon by unitholders of the Trust voting together in the
aggregate without regard to a particular investment portfolio. In addition,
unitholders of each of the classes in a particular investment portfolio have
equal voting rights except that only units of a particular class of an
investment portfolio will be entitled to vote on matters submitted to a vote of
unitholders (if any) relating to unitholder servicing expenses and transfer
agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder voting
only for the election or removal of one or more Trustees, if a meeting is called
for that purpose, and for certain other designated matters. Each Trustee serves
until the next meeting of unitholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the unitholders or two-thirds of the Trustees.
Under the Delaware Business Trust Act (the "Delaware Act"), Unitholders 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 Unitholder liability exists in many other
states. As a result, to the extent that the Trust, business trust or a
Unitholder is subject to the jurisdiction of courts in such other states, those
courts may not
B-63
<PAGE>
apply Delaware law and may subject the Unitholders to liability. To offset this
risk, the Trust Agreement (i) contains an express disclaimer of Unitholder
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 Unitholder held
personally liable for the obligations of the Trust solely by reason of being or
having been a Unitholder and not because of the Unitholder's acts or omissions
or for some other reason. Thus, the risk of a Unitholder incurring financial
loss beyond his or her investment because of Unitholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refuses to apply Delaware law; (2) the 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 Unitholder 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.
As of December 31, 1997 substantially all of the Portfolios' outstanding
units were held of record by Northern for the benefit of its customers and the
customers of its affiliates and correspondent banks that have invested in the
Portfolios. As of the same date, the Trust's Trustees and officers owned
beneficially less than 1% of the outstanding units of each Portfolio. Northern
has advised the Trust that the following persons (whose mailing address is: c/o
The Northern Trust Company, 50 South LaSalle, Chicago, IL 60675) beneficially
owned five percent or more of the outstanding units of the following Portfolios
as of December 31, 1997:
<TABLE>
<CAPTION>
Number Percentage
of Outstanding
Units Units
--------- ------------
<S> <C> <C>
BALANCED PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 1,336,778 30.885%
Retirement Trust for Employees
of Tetra Pak Inc. 801,586 18.11%
Jordan Industries, Inc. 445,365 10.06%
LaPorte, The Retirement Plus Plan 292,862 6.62%
DIVERSIFIED GROWTH PORTFOLIO
</TABLE>
B-64
<PAGE>
<TABLE>
<CAPTION>
Number Percentage
of Outstanding
Units Units
--------- -----------
<S> <C> <C>
The Northern Trust Company
Pension Plan 4,423,922 39.88%
The Pension Plan for Home
Office Employees of Mutual
Trust Equity 574,037 5.17%
EQUITY INDEX PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 8,152,491 14.94%
Libby-Owens-Ford Company
Savings Trust 4,152,436 7.61%
Meadows Foundation Incorporated 5,568,632 10.21%
FOCUSED GROWTH PORTFOLIO
The Northern Trust Company
Thrift Incentive Plan 4,048,915 42.98%
Doe Run Resources Corporation
Retirement Plan 985,151 10.46%
Rexene Corporation
Retirement Plan 650,239 6.90%
Kitch Drotchas Planability
Trust Profit Sharing Plan 482,583 5.12%
SMALL COMPANY PORTFOLIO
The Northern Trust Company
Pension Plan 2,878,538 27.19%
Doe Run Resources Corporation
Retirement Plan 759,927 7.18%
Kettering Foundation 892,343 8.43%
INTERNATIONAL EQUITY INDEX
The Northern Trust Company
Pension Plan 1,178,522 29.49%
NI Gas Savings Investment
and Thrift Trust 803,653 20.11%
The Northern Trust Company
Thrift Incentive Plan 482,609 12.08%
Sisters of the Precious
Blood Fund 200,647 5.02%
Fel-Pro Incorporated Employees--
Profit Sharing & Retirement Trust 55,678 18.91%
Lincoln Electric Company Master
Retirement Trust 238,554 5.97%
INTERNATIONAL GROWTH PORTFOLIO
The Northern Trust Company
Pension Plan 1,466,965 13.82%
First National Bank of
North Dakota 758,650 7.15%
Global Industrial Technologies, Inc.
Master Retirement Trust 985,440 9.28%
</TABLE>
B-65
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Tuthill Corporation Master
Retirement Trust 726,045 6.84%
White Cap, Inc. Master
Retirement Trust 669,827 6.31%
</TABLE>
B-66
<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, any portfolio losses,
fees for the registration or qualification of Portfolio units under Federal or
state securities laws, expenses of the organization of the Portfolios, taxes,
interest, costs of liability insurance, fidelity bonds, indemnification or
contribution, any costs, expenses or losses arising out of any liability of, or
claim for damages or other relief asserted against, the Trust for violation of
any law, legal, tax and auditing fees and expenses, Servicing Fees, expenses of
preparing and printing prospectuses, statements of additional information, proxy
materials, reports and notices and the printing and distributing of the same to
the Trust's unitholders and regulatory authorities, compensation and expenses of
its Trustees, expenses of industry organizations such as the Investment Company
Institute, miscellaneous expenses and extraordinary expenses incurred by the
Trust.
The term "majority of the outstanding units" of either the Trust or a
particular Portfolio means, with respect to the approval of an Investment
Advisery agreement or a change in a fundamental investment restriction, the vote
of the lesser of (i) 67% of more of the units of the Trust or such Portfolio
present at a meeting, if the holders of more than 50% of the outstanding units
of the Trust or such Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding units of the Trust or such Portfolio.
Statements contained in the Prospectus or in this Additional Statement as
to the contents of any contract or other documents referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part, each such
statement being qualified in all respects by such reference.
B-67
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, contained in the Annual Report for the fiscal year ended
November 30, 1997 will be filed by amendment.
B-68
<PAGE>
APPENDIX A
Description of Bond Ratings
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher rated categories.
BB and B: Debt rated BB and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt rated BB has less near-
term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity
to meet timely interest and principal payments. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
To provide more detailed indications of credit quality, the ratings AA and
lower may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
1-A
<PAGE>
S&P may attach the rating "r" to highlight derivative, hybrid and certain
other obligations that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and
are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba and B: Bonds that possess one of these ratings provide questionable
protection of interest and principal. Ba indicates some speculative
elements. B indicates a general lack of characteristics of desirable
investment.
The foregoing ratings for corporate and municipal long-term debt are
sometimes presented in parenthesis preceded with a "con"
2-A
<PAGE>
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 provisional pending delivery of the bonds. The
rating may be revised prior to delivery if changes occur in the legal documents
or the underlying credit quality of the bond.
The following summarizes the highest six ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for corporate and municipal long term debt:
AAA: Debt rated AAA is of the highest credit quality. The risk factors
are considered to be negligible, being only slightly more than for risk-
free U.S. Treasury debt.
AA: Debt rated AA is of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A: Bonds that are rated A have protection factors which are average but
adequate. However risk factors are more variable and greater in periods of
economic stress.
BBB: Bonds that are rated BBB have below average protection factors but
such protection factors are still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles.
BB and B: Bonds that are rated BB or B are below investment grade. Bonds
rated BB are deemed likely to meet obligations when due. Bonds rated B
possess the risk that the obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA and
lower may be modified by the addition of a plus or minus sign to show
relative standing within these major categories.
The following summarizes the highest six ratings used by Fitch IBCA, Inc.
("Fitch") for corporate and municipal bonds:
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as
3-A
<PAGE>
strong as bonds rated "AAA". 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 "F-1+."
A: Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB: Bonds considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified,
which could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While securities in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the instrument.
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.
4-A
<PAGE>
The following summarizes the two highest ratings used by Moody's for short-
term municipal notes and variable rate demand obligations:
MIG-1/VMIG-1: Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2: Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
The two highest rating categories of D&P for short-term debt are D1 and D2.
D&P employs three designations, D1+, D1 and D1-, within the highest rating
category. D1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D2 indicates good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of
Bond Ratings" for tax-exempt notes and other short-term obligations. Fitch uses
the short-term ratings described below under "Description of Commercial Paper
Ratings" for new municipal notes.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted in A-1+. Capacity for
timely payment on commercial paper rated A-2 is satisfactory but the relative
degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers or related supporting institutions rated Prime-1 are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will often be evidenced by the
following
5-A
<PAGE>
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. Issuers or related supporting institutions rated Prime-2
are considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as the F-1+ and F-1 categories.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
6-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within three business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Portfolio could use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this could include the use of futures contract sales to protect
against expected increases in interest rates and the use of futures contract
purchases to offset the impact of interest rate declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures contracts.
Interest rate futures contracts can also be used by a portfolio for
nonhedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in
1-B
<PAGE>
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Portfolio
would deal only in standardized contracts on recognized exchanges. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. A Portfolio may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
II. Index Futures Contracts
General. A stock or bond index assigns relative values to the securities
included in the index and the index fluctuates with changes in the market values
of the securities included.
A Portfolio may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio may do so either to hedge the value of its portfolio
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold.
2-B
<PAGE>
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.
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
3-B
<PAGE>
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 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
4-B
<PAGE>
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.
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
5-B
<PAGE>
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 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
6-B
<PAGE>
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 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
7-B
<PAGE>
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 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
Money Market Portfolios
- -------------------------------------------------------------------------------
MARKET VIEW
THE BENCHMARK DIVERSIFIED ASSETS PORTFOLIO
THE BENCHMARK GOVERNMENT PORTFOLIO
THE BENCHMARK GOVERNMENT SELECT PORTFOLIO
The Federal Reserve's monetary policy and expectations about where that policy
was headed had the largest influence on portfolio activity during the fiscal
year ended November 30, 1996.
The Diversified Assets Portfolio was heavily weighted in commercial paper,
where yields were the most attractive. We maintained a barbell maturity struc-
ture as we tried to anticipate Fed activity. Any opportunities to capture ad-
ditional yield by extending the portfolio's maturity were evaluated on a case-
by-case basis. At year end, the portfolio's average maturity was 35 days--con-
sistent with other money market funds with similar investment objectives.
During the first half of the fiscal year, the Government and Government Se-
lect Portfolios were heavily weighted in monthly agency securities. We ex-
pected the federal funds rate to go down, so we initiated this strategy to ex-
tend the portfolios and take advantage of higher yields. In the second half of
the year, as signs of a strengthening economy emerged, the consensus was that
the Fed would raise rates. We employed a barbell strategy, focusing on one-
year Treasury bills for yield and to maintain our average maturity and over-
night securities for liquidity.
Looking ahead, year-end pressures should push rates higher. After that, fi-
nal inflation numbers for 1996 may cause the Fed to take action. We will main-
tain our current portfolio structures and continue to act defensively in an-
ticipating the Fed's next move.
Mary Ann Flynn and Ed Kyritz, Portfolio Managers
THE BENCHMARK TAX-EXEMPT PORTFOLIO
Early in the fiscal year, our outlook was for a stable or declining interest
rate environment. Our strategy, therefore, was to keep the portfolio's average
maturity longer than other portfolios with a similar investment objective.
When short-term rates are stable or declining, it is better to have a rela-
tively longer maturity structure in order to capture incremental yield in-
creases.
As it turned out, interest rates remained relatively stable during the year,
and our strategy worked well. The portfolio's one-year performance was favora-
ble compared to industry averages.
Going forward, we plan to maintain the portfolio's relatively longer average
maturity. Currently, the consensus is split as to whether the Federal Re-
serve's next move will be a tightening or easing of rates. We believe that a
stable rate environment will prevail for at least the next quarter, and possi-
bly for the next six to 12 months. However, we will continue to monitor and
evaluate the country's economic data as it is released, and we will position
the portfolio accordingly.
Brad Snyder, Portfolio Manager
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company, or its affiliates, and are not Federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested. The
Benchmark Money Market Portfolios seek to maintain a net asset value of $1.00
per unit, but there can be no assurance that they will be able to do so on a
continuous basis.
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
INVESTMENT ABBREVIATIONS AND NOTES:
AMBAC--American Municipal Bond Assurance Corp.
BAN --Bond Anticipation Note
BTP --Bankers Trust Partnership
Colld.
--Collateral
CP --Commercial Paper
FGIC --Financial Guaranty Insurance Corp.
FNMA --Federal National Mortgage Association
FRN --Floating Rate Note
FSAC --Financial Security Assurance Corp.
GO --General Obligation
Gtd. --Guaranteed
GNMA --Government National Mortgage Association
HDA --Housing Development Authority
IDA --Industrial Development Authority
IDR --Industrial Development Revenue
LOC
--Letter of Credit
MBIA --Municipal Bond Insurance Association
ML SG--Merrill Lynch/Societe Generale
P-Floats
--Puttable Floating Rate Security
PCR --Pollution Control Revenue
RAN --Revenue Anticipation Note
TAN --Tax Anticipation Note
TOB --Tender Option Bond
TRAN --Tax and Revenue Anticipation Note
VRDN --Variable Rate Demand Note
- --The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --Interest rates represent either the stated coupon rate, annualized yield on
date of purchase for discounted notes, or, for floating rate securities, the
current reset rate.
- --Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
- --The amortized cost also represents cost for federal income tax purposes.
- --Interest rates are reset daily and interest is payable monthly with respect
to all joint repurchase agreements.
See accompanying notes to financial statements.
2
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED ASSETS PORTFOLIO
BANK NOTES--2.2%
Boatmen's National Bank of Kansas
City FRN
$ 50,000 5.580% 12/03/96 $ 49,995
Boatmen's National Bank of St. Louis
FRN
20,000 5.580 12/03/96 20,000
- -------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 69,995
- -------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--10.9%
DOMESTIC DEPOSITORY INSTITUTIONS--1.1%
First Alabama Bank
$ 10,000 5.400% 03/07/97 $ 10,000
First Tennessee Bank
25,000 5.300 12/23/96 25,000
--------
35,000
FOREIGN DEPOSITORY INSTITUTIONS--9.8%
Abbey National PLC, London
100,000 5.510 04/15/97 100,009
ABN-Amro Bank, New York
35,000 5.690 04/17/97 35,002
Credit Agricole, New York
30,000 5.420 12/30/96 30,002
Deutsche Bank, London
25,000 5.420 12/27/96 25,001
Landesbank Hessen, New York
20,000 6.090 09/11/97 20,065
Norinchukin Bank, New York
25,000 5.540 12/06/96 25,001
Societe Generale, New York
26,000 5.840 10/06/97 26,057
Sumitomo Bank Ltd., New York
5,000 5.410 12/09/96 5,000
35,000 5.370 12/12/96 35,000
Swiss Bank Corp., New York
10,000 5.530 12/18/96 10,001
--------
311,138
- -------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT $346,138
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Amortized
Amount Interest Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER--48.2%
ASSET-BACKED SECURITIES--9.5%
Ascot Capital Corp.
$ 22,100 5.373% 12/20/96 $ 22,038
Barton Capital Corp.
2,718 5.369 12/16/96 2,712
Centric Funding
13,000 5.344 12/04/96 12,994
5,000 5.405 12/05/96 4,997
Cooperative Association of Tractor
Dealers, Inc.
13,600 5.446 12/10/96 13,582
7,600 5.524 01/10/97 7,554
Crosby Head Funding Corp.
10,000 5.478 12/19/96 9,973
Eureka Securitization, Inc.
10,000 5.360 12/03/96 9,997
Jet Funding Corp. (Dai-Ichi Kangyo
Bank LOC)
18,916 5.452 12/02/96 18,913
30,563 5.506 12/30/96 30,429
SALTS (II) Cayman Islands Corp.
25,000 5.775 12/19/96 25,000
SALTS (III) Cayman Islands Corp.
48,000 5.681 01/23/97 48,000
30,000 5.974 01/23/97 30,000
Strategic Asset Funding Corp. (Sanwa
Bank LOC)
40,744 5.476 01/31/97 40,371
WCP Funding, Inc.
25,000 5.455 12/03/96 24,992
----------
301,552
COMMUNICATIONS--4.6%
GTE Financial Corp.
25,997 5.353 12/13/96 25,951
Lucent Technologies, Inc.
75,000 5.404 12/02/96 74,989
NYNEX Corp.
35,000 5.394 02/14/97 34,612
11,000 5.400 02/21/97 10,867
----------
146,419
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
DOMESTIC DEPOSITORY INSTITUTIONS--0.2%
Bankers Trust Corp.
<S> <C> <C> <C>
$ 7,300 5.463% 04/04/97 $ 7,166
ELECTRONIC AND OTHER ELECTRICAL COMPONENTS--4.5%
Cooper Industries, Inc.
50,000 5.404 12/02/96 49,993
Sanyo Electric Finance (USA) Corp.
2,000 5.432 02/07/97 1,980
5,000 5.446 02/25/97 4,936
Whirlpool Financial Corp.
1,440 5.350 12/02/96 1,440
27,000 5.420 12/04/96 26,988
10,000 5.360 12/20/96 9,972
33,000 5.370 12/20/96 32,907
15,000 5.474 02/24/97 14,809
----------
143,025
FOOD AND KINDRED PRODUCTS--2.2%
Pepsico, Inc.
20,000 5.405 12/03/96 19,994
Philip Morris Companies, Inc.
50,000 5.404 12/02/96 49,993
----------
69,987
FOOD STORES--0.5%
Big B, Inc. (NationsBank Georgia LOC)
17,000 5.495 12/18/96 16,956
FOREIGN DEPOSITORY INSTITUTIONS--2.7%
Halifax Building Society
1,550 5.469 03/13/97 1,527
National Australia Funding Inc.
1,000 5.445 02/12/97 989
Nationwide Building Society
39,052 5.474 04/07/97 38,315
San Paolo U.S. Financial Co.
11,000 5.484 04/16/97 10,778
Woolwich Building Society
35,000 5.412 12/13/96 34,938
----------
86,547
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
GENERAL MERCHANDISE STORES--0.8%
J.C. Penney Funding Corp.
<S> <C> <C> <C>
$ 25,000 5.415% 03/07/97 $ 24,645
HOLDING AND OTHER COMPANIES--3.5%
AESOP Funding Corp.
2,000 5.345 12/13/96 1,996
B.A.T. Capital Corp.
10,000 5.376 12/16/96 9,978
CSW Credit, Inc.
12,200 5.296 12/03/96 12,196
16,000 5.309 12/04/96 15,993
Green Tree Financial Corp.
23,143 5.413 12/12/96 23,105
2,000 5.418 12/12/96 1,997
7,000 5.424 12/19/96 6,981
25,000 5.441 12/23/96 24,917
National Rural Utilities Cooperative
15,000 5.370 12/09/96 14,982
----------
112,145
INSURANCE CARRIERS--0.5%
Copley Financing Corp.
7,537 5.372 12/17/96 7,519
Prudential Funding Corp.
8,400 5.277 12/02/96 8,399
----------
15,918
NONDEPOSITORY BUSINESS CREDIT INSTITUTIONS--9.4%
Associates Corp. of North America
150,000 5.424 12/02/96 149,977
FBA Properties, Inc. (NationsBank
Georgia LOC)
11,400 5.474 02/10/97 11,278
Finova Capital Corp.
30,000 5.332 12/02/96 29,995
20,000 5.404 12/02/96 19,997
PHH Corp.
16,300 5.327 12/16/96 16,264
Sanwa Business Credit Corp.
2,000 5.391 12/02/96 2,000
2,000 5.392 12/03/96 1,999
18,000 5.429 02/06/97 17,820
25,000 5.453 02/06/97 24,750
16,000 5.442 02/12/97 15,826
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
NONDEPOSITORY BUSINESS CREDIT INSTITUTIONS--CONTINUED
Showa Leasing (U.S.A.), Inc. Series:
C
(Industrial Bank of Japan Ltd. LOC)
<S> <C> <C> <C>
$10,000 5.457% 02/18/97 $ 9,882
----------
299,788
NONDEPOSITORY PERSONAL CREDIT INSTITUTIONS--0.8%
Countrywide Home Loans
25,000 5.347 12/09/96 24,971
TRANSPORTATION--8.7%
BMW US Capital Corp.
25,000 5.327 12/16/96 24,945
18,091 5.346 12/16/96 18,051
Chrysler Financial Corp.
25,000 5.378 12/19/96 24,933
20,000 5.423 02/20/97 19,759
20,000 5.425 02/20/97 19,759
45,000 5.427 02/25/97 44,425
Ford Motor Credit Corp.
50,000 5.404 12/02/96 49,992
General Motors Acceptance Corp.
2,806 5.580 12/16/96 2,800
28,000 5.626 02/12/97 27,689
11,000 5.467 05/01/97 10,754
35,000 5.478 05/15/97 34,144
----------
277,251
TRANSPORTATION EQUIPMENT--0.3%
PACCAR Financial Corp.
8,000 5.368 12/19/96 7,979
- ---------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER $1,534,349
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
CORPORATE NOTES--6.1%
AT&T Capital Corp. FRN
<S> <C> <C> <C>
$50,000 5.415% 12/23/96 $ 50,000
Bear Stearns Companies FRN
10,100 5.913 12/18/96 10,101
FPL Capital Group
5,400 6.500 07/01/97 5,429
General Electric Engine Receivables
1995-1 Trust FRN
20,974 5.476 12/02/96 20,975
General Motors Acceptance Corp.
4,660 8.000 04/10/97 4,701
International Business Machines
Credit Corp.
55,000 5.000 02/24/97 54,985
10,000 5.450 11/10/97 9,982
PHH Corp.
40,000 4.950 02/10/97 39,940
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES $ 196,113
- ---------------------------------------------------------------------------------------------------
EURODOLLAR TIME DEPOSITS--5.1%
Creditanstalt Bank, Grand Cayman
$75,000 5.625% 12/02/96 $ 75,000
Hong Kong & Shanghai Bank, Grand
Cayman
89,000 5.438 12/02/96 89,000
- ---------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR TIME DEPOSITS $ 164,000
- ---------------------------------------------------------------------------------------------------
GUARANTEED INVESTMENT CONTRACTS--3.5%
General American Life Insurance Co.
FRN
$75,000 5.580% 12/23/96 $ 75,000
Transamerica Life Insurance and
Annuity Co. FRN
35,000 5.375 12/02/96 35,000
- ---------------------------------------------------------------------------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS $ 110,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS PORTFOLIO--CONTINUED
MUNICIPAL INVESTMENTS--2.8%
County of Broward (Florida)
Professional Sports Facilities
<S> <C> <C> <C>
$ 17,500 5.460% 12/01/96 $ 17,500
City of Minneapolis-St. Paul (Minnesota) Metro Airport G.O. Bond
20,000 5.475 12/01/96 20,000
City of Seattle (Washington) Ltd.G.O. Bond, Series: C
30,000 5.400 12/04/96 30,000
Hydro-Quebec Corp. Monthly Put TOB FRN
9,000 5.480 12/01/96 9,000
State of Virginia HDA Multi-Family
Housing Bond
12,745 5.475 12/01/96 12,745
- ---------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $ 89,245
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY--1.6%
Federal Home Loan Bank Discount Note
$ 50,000 5.703% 12/02/96 $ 49,992
- ---------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY $ 49,992
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--1.6%
U.S. Treasury Bill
$ 50,000 5.005% 02/06/97 $ 49,556
- ---------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION $ 49,556
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--20.2%
REPURCHASE AGREEMENTS--18.6%
Bear Stearns & Co., Inc., Dated
11/29/96, Repurchase Price $260,123
(U.S. Government Securities Colld.)
$ 260,000 5.680% 12/02/96 $260,000
Donaldson, Lufkin & Jenrette
Securities, Inc., Dated 11/27/96,
Repurchase Price $200,149 (U.S.
Government Securities Colld.)
200,000 5.360 12/02/96 200,000
J.P. Morgan Securities, Inc., Dated
11/29/96, Repurchase Price $115,054
(U.S. Government Securities Colld.)
115,000 5.680 12/02/96 115,000
J.P. Morgan Securities, Inc., Dated
11/29/96, Repurchase Price $16,071
(U.S. Government Securities Colld.)
16,063 5.800 12/02/96 16,063
--------
591,063
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENT--1.6%
Merrill Lynch Government Securities,
Inc., Dated 8/12/96 (U.S. Government
Securities Colld.) Accrued Interest
$143
<S> <C> <C> <C>
$ 50,000 5.726% 12/02/96 $ 50,000
- ----------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 641,063
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--102.2% $3,250,451
- ----------------------------------------------------------------------------------------------------
Liabilities, less other assets--(2.2%) (70,922)
- ----------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $3,179,529
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
U.S. GOVERNMENT AGENCIES--66.5%
FEDERAL HOME LOAN BANK DISCOUNT NOTES--23.2%
<S> <C> <C> <C>
$213,000 5.703% 12/02/96 $212,966
25,000 5.318 12/17/96 24,942
11,000 5.652 01/09/97 10,934
17,000 5.638 01/17/97 16,878
20,000 5.451 01/21/97 19,851
9,000 5.445 01/22/97 8,932
--------
294,503
FEDERAL HOME LOAN BANK MEDIUM TERM
NOTE--1.3%
15,915 5.800 08/12/97 15,921
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES--14.2%
15,000 5.222 12/11/96 14,978
25,000 5.241 12/11/96 24,964
14,900 5.246 12/16/96 14,868
30,000 5.288 02/04/97 29,717
47,000 5.285 02/14/97 46,489
15,000 5.332 02/18/97 14,827
34,000 5.284 02/19/97 33,606
--------
179,449
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DISCOUNT NOTES--15.9%
25,000 5.357 12/18/96 24,938
20,000 5.549 12/19/96 19,946
25,000 5.282 02/10/97 24,743
40,000 5.288 02/10/97 39,588
25,000 5.301 02/18/97 24,713
20,000 5.379 04/04/97 19,638
20,000 5.290 04/16/97 19,609
5,000 5.388 04/16/97 4,901
24,500 5.392 04/16/97 24,014
--------
202,090
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MEDIUM TERM NOTES--3.9%
14,000 5.350 12/26/96 14,000
20,000 5.860 07/03/97 20,024
15,000 5.520 10/28/97 14,996
--------
49,020
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
OVERSEAS PRIVATE INVESTMENT CORP. FRN--2.8%
<S> <C> <C> <C>
$ 35,800 5.390% 12/04/96 $ 35,800
STUDENT LOAN MARKETING ASSOCIATION FRN--3.5%
30,000 5.220 12/03/96 29,994
15,000 5.350 12/03/96 14,992
----------
44,986
STUDENT LOAN MARKETING ASSOCIATION MEDIUM TERM NOTE--1.7%
21,710 5.965 09/12/97 21,737
- -----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $ 843,506
- -----------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.7%
U.S. TREASURY BILLS
$ 5,000 5.005% 02/06/97 $ 4,956
10,000 5.134 02/06/97 9,909
20,000 5.458 11/13/97 19,003
- -----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 33,868
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--31.4%
REPURCHASE AGREEMENTS--27.5%
Bear Stearns & Co., Inc., Dated 11/27/96, Repurchase Price $140,104 (U.S.
Government Securities Colld.)
$140,000 5.350% 12/02/96 $ 140,000
J.P. Morgan Securities, Inc, Dated 11/29/96, Repurchase Price
$8,708 (U.S. Government Securities Colld.)
8,704 5.800 12/02/96 8,704
Nomura Securities International, Dated 11/27/96, Repurchase Price
$200,149 (U.S. Government Securities Colld.)
200,000 5.375 12/02/96 200,000
----------
348,704
JOINT REPURCHASE AGREEMENT--3.9%
UBS Securities, Inc., Dated 08/26/96 (U.S. Government Securities Colld.)
Accrued Interest $144
50,000 5.710 12/02/96 50,000
- -----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 398,704
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.6% $1,276,078
- -----------------------------------------------------------------------------------------------
Liabilities, less other assets--(0.6)% (7,563)
- -----------------------------------------------------------------------------------------------
NET ASSETS--100.0% $1,268,515
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
GOVERNMENT SELECT PORTFOLIO
U.S. GOVERNMENT AGENCIES--97.6%
FEDERAL FARM CREDIT BANK DISCOUNT NOTES--15.9%
<S> <C> <C> <C>
$23,560 5.205% 12/02/96 $ 23,557
18,000 5.159 12/04/96 17,992
15,000 5.223 12/05/96 14,991
20,000 5.173 12/09/96 19,977
10,000 5.214 12/09/96 9,989
7,255 5.248 12/12/96 7,243
9,400 5.214 12/13/96 9,384
15,735 5.210 12/18/96 15,696
5,000 5.375 08/14/97 4,816
10,000 5.403 09/25/97 9,572
----------
133,217
FEDERAL FARM CREDIT BANK--0.9%
7,500 5.850 08/01/97 7,505
FEDERAL HOME LOAN BANK--1.2%
10,000 5.800 08/12/97 10,004
FEDERAL HOME LOAN BANK DISCOUNT NOTES--55.3%
6,610 5.147 12/02/96 6,609
15,830 5.216 12/02/96 15,828
42,415 5.703 12/02/96 42,408
25,000 5.165 12/03/96 24,993
13,000 5.186 12/04/96 12,994
40,830 5.255 12/05/96 40,806
30,500 5.336 12/05/96 30,482
6,025 5.234 12/09/96 6,018
30,000 5.201 12/11/96 29,957
35,690 5.220 12/19/96 35,597
20,000 5.221 12/19/96 19,948
30,000 5.451 01/21/97 29,777
22,180 5.445 01/22/97 22,012
20,000 5.284 02/06/97 19,806
26,950 5.472 02/06/97 26,686
20,000 5.291 02/14/97 19,783
40,000 5.301 02/18/97 39,541
9,975 5.269 02/20/97 9,858
9,855 5.587 02/21/97 9,732
17,060 5.656 03/24/97 16,766
3,280 5.376 03/27/97 3,225
----------
462,826
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount/Shares Rate Date Cost
- --------------------------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION DISCOUNT NOTES--7.9%
<S> <C> <C> <C>
$35,000 5.324% 12/02/96 $ 34,995
31,100 5.210 12/18/96 31,024
--------
66,019
STUDENT LOAN MARKETING ASSOCIATION FRN--5.7%
15,000 5.870 06/30/97 15,010
20,000 5.220 08/06/97 19,996
13,000 5.350 09/03/97 12,993
--------
47,999
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES--10.7%
10,000 5.245 12/10/96 9,987
20,000 5.227 12/12/96 19,968
10,000 5.242 12/12/96 9,984
20,000 5.229 12/20/96 19,945
10,000 5.268 01/24/97 9,922
20,000 5.279 02/03/97 19,814
--------
89,620
- --------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES $817,190
- --------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.5%
U.S. TREASURY BILLS
$10,000 5.134% 02/06/97 $ 9,911
20,000 5.458 11/13/97 19,003
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION_______________________________________S$ 28,914
- --------------------------------------------------------------------------------
OTHER--0.1%
Dreyfus Treasury Prime Cash Management, Class A
542 $ 542
- --------------------------------------------------------------------------------------------------
TOTAL OTHER $ 542
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--101.2% $846,646
- --------------------------------------------------------------------------------------------------
Liabilities, less other assets--(1.2)% (10,297)
- --------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $836,349
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
MUNICIPAL INVESTMENTS--98.1%
ALABAMA--0.2%
City of Greenville IDR VRDN, Series:
1992,
Allied Signal Project (Allied-
Signal, Inc. Gtd.)
<S> <C> <C> <C>
$ 1,350 3.700% 12/06/96 $ 1,350
ALASKA--2.0%
Alaska Housing Finance Corp. VRDN,
Series: 1994,
Merrill P-Floats PT-37 (FNMA
Securities Colld.)
2,300 3.550 12/02/96 2,300
Valdez Marine Terminal Revenue VRDN,
Series: 1994 B,
ARCO Transportation Project
(Atlantic Richfield Co. Gtd.)
10,550 3.700 12/06/96 10,550
--------
12,850
ARIZONA--0.8%
County of Maricopa PCR VRDN, Series:
A, El Paso Electric Project (Westpac
Banking Corp. LOC)
5,000 3.700 12/06/96 5,000
CALIFORNIA--6.8%
California Statewide Community
Development Authority TRAN, Series:
A (California Statewide Communities
Program Pool Residual Fund Insured)
9,000 4.750 06/30/97 9,038
City of Los Angeles IDR VRDN, Series:
BTP-129,
(U.S. Government Securities Colld.)
2,500 3.250 12/12/96 2,500
City of San Marcos Public Facilities
Authority, Series: BTP-187, Civic
Center Project (U.S. Government
Securities Colld.)
6,000 3.750 03/06/97 6,000
City of Santa Rosa High School
District TRAN, Series: 1996-1997
3,000 4.500 07/03/97 3,008
County of Irvine Ranch Water District
VRDN, Series: 1993 B, Districts 2,
102, 103, & 206 (Morgan Guaranty
Trust Co. LOC)
9,800 3.950 12/02/96 9,800
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
County of Los Angeles Convention &
Exhibition Center VRDN, Series:
1993, Merrill P-Floats Series: PA-88
(MBIA Insured)
<S> <C> <C> <C>
$ 2,000 3.650% 12/06/96 $ 2,000
County of Orange VRDN, Irvine Coast
Assessment District #88-1 (Societe
Generale LOC)
3,600 4.050 12/02/96 3,600
County of Sacramento Multifamily
Housing Revenue VRDN, Series: 1985
E, River Oaks Apartments (Dai-Ichi
Kangyo Bank LOC)
1,600 3.550 12/06/96 1,600
State of California RAN, Series: A
6,000 4.500 06/30/97 6,018
--------
43,564
COLORADO--1.6%
Broomfield IDR VRDN, Series: 1984,
Buckeye Investment Project (Bank of
America NT & SA LOC)
1,500 3.600 12/06/96 1,500
City and County of Denver
Transportation VRDN, Series: 1991 B
(Sanwa Bank LOC)
8,000 3.700 12/06/96 8,000
County of Pitkin IDA VRDN, Series:
1994 B, Aspen Skiing Project (First
Chicago NBD Bank LOC)
1,000 4.100 12/02/96 1,000
--------
10,500
FLORIDA--5.2%
County of Broward Housing Finance
Authority Revenue VRDN Landings
Inverrary Apartments (PNC Bank LOC)
7,000 3.650 12/02/96 7,000
County of Dade School District GO
VRDN, Series: 1994, BTP-66 (MBIA
Insured)
5,535 3.750 12/06/96 5,535
County of Orange Housing Finance
Authority VRDN, Series: A (GNMA
Securities Colld.)
5,500 3.750 12/06/96 5,500
County of Palm Beach Housing Finance
Authority Revenue VRDN, Series: 1988
D, Cotton Bay (New England Mutual
Gtd.)
3,600 3.500 12/06/96 3,600
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
FLORIDA--CONTINUED
Florida State Board of Education
Capital Outlay Board VRDN, Series:
1990 B, BTP-52
<S> <C> <C> <C>
$ 5,000 3.750% 12/06/96 $ 5,000
Jacksonville Health Facilities
Authority VRDN, Series: 1990,
Baptist Health Project (Barnett
Banks NA LOC)
3,200 4.100 12/02/96 3,200
Orlando Utilities Commission VRDN,
Series: 1993, ML SG, Series: 1995
SG8 (Orlando Utilities Commission
Water and Electric-Senior Lien)
3,650 3.600 12/06/96 3,650
--------
33,485
GEORGIA--3.6%
County of DeKalb Development
Authority PCR VRDN, Series: 1987,
General Motors Project (General
Motors Corp. Gtd.)
6,300 3.650 12/06/96 6,300
County of Elbvert Development
Authority IDR VRDN, Series: 1992,
Allied-Signal Project (FMC Corp.
Gtd.)
2,430 3.700 12/06/96 2,430
County of Fulton Development
Authority IDR VRDN, General Motors
Project (General Motors Corp. Gtd.)
1,500 3.650 12/06/96 1,500
County of Fulton Resident Elderly
Authority VRDN, St. Anne's Terrace
Project (NationsBank Georgia LOC)
2,600 3.550 12/06/96 2,600
County of Monroe Development
Authority PCR VRDN, Series: 1995,
Scherer Plant Project (Georgia Power
Co. Gtd.)
4,000 4.100 12/02/96 4,000
Metro Atlanta Rapid Transit Authority
Revenue VRDN, Series: A, BTP-58
(AMBAC Insured)
5,965 3.750 12/06/96 5,965
--------
22,795
ILLINOIS--4.9%
City of Naperville IDR VRDN, General
Motors Project (General Motors Corp.
Gtd.)
1,480 3.650 12/06/96 1,480
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
Illinois HDA TOB, Series: 1987 B,
Residential Mortgage Program
<S> <C> <C> <C>
$ 4,645 3.950 02/01/97 $ 4,645
Illinois HDA TOB, Series: 1987 C,
Residential Mortgage Program
12,900 3.950 02/01/97 12,900
Illinois HDA TOB, Series: 1987 E,
Residential Mortgage Program
2,105 3.950 02/01/97 2,105
Illinois Health Facilities Authority
VRDN, Series: E, Hospital Sisters
Service Project (MBIA Insured)
300 3.550% 12/06/96 300
Illinois Health Facilities Authority
VRDN, Series: 1995, Healthcor
Project (Fuji Bank LOC)
5,950 4.050 12/06/96 5,950
Regional Transportation Authority
Revenue VRDN, Series: D (FGIC
Insured)
4,000 3.650 12/06/96 4,000
-------
31,380
KANSAS--2.7%
City of LaCygne Environmental Revenue
VRDN, Series: 1994 A, Kansas City
Power & Light Project (Kansas City
Power & Light Gtd.)
6,940 3.700 12/06/96 6,940
City of Lawrence GO, Series: 1996 C
9,820 4.000 10/01/97 9,820
City of Topeka Sewer System Revenue
VRDN, Series: 1984 (MBIA Insured)
500 3.550 12/01/96 500
-------
17,260
KENTUCKY--0.3%
City of Mayfield Lease Revenue VRDN,
Series: 1996, Kentucky League of
Cities Pooled Project (PNC Bank LOC)
1,700 3.700 12/06/96 1,700
LOUISIANA--1.4%
Parish of Caddo IDR VRDN, General
Motors Corp. Project (General Motors
Corp. Gtd.)
3,500 3.650 12/06/96 3,500
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
Parish of West Baton Rouge District
#3 PCR CP, Dow Chemical Project (Dow
Chemical Gtd.)
<S> <C> <C> <C>
$ 1,700 3.600% 01/15/97 $ 1,700
West Feliciana Parish PCR IDR VRDN,
Series: 1986, Gulf States Utilities
Project (Canadian Imperial Bank of
Commerce LOC)
3,300 4.050 12/02/96 3,300
West Feliciana Parish PCR VRDN,
Series: 1985 D, Gulf States
Utilities Project (Canadian Imperial
Bank of Commerce LOC)
700 4.050 12/02/96 700
--------
9,200
MARYLAND--7.5%
City of Baltimore IDA VRDN, Series:
1986, Capital Acquisition Program
(Dai-Ichi Kangyo Bank LOC)
7,300 3.700 12/06/96 7,300
County of Anne Arundel PCR Bond,
Baltimore Gas and Electric Project
(Baltimore Gas & Electric Gtd.)
2,685 3.950 07/01/97 2,685
County of Baltimore Consolidated CP,
Series: 1995, Public Improvement BAN
2,900 3.750 12/10/96 2,900
County of Montgomery CP BAN, Series:
1995
2,300 3.600 12/10/96 2,300
Maryland State Community Development
Administration, Series: PT-12,
Merrill P-Floats (Maryland Community
Development Administration)
7,720 3.550 12/02/96 7,720
Maryland State Economic Development
Authority VRDN, Series: 1995
(NationsBank NA LOC)
2,400 3.550 12/06/96 2,400
Maryland State Health & Higher
Education Facility Authority VRDN,
Series: A, Helix Health, Inc.
(NationsBank NA LOC)
16,300 3.550 12/06/96 16,300
Maryland State Health & Higher
Education Facility Authority VRDN,
Series: D, Pooled Loan Program
(NationsBank NA LOC)
5,915 3.550 12/06/96 5,915
--------
47,520
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
MASSACHUSETTS--1.2%
Massachusetts Housing Finance
Authority TOB, Series: 6, Single
Family Mortgage Program
(Massachusetts Housing Finance
Authority)
<S> <C> <C> <C>
$ 1,895 3.850% 12/01/96 $ 1,895
Massachusetts Municipal Electric Co.
Revenue VRDN, Series: 1994 B, BTP-67
(MBIA Insured)
5,760 3.750 12/06/96 5,760
--------
7,655
MICHIGAN--2.5%
City of Detroit School District,
Series: 1996, State School Aid Notes
(Detroit School District Gtd.)
8,000 4.500 05/01/97 8,018
Michigan State Strategic Fund IDR
VRDN, Allied-Signal Project (FMC
Corp. Gtd.)
6,700 3.650 12/06/96 6,700
Michigan State Strategic Fund PCR CP
(Dow Chemical Gtd.)
1,420 3.750 01/27/97 1,420
--------
16,138
MISSOURI--2.9%
City of St. Louis TRAN, Series: 1996
5,000 4.750 06/30/97 5,021
County of Callaway IDA Health System
VRDN, Series: 1995 (NationsBank
Tennessee LOC)
4,800 3.600 12/06/96 4,800
County of St. Louis IDA VRDN,
Friendship Village West Community
Project (LaSalle National Bank LOC)
4,370 3.600 12/06/96 4,370
Missouri Health & Education Facility
Authority Revenue VRDN, Series: 1996
A, Bethesda Barclay House Project
(Mercantile Bank of St. Louis NA
LOC)
4,200 4.250 12/02/96 4,200
--------
18,391
MONTANA--1.5%
City of Forsyth PCR VRDN, Series:
1988 A, Pacificorp Project
(Industrial Bank of Japan LOC)
9,400 4.400 12/02/96 9,400
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
NEVADA--0.2%
Nevada Housing Division Housing
Revenue Bonds Single Family Program
Senior Bonds, A-1
<S> <C> <C> <C>
$ 1,065 3.700% 04/01/97 $ 1,065
NEW YORK--8.4%
City of New York GO RAN, Series: B
(Bank of Nova Scotia LOC)
10,000 4.500 06/30/97 10,041
City of New York GO VRDN, Subseries:
1994 B-4 (Union Bank of Switzerland
LOC)
1,400 4.250 12/02/96 1,400
Marine Midland Premium Loan Trust
VRDN, Series: 1991 (Hong Kong &
Shanghai Banking Corp. LOC)
1,200 3.750 12/06/96 1,200
Marine Midland Premium Loan Trust
VRDN, Series: 1991 B (Hong Kong &
Shanghai Banking Corp. LOC)
1,492 3.850 12/06/96 1,492
New York State Environmental
Facilities Corp. PCR VRDN, Eagle
Trust Series: 943204 (FSAC Insured)
19,300 3.650 12/06/96 19,300
New York State Medical Care Finance
Agency Revenue Bond, Series: BTP-175
(U.S. Government Securities Colld.)
20,000 3.850 12/17/96 20,000
--------
53,433
NORTH CAROLINA--1.5%
County of Buncombe PCR IDR VRDN,
Series: 1996, Cooper Industries
Project (Cooper Industries Gtd.)
3,200 3.750 12/06/96 3,200
County of Wake Industrial Pollution
Finance Authority PCR VRDN, Carolina
Power & Light Project (Sumitomo Bank
Ltd. LOC)
1,400 3.650 12/06/96 1,400
North Carolina Medical Care
Commission Hospital Revenue VRDN,
Series: 1991 A, Pooled Financing
Project (NationsBank NA LOC)
4,700 4.050 12/02/96 4,700
--------
9,300
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
OHIO--4.3%
County of Mahoning Care Facility IDR
VRDN, Series: 1994, Assumption
Nursing Home Project (PNC Bank LOC)
<S> <C> <C> <C>
$ 1,400 3.650% 12/06/96 $ 1,400
State of Ohio Air Quality Development
Authority CP, Series: A, Pollution
Control-Duquesne (Union Bank of
Switzerland LOC)
4,000 3.950 07/16/97 4,000
State of Ohio GO VRDN, Series: 1994,
BTP-170
5,875 3.700 12/06/96 5,875
State of Ohio Higher Education
Capital Facilities VRDN, Series:
1990 A, BTP-29 (MBIA Insured)
3,000 3.750 12/06/96 3,000
State of Ohio Higher Education
Capital Facilities VRDN, Series:
1994 A, BTP-69 (AMBAC Insured)
8,745 3.750 12/06/96 8,745
Red Roof Inns Mortgage Bond Trust
VRDN (National City Bank LOC)
4,529 3.650 12/15/96 4,529
--------
27,549
OKLAHOMA--3.4%
State of Oklahoma Water Resources
Board, Series: 1994 A, State Loan
Program
21,725 3.750 03/01/97 21,725
OREGON--1.3%
City of Medford Hospital Facilities
Authority VRDN, Series: 1991, Rogue
Valley Project (Banque Paribas LOC)
8,400 3.700 12/06/96 8,400
</TABLE>
PENNSYLVANIA--11.3%
City of Philadelphia Hospital &
Higher Education Facilities
Authority VRDN, Series: A,
Children's Hospital Project
<TABLE>
<S> <C> <C> <C>
4,500 4.000 12/02/96 4,500
</TABLE>
City of Philadelphia IDR VRDN,
Series: 1988, Franklin Institute
Project (PNC Bank LOC)
<TABLE>
<S> <C> <C> <C>
2,800 3.650 12/06/96 2,800
City of Philadelphia School District
TRAN
17,000 4.500 06/30/97 17,047
City of Philadelphia TRAN, Series:
1995-96 A
18,000 4.500 06/30/97 18,055
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
County of Schuylkill IDA IDR VRDN,
Gilbert Power Project (Mellon Bank
NA LOC)
<S> <C> <C> <C>
$ 7,650 3.550% 12/06/96 $ 7,650
County of Warren Hospital Revenue
VRDN, Series: 1994 B (PNC Bank LOC)
1,000 3.650 12/06/96 1,000
Delaware Valley Regional Finance
Authority Pooled Revenue VRDN,
Series: 1985 A (Midland Bank PLC
LOC)
5,000 3.600 12/06/96 5,000
Delaware Valley Regional Finance
Authority Pooled Revenue VRDN,
Series: 1985 C (Midland Bank PLC
LOC)
2,400 3.600 12/06/96 2,400
Delaware Valley Regional Finance
Authority Pooled Revenue VRDN,
Series: 1985 A-D (Midland Bank PLC
LOC)
9,500 3.600 12/06/96 9,500
Delaware Valley Regional Finance
Authority Pooled Revenue VRDN,
Series: 1985 D (Midland Bank PLC
LOC)
1,900 3.600 12/06/96 1,900
State of Pennsylvania Higher
Education Facilities Authority VRDN,
Series: 1996, Allegheny College
Project (Mellon Bank NA LOC)
2,000 3.550 12/06/96 2,000
--------
71,852
RHODE ISLAND--0.4%
State of Rhode Island TAN, Series:
1996 A
2,500 4.500 06/30/97 2,507
SOUTH CAROLINA--1.9%
County of Lexington IDR VRDN, Series:
1992, Allied-Signal Project (FMC
Corp. Gtd.)
700 3.700 12/06/96 700
County of Lexington Pollution Control
Finance Authority IDR VRDN, Series:
1992 A, Allied-Signal Project (FMC
Corp. Gtd.)
1,880 3.700 12/06/96 1,880
South Carolina Public Service
Authority Revenue VRDN, Series: 1995
B ML SG, Series: SG-32 (FGIC
Insured)
9,855 3.650 12/06/96 9,855
--------
12,435
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--0.4%
State of South Dakota HDA Homeowner
Mortgage VRDN, Merrill P-Floats,
Series: PT-73-A
<S> <C> <C> <C>
$ 2,500 3.700% 12/06/96 $ 2,500
TENNESSEE--2.6%
City of Clarksville Public Building
Authority Revenue VRDN, Series:
1995, Tennessee Muni Bond Fund
(NationsBank of Florida LOC)
1,600 3.550 12/06/96 1,600
City of Memphis GO VRDN, Series: 1996
ML SG, Series: SGB-23
5,000 3.650 12/06/96 5,000
County of Chattanooga-Hamilton
Hospital Authority VRDN, Series:
1987, Erlanger Medical Center
Project
800 4.200 12/02/96 800
County of Hamilton IDA VRDN, Series:
1995, Tennessee Aquarium Project
(NationsBank Tennessee LOC)
5,350 3.550 12/06/96 5,350
County of Shelby GO, Series: B, BTP-
216
4,000 3.700 11/06/97 4,000
--------
16,750
TEXAS--6.9%
Brazos River Harbor Navigation
District PCR CP, Series: 1987 B, Dow
Chemical Project (Dow Chemical Gtd.)
3,000 3.750 01/27/97 3,000
Brazos River Harbor Navigation
District PCR CP, Series: 1990, Dow
Chemical Project (Dow Chemical Gtd.)
1,000 3.750 01/27/97 1,000
City of Austin School District
Building VRDN, Series: 1996 ML SG,
Series: SG-68 (Permanent School Fund
of Texas Gtd.)
7,300 3.650 12/06/96 7,300
City of Denton Independent School
District GO, Series: B, (Permanent
School Fund of Texas Gtd.)
10,000 3.980 08/15/97 10,000
City of Houston Water & Sewer System
CP, Series: A
5,000 3.650 01/23/97 5,000
City of Mansfield Independent School
District, Series: 1996 School
Building (Permanent School Fund of
Texas Gtd.)
7,500 4.140 07/01/97 7,500
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO--CONTINUED
TEXAS--CONTINUED
County of Bexar Multifamily Housing
Finance Authority VRDN, Series: 1988
A, Creighton's Mill Development
Project (New England Mutual Gtd.)
<S> <C> <C> <C>
$ 2,600 3.650% 12/06/96 $ 2,600
County of Harris Toll Road Unlimited
Tax Revenue VRDN, Series: 1994 A,
Citicorp Eagle Trust Series: 954302
5,500 3.700 12/06/96 5,500
State of Texas Water Development
Board Pooled VRDN, Series: 1992 A
Revolving Fund (Junior Lien)
2,100 4.200 12/02/96 2,100
--------
44,000
VIRGINIA--2.9%
City of Norfolk GO VRDN, Eagle Trust,
Series: 944601
4,800 3.700 12/06/96 4,800
City of Richmond Redevelopment &
Housing Authority VRDN, Series: 1995
A, Old Manchester Project (Wachovia
Bank of North Carolina NA LOC)
2,000 3.650 12/06/96 2,000
City of Roanoke IDR VRDN, Series:
1994, Cooper Industries Project
(Cooper Industries Gtd.)
2,000 3.700 12/06/96 2,000
State of Virginia GO VRDN, Series:
1994, Citicorp Eagle Trust, Series:
954601
7,000 3.700 12/06/96 7,000
Town of Louisa IDA PCR CP, Series:
1984 (Virginia Electric Power Gtd.)
1,000 3.550 12/17/96 1,000
Town of Louisa PCR CP, Series: 1987
(Virginia Electric Power Gtd.)
1,800 3.800 01/15/97 1,800
--------
18,600
WASHINGTON--4.6%
City of Kent Economic Development
Corp. IDR VRDN, Associated Grocers
Project (Seattle-First National Bank
LOC)
3,800 4.272 12/06/96 3,800
City of Seattle Metropolitan
Municipality GO (U.S. Government
Securities Colld.)
1,000 7.200 01/01/97 1,005
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
Washington Public Power Supply System
Revenue Bond,
Series: 1996 A BTP-206 (AMBAC
Insured)
<S> <C> <C> <C>
$ 4,950 4.000% 08/21/97 $ 4,950
Washington Public Power Supply System
Revenue VRDN,
ML SG, Series: SG-15 (MBIA Insured)
6,595 3.650 12/06/96 6,595
Washington Public Power Supply System
Revenue VRDN,
Series: 1990 B BTP-85 (U.S.
Government Securities Colld.)
6,221 3.750 12/06/96 6,221
Washington State GO VRDN, Series:
1993 B
6,950 3.650 12/06/96 6,950
--------
29,521
WISCONSIN--0.8%
Wisconsin Health & Education Revenue
Bond, Series:
1996 B, Riverview Hospital
Association
(Firstar Bank of Milwaukee NA LOC)
500 4.150 12/02/96 500
Wisconsin Housing & Economic
Development Authority,
Home Ownership Revenue Bond, Series:
A
4,875 3.800 03/01/97 4,875
--------
5,375
WYOMING--0.4%
City of Green River PCR VRDN Allied
Signal Project
(FMC Corp. Gtd.)
2,225 3.700 12/06/96 2,225
OTHER MUNICIPAL INVESTMENTS--1.7%
IBM Tax-Exempt Grantor Trust Asset-
Back Lease VRDN, Series: IBM 1996 A,
Certificate Merrill P-Floats (Credit
Suisse Gtd.)
9,050 3.800 12/06/96 9,050
Pooled Puttable Floating Option VRDN,
Series: PPT2 (Alaska Housing Finance
Corp. Insured)
1,650 4.100 12/02/96 1,650
--------
10,700
- -------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS $626,125
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interest Maturity
Shares Rate Date Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER INVESTMENTS--0.7%
AIM Tax Free Money Market Fund
105 -- -- $ 105
Dreyfus Tax Exempt Cash Management
Fund
400 -- -- 400
Federated Tax Free Trust Money Market
Fund #15
2,739 -- -- 2,739
Federated Tax-Free Trust Money Market
Fund #73
819 -- -- 819
Provident Municipal Fund
353 -- -- 353
- --------------------------------------------------------------------------------------------------------------
TOTAL OTHER $ 4,416
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.8% $630,541
- --------------------------------------------------------------------------------------------------------------
Other assets, less liabilities--1.2% 7,966
- --------------------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $638,507
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost $2,609,388 $ 877,374 $846,646 $630,541
Repurchase agreements, at cost 641,063 398,704 -- --
Cash 1 1 15 --
Receivables:
Interest 10,425 2,750 1,256 5,502
Fund units sold 111,755 32,941 5,246 17,303
Investment securities sold -- -- -- 4,665
Administrator -- 23 28 33
Other assets 2 1 1 1
- -------------------------------------------------------------------------------
TOTAL ASSETS 3,372,634 1,311,794 853,192 658,045
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 179,676 37,728 13,167 17,523
Distributions to unitholders 12,481 5,147 3,488 1,768
Accrued expenses:
Advisory fees 605 253 68 134
Administration fees 163 93 76 67
Custodian fees 42 10 8 9
Transfer agent fees 5 3 2 3
Other liabilities 133 45 34 34
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 193,105 43,279 16,843 19,538
- -------------------------------------------------------------------------------
NET ASSETS $3,179,529 $1,268,515 $836,349 $638,507
- -------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $3,181,103 $1,268,820 $836,425 $638,366
Accumulated net realized gain
(loss) on
investment transactions (1,574) (305) (76) 141
- -------------------------------------------------------------------------------
NET ASSETS $3,179,529 $1,268,515 $836,349 $638,507
- -------------------------------------------------------------------------------
Total units outstanding (no par
value),
unlimited units authorized 3,181,103 1,268,820 836,425 638,366
- -------------------------------------------------------------------------------
Net asset value, offering and
redemption price per unit
(net assets/units outstanding) $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Government
Assets Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $173,018 $56,872 $41,631 $27,703
- ------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 7,832 2,618 1,930 1,885
Administration fees 2,079 1,036 897 885
Custodian fees 360 132 97 106
Transfer agent fees 65 31 22 15
Registration fees 47 29 26 32
Professional fees 139 50 36 50
Trustee fees 86 29 23 23
Other 102 45 36 28
- ------------------------------------------------------------------------------
TOTAL EXPENSES 10,710 3,970 3,067 3,024
Less: Voluntary waivers of in-
vestment advisory fees -- -- (1,158) --
Less: Expenses reimbursable by
Administrator -- (306) (365) (382)
- ------------------------------------------------------------------------------
Net expenses 10,710 3,664 1,544 2,642
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 162,308 53,208 40,087 25,061
Net realized gains on investment
transactions 327 133 97 102
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RE-
SULTING FROM OPERATIONS $162,635 $53,341 $40,184 $25,163
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
The Benchmark Funds
Money Market Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30,
(All amounts in thousands)
<TABLE>
<CAPTION>
Diversified Assets Government Government Select Tax-Exempt
Portfolio Portfolio Portfolio Portfolio
-------------------------- -------------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment
income $ 162,308 $ 159,519 $ 53,208 $ 42,613 $ 40,087 $ 32,259 $ 25,061 $ 24,498
Net realized
gains (losses)
on investment
transactions 327 (1,460) 133 (828) 97 (73) 102 48
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in
net assets re-
sulting from
operations 162,635 158,059 53,341 41,785 40,184 32,186 25,163 24,546
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS:
Net investment
income (162,308) (159,519) (53,208) (42,613) (40,087) (32,259) (25,061) (24,498)
- ------------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (162,308) (159,519) (53,208) (42,613) (40,087) (32,259) (25,061) (24,498)
- ------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS
(AT $1.00 PER
UNIT):
Proceeds from
the sale of
units 42,285,142 43,084,716 12,329,359 10,203,042 4,712,236 3,588,011 5,526,968 5,729,794
Reinvested dis-
tributions 860 -- -- -- 963 -- 126 --
Cost of units
redeemed (41,717,147) (43,366,308) (11,911,641) (10,140,281) (4,562,089) (3,396,629) (5,692,419) (5,779,215)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (de-
crease) in net
assets resulting
from unit trans-
actions 568,855 (281,592) 417,718 62,761 151,110 191,382 (165,325) (49,421)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL CONTRIBU-
TIONS RECEIVED
FROM NORTHERN
TRUST CORPORA-
TION -- 1,519 -- 915 -- 115 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (de-
crease) 569,182 (281,533) 417,851 62,848 151,207 191,424 (165,223) (49,373)
Net assets--be-
ginning of year 2,610,347 2,891,880 850,664 787,816 685,142 493,718 803,730 853,103
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS--END
OF YEAR $ 3,179,529 $ 2,610,347 $ 1,268,515 $ 850,664 $ 836,349 $ 685,142 $ 638,507 $ 803,730
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Diversified Assets Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAr $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- -----------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 5.30% 5.78% 3.92% 3.00% 3.80% 6.19% 8.01%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.34% 0.34% 0.35% 0.34% 0.34% 0.35% 0.35%
Expenses, be-
fore waivers
and
reimbursements 0.34% 0.34% 0.35% 0.36% 0.35% 0.36% 0.36%
Net investment income, net of waivers
and reimburse-
ments 5.18% 5.63% 3.74% 3.00% 3.79% 6.18% 8.01%
Net investment income, before waivers
and reimburse-
ments 5.18% 5.63% 3.74% 2.98% 3.78% 6.17% 8.00%
Net assets at end of year (in thousands) $3,179,529 $2,610,347 $2,891,880 $3,200,288 $2,801,744 $2,784,485 $2,192,756
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAr $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.09 0.07 0.06
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.09 0.07 0.06
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS
FROM:
Net investment
income (0.09) (0.07) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
Total distribu-
tions to
unitholders (0.09) (0.07) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return
(a)(b) 8.98% 7.15% 6.30%
Ratio to average
net assets of :
Expenses, net
of waivers and
reimbursements 0.37% 0.39% 0.41%
Expenses, be-
fore waivers
and
reimbursements 0.37% 0.39% 0.41%
Net investment income, net of waivers
and reimburse-
ments 8.98% 7.15% 6.30%
Net investment income, before waivers
and reimburse-
ments 8.98% 7.15% 6.30%
Net assets at end of year (in thousands) $1,871,713 $1,528,203 $1,533,941
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
year.
(b) Total return for the year ended November 30, 1995 would have been 5.73%
absent the effect of a capital contribution equivalent to $.0005 per
share received from Northern Trust Corporation.
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Government Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BE-
GINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (a)(b) 5.20% 5.64% 3.78% 2.91% 3.91% 6.18% 7.89% 8.63% 6.83% 6.15%
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.37% 0.50% 0.54% 0.44%
Expenses, before
waivers and
reimbursements 0.38% 0.40% 0.41% 0.38% 0.40% 0.40% 0.46% 0.50% 0.55% 0.55%
Net investment in-
come, net of waivers
and reimbursements 5.08% 5.49% 3.60% 2.92% 3.71% 6.03% 7.88% 8.63% 6.83% 6.15%
Net investment in-
come, before waivers
and reimbursements 5.05% 5.44% 3.53% 2.88% 3.65% 5.98% 7.79% 8.63% 6.82% 6.04%
Net assets at end of
year (in thousands) $1,268,515 $850,664 $787,816 $1,065,705 $1,163,905 $895,405 $971,720 $423,517 $335,301 $218,530
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the year.
(b) Total return for the year ended November 30, 1995 would have been 5.53%
absent the effect of a capital contribution equivalent to $.0011 per share
received from Northern Trust Corporation.
See accompanying notes to financial statements.
20
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Government Select Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990(a)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- -----------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.05 0.06 0.04 0.03 0.04 0.06 0.01
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- -----------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.01)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Total return (b)(c) 5.31% 5.82% 3.84% 3.00% 3.71% 5.82% 0.50%
Ratio to average net
assets of (d):
Expenses, net of waiv-
ers and reimbursements 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Expenses, before waiv-
ers and reimbursements 0.40% 0.41% 0.43% 0.49% 0.52% 0.60% 1.33%
Net investment income,
net of waivers and re-
imbursements 5.19% 5.67% 3.83% 2.99% 3.70% 5.78% 7.65%
Net investment income,
before waivers and re-
imbursements 4.99% 5.46% 3.60% 2.70% 3.38% 5.38% 6.52%
Net assets at end of
year (in thousands) $836,349 $685,142 $493,718 $386,507 $264,756 $160,750 $44,215
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on November 7, 1990.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
period.
(c) Total return for the year ended November 30, 1995 would have been 5.80%
absent the effect of a capital contribution equivalent to $.0002 per
share received from Northern Trust Corporation.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
21
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Total income from in-
vestment operations 0.03 0.04 0.02 0.02 0.03 0.05 0.06 0.06 0.05 0.04
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05) (0.04)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.03) (0.04) (0.02) (0.02) (0.03) (0.05) (0.06) (0.06) (0.05) (0.04)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total return (a) 3.37% 3.71% 2.62% 2.27% 2.97% 4.57% 5.71% 6.04% 4.92% 4.00%
Ratio to average net
assets of :
Expenses, net of
waivers and
reimbursements 0.35% 0.35% 0.35% 0.34% 0.34% 0.35% 0.36% 0.49% 0.48% 0.45%
Expenses, before
waivers and
reimbursements 0.40% 0.41% 0.36% 0.38% 0.39% 0.40% 0.43% 0.49% 0.48% 0.46%
Net investment income,
net of waivers and re-
imbursements 3.32% 3.63% 2.40% 2.27% 2.95% 4.57% 5.71% 6.03% 4.92% 4.00%
Net investment income,
before waivers and re-
imbursements 3.27% 3.57% 2.39% 2.23% 2.90% 4.52% 5.64% 6.03% 4.92% 3.99%
Net assets at end of
year (in thousands) $638,507 $803,730 $853,103 $1,191,932 $1,226,480 $872,405 $752,257 $545,215 $529,680 $410,772
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at net asset value at the beginning of the year,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the end of the year.
See accompanying notes to financial statements.
22
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end manage-
ment investment company. The Trust includes sixteen portfolios, each with its
own investment objective. The Northern Trust Company ("Northern") acts as the
Trust's investment adviser, transfer agent, and custodian. Goldman, Sachs &
Co. ("Goldman Sachs") acts as the Trust's administrator and distributor. Pre-
sented herein are the financial statements of the money market portfolios.
The Trust includes four diversified money market portfolios: Diversified As-
sets Portfolio, Government Portfolio, Government Select Portfolio and Tax-Ex-
empt Portfolio (the "Portfolios").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP re-
quires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual results could differ from those estimates. Certain amounts reported for
periods prior to the year ended November 30, 1996 have been restated to con-
form to the current financial statement presentation.
(a) Investment Valuation
Investments are valued at amortized cost, which approximates market value. Un-
der the amortized cost method, investments purchased at a discount or premium
are valued by amortizing the difference between the original purchase price
and maturity value of the issue over the period to maturity.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
Each Portfolio may enter into joint repurchase agreements with non-affili-
ated 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, 1996, as reflected in the accompany-
ing Statements of Investments.
(c) Interest Income
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(d) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and tax-exempt income to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, there were capi-
tal loss carryforwards for U.S. federal tax purposes of approximately
$1,574,000, $305,000 and $76,000 for the Diversified Assets, Government and
Government Select Portfolios, respectively. These amounts are available to be
carried forward to offset future capital gains to the extent permitted by ap-
plicable laws or regulations. These capital loss carryforwards expire in 2002.
23
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
(e) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio.
Expenses incurred which do not specifically relate to an individual portfolio
are allocated among the Portfolios based on each Portfolio's relative average
net assets for the year.
(f) Distributions
Each Portfolio's net investment income is declared daily as a dividend to
unitholders of record as of 3:00 p.m., Chicago time. Net realized short-term
capital gains, if any in excess of net capital loss carryforwards, are de-
clared and distributed at least annually.
Distributions of net investment income with respect to a calendar month (in-
cluding with respect to units redeemed at any time during the month) are made
as soon as practicable following the end of the month. Distributions are made
by each Portfolio to Northern in cash or automatically reinvested in addi-
tional units of the Portfolio. Northern has undertaken to credit or arrange
for the crediting of such distributions to each unitholder's account with
Northern, its affiliates or its correspondents.
3. ADVISORY, TRANSFER AGENCY, CUSTODIAN AND OTHER AGREEMENTS
As compensation for the services rendered as investment adviser, including the
assumption by Northern of the expenses related thereto, Northern is entitled
to a fee, computed daily and payable monthly, at an annual rate of .25% of
each portfolio's average daily net assets.
Until further notice, Northern has voluntarily agreed to waive .15% of its
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, 1996 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.
The Trust and Northern Trust Corporation (the "Corporation"), parent company
of Northern, entered into an agreement (the "Put Agreement") dated May 19,
1994 which provided the Trust the right to require the Corporation to pur-
chase, and the Corporation the right to require the Trust to sell, certain
Federal Home Loan and Federal Farm Credit Banks securities held by the Diver-
sified Assets, Government and Government Select Portfolios on or before June
19, 1995 (the "final purchase date"). Pursuant to the Put Agreement, the Cor-
poration, on June 19, 1995, purchased these securities at amortized cost,
which exceeded market value by approximately $1,519,000, $915,000 and $115,000
for the Diversified Assets, Government and Government Select Portfolios, re-
spectively. The Portfolios recorded realized losses to the extent the purchase
price exceeded market value of the securities. The Portfolios received capital
contributions from the Corporation in connection with the Put Agreement, which
served to offset such losses.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
As compensation for the services rendered as administrator, and the assumption
by Goldman Sachs of expenses related thereto, Goldman Sachs is entitled to re-
ceive from each Portfolio a fee, computed daily and payable monthly, at an an-
nual rate of .25% of the first $100 million, .15% of the next $200 million,
.075% of the next $450 million and .05% of any excess over $750 million of the
average daily net assets of each Portfolio.
Goldman Sachs has voluntarily agreed to waive a portion of its administration
fees in the event that overall administration fees earned during the prior
fiscal year exceeded certain specified levels. For the year ended November 30,
1996, there was no reduction in administration fees due to this waiver.
Furthermore, Goldman Sachs has agreed to reimburse the portfolios for certain
expenses in the event that such expenses, as defined, exceed, on an annualized
basis,
24
<PAGE>
- --------------------------------------------------------------------------------
.10% of each portfolio's average daily net assets. The expenses reimbursed dur-
ing the year ended November 30, 1996, are shown on the accompanying Statements
of Operations.
Goldman Sachs receives no compensation under the Distribution Agreement.
5. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are se-
cured by pledged securities equal to or exceeding 120% of the outstanding bal-
ance.
There were no borrowings under this agreement during the year ended November
30, 1996.
25
<PAGE>
The Benchmark Funds
Money Market Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Money Market Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Diversified Assets,
Government, Government Select and Tax-Exempt Portfolios, comprising the Money
Market Portfolios of The Benchmark Funds, as of November 30, 1996, and the
related statements of operations for the year then ended and changes in net
assets for each of the two years in the period then ended and financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Diversified Assets, Government, Government Select and Tax-Exempt Portfolios,
comprising the Money Market Portfolios of The Benchmark Funds, at November 30,
1996, the results of their operations for the year then ended and the changes
in their net assets for each of the two years in the period then ended and
financial highlights for the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 21, 1997
26
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management expenses and other
information.
The
Benchmark
Funds
Money
Market
Portfolios
Annual Report
November 30, 1996
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK BOND PORTFOLIO
Yields on securities with two- to 30-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, and the 30-year Treasury moved in a
1.24% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors
and, in particular, through exposure to surplus notes and perpetual floating
rate notes.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK BOND
PORTFOLIO VS. THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
[PERFORMANCE GRAPH APPEARS HERE]
Bond Portfolio Lehman Brothers Government/Corporate Bond Index
-------------- -----------------------------------------------
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
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class A Corporate
November 30, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.57% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 8.26% 7.58%
- ---------------------------------------------------------------------------------------
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
Bond Portfolio Lehman Brothers Government/Corporate Bond Index
-------------- -----------------------------------------------
7/3/95 $10,000 $10,000
11/30/95 $10,608 $10,499
11/30/96 $11,174 $11,086
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, 1996: Units Bond Index
- -----------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.33% 5.59%
- -----------------------------------------------------------------------------------------
Since Commencement on 7/3/95: 8.17% 7.55%
- -----------------------------------------------------------------------------------------
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
Bond Portfolio Lehman Brothers Government/Corporate Bond Index
-------------- -----------------------------------------------
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
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, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.17% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 11.05% 10.02%
- ---------------------------------------------------------------------------------------
</TABLE>
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company or its affiliates, and are not federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested.
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK INTERNATIONAL BOND PORTFOLIO
Total return performance of most non-U.S. bond markets was excellent for the
fiscal year ended November 30, 1996. Economic growth in these countries turned
out to be slower than expected and, as a result, monetary policy remained loose
during the year. In addition inflation was cooperative as it actually declined
in many markets.
The portfolio significantly outperformed its benchmark during the period, due
primarily to its 10% underweighting in the Japanese bond and currency markets.
Of the non-U.S. bond markets, Japan performed the worst during the year, and
the yen fell nearly 11% in value versus the U.S. dollar.
Whenever the dollar increases in value versus other currencies, such as the
yen, the portfolio's nominal return is likely to suffer. However, because the
portfolio was significantly underweighted in Japan throughout the year, we were
able to avoid some of the currency effects caused by the stronger dollar and
weaker yen.
In addition to underweighting the Japanese market, another strategy that
contributed to the portfolio's relative performance was overweighting the
Canadian and Australian markets, both of which performed exceptionally well
compared to other countries.
We recently reduced the portfolio's underweight in Japan and its overweight
in U.S. dollars. Even though the yen may continue to fall further, going
forward, we don't believe it's prudent to take as strong a stand as we did over
the past 12 months. From an overall interest rate sensitivity standpoint, the
portfolio is positioned near neutral versus its benchmark.
Mike Lannan, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL BOND PORTFOLIO VS. THE J.P.
MORGAN NON-U.S. GOVERNMENT BOND INDEX
[PERFORMANCE GRAPH APPEARS HERE]
International Bond Portfolio J.P. Morgan Non-U.S. Government Bond Index
---------------------------- ------------------------------------------
3/28/94 $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
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, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.47% 7.13%
- -------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 11.72% 11.80%
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
Diversified Growth Portfolio J.P. Morgan Non-U.S. Government Bond Index
---------------------------- ------------------------------------------
11/20/95 $10,000 $10,000
11/30/95 $ 9,970 $ 9,912
11/30/96 $10,871 $10,619
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, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.04% 7.13%
- ------------------------------------------------------------------------------------------
Since Commencement on 11/20/95: 8.45% 6.02%
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK SHORT DURATION PORTFOLIO
The portfolio's composition did not change much during the fiscal year ended
November 30, 1996. We continued to invest primarily in asset-backed and other
floating-rate securities, two-year Treasuries and commercial notes. We tended
to favor securities from the bank and finance sectors, as they offered the most
attractive yields without sacrificing quality.
Compared to the three-month LIBOR Index and the 90-day Treasury Bill Index,
the portfolio performed relatively poorly from February through April. However,
during the final three months of the fiscal year, the portfolio recovered
nicely, with its yield surpassing both indices.
The portfolio's duration was approximately 100 days at the beginning of the
fiscal year, peaked at approximately 160 days in June and decreased to
approximately 80 days by year end, reflecting the more defensive nature of the
portfolio.
With the economy continuing to show some strength, future Federal Reserve
actions are uncertain. As such, we expect to maintain a more defensive
position. We feel that the portfolio remains an attractive alternative to money
market funds for those who want to keep their investments in a short-term
strategy for more than three to six months.
Jerry Pearson, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK
SHORT DURATION PORTFOLIO, THE LEHMAN
BROTHERS SHORT (1-3) INVESTMENT
GRADE DEBT INDEX AND THE 3 MONTH
LIBOR INDEX
[PERFORMANCE GRAPH APPEARS HERE]
Short Duration Lehman Brothers Short
Portfolio (1-3) Inv't. Grade Debt Index 3 Month LIBOR Index
-------------- ----------------------------- -------------------
6/2/93 $10,000 $10,000 $10,000
11/30/93 $10,173 $10,294 $10,157
11/30/94 $10,543 $10,422 $10,561
11/30/95 $11,191 $11,608 $11,193
11/30/96 $11,801 $12,362 $11,840
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A Lehman 3 Month
November 30, 1996: Units Brothers LIBOR
<S> <C> <C> <C>
One Year: 5.45% 6.49% 5.60%
- -------------------------------------------------------------------------------------------
Since Commencement on 6/2/93: 4.84% 6.24% 4.94%
</TABLE>
3
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK SHORT-INTERMEDIATE BOND PORTFOLIO
Yields on securities with two- to five-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, while five-year securities moved in a
1.72% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK
SHORT-INTERMEDIATE BOND PORTFOLIO VS.
THE MERRILL LYNCH 1-5
CORPORATE/GOVERNMENT INDEX
[PERFORMANCE GRAPH APPEARS HERE]
Short-Intermediate Merrill Lynch 1-5
Bond Portfolio Corporate/Government Index
------------------ --------------------------
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
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class A Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.68% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.10% 6.08%
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
Short-Intermediate Merrill Lynch 1-5
Bond Portfolio Corporate/Government Index
------------------ --------------------------
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
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class D Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.22% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 7.16% 7.72%
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK U.S. GOVERNMENT SECURITIES PORTFOLIO
A static snapshot of the fiscal year would show short-term government bond
yields rising 0.25% higher during the year, on average. By most measures, this
movement would be considered modest. Nevertheless, this seeming stability does
not serve as an accurate portrayal of the volatility experienced. Two-year
Treasury bonds, for example, traded in a 1.75% range--from 4.75% to 6.50%--
during the fiscal year. Investors moved the market in this sideways fashion
based on ever-changing views of the future economic environment and its impact
on future interest rates. In general, the Federal Reserve was quiet during the
year, as it has not adjusted short-term rates since January 31, 1996.
As we have maintained since April 1996 (when two-year Treasury rates moved
above 6.00%), the current benign inflation outlook makes short-term interest
rates attractive from a "real" return standpoint for long-term investors. Thus,
the portfolio has been in a normal interest rate posture with respect to short-
term government bonds throughout the year, and it has correspondingly earned
market-type returns.
With the portfolio limited to investing in U.S. Treasury, government agency
and government agency mortgage-backed securities, we continually monitor the
agency/Treasury relative value trade-off. While government agency securities do
not typically compensate investors for the liquidity foregone relative to
Treasuries, we have found opportunities in mortgage securities to add
incremental yield with only a minimal level of call risk.
Steve Schafer, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK
U.S. GOVERNMENT SECURITIES PORTFOLIO
VS. THE MERRILL LYNCH 1-5 GOVERNMENT
INDEX
[PERFORMANCE GRAPH APPEARS HERE]
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
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, 1996: Units Index
<S> <C> <C>
One Year: 5.15% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 4/5/93: 5.04% 5.57%
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
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
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns** Merrill Lynch
For Period Ended Class C 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
Since Commencement on 12/29/95: 4.05% 4.76%
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
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
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, 1996: Units Index
<S> <C> <C>
One Year: 4.77% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/15/94: 6.48% 7.53%
</TABLE>
**Average Annual Total Returns are not annualized for periods less than one
year.
5
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK U.S. TREASURY INDEX PORTFOLIO
On average, Treasury yields remained relatively stable from the beginning of
the fiscal year to the end. In between, however, there was significant short-
term volatility, as the ever-changing views on where the economy was headed and
what impact that would have on future interest rates caused yields to go up and
down.
Yields on two-year Treasury bonds, for example, moved in a 1.75% range, while
yields on the 30-year Treasury bond moved in a 1.24% range during the year.
As it is designed to do, the U.S. Treasury Index Portfolio performed in line
with the Lehman Brothers U.S. Treasury Bond Index during the period from
December 1, 1995, to November 30, 1996. We will continue to invest in
securities represented by the Index in our effort to provide returns that
closely approximate those of the Index.
Richard Steck, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK U.S. TREASURY INDEX PORTFOLIO VS. THE LEHMAN
BROTHERS U.S. TREASURY BOND INDEX
[PERFORMANCE GRAPH APPEARS HERE]
U.S. Treasury Lehman Brothers U.S.
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
Past preformance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class A U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.10% 5.24%
- ----------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.97% 7.24%
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Past preformance is not predictive of future performance.
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class D U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 4.72% 5.24%
- -----------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 10.40% 11.29%
</TABLE>
6
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------
BOND PORTFOLIO
<C> <C> <S> <C>
ASSET-BACKED SECURITIES--0.2%
AUTOMOTIVE--0.2%
General Motors
Acceptance Corp.
Class A, Series:
1993-B
$ 827 4.000% 09/15/98 $ 819
HOME EQUITY LOANS--0.0%
U.S. Home Equity
Loan, Series: 1991-2
116 8.500 04/15/21 117
- -----------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $941) $ 936
- -----------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
12.3%
Countrywide Funding
Corp.
Class A4, Series:
1993-1
$13,567 5.321% 10/25/23 $ 12,244
Delta Funding Corp.,
Interest Only
Stripped Security,
Class A-4, Series:
1991-1*
-- -- 01/01/06 202
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Series 1994-Q8,
Class 2A1
5,752 7.250 05/25/24 5,752
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Adjustable Rate,
Interest Only
Stripped Security,
Series 1995-QE9*
-- -- 11/25/25 1,698
GE Capital Mortgage
Services Inc.
Class A-23, Series:
1994-10
13,850 6.500 03/25/24 12,160
PaineWebber Mortgage
Acceptance Corp.
Class A15, Series:
1993-9
7,919 7.000 10/25/23 7,848
Prudential Home
Mortgage Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-17,
Series: 1993-36*
-- -- 10/25/23 2,972
Class A-18,
Series: 1994-8*
-- -- 03/25/24 1,123
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
Residential
Funding Mortgage
Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-14,
Series: 1993-S22*
$ -- --% 06/25/23 $ 2,140
- -------------------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS (Cost
$46,317) $ 46,139
- -------------------------------------------------------
CORPORATE BONDS--10.9%
BROKERAGE SERVICES--2.5%
Salomon Brothers,
Inc.
$ 9,450 8.000% 03/28/97 $ 9,515
FINANCIAL--1.4%
General Motors
Acceptance Corp.
4,285 8.875 06/01/00 5,119
INSURANCE SERVICES--1.8%
Lumberman's
Mutual Casualty
Co.
6,000 9.150 07/01/26 6,717
RETAIL--2.1%
Penney (J.C.) &
Co., Inc.
7,700 6.900 08/15/03 7,939
SANITARY SERVICES--3.1%
WMX Technologies
11,000 7.100 08/01/03 11,604
- -------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$38,843) $ 40,894
- -------------------------------------------------------
U.S. GOVERNMENT AGENCIES--
21.9%
COLLATERALIZED MORTGAGE OBLIGA-
TIONS--15.7%
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
INTEREST ONLY STRIPPED SE-
CURITY*--0.0%
Class 1392-S,
Series: 1392
$ -- --% 09/15/18 $ 37
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
PRINCIPAL ONLY STRIPPED
SECURITIES*--4.2%
Class B, Series:
G011
$ 912 -- 04/25/23 632
Class D, Series:
1571
13,511 -- 08/15/23 8,525
Class PD, Series:
1750-C
10,054 -- 03/15/24 6,550
--------
15,707
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------
<C> <C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REMIC TRUST--5.8%
Class 3-D, Series:
1990-3
$ 953 8.500% 07/25/18 $ 966
Class A, Series:
1996-M4
8,947 7.750 03/17/17 9,216
Class G, Series:
1992-73
7,500 7.500 04/25/21 7,660
Class SA, Series:
1991-127
660 12.661 09/25/98 671
Class SB, Series:
1994-59
6,364 2.880 03/25/24 3,304
--------
21,817
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
INTEREST ONLY STRIPPED SE-
CURITY*--0.2%
Class S, Series:
G-12
-- -- 05/25/21 705
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
PRINCIPAL ONLY STRIPPED SE-
CURITIES*--5.5%
Class B, Series:
1993-161
$ 4,732 -- 10/25/18 4,504
Class D, Series:
1993-132
1,947 -- 10/25/22 1,082
Class EA, Series:
1993-205
3,150 -- 09/25/23 2,165
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
Class L, Series:
1993-184
7,585 -- 09/25/23 4,982
Class PR, Series:
1996-14
9,000 -- 01/25/24 6,019
--------
20,622
MORTGAGE-BACKED SECURITIES--
6.2%
FEDERAL HOME LOAN MORTGAGE CORP.--
0.0%
1 6.500 06/01/04 1
GOVERNMENT NATIONAL MORTGAGE ASSOCIA-
TION--6.2%
7,615 8.000 11/15/26 7,852
Series: 2026
8,802 8.000 08/15/26 9,072
5,940 8.000 09/15/26 6,122
--------
23,046
- ----------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $76,677) $ 81,935
- ----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------
<C> <C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--43.6%
U.S. TREASURY NOTES--41.4%
$12,310 6.750% 02/28/97 $ 12,352
25,000 5.875 10/31/98 25,125
13,600 6.750 05/31/99 13,942
38,745 6.875 08/31/99 39,901
14,000 7.750 01/31/00 14,807
8,450 5.750 08/15/03 8,363
37,000 7.500 02/15/05 40,486
--------
154,976
U.S. TREASURY BOND--2.2%
7,635 7.125 02/15/23 8,239
- -------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $160,865) $163,215
- -------------------------------------------
FLOATING RATE BANK NOTES--
6.0%
Lloyds Bank PLC
$11,450 6.063% 12/13/96 $ 10,138
National
Westminster Bank
13,800 5.625 02/28/97 12,101
- -------------------------------------------
TOTAL FLOATING RATE BANK
NOTES
(Cost $21,480) $ 22,239
- -------------------------------------------
SHORT-TERM INVESTMENT--4.2%
Berliner Handels und
Frankfurter,
Grand Cayman
$15,853 5.688% 12/02/96 $ 15,853
- -------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $15,853) $ 15,853
- -------------------------------------------
TOTAL INVESTMENTS--99.1%
(Cost $360,976) $371,211
- -------------------------------------------
Other assets, less
liabilities--0.9% 3,201
- -------------------------------------------
NET ASSETS--100.0% $374,412
- -------------------------------------------
- -------------------------------------------
</TABLE>
*At November 30, 1996, effective yields on these securities ranged from
approximately 5.00% to 15.00%. Refer to notes to statements of investments for
a discussion of stripped securities.
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO
<C> <C> <S> <C>
DEBT OBLIGATIONS--93.8%
AUSTRALIAN DOLLAR--4.3%
Commonwealth of
Australia
1,580 10.000% 10/15/02 $ 1,471
BELGIAN FRANC--1.9%
Kingdom of Belgium
18,275 7.500 07/29/08 641
BRITISH POUND STERLING--15.0%
Abbey National PLC
825 6.000 08/10/99 1,352
Lloyds Bank PLC
800 7.375 03/11/04 1,302
Treasury of United
Kingdom
1,420 8.000 06/10/03 2,490
-------
5,144
CANADIAN DOLLAR--8.4%
Dominion of Canada
1,075 7.500 12/01/03 880
Province of Ontario
1,050 7.250 09/27/05 826
Province of Quebec
1,325 10.250 10/15/01 1,187
-------
2,893
DANISH KRONE--5.5%
Kingdom of Denmark
10,100 8.000 03/15/06 1,872
FRENCH FRANC--8.9%
Electricite de
France
6,200 8.600 04/09/04 1,416
Republic of France
3,000 8.500 03/12/97 582
4,600 8.250 02/27/04 1,041
-------
3,039
GERMAN MARK--13.6%
Federal Republic of
Germany
1,795 6.250 01/04/24 1,117
LKB Global Bond
1,500 6.000 05/10/99 1,023
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ----------------------------------------------
<C> <C> <S> <C>
Republic of Austria
1,670 8.000% 01/30/02 $ 1,230
Republic of Finland
1,920 5.500 02/09/01 1,289
-------
4,659
ITALIAN LIRA--8.2%
Republic of Italy
4,000,000 8.500 04/01/04 2,808
JAPANESE YEN--13.5%
Asian Development
Bank
90,000 5.000 02/05/03 926
European Bank for
Reconstruction and
Development
95,000 5.875 11/26/99 953
International Bank
for
Reconstruction and
Development
100,000 4.500 03/20/03 1,010
Japan Development
Bank
160,000 6.500 09/20/01 1,721
-------
4,610
NETHERLANDS GUILDER--3.3%
Kingdom of the
Netherlands
1,675 8.500 03/15/01 1,118
SPANISH PESETA--4.1%
Kingdom of Spain
35,000 11.450 08/30/98 294
120,000 11.300 01/15/02 1,120
-------
1,414
SWEDISH KRONA--3.8%
Kingdom of Sweden
7,400 10.250 05/05/03 1,317
UNITED STATES DOLLAR--3.3%
U.S. Treasury Note
1,000 7.875 11/15/04 1,117
- ----------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $29,495) $32,103
- ----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- -----------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO--CONTINUED
<C> <C> <S> <C>
SHORT-TERM INVESTMENT--2.6%
UNITED STATES DOLLAR
Berliner Handels und
Frankfurter,
Grand Cayman
$ 895 5.688% 12/02/96 $ 895
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$895) $ 895
- -----------------------------------------------------------
TOTAL INVESTMENTS--96.4%
(Cost $30,390) $32,998
- -----------------------------------------------------------
Other assets, less liabilities--
3.6% 1,237
- -----------------------------------------------------------
NET ASSETS--100.0% $34,235
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
SHORT DURATION PORTFOLIO
ASSET-BACKED SECURITY--5.6%
Household Consumer
Loan Trust
Series: 96-2A
$ 2,324 5.545% 08/15/06 $ 2,324
- ------------------------------------------------------
TOTAL ASSET-BACKED SECURITY
(Cost $2,324) $ 2,324
- ------------------------------------------------------
FLOATING RATE NOTES--15.5%
Beneficial Corp.
$ 2,500 5.570% 11/04/99 $ 2,489
Household Finance
Co.
2,500 5.681 11/01/01 2,495
USL Capital Corp.
Series D
1,500 5.705 04/19/99 1,497
- ------------------------------------------------------
TOTAL FLOATING RATE NOTES
(Cost $6,499) $ 6,481
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--6.0%
U.S. Treasury Note
$ 2,500 5.733% 11/15/99 $ 2,512
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $2,511) $ 2,512
- ------------------------------------------------------
COMMERCIAL PAPER--35.6%
ASSET-BACKED SECURITIES--13.5%
Ascot Capital
Corp.
$ 1,000 5.391% 02/10/97 $ 989
Cooperative
Association of
Tractor Dealers
500 5.376 12/10/96 499
Corporate
Receivables Corp.
400 5.317 12/09/96 399
Gotham Funding
Corp.
1,000 5.444 02/05/97 990
Old Line Funding
785 5.373 12/12/96 784
Strategic Asset
Funding Corp.
1,000 5.476 01/31/97 991
Wood Street
Funding Corp.
1,000 5.371 12/10/96 999
-------
5,651
COMMUNICATIONS--2.3%
NYNEX Corp.
1,000 5.375 12/16/96 998
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
FOOD AND KINDRED PRODUCTS--
4.8%
Coca-Cola
Enterprises Inc.
$ 1,000 5.466% 12/05/96 $ 999
Thames Asset
Global
Securitization No.
1, Inc.
1,000 5.427 02/18/97 988
-------
1,987
HOLDING AND OTHER INVESTMENT
OFFICES--4.2%
CSW Credit, Inc.
900 5.309 12/04/96 899
400 5.314 12/10/96 399
Enterprise Funding
Corp.
466 5.354 12/13/96 465
-------
1,763
INSURANCE CARRIERS--4.8%
John Hancock
Capital Corp.
2,000 5.291 12/10/96 1,997
MISCELLANEOUS RETAIL--1.0%
Mont Blanc Capital
423 5.366 12/04/96 423
NONDEPOSITORY BUSINESS
CREDIT INSTITUTIONS--2.6%
PHH Corp.
1,000 5.327 12/16/96 999
Transamerica Corp.
100 5.261 12/05/96 100
-------
1,099
TRANSPORTATION--2.4%
General Motors
Acceptance Corp.
1,000 5.747 03/11/97 984
- --------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $14,902) $14,902
- --------------------------------------------------
SHORT-TERM INVESTMENTS--15.6%
Federal Home Loan
Mortgage
Association
$ 4,525 5.703% 12/02/96 $ 4,524
Norinchukin Bank
1,000 5.340 12/06/96 1,000
Swiss Bank
1,000 5.520 12/18/96 1,000
- --------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,524) $ 6,524
- --------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS--23.9%
Bear Stearns & Co., Inc., Dated 11/29/96,
Repurchase Price $10,005
(U.S. Government Securities Colld.)
$10,000 5.680% 12/02/96 $10,000
Donaldson Lufkin & Jenrette Securities, Inc.,
Dated 11/29/96, Repurchase Price $3
(U.S. Government Securities Colld.)
3 5.920% 12/02/96 3
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,003) $10,003
- --------------------------------------------------------------------
TOTAL INVESTMENTS--102.2%
(Cost $42,763) $42,746
- --------------------------------------------------------------------
Liabilities, less other assets--(2.2)% (933)
- --------------------------------------------------------------------
NET ASSETS--100.0% $41,813
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
SHORT-INTERMEDIATE BOND PORTFOLIO
ASSET-BACKED SECURITIES--8.2%
AUTOMOTIVE--8.2%
<C> <C> <S> <C>
Olympic Automobile
Receivables Trust
$4,000 5.950% 11/15/99 $4,017
2,627 7.875 07/15/01 2,693
Olympic Automobile
Receivables Trust,
Interest Only
Stripped Security*
-- -- 01/15/99 1,703
Premier Auto Trust
2,222 4.750 02/02/00 2,209
Western Financial
Automobile Loan
Trust
507 4.700 01/01/98 507
1,505 7.100 01/01/00 1,526
- --------------------------------------------------------
TOTAL ASSET-BACKED SECURI-
TIES
(Cost $12,880) $12,655
- --------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATION--1.6%
Donaldson, Lufkin
& Jenrette, Inc.
Mortgage
Acceptance Corp.,
Series 1994-Q8,
Class 2A1
$2,473 7.250% 05/25/24 $ 2,473
- --------------------------------------------------------
TOTAL COLLATERALIZED MORT-
GAGE
OBLIGATION (Cost $2,429) $ 2,473
- --------------------------------------------------------
CORPORATE OBLIGATIONS--9.7%
BROKERAGE SERVICES--7.4%
Donaldson Lufkin &
Jenrette, Inc.
Medium Term Note
$6,500 5.625% 02/15/16 $ 6,353
Salomon Brothers,
Inc. Medium Term
Notes
3,000 5.500 01/31/98 2,987
2,000 5.700 02/11/98 1,995
-------
11,335
FINANCIAL--2.3%
Greyhound
Financial Corp.
3,590 8.250 03/11/97 3,613
- --------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $15,075) $14,948
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------
Principal Maturity
Amount Rate Date Value
- ---------------------------------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--
9.2%
COLLATERALIZED MORTGAGE OBLIGATIONS
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--3.3%
Class
BA, Series: 1571
$ 5,472 -- % 04/15/19 $ 5,098
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST--4.0%
Class
A, Series: 1996-M4
5,965 7.750 03/17/17 6,144
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--1.9%
Class B, Series:
1993-161
1,183 -- 10/25/18 1,126
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
--------
2,996
- ---------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $12,738) $ 14,238
- ---------------------------------------
U.S. GOVERNMENT OBLIGA-
TIONS--67.1%
U.S. TREASURY NOTES--67.1%
$ 5,000 5.375% 11/30/97 $ 4,996
7,000 5.625 01/31/98 7,010
12,000 5.125 03/31/98 11,942
8,000 5.375 05/31/98 7,983
2,000 5.125 11/30/98 1,982
26,600 6.750 05/31/99 27,269
13,675 6.875 08/31/99 14,083
18,000 7.750 01/31/00 19,038
4,000 5.500 12/31/00 3,958
4,890 6.625 06/30/01 5,046
- ---------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $102,332) $103,307
- ---------------------------------------
SHORT-TERM INVESTMENT--2.3%
Berliner Handels
und Frankfurter,
Grand Cayman
$ 3,537 5.688% 12/02/96 $ 3,537
- ---------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,537) $ 3,537
- ---------------------------------------
TOTAL INVESTMENTS--98.1%
(Cost $148,991) $151,158
- ---------------------------------------
Other assets, less other
liabilities--1.9% 2,860
- ---------------------------------------
NET ASSETS--100.0% $154,018
- ---------------------------------------
- ---------------------------------------
</TABLE>
*At November 30, 1996, the effective yields on these securities ranged from
approximately 5.00% to 7.00%. Refer to notes to statements of investments for a
discussion of stripped securities.
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
U.S. GOVERNMENT AGENCIES--25.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--15.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.8%
<C> <C> <S> <C>
Class F, Series:
1520
$ 750 5.650% 09/15/04 $ 745
FEDERAL NATIONAL MORTGAGE ASSOCIATION--14.2%
Class A, Series:
1996-M4
3,977 7.750 03/17/17 4,096
Class E, Series:
1992-200
1,000 6.250 06/25/17 1,000
Class EZ, Series:
1993-133
3,626 5.850 02/25/17 3,574
Class PD, Series:
1993-085
4,700 5.500 07/25/03 4,678
Class 14-F,
Series: 1988-14
297 9.200 12/25/17 308
-------
13,656
MORTGAGE-BACKED SECURITIES--7.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.6%
594 7.599 11/01/24 605
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--7.3%
6,632 8.000 08/15/26 6,835
179 8.000 11/15/26 184
-------
7,019
AGENCY OBLIGATIONS--2.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.5%
500 7.130 06/30/05 505
TENNESSEE VALLEY AUTHORITY NOTE--1.6%
1,500 6.235 07/15/45 1,524
-------
2,029
- ----------------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $23,881) $24,054
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--72.3%
U.S. TREASURY NOTES
<C> <C> <S> <C>
$15,000 6.750% 02/28/97 $15,051
18,000 5.500 11/15/98 17,966
7,500 6.750 05/31/99 7,689
15,000 7.750 01/31/00 15,865
12,000 6.125 07/31/00 12,141
715 6.625 06/30/01 738
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $69,274) $69,450
- ------------------------------------------------------
SHORT TERM INVESTMENT--1.3%
Federal Home Loan Bank
Discount Note
$ 1,225 5.700% 12/02/96 $ 1,225
- ------------------------------------------------------
TOTAL SHORT TERM INVESTMENT
(Cost $1,225) $ 1,225
- ------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $94,380) $94,729
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Other assets, less liabilities--1.4% 1,382
- ------------------------------------------------------------------------------
NET ASSETS--100.0% $96,111
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
U.S. TREASURY INDEX PORTFOLIO
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGA-
TIONS--97.4%
U.S. TREASURY NOTES--63.7%
$1,500 5.500% 07/31/97 $ 1,502
1,115 9.250 08/15/98 1,181
6,100 5.000 01/31/99 6,024
1,400 5.500 02/28/99 1,396
2,350 7.875 11/15/99 2,487
2,900 6.375 01/15/00 2,954
1,700 6.250 02/15/03 1,730
-------
17,274
U.S. TREASURY BONDS--32.0%
435 13.875 05/15/11 673
660 14.000 11/15/11 1,040
490 13.250 05/15/14 781
1,000 7.250 05/15/16 1,089
900 8.125 05/15/21 1,078
1,100 6.250 08/15/23 1,067
2,800 6.875 08/15/25 2,954
-------
8,682
U.S. TREASURY INTEREST ONLY
STRIPPED SECURITY*--1.7%
475 -- 08/15/97 458
- ------------------------------------
TOTAL U.S. GOVERNMENT OB-
LIGATIONS
(Cost $25,857) $26,414
- ------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
<C> <C> <S> <C>
SHORT TERM INVESTMENT--1.1%
Federal Home
Loan Bank
Discount Note
$ 310 5.700% 12/02/96 $ 310
- ------------------------------------
TOTAL SHORT TERM INVEST-
MENT
(Cost $310) $ 310
- ------------------------------------
TOTAL INVESTMENTS--98.5%
(Cost $26,167) $26,724
- ------------------------------------
Other assets, less liabil-
ities--1.5% 397
- ------------------------------------
NET ASSETS--100.0% $27,121
- ------------------------------------
- ------------------------------------
</TABLE>
*The effective yield on this Interest Only Stripped Security was 5.44% at
November 30, 1996. Refer to notes to statements of investments for a discussion
of stripped securities.
See accompanying notes to financial statements.
16
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO STATEMENTS OF INVESTMENTS
November 30, 1996
- --The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --Interest rates represent either the stated coupon rate, annualized yield on
date of purchase for discounted notes or, for floating rate securities, the
current reset rate.
- --Stripped securities represent the right to receive either future interest
payments (interest only stripped securities) or principal payments (principal
only stripped securities). The value of variable rate interest only stripped
securities varies directly with changes in interest rates, while the value of
fixed rate interest only stripped securities and the value of principal only
stripped securities varies inversely with changes in interest rates.
17
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Short- U.S. U.S.
International Short Intermediate Government Treasury
Bond Bond Duration Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties, at cost $360,976 $30,390 $32,760 $148,991 $94,380 $26,167
Repurchase agreements,
at cost -- -- 10,003 -- -- --
- ----------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $371,211 $32,998 $32,743 $151,158 $94,729 $26,724
Repurchase agreements,
at value -- -- 10,003 -- -- --
Cash 196 141 -- 1,301 7 6
Receivables:
Interest 5,134 1,078 74 1,589 1,387 381
Foreign tax reclaims -- 17 -- -- -- --
Fund units sold 3 -- -- 36 -- --
Administrator 11 5 14 8 6 6
Deferred organization
costs, net 15 37 29 15 18 15
Other assets -- 2 2 -- -- --
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS 376,570 34,278 42,865 154,107 96,147 27,132
- ----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 2,027 -- 1,000 30 -- --
Distributions to
unitholders -- -- 25 -- -- --
Accrued expenses:
Advisory fees 76 20 7 32 20 3
Administration fees 30 3 11 13 8 2
Custodian fees 4 5 4 2 2 2
Transfer agent fees 4 -- -- 1 1 --
Other liabilities 17 15 5 11 5 4
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,158 43 1,052 89 36 11
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $366,616 $31,072 $42,377 $151,156 $95,994 $27,538
Accumulated undistrib-
uted net investment in-
come -- 31 35 45 75 25
Accumulated net realized
gain (loss) on
investments (2,439) 529 (582) 650 (307) (999)
Net unrealized apprecia-
tion (depreciation) on
investments 10,235 2,608 (17) 2,167 349 557
Net unrealized loss on
translation of other
assets and liabilities
denominated in foreign
currencies -- (5) -- -- -- --
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
Total units outstanding
(no par value), unlim-
ited units authorized
Class A 17,661 1,543 4,187 7,423 4,602 1,276
Class C 353 -- -- -- 176 --
Class D 11 2 -- 17 11 41
- ----------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per unit
Class A $ 20.77 $ 22.16 $ 9.99 $ 20.70 $ 20.07 $ 20.60
Class C $ 20.78 -- -- -- $ 20.06 --
Class D $ 20.76 $ 22.14 -- $ 20.66 $ 20.03 $ 20.57
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Short- U.S. U.S.
International Short Intermediate Government Treasury
Bond Bond Duration Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME: $22,432 $2,199(a) $2,692 $10,435 $4,897 $1,082
- ---------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,993 288 194 1,011 527 70
Administration fees 575 80 121 353 220 44
Custodian fees 46 67 32 28 20 20
Transfer agent fees 38 3 -- 17 12 2
Registration fees 33 42 8 25 22 20
Professional fees 19 5 6 11 4 4
Trustee fees 12 2 2 7 2 2
Amortization of deferred
organization costs, net 14 17 20 14 13 13
Unitholder Servicing
Fees 7 -- -- -- 5 1
Other 19 2 12 12 8 8
- ---------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,756 506 395 1,478 833 184
Less voluntary waivers
of:
Investment advisory
fees (1,163) (64) (121) (590) (307) (44)
Administration fees (243) (48) -- (184) (132) (26)
Less: Expenses reimburs-
able by Administrator (143) (87) (153) (97) (69) (67)
- ---------------------------------------------------------------------------------------------
Net expenses 1,207 307 121 607 325 47
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 21,225 1,892 2,571 9,828 4,572 1,035
Net realized gains
(losses) on:
Investment transactions 2,094 1,011 29 392 (58) 91
Foreign currency trans-
actions -- (35) -- -- -- --
Net change in unrealized
appreciation
(depreciation) on in-
vestments (3,905) 20 -- (1,308) (201) (239)
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- 6 -- -- -- --
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS $19,414 $2,894 $2,600 $ 8,912 $4,313 $ 887
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $49 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
(All amounts in thousands)
<TABLE>
<CAPTION>
Bond International
Portfolio Bond Portfolio
------------------ ----------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 21,225 $ 15,744 $ 1,892 $ 1,898
Net realized gains (losses) on invest-
ments and foreign currency transactions 2,094 1,622 976 731
Net change in unrealized appreciation
(depreciation) on investments (3,905) 34,676 20 2,711
Net change in unrealized gains (losses)
on translations of other assets and li-
abilities denominated in foreign cur-
rencies -- -- 6 (11)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 19,414 52,042 2,894 5,329
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (20,213) (15,211) (2,300) (2,605)
Return of capital (556) (347) -- --
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (20,769) (15,558) (2,300) (2,605)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS
FROM:
Net investment income (264) (82) -- --
Return of capital (7) (2) -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (271) (84) -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS
FROM:
Net investment income (8) (4) (1) --
Return of capital (1) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (9) (4) (1) --
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 143,593 65,433 5,918 6,142
Reinvested distributions 18,565 13,688 1,747 2,073
Cost of units redeemed (79,885) (86,462) (6,747) (5,213)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets re-
sulting from Class A unit transactions 82,273 (7,341) 918 3,002
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 4,311 4,059 -- --
Reinvested distributions 271 84 -- --
Cost of units redeemed (1,032) (574) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class C unit transactions 3,550 3,569 -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 127 100 41 9
Reinvested distributions 9 4 1 --
Cost of units redeemed (37) (9) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class D unit transactions 99 95 42 9
- --------------------------------------------------------------------------------
Net increase (decrease) 84,287 32,719 1,553 5,735
Net assets--beginning of year 290,125 257,406 32,682 26,947
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $374,412 $290,125 $34,235 $32,682
- --------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME: $ -- $ -- $ 31 $ 36
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short-
Short Duration Intermediate U.S. Government U.S. Treasury
Portfolio Bond Portfolio Securities Portfolio Index Portfolio
- ----------------- ------------------ ---------------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,571 $ 4,196 $ 9,828 $ 6,272 $ 4,572 $ 1,688 $ 1,035 $ 1,675
29 (41) 392 735 (58) 60 91 823
-- 161 (1,308) 6,055 (201) 1,548 (239) 3,234
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
2,600 4,316 8,912 13,062 4,313 3,296 887 5,732
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
- --------------------------------------------------------------------------------
64,087 48,728 69,730 84,233 104,606 58,790 13,176 14,609
2,425 3,722 8,697 5,697 4,198 1,508 746 1,392
(70,201) (96,900) (82,742) (34,345) (72,555) (30,910) (5,169) (39,656)
- --------------------------------------------------------------------------------
(3,689) (44,450) (4,315) 55,585 36,249 29,388 8,753 (23,655)
- --------------------------------------------------------------------------------
-- -- -- -- 4,695 -- -- --
-- -- -- -- 159 -- -- --
-- -- -- -- (1,298) -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- 3,556 -- -- --
- --------------------------------------------------------------------------------
-- -- 328 12 210 55 592 281
-- -- 3 -- 8 2 26 4
-- -- (2) -- (60) (5) (66) (3)
- --------------------------------------------------------------------------------
-- -- 329 12 158 52 552 282
- --------------------------------------------------------------------------------
(3,660) (44,330) (4,673) 62,481 39,715 31,090 9,161 (19,345)
45,473 89,803 158,691 96,210 56,396 25,306 17,960 37,305
- --------------------------------------------------------------------------------
$41,813 $45,473 $154,018 $158,691 $ 96,111 $ 56,396 $27,121 $17,960
- --------------------------------------------------------------------------------
$ 35 $ 35 $ 45 $ 206 $ 75 $ 75 $ 25 $ 21
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Bond Portfolio
------------------------------------------------------------------------------------
Class A Class C Class D
--------------------------------------- ---------------- --------------------------
1996 1995 1994 1993 (a) 1996 1995 (b) 1996 1995 1994 (c)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.96 $ 18.29 $ 20.70 $ 20.00 $20.96 $20.21 $ 20.94 $ 18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.29 1.17 1.42 1.42 1.25 0.47 1.22 1.08 0.28
Net realized and
unrealized gain (loss)
on investments (0.19) 2.66 (2.21) 0.66 (0.18) 0.74 (0.18) 2.66 (0.45)
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment
operations 1.10 3.83 (0.79) 2.08 1.07 1.21 1.04 3.74 (0.17)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.26) (1.14) (1.46) (1.38) (1.22) (0.45) (1.19) (1.09) (0.28)
Net realized gain on
investments -- -- (0.15) -- -- -- -- -- --
Return of capital (.03) (0.02) (0.01) -- (.03) (0.01) (.03) -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.29) (1.16) (1.62) (1.38) (1.25) (0.46) (1.22) (1.09) (0.28)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.19) 2.67 (2.41) 0.70 (0.18) 0.75 (0.18) 2.65 (0.45)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.77 $ 20.96 $ 18.29 $ 20.70 $20.78 $20.96 $ 20.76 $ 20.94 $18.29
- ---------------------------------------------------------------------------------------------------------------
Total return (d) 5.57% 21.55% (4.04)% 10.60% 5.33% 6.08% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and
reimbursements 0.36% 0.36% 0.36% 0.36% 0.60% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and
reimbursements 0.84% 0.84% 0.87% 0.92% 1.08% 1.08% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and re-
imbursements 6.39% 5.94% 7.31% 7.84% 6.09% 5.59% 5.99% 5.48% 6.31%
Net investment income,
before waivers and re-
imbursements 5.91% 5.46% 6.80% 7.28% 5.61% 5.11% 5.51% 5.00% 5.80%
Portfolio turnover rate 101.38% 74.19% 103.09% 89.06% 101.38% 74.19% 101.38% 74.19% 103.09%
Net assets at end of pe-
riod (in
thousands) $366,850 $286,301 $257,391 $245,112 $7,342 $3,704 $ 220 $ 120 $ 15
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class C units were issued on July 3, 1995.
(c) Class D units were issued on September 14, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
22
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Bond Portfolio Short Duration Portfolio
-------------------------------------------- -------------------------------------
Class A Class D Class A
-------------------------- ---------------- -------------------------------------
1996 1995 1994 (a) 1996 1995 (b) 1996 1995 1994 1993 (c)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 21.74 $ 19.93 $ 20.00 $21.74 $22.17 $ 9.99 $ 9.97 $ 10.03 $ 10.00
Income (loss) from
investment operations:
Net investment income 1.54 1.26 0.79 1.37 0.02 0.53 0.59 0.40 0.14
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions 0.43 2.28 0.01 0.51 (0.08) -- 0.01 (0.05) 0.03
- --------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.97 3.54 0.80 1.88 (0.06) 0.53 0.60 0.35 0.17
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
(d) (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.40) (0.14)
Net realized gain on
investments
transactions -- -- -- -- -- -- -- (0.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.41) (0.14)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.42 1.81 (0.07) 0.40 (0.43) -- 0.02 (0.06) 0.03
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 22.16 $ 21.74 $ 19.93 $22.14 $21.74 $ 9.99 $ 9.99 $ 9.97 $ 10.03
- --------------------------------------------------------------------------------------------------------------
Total return (e) 9.47% 18.20% 4.03% 9.04% (0.30)% 5.45% 6.14% 3.64% 1.73%
Ratio to average net as-
sets of (f):
Expenses, net of
waivers and
reimbursements 0.96% 0.96% 0.96% 1.35% 1.35% 0.25% 0.25% 0.25% 0.32%
Expenses, before
waivers and
reimbursements 1.58% 1.47% 1.49% 1.97% 1.86% 0.81% 0.80% 0.77% 0.50%
Net investment income,
net of waivers and
reimbursements 5.91% 5.92% 5.93% 5.67% 3.26% 5.30% 5.80% 3.93% 3.00%
Net investment income,
before waivers and re-
imbursements 5.29% 5.41% 5.40% 5.05% 2.75% 4.74% 5.25% 3.41% 2.82%
Portfolio turnover rate 33.89% 54.46% 88.65% 33.89% 54.46% 828.58% 1,272.21% 1,364.00% 434.32%
Net assets at end of
period (in thousands) $34,183 $32,673 $26,947 $ 52 $ 9 $41,813 $ 45,473 $ 89,803 $186,765
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 20, 1995.
(c) Commenced investment operations on June 2, 1993.
(d) For the International Bond Portfolio, distributions to unitholders from
net investment income include amounts relating to foreign currency
transactions which are treated as ordinary income for Federal income tax
purposes.
(e) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(f) Annualized for periods less than a full year.
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Short-Intermediate Bond Portfolio
---------------------------------------------------------------
Class A Class D
------------------------------------- ------------------------
1996 1995 1994 1993 (a) 1996 1995 1994 (b)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.71 $19.53 $19.82
Income (loss) from in-
vestment operations:
Net investment income 1.14 1.02 0.97 0.85 1.07 0.94 0.23
Net realized and
unrealized gain (loss)
on investments (0.01) 1.19 (0.80) 0.31 (0.02) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.13 2.21 0.17 1.16 1.05 2.12 (0.06)
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (0.03) 1.20 (0.80) 0.33 (0.05) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.66 $20.71 $19.53
- ------------------------------------------------------------------------------------------
Total return (c) 5.68% 11.58% 0.84% 5.90% 5.22% 11.09% (0.30)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.88% 0.91% 0.95% 1.00% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and re-
imbursements 5.83% 5.14% 4.84% 4.79% 4.96% 4.85% 4.42%
Net investment income,
before waivers and re-
imbursements 5.31% 4.59% 4.25% 4.15% 4.44% 4.30% 3.83%
Portfolio turnover rate 47.68% 54.68% 48.67% 19.48% 47.68% 54.68% 48.67%
Net assets at end of pe-
riod (in thousands) $153,675 $158,678 $96,209 $107,550 $ 343 $ 13 $ 1
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
24
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Portfolio
-------------------------------------------------------------------------
Class A Class C Class D
----------------------------------- -------- --------------------------
1996 1995 1994 1993 (a) 1996 (b) 1996 1995 1994 (c)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.08 $ 19.05 $ 20.07 $ 20.00 $ 20.13 $ 20.04 $ 19.05 $19.43
Income (loss) from in-
vestment operations:
Net investment income 1.02 1.05 0.91 0.55 0.91 0.96 0.96 0.22
Net realized and
unrealized gain (loss)
on investments (0.01) 1.02 (1.02) 0.05 (0.12) (0.03) 1.00 (0.38)
- ----------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 2.07 (0.11) 0.60 0.79 0.93 1.96 (0.16)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) (0.01) 1.03 (1.02) 0.07 (0.07) (0.01) 0.99 (0.38)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.07 $ 20.08 $ 19.05 $ 20.07 $ 20.06 $ 20.03 $ 20.04 $19.05
- ----------------------------------------------------------------------------------------------------
Total return (d) 5.15% 11.18% (0.57)% 3.00% 4.05% 4.77% 10.66% (0.90)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.43% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.94% 1.09% 1.12% 1.18% 1.18% 1.33% 1.48% 1.51%
Net investment income,
net of waivers and
reimbursements 5.22% 5.43% 4.62% 4.18% 4.97% 4.83% 5.08% 4.65%
Net investment income,
before waivers and
reimbursements 4.64% 4.70% 3.86% 3.43% 4.39% 4.25% 4.35% 3.89%
Portfolio turnover rate 119.75% 141.14% 45.55% 20.59% 119.75% 119.75% 141.14% 45.55%
Net assets at end of pe-
riod (in thousands) $92,351 $56,329 $25,293 $32,479 $ 3,535 $ 225 $ 67 $ 13
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on April 5, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on September 15, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
U.S. Treasury Index Portfolio
------------------------------------------------------------
Class A Class D
----------------------------------- -----------------------
1996 1995 1994 1993(a) 1996 1995 1994(b)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.19 1.11 1.15 0.95 1.17 1.00 0.09
Net realized and
unrealized gain (loss)
on investments (0.18) 2.01 (1.93) 1.02 (0.24) 2.03 (0.03)
- --------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 3.12 (0.78) 1.97 0.93 3.03 0.06
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.19) (1.11) (1.14) (0.92) (1.11) (1.05) (0.09)
Net realized gain on
investments -- -- (0.36) -- -- -- --
- --------------------------------------------------------------------------------------
Total distributions to
unitholders (1.19) (1.11) (1.50) (0.92) (1.11) (1.05) (0.09)
- --------------------------------------------------------------------------------------
Net increase (decrease) (0.18) 2.01 (2.28) 1.05 (0.18) 1.98 (0.03)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.57 $20.75 $18.77
- --------------------------------------------------------------------------------------
Total return (c) 5.10% 16.95% (3.80)% 9.94% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.26% 0.26% 0.26% 0.26% 0.65% 0.65% 0.65%
Expenses, before waiv-
ers and reimbursements 1.04% 0.89% 0.79% 0.83% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and re-
imbursements 5.93% 5.09% 5.60% 5.11% 5.57% 5.41% 6.05%
Net investment income,
before waivers and re-
imbursements 5.15% 4.46% 5.07% 4.54% 4.79% 4.78% 5.52%
Portfolio turnover rate 42.49% 80.36% 52.80% 77.75% 42.49% 80.36% 52.80%
Net assets at end of pe-
riod (in thousands) $26,273 $17,674 $37,305 $71,456 $ 848 $ 286 $ --
- --------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
26
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end
management investment company. The Trust includes sixteen portfolios, each
with its own investment objective. The Northern Trust Company ("Northern")
acts as the Trust's investment adviser, transfer agent, and custodian.
Goldman, Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the fixed income
portfolios (the "Portfolios").
The Bond, International Bond, Short-Intermediate Bond, U.S. Government
Securities, and U.S. Treasury Index Portfolios may issue four separate unit
classes: Class A, B, C and D. Each class is distinguished by the level of
administrative support and transfer agent service provided. As of November 30,
1996, Class A, Class C and Class D units are outstanding for certain
portfolios.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.
(a) Investment Valuation
Investments held by a portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any
securities are not traded on a valuation date, at the last quoted bid price.
Securities which are traded in the over-the-counter markets are valued at the
last quoted bid price. Any securities, including restricted securities, for
which current quotations are not readily available are valued at fair value as
determined in good faith by Northern under the supervision of the Board of
Trustees ("Board"). Short-term investments are valued at amortized cost which
Northern has determined, pursuant to Board authorization, approximates market
value.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
(c) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments and interest income
are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on
investments.
(d) Investment Transactions and Investment Income
Investment transactions are recorded on the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(e) Forward Foreign Currency Exchange Contracts
The International Bond Portfolio is authorized to enter into forward foreign
currency exchange contracts for the
27
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or
portfolio positions. In addition, the International Bond Portfolio may enter
into foreign currency contracts for speculative purposes. The objective of the
Portfolio's foreign currency hedging transactions is to reduce the risk that
the U.S. dollar value of the Portfolio's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All forward foreign currency contracts are "marked-to-market" daily at
the applicable translation rates and any resulting unrealized gains or losses
are recorded in the financial statements. The portfolio records realized gains
or losses when the forward contract is offset by entry into a closing
transaction or extinguished by delivery of the currency. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
(f) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and capital gains to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, the portfolios
had approximately the following amounts of capital loss carryforwards for U.S.
federal tax purposes:
<TABLE>
<CAPTION>
Amount Year(s) of Expiration
- ----------------------------------------------------------------
(in thousands)
<S> <C> <C>
Bond $1,398 2002 to 2003
Short Duration 581 2002 to 2003
U.S. Government Securities 168 2001 to 2003
U.S. Treasury Index 979 2002
</TABLE>
- -------------------------------------------------------------------------------
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
(g) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(h) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio. Certain expenses arising in connection with a class of units are
allocated to that class of units. Expenses incurred which do not specifically
relate to an individual portfolio are allocated among the portfolios based on
each portfolio's relative net assets.
(i) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
<CAPTION>
Declared Paid
- -----------------------------------------------
<S> <C> <C>
Bond Monthly Monthly
International Bond Quarterly Quarterly
Short Duration Daily Monthly
Short-Intermediate Bond Monthly Monthly
U.S. Government Securities Monthly Monthly
U.S. Treasury Index Monthly Monthly
- -----------------------------------------------
</TABLE>
Each portfolio's net realized capital gains are distributed at least
annually.
28
<PAGE>
- -------------------------------------------------------------------------------
Income dividends and capital gains distributions are determined in accordance
with income tax regulations. Such amounts may differ from income and capital
gains recorded in accordance with generally accepted accounting principles.
Distributions of short-term and long-term capital gains were declared and
paid December 24, 1996 to unitholders of record on December 23, 1996, as
follows:
<TABLE>
<CAPTION>
Short-Term Long-Term
Capital Capital
Gain Gain Total
- -----------------------------------------------------
<S> <C> <C> <C>
International Bond $0.0872 $0.2491 $0.3363
Short-Intermediate Bond 0.0123 0.0426 0.0549
- -----------------------------------------------------
</TABLE>
(j) Reclassifications
At November 30, 1996, the Bond Portfolio reclassified approximately $740,000
from accumulated net realized loss on investment transactions to undistributed
net investment income. The International Bond Portfolio reclassified
approximately $439,000 from accumulated net realized gain (loss) on investment
transactions, and $35,000 from net realized loss on foreign currency
transactions, to accumulated undistributed net investment income. The Short-
Intermediate Bond Portfolio reclassified approximately $390,000 from
accumulated net realized gain (loss) on investment transactions to
undistributed net investment income, and the U.S. Government Securities
Portfolio reclassified approximately $11,000 from accumulated net realized
gain (loss) on investment transactions to undistributed net investment income.
These reclassifications had no impact on the net asset value of the Portfolios
and are designed to present the Portfolios' capital accounts on a tax basis.
3. ADVISORY, TRANSFER AGENCY AND CUSTODIAN AGREEMENTS
The Trust has an investment advisory agreement with Northern whereby each
portfolio pays Northern a fee, computed daily and payable monthly, based on a
specified percentage of its average daily net assets. For the current fiscal
year, Northern voluntarily agreed to waive a portion of the advisory fees as
shown on the accompanying Statements of Operations. The annual advisory fees
and waiver rates, expressed as a percentage of average daily net assets for
the year ended November 30, 1996, are as follows:
<TABLE>
<CAPTION>
Net
Advisory Less: Advisory
Fee Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
International Bond .90 .20 .70
Short Duration .40 .25 .15
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
- ----------------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%,
.10%, and .15% of the average daily net asset value of the outstanding Class
A, B, C and D units, respectively, for the Bond, International Bond, Short-
Intermediate Bond, U.S. Government Securities and U.S. Treasury Index
Portfolios.
As compensation for the services rendered as custodian for the portfolios,
and for the services rendered as transfer agent for the Short Duration
Portfolio, including the assumption by Northern of the expenses related
thereto, Northern receives compensation based on a pre-determined schedule of
charges approved by the Board.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement with Goldman Sachs whereby each
portfolio pays the Administrator a fee, computed daily and payable monthly,
based on the average net assets of each portfolio at the rates set forth
below:
29
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
<TABLE>
<CAPTION>
Average net assets Rate
- ---------------------------------------
<S> <C>
For the first $100,000,000 .250%
For the next $200,000,000 .150
For the next $450,000,000 .075
For net assets over $750,000,000 .050
- ---------------------------------------
</TABLE>
For the current fiscal year, Goldman Sachs voluntarily agreed to limit
administration fees to .10% of average daily net assets for the Bond,
International Bond, Short-Intermediate Bond, U.S. Government Securities and
U.S. Treasury Index Portfolios. In addition, Goldman Sachs agreed to waive a
portion of its administrative fees should overall administration fees earned
during the preceding year exceed certain specified levels. No waiver was
required under this agreement during the year ended November 30, 1996.
Furthermore, Goldman Sachs has agreed to reimburse each portfolio for certain
expenses in the event that such expenses, as defined, exceed on an annualized
basis .10% of the average daily net assets for the Bond, Short-Intermediate
Bond, Short Duration, U.S. Government Securities and U.S. Treasury Index
Portfolios and .25% of the average daily net assets for the International Bond
Portfolio.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1996, are shown on the accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
5. UNITHOLDER SERVICING PLAN
The Trust has adopted a Unitholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain unitholder administrative support
services for their customers or other investors who beneficially own Class B,
C and D units. As compensation under the Unitholder Servicing Plan, the
institution or other financial intermediary receives a fee at an annual rate
of up to .10%, .15% and .25% of the average daily net asset value of the
outstanding Class B, C and D units, respectively.
6. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1996 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from sales
Purchases maturities and
of U.S. Purchases of U.S. maturities
Government of other Government of other
Obligations securities Obligations securities
- ------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $299,522 $95,138 $230,507 $62,706
International Bond -- 10,260 -- 10,601
Short Duration 49,240 36,941 51,720 38,111
Short-Intermediate Bond 62,699 12,135 62,188 13,881
U.S.Government Securities 136,302 -- 95,525 --
U.S. Treasury Index 16,514 -- 7,346 --
- ------------------------------------------------------------------------
</TABLE>
As of November 30, 1996, the composition of unrealized appreciation
(depreciation) of investment securities (including the effects of foreign
currency translation) based on the aggregate cost of investments for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Net Income
Appreciation Tax
Appreciation Depreciation (Depreciation) Purposes
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $12,054 $2,860 $9,194 $362,017
International Bond 2,935 327 2,608 30,390
Short Duration 2 19 (17) 42,763
Short-Intermediate Bond 2,687 520 2,167 148,991
U.S. Government Securities 655 433 222 94,507
U.S. Treasury Index 571 14 557 26,167
- -----------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- -------------------------------------------------------------------------------
7. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
Interest expense for the year ended November 30, 1996 was approximately
$1,000 for the International Bond Portfolio. This amount is included in other
expenses on the Statements of Operations.
As of November 30, 1996, there were no outstanding borrowings.
8. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,010 910 3,920 4,000
International Bond 272 81 313 40
Short Duration 6,424 243 7,034 (367)
Short-Intermediate Bond 3,372 424 4,028 (232)
U.S. Government Securities 5,223 211 3,637 1,797
U.S. Treasury
Index 642 37 254 425
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class A units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 3,353 696 4,459 (410)
International Bond 297 97 243 151
Short Duration 4,868 388 9,707 (4,451)
Short-Intermediate Bond 4,158 285 1,714 2,729
U.S. Government Securities 2,965 77 1,564 1,478
U.S. Treasury
Index 748 70 1,953 (1,135)
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 214 13 51 176
U.S.Government Securities 234 8 66 176
- -------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- ----------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 201 4 28 177
- ----------------------------------------------
</TABLE>
Transactions in Class D units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- --------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 6 -- 1 5
International Bond 1 -- -- 1
Short-Intermediate Bond 16 -- -- 16
U.S. Government Securities 10 1 3 8
U.S. Treasury Index 29 1 3 27
- --------------------------------------------------------------------
</TABLE>
Transactions in Class D units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 5 -- -- 5
International Bond 1 -- -- 1
U.S. Government Securities 3 -- 1 2
U.S. Treasury Index 13 -- -- 13
- ---------------------------------------------------------------------
</TABLE>
31
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Fixed Income Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Bond, International Bond,
Short Duration, Short-Intermediate Bond, U.S. Government Securities and U.S.
Treasury Index Portfolios, comprising the Fixed Income Portfolios of The
Benchmark Funds, as of November 30, 1996, and the related statements of
operations for the year then ended and changes in net assets for each of the
two years in the period then ended and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bond, International Bond, Short Duration, Short-Intermediate Bond, U.S.
Government Securities and U.S. Treasury Index Portfolios, comprising the Fixed
Income Portfolios of The Benchmark Funds, at November 30, 1996, the results of
their operations for the year then ended and the changes in their net assets
for each of the two years in the period then ended and financial highlights
for the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 21, 1997
32
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management, expenses and other
information.
The
Benchmark
Funds
Fixed
Income
Portfolios
Annual Report
November 30, 1996
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK BALANCED PORTFOLIO
The relative superiority of stock returns over bond returns had the largest in-
fluence on the portfolio's absolute performance during the fiscal year ended
November 30, 1996.
In general, the stock market environment was most favorable to larger-capi-
talization portfolios. The Benchmark Balanced Portfolio underperformed its com-
posite index, primarily due to the portfolio's less-aggressive stance toward
technology stocks. In addition, the underperformance of medium-capitalization
health care stocks also was a factor.
We implemented three primary equity strategies during the year. First, we fo-
cused on holding fewer companies. Second, as trades transpired, we raised the
capitalization of new issues. And third, we gave a little more emphasis to the
energy sector.
In addition to raising the energy weighting, we increased the portfolio's
technology and financial weightings, and we reduced the weightings in utili-
ties, cyclicals and capital goods. In the technology area, we are favoring PC
and networking stocks, while the financial area remains attractive due to pos-
sible easing by the Federal Reserve and low inflation.
Over the next 12 months we will continue to emphasize quality growth stocks,
particularly those in the technology and financial sectors. We believe that
these securities should do well as the economic climate remains favorable and
inflation and interest rates remain low.
In the portfolio's bond component, we continue to hold a neutral interest
rate posture. The current inflation rate continues to make yields attractive
from a historical real yield perspective. While corporate spreads remain tight
by historical standards, we continue to find opportunity to add value and re-
main overweighted in the corporate and mortgage sectors.
Kurt Anderson, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE INDEX AND THE COMPOSITE INDEX
-l-Balanced Portfolio
- - + - -
Composite Index
- -c- -S&P 500 Index
- -2 - -Lehman Brothers
Intermediate Government/
Corporate Index (Lehman
Brothers)
<TABLE>
<CAPTION>
Balanced Lehman Composite
Portfolio S&P 500 Brothers Index
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
7/1/93 $10,000 $10,000 $10,000 $10,000
11/30/93 $10,312 $10,372 $10,195 $10,290
11/30/94 $9,821 $10,485 $10,009 $10,304
11/30/95 $11,807 $14,365 $11,462 $12,981
11/30/96 $13,468 $18,369 $12,130 $15,261
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year: 14.07% 27.88% 5.83% 17.57%
- ---------------------------------------------------------------------------------
Since Commencement on 7/1/93: 9.09% 19.45% 5.80% 13.15%
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Balanced Composite Lehman
Portfolio S&P 500 Index Brothers
--------- ------- --------- --------
<S> <C> <C> <C> <C>
12/29/95 $10,000 $10,000 $10,000 $10,000
11/30/96 $11,272 $12,546 $11,582 $10,473
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class C S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since Commencement on 12/29/95: 12.72% 25.46% 4.73% 15.82%
- -----------------------------------------------------------------------------------
</TABLE>
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company or its affiliates, and are not federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested.
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK BALANCED
PORTFOLIO VS. S&P 500 COMPOSITE STOCK PRICE INDEX, THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT/CORPORATE INDEX AND THE COMPOSITE INDEX--CONTINUED
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
BALANCED S&P LEHMAN COMPOSITE
PORTFOLIO 500 INDEX BROTHERS INDEX
- ------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
2/20/96 $ 10,000 $ 10,000 $10,000 $10,000
11/30/96 $ 11,055 $ 12,026 $10,455 $11,227
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class D S&P 500 Lehman Composite
November 30, 1996: Units Index Brothers Index*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since Commencement on 2/20/96: 10.55% 20.26% 4.55% 12.27%
- -----------------------------------------------------------------------------------
</TABLE>
*The Composite Index consists of 55%, 40% and 5% of the S&P 500, The Lehman
Brothers Intermediate Government/Corporate Index and 91-Day Treasury Bills,
respectively.
**Average Annual Total Returns are not annualized for periods less than one
year.
2
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK DIVERSIFIED GROWTH PORTFOLIO
Several factors influenced the portfolio's fiscal-year performance, particu-
larly the portfolio's relative overweighting in selected financial and health
care issues and its overall exposure to larger-capitalization stocks, which
dominated this phase of the market cycle.
Compared to the return on the S&P 500 Index, the portfolio's performance
lagged. This was due to the portfolio's less-than-aggressive stance toward the
technology sector throughout most of the year. And, as we moved into the latter
part of the fiscal year, certain issues--such as Olsten and Electronic Data
Systems--fell short of anticipated earnings, which held back the portfolio's
performance.
Throughout the 12-month period, we reduced the number of issues in the port-
folio. Early on, the portfolio held as many as 75 stocks and was much more
broadly diversified across issues. By year-end, the portfolio held approxi-
mately 55 securities. We reduced the portfolio's exposure to more aggressive
stocks and focused instead on quality growth issues that had the potential to
reduce total portfolio risk.
We currently are not emphasizing any particular market sectors, but we are
focusing on specific issues that we believe will show favorable revenue compar-
isons and those that represent good value relative to their expected earnings
growth rates.
John Zielinski, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK DIVERSIFIED GROWTH PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
- -l- Diversified Growth Portfolio - -
c- - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Diversified
Growth S&P
Portfolio 500 Index
---------- ---------
<S> <C> <C>
1/11/93 $10,000 $10,000
11/30/93 $10,738 $11,041
11/30/94 $ 9,988 $11,161
11/30/95 $12,441 $15,291
11/30/96 $15,032 $19,554
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 20.83% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 11.05% 18.81%
- -------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Diversified
Growth S&P
Portfolio 500 Index
---------- ---------
<S> <C> <C>
9/14/94 $10,000 $10,000
11/30/94 $ 9,486 $ 9,738
11/30/95 $11,781 $13,341
11/30/96 $14,183 $17,060
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 20.39% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 17.10% 27.29%
- -------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK EQUITY INDEX PORTFOLIO
The S&P 500 Index continued its strong performance, returning 27.9% for the
fiscal year ended November 30, 1996. This surpassed the performance of small-
capitalization stocks as measured by the Russell 2000 Index, which returned
16.5% for the year.
After adjusting for expenses, the portfolio, which is designed to replicate
the S&P 500 Index's performance in an efficient, cost-effective manner, pro-
vided a return that closely matched the return for the Index.
There were 23 additions and deletions to the Index throughout the fiscal
year, the most notable being the Chemical Bank/Chase merger and the
Disney/Capital Cities merger. These changes, as well as quarterly rebalancings,
were made in the portfolio at the time they were initiated in the Index.
During the next 12 months, we will continue to follow a passive index strat-
egy designed to provide equity market returns, as defined by the S&P 500 Index.
Susan French, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK EQUITY INDEX PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
-l- Equity Index Portfolio - -
c- - S&P 500 Index
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
1/11/93 $10,000 $10,000
11/30/93 $11,008 $11,041
11/30/94 $11,104 $11,161
11/30/95 $15,168 $15,291
11/30/96 $19,344 $19,554
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.53% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 18.48% 18.81%
- -------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK EQUITY INDEX PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX--CONTINUED
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
9/28/95 $10000 $10000
11/30/95 $10394 $10402
11/30/96 $13225 $13302
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class C S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.24% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/28/95: 26.85% 27.61%
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Equity
Index S&P
Portfolio 500 Index
- ------------------- --------- ---------
<S> <C> <C>
9/14/94 $10000 $10000
11/30/94 $ 9732 $9738
11/30/95 $13255 $13341
11/30/96 $16860 $17060
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 27.20% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 26.61% 27.29%
- -------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK FOCUSED GROWTH PORTFOLIO
Activity in the technology sector, and how we invested in technology stocks at
certain points during the year, had the largest influence on the portfolio's
performance for the fiscal year ended November 30, 1996.
The portfolio's underperformance relative to its market index can be attrib-
uted to two specific periods of time. In December 1995 a number of sectors, in-
cluding business services, technology, financial and health care,
underperformed the index by a large margin. As a result, the portfolio's per-
formance was off by approximately 2.6% for the month. In the summer, technology
stocks suffered a setback, which was reflected in the portfolio's performance.
We then implemented a hedge against technology, which prevented the portfolio
from participating in the technology upswing that occurred late in the third
quarter.
Investors should keep in mind that the portfolio normally contains a limited
number of stocks, which may create some underperformance, relative to the S&P
500 Index, over shorter time periods. Our system of identifying fundamentally
sound companies strives to provide good long-term performance.
Going forward, we believe it's doubtful that returns from the technology and
financial sectors will continue to be so relatively strong. As such, we may
take some profits from stocks in strong sectors and reinvest the proceeds in
promising areas of the market that haven't performed quite as well over the
prior year.
Tom Kirkenmeier, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX
-l- Focused Growth Portfolio - - c - - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Focused
Growth 500 S&P 500
---------- -------
<S> <C> <C>
7/1/93 $10,000 $10,000
11/30/93 $10,433 $10,372
11/30/94 $ 9,791 $10,485
11/30/95 $12,570 $14,365
11/30/96 $14,811 $18,369
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A S&P 500
November 30, 1996: Units Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 17.82% 27.88%
- ---------------------------------------------------------------------------------------------
Since Commencement on 7/1/93: 12.16% 19.45%
- ---------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
FOCUSED S&P
GROWTH 500 INDEX
------- ---------
<S> <C> <C>
6/14/96 $10,000 $10,000
11/30/96 $10,751 $11,481
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns**
For Period Ended Class C S&P 500
November 30, 1996: Units Index
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Since Commencement on 6/14/96: 7.51% 14.81%
- --------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK FOCUSED GROWTH
PORTFOLIO VS. THE S&P 500
COMPOSITE STOCK PRICE INDEX--CONTINUED
-l- Focused Growth Portfolio - - c - - S&P 500 Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Focused
Growth S&P 500
------- -------
<S> <C> <C>
12/8/94 $10,000 $10,000
11/30/95 $13,097 $13,767
11/30/96 $15,378 $17,605
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D S&P 500
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 17.42% 27.88%
- -------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 24.27% 33.05%
- -------------------------------------------------------------------------------------------
</TABLE>
**Average Annual Total Returns are not annualized for periods less than one
year.
6
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK INTERNATIONAL GROWTH PORTFOLIO
The portfolio's exposure to the underperforming Japanese stock market and the
strength of the U.S. dollar were the primary factors influencing performance
during the fiscal year. The portfolio maintained a slightly greater-than-aver-
age weighting in the Japanese market, but, more important, the dollar rose
about 10% against the yen, which magnified the underperformance in U.S. dollar
terms.
Relative to its market index, the portfolio lagged somewhat, primarily due to
its position in Japan, its less-than-aggressive stance toward Hong Kong and a
slight underexposure to Europe.
Throughout the fiscal year, we tended to favor the Asian markets, lead by Ja-
pan, rather than the European markets. In general, Asia accounted for more than
50% of the fund's weighting. Asia, however, underperformed Europe during the
period, as strong bond market performance helped propel Europe's stock markets
upward.
Recently, we reduced the portfolio's position in Asia and increased its posi-
tion in Europe, which now accounts for a little more than half of the portfo-
lio. We also reduced the portfolio's Japanese exposure to about 30%, compared
to the EAFE Index weighting of 35%.
Looking ahead, we believe that the portfolio's repositioning toward Japan and
Europe should help future performance. We will continue to emphasize specific
countries rather than economic sectors.
Robert A. LaFleur, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL
GROWTH PORTFOLIO VS. THE MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST (EAFE)
INDEX
-l- International Growth
Portfolio
- -c- - EAFE Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International
Growth EAFE
Portfolio Index
------------- -------
<S> <C> <C>
3/28/94 $10,000 $10,000
11/30/94 $10,211 $10,204
11/30/95 $ 9,974 $10,976
11/30/96 $10,967 $12,267
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A EAFE
November 30, 1996: Units Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 9.96% 11.76%
- ---------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 3.50% 7.91%
- ---------------------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International
Growth EAFE
Portfolio Index
------------- -------
<S> <C> <C>
11/16/94 $10,000 $10,000
11/30/94 $ 9,744 $ 9,823
11/30/95 $ 9,474 $10,567
11/30/96 $10,382 $11,809
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D EAFE
November 30, 1996: Units Index
- -------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 9.59% 11.76%
- -------------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 1.86% 8.49%
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK SMALL COMPANY INDEX PORTFOLIO
Small-capitalization stocks, as represented by the Russell 2000 Index, returned
16.5% for the fiscal year ended November 30, 1996. Compared to large-cap
stocks, as measured by the S&P 500 Index, small-cap stocks underperformed by
11.4%.
As it is designed to do, the portfolio's performance nearly matched that of
the Russell 2000 Index during the fiscal year.
The major changes to the portfolio occurred in June, when the Russell 2000
Index was reconstituted. Once a year, all eligible securities in the Index are
re-ranked according to market capitalization. This activity resulted in the ad-
dition of approximately 450 stocks and the deletion of approximately 350. These
changes were incorporated into the portfolio at the end of June.
At the end of the current fiscal year, the market capitalization of the com-
panies in the Index, adjusted for cross holdings, ranged from $26.13 million to
$2.10 billion. The average market capitalization of the Index's companies was
$424 million.
Going forward, we will continue to stay aligned with the Russell 2000, with
our focus on closely approximating the Index's return.
Andrew Buchner, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BENCHMARK SMALL COMPANY
PORTFOLIO VS. THE RUSSELL 2000 SMALL STOCK INDEX
-l- Small Company Portfolio - -c- -
Russell 2000 Index
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Small Company Russell
Portfolio 2000 INDEX
- ------------------- ---------- ---------
<S> <C> <C>
1/11/93 $10000 $10000
11/30/93 $11409 $11515
11/30/94 $11233 $11363
11/30/95 $14352 $14576
11/30/96 $16642 $16976
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A Russell 2000
November 30, 1996: Units Index
- ------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 15.96% 16.46%
- ------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 13.99% 14.57%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[GRAPH APPEARS HERE]
<CAPTION>
Small Company Russell
Portfolio 2000 INDEX
- ------------------- ---------- ---------
<S> <C> <C>
12/08/94 $10000 $10000
11/30/95 $13162 $13263
11/30/96 $15295 $15447
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class D Russell 2000
November 30, 1996: Units Index
- ------------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 16.20% 16.46%
- ------------------------------------------------------------------------------------------
Since Commencement on 12/8/94: 23.93% 24.55%
- ------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
BALANCED PORTFOLIO
<C> <S> <C>
COMMON STOCKS--54.4%
BANKING--1.2%
13,200 Banc One Corp. $ 629
BROKERAGE AND FINANCIAL SERVICES--1.2%
17,500 T. Rowe Price, Associates Inc.* 632
CHEMICALS AND ALLIED PRODUCTS--6.3%
9,100 American Home Products Corp. 585
9,400 Merck & Co., Inc. 780
14,211 Morton International, Inc. 574
11,800 Praxair, Inc. 574
6,400 Procter & Gamble Co. 696
-------
3,209
COMMUNICATIONS--1.2%
10,700 Ameritech Corp. 630
COMPUTERS AND OFFICE MACHINES--2.5%
9,300 Cisco Systems, Inc.* 631
4,300 Microsoft Corp.* 675
-------
1,306
COSMETICS AND PERSONAL CARE--1.3%
9,200 Gillette Co. 679
CREDIT INSTITUTIONS--2.5%
14,300 Green Tree Financial Corp. 599
16,300 MBNA Corp. 658
-------
1,257
ELECTRICAL SERVICES--1.1%
12,700 Duke Power Co. 589
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--5.8%
9,700 General Electric Co. 1,009
6,600 Intel Corp. 837
10,300 Linear Technology Corp. 485
11,400 Solectron Corp.* 667
-------
2,998
FOOD AND BEVERAGES--3.2%
14,400 PepsiCo, Inc. 430
4,900 Philip Morris Cos., Inc. 505
20,400 Starbucks Corp.* 706
-------
1,641
HEALTH SERVICES--3.4%
25,300 Health Management Associates, Inc.,
Class A* 560
10,898 Johnson & Johnson Co. 579
3,800 Invacare Corp. 103
7,700 Medtronic, Inc. 509
-------
1,751
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
INDUSTRIAL INSTRUMENTS--1.0%
11,100 Danaher Corp. $ 497
INSURANCE SERVICES--3.7%
5,400 American International Group, Inc. 621
3,500 General Re Corp. 591
6,700 MBIA, Inc. 678
-------
1,890
MORTGAGE AGENCIES--1.4%
17,900 Federal National Mortgage Association 738
OIL AND GAS--2.7%
6,400 Enron Corp. 293
9,900 Noble Affiliates, Inc. 466
5,900 Schlumberger Ltd. 614
-------
1,373
PAPER PRODUCTS--1.4%
7,200 Kimberly-Clark Corp. 704
PETROLEUM PRODUCTS--3.6%
9,100 Chevron Corp. 610
6,700 Exxon Corp. 634
3,400 Royal Dutch Petroleum Co. 577
-------
1,821
PROFESSIONAL SERVICES--5.3%
7,200 Cintas Corp. 437
6,800 Computer Sciences Corp.* 535
21,450 CUC International, Inc.* 566
13,800 First Data Corp. 550
12,700 Oracle Systems Corp.* 622
-------
2,710
RETAIL--4.5%
8,100 Home Depot, Inc. 422
22,700 Staples, Inc.* 448
5,000 Tommy Hilfiger Corp.* 270
10,900 Viking Office Products, Inc. 341
19,500 Walgreen Co. 814
-------
2,295
TRANSPORTATION PARTS AND EQUIPMENT--1.1%
5,900 Boeing Co. 586
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $21,087) $27,935
- --------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
BALANCED PORTFOLIO--CONTINUED
ASSET-BACKED SECURITIES--3.1%
FINANCIAL--3.1%
Olympic Automobile Receivables Trust Series: 1995-D, Class
A3
$ 700 5.950%Due 11/15/99 $ 703
Premier Auto Trust
Series: 1994-1, Class A3
156 4.750%Due 02/02/00 155
Western Financial Grantor Trust
Series: 1994-4, Class A1
151 7.100%Due 01/01/00 153
Western Financial Grantor Trust
Series: 1995-5, Class A1
596 5.875%Due 03/01/02 597
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $1,603) $ 1,608
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATION--0.6%
Donaldson, Lufkin & Jenrette, Inc. Mortgage Acceptance
Corp.
Series: 1994-Q8, Class 2A1
$ 327 7.250% Due 05/25/24 $ 327
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATION
(Cost $318) $ 327
- -------------------------------------------------------------------------------
CORPORATE BONDS--6.4%
FINANCIAL--4.3%
Equitable Life Assurance Co.
$ 400 6.950%Due 12/01/05 $ 402
Lehman Brothers Medium Term Note
475 6.875%Due 06/08/98 480
Lumbermens Mutual Casualty Co.
350 9.150%Due 07/01/26 392
Prudential Insurance Co. of America
400 7.650%Due 07/01/07 417
Salomon, Inc. Medium Term Note
500 5.500%Due 01/31/98 498
-------
2,189
RETAIL--0.8%
Penney (J. C.), Inc.
420 6.900%Due 08/15/26 433
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------
<C> <S> <C>
SANITARY SERVICES--1.3%
WMX Technologies, Inc.
$ 650 7.100%Due 08/01/26 $ 686
- -----------------------------------------------
TOTAL CORPORATE BONDS
(Cost $3,209) $ 3,308
- -----------------------------------------------
U.S. GOVERNMENT AGENCIES--6.0%
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC
TRUST--3.0%
Series: 1991-37, Class G
$ 250 8.150% Due 08/25/05 $ 257
Series: 1996-M4, Class A
746 7.750% Due 03/17/17 768
Series: 1992-200, Class E
500 6.250% Due 06/25/17 500
--------
1,525
GOVERNMENT NATIONAL MORTGAGE ASSOCI-
ATION--3.0%
Pool # 432153
1,522 8.000% Due 11/15/26 1,570
- -----------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $3,048) $ 3,095
- -----------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--21.4%
U.S. TREASURY NOTES--21.4%
$ 1,550 8.125% Due 02/15/98 $ 1,596
750 5.375% Due 05/31/98 748
1,835 6.750% Due 05/31/99 1,881
640 6.875% Due 08/31/99 659
1,475 6.250% Due 05/31/00 1,498
1,325 7.750% Due 02/15/01 1,420
800 6.250% Due 02/15/03 814
1,000 5.750% Due 08/15/03 990
1,260 7.500% Due 02/15/05 1,379
- -----------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $10,792) $ 10,985
- -----------------------------------------------
FLOATING RATE BANK NOTE--1.6%
National Westminster Bank
$ 900 5.625%Due 02/28/97 $ 789
- -----------------------------------------------
TOTAL FLOATING RATE BANK NOTE
(Cost $762) $ 789
- -----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--6.6%
Berliner Handels und Frankfurter,
Grand Cayman
$ 3,401 5.688%Due 12/02/96 $ 3,401
- -------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,401) $ 3,401
- -------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost $44,220) $51,448
- -------------------------------------------------------
Liabilities, less other assets--(0.1)% (62)
- -------------------------------------------------------
NET ASSETS--100.0% $51,386
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
DIVERSIFIED GROWTH PORTFOLIO
<C> <S> <C> <C>
COMMON STOCKS--99.1%
BANKING--4.8%
68,640 Banc One Corp. $ 3,269
108,200 First USA, Inc. 3,557
--------
6,826
BROKERAGE SERVICES--2.1%
100,000 Schwab (Charles) Corp. 3,012
CHEMICALS AND ALLIED PRODUCTS--14.3%
41,000 Abbott Laboratories 2,286
50,800 Air Products and Chemicals, Inc. 3,531
40,000 American Home Products Corp. 2,570
31,200 Merck & Co., Inc. 2,590
72,437 Morton International, Inc. 2,925
17,000 Pfizer, Inc. 1,523
62,000 Praxair, Inc. 3,015
18,300 Procter & Gamble Co. 1,990
--------
20,430
COMMUNICATIONS--3.6%
50,000 Ameritech Corp. 2,944
55,000 AT&T Corp. 2,159
--------
5,103
COMPUTERS AND OFFICE MACHINES--3.7%
27,000 Cisco Systems, Inc.* 1,833
20,000 Electronic Data Systems Corp. 967
16,300 Microsoft Corp.* 2,557
--------
5,357
COSMETICS AND PERSONAL CARE--0.7%
14,100 Gillette Co. 1,040
CREDIT INSTITUTIONS--1.5%
50,000 Green Tree Financial Corp. 2,094
ELECTRONICS AND OTHER ELECTRICAL EQUIP-
MENT--9.7%
18,000 Emerson Electric Co. 1,766
49,600 General Electric Co. 5,158
22,900 Intel Corp. 2,905
44,000 Linear Technology Corp. 2,074
35,000 Motorola, Inc. 1,938
--------
13,841
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
FOOD AND BEVERAGES--4.1%
117,000 Brinker International, Inc.* $ 2,165
45,000 PepsiCo, Inc. 1,344
22,000 Philip Morris Cos., Inc. 2,269
--------
5,778
GLASS, CLAY AND STONE PRODUCTS--1.3%
58,700 Newell Co. 1,820
HEALTH SERVICES--2.0%
35,000 Health Management Associates, Inc.,
Class A* 774
40,000 Johnson & Johnson Co. 2,125
--------
2,899
HEAVY CONSTRUCTION--2.4%
51,000 Fluor Corp. 3,468
INDUSTRIAL INSTRUMENTS--3.1%
37,600 Hewlett-Packard Co. 2,026
60,000 Sundstrand Corp. 2,340
--------
4,366
INSURANCE SERVICES--3.6%
23,900 American International Group, Inc. 2,748
23,400 MBIA, Inc. 2,366
--------
5,114
MORTGAGE AGENCIES--2.8%
92,000 Federal National Mortgage Association 3,795
OIL AND GAS--2.9%
45,000 Noble Affiliates, Inc. 2,121
20,000 Schlumberger Ltd. 2,080
--------
4,201
PAPER PRODUCTS--2.1%
31,300 Kimberly-Clark Corp. 3,059
PETROLEUM PRODUCTS--9.1%
43,000 Chevron Corp. 2,881
37,300 Exxon Corp. 3,529
34,650 Mobil Corp. 4,193
14,000 Royal Dutch Petroleum Co. 2,378
--------
12,981
PROFESSIONAL SERVICES--7.5%
35,000 Cintas Corp. 2,126
17,000 Computer Sciences Corp.* 1,337
100,700 CUC International, Inc.* 2,656
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
32,736 First Data Corp. $ 1,305
71,900 Olsten Corp. 980
47,500 Oracle Systems Corp.* 2,327
--------
10,731
RECREATION AND LEISURE SERVICES--4.2%
88,100 Carnival Corp., Class A 2,786
88,000 Circus Circus Enterprises, Inc.* 3,212
--------
5,998
RETAIL--11.1%
58,200 Home Depot, Inc. 3,034
131,050 Staples, Inc.* 2,588
50,000 Tommy Hilfiger Corp.* 2,700
115,600 Wal-Mart Stores, Inc. 2,948
107,300 Walgreen Co. 4,480
--------
15,750
TRANSPORTATION PARTS AND EQUIPMENT--2.5%
36,000 Boeing Co. 3,578
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $105,076) $141,241
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--1.1%
Berliner Handels und Frankfurter, Grand Cayman
$1,490 5.688%Due 12/02/96 $ 1,490
- -----------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $1,490) $ 1,490
- -----------------------------------------------------------------------
TOTAL INVESTMENTS--100.2%
(Cost $106,566) $142,731
- -----------------------------------------------------------------------
Liabilities, less other assets--(0.2)% (243)
- -----------------------------------------------------------------------
NET ASSETS--100.0% $142,488
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO
COMMON STOCKS--98.2%
AGRICULTURE--0.1%
10,400 Pioneer Hi-Bred International, Inc. $ 725
APPAREL--0.1%
9,200 Liz Claiborne, Inc. 390
8,000 V. F. Corp. 543
--------
933
BANKING--7.8%
13,500 Ahmanson (H.F.) & Co. 445
54,949 Banc One Corp. 2,617
19,200 Bank of Boston Corp. 1,342
48,600 Bank of New York Co., Inc. 1,744
45,376 BankAmerica Corp. 4,674
10,100 Bankers Trust New York Corp. 879
24,300 Barnett Banks, Inc. 1,069
19,800 Boatmen's Bancshares, Inc. 1,319
55,046 Chase Manhattan Corp. 5,202
60,600 Citicorp 6,620
14,500 Comerica, Inc. 848
28,100 Corestates Financial Corp. 1,514
13,300 Fifth Third Bancorp 931
17,800 First Bank System, Inc. 1,297
39,907 First Chicago NBD Corp. 2,345
34,815 First Union Corp. 2,659
7,300 Golden West Financial Corp. 493
17,300 Great Western Financial Corp. 538
29,000 Keycorp 1,519
16,350 Mellon Bank Corp. 1,181
23,500 Morgan (J.P.) & Co., Inc. 2,218
28,000 National City Corp. 1,298
36,668 NationsBank Corp. 3,800
46,700 Norwest Corp. 2,183
43,000 PNC Bank Corp. 1,698
7,000 Republic New York Corp. 618
28,100 Sun Trust Banks, Inc. 1,426
19,500 U.S. Bancorp 834
21,000 Wachovia Corp. 1,260
11,866 Wells Fargo & Co. 3,377
--------
57,948
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
31,400 Houston Industries, Inc. $ 691
1,100 Nacco Industries, Inc. 52
--------
743
BROKERAGE AND FINANCIAL SERVICES--1.2%
59,800 American Express Co. 3,125
33,101 Fleet Financial Group, Inc. 1,833
17,300 Green Tree Financial Corp. 724
21,300 Merrill Lynch & Co., Inc. 1,709
19,100 Morgan Stanley Group, Inc. 1,148
13,300 Salomon Brothers, Inc. 607
--------
9,146
CHEMICALS AND ALLIED PRODUCTS--11.9%
98,400 Abbott Laboratories 5,486
14,100 Air Products and Chemicals, Inc. 980
8,200 Allergan, Inc. 263
10,600 Alza Corp.* 299
80,200 American Home Products Corp. 5,153
33,400 Amgen, Inc.* 2,033
16,800 Avon Products, Inc. 937
34,400 Baxter International, Inc. 1,462
63,200 Bristol-Myers Squibb Co. 7,189
6,500 Clorox Co. 678
18,500 Colgate-Palmolive Co. 1,714
30,900 Dow Chemical Co. 2,588
70,700 Du Pont (E.I.) de Nemours & Co., Inc. 6,663
9,875 Eastman Chemical Co. 564
8,100 Ecolab, Inc. 315
68,998 Eli Lilly & Co. 5,278
4,700 FMC Corp.* 363
6,800 Goodrich (B.F.) Co. 305
11,100 Grace (W.R.) & Co. 587
8,000 Great Lakes Chemical Corp. 429
13,500 Hercules, Inc. 655
14,000 International Flavors & Fragrances, Inc. 637
153,400 Merck & Co., Inc. 12,732
18,000 Morton International, Inc. 727
8,500 Nalco Chemical Co. 324
81,000 Pfizer, Inc. 7,260
64,120 Pharmacia & Upjohn, Inc. 2,477
23,500 PPG Industries, Inc. 1,439
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
19,600 Praxair, Inc. $ 953
86,400 Procter & Gamble Co. 9,396
8,200 Rohm & Haas Co. 653
46,600 Schering-Plough Corp. 3,320
10,800 Sherwin-Williams Co. 613
16,300 Union Carbide Corp. 752
34,200 Warner-Lambert Co. 2,445
--------
87,669
COMMUNICATIONS--7.4%
62,900 AirTouch Communications, Inc.* 1,612
23,900 Alltel Corp. 762
69,300 Ameritech Corp. 4,080
203,300 AT&T Corp. 7,979
55,200 Bell Atlantic Corp. 3,471
125,300 Bellsouth Corp. 5,059
41,200 Comcast Corp. 690
122,000 GTE Corp. 5,475
80,264 Lucent Technologies, Inc.* 4,114
9,300 Mallinckrodt, Inc. 409
86,700 MCI Communications Corp. 2,644
55,300 Nynex Corp. 2,564
54,000 Pacific Telesis Group 1,998
11,800 Providian Corp. 631
76,800 SBC Communications, Inc. 4,042
54,300 Sprint Corp. 2,274
22,500 Tellabs, Inc.* 894
78,700 U.S. West Media Group 1,505
60,200 U.S. West, Inc.* 1,881
45,000 Viacom, Inc., Class B* 1,699
48,900 Worldcom, Inc.* 1,131
--------
54,914
COMPUTERS AND OFFICE MACHINES--5.5%
15,200 Amdahl Corp.* 181
15,700 Apple Computer, Inc.* 379
23,700 Bay Network Inc.* 634
19,200 Cabletron Systems, Inc.* 775
8,600 Ceridian Corp.* 414
81,600 Cisco Systems, Inc.* 5,539
34,000 Compaq Computer Corp.* 2,694
4,900 Data General Corp.* 72
11,400 Dell Computer Corp.* 1,159
19,600 Digital Equipment Corp.* 720
29,200 EMC Corp.* 942
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
5,900 Intergraph Corp.* $ 54
66,500 International Business Machines Corp. 10,598
75,400 Microsoft Corp.* 11,828
18,800 Pitney Bowes, Inc. 1,109
27,300 Seagate Technology Inc.* 1,078
21,700 Silicon Graphics, Inc.* 431
14,800 Tandem Computers, Inc.* 202
7,500 Tandy Corp. 316
21,300 3Com Corp.* 1,600
21,900 Unisys Corp.* 167
--------
40,892
CONSTRUCTION--0.2%
14,400 Dover Corp. 769
22,600 Dresser Industries, Inc. 740
--------
1,509
COSMETICS AND PERSONAL CARE--0.6%
56,200 Gillette Co. 4,145
CREDIT INSTITUTIONS--0.6%
6,800 Beneficial Corp. 422
20,672 Dean Witter Discover & Co. 1,413
12,200 Household International, Inc. 1,156
28,050 MBNA Corp. 1,133
7,400 MGIC Investment Corp. 554
--------
4,678
ELECTRICAL SERVICES--2.7%
23,600 American Electric Power Co., Inc. 979
18,600 Baltimore Gas and Electric Co. 518
19,200 Carolina Power & Light Co. 703
26,500 Central and South West Corp. 709
19,910 Cinergy Corp. 667
29,600 Consolidated Edison Co. of New York, Inc. 858
22,400 Dominion Resources, Inc. 854
18,300 DTE Energy Co. 586
25,600 Duke Power Co. 1,187
55,300 Edison International 1,099
28,800 Entergy Corp. 781
23,100 FPL Group, Inc. 1,066
15,200 General Public Utilities Corp. 511
18,200 Niagara Mohawk Power Corp.* 159
8,700 Northern States Power Co. 410
19,200 Ohio Edison Co. 442
52,400 Pacific Gas & Electric Co. 1,264
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
ELECTRICAL SERVICES--CONTINUED
37,100 PacifiCorp $ 779
28,100 Peco Energy Co. 717
20,400 PP&L Resources, Inc. 467
30,800 Public Service Enterprise Group, Inc. 882
84,900 Southern Co. 1,889
28,300 Texas Utilities Co. 1,118
27,200 Unicom Corp. 724
12,900 Union Electric Co. 513
--------
19,882
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--7.3%
17,000 Advanced Micro Devices, Inc.* 412
27,656 AMP, Inc. 1,058
7,587 Andrew Corp.* 439
13,600 Cooper Industries, Inc. 564
14,700 DSC Communications Corp.* 265
28,300 Emerson Electric Co. 2,777
208,200 General Electric Co. 21,653
17,300 General Instrument Corp.* 383
4,900 Harris Corp. 336
103,700 Intel Corp. 13,157
14,800 ITT Corp. * 683
16,300 LSI Logic Corp.* 491
12,800 Maytag Corp. 245
26,300 Micron Technology, Inc. 871
74,700 Motorola, Inc. 4,136
17,400 National Semiconductor Corp.* 426
6,000 National Service Industries, Inc. 210
32,600 Northern Telecom, Ltd. 2,143
5,600 Raychem Corp. 477
9,700 Scientific-Atlanta, Inc. 150
82,300 TeleCommunications, Inc.* 1,111
23,900 Texas Instruments, Inc. 1,524
5,100 Thomas & Betts Corp. 231
9,400 Whirlpool Corp. 470
--------
54,212
FOOD AND BEVERAGES--8.7%
62,500 Anheuser-Busch Cos., Inc. 2,649
68,809 Archer-Daniels-Midland Co. 1,514
8,700 Brown-Forman, Inc. 404
29,600 Campbell Soup Co. 2,446
314,300 Coca-Cola Co. 16,069
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
30,650 ConAgra, Inc. $ 1,628
4,800 Coors (Adolph) Co. 95
18,300 CPC International, Inc. 1,524
20,000 General Mills, Inc. 1,270
46,600 Heinz (H.J.) Co. 1,765
19,400 Hershey Foods Corp. 968
26,700 Kellogg Co. 1,812
3,000 Luby's Cafeterias, Inc. 66
88,200 McDonalds Corp. 4,123
197,500 PepsiCo, Inc. 5,900
103,200 Philip Morris Cos., Inc. 10,643
17,100 Quaker Oats Co. 673
13,400 Ralston Purina Group 1,025
61,200 Sara Lee Corp. 2,402
47,200 Seagram Co., Ltd. 1,929
20,200 Unilever N.V. ADR 3,497
23,700 UST, Inc. 773
13,300 Whitman Corp. 306
14,600 Wrigley (WM) Jr. Co. 852
-------
64,333
FURNITURE AND FIXTURES--0.1%
20,200 Masco Corp. 737
GENERAL BUILDING CONTRACTORS--0.2%
3,600 Centex Corp. 130
16,000 Honeywell, Inc. 1,098
4,900 Kaufman & Broad Home Corp. 63
3,000 Pulte Corp. 92
-------
1,383
GLASS, CLAY AND STONE PRODUCTS--0.2%
29,000 Corning, Inc. 1,175
20,000 Newell Co. 620
-------
1,795
HEALTH SERVICES--1.9%
12,500 Beverly Enterprises, Inc.* 165
84,595 Columbia/HCA Healthcare Corp. 3,384
20,500 Humana, Inc.* 387
168,000 Johnson & Johnson Co. 8,925
7,950 Manor Care, Inc.* 201
10,200 St. Jude Medical, Inc.* 426
27,300 Tenet Healthcare Corp.* 611
-------
14,099
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
HEAVY CONSTRUCTION--0.3%
10,500 Fluor Corp. $ 714
5,100 Foster Wheeler Corp. 184
15,800 Halliburton Co. 952
--------
1,850
INDUSTRIAL INSTRUMENTS--2.8%
7,200 Bard (C.R.), Inc. 202
7,100 Bausch & Lomb, Inc. 264
15,700 Becton Dickinson & Co. 659
14,600 Biomet, Inc.* 241
22,300 Boston Scientific Corp.* 1,302
42,500 Eastman Kodak Co. 3,442
128,900 Hewlett-Packard Co. 6,944
5,200 Johnson Controls, Inc. 403
30,200 Medtronic, Inc. 1,997
5,500 Millipore Corp. 225
5,500 Perkin-Elmer Co. 339
5,700 Polaroid Corp. 243
29,800 Raytheon Co. 1,523
4,100 Tektronix, Inc. 200
7,900 United States Surgical Corp. 317
41,000 Xerox Corp. 2,014
--------
20,315
INSURANCE SERVICES--4.1%
18,957 Aetna Life & Casualty Co. 1367
5,700 Alexander & Alexander Services, Inc. 83
56,065 Allstate Corp. 3,378
25,800 American General Corp. 1,061
59,175 American International Group, Inc. 6,805
13,600 AON Corp. 828
22,000 Chubb Corp. 1,193
9,600 CIGNA Corp. 1,357
10,400 General Re Corp. 1,755
14,800 ITT Hartford Group, Inc. 1,012
9,025 Jefferson-Pilot Corp. 526
13,100 Lincoln National Corp. 706
14,500 Loews Corp. 1,345
9,100 Marsh & McLennan Cos., Inc. 1,032
15,900 Safeco Corp. 662
10,600 St. Paul Cos., Inc. 624
9,050 Torchmark Corp. 471
8,300 Transamerica Corp. 659
80,716 Travelers Group, Inc. 3,632
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
23,200 United Healthcare Corp. $ 1,000
9,200 UNUM Corp. 654
14,900 USF & G Corp. 298
4,300 USLIFE Corp. 133
--------
30,581
JEWELRY AND PRECIOUS METALS--0.0%
4,900 Jostens, Inc. 104
LEATHER PRODUCTS--0.0%
6,300 Stride Rite Corp. 63
LUMBER AND WOOD PRODUCTS--0.1%
13,700 Louisiana-Pacific Corp. 310
MACHINERY--1.4%
22,600 Applied Materials, Inc.* 862
18,200 Baker Hughes, Inc. 666
11,100 Black & Decker Corp. 420
3,600 Briggs & Stratton Corp. 149
12,400 Brunswick Corp. 316
9,100 Case Equipment Corp. 478
24,300 Caterpillar, Inc. 1,923
5,000 Cincinnati Milacron, Inc. 104
5,000 Cummins Engine Co., Inc. 226
32,600 Deere & Co. 1,455
6,300 General Signal Corp. 272
4,400 Giddings & Lewis, Inc. 52
5,900 Harnischfeger Industries, Inc. 262
13,800 Ingersoll-Rand Co. 642
21,500 Tenneco, Inc. 1,096
4,000 Timken Co. 182
19,200 Tyco Laboratories, Inc. 1,051
--------
10,156
MANUFACTURING--0.1%
3,500 Alberto-Culver Co., Class B 166
14,900 ITT Industries 349
--------
515
MERCHANDISE--GENERAL--0.2%
16,400 Alco Standard Corp. 849
7,700 Snap-On, Inc. 279
11,200 Stanley Works 330
--------
1,458
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
METAL MINING--0.7%
45,000 Barrick Gold Corp. $ 1,350
28,300 Battle Mountain Gold Co. 205
11,750 Cyprus/Amax Minerals Co. 291
17,600 Echo Bay Mines Ltd. 109
24,600 Freeport-McMoran Copper & Gold, Inc. 775
18,500 Homestake Mining Co. 280
21,200 Inco Ltd. 739
12,539 Newmont Mining Corp. 600
30,200 Placer Dome, Inc. 713
16,580 Santa Fe Pacific Gold Corp. 191
--------
5,253
METAL PRODUCTS--0.3%
21,927 Allegheny Teledyne Corp. 512
3,800 Ball Corp. 93
3,800 Crane Co. 178
16,200 Crown Cork & Seal Co., Inc. 859
6,900 McDermott International, Inc. 122
9,350 Parker-Hannifin Co. 380
--------
2,144
MORTGAGE AGENCIES--1.1%
22,500 Federal Home Loan Mortgage Corp. 2,571
137,700 Federal National Mortgage Association 5,680
--------
8,251
NATURAL GAS TRANSMISSION--0.8%
13,300 Coastal Corp. 640
6,900 Columbia Gas System, Inc. 446
11,900 Consolidated Natural Gas Co. 680
2,600 Eastern Enterprises 98
32,000 Enron Corp. 1,464
8,700 Enserch Corp. 203
6,300 Nicor, Inc. 232
17,300 Norman Energy Corp. 268
3,400 Oneok, Inc. 94
10,700 Pacific Enterprises 328
4,400 Peoples Energy Corp. 159
10,900 Sonat, Inc. 564
13,200 Williams Company, Inc. 741
--------
5,917
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
OIL AND GAS--1.1%
15,800 Burlington Resources, Inc. $ 837
3,100 Helmerich & Payne, Inc. 167
4,300 Louisiana Land & Exploration Co. 257
40,700 Occidental Petroleum Corp. 977
13,200 Oryx Energy Co.* 274
19,000 Panenergy Corp. 836
10,700 Rowan Cos., Inc.* 253
11,400 Santa Fe Energy Resources, Inc.* 165
30,900 Schlumberger Ltd. 3,214
31,376 Union Pacific Resources Group, Inc.* 937
6,700 Western Atlas, Inc.* 472
--------
8,389
PAPER PRODUCTS--2.0%
6,600 Avery Dennison Corp. 466
6,600 Bemis Co., Inc. 235
6,100 Boise Cascade Co. 189
12,000 Champion International Corp. 516
11,500 Georgia-Pacific Corp. 837
37,835 International Paper Co. 1,608
10,700 James River Corp. 342
35,492 Kimberly-Clark Corp. 3,470
6,600 Mead Corp. 391
52,800 Minnesota Mining & Manufacturing Co. 4,422
12,504 Stone Container Corp. 192
7,000 Temple Inland, Inc. 376
8,600 Union Camp Corp. 423
12,850 Westvaco Corp. 363
25,000 Weyerhaeuser Co. 1,150
--------
14,980
PERSONAL SERVICES--0.6%
13,000 Block (H.& R.), Inc. 380
15,500 HFS Inc.* 1,004
24,600 Hilton Hotels Corp. 719
16,100 Marriott International Corp. 898
29,700 Service Corp. International 895
7,000 Willamette Industries, Inc. 476
--------
4,372
PETROLEUM PRODUCTS--7.4%
11,700 Amerada Hess Corp. 689
62,700 Amoco Corp. 4,867
8,100 Ashland Oil, Inc. 389
20,300 Atlantic Richfield Co. 2,824
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
82,300 Chevron Corp. $ 5,514
156,600 Exxon Corp. 14,818
6,200 Kerr-McGee Corp. 434
49,700 Mobil Corp. 6,014
5,900 Pennzoil Co. 332
33,200 Phillips Petroleum Co. 1,498
67,600 Royal Dutch Petroleum Co. 11,484
9,300 Sun Co., Inc. 233
33,300 Texaco, Inc. 3,301
31,300 Unocal Corp. 1,275
36,200 USX-Marathon Group 828
--------
54,500
PRINTING AND PUBLISHING--1.3%
9,400 American Greetings Corp. 265
10,400 Deluxe Corp. 322
19,300 Donnelley (R.R.) & Sons Co. 647
12,200 Dow Jones & Co., Inc. 424
17,800 Gannett Co., Inc. 1,397
3,900 Harland (John H.) Co. 120
12,100 Knight-Ridder, Inc. 508
12,500 McGraw-Hill Cos., Inc. 569
3,400 Meredith Corp. 175
12,600 Moore Corp. Ltd. 265
12,300 New York Times Co. 460
71,700 Time Warner, Inc. 2,922
13,000 Times Mirror Co. 681
7,700 Tribune Co. 666
--------
9,421
PROFESSIONAL SERVICES--2.2%
5,800 Autodesk, Inc. 162
36,500 Automatic Data Processing, Inc. 1,565
45,950 Computer Associates International, Inc. 3,021
9,500 Computer Sciences Corp.* 747
49,625 CUC International, Inc.* 1,309
56,500 First Data Corp. 2,253
10,300 Interpublic Group of Cos., Inc. 510
44,500 Novell, Inc.* 490
82,500 Oracle Systems Corp.* 4,042
10,200 Ryder System, Inc. 310
7,300 Safety-Kleen Corp. 116
3,000 Shared Medical Systems Corp. 149
23,200 Sun Microsystems, Inc.* 1,351
--------
16,025
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
RECREATION AND LEISURE SERVICES--1.2%
6,400 Bally Entertainment Corp.* $ 186
85,500 Disney (Walt) Co. 6,306
9,200 Harcourt General, Inc. 503
13,000 Harrah's Entertainment, Inc.* 231
10,850 Hasbro, Inc. 446
4,700 King World Productions, Inc.* 179
34,445 Mattel, Inc. 1,063
--------
8,914
RESEARCH AND CONSULTING SERVICES--0.2%
21,400 Cognizant Corp.* 738
21,400 Dun & Bradstreet Corp. 484
6,000 EG&G, Inc. 110
--------
1,332
RETAIL--4.4%
31,800 Albertson's, Inc. 1,109
18,400 American Stores Co. 734
13,100 Charming Shoppes, Inc.* 67
12,300 Circuit City Stores, Inc. 411
13,300 CVS Corp 547
19,900 Darden Restaurants, Inc. 172
27,300 Dayton-Hudson Corp. 1,061
14,300 Dillard Department Stores, Inc. 438
26,200 Federated Department Stores, Inc.* 894
36,200 Gap, Inc. 1,163
7,500 Giant Food, Inc. 253
4,800 Great Atlantic & Pacific Tea Co., Inc. 157
60,400 Home Depot, Inc. 3,148
61,300 K-Mart Corp.* 682
15,800 Kroger Co.* 729
34,100 Limited, Inc. 614
2,500 Long Drug Stores Corp. 125
21,700 Lowe's Cos., Inc. 882
31,500 May Department Stores Co. 1,536
4,600 Mercantile Stores Co., Inc. 231
10,300 Nordstrom, Inc. 448
28,400 Penney (J.C.), Inc. 1,526
7,800 Pep Boys-Manny Moe & Jack 286
24,703 Price/Costco, Inc.* 574
10,600 Rite Aid Corp. 420
6,400 Ryan's Family Steak Houses, Inc.* 45
49,400 Sears, Roebuck & Co. 2,458
6,100 Shoney's, Inc.* 50
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
EQUITY INDEX PORTFOLIO--CONTINUED
RETAIL--CONTINUED
9,200 TJX Cos., Inc. $ 415
34,500 Toys "R" Us, Inc.* 1,190
289,200 Wal-Mart Stores, Inc. 7,375
31,000 Walgreen Co. 1,294
16,200 Wendy's International, Inc. 346
19,100 Winn-Dixie Stores, Inc. 642
16,800 Woolworth Corp.* 403
--------
32,425
RUBBER AND PLASTICS--0.8%
4,600 Armstrong World Industries, Inc. 346
10,500 Cooper Tire & Rubber Co. 215
19,600 Goodyear Tire & Rubber Co. 951
73,900 Monsanto Co. 2,938
18,900 Rubbermaid, Inc. 454
7,800 Tupperware Corp. 413
--------
5,317
SANITARY SERVICES--0.5%
26,800 Browning-Ferris Industries, Inc. 720
39,500 Laidlaw, Inc. 484
61,900 WMX Technologies, Inc. 2,229
--------
3,433
SERVICE INDUSTRY MACHINERY--0.2%
14,566 Pall Corp. 381
3,600 Trinova Corp. 131
53,100 Westinghouse Electric Corp. 996
--------
1,508
STEEL PRODUCTS--0.8%
28,500 Alcan Aluminum Ltd. 1,004
22,000 Aluminum Co. of America 1,400
13,400 Armco, Inc.* 60
5,400 Asarco, Inc. 147
14,000 Bethlehem Steel Corp.* 126
18,187 Engelhard Corp. 355
6,100 Inland Steel Industries, Inc. 114
11,100 Nucor Corp. 604
6,500 Owens Corning Fiberglass Corp. 279
8,300 Phelps Dodge Corp. 603
8,000 Reynolds Metals Co. 476
10,600 USX-U.S. Steel Group 319
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
11,475 Worthington Industries, Inc. $ 228
--------
5,715
TEXTILES--0.1%
9,600 Fruit of the Loom, Inc.* 342
4,900 Russell Corp. 141
2,500 Spring Industries, Inc. 116
--------
599
TOBACCO PRODUCTS--0.1%
21,500 American Brands, Inc. 1,027
TRANSPORTATION PARTS AND EQUIPMENT--4.7%
35,600 Allied Signal, Inc. 2,608
43,900 Boeing Co. 4,362
91,900 Chrysler Corp. 3,262
12,800 Dana Corp. 398
9,800 Eaton Corp. 679
7,700 Echlin, Inc. 259
4,500 Fleetwood Enterprises, Inc. 137
149,100 Ford Motor Co. 4,883
7,900 General Dynamics Corp. 583
95,300 General Motors Corp. 5,492
15,400 Illinois Tool Works, Inc. 1,320
25,254 Lockheed Martin Corp.* 2,289
27,100 McDonnell Douglas Corp. 1,433
9,520 Navistar International. Corp.* 90
7,300 Northrop Grumman Co. 607
4,860 PACCAR, Inc. 323
27,500 Rockwell International Corp. 1,767
10,200 Textron, Inc. 973
8,100 TRW, Inc. 789
15,400 United Technologies Corp. 2,160
--------
34,414
TRANSPORTATION SERVICES--1.4%
11,500 AMR Corp.* 1,049
19,265 Burlington Northern Santa Fe Corp. 1,732
4,900 Caliber Systems Inc. 95
10,200 Conrail, Inc. 992
5,500 Consolidated Freightways, Inc. 133
26,700 CSX Corp. 1,248
10,000 Delta Air Lines, Inc. 753
14,400 Federal Express Corp.* 637
15,900 Norfolk Southern Corp. 1,431
18,200 Southwest Airlines Co. 450
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ---------------------------------------------------
<C> <S> <C>
30,700 Union Pacific Corp. $ 1,788
8,000 USAir Group* 186
--------
10,494
WHOLESALE--0.7%
4,800 Fleming Cos., Inc. 79
15,250 Genuine Parts Co. 686
6,400 Grainger (W.W.), Inc. 509
36,200 Nike, Inc. 2,059
3,600 Potlatch Corp. 159
7,100 Reebok International, Ltd.* 270
6,300 Sigma-Aldrich, Corp. 394
8,500 Supervalu Stores, Inc. 252
22,900 Sysco Corp. 781
--------
5,189
- ---------------------------------------------------
TOTAL COMMON STOCKS
(Cost $530,260) $724,714
- ---------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.3%
U.S. Treasury Bills #
$180 5.095% Due 12/26/96 $ 177
100 4.906% Due 01/09/97 99
820 4.940% Due 01/09/97 809
400 4.990% Due 01/09/97 395
390 5.220% Due 01/09/97 383
- ---------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $1,863) $ 1,863
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ---------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT--1.3%
Berliner Handels und Frankfurter,
Grand Cayman
$9,787 5.688% Due 12/02/96 $ 9,787
- ---------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $9,787) $ 9,787
- ---------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(Cost $541,910) $736,364
- ---------------------------------------------------------
Other assets, less liabilities--0.2% 1,374
- ---------------------------------------------------------
NET ASSETS--100.0% $737,738
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 30 $9,997 Long 12/20/96 $1,377
- -------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
21
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
FOCUSED GROWTH PORTFOLIO
COMMON STOCKS--98.3%
BANKING--5.2%
125,800 First USA, Inc. $ 4,136
26,500 State Street Bank Boston Corp. 1,792
-------
5,928
CHEMICALS AND ALLIED PRODUCTS--10.4%
34,400 American Home Products Corp. 2,210
25,000 Lilly (Eli) & Co. 1,913
44,900 Merck & Co., Inc. 3,727
81,400 Praxair, Inc. 3,958
-------
11,808
COMMUNICATIONS--3.0%
43,999 Lucent Technologies, Inc. 2,255
15,400 Reuters Holding PLC ADR 1,118
-------
3,373
COMPUTERS AND OFFICE MACHINES--3.6%
30,200 Cisco Systems, Inc.* 2,050
37,000 Parametric Technology Corp.* 2,012
-------
4,062
CREDIT INSTITUTIONS--4.0%
41,300 Associates First Capital Corp. 1,998
62,500 Green Tree Financial Corp. 2,617
-------
4,615
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--
18.7%
63,700 General Electric Co. 6,625
20,500 Intel Corp. 2,601
43,000 Linear Technology Corp. 2,026
64,900 Motorola, Inc. 3,594
110,000 Solectron Corp.* 6,435
-------
21,281
FOOD AND BEVERAGES--5.4%
43,000 Philip Morris Cos., Inc. 4,434
50,100 Starbucks Corp.* 1,735
-------
6,169
GLASS, CLAY AND STONE PRODUCTS--0.8%
33,000 Newell Co. 1,023
HEALTH SERVICES--4.2%
89,350 Health Management Associates, Inc.,
Class A* 1,977
53,600 Johnson & Johnson Co. 2,847
-------
4,824
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------
<C> <S> <C> <C>
INDUSTRIAL INSTRUMENTS--4.0%
45,400 Hewlett-Packard Co. $ 2,446
41,800 Raytheon Co. 2,137
--------
4,583
INSURANCE SERVICES--4.1%
16,500 American International Group, Inc. 1,897
28,000 MBIA, Inc. 2,831
--------
4,728
MEDICAL PRODUCTS AND EQUIPMENT--2.1%
36,000 Medtronic, Inc. 2,380
MORTGAGE AGENCIES--2.0%
55,000 Federal National Mortgage Association 2,269
PROFESSIONAL SERVICES--13.4%
20,600 Cintas Corp. 1,251
34,100 Computer Associates International, Inc. 2,242
25,700 Computer Sciences Corp.* 2,021
135,150 CUC International, Inc.* 3,565
88,002 First Data Corp. 3,509
127,000 Olsten Corp. 1,730
15,500 Sun Microsystems, Inc.* 903
--------
15,221
RECREATION AND LEISURE SERVICES--10.3%
35,000 Callaway Golf Co. 1,063
120,500 Carnival Corp., Class A 3,811
104,100 Circus Circus Enterprises, Inc.* 3,800
41,600 Disney (Walt) Co. 3,068
--------
11,742
RETAIL--7.1%
65,000 Kohls Corp.* 2,592
18,300 Home Depot, Inc. 954
66,200 PETsMART, Inc.* 1,688
45,000 Staples, Inc.* 889
35,300 Tommy Hilfiger Corp.* 1,906
--------
8,029
- -------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $92,269) $112,035
- -------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENT--1.8%
Berliner Handels und Frankfurter,
Grand Cayman
$2,008 5.688% Due 12/02/96 $ 2,008
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,008) $ 2,008
- -------------------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost $94,277) $114,043
- -------------------------------------------------------------
Liabilities, less other assets--(0.1)% (144)
- -------------------------------------------------------------
NET ASSETS--100.0% $113,899
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO
<C> <S> <C>
COMMON STOCKS--89.0%
AUSTRALIA--2.8%
90,000 Broken Hill Proprietary Co. $ 1,321
270,000 News Corp. Ltd. 1,438
165,000 WMC Ltd. 1,048
--------
3,807
CZECH REPUBLIC--0.6%
90,000 Czechoslovakia & Slovak Investment Corp.* 756
12,000 Czechoslovakia & Slovak Investment Corp. Warrants * 12
--------
768
FINLAND--0.7%
16,000 Nokia Corp. ADR 898
FRANCE--7.3%
11,000 Cie Generale des Eaux 1,356
17,000 Elf Aquitaine S.A. 1,485
25,000 Havas S.A. 1,771
55,000 Lagardere S.C.A. 1,664
12,000 Lyonnaise Des Eaux S.A. 1,142
15,000 PSA Peugeot 1,844
27,000 Rhone-Poulenc, Class A 875
--------
10,137
GERMANY--6.0%
1,800 Bayerische Motoren Werke A.G. 1,168
45,000 Commerzbank A.G. 1,107
25,000 Hoechst A.G. 1,095
3,000 Mannesmann A.G. 1,252
33,000 VEBA A.G. 1,931
4,500 Volkswagen A.G. 1,805
--------
8,358
HONG KONG--3.3%
125,000 Citic Pacific Ltd. 652
80,000 Guoco Group Ltd. 437
600,000 Hong Kong Telecommunications Ltd. 1,040
140,000 Hutchison Whampoa Ltd. 1,082
135,000 Swire Pacific Ltd. 1,279
--------
4,490
ITALY--2.9%
1,000,000 Credito Italiano 1,096
225,000 Ente Nazionale Idrocarburi S.p.A. 1,185
675,000 Pirelli S.p.A. 1,234
125,000 Stet Societa' Finanziaria Telefonica S.p.A. 531
--------
4,046
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
JAPAN--27.2%
110,000 Asahi Bank Ltd. $ 1,073
5,000 Bellsystem 24, Inc. 620
45,000 CMK Corp. 637
40,000 CSK Corp. 1,128
60,000 Eisai Co. Ltd. 1,181
18,000 FamilyMart 712
14,000 Forval Corp. 578
280,000 Hitachi Zosen Corp. 1,297
30,000 Honda Motor Co., Ltd. 886
65,000 Industrial Bank of Japan 1,285
300,000 Ishikawajima-Harima Heavy Industries Co. 1,397
300,000 Isuzu Motors Ltd. 1,500
63,000 Japan Radio Co. 769
50,000 Laox 769
150,000 Long-Term Credit Bank of Japan 949
14,000 Mars Engineering Corp. 535
280,000 Marubeni Corp. 1,267
22,000 Matsumotokiyoshi 746
55,000 Matsushita Electric Industrial Co. Ltd. 952
30,000 Matsushita-Kotobuki Electron 770
120,000 Minebea Co. Ltd. 1,025
110,000 Mitsubishi Estate Co. Ltd. 1,392
13,000 Nichii Gakkan Co. 617
50,000 Nikko Securities Co. Ltd. 466
23,000 Nintendo Corp. Ltd 1,628
165 Nippon Telegraph & Telephone Corp. 1,177
575,000 NKK Corp.* 1,415
25,000 Nomura Securities Co. Ltd. 422
200,000 NSK Ltd. 1,278
24,000 Orix Corp. 915
120,000 Ricoh Co. Ltd. 1,286
30,000 Sagami Chain Co. Ltd. 535
20,000 Sony Corp. 1,281
80,000 Sumitomo Electric Industries 1,125
60,000 Takeda Chemical Industries 1,176
230,000 Teijin Ltd. 1,097
50,000 Tokyo Style 738
35,000 Toyota Motor Corp. 957
--------
37,581
MALAYSIA--2.4%
120,000 AMMB Holdings Berhad 954
200,500 Genting Berhad 1,428
100,000 Malayan Banking Berhad 989
--------
3,371
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
NETHERLANDS--4.5%
23,000 ABN AMRO Holding N.V. $ 1,490
17,000 Akzo Nobel 2,256
35,000 ING Groep N.V. 1,226
20,000 Koninklijke Ahold N.V. 1,251
--------
6,223
NORWAY--0.8%
70,000 Saga Petroleum A.S.A. 1,135
SINGAPORE--1.4%
67,000 Development Bank of Singapore Ltd. 865
140,000 Keppel Corp. Ltd. 1,088
--------
1,953
SOUTH AFRICA--0.5%
28,000 South African Breweries Ltd. 706
SOUTH KOREA--0.5%
80,000 Cho Hung Bank Co. Ltd. General Depository Receipt 652
368 Daewoo Corp. 3
--------
655
SPAIN--3.4%
23,000 Banco Santander S.A. 1,247
30,000 Empresa Nacional de Electricidad S.A. 2,027
40,000 Repsol S.A. ADR 1,465
--------
4,739
SWEDEN--1.0%
30,000 Astra AB 1,439
SWITZERLAND--4.9%
1,200 Ciba-Geigy A.G. 1,486
19,000 CS Holding A.G. 2,024
9,000 SMH A.G. 1,306
7,000 Zurich Versicherungsgesellschaft 1,989
--------
6,805
TAIWAN--0.8%
433,500 Far Eastern Department Stores Ltd. 577
625,000 Pacific Construction* 527
--------
1,104
UNITED KINGDOM--18.0%
115,000 Barclays PLC 1,978
200,000 Cable & Wireless PLC 1,600
135,000 Commercial Union PLC 1,497
350,000 General Electric Co. PLC 2,191
30,000 Glaxo Wellcome PLC ADR 986
120,000 Imperial Chemical Industries PLC 1,556
</TABLE>
<TABLE>
<CAPTION>
Shares/
Principal
Amount Description Value
- ------------------------------------------------------------
<C> <S> <C>
175,000 Kingfisher PLC $ 1,908
175,000 Marks & Spencer PLC 1,492
600,000 National Grid Group PLC 1,976
175,000 National Westminster Bank PLC 2,024
125,000 Pearson PLC 1,544
200,000 Rank Group PLC 1,462
70,000 RTZ Corp. PLC 1,177
425,000 Tomkins PLC 1,775
38,000 Vodafone Group PLC ADR 1,644
--------
24,810
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $118,511) $123,025
- ------------------------------------------------------------
PREFERRED STOCK--1.0%
GERMANY--1.0%
29,000 Henkel KGaA-Vorzug $ 1,445
- ------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $1,223) $ 1,445
- ------------------------------------------------------------
OTHER--4.2%
JAPAN--4.2%
2,200,000 Nikkei 300 Stock Index Fund* $ 5,761
- ------------------------------------------------------------
TOTAL OTHER
(Cost $6,274) $ 5,761
- ------------------------------------------------------------
SHORT-TERM INVESTMENT--6.7%
Berliner Handels und Frankfurter,
Grand Cayman
$ 9,249 5.688% Due 12/02/96 $ 9,249
- ------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $9,249) $ 9,249
- ------------------------------------------------------------
TOTAL INVESTMENTS--100.9%
(Cost $135,257) $139,480
- ------------------------------------------------------------
Liabilities, less other assets--(0.9)% (1,204)
- ------------------------------------------------------------
NET ASSETS--100.0% $138,276
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
*Non-income producing security.
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
INTERNATIONAL GROWTH PORTFOLIO--CONTINUED
At November 30, 1996 the Portfolio's investments, excluding the short-term
investment, were diversified as follows:
<TABLE>
<CAPTION>
INDUSTRY/SECTOR
- --------------------------
<S> <C>
Auto 5.1%
Basic Industry 19.5
Capital Goods 8.1
Consumer Goods 14.1
Financial Services 19.5
Medical 5.3
Real Estate 1.5
Retail 6.1
Steel 1.0
Technology 5.0
Other 14.8
- --------------------------
TOTAL 100.0%
- --------------------------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO
<C> <S> <C>
COMMON STOCKS--93.5%
AGRICULTURE--0.5%
2,600 Barefoot, Inc. $ 33
2,700 DeKalb Genetics Corp. 101
2,999 Delta & Pine Land Co. 96
5,300 Dimon, Inc. 110
8,100 Longview Fibre Co. 148
2,400 Northland Cranberries, Inc. 53
1,500 Tejon Ranch Co. 24
--------
565
APPAREL--0.5%
1,600 Donnkenny, Inc.* 6
800 Fossil, Inc.* 10
1,500 Gadzooks, Inc.* 43
4,200 Genesco, Inc.* 43
4,300 Hartmarx Corp.* 23
3,250 Kellwood Co. 58
1,100 Kenneth Cole Productions, Inc.* 17
1,100 Marisa Christina, Inc.* 8
5,600 Nautica Enterprises, Inc.* 179
1,900 Oshkosh B' Gosh, Inc. 28
2,300 St. John Knits, Inc. 99
1,900 Starter Corp.* 12
1,650 Unitog Co. 45
1,500 Vans, Inc.* 23
--------
594
BANKING--7.9%
2,000 Aames Financial Corp. 86
1,880 Albank Financial Corp. 62
1,900 Amcore Financial, Inc. 42
1,900 American Federal Bank 36
1,000 Anchor Bancorp, Inc. 35
3,075 Associated Banc-Corp. 135
2,900 BancorpSouth, Inc. 76
1,302 Bank of Granite Corp. 42
1,200 BankAtlantic Bancorp, Inc. 15
2,264 Bankers Corp. 44
1,200 Banknorth Group, Inc. 46
1,100 Bay View Capital Corp. 45
990 Brenton Banks, Inc. 25
7,180 Cal Fed Bancorp* 174
1,400 CBT Corp. 33
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
2,300 CCB Financial Corp. $ 153
3,600 Centura Banks, Inc. 164
1,787 Chittenden Corp. 45
900 CitFed Bancorp, Inc. 42
2,100 Citizens Bancorp 121
1,700 Citizens Banking Corp. 53
5,900 City National Corp. 122
2,978 CNB Bancshares, Inc. 107
2,900 Coast Savings Financial, Inc.* 103
1,400 Cole Taylor Financial Group, Inc. 40
3,100 Collective Bancorp, Inc. 110
1,700 Colonial BancGroup, Inc. 68
1,768 Commerce Bancorp, Inc. 51
2,300 Commercial Federal Corp. 111
2,654 Commonwealth Bancorp 38
1,800 Community First Bankshares, Inc. 49
800 CPB, Inc. 24
3,880 Cullen/Frost Bankers, Inc. 138
1,685 Downey Financial Corp. 48
1,080 F & M Bancorp 33
3,055 F & M National Corp. 60
1,607 Fidelity National Corp. 27
1,370 Financial Trust Corp.* 39
1,700 First Citizens Bancshares, Inc. 136
1,900 First Commercial Bancshares, Inc. 47
3,437 First Commercial Corp. 125
3,500 First Commonwealth Financial Corp. 64
1,700 First Federal Financial Corp.* 41
2,700 First Federal Savings Bank of Colorado 48
2,152 First Financial Bancorp 66
925 First Financial Bancshares, Inc. 33
4,700 First Financial Corp. 140
3,700 First Hawaiian, Inc. 120
1,039 First Indiana Corp. 26
4,054 First Michigan Bank Corp. 116
1,900 First Midwest Bancorp, Inc. 68
1,900 First Savings Bank of Washington Bancorp, Inc. 35
1,050 First United Bancshares, Inc. 29
1,388 First Western Bancorp, Inc. 37
1,800 Firstbank of Illinois Co. 61
2,025 FirstBank Puerto Rico 51
4,800 Firstmerit Corp. 167
1,559 FNB Corp. 36
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
BANKING--CONTINUED
<C> <S> <C>
1,750 Fort Wayne National Corp. $ 66
5,159 Fulton Financial Corp. 107
6,876 Glendale Federal Bank FSB* 144
2,300 Great Financial Corp. 69
1,400 Hancock Holding Co. 59
1,113 Harleysville National Corp. 28
500 Harris Savings Bank 9
900 Heritage Financial Services, Inc. 19
3,897 Home Financial Corp. 67
1,000 Homeland Bankshares Corp. 41
2,529 Hubco, Inc. 62
2,556 Imperial Bancorp* 58
3,464 Imperial Credit Industries, Inc.* 74
69 Investors Financial Services Corp.,
Class A* 2
500 Irwin Financial Corp. 24
2,300 Jefferson Bancshares, Inc. 67
5,849 Keystone Financial, Inc. 158
2,100 Klamath First Bancorp 31
900 Liberty Bancorp, Inc. 37
3,900 Long Island Bancorp, Inc. 125
2,200 Magna Bancorp, Inc. 38
4,400 Magna Group, Inc. 134
2,250 Mark Twain Bancshares, Inc. 112
3,259 Mid-Am, Inc. 58
2,600 ML Bancorp, Inc. 38
600 National Bancorp of Alaska, Inc. 42
1,638 National City Bancshares, Inc. 48
3,950 National Commerce Bancorp 144
1,126 National Penn Bancshares, Inc. 29
1,651 New York Bancorp, Inc. 56
3,900 North Fork Bancorp, Inc. 133
729 North Side Savings Bank 38
3,900 Old National Bancorp 143
1,000 Omega Financial Corp. 34
2,195 ONBANCorp, Inc. 85
3,225 One Valley Bancorp of West Virginia, Inc. 121
600 Park National Corp. 30
2,000 Peoples Bank of Bridgeport, CT 56
4,000 Peoples Heritage Financial Group, Inc. 112
1,300 Pikeville National Corp. 28
1,100 Pinnacle Banc Group, Inc. 11
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
1,900 Provident Bancorp, Inc. $ 99
1,328 Provident Bankshares Corp. 51
1,200 Queen City Bancorp 56
1,900 RCSB Financial, Inc. 57
2,792 Republic Bancorp, Inc. 33
1,797 Resource Bancshares Mortgage Group, Inc.* 27
3,100 Riggs National Corp.* 54
5,414 Roosevelt Financial Group, Inc. 104
1,800 S & T Bancorp, Inc. 54
1,500 Security Capital Corp. 107
1,600 Silicon Valley Bancshares* 48
7,640 Sovereign Bancorp, Inc. 100
2,971 St. Paul Bancorp, Inc. 84
2,900 Standard Financial, Inc.* 57
700 Student Loan Corp. 27
700 Sumitomo Bank of California 17
2,075 Susquehanna Bancshares, Inc. 74
1,500 T.R. Financial Corp.* 44
3,100 Trust Co. of Jersey City 46
3,183 Trustco Bank Corp. 68
4,300 Trustmark Corp. 110
2,698 UMB Financial Corp. 106
2,100 United Bankshares, Inc. 67
3,800 United Carolina Bancshares Corp. 152
900 USBancorp, Inc. 37
2,800 UST Corp. 52
6,700 Washington Federal, Inc. 178
1,300 Wesbanco, Inc. 39
1,500 Westamerica Bancorp 87
1,718 Westcorp, Inc. 41
2,375 Whitney Holding Corp. 84
--------
8,985
BITUMINOUS COAL AND LIGNITE SURFACE MINING--0.1%
1,300 Addington Resources, Inc.* 39
1,200 Ashland Coal, Inc. 31
1,200 Nacco Industries, Inc. 57
--------
127
BROKERAGE AND FINANCIAL SERVICES--1.6%
2,200 Alex Brown, Inc. 132
2,200 Allied Capital Commercial Corp. 49
400 American Financial Enterprises, Inc. 11
2,300 Amresco, Inc. 49
2,900 Bankers Life Holding Corp. 71
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
867 BOK Financial Corp.* $ 23
700 CapMAC Holdings, Inc. 23
1,600 Carolina First Corp. 31
800 Cityscape Financial Corp.* 21
1,700 CMAC Investment Corp. 130
3,800 Crawford & Co., Class B 78
4,800 Crimmi Mae, Inc. 59
1,000 Cybercash, Inc.* 25
1,700 Financial Federal Corp.* 26
4,000 Insignia Financial Group, Inc., Class A* 91
1,900 Inter-Regional Financial Group, Inc. 67
600 Investment Technology Group, Inc.* 11
1,700 Jefferies Group, Inc. 61
2,100 Legg Mason, Inc. 82
1,540 McDonald & Co. Investments, Inc. 47
2,625 Morgan Keegan, Inc. 46
5,100 Olympic Financial Ltd. 71
3,600 Penncorp Financial Group, Inc. 124
7,550 Phoenix Duff & Phelps Corp. 53
3,300 Pioneer Group, Inc. 80
1,900 Piper Jaffray Cos., Inc. 28
1,857 Quick & Reilly Group, Inc. 53
600 RAC Financial Group, Inc.* 32
2,400 Raymond James Financial, Inc. 68
2,100 SEI Corp. 47
1,500 U.S. Trust Corp. 111
300 Value Line, Inc. 12
770 WFS Financial, Inc.* 18
500 Winthrop Resource Corp.* 14
--------
1,844
CHEMICALS AND ALLIED PRODUCTS--3.6%
2,600 Advanced Polymer Systems, Inc.* 20
4,300 Alliance Pharmaceutical Corp.* 54
2,300 Alpharma, Inc., Class A* 29
3,100 Amylin Pharmaceuticals, Inc.* 37
1,000 Aphton Corp.* 18
6,000 Arcadian Corp. 152
1,100 Bush Boake Allen, Inc.* 28
6,300 Calgon Carbon Corp. 73
2,100 Capstone Pharmacy Services, Inc.* 23
3,900 Carter-Wallace, Inc. 61
2,500 Cellpro, Inc.* 32
3,700 Cephalone, Inc.* 64
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
1,500 Chemed Corp. $ 56
2,800 Church & Dwight, Inc. 63
1,500 Collagen Corp. 30
1,274 Copley Pharmaceutical, Inc.* 17
10,839 Crompton & Knowles Corp. 199
2,800 Cygnus, Inc.* 35
3,800 Dexter Corp. 124
1,700 Diagnostic Products Corp. 45
5,000 Dura Pharmaceuticals, Inc.* 185
2,200 Epitope, Inc.* 27
1,500 Ergo Science Corp.* 18
3,200 First Mississippi Corp. 92
2,200 Fuller (H.B.) Co. 104
2,100 GelTex Pharmaceuticals, Inc.* 38
5,100 Genelabs Technologies, Inc.* 20
3,600 Geon Co. 68
2,100 Herbalife International, Inc. 54
4,100 Hybridon, Inc. 33
5,101 ICN Pharmaceuticals, Inc. 99
5,200 ICOS Corp.* 40
3,200 Immulogic Pharmaceutical Corp.* 27
3,900 Isis Pharmaceuticals, Inc.* 64
2,500 Jones Medical Industries, Inc. 100
1,400 Kronos, Inc.* 40
500 Landec Corp.* 4
4,800 Lawter International, Inc. 58
1,200 Learonal, Inc. 28
1,771 Life Technologies, Inc. 39
2,975 Lilly Industrial, Inc. 55
900 MacDermid, Inc. 31
2,900 Matrix Pharmaceutical, Inc.* 25
1,100 McWhorter Technologies, Inc.* 22
2,100 Medimmune, Inc.* 32
3,500 Mineral Technologies, Inc. 137
3,300 Mississippi Chemical Corp. 84
2,700 NBTY, Inc.* 44
600 NCH Corp. 34
4,200 NL Industries, Inc.* 40
2,600 Noven Pharmaceuticals, Inc.* 35
2,000 OM Group, Inc. 83
1,000 PDT, Inc.* 31
1,000 Petrolite Corp. 44
1,800 Pharmacopeia, Inc.* 33
3,000 Regeneron Pharmaceuticals, Inc.* 57
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
CHEMICALS AND ALLIED PRODUCTS--CONTINUED
3,300 Rexene Corp.* $ 44
2,000 Roberts Pharmaceutical Corp.* 22
3,400 Ross Cosmetics Distribution Centers, Inc. 11
5,800 Schulman (A.), Inc. 138
3,000 Scotts Co.* 54
4,200 Sepracor, Inc.* 70
4,500 Sequus Pharmaceuticals, Inc.* 65
3,100 Somatogen, Inc.* 35
1,600 Stepan Co. 30
700 Systemix, Inc.* 10
1,500 Techne Corp.* 36
1,935 Tetra Tech, Inc.* 36
2,200 Tetra Technologies, Inc.* 56
1,000 USA Detergents, Inc.* 38
1,800 Valhi, Inc. 11
2,400 Valspar Corp. 138
2,800 Vertex Pharmaceuticals, Inc.* 90
1,065 WD-40 Co. 55
4,700 Wellman, Inc. 76
--------
4,100
COMMUNICATIONS--3.4%
1,800 ACC Corp.* 54
3,400 Ackerley Communications, Inc. 44
2,700 Adelphia Communications Corp.* 18
5,800 Aliant Communications, Inc. 93
2,700 American Mobile Satellite Corp.* 34
600 American Paging, Inc.* 3
2,300 American Radio Systems, Inc.* 63
1,700 American Telecasting, Inc.* 13
900 Ancor Communications, Inc.* 14
2,800 ANTEC Corp.* 27
2,100 Applied Digital Access, Inc.* 15
1,600 Applied Innovation, Inc.* 11
1,700 Argyle Television, Inc.* 44
2,800 ATC Communications Group, Inc.* 43
900 Atlantic Tele-Network, Inc.* 17
1,200 BET Holdings, Inc.* 33
2,600 Black Box Corp.* 107
2,321 Block Drug Co., Inc. 104
1,300 Brightpoint, Inc.* 47
1,500 Brite Voice Systems, Inc.* 22
1,900 Broadband Technologies, Inc.* 37
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C>
2,200 C-TEC Corp.* $ 54
2,450 Cable Design Technologies Corp.* 72
5,470 CAI Wireless Systems, Inc.* 14
1,600 Cellstar Corp.* 19
1,800 Cellular Communications International, Inc.* 47
2,980 Cellular Technical Services, Inc.* 49
900 Cellularvision USA, Inc.* 6
5,500 Century Communications Corp., Class A* 36
2,100 CFW Communications Co. 47
2,000 CIDCO, Inc.* 39
2,200 Commnet Cellular, Inc.* 62
1,000 Data Transmission Network Corp.* 22
800 Davox Corp.* 30
1,100 Desktop Data, Inc.* 25
1,000 Digital Systems International, Inc.* 15
3,400 DSP Communications, Inc.* 132
1,300 EIS International, Inc.* 11
1,200 Emmis Broadcasting Corp., Class A* 41
3,350 Evergreen Media Corp., Class A* 83
2,500 Executive Telecard Ltd.* 18
8,000 Executone Information Systems, Inc.* 20
1,100 EZ Communications, Inc., Class A* 38
1,700 FastComm Communications Corp.* 14
4,100 General Communications, Inc.* 29
1,700 Harmonic Lightwaves, Inc.* 34
2,100 Heartland Wireless Communications, Inc.* 25
400 Heftel Broadcasting Corp., Class A* 13
5,100 Heritage Media Corp.* 71
3,400 HighwayMaster Communications, Inc.* 71
900 Intercel, Inc.* 14
2,000 Intermedia Communications, Inc.* 59
4,733 International Cabletel, Inc.* 118
600 IPC Information Systems, Inc.* 10
1,100 Jacor Communications, Inc.* 26
3,278 Jones Intercable, Inc., Class A* 36
2,100 Level One Communications, Inc.* 72
2,000 Lin Television Corp* 80
1,200 Mastec, Inc.* 57
1,900 Media General, Inc. 60
3,903 Metrocall, Inc.* 21
5,057 Metromedia International Group, Inc.* 61
2,700 MIDCOM Communications, Inc.* 31
8,500 Mobile Telecommunications Technologies Corp.* 99
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
7,400 MobileMedia Corp.* $ 9
1,000 Ortel Corp.* 22
2,500 P-COM, Inc.* 79
1,100 Palmer Wireless, Inc.* 16
200 Paxson Communications Corp.* 1
1,800 People's Choice TV Corp.* 11
1,600 Periphonics Corp.* 32
1,500 Plantronics, Inc.* 61
1,500 ProNet, Inc.* 7
1,850 Renaissance Communications Corp.* 66
1,200 SAGA Communications, Inc.* 24
1,000 SFX Broadcasting, Inc., Class A* 31
1,600 Silver King Communications, Inc.* 40
2,500 TCA Cable TV, Inc. 73
1,300 Tel-Save Holdings, Inc.* 28
1,800 Telco Systems, Inc.* 32
1,000 Teltrend, Inc.* 28
1,250 Transaction Network Services, Inc.* 16
2,000 Trescom International, Inc.* 21
2,900 True North Communications, Inc. 65
2,500 U.S. Long Distance Corp.* 22
5,100 United International Holdings, Inc.,
Class A* 69
600 United Television, Inc. 55
1,800 United Video Satellite Group, Inc.* 27
4,500 Valuevision International, Inc.* 25
4,600 Vanguard Cellular Systems, Inc.* 78
2,100 VideoLan Technologies, Inc.* 4
4,600 Westwood One, Inc.* 76
4,000 WinStar Communications, Inc.* 83
2,000 Wireless One Corp.* 19
1,500 Young Broadcasting Corp.* 46
-------
3,890
COMPUTERS AND OFFICE MACHINES--3.7%
1,300 ACT Networks, Inc.* 36
2,800 Actel Corp.* 62
3,900 Alliance Semiconductor Corp.* 31
1,400 Applix, Inc.* 28
4,700 AST Research, Inc.* 21
3,800 Auspex Systems, Inc.* 45
3,300 Avid Technology, Inc.* 42
3,166 BancTec, Inc.* 63
900 Boca Research, Inc.* 11
5,400 Borland International, Inc.* 44
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,400 Brooktrout Technology, Inc.* $ 45
1,700 BT Office Products International, Inc.* 16
2,300 Caere Corp.* 20
1,796 Cambrex Corp. 57
1,800 Centennial Technologies, Inc.* 64
3,200 Chips & Technologies, Inc.* 67
2,100 Chronimed, Inc.* 30
4,000 Computer Network Technology Corp.* 24
3,300 Comverse Technology, Inc.* 112
2,200 Control Data Systems, Inc.* 44
6,900 Copytele, Inc.* 41
5,500 Data General Corp.* 80
900 Day Runner, Inc.* 22
1,300 Dialogic Corp.* 40
4,900 Diamond Multimedia Systems, Inc.* 63
2,000 Digi International, Inc.* 26
2,900 Dynatech Corp.* 136
1,100 Encad, Inc.* 41
2,000 EPIC Design Technology, Inc.* 50
1,600 Evans & Sutherland Computer Corp.* 41
3,400 Exabyte Corp.* 49
1,500 Excalibur Technologies Corp.* 24
2,300 Filenet Corp.* 83
4,900 FTP Software, Inc.* 39
1,100 General Binding Corp. 30
1,500 HMT Technology Corp.* 26
2,900 Hyperion Software Corp.* 63
4,300 Information Resources, Inc.* 49
5,300 Intelligent Electronics, Inc. 40
6,300 Intergraph Corp.* 57
1,800 Interpool, Inc.* 43
1,600 Itron, Inc.* 31
1,884 Logicon, Inc. 77
2,700 Mercury Interactive Corp.* 27
2,700 Microcom, Inc.* 31
1,400 Micros Systems, Inc.* 41
1,400 MicroTouch Systems, Inc.* 35
3,900 Miller (Herman), Inc. 183
3,000 Mylex Corp.* 37
2,200 National Computer Systems, Inc. 52
5,300 Netmanage, Inc.* 44
3,700 Nu-Kote Holding, Inc.* 39
1,500 Optical Data Systems, Inc.* 20
5,400 PHH Corp. 242
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
COMPUTERS AND OFFICE MACHINES--CONTINUED
2,400 Phoenix Technologies Ltd.* $ 41
1,400 Planar Systems, Inc.* 14
7,998 Platinum Technology, Inc.* 96
1,500 Proxim, Inc.* 28
800 Radisys, Inc.* 37
7,400 S3, Inc.* 126
2,700 Sandisk Corp.* 37
3,400 Santa Cruz Operation, Inc.* 22
4,700 Sequent Computer Systems, Inc.* 79
3,300 Silicon Storage Technology, Inc.* 27
2,200 SMART Modular Technologies, Inc.* 50
2,300 Standard Microsystems Corp.* 25
500 Storage Computer Corp.* 6
3,000 StorMedia, Inc.* 38
3,800 Stratus Computer, Inc.* 98
2,000 SubMicron Systems, Inc.* 9
2,050 Sylvan Learning Systems, Inc.* 54
2,700 Synetic, Inc.* 125
1,200 3D Systems Corp.* 12
5,400 Tech Data Corp.* 162
2,100 Trident Microsystems, Inc.* 45
2,400 Tseng Laboratories, Inc.* 16
1,200 USDATA Corp., Inc* 8
1,300 Wall Data, Inc.* 19
5,400 Wang Labs, Inc.* 114
2,300 Wonderware Corp.* 22
500 Xpedite Systems, Inc.* 9
2,800 Zebra Technologies Corp.* 72
--------
4,155
CREDIT INSTITUTIONS--0.4%
2,200 Astoria Financial Corp. 83
3,200 Credit Acceptance Corp.* 83
902 First Financial Corp. 31
1,700 Jayhawk Acceptance Corp.* 21
1,500 JSB Financial, Inc. 54
2,200 National Auto Credit, Inc.* 23
2,400 North American Mortgage Co. 55
2,600 Ryland Group, Inc. 36
3,600 World Acceptance Corp.* 23
--------
409
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
ELECTRICAL SERVICES--2.6%
600 Advanced Lighting Technologies, Inc.* $ 13
8,200 Atlantic Energy, Inc. 145
2,200 Black Hills Corp. 57
2,800 Central Hudson Gas & Electric Corp. 85
3,500 Central Louisiana Electric Co., Inc. 99
5,000 Central Maine Power Co. 59
3,200 Checkfree Corp.* 54
2,100 CILCORP, Inc. 77
12,095 Citizens Utilities Co., Series B* 136
3,400 Commonwealth Energy Systems Cos. 82
3,200 Eastern Utilities Association 54
9,400 El Paso Electric Co.* 56
3,100 Electroglas, Inc.* 55
2,800 Empire District Electric Co. 53
1,900 Envoy Corp.* 71
4,600 IES Industries, Inc. 141
1,700 Interstate Power Co. 51
2,450 Madison Gas & Electric Co. 52
4,900 Minnesota Power & Light Co. 138
7,500 Nevada Power Co. 154
1,589 Northwestern Public Service Co. 55
2,200 Orange & Rockland Utilities, Inc. 79
1,700 Otter Tail Power Co. 55
3,600 PMT Services, Inc.* 77
5,800 Public Service Co. of New Mexico* 111
6,000 Rochester Gas & Electric Corp. 115
4,700 Sierra Pacific Resources 135
2,400 SIGCORP, Inc. 83
1,800 TNP Enterprises, Inc. 46
4,980 Tucson Electric Power Co.* 93
2,200 United Illuminating Co. 73
4,800 WPL Holdings, Inc. 135
3,800 WPS Resources Corp. 112
1,850 Yankee Energy System, Inc. 41
1,900 Zurn Industries, Inc. 54
--------
2,896
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--
5.7%
1,000 Advanced Energy Industries, Inc.* 7
2,500 Altron, Inc.* 47
5,100 Ametek, Inc. 108
4,300 Ampex Corp.* 44
800 ANADIGICS, Inc.* 30
6,200 Anixter International, Inc.* 104
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
4,122 Applied Magnetics Corp.* $ 113
1,000 Associated Group, Inc.* 29
2,900 Augat, Inc. 82
2,275 Avant! Corp.* 67
3,120 Baldor Electric Co. 73
3,700 Belden, Inc. 126
1,000 Berg Electronics Corp.* 30
4,300 BMC Industries, Inc. 124
3,400 Boston Technology, Inc.* 67
2,500 Burr-Brown Corp.* 65
1,700 C-COR Electronics, Inc.* 25
1,700 C.P. Clare Corp.* 14
2,000 California Amplifier, Inc.* 16
2,800 California Microwave, Inc.* 42
1,000 Charter Power Systems, Inc. 27
750 Chicago Miniature Lamp, Inc.* 25
14,900 Chyron Corp.* 56
1,500 Coherent Communications Systems Corp.* 31
1,600 Cohu, Inc. 38
3,800 Computer Products, Inc.* 76
3,300 Credence Systems Corp.* 65
1,800 Cree Research, Inc.* 18
563 CTS Corp. 22
2,900 Cyrix Corp.* 55
4,200 Dallas Semiconductor Corp. 91
2,500 Digital Microwave Corp.* 60
1,600 DII Group* 40
1,500 Electro Scientific Industries, Inc.* 36
900 Eltron International, Inc.* 28
1,800 Energy Conversion Devices, Inc.* 27
2,900 ESS Technology, Inc.* 57
1,500 Esterline Technologies Corp.* 38
768 Franklin Electric Co., Inc.* 31
1,100 Galileo Corp.* 26
3,600 General DataComm Industries, Inc.* 40
1,200 General Scanning, Inc.* 12
2,800 Genus, Inc.* 19
4,500 Griffon Corp.* 48
1,400 HADCO Corp.* 65
2,310 Harman International Industries, Inc. 118
1,800 Holophane Corp.* 34
900 Hutchinson Technologies, Inc.* 47
11,100 Imatron, Inc.* 39
1,600 Imnet Systems, Inc.* 29
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C>
4,700 IMP, Inc.* $ 15
12,100 Integrated Device Technology, Inc.* 150
2,600 Integrated Silicon Solution, Inc.* 26
1,400 Inter-Tel, Inc.* 25
7,200 Interdigital Communications Corp.* 52
2,086 Intermagnetics General Corp.* 28
4,200 International Family Entertainment, Inc.* 65
2,700 Intervoice, Inc.* 34
1,500 ITI Technologies, Inc.* 19
2,900 Juno Lighting, Inc. 45
2,300 Kuhlman Corp.* 41
3,450 Lattice Semiconductor Corp.* 154
3,900 Lincoln Electric Co. 125
1,900 Littelfuse, Inc.* 83
3,800 Lojack Corp.* 36
1,200 LSI Industries, Inc. 14
6,100 LTX Corp.* 36
3,500 Magnetek, Inc.* 44
1,800 Mattson Technology, Inc.* 19
600 Merix Corp.* 10
4,950 Methode Electronics, Inc., Class A 95
5,400 Microchip Technology, Inc.* 258
2,100 MRV Communications, Inc.* 48
700 National Presto Industries, Inc. 26
4,100 NexGen, Inc. 57
2,840 Oak Industries, Inc.* 66
2,900 Palomar Medical Technologies, Inc.* 20
1,698 Park Electrochemical Corp.* 39
5,800 Pentair, Inc. 168
1,200 Perceptron, Inc.* 42
3,937 Pioneer Standard Electronics, Inc. 43
2,350 Pittway Corp. 127
3,875 PriCellular Corp.* 43
2,400 Quickturn Design Systems, Inc.* 41
4,700 Ramtron International Corp.* 35
1,698 Recoton Corp.* 25
1,700 Rival Co. 38
2,600 Robotic Vision Systems, Inc.* 34
2,700 Sammina Corp.* 118
1,100 SDL, Inc.* 25
1,150 Semitool, Inc.* 12
1,500 Sheldahl, Inc.* 29
4,300 Sierra Semiconductor Corp.* 62
4,700 Silicon Valley Group, Inc.* 100
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
ELECTRONICS AND OTHER ELECTRICAL EQUIPMENT--CONTIN-
UED
1,700 Siliconix, Inc.* $ 37
700 Speedfam International, Inc.* 14
1,200 SPS Transaction Services, Inc.* 19
1,400 Standard Motor Products, Inc. 19
700 Stanford Telecommunications, Inc.* 20
1,200 Supertex, Inc.* 23
2,700 Symetricon, Inc. 51
2,600 3DO Co.* 17
1,200 Technitrol, Inc. 43
1,200 Tekelec* 16
4,800 Tencor Instruments* 128
500 ThermoSpectra Corp.* 7
1,800 Thomas Industries, Inc. 36
4,900 Top Source Technologies, Inc.* 17
2,000 TranSwitch Corp.* 12
1,300 Triquint Semiconductor, Inc.* 29
1,500 TSX Corp. 14
3,100 Ultratech Stepper, Inc.* 71
1,700 Uniphase Corp.* 101
1,800 Unitrode Corp.* 48
4,900 Vicor Corp.* 96
2,400 Vitesse Semiconductor Corp.* 115
7,200 VLSI Technology, Inc.* 166
2,700 Windmere Corp. 39
2,000 Wyle Electronics 72
3,200 Xicor, Inc.* 31
4,147 Zenith Electronics Corp.* 55
3,050 Zilog, Inc.* 68
700 Zygo Corp.* 28
800 Zytec Corp.* 9
--------
6,484
FOOD AND BEVERAGES--1.8%
4,900 Applebee's International, Inc. 143
6,700 Bob Evans Farms, Inc. 87
2,600 Boston Beer Co., Inc.* 30
5,300 Calgene, Inc.* 29
2,700 Canandaigua Wine Company, Inc.* 77
4,700 Chiquita Brands International, Inc. 62
1,000 Coca-Cola Bottling Co. 46
5,900 Coors (Adolph) Co., Class B 117
6,300 Dean Foods Co. 176
1,800 Dreyer's Grand Ice Cream, Inc. 48
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
1,600 Earthgrains Co. $ 83
5,800 Fleming Companies, Inc. 95
2,200 FoodBrands America, Inc.* 29
5,500 Host Marriott Services Corp.* 49
3,300 Hudson Foods, Inc. 60
1,400 IHOP Corp.* 34
2,300 International Dairy Queen, Inc.* 44
2,700 Lance, Inc. 48
2,300 Landry's Seafood Restaurants, Inc.* 55
1,000 Longhorn Steaks, Inc.* 20
3,700 Luby's Cafeterias, Inc. 81
400 Manhattan Bagel Co., Inc.* 3
2,100 Michael Foods, Inc. 24
1,400 Mondavi (Robert) Corp., Class A* 51
1,950 Papa Johns International, Inc.* 63
2,900 Pepsi-Cola Puerto Rico Bottling Co. 13
1,400 Pete's Brewing Co.* 9
900 Quality Dining, Inc.* 20
1,500 Rainforest Cafe, Inc.* 44
1,300 Redhook Ale Brewery, Inc.* 18
1,300 Riviana Foods, Inc. 23
2,500 Ruby Tuesday, Inc.* 40
8,200 Ryan's Family Steak Houses, Inc.* 57
1,950 Sbarro, Inc. 51
5,800 Shoney's, Inc.* 48
2,500 Smithfield Foods, Inc.* 81
3,920 Triarc Cos., Inc., Class A* 44
2,750 WLR Foods, Inc. 35
--------
2,037
FOOD AND MANUFACTURING--1.0%
1,500 Cheesecake Factory, Inc.* 30
2,000 Daka International, Inc.* 18
198 Farmer Bros. Co. 29
9,100 Flowers Industries, Inc., Class A 215
1,350 Performance Food Group Co.* 16
8,700 Premark International, Inc. 211
4,900 Ralcorp Holding, Inc.* 96
1,400 Riser Foods, Inc.* 43
1,200 Sanderson Farms, Inc. 19
3,200 Savannah Foods & Industries, Inc. 46
100 Seaboard Corp. 22
4,600 Smucker (J.M.) Co. 83
2,749 Tootsie Roll Industries, Inc. 105
700 TurboChef, Inc.* 6
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,000 Universal Foods Corp. $ 148
--------
1,087
FURNITURE AND FIXTURES--0.6%
2,200 Bassett Furniture Industries, Inc. 50
1,500 Bush Industires, Inc. 27
1,800 CORT Business Services Corp.* 40
2,200 Ethan Allen Interiors, Inc.* 73
1,100 Falcon Building Products, Inc.* 14
7,700 Heilig-Meyers Co. 107
3,700 HON Industries, Inc. 115
2,900 Kimball International, Inc. 121
2,100 La-Z-Boy Chair Co. 63
2,200 Triangle Pacific Corp.* 48
--------
658
GENERAL BUILDING CONTRACTORS--0.9%
1,800 ABT Building Products Corp.* 43
3,000 AMCOL International Co. 42
2,100 AMRE, Inc.* 6
1,400 Blount, Inc. 52
11,600 Catellus Development Corp.* 116
4,500 Centex Corp. 162
1,200 Continental Homes Holding Corp. 25
3,000 Eagle Hardware & Garden, Inc.* 73
3,158 Horton (D.R.), Inc.* 33
6,100 Kaufman & Broad Home Corp. 79
1,100 NCI Building Systems, Inc.* 32
2,000 NVR, Inc.* 20
1,725 Palm Harbor Homes, Inc.* 46
3,000 Pulte Corp. 92
1,650 Southern Energy Homes, Inc.* 20
5,200 Standard Pacific Corp. 31
3,400 Toll Brothers, Inc.* 68
1,779 U.S. Home Corp.* 44
3,000 Webb (Del E.) Corp. 51
--------
1,035
GLASS, CLAY AND STONE PRODUCTS--0.5%
700 Ameron, Inc. 34
4,700 Ball Corp. 115
2,000 Centex Construction Products, Inc.* 32
1,200 Florida Rock Industries, Inc. 37
5,000 Gentex Corp.* 97
2,500 Medusa Corp. 87
1,290 Mikasa, Inc.* 14
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
<C> <S> <C>
1,500 Photronics, Inc.* $ 47
800 Puerto Rican Cement Co. 23
2,700 Southdown, Inc.* 88
-------
574
HEALTH SERVICES--4.4%
1,900 Access Health Marketing, Inc.* 75
2,700 Alteon, Inc.* 20
1,200 American HomePatient, Inc.* 28
2,800 American Medical Response, Inc.* 84
1,300 Amisys Managed Care Systems* 19
3,300 Angeion Corp.* 11
2,100 Apogee, Inc. 93
1,000 Arbor Health Care Co.* 24
800 Barr Labs, Inc.* 20
1,500 Bio-Rad Labs, Inc.* 45
1,300 Carrington Laboratories, Inc.* 13
3,800 Cerner Corp.* 57
2,800 Coastal Physician Group, Inc.* 10
3,300 Cocensys, Inc.* 20
6,900 Community Psychiatric Centers* 62
1,700 Compdent Corp.* 47
3,400 COR Therapeutics, Inc.* 36
7,100 Coram Healthcare Corp.* 31
5,000 Creative BioMolecules, Inc.* 40
1,200 Cryolife, Inc.* 17
1,700 Curative Health Services, Inc.* 44
3,300 Cytel Corp.* 13
1,400 Emeritus Corp.* 19
3,123 Enzo Biochem, Inc.* 59
2,400 Equimed, Inc.* 10
4,000 Extended Stay America, Inc.* 83
2,100 Fuisz Technologies, Ltd.* 17
1,300 Fusion Systems Corp.* 25
1,200 Gelman Sciences, Inc.* 38
3,800 Genesis Health Ventures, Inc.* 106
4,400 Gensia, Inc.* 20
3,785 Grancare, Inc.* 67
2,000 Gulf South Medical Supply, Inc.* 58
3,600 Haemonetics Corp.* 63
2,200 Health Management Systems, Inc.* 33
2,121 Healthdyne Technologies, Inc.* 19
1,400 HealthPlan Services Corp.* 27
1,100 Henry Schien, Inc.* 45
8,092 Horizon Healthcare Corp.* 87
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
HEALTH SERVICES--CONTINUED
2,900 Human Genome Sciences, Inc.* $ 108
2,000 I-STAT Corp.* 49
1,300 ICU Medical, Inc.* 11
1,900 IDEC Pharmaceuticals Corp.* 46
900 IDX Systems Corp.* 22
2,600 Immune Response Corp.* 21
3,600 Immunomedics, Inc.* 24
1,575 INBRAND Corp.* 38
1,100 Incyte Pharmaceuticals, Inc.* 42
1,800 Inhale Therapeutic Systems* 27
1,900 Inphynet Medical Management, Inc.* 34
4,400 Integra Lifesciences Corp.* 25
3,500 Integrated Health Services, Inc. 77
400 Intercardia, Inc.* 7
4,700 Invacare Corp. 127
2,100 KeraVision, Inc.* 30
2,800 Kinetic Concepts, Inc. 35
400 Labone, Inc. 6
13,200 Laboratory Corporation of America Holdings* 36
1,500 Landauer, Inc. 31
400 LCA-Vision, Inc.* 1
1,800 Lifecore Biomedical, Inc.* 28
3,458 Ligand Pharmaceuticals, Inc.* 42
2,200 Living Centers of America, Inc.* 56
4,600 Magellan Health Services, Inc.* 96
4,300 Mariner Health Group, Inc.* 32
2,100 Martek Biosciences Corp.* 37
5,700 Matria Healthcare, Inc.* 34
3,000 Maxicare Health Plans, Inc.* 62
1,600 MedCath, Inc.* 24
1,600 Meridian Diagnostics, Inc. 18
600 MiniMed, Inc.* 16
1,600 MMI Cos., Inc. 49
1,633 Morrison Health Care, Inc. 23
2,200 Multicare Cos., Inc.* 43
1,500 Myriad Genetics, Inc.* 38
4,900 NABI, Inc.* 45
1,200 National Surgery Centers, Inc.* 38
3,000 Neoprobe Corp.* 43
1,400 Neose Technologies, Inc.* 21
2,500 Neurex Corp.* 32
2,100 Neurogen Corp.* 39
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
4,300 Neuromedical Systems, Inc.* $ 58
2,100 Northfield Laboratories, Inc.* 28
10,300 NovaCare, Inc.* 88
3,200 OccuSystems, Inc.* 93
3,100 OIS Optical Imaging Systems, Inc.* 8
3,000 Oncogene Science, Inc.* 21
2,200 OrthoLogic Corp.* 13
2,000 Owen Healthcare, Inc.* 51
1,900 PathoGenesis Corp.* 48
1,300 Pediatrix Medical Group* 50
1,300 Perclose, Inc.* 22
10,500 Perrigo Co.* 97
1,800 PHP Healthcare Corp.* 41
6,000 Physician Corporation Of America* 64
1,200 Physicians Health Services, Inc.* 18
1,500 Prime Medical Services, Inc.* 17
2,900 Regency Health Services, Inc.* 30
3,900 Renal Treatment Centers, Inc.* 101
700 RES-CARE, Inc.* 11
1,700 Research Medical, Inc.* 35
2,500 Resound Corp.* 22
1,450 Rexall Sundown, Inc.* 37
600 RightCHOICE Managed Care, Inc.,
Class A* 5
3,900 RoTech Medical Corp.* 66
1,600 Rural/Metro Corp.* 56
1,300 Safeskin Corp.* 67
1,300 Serologicals Corp.* 44
3,300 Sofamor/Danek Group, Inc.* 93
3,700 Somatix Therapy Corp.* 13
6,280 Sun Healthcare Group, Inc.* 78
1,600 Target Therapeutics, Inc.* 56
3,100 TheraTx, Inc.* 32
1,400 Universal Health Realty Income Trust 27
4,600 Universal Health Services, Inc.* 130
3,300 Uromed Corp.* 30
2,300 Veterinary Centers of America, Inc.* 24
2,500 Vical, Inc.* 46
400 Vitalink Pharmacy Services, Inc.* 9
2,300 Vivus, Inc.* 79
4,600 XOMA Corp.* 18
3,800 Zila, Inc.* 28
--------
5,052
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
HEAVY CONSTRUCTION--0.3%
420 Diana Corp.* $ 14
1,750 Granite Construction, Inc. 35
2,500 Greenfield Industries, Inc. 73
3,716 Instituform Technologies, Inc.* 29
4,200 Lennar Corp. 109
1,900 Lone Star Industries, Inc.* 70
1,591 Morrison Knudsen Corp.* 14
--------
344
INDUSTRIAL INSTRUMENTS--3.4%
3,300 Acuson Corp.* 75
2,800 ADAC Laboratories 62
2,300 Advanced Technology Laboratories, Inc.* 66
2,400 Alkermes, Inc.* 34
3,600 Allen Group, Inc. 80
1,300 Analogic Corp. 36
1,800 Arrow International, Inc.* 48
900 ArthroCare Corp. 9
2,600 ATS Medical, Inc.* 20
4,200 Ballard Medical Products 79
2,100 Barnett, Inc.* 52
1,200 Biomatrix, Inc.* 18
2,700 Buckeye Cellulose Corp.* 73
1,751 Chad Therapeutics, Inc.* 28
6,200 Cincinnati Milacron, Inc.* 129
1,800 Circon Corp.* 29
3,100 CNS, Inc. 44
5,200 Cognex Corp.* 103
1,700 Coherent, Inc.* 74
7,900 Coltec Industries, Inc.* 146
400 Conceptus, Inc.* 4
2,450 CONMED Corp.* 43
876 Cubic Corp. 19
700 Cytyc Corp.* 18
1,800 Daniel Industries, Inc. 25
2,400 Datascope Corp.* 44
2,000 DepoTech Corp.* 28
2,100 Dionex Corp.* 73
2,200 Endosonics Corp. 25
2,300 Etec Systems, Inc. 68
4,200 Ferro Corp. 121
2,500 Fisher Scientific International, Inc. 114
1,000 Fluke (John) Manufacturing Co., Inc.* 43
3,300 Genrad, Inc.* 73
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
4,400 Gilead Sciences, Inc.* $ 113
575 Hach Co. 9
1,700 Hologic, Inc.* 42
1,900 InControl, Inc.* 17
3,900 Isolyser Company, Inc.* 31
4,100 Kennametal, Inc. 148
4,800 Keystone International, Inc. 94
900 Lunar Corp.* 28
1,300 Marquette Medical Systems, Inc.* 24
4,900 Mascotech, Inc. 81
2,200 Measurex Corp. 54
3,564 Mentor Corp. 98
600 Mine Safety Appliances Co. 30
1,600 MTS Systems Corp. 33
700 OnTrak Systems, Inc.* 13
1,600 Ostex International, Inc.* 10
101 PerSeptive Biosystems 1
2,600 Physio-Control International Corp.* 48
2,100 Possis Corp.* 37
3,600 Power Control Technologies, Inc.* 28
1,200 Protocol Systems, Inc.* 16
3,400 R.P. Scherer Corp.* 156
2,600 Respironics, Inc.* 38
1,900 SangStat Medical Corp.* 43
1,700 Spine-Tech, Inc. 45
2,200 Staar Surgical Co.* 25
1,200 Starrett (L.S.) Co. 33
2,900 Sunrise Medical, Inc.* 42
1,100 Tech-Sym Corp.* 32
2,650 TECNOL Medical Products, Inc.* 35
1,600 Theragenics Corp.* 36
2,500 Theratech, Inc.* 28
3,400 Thoratec Laboratories, Inc.* 32
3,100 Trimble Navigation Ltd.* 43
1,700 UROHEALTH Systems, Inc.* 15
3,000 Ventritex, Inc.* 70
1,000 Vital Signs, Inc. 22
3,800 Waters Corp.* 103
1,396 Watkins-Johnson Co. 36
1,800 Watsco, Inc. 45
2,300 X-Rite, Inc. 43
1,300 Zoltek Companies, Inc.* 46
--------
3,826
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
INSURANCE SERVICES--4.3%
2,100 Acceptance Insurance Cos., Inc.* $ 43
2,200 Acordia, Inc. 65
6,500 Alexander & Alexander Services, Inc. 94
3,500 Alfa Corp. 39
2,250 Allied Group, Inc. 100
1,524 American Annuity Group, Inc.* 20
3,200 American Bankers Insurance Group, Inc. 156
1,450 American Heritage Life Investment Corp. 32
2,200 American Travelers Corp.* 78
4,000 Amerin Corp.* 91
2,200 Amvestors Financial Corp. 32
2,800 Argonaut Group, Inc. 83
2,000 Baldwin & Lyons, Inc. 36
2,200 Berkley (W.R.) Corp. 115
1,800 Blanch (E.W.) Holdings, Inc. 35
1,700 Capital RE Corp. 65
700 Capitol American Financial Corp. 25
1,200 Citizens Corp. 26
3,100 Commerce Group, Inc. 74
4,500 Coventry Corp.* 44
1,960 Delphi Financial Group, Inc.* 55
1,900 Enhance Financial Services Group, Inc. 65
1,800 Executive Risk, Inc. 72
4,974 Financial Security Assurance International 158
1,700 First American Financial Corp. 62
1,400 Foremost Corp. of America 78
3,112 Fremont General Corp. 97
1,684 Frontier Insurance Group, Inc. 64
1,100 Fund American Enterprises Holdings, Inc.* 101
3,285 Gainsco, Inc. 31
2,200 Gallagher (Arthur J.) & Co. 68
1,700 Guarantee Life Companies, Inc. 33
2,600 Guaranty National Corp. 43
1,100 Harleysville Group, Inc. 34
3,100 Hartford Steam Boiler 141
3,900 HCC Insurance Holdings, Inc.* 109
1,800 Highlands Insurance Group, Inc.* 35
2,400 Hilb, Rogal & Hamilton Co. 32
1,900 Home Beneficial Corp. 47
3,700 Horace Mann Educators Corp. 140
2,300 Integon Corp. 44
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
3,600 John Alden Financial Corp. $ 63
500 Kansas City Life Insurance Co. 29
2,300 Liberty Corp. 88
800 Liberty Financial Cos., Inc. 28
1,700 Life Reinsurance Corp. 63
2,700 Life USA Holding, Inc.* 27
1,414 MAIC Holdings, Inc.* 47
600 Markel Corp.* 51
800 Meadowbrook Insurance Group, Inc. 17
2,300 NAC RE Corp. 84
400 National Western Life Insurance Co.* 33
900 Nymagic, Inc. 16
2,190 Orion Capital Corp. 137
1,300 Pioneer Financial Services, Inc. 24
950 Poe & Brown, Inc. 25
4,000 Presidential Life Corp. 47
1,400 PXRE Corp. 34
2,600 Reinsurance Group of America, Inc. 122
9,500 Reliance Group Holdings, Inc. 85
2,900 Risk Capital Holdings, Inc.* 51
1,065 RLI Corp. 34
800 Seafield Capital Corp. 27
1,500 Security Connecticut Corp. 52
2,200 Selective Insurance Group, Inc. 74
2,200 Sierra Health Services, Inc.* 54
1,050 State Auto Financial Corp. 17
7,000 20th Century Industries* 105
900 Transnational Re Corp., Class A 23
900 Trenwick Group, Inc. 44
5,300 UICI* 148
3,820 United Cos. Financial Corp. 114
900 United Dental Care, Inc. 25
1,650 United Fire & Casualty Co. 51
1,100 United Wisconsin Services, Inc. 28
3,000 Vesta Insurance Group, Inc. 97
1,700 Washington National Corp. 47
1,800 Zenith National Insurance Corp. 49
1,700 Zurich Reinsurance Centre Holdings, Inc. 52
--------
4,874
JEWELRY AND PRECIOUS METALS--0.0%
1,600 Oneida, Ltd. 27
700 Syratech Corp.* 22
--------
49
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
LEATHER PRODUCTS--0.2%
2,800 Brown Group, Inc. $ 53
3,300 Justin Industries, Inc. 35
1,400 Timberland Co.* 54
4,287 Wolverine World Wide, Inc. 115
--------
257
LUMBER AND WOOD PRODUCTS--0.2%
1,500 Fibreboard Corp.* 52
1,900 Ply-Gem Industries, Inc. 25
2,300 Pope & Talbot, Inc. 37
2,600 TJ International, Inc. 57
--------
171
MACHINERY--2.0%
700 Ag-Chem Equipment Co., Inc.* 11
1,400 Alamo Group, Inc. 23
1,600 Allied Products Corp. 38
2,000 Avondale Industries, Inc.* 35
2,100 Borg-Warner Security Corp.* 22
1,700 Cascade Corp. 24
700 Columbus McKinnon Corp. 11
3,300 Donaldson Co., Inc. 101
900 DT Industries, Inc. 31
3,800 Duriron Co., Inc. 103
2,900 Figgie International Holdings, Inc.* 37
3,900 FSI International, Inc.* 57
1,450 Gasonics International Corp.* 16
5,400 Giddings & Lewis, Inc. 63
600 Gleason Corp. 18
3,500 Global Industrial Technologies, Inc.* 72
3,300 Goulds Pumps, Inc. 81
2,197 Graco, Inc. 57
1,300 Helix Technology Corp. 41
2,650 IDEX Corp. 104
3,100 Indentix, Inc. 25
2,500 Integrated Process Equipment Corp.* 43
2,400 Ionics, Inc.* 116
2,600 Kaydon Corp. 106
3,400 Kulicke & Soffa Industries, Inc.* 69
1,000 Lindsay Manufacturing Co.* 41
1,750 Manitowoc Co., Inc. 77
6,300 Marine Drilling Co., Inc.* 100
3,400 Modine Manufacturing Co. 85
3,250 Mohawk Industries, Inc.* 77
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
2,400 Molten Metal Technology, Inc.* $ 36
1,300 Morningstar Group, Inc.* 22
1,600 Osmonics, Inc.* 34
3,100 Outboard Marine Corp. 50
699 Pilgrims Pride Corp. 6
3,200 Regal-Beloit Corp. 62
2,200 Rexel, Inc.* 31
1,348 Robbins & Myers, Inc. 32
2,000 Roper Industries, Inc. 86
1,700 Specialty Equipment Cos., Inc.* 20
100 Spinnaker Industries* 6
1,700 SPX Corp. 54
800 Thermo Power Corp.* 7
1,900 Toro Co. 68
800 Tractor Supply Co.* 17
3,000 Varco International, Inc.* 69
--------
2,284
MANUFACTURING--GENERAL--1.1%
500 Bacou U.S.A., Inc.* 8
3,380 Brady (W.H.) Co. 74
3,150 Cuno, Inc. 49
9,300 Furniture Brands International, Inc.* 115
5,800 Hexcel Corp.* 105
1,400 Hunt Manufacturing Co. 25
1,600 Insilico Corp.* 62
1,000 Jabil Circuit, Inc.* 25
6,000 Kemet Corp.* 138
1,300 Matthews International Corp., Class A 37
2,500 Novellus Systems, Inc.* 144
1,700 Optical Coating Laboratory, Inc. 19
1,800 Paragon Trade Brands, Inc.* 50
2,000 Samsonite Corp.* 76
1,400 Seattle Filmworks, Inc.* 27
700 Simpson Manufacturing Co.* 15
850 Simula, Inc.* 13
3,000 Toy Biz, Inc.* 55
2,400 Tracor, Inc.* 53
800 Tremont Corp.* 29
700 Trigen Energy Corp. 19
2,000 U.S. Can Corp.* 33
700 Visioneer, Inc.* 4
2,400 Wireless Telecom Group, Inc. 24
--------
1,199
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
MERCHANDISE--GENERAL--0.4%
1,200 Action Performance Companies, Inc.* $ 21
3,700 Amerisource Corp.* 146
2,200 Cross (A.T.) Co. 24
3,300 Department 56, Inc.* 77
5,300 Jostens, Inc. 113
2,200 Libbey, Inc. 59
6,200 Playtex Products, Inc.* 50
1,900 Strategic Distribution, Inc.* 13
--------
503
METAL MINING--0.6%
20,200 Battle Mountain Gold Co. 146
1,700 Cleveland Cliffs, Inc. 75
3,300 Coeur D'Alene Mines Corp. 48
4,200 Freeport-McMoran Copper and Gold Inc. 128
4,017 Getchell Gold Corp.* 157
8,000 Hecla Mining Co.* 47
2,600 Stillwater Mining Co. 45
33,600 Sunshine Mining Co.* 38
--------
684
METAL PRODUCTS--0.9%
1,400 Alltrista Corp.* 35
7,800 Amax Gold, Inc.* 47
800 American Buildings Co.* 17
2,800 Aptargroup, Inc. 97
600 Barnes Group, Inc. 34
1,050 Butler Manufacturing Co. 33
1,600 Chase Brass Industries, Inc.* 29
1,200 Citation Corp.* 12
2,300 Clarcor, Inc. 51
1,000 Greenbriar Cos., Inc. 10
1,100 Hardinge, Inc. 29
2,700 Material Sciences Corp.* 45
1,800 Miller Industries, Inc.* 50
1,500 NN Ball & Roller, Inc. 20
1,100 Oregon Meetallurgical Corp.* 39
1,100 Penn Engineering & Manufacturing Corp. 22
1,900 Quanex Corp. 51
964 SPS Technologies, Inc.* 60
2,400 TriMas Corp. 61
3,100 Watts Industries, Inc., Class A 68
1,600 Whittaker Corp.* 22
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
2,200 Wolverine Tube, Inc.* $ 82
3,000 Wyman-Gordon Co.* 64
2,600 Zero Corp. 51
--------
1,029
MINING, QUARRYING OF NONMETALLIC MINERAL--
0.2%
1,100 Cliff's Drilling Co.* 57
2,300 Dravo Corp.* 30
1,800 RMI Titanium Corp.* 42
2,600 Solv-Ex Corp.* 34
2,600 Zeigler Coal Holding Co. 48
--------
211
MISCELLANEOUS INVESTING INSTITUTIONS--3.0%
5,424 BRE Properties, Inc. 120
3,000 Burnham Pacific Properties, Inc. 39
200 Capital Southwest Corp. 14
5,575 Capstead Mortgage Corp. 135
9,104 Champion Enterprises, Inc.* 190
1,619 Chemical Financial Corp. 59
1,400 Corus Bankshares, Inc. 45
3,200 Crescent Real Estate Equities, Inc.* 140
6,900 CWM Mortgage Holdings, Inc. 142
4,800 Dauphin Deposit Corp. 156
3,100 Deposit Guaranty Corp. 179
6,300 Franchise Finance Corp. 160
8,700 Geotek Communications, Inc.* 61
2,708 Horizon Group, Inc. 53
3,400 Hospital Properties Trust 92
4,500 IRT Property Co. 48
1,000 John Nuveen and Company, Inc. 27
4,200 Kimco Realty Corp. 122
2,700 Koger Equity, Inc.* 44
2,900 LTC Properties, Inc. 50
1,873 MAF Bancorp, Inc. 64
1,800 Meridian Industrial Trust, Inc. 34
5,500 Merry Land & Investment Co., Inc. 110
2,000 MGI Properties, Inc. 40
6,500 Mid Atlantic Medical Services, Inc.* 76
6,200 Nationwide Health Properties, Inc. 138
3,500 Noel Group, Inc.* 23
2,600 Patriot American Hospitality, Inc. 98
1,000 PEC Israel Economic Corp.* 17
1,433 Peoples First Corp. 32
6,000 Public Storage, Inc. 152
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
3,600 Realty Income Corp. $ 86
1,600 Reckson Associates Realty Corp. 61
1,400 Redwood Trust, Inc. 53
3,100 Resource Mortgage Capital, Inc. 83
1,100 Seacor Holdings, Inc.* 70
1,000 Sirrom Capital Corp. 36
1,700 Smith, (Charles E.) Residential
Realty, Inc. 43
1,800 Trans Financial Bancorp, Inc. 38
1,000 Union Acceptance Corp.* 20
2,300 Vallicorp Holdings, Inc. 46
3,700 Weingarten Realty Investors 145
--------
3,341
NATURAL GAS TRANSMISSION--1.9%
2,450 Atmos Energy Corp. 60
2,100 Bay State Gas Co. 61
1,500 Colonial Gas Co. 34
1,600 Connecticut Energy Corp. 35
1,700 Connecticut Natural Gas Corp. 40
3,100 Eastern Enterprises 116
1,700 Energen Corp. 46
3,100 Indiana Energy, Inc. 75
12,300 Kelley Oil and Gas Corp.* 35
3,151 KN Energy, Inc. 128
2,700 Laclede Gas Co. 64
2,800 New Jersey Resources Corp. 83
1,100 North Carolina Natural Gas Corp. 32
3,500 Northwest Natural Gas Co. 88
1,700 NUI Corp. 34
3,700 Oneok, Inc. 102
4,576 Piedmont Natural Gas Co. 115
3,700 Primark Corp.* 97
2,950 Public Service Co. of North Carolina, Inc. 56
1,320 South Jersey Industries, Inc. 32
2,184 Southeastern Michigan Gas Enterprises, Inc. 39
1,420 Southern Union Co.* 35
3,900 Southwest Gas Corp. 76
3,900 Southwestern Energy Co. 62
1,957 Tejas Gas Corp.* 86
1,700 TransTexas Gas Corp.* 23
5,100 UGI Corp. 112
2,000 United Cities Gas Co. 47
3,800 Washington Energy Co. 73
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
6,700 Washington Gas Light Co. $ 160
2,900 Wicor, Inc. 105
--------
2,151
OIL AND GAS--2.9%
8,600 AGL Resources, Inc. 182
900 Aquila Gas Pipeline Corp. 13
800 Atwood Oceanics, Inc.* 44
4,040 Barrett Resources Corp.* 165
1,000 Belco Oil & Gas Corp.* 29
1,800 Belden & Blake Corp.* 45
4,100 Benton Oil & Gas Co.* 105
3,400 Berry Petroleum Co. 45
4,543 BJ Services Co.* 217
3,200 Box Energy Corp.* 27
2,900 Brown (Tom), Inc.* 55
3,200 Cabot Oil & Gas Corp. 57
2,600 Cairn Energy USA, Inc.* 31
3,000 Calmat Co. 55
2,000 Capsure Holdings Corp.* 19
2,400 Cross Timbers Oil Co. 58
2,400 Destec Energy, Inc.* 37
3,000 Devon Energy Corp. 109
1,900 Energy Ventures, Inc.* 93
1,800 Falcon Drilling Co., Inc.* 72
1,700 Flores & Rucks, Inc.* 84
1,600 Forcenergy, Inc.* 49
3,700 Forest Oil Corp.* 57
1,200 Giant Industries, Inc. 18
11,500 Harken Energy Corp.* 34
3,900 Helmerich & Payne, Inc. 210
499 Hondo Oil & Gas Co.* 6
2,100 Hugoton Energy Corp.* 23
1,700 KCS Energy, Inc. 57
1,800 KFX, Inc.* 11
11,800 Mesa, Inc.* 60
5,800 Mitchell Energy & Development Corp. 126
1,500 Nuevo Energy Co.* 75
3,600 Oceaneering International, Inc.* 60
5,600 Parker & Parsley Petroleum Co. 185
7,900 Parker Drilling Co.* 74
2,800 Plains Resources, Inc.* 46
2,400 Pool Energy Services Co.* 35
4,100 Pride Petroleum Services, Inc.* 74
1,400 Production Operators Corp. 63
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
OIL AND GAS--CONTINUED
9,336 Seagull Energy Corp.* $ 214
4,300 Snyder Oil Corp. 74
2,100 Swift Energy Co.* 66
4,100 Tuboscope Vetco International Corp.* 63
1,800 Vintage Petroleum, Inc. 60
2,500 Western Gas Resources, Inc. 47
--------
3,329
ORDNANCE AND ACCESSORIES--0.1%
1,400 Alliant Techsystems, Inc.* 75
3,100 Sturm Ruger & Co., Inc. 55
--------
130
OTHER SERVICES--0.6%
800 Central Parking Corp. 27
400 CKS Group, Inc.* 8
1,600 Integrated Packaging Assembly Corp.* 13
1,100 McGrath Rentcorp 28
7,700 Ogden Corp. 149
1,400 Pixar, Inc.* 21
1,100 Quick Response Services, Inc.* 34
3,300 Rollins, Inc. 61
1,300 Sovran Self Storage, Inc. 37
700 Summit Care Corp.* 11
750 Thermo Ecotek Corp.* 12
250 Thermo Remediation, Inc. 3
5,600 United Waste Systems, Inc.* 188
800 Wackenhut Corrections Corp.* 14
6,000 Walter Industries, Inc.* 80
--------
686
PAPER PRODUCTS--0.7%
3,200 Chesapeake Corp. 98
8,500 Gaylord Container Corp.* 54
2,500 Greif Bros. Corp. 73
1,653 Mosinee Paper Corp. 57
4,000 P.H. Glatfelter Co. 73
3,646 Paxar Corp.* 62
5,270 Rock-Tenn Co. 111
2,500 Schweitzer-Mauduit International, Inc. 83
2,500 Shorewood Packaging Corp.* 47
2,100 Universal Forest Products, Inc. 27
4,400 Wausau Paper Mills Co. 90
--------
775
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
PERSONAL SERVICES--0.5%
1,600 Angelica Corp. $ 31
2,600 Bristol Hotel Co.* 70
2,900 Catalina Marketing Corp.* 148
2,400 CPI Corp. 41
1,300 Craig (Jenny), Inc.* 12
1,500 Equity Corp. International 32
3,150 G & K Services, Inc. 114
1,873 Marcus Corp. 43
1,700 Red Roof Inns, Inc.* 27
3,200 Unifirst Corp. 68
--------
586
PETROLEUM PRODUCTS--1.0%
3,800 Camco International, Inc. 159
1,200 Crown Central Petroleum Corp.* 17
3,700 Diamond Shamrock, Inc. 120
1,500 Elcor Corp. 32
2,300 Lomak Petroleum, Inc. 38
1,300 Louis Dreyfus Natural Gas Corp.* 22
2,700 Newfield Exploration, Inc.* 135
1,690 Newpark Resources, Inc.* 59
5,300 Quaker Chemical Corp. 91
2,000 Royal Gold, Inc.* 26
1,100 RPC, Inc.* 17
1,700 Seitel, Inc.* 69
1,500 Stone Energy Corp.* 35
4,100 Tesoro Petroleum Corp.* 59
4,210 United Meridian Corp.* 215
--------
1,094
PRINTING AND PUBLISHING--1.5%
1,800 American Business Information, Inc.* 31
1,950 American Business Products, Inc. 43
7,300 American Media, Inc., Class A 42
2,500 Big Flower Press Holdings, Inc.* 44
2,800 Bowne & Co., Inc. 69
1,200 CSS Industries, Inc.* 29
1,100 Devon Group, Inc.* 28
1,290 DH Technology, Inc.* 31
1,050 Edmark Corp.* 16
2,900 Ennis Business Forms, Inc. 29
2,500 Express Scripts, Inc.* 89
1,400 Franklin Electronic Publishers, Inc.* 18
2,800 Gibson Greetings, Inc.* 53
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
3,000 Golden Books Family
Entertainment, Inc.* $ 35
4,800 Harland (John H.) Co. 148
2,457 Harte-Hanks Communications, Inc. 63
4,000 Hollinger International, Inc. 44
2,200 Houghton Mifflin Co. 115
4,700 McClatchy Newspapers, Inc., Class A 145
954 Merrill Corp. 22
2,250 Nelson (Thomas), Inc. 28
2,100 New England Business Service, Inc. 41
2,900 Playboy Enterprises, Inc.* 34
966 Pulitzer Publishing Co. 44
1,900 Scholastic Corp.* 142
2,100 Standard Register Co. 59
400 Steck-Vaughn Publishing Corp.* 4
7,300 Topps, Inc.* 31
3,400 Valassis Communications, Inc.* 61
400 Waverly, Inc.* 10
2,100 Wiley (John) & Sons, Inc. 62
5,300 World Color Press, Inc.* 127
--------
1,737
PROFESSIONAL SERVICES--7.0%
2,520 ABM Industries, Inc. 43
1,550 ADR Information Services, Inc.* 67
5,100 Acclaim Entertainment, Inc.* 26
2,000 Activision, Inc.* 23
7,200 Acxiom Corp.* 165
600 Advent Software, Inc.* 19
3,725 Advo, Inc. 47
3,600 Affiliated Computer Services, Inc.* 104
5,800 Allwaste, Inc.* 25
2,200 Alternative Resources Corp.* 38
2,700 AMERCO* 128
4,400 American Oncology Resources, Inc.* 43
2,474 Analysts International Corp. 67
1,700 Arbor Software Corp.* 49
1,400 Aspen Technologies, Inc.* 117
600 Astea International, Inc.* 3
4,800 Banta Corp. 114
800 Barra, Inc.* 21
3,200 BBN Corp.* 74
2,300 BDM International* 108
2,600 BE Aerospace, Inc.* 60
2,200 Bell & Howell Co.* 57
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
700 Billing Information Concepts* $ 21
3,800 Bisys Group, Inc.* 142
1,856 Boole & Babbage, Inc.* 53
900 BRC Holdings, Inc.* 38
2,700 Broderbund Software, Inc.* 81
3,800 BWIP Holding, Inc. 58
1,700 Casino Data Systems* 22
1,700 CDI Corp.* 50
100 Cheyenne Software, Inc.* 3
1,300 Ciber, Inc.* 43
2,800 Citrix Systems, Inc.* 128
1,600 Clarify, Inc.* 72
1,200 ClinTrials Research, Inc.* 26
1,200 CMG Information Services, Inc.* 19
500 COMFORCE Corp.* 7
2,200 Computer Horizons Corp.* 74
600 Computer Language Research, Inc. 6
1,500 Computer Task Group, Inc. 63
9,900 Computervision Corp.* 94
1,700 Comshare, Inc.* 25
1,000 Cooper & Chyan Technology, Inc.* 33
1,900 COREStaff, Inc.* 49
500 CRA Managed Care, Inc.* 23
500 CSG Systems International, Inc.* 9
1,200 Data Translation, Inc.* 14
700 Datastream Systems, Inc.* 16
1,300 DecisionOne Corp.* 20
1,500 Dendrite International, Inc.* 36
1,600 Documentum, Inc.* 61
1,100 Elcom International, Inc.* 9
1,284 Electro Rent Corp.* 31
1,100 EmCare Holdings, Inc. 22
2,900 Employee Solutions, Inc.* 54
700 Enterprise Systems, Inc.* 11
600 Excite, Inc.* 6
1,200 Fair Isaac & Co. 42
2,900 Franklin Quest Co.* 62
2,300 General Magic, Inc.* 7
1,600 Geoworks* 35
3,000 Gerber Scientific, Inc. 47
3,400 Global Industries Ltd.* 60
200 Grey Advertising, Inc. 46
800 HA-LO Industries, Inc.* 31
1,500 Harbinger Corp.* 39
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
PROFESSIONAL SERVICES--CONTINUED
400 HCIA, Inc.* $ 12
1,300 Henry (Jack) & Associates, Inc. 49
2,300 HNC Software, Inc.* 68
978 Holly Corp. 26
2,200 HPR, Inc.* 33
800 IDT Corp.* 11
1,300 IKOS Systems, Inc.* 25
1,600 Inacom Corp.* 50
400 Individual, Inc.* 2
600 Indus Group, Inc.* 13
1,300 Inference Corp.* 8
1,600 Infocus Systems* 34
1,300 Inso Corp.* 55
500 Integrated Measurement Systems, Inc.* 9
2,400 Integrated Systems Consulting
Group, Inc.* 52
3,500 InteliData Technologies Corp.* 26
400 IntelliQuest Information Group, Inc.* 10
2,400 Interim Services, Inc.* 94
1,200 International Imaging Materials, Inc.* 29
3,400 Intersolv, Inc.* 31
500 Intevac, Inc.* 8
800 Iron Mountain, Inc.* 25
750 ITT Educational Services, Inc.* 15
500 JDA Software Group, Inc.* 13
2,400 Katz Media Group* 24
2,475 Keane, Inc.* 131
2,000 Kinder Care Learning Centers, Inc.* 40
2,000 Landstar Systems, Inc.* 46
800 Learning Tree International, Inc.* 36
2,000 Legato Systems, Inc.* 70
1,200 Logic Works, Inc.* 7
1,200 Manugistics Group, Inc.* 45
1,100 Maxis, Inc.* 17
1,200 May & Speh, Inc.* 16
1,300 MDL Information Systems, Inc.* 22
4,450 MDU Resources Group, Inc. 100
1,400 MetaTools, Inc.* 26
2,000 Metricom, Inc.* 27
900 Microware Systems Corp.* 14
3,900 National Data Corp. 156
3,000 National Health Investors, Inc. 107
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
1,400 National Instruments Corp.* $ 45
1,900 NETCOM On-Line Communication Services, Inc.* 33
2,500 Network Data Processing Corp. 90
3,200 Network Equipment Technologies, Inc.* 49
1,700 Network Peripherals, Inc.* 27
1,200 NHP, Inc.* 21
1,350 Nichols Research Corp.* 33
2,300 Nimbus CD International, Inc.* 20
2,000 Norrell Corp. 46
1,900 Novadigm, Inc.* 20
5,500 Oak Technology, Inc.* 54
400 On Assignment, Inc.* 12
2,300 Orthodontic Centers of America, Inc.* 29
1,700 Personnel Group of America, Inc.* 38
1,200 PhyMatrix Corp.* 18
2,700 Physician Resource Group, Inc.* 56
3,100 Physician Computer Network, Inc.* 26
1,000 Pinkertons, Inc.* 25
5,050 Players International, Inc.* 33
2,400 Policy Management Systems Corp.* 96
3,700 Pre-Paid Legal Services, Inc.* 51
2,400 Precision Systems, Inc.* 13
1,000 Premenos Technology Corp.* 10
1,100 Premiere Technologies, Inc.* 26
800 Prism Solutions, Inc.* 6
800 Profit (The) Recovery Group
International, Inc.* 11
1,900 Progress Software Corp.* 38
1,000 Project Software & Development, Inc.* 42
1,700 Protein Design Labs, Inc.* 41
4,200 PSINET, Inc.* 53
3,862 Pure Atria Corp.* 108
5,100 Quarterdeck Corp.* 34
1,000 Rainbow Technologies, Inc.* 20
500 Raptor Systems, Inc.* 11
1,800 Red Brick Systems, Inc.* 42
1,800 Remedy Corp.* 81
500 Renaissance Solutions, Inc.* 19
5,500 RISCORP, Inc.* 24
5,900 Rollins Truck Leasing Corp. 71
900 Romac International, Inc.* 22
1,800 RTW, Inc.* 29
2,300 7th Level, Inc.* 11
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
300 Sapient Corp.* $ 12
1,300 Scopus Technologies, Inc.* 49
1,500 Secure Computing Corp.* 14
500 Seque Software, Inc.* 6
2,300 Sitel Corp.* 45
600 Smith Micro Software, Inc.* 3
1,300 Software 2000, Inc.* 11
6,700 Sotheby's Holdings, Inc., Class A 118
4,300 Spectrum Holobyte, Inc. 22
1,000 SPSS, Inc.* 29
1,900 Spyglass, Inc.* 20
500 SQA, Inc.* 14
3,600 Stac, Inc.* 24
1,600 State of the Art, Inc.* 21
5,000 Structural Dynamics Research Corp.* 97
1,000 Summit Medical Systems* 8
3,800 SunRiver Corp.* 9
2,400 Sync Research, Inc.* 47
4,450 System Software Associates, Inc. 62
2,400 Systems & Computer Technology Corp.* 35
2,900 Systemsoft Corp.* 53
1,800 TCSI Corp.* 16
2,800 Telxon Corp. 34
565 Thermo TerraTech, Inc.* 6
1,650 Thermotrex Corp.* 56
3,400 Transaction Systems Architects, Inc.* 123
3,000 Transcend Services, Inc.* 18
500 Unison Software, Inc.* 12
2,300 Vanstar Corp.* 63
1,300 Vantive Corp. 45
1,600 Veritas DGC, Inc.* 34
1,550 Veritas Software Corp.* 72
1,400 Verity, Inc.* 23
2,600 Viasoft, Inc.* 118
2,000 VideoServer, Inc.* 98
2,800 Viewlogic Systems, Inc.* 28
1,100 Visio Corp.* 54
1,800 VISX Corp.* 42
800 Volt Information Sciences, Inc.* 28
1,697 Wackenhut Corp. 28
1,350 Wind River Systems* 66
600 Workgroup Technology Corp.* 3
2,800 Xircom, Inc.* 56
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------
<C> <S> <C>
400 Yahoo!, Inc.* $ 8
800 Zoran Corp.* 17
--------
8,049
REAL ESTATE--4.9%
3,300 American Health Properties, Inc. 73
700 American Homestar Corp.* 13
1,400 AMLI Residential Properties 30
2,000 Apartment Investment & Management Co. 50
1,800 Associated Estates Realty Corp. 40
4,600 Avalon Properties, Inc. 118
1,200 Avatar Holdings, Inc.* 37
1,800 Bay Apartment Communities, Inc. 59
3,700 Beacon Properties Corp. 117
4,000 Berkshire Realty, Inc. 38
2,403 Bradley Real Estate Trust 42
2,300 Cali Realty Corp. 65
2,200 Camden Property Trust 61
3,200 Carr Realty Corp. 83
2,700 Castle & Cooke, Inc.* 43
2,000 Cavalier Homes, Inc. 23
2,600 CBL & Associates Properties, Inc. 64
1,900 Centerpoint Properties Corp. 52
1,800 Chelsea GCA Realty, Inc. 57
2,800 Colonial Property Trust* 75
1,800 Columbus Realty Trust 38
2,700 Commercial Net Lease Realty, Inc. 39
3,600 Cousins Properties, Inc. 84
4,200 Crown American Realty Trust 32
3,000 Developers Diversified Realty Corp. 101
4,834 Doubletree Corp.* 203
4,500 Duke Realty Investments, Inc. 161
3,900 Equity Inns, Inc. 46
2,900 Evans Withycombe Residential, Inc. 59
2,200 Excel Realty Trust, Inc. 50
5,000 Federal Realty Investment Trust 130
3,600 FelCor Suite Hotel, Inc. 128
3,800 First Industrial Realty Trust, Inc. 109
600 Forest City Enterprises, Inc. 32
2,400 Gables Residential Trust 64
4,200 General Growth Properties, Inc. 117
3,400 Glimcher Realty Trust 66
4,500 Health Care Property Investors, Inc. 154
2,200 Health Care REIT, Inc. 55
1,800 Healthcare Realty Trust 46
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
REAL ESTATE--CONTINUED
3,600 Highwoods Properties, Inc. $ 111
2,000 Irvine Apartment Communities, Inc. 49
1,700 JDN Realty Co. 44
2,100 JP Realty, Inc. 51
4,400 Liberty Property Trust 102
2,900 Macerich Co. 67
3,800 Manufactured Home Communities, Inc. 76
900 Maxxam, Inc.* 42
1,800 Mid-America Apartment Communities, Inc. 46
2,300 Mills Corp. 48
1,800 National Golf Properties, Inc. 51
2,400 Oasis Residential, Inc. 50
2,600 Paragon Group, Inc. 41
1,300 Pennsylvania REIT 30
3,400 Post Properties, Inc. 131
1,100 PRI Automation, Inc.* 53
2,500 Price Enterprises, Inc.* 43
1,400 Price REIT, Inc. 49
1,600 Regency Realty Corp.* 38
3,800 RFS Hotel Investors, Inc. 64
1,800 ROC Communities, Inc. 45
1,700 Saul Centers, Inc. 26
3,600 Shurguard Storage Centers, Inc. 99
3,125 South West Property Trust, Inc. 50
4,800 Spieker Properties, Inc. 147
1,400 Storage Trust Realty 34
3,100 Storage USA, Inc. 117
2,500 Summit Property, Inc. 49
1,900 Sun Communities, Inc. 61
4,800 Taubman Centers, Inc. 56
2,700 Thornburg Mortgage Asset Corp. 47
2,700 Town & Country Trust 39
1,900 Trinet Corporate Realty Trust 65
8,800 United Dominion Realty Trust 130
2,100 Urban Shopping Centers, Inc. 55
3,900 Vornado Realty Trust 176
1,700 Walden Residential Properties, Inc. 39
4,900 Washington Real Estate Investment Trust 81
1,700 Weeks Corp. 48
2,700 Wellsford Residential Property Trust 65
3,000 Western Investment Real Estate Trust 39
--------
5,508
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
RECREATIONAL AND LEISURE SERVICES--1.3%
500 AMC Entertainment, Inc.* $ 10
500 Ameristar Casinos, Inc.* 3
1,100 Anchor Gaming* 46
2,500 Argosy Gaming Corp.* 14
1,000 Ascent Entertainment Group, Inc. 17
3,100 Authentic Fitness Corp. 34
6,300 Aztar Corp.* 46
200 Bally's Grand, Inc.* 7
4,200 Boyd Gaming Corp.* 34
1,700 Carmike Cinemas, Inc.* 46
3,150 Casino America, Inc.* 11
4,300 Casino Magic Corp.* 12
2,300 Galoob (Lewis) Toys, Inc.* 67
1,000 GC Cos., Inc.* 35
1,000 Harvey's Casino Resorts 17
2,600 Hollywood Casino Corp., Class A* 31
2,217 K2, Inc. 58
2,700 Lydall, Inc.* 61
800 Movie Gallery, Inc.* 11
500 Penn National Gaming, Inc.* 19
1,400 Primadonna Resorts, Inc.* 26
4,900 Prime Hospitality Corp.* 81
600 Quintel Entertainment, Inc.* 5
3,662 Regal Cinemas, Inc.* 119
2,900 Rio Hotel & Casino, Inc.* 44
5,200 Savoy Pictures Entertainment, Inc.* 18
2,100 Scientific Games Holdings Corp.* 55
2,500 Showboat, Inc. 47
1,950 Shuffle Master, Inc.* 19
1,600 Skyline Corp. 42
1,500 Sodak Gaming, Inc.* 24
2,300 Spelling Entertainment Group, Inc.* 18
3,400 Sports & Recreation, Inc.* 29
3,800 Starsight Telecast Co.* 29
3,200 Station Casinos, Inc.* 34
1,700 Stratosphere Corp.* 2
1,650 Studio Plus Hotels* 29
3,000 Trump Hotels and Casino Resorts, Inc.* 42
6,100 Tyco Toys, Inc.* 72
800 White River Corp.* 43
2,900 WMS Industries, Inc.* 73
--------
1,430
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
RESEARCH AND CONSULTING SERVICES--1.3%
5,800 Advance Tissue Science, Inc.* $ 70
1,700 Agouron Pharmaceuticals, Inc.* 93
3,200 Air & Water Technologies Corp.* 20
2,600 Alliance Entertainment Corp.* 6
10,400 Aura Systems, Inc.* 26
7,100 Bio-Technology General Corp.* 65
4,300 Columbia Laboratories, Inc.* 52
675 Computer Management Sciences, Inc.* 11
7,700 Cytogen Corp.* 42
2,800 Dames & Moore, Inc. 38
4,300 Data Broadcasting Corp.* 33
500 Data Processing Resources Corp.* 9
700 Eagle River Interactive, Inc.* 4
1,600 GRC International, Inc.* 24
3,300 ImCrone Systems, Inc.* 34
3,300 Jacobs Engineering Group, Inc.* 80
4,900 Liposome Technology, Inc.* 88
2,100 Mercer International, Inc.* 25
3,000 Mycogen Corp.* 50
1,900 NeoPath, Inc.* 34
1,500 NFO Research, Inc.* 33
3,400 OHM Corp.* 29
1,980 Organogenesis, Inc.* 41
1,200 Parexel International Corp.* 62
2,345 Pharmaceutical Product
Development, Inc.* 52
6,000 Scios-Nova, Inc.* 35
1,800 Spacelabs Medical, Inc.* 36
1,300 Stone & Webster, Inc. 42
5,050 Summit Technology, Inc.* 27
8,500 Symantec Corp.* 126
2,400 Technology Solutions Co.* 108
3,200 U.S. Bioscience, Inc.* 38
--------
1,433
RETAIL--4.5%
1,900 Aaron Rents, Inc. 27
570 Alexander's, Inc.* 41
700 American Eagle Outfitters, Inc.* 17
4,500 Americredit Corp.* 89
3,600 AnnTaylor Stores, Inc.* 73
3,912 Apple South, Inc. 58
2,800 Arbor Drugs, Inc. 72
1,800 Baby Superstores, Inc.* 50
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
4,900 Best Buy, Inc.* $ 62
1,400 Blair Corp. 27
6,500 Bombay Company, Inc.* 31
1,800 Books-a-Million, Inc.* 12
300 Buckle, Inc.* 8
7,540 Buffets, Inc.* 70
2,800 Burlington Coat Factory Warehouse* 34
2,500 Carson Pirie Scott & Co.* 65
5,000 Cash America International, Inc. 39
4,100 Cato Corp. 20
14,700 Charming Shoppes, Inc.* 75
2,900 CKE Restaurants, Inc. 89
7,450 Claire's Stores, Inc. 120
8,600 CML Group, Inc. 34
1,800 Cole National Corp.* 47
1,930 Consolidated Products, Inc.* 35
268 Dart Group Corp. 25
983 Delchamps, Inc. 20
2,800 Dress Barn, Inc.* 40
3,100 Duty Free International, Inc. 49
2,500 Fabri-Centers of America, Inc., Class A* 39
6,500 Family Dollar Stores, Inc. 122
7,000 Fedders Corp. 40
7,200 Fingerhut Cos., Inc. 90
6,000 Foodmaker, Inc.* 55
2,200 Friedmans, Inc., Class A* 30
2,200 Garden Ridge Corp.* 18
3,900 Gymboree Corp.* 110
3,700 Hancock Fabrics, Inc. 34
9,000 HEARx Ltd.* 17
5,300 Hechinger Co. 15
3,300 Hollywood Entertainment Corp.* 66
1,200 Ingles Markets, Inc. 17
2,950 Just For Feet, Inc.* 70
1,100 L.L. Knickerbocker Co.* 10
2,500 Lands' End, Inc. 68
2,200 Longs Drug Stores, Inc. 110
4,000 Mac Frugal's Bargains Close-Outs, Inc.* 99
800 Mafco Consolidated Group* 23
1,300 Mail Boxes Etc.* 29
1,775 Men's (The) Warehouse, Inc.* 41
4,100 Meyer (Fred), Inc.* 137
3,100 Michael's Stores, Inc.* 31
2,300 National Media Corp.* 18
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
RETAIL--CONTINUED
2,623 Natures Sunshine Products, Inc. $ 53
2,900 NPC International, Inc.* 24
800 O'Reilly Automotive, Inc.* 27
6,900 Payless Cashways, Inc.* 12
2,150 Petco Animal Supplies, Inc.* 47
4,400 Petroleum Heat & Power, Inc. 31
6,435 Pier I Imports, Inc. 88
2,400 Proffitt's, Inc.* 97
1,500 Quality Food Centers, Inc.* 57
1,600 Regis Corp.* 40
2,400 Renters Choice, Inc.* 44
3,800 Ross Stores, Inc. 193
15,700 Service Merchandise Co., Inc.* 86
3,000 Shopko Stores, Inc. 47
2,750 Showbiz Pizza Time, Inc.* 45
3,098 Smith Food & Drug Centers, Inc., Class B 94
2,100 Sonic Corp.* 48
4,900 Sports Authority, Inc.* 121
2,900 Stanhome, Inc. 79
1,550 Stein Mart, Inc.* 30
1,220 Strawbridge & Clothier, Class A 20
7,700 Stride Rite Corp. 77
9,300 Thrifty PayLess Holdings, Inc.* 238
3,800 U.S. Office Products Co.* 118
5,500 Universal Corp. 158
1,200 Urban Outfitters, Inc.* 18
1,500 Valmont Industries, Inc. 59
1,700 Value City Department Stores, Inc.* 22
4,900 Waban, Inc.* 129
1,200 West Marine, Inc.* 40
900 Wet Seal, Inc.* 20
2,200 Whole Foods Market, Inc.* 50
2,900 Williams-Sonoma, Inc.* 101
1,300 Wilmar Industries, Inc.* 30
5,000 Zale Corp.* 99
--------
5,060
RUBBER AND PLASTICS--0.7%
2,200 ACX Technologies, Inc.* 40
2,100 Carlisle Cos., Inc. 121
2,500 Foamex International, Inc.* 42
1,500 Furon Co. 31
800 Liqui-Box Corp. 26
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
<C> <S> <C> <C>
2,195 Myers Industries, Inc.* $ 33
2,200 O'Sullivan Corp. 24
1,300 Park Ohio Industries, Inc.* 19
1,200 Rogers Corp.* 33
3,500 Sola International, Inc.* 123
2,500 Spartech Corp. 27
1,300 Tredegar Industries, Inc. 52
4,200 TRINOVA Corp. 153
2,000 West Co., Inc. 57
--------
781
SANITARY SERVICES--0.3%
9,400 Allied Waste Industries, Inc.* 85
2,800 Centennial Cellular Corp.* 33
1,500 Continental Waste Industries, Inc.* 40
10,500 Rollins Environmental Services, Inc.* 21
9,100 Safety-Kleen Corp. 144
600 Superior Services, Inc.* 10
--------
333
SERVICE INDUSTRY MACHINERY--0.4%
1,900 Applied Power, Inc. 69
2,450 Commercial Intertech Corp. 25
600 Greenwich Air Services, Inc. 15
1,600 Scotsman Industries, Inc. 37
1,500 Tennant Co. 37
5,675 United States Filter Corp.* 194
1,575 Wynn's International, Inc. 46
--------
423
SOCIAL SERVICES--0.3%
547 Berlitz International, Inc.* 11
2,100 DeVry, Inc.* 94
5,600 National Education Corp.* 79
2,618 Omega Healthcare Investors, Inc. 85
1,000 Youth Services International, Inc.* 13
--------
282
STEEL PRODUCTS--1.3%
2,000 Acme Metals, Inc.* 42
1,500 Amcast Industrial Corp. 35
13,700 Armco, Inc.* 62
4,500 Birmingham Steel Corp. 79
2,800 Brush Wellman, Inc. 47
2,400 Carpenter Technology Corp. 85
1,000 Chaparral Steel Co. 13
1,100 Coastcast Corp.* 17
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
1,600 Commonwealth Aluminum Corp. $ 26
400 Curtiss Wright Corp. 20
2,200 Geneva Steel Co.* 8
500 Gibraltar Steel Corp.* 12
2,400 Handy & Harman 40
1,000 Huntco, Inc., Class A 16
1,800 IMCO Recycling, Inc. 29
3,100 Intermet Corp.* 41
3,100 J & L Specialty Steel, Inc. 38
1,700 Kaiser Aluminum Corp.* 18
3,100 Lone Star Technologies, Inc. 55
2,600 Lukens, Inc. 48
2,700 Mueller Industries, Inc.* 106
3,700 National Steel Corp., Class B* 35
3,200 Oregon Steel Mills, Inc. 55
3,150 Precision Castparts Corp. 148
1,300 Reliance Steel & Aluminum Co. 49
1,500 Rouge Steel Co. 32
700 Schnitzer Steel Industries, Inc. 19
900 Shiloh Industries, Inc.* 15
1,900 Standex International Corp. 59
1,250 Steel Technologies, Inc. 16
1,700 Texas Industries, Inc. 97
4,000 UNR Industries, Inc. 28
1,000 WCI Steel, Inc.* 10
4,000 WHX Corp.* 38
--------
1,438
TEXTILES--0.6%
4,000 Albany International Corp. 89
9,800 Burlington Industries, Inc.* 107
3,400 Cone Mills Corp.* 28
800 Fab Industries, Inc. 21
1,582 Fieldcrest Cannon, Inc.* 23
1,898 Guilford Mills, Inc. 49
3,000 Interface, Inc. 59
4,100 Phillips-Van Heusen 53
1,200 Quiksilver, Inc.* 24
4,100 Ruddick Corp. 54
2,200 Springs Industries, Inc. 102
2,700 West Point Stevens, Inc.* 81
--------
690
TRANSPORTATION PARTS AND EQUIPMENT--2.3%
2,500 AAR Corp. 75
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------
<C> <S> <C>
1,400 ABC Rail Products Corp.* $ 28
2,200 APS Holding Corp. 42
3,850 Arctic Cat, Inc. 37
1,700 Armor All Products Corp. 32
3,500 Arvin Industries, Inc. 83
2,700 Aviall, Inc. 27
2,200 Borg Warner Automotive, Inc. 88
2,200 Breed Technologies, Inc. 59
1,100 Cannondale Corp.* 21
2,700 Chancellor Corp.* 78
2,300 Coachmen Industries, Inc. 59
10,800 Collins & Aikman Corp.* 65
1,300 Copart, Inc.* 23
1,500 Detroit Diesel Corp.* 30
1,200 Eaton Vance Corp. 52
2,900 Exide Corp. .74
2,300 Fairchild Corp.* 38
5,500 Federal-Mogul Corp. 122
4,100 Gencorp, Inc. 76
2,300 Huffy Corp. 32
4,700 Mesa Airlines, Inc.* 46
11,800 Navistar International Corp.* 112
2,600 OEA, Inc. 105
4,200 Orbital Sciences Corp.* 81
2,104 Pacific Scientific Co. 24
4,300 Polaris Industries, Inc. 94
3,300 Rohr, Inc.* 58
1,300 Sequa Corp.* 52
2,800 Simpson Industries, Inc. 29
2,400 Smith (A.O.) Corp. 71
2,225 Standard Products Co. 51
2,800 Stant Corp. 35
4,900 Stewart & Stevenson Services, Inc. 121
3,300 Superior Industries International, Inc. 83
2,700 Teleflex, Inc. 134
2,900 Thiokol Corp. 133
889 Thor Industries, Inc. 21
2,525 Titan Wheel International, Inc. 33
900 Tower Automotive, Inc. 29
3,000 Wabash National Corp. 53
1,500 Walbro Corp. 30
3,200 Westinghouse Air Brake Co. 36
2,500 Winnebago Industries, Inc. 19
--------
2,591
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands, except shares)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------
SMALL COMPANY INDEX PORTFOLIO--
CONTINUED
<C> <S> <C>
TRANSPORTATION SERVICES--1.8%
2,600 Air Express International Corp. $ 85
3,100 Airborne Freight Corp. 67
2,200 Alaska Air Group, Inc.* 53
7,630 America West Airlines, Inc.* 112
3,600 American Freightways, Inc.* 37
3,500 APL Ltd. 84
3,100 Arnold Industries, Inc. 49
3,700 Atlantic Southeast Airlines, Inc. 84
1,800 Covenant Transportation, Inc., Class A* 27
400 Eagle USA Airfreight, Inc.* 11
1,900 Expeditors International of
Washington, Inc. 85
1,458 First Source Corp. 34
600 Florida East Coast Industries, Inc. 53
1,553 Frozen Food Express Industries, Inc. 15
3,100 GATX Corp. 155
7,900 Greyhound Lines, Inc.* 31
1,800 Harper Group, Inc. 41
2,739 Heartland Express, Inc.* 65
3,600 Hunt (J.B.) Transportation Services, Inc. 50
4,100 Kirby Corp.* 81
400 Knight Transportation, Inc.* 9
1,500 M.S. Carriers, Inc.* 29
900 Midwest Express Holdings, Inc.* 30
3,100 Offshore Logistics, Inc.* 62
4,800 OMI Corp.* 37
4,400 Overseas Shipholding Group, Inc. 70
900 Oxford Resources Corp., Class A* 23
3,200 Pittston Burlington Group 63
1,600 Railtex, Inc.* 40
2,300 Roadway Express, Inc. 38
1,300 Skywest, Inc. 19
1,800 Swift Transportation Co., Inc.* 43
2,900 Trans World Airlines, Inc.* 22
3,450 USFreightways, Corp.* 89
5,600 ValuJet, Inc.* 50
3,350 Werner Enterprises, Inc. 54
1,300 Western Pacific Airlines, Inc.* 11
1,900 Xtra Corp. 80
3,500 Yellow Corp.* 53
--------
2,041
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------
<C> <S> <C>
WATER SUPPLY--0.4%
1,200 Aquarion Co. $ 30
1,063 California Water Service Co. 42
2,600 Culligan Water Technologies, Inc.* 97
1,300 E'Town Corp. 39
700 Pennsylvania Enterprises, Inc.* 31
2,700 Philadelphia Suburban Corp. 50
1,360 Southern California Water Co. 32
3,852 United Water Resources, Inc. 59
1,200 Western Water Co.* 22
-------
402
WHOLESALE--1.4%
3,185 Arch Communications Group, Inc.* 35
1,900 Bearings, Inc. 52
1,400 Bindley Western Industries, Inc. 25
1,750 BMC West Corp.* 21
4,000 Caraustar Industries, Inc. 136
4,000 Casey's General Stores, Inc. 69
1,756 Castle (A. M.) & Co. 32
Cellular Communications of Puerto
1,900 Rico, Inc.* 40
1,866 Commercial Metals Co. 59
3,700 Compucom Systems, Inc.* 43
400 Culbro Corp.* 23
600 Daisytek International Corp.* 21
1,500 Discount Auto Parts, Inc.* 38
2,600 Egghead, Inc.* 16
2,838 Foxmeyer Corp.* 6
1,162 Getty Petroleum Corp. 19
5,800 Handleman Co. 48
900 Hughes Supply, Inc. 39
3,100 Immunex Corp.* 42
2,800 International Multifoods Corp. 44
1,800 JP Foodservice, Inc.* 44
3,200 Kaman Corp. 40
3,800 Kent Electronics Corp.* 99
1,200 Lawson Products, Inc. 26
2,700 Marshall Industries* 84
2,450 Microage, Inc.* 55
1,900 Nash-Finch Co. 36
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
4,400 Owens & Minor, Inc. $ 46
1,800 Patterson Dental Co.* 47
1,500 Peak (The) Technologies Group* 17
1,700 Russ Berrie & Co., Inc. 30
4,075 Rykoff-Sexton, Inc. 59
2,400 Sciclone Pharmaceuticals, Inc.* 20
1,700 Smart & Final, Inc. 37
4,100 TBC Corp.* 30
2,300 United Stationers, Inc.* 47
3,100 VWR Corp.* 48
--------
1,573
- -----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $93,126) $105,786
- -----------------------------------------------------------------
WARRANTS--0.0%
247 Aquila Biopharmaceuticals, Inc., Exp.12/03/96* $ 0
Milicom American Satellite Corp.,
350 Exp. 06/30/99* 0
PerSeptive Biosystems, Inc.,
57 Exp. 08/08/97* 0
- -----------------------------------------------------------------
TOTAL WARRANTS
(Cost $0) $ 0
- -----------------------------------------------------------------
OTHER--0.0%
2,000 Escrow CFS Group, Inc.* $ 0
1,400 Escrow Millicom, Inc.* 0
900 Escrow Northeast Bancorp, Inc.* 0
2,790 Escrow Statesman Group, Inc.* 0
1,700 Escrow Takecare, Inc.* 0
- -----------------------------------------------------------------
TOTAL OTHER
(Cost $0) $ 0
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount Description Value
- --------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--0.2%
U.S. Treasury Bills #
$ 70 4.89% Due 01/09/97 $ 69
25 4.93% Due 01/09/97 25
80 4.96% Due 01/09/97 79
40 5.11% Due 01/09/97 39
- --------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $212) $ 212
- --------------------------------------------------------------
SHORT-TERM INVESTMENT--6.1%
Berliner Handels und Frankfurter,
Grand Cayman
$6,868 5.688% Due 12/02/96 $ 6,868
- --------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $6,868) $ 6,868
- --------------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(Cost $100,206) $112,866
- --------------------------------------------------------------
Assets, less other liabilities--0.2% 259
- --------------------------------------------------------------
NET ASSETS--100.0% $113,125
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
OPEN FUTURES CONTRACTS:
<TABLE>
<CAPTION>
Number of Contract Contract Contract Unrealized
Type Contracts Amount Position Expiration Gain
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RUSSELL 2000 40 $6,935 Long 12/20/96 $172
- ---------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
#Securities pledged to cover margin requirements for open futures contracts.
See accompanying notes to financial statements.
51
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International Company
Balanced Growth Index Growth Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at cost $44,220 $106,566 $541,910 $ 94,277 $135,257 $100,206
- --------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value $51,448 $142,731 $736,364 $114,043 $139,480 $112,866
Cash 143 2 7 2 -- 4
Receivables:
Dividends and interest 293 200 1,557 65 143 109
Foreign tax reclaims -- -- -- -- 217 --
Fund units sold 15 -- 108 24 5 --
Investment securities sold 143 -- -- -- 4,297 158
Administrator 6 8 23 7 2 8
Deferred organization costs, net 20 15 15 27 33 14
Other assets 1 -- 2 -- 1 1
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 52,069 142,956 738,076 114,168 144,178 113,160
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Due to custodian -- -- -- -- 684 --
Payable for:
Fund units redeemed 52 -- 119 27 5 --
Investment securities purchased 596 382 27 150 5,075 --
Accrued expenses:
Advisory fees 21 63 58 73 89 18
Administration fees 4 11 58 9 11 9
Custodian fees 2 2 23 1 13 --
Transfer agent fees 1 1 11 1 1 1
Other liabilities 7 9 42 8 24 7
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 683 468 338 269 5,902 35
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $51,386 $142,488 $737,738 $113,899 $138,276 $113,125
- --------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $42,854 $90,550 $508,982 $82,474 $130,284 $86,770
Accumulated undistributed net investment income 49 1,355 468 111 720 1,159
Accumulated net realized gain on investments, options
and futures 1,255 14,418 32,457 11,548 3,034 12,364
Net unrealized appreciation on investments and futures 7,228 36,165 195,831 19,766 4,223 12,832
Net unrealized gain on translation of other assets and
liabilities denominated in foreign currencies -- -- -- -- 15 --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $51,386 $142,488 $737,738 $113,899 $138,276 $113,125
- --------------------------------------------------------------------------------------------------------------------------
Total units outstanding (no par value), unlimited units
authorized
Class A 3,690 9,892 40,255 7,337 12,998 8,081
Class C 490 -- 3,213 483 -- --
Class D 19 30 477 46 9 19
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per unit
Class A $12.24 $14.36 $16.79 $14.48 $10.63 $13.97
Class C $12.24 -- $16.79 $14.47 -- --
Class D $12.23 $14.26 $16.77 $14.37 $10.54 $13.96
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Small
Diversified Equity Focused International Company
Balanced Growth Index Growth Growth Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 397 $ 2,151 $ 12,910 $ 927 $ 2,149 $ 1,638
Interest 1,256 146 1,191 116 293 141
- --------------------------------------------------------------------------------------------
TOTAL INCOME 1,653 2,297 14,101 1,043 2,442(a) 1,779
- --------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 363 1,118 1,810 1,116 1,362 424
Administration fees 114 310 780 250 305 258
Custodian fees 21 27 154 22 170 67
Transfer agent fees 9 14 92 13 14 12
Registration fees 17 25 42 23 46 27
Professional fees 5 15 45 5 14 9
Trustee fees 2 4 18 2 6 5
Amortization of deferred
organization costs 10 13 13 17 15 13
Unitholder Servicing
Fees 7 1 54 4 -- --
Other 10 16 86 14 17 20
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 558 1,543 3,094 1,466 1,949 835
Less voluntary waivers
of:
Investment advisory
fees (136) (349) (1,207) (305) (272) (212)
Administration fees (69) (171) (176) (148) (169) (152)
Less: Expenses reimburs-
able by Administrator (66) (98) (307) (80) (55) (135)
- --------------------------------------------------------------------------------------------
Net expenses 287 925 1,404 933 1,453 336
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,366 1,372 12,697 110 989 1,443
Net realized gains on:
Investment transactions 1,703 14,070 30,814 11,332 8,918 12,772
Futures transactions -- -- 5,198 140 -- 74
Foreign currency trans-
actions -- -- -- -- 24 --
Options 131 383 -- 76 -- --
Net change in unrealized
appreciation on
investments and futures 2,874 10,529 100,945 5,017 3,186 976
Net change in unrealized
losses on translation
of other assets and li-
abilities denominated
in
foreign currencies -- -- -- -- (22) --
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS $6,074 $26,354 $149,654 $16,675 $13,095 $15,265
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $119 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
53
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
(All amounts in thousands)
<TABLE>
<CAPTION>
Balanced Diversified Growth
Portfolio Portfolio
---------------- --------------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 1,366 $ 1,217 $ 1,372 $ 1,779
Net realized gains (losses) on invest-
ments, options,
futures, and foreign currency transac-
tions 1,834 587 14,453 3,960
Net change in unrealized appreciation
(depreciation) on:
Investments and futures transactions 2,874 4,957 10,529 27,492
Forward foreign currency contracts -- -- -- --
Net change in unrealized gains (loss-
es) on translations of other assets
and liabilities denominated in for-
eign currencies -- (5) -- 364
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 6,074 6,756 26,354 33,595
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (1,231) (1,221) (1,750) (1,361)
Net realized gain on investment and
futures transactions -- -- (1,919) --
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (1,231) (1,221) (3,669) (1,361)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS:
Net investment income (132) -- -- --
Net realized gain on investment and
futures transactions -- -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (132) -- -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS:
Net investment income (2) -- (2) (1)
Net realized gain on investment and
futures transactions -- -- (3) --
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (2) -- (5) (1)
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 11,431 10,695 14,860 32,849
Reinvested distributions 1,076 1,179 3,424 1,264
Cost of units redeemed (10,419) (9,974) (45,585) (84,547)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from Class A unit transac-
tions 2,088 1,900 (27,301) (50,434)
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 6,132 -- -- --
Reinvested distributions 132 -- -- --
Cost of units redeemed (797) -- -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from Class C unit transactions 5,467 -- -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 232 -- 227 185
Reinvested distributions 2 -- 5 --
Cost of units redeemed (9) -- (75) (35)
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from Class D unit transactions 225 -- 157 150
- --------------------------------------------------------------------------------
Net increase (decrease) 12,489 7,435 (4,464) (18,051)
Net assets--beginning of year 38,897 31,462 146,952 165,003
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $51,386 $38,897 $ 142,488 $ 146,952
- --------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVEST-
MENT INCOME $49 $48 $1,355 $1,735
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Index Focused Growth International Small Company
Portfolio Portfolio Growth Portfolio Index Portfolio
- --------------------- ------------------ ------------------ -----------------
1996 1995 1996 1995 1996 1995 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12,697 $ 9,656 $ 110 $ 349 $ 989 $ 1,794 $ 1,443 $ 1,130
36,012 13,989 11,548 5,691 8,942 (4,915) 12,846 5,913
100,945 94,961 5,017 13,082 3,186 754 976 13,771
-- -- -- -- -- (62) -- --
-- -- -- (24) (22) 35 -- --
- ---------------------------------------------------------------------------------
149,654 118,606 16,675 19,098 13,095 (2,394) 15,265 20,814
- ---------------------------------------------------------------------------------
(11,982) (9,464) (317) (147) (2,919) (684) (1,002) (1,027)
(15,194) (5,459) (1,293) -- -- (510) (5,764) (3,919)
- ---------------------------------------------------------------------------------
(27,176) (14,923) (1,610) (147) (2,919) (1,194) (6,766) (4,946)
- ---------------------------------------------------------------------------------
(603) (93) -- -- -- -- -- --
(570) -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------
(1,173) (93) -- -- -- -- -- --
- ---------------------------------------------------------------------------------
(60) (6) (2) -- (1) -- (1) --
(26) -- (8) -- -- -- (2) --
- ---------------------------------------------------------------------------------
(86) (6) (10) -- (1) -- (3) --
- ---------------------------------------------------------------------------------
338,095 216,653 32,348 27,342 28,193 63,136 28,946 17,266
24,880 13,649 1,413 100 2,297 962 6,297 4,615
(279,296) (135,290) (27,923) (18,063) (51,182) (45,016) (25,770) (19,967)
- ---------------------------------------------------------------------------------
83,679 95,012 5,838 9,379 (20,692) 19,082 9,473 1,914
- ---------------------------------------------------------------------------------
52,571 18,118 6,934 -- -- -- -- --
1,029 94 -- -- -- -- -- --
(25,869) (427) (598) -- -- -- -- --
- ---------------------------------------------------------------------------------
27,731 17,785 6,336 -- -- -- -- --
- ---------------------------------------------------------------------------------
6392 762 168 459 71 24 223 43
86 6 10 -- -- -- 3 --
(332) (6) (96) (2) (2) (6) (13) (2)
- ---------------------------------------------------------------------------------
6,146 762 82 457 69 18 213 41
- ---------------------------------------------------------------------------------
238,775 217,143 27,311 28,787 (10,448) 15,512 18,182 17,823
498,963 281,820 86,588 57,801 148,724 133,212 94,943 77,120
- ---------------------------------------------------------------------------------
$ 737,738 $ 498,963 $113,899 $ 86,588 $138,276 $148,724 $113,125 $94,943
- ---------------------------------------------------------------------------------
$468 $416 $111 $320 $720 $2,579 $1,159 $724
- ---------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Balanced Portfolio
---------------------------------------------------------
Class A Class C Class D
------------------------------------- -------- --------
1996 1995 1994 1993 (a) 1996 (b) 1996 (c)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 11.05 $ 9.50 $ 10.22 $ 10.00 $ 11.12 $ 11.34
Income (Loss) from in-
vestment operations:
Net investment income 0.34 0.34 0.24 0.09 0.29 0.22
Net realized and
unrealized gain (loss)
on investments and op-
tions 1.19 1.55 (0.72) 0.22 1.12 0.96
- -----------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.53 1.89 (0.48) 0.31 1.41 1.18
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.34) (0.34) (0.22) (0.09) (0.29) (0.29)
Net realized gain on
investments and op-
tions -- -- (0.02) -- -- --
- -----------------------------------------------------------------------------------
Total distributions to
unitholders (0.34) (0.34) (0.24) (0.09) (0.29) (0.29)
- -----------------------------------------------------------------------------------
Net increase (decrease) 1.19 1.55 (0.72) 0.22 1.12 0.89
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 12.24 $ 11.05 $ 9.50 $ 10.22 $ 12.24 $ 12.23
- -----------------------------------------------------------------------------------
Total return (d) 14.07% 20.22% (4.76)% 3.12% 12.72% 10.55%
Ratio to average net as-
sets of: (e)
Expenses, net of waiv-
ers and reimbursements 0.61% 0.61% 0.61% 0.61% 0.85% 1.00%
Expenses, before waiv-
ers and reimbursements 1.20% 1.28% 1.50% 1.62% 1.44% 1.59%
Net investment income,
net of waivers and re-
imbursements 3.03% 3.36% 2.56% 2.20% 2.80% 2.78%
Net investment income,
before waivers and re-
imbursements 2.44% 2.69% 1.68% 1.19% 2.21% 2.19%
Portfolio turnover rate 104.76% 93.39% 75.69% 35.03% 104.76% 104.76%
Average commission rate
per share $0.0718 NA NA NA $0.0718 $0.0718
Net assets at end of pe-
riod (in thousands) $45,157 $38,897 $ 31,462 $15,928 $ 5,997 $ 232
- -----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on February 20, 1996.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
56
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Diversified Growth Portfolio
------------------------------------------------------------------
Class A Class D
--------------------------------------- -------------------------
1996 1995 1994 1993 (a) 1996 1995 1994 (b)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 12.20 $ 9.88 $ 10.65 $ 10.00 $ 12.16 $ 9.88 $10.41
Income (Loss) from in-
vestment operations:
Net investment income 0.14 0.15 0.09 0.09 0.11 0.11 0.01
Net realized and
unrealized gain (loss)
on investments
and options 2.33 2.26 (0.83) 0.65 2.29 2.25 (0.54)
- ---------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 2.47 2.41 (0.74) 0.74 2.40 2.36 (0.53)
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.15) (0.09) (0.01) (0.09) (0.14) (0.08) --
Net realized gain on
investments and op-
tions (0.16) -- (0.02) -- (0.16) -- --
- ---------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.31) (0.09) (0.03) (0.09) (0.30) (0.08) --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 2.16 2.32 (0.77) 0.65 2.10 2.28 (0.53)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 14.36 $ 12.20 $ 9.88 $ 10.65 $ 14.26 $12.16 $ 9.88
- ---------------------------------------------------------------------------------------------
Total return (c) 20.83% 24.55% (6.98)% 7.38% 20.39% 24.19% (5.14)%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 0.66% 0.69% 0.67% 0.71% 1.05% 1.08% 1.05%
Expenses, before waiv-
ers and reimbursements 1.10% 1.12% 1.08% 1.13% 1.49% 1.51% 1.46%
Net investment income,
net of waivers and
reimbursements 0.98% 1.16% 0.77% 1.04% 0.59% 0.73% 0.94%
Net investment income,
before waivers and
reimbursements 0.54% 0.73% 0.35% 0.62% 0.15% 0.30% 0.53%
Portfolio turnover rate 59.99% 81.65% 78.94% 140.88% 59.99% 81.65% 78.94%
Average commission rate
per share $ 0.0655 NA NA NA $0.0655 NA NA
Net assets at end of pe-
riod (in thousands) $142,055 $146,731 $164,963 $199,053 $ 433 $ 221 $ 40
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
57
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Equity Index Portfolio
------------------------------------------------------------------------------------
Class A Class C Class D
-------------------------------------- ----------------- -------------------------
1996 1995 1994 1993 (a) 1996 1995 (b) 1996 1995 1994 (c)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN- $ 13.86 $ 10.60 $ 10.78 $ 10.00 $ 13.86 $ 13.43 $ 13.83 $10.60 $10.96
NING OF PERIOD
Income (Loss) from in-
vestment
operations:
Net investment income 0.31 0.30 0.27 0.22 0.28 0.05 0.27 0.25 0.02
Net realized and
unrealized gain (loss)
on investments and
futures 3.36 3.47 (0.18) 0.78 3.35 0.45 3.36 3.47 (0.31)
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 3.67 3.77 0.09 1.00 3.63 0.50 3.63 3.72 (0.29)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.31) (0.30) (0.27) (0.22) (0.27) (0.07) (0.26) (0.28) (0.07)
Net realized gain on
investments and
futures (0.43) (0.21) -- -- (0.43) -- (0.43) (0.21) --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.74) (0.51) (0.27) (0.22) (0.70) (0.07) (0.69) (0.49) (0.07)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) 2.93 3.26 (0.18) 0.78 2.93 0.43 2.94 3.23 (0.36)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 16.79 $ 13.86 $ 10.60 $ 10.78 $ 16.79 $ 13.86 $ 16.77 $13.83 $10.60
- ---------------------------------------------------------------------------------------------------------------
Total return (d) 27.53% 36.60% 0.87% 10.08% 27.24% 3.94% 27.20% 36.20% (2.68)%
Ratio to average net
assets of: (e)
Expenses, net of
waivers and
reimbursements 0.22% 0.22% 0.23% 0.21% 0.46% 0.46% 0.61% 0.61% 0.60%
Expenses, before
waivers and
reimbursements 0.50% 0.54% 0.59% 0.66% 0.74% 0.78% 0.89% 0.93% 0.96%
Net investment income,
net of waivers and
reimbursements 2.12% 2.54% 2.62% 2.62% 1.89% 2.29% 1.78% 2.07% 2.67%
Net investment income,
before waivers and
reimbursements 1.84% 2.22% 2.25% 2.17% 1.61% 1.97% 1.50% 1.75% 2.31%
Portfolio turnover rate 18.02% 15.27% 71.98% 2.06% 18.02% 15.27% 18.02% 15.27% 71.98%
Average commission rate
per share $ 0.0228 NA NA NA $0.0228 NA $0.0228 NA NA
Net assets at end of
period (in thousands) $675,804 $479,763 $281,817 $219,282 $53,929 $18,390 $ 8,005 $ 810 $ 3
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class C units were issued on September 28, 1995.
(c) Class D units were issued on September 14, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
58
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Focused Growth Portfolio
-----------------------------------------------------------------------
Class A Class C Class D
--------------------------------------- -------- ------------------
1996 1995 1994 1993 (a) 1996 (b) 1996 1995 (c)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD: $12.53 $9.79 $10.43 $10.00 $ 13.46 $ 12.48 $9.55
Income (Loss) from in-
vestment operations:
Net investment income
(loss) 0.02 0.05 0.02 0.01 (0.01) (0.03) 0.02
Net realized and
unrealized gain (loss)
on investments,
futures and options 2.17 2.71 (0.66) 0.43 1.02 2.15 2.93
- --------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 2.19 2.76 (0.64) 0.44 1.01 2.12 2.95
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.05) (0.02) -- (0.01) -- (0.04) (0.02)
Net realized gain on
investments, futures
and options (0.19) -- -- -- -- (0.19) --
- --------------------------------------------------------------------------------------------------
Total distributions to
unitholders (0.24) (0.02) -- (0.01) -- (0.23) (0.02)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) 1.95 2.74 (0.64) 0.43 1.01 1.89 2.93
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $14.48 $12.53 $9.79 $10.43 $14.47 $14.37 $12.48
- --------------------------------------------------------------------------------------------------
Total return (d) 17.82% 28.38% (6.15)% 4.33% 7.51% 17.42% 30.97%
Ratio to average net as-
sets of: (e)
Expenses, net of waiv-
ers and reimbursements 0.91% 0.91% 0.91% 0.91% 1.15% 1.30% 1.30%
Expenses, before waiv-
ers and reimbursements 1.43% 1.47% 1.55% 1.88% 1.67% 1.82% 1.86%
Net investment income
(loss), net of waivers
and reimbursements 0.12% 0.46% 0.24% 0.14% (0.12)% (0.28)% (0.11)%
Net investment loss,
before waivers and
reimbursements (0.40)% (0.10)% (0.39)% (0.83)% (0.64)% (0.80)% (0.67)%
Portfolio turnover rate 116.78% 85.93% 74.28% 27.48% 116.78% 116.78% 85.93%
Average commission rate
per share $ 0.0730 NA NA NA $0.0730 $0.0730 NA
Net assets at end of pe-
riod (in thousands) $106,250 $86,099 $57,801 $32,099 $6,993 $656 $489
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on July 1, 1993.
(b) Class C units were issued on June 14, 1996.
(c) Class D units were issued on December 8, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
59
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
International Growth Portfolio
--------------------------------------------------------
Class A Class D
----------------------------- -------------------------
1996 1995 1994(a) 1996 1995 1994(b)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 9.88 $ 10.21 $ 10.00 $ 9.83 $10.21 $10.47
Income (loss) from in-
vestment operations:
Net investment income 0.10 0.12 0.05 0.01 0.19 --
Net realized and
unrealized gain (loss)
on investments
and foreign currency
transactions 0.87 (0.36) 0.16 0.92 (0.48) (0.26)
- -----------------------------------------------------------------------------------
Total income (loss) from
investment operations 0.97 (0.24) 0.21 0.93 (0.29) (0.26)
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.22) (0.05) -- (0.22) (0.05) --
Net realized gain on
investments and for-
eign currency transac-
tions -- (0.04) -- -- (0.04) --
- -----------------------------------------------------------------------------------
Total distributions to
unitholders (0.22) (0.09) -- (0.22) (0.09) --
- -----------------------------------------------------------------------------------
Net increase (decrease) 0.75 (0.33) 0.21 0.71 (0.38) (0.26)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.63 $ 9.88 $ 10.21 $ 10.54 $ 9.83 $10.21
- -----------------------------------------------------------------------------------
Total return (c) 9.96% (2.32)% 2.11% 9.59% (2.78)% (2.56)%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 1.06% 1.06% 1.04% 1.45% 1.45% 1.35%
Expenses, before waiv-
ers and reimbursements 1.43% 1.38% 1.47% 1.82% 1.77% 1.78%
Net investment income,
net of waivers and re-
imbursements 0.73% 1.22% 0.76% 0.44% 2.01% --
Net investment income
(loss), before waivers
and reimbursements 0.36% 0.90% 0.33% 0.07% 1.69% (0.43)%
Portfolio turnover rate 202.47% 215.31% 77.79% 202.47% 215.31% 77.79%
Average commission rate
per share $ 0.0292 NA NA $0.0292 NA NA
Net assets at end of pe-
riod (in thousands) $138,182 $148,704 $133,212 $ 94 $ 20 --
- -----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
60
<PAGE>
The Benchmark Funds
Equity Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Small Company Index Portfolio
--------------------------------------------------------
Class A Class D
------------------------------------- -----------------
1996 1995 1994 1993 (a) 1996 1995 (b)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 12.98 $ 10.86 $ 11.29 $ 10.00 $ 12.95 $ 10.51
Income (Loss) from in-
vestment operations:
Net investment income 0.19 0.16 0.14 0.11 0.13 0.18
Net realized and
unrealized gain (loss)
on investments and
futures 1.75 2.67 (0.30) 1.29 1.83 2.96
- ----------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.94 2.83 (0.16) 1.40 1.96 3.14
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (0.14) (0.15) (0.02) (0.11) (0.14) (0.14)
Net realized gain on
investments and
futures transactions (0.81) (0.56) (0.25) -- (0.81) (0.56)
- ----------------------------------------------------------------------------------
Total distributions to
unitholders (0.95) (0.71) (0.27) (0.11) (0.95) (0.70)
- ----------------------------------------------------------------------------------
Net increase (decrease) 0.99 2.12 (0.43) 1.29 1.01 2.44
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 13.97 $ 12.98 $ 10.86 $ 11.29 $ 13.96 $ 12.95
- ----------------------------------------------------------------------------------
Total return (c) 15.96% 27.76% (1.54)% 14.09% 16.20% 31.62%
Ratio to average net as-
sets of: (d)
Expenses, net of waiv-
ers and reimbursements 0.32% 0.32% 0.33% 0.31% 0.71% 0.71%
Expenses, before waiv-
ers and reimbursements 0.79% 0.81% 0.86% 1.02% 1.18% 1.20%
Net investment income,
net of waivers and re-
imbursements 1.36% 1.31% 1.27% 1.25% 1.02% 0.90%
Net investment income,
before waivers and re-
imbursements 0.89% 0.82% 0.74% 0.54% 0.55% 0.41%
Portfolio turnover rate 46.26% 38.46% 98.43% 26.31% 46.26% 38.46%
Average commission rate
per share $ 0.0257 NA NA NA $0.0257 NA
Net assets at end of pe-
riod (in thousands) $112,856 $94,899 $77,120 $54,763 $ 269 $ 44
- ----------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on December 8, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
NA--Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
61
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end manage-
ment investment company. The Trust includes sixteen portfolios, each with its
own investment objective. The Northern Trust Company ("Northern") acts as the
Trust's investment adviser, transfer agent, and custodian. Goldman, Sachs &
Co. ("Goldman Sachs") acts as the Trust's administrator and distributor. Pre-
sented herein are the financial statements of the equity portfolios ("the
Portfolios").
Each of the equity portfolios may issue four separate classes: Class A, B, C
and D. Each class is distinguished by the level of administrative support and
transfer agent service provided. As of November 30, 1996, Class A, Class C and
Class D units are outstanding for certain portfolios.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP re-
quires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Ac-
tual results could differ from those estimates.
(a) Investment Valuation
Investments held by a portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any securi-
ties are not traded on a valuation date, at the last quoted bid price. Securi-
ties which are traded in the over-the-counter markets are valued at the last
quoted bid price. Exchange traded futures and options are valued at the set-
tlement price as established by the exchange on which they are traded. Index
futures are marked to market on a daily basis. Any securities, including re-
stricted securities, for which current quotations are not readily available
are valued at fair value as determined in good faith by Northern under the su-
pervision of the Board of Trustees ("Board"). Short-term investments are val-
ued at amortized cost which Northern has determined, pursuant to Board autho-
rization, approximates market value.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
(c) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments and dividend income
are translated into U.S. dollars using the spot market rate of exchange pre-
vailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on invest-
ments.
(d) Investment Transactions and Investment Income
Investment transactions are recorded on the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Dividend income is recorded on the ex-dividend date and interest income is re-
corded on the accrual basis and includes amortization of discounts and premi-
ums. Dividends from foreign securities are recorded on the ex-date, or as soon
as the information is available.
62
<PAGE>
- -------------------------------------------------------------------------------
(e) Forward Foreign Currency Exchange Contracts
Certain portfolios are authorized to enter into forward foreign currency ex-
change contracts for the purchase of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. In addition, the International Growth
Portfolio may enter into foreign currency exchange contracts for speculative
purposes. The objective of the Portfolio's foreign currency hedging transac-
tions is to reduce the risk that the U.S. dollar value of the Portfolio's for-
eign currency denominated securities will decline in value due to changes in
foreign currency exchange rates. All forward foreign currency contracts are
"marked-to-market" daily at the applicable exchange rates and any resulting
unrealized gains or losses are recorded in the financial statements. The port-
folio records realized gains or losses when the forward contract is offset by
entry into a closing transaction or extinguished by delivery of the currency.
Risks may arise upon entering into these contracts from the potential inabil-
ity of counterparties to meet the terms of their contracts and from unantici-
pated movements in the value of a foreign currency relative to the U.S. dol-
lar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all re-
lated and offsetting transactions are considered.
(f) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and capital gains to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, there were no
capital loss carryforwards for U.S. federal tax purposes.
(g) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(h) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio. Certain expenses arising in connection with a class of units are
allocated to that class of units. Expenses incurred which do not specifically
relate to an individual portfolio are allocated among the portfolios based on
each portfolio's relative net assets.
(i) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
- -------------------------------
<S> <C>
Balanced Quarterly
Diversified Growth Annually
Equity Index Quarterly
Focused Growth Annually
International Growth Annually
Small Company Index Annually
- -------------------------------
</TABLE>
Each portfolio's net realized capital gains are distributed at least annual-
ly. Income dividends and capital gain distributions are determined in accor-
dance with income tax regulations. Such amounts may differ from income and
capital gains recorded in accordance with generally accepted accounting prin-
ciples.
Distributions of short-term and long-term capital gains were declared and
paid December 24, 1996 to unitholders of record on December 23, 1996, as fol-
lows:
<TABLE>
<CAPTION>
Short-Term Long-Term
Capital Capital
Gain Gain Total
- --------------------------------------------------
<S> <C> <C> <C>
Balanced -- $0.3085 $0.3085
Diversified Growth $0.5764 0.8847 1.4611
Equity Index 0.0188 0.8107 0.8295
Focused Growth 0.3562 1.3199 1.6761
International Growth 0.3956 0.0519 0.4475
Small Company Index 0.4540 1.1386 1.5926
- --------------------------------------------------
</TABLE>
63
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
(j) Reclassifications
The International Growth Portfolio reclassified approximately $48,000 from ac-
cumulated net realized gain on investment transactions, and $24,000 from net
realized gain on foreign currency transactions to accumulated undistributed
net investment income. The Small Company Index Portfolio reclassified approxi-
mately $5,000 from undistributed net investment income to accumulated net re-
alized gain on investment transactions. These reclassifications had no impact
on the net asset value of the Portfolios and are designed to present those
Portfolio's capital accounts on a tax basis.
3. ADVISORY, TRANSFER AGENCY AND CUSTODIAN AGREEMENTS
The Trust has an investment advisory agreement with Northern whereby each
portfolio pays Northern a fee, computed daily and payable monthly, based on a
specified percentage of its average daily net assets. For the current fiscal
year, Northern voluntarily agreed to waive a portion of the advisory fees as
shown on the accompanying Statements of Operations. The annual advisory fees
and waiver rates expressed as a percentage of average daily net assets for the
year ended November 30, 1996, are as follows:
<TABLE>
<CAPTION>
Net
Advisory Less: Advisory
Fee Waiver Fee
- ----------------------------------------------
<S> <C> <C> <C>
Balanced .80% .30% .50%
Diversified Growth .80 .25 .55
Equity Index .30 .20 .10
Focused Growth 1.10 .30 .80
International Growth 1.00 .20 .80
Small Company Index .40 .20 .20
- ----------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%, .10%
and .15% of the average daily net asset value of the outstanding Class A, B, C
and D units, respectively, of the portfolios.
As compensation for the services rendered as custodian, including the assump-
tion by Northern of the expenses related thereto, Northern receives compensa-
tion based on a pre-determined schedule of charges approved by the Board.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement with Goldman Sachs whereby each
portfolio pays the Administrator a fee, computed daily and payable monthly,
based on the average net assets of each portfolio at the rates set forth be-
low:
<TABLE>
<CAPTION>
Average net assets Rate
- ---------------------------------------
<S> <C>
For the first $100,000,000 .250%
For the next $200,000,000 .150
For the next $450,000,000 .075
For net assets over $750,000,000 .050
- ---------------------------------------
</TABLE>
For the current fiscal year, Goldman Sachs voluntarily agreed to limit admin-
istration fees to .10% of average daily net assets for each portfolio. In ad-
dition, Goldman Sachs agreed to waive a portion of its administrative fees
should overall administration fees earned during the preceding year exceed
certain specified levels. No waiver was required under this agreement during
the year ended November 30, 1996. Furthermore, Goldman Sachs has agreed to re-
imburse each portfolio for certain expenses in the event that such expenses,
as defined, exceed on an annualized basis .10% of its average daily net assets
for the Balanced, Diversified Growth, Equity Index, Focused Growth and Small
Company Index Portfolios and .25% of the average daily net assets for the In-
ternational Growth Portfolio.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1996 are shown on the accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
64
<PAGE>
- -------------------------------------------------------------------------------
5. UNITHOLDER SERVICING PLAN
The Trust has adopted a Unitholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain unitholder administrative support serv-
ices for their customers or other investors who beneficially own Class B, C
and D units. As compensation under the Unitholder Servicing Plan, the institu-
tion or other financial intermediary receives a fee at an annual rate of up to
.10%, .15% and .25% of the average daily net asset value of the outstanding
Class B, C and D units, respectively.
6. FUTURES CONTRACTS
Each portfolio may invest in long equity index or currency futures to maintain
liquidity or short futures contracts for hedging purposes. The portfolios bear
the market risk arising from changes in the value of these financial instru-
ments. At the time a portfolio enters into a futures contract it is required
to make a margin deposit with the custodian of a specified amount of cash or
eligible securities. Subsequently, as the market price of the futures contract
fluctuates, gains or losses are recorded and payments are made, on a daily ba-
sis, between the portfolio and the broker. The Statements of Operations re-
flects gains and losses as realized for closed futures contracts and as
unrealized for open futures contracts.
At November 30, 1996, the Equity Index and Small Company Index Portfolios had
entered into long exchange traded futures contracts. The aggregate market
value of investments pledged to cover margin requirements for open positions
at November 30, 1996 was approximately $1,863,000 and $212,000 for the Equity
Index and Small Company Index Portfolios, respectively.
7. OPTIONS CONTRACTS
Each Portfolio may purchase and write (sell) put and call options on foreign
and domestic stock indices, foreign currencies, and U.S. and foreign securi-
ties that are traded on U.S. and foreign securities exchanges and over-the-
counter markets. These transactions are for hedging (or cross-hedging ) pur-
poses or for the purposes of earning additional income.
The risk associated with purchasing an option is that the portfolio pays a
premium whether or not the option is exercised. Additionally, the portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as portfolio securities. The cost of se-
curities acquired through the exercise of call options is increased by the
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
In writing an option, the portfolio bears the market risk of an unfavorable
change in the price of the security or currency underlying the written option.
Exercise of an option written by the portfolio could result in the portfolio
selling or buying a security or currency at a price different from the current
market value. Transactions in written call options for the year ended November
30, 1996 for the Balanced, Diversified Growth and Focused Growth Portfolios
were as follows:
<TABLE>
<CAPTION>
Diversified Focused
Premiums Balanced Growth Growth
- ----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Options outstanding, beginning of period $ -- $ -- $ --
Options written 169 383 1,203
Options terminated in closing purchase
transactions (38) -- (1,127)
Options expired (131) (383) (76)
- ----------------------------------------------------------------------
Options outstanding, end of period $ -- $ -- $ --
- ----------------------------------------------------------------------
</TABLE>
The Portfolios did not write put options during the year ended November 30,
1996.
65
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
8. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1996 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds
from sales Proceeds
and from sales
Purchases maturities and
of U.S. Purchases of U.S. maturities
Government of other Government of other
Obligations securities Obligations securities
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced $25,380 $ 26,459 $20,152 $ 24,199
Diversified Growth -- 82,570 -- 112,306
Equity Index -- 211,463 -- 104,654
Focused Growth -- 126,812 -- 116,129
International Growth -- 264,292 -- 291,224
Small Company Index -- 47,979 -- 48,418
- -------------------------------------------------------------------
</TABLE>
As of November 30, 1996, the composition of unrealized appreciation (depreci-
ation) of investment securities (including the effects of foreign currency
translation) based on the aggregate cost of investments for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Income
Net Tax
Appreciation Depreciation Appreciation Purposes
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced $ 7,396 $ 196 $ 7,200 $ 44,248
Diversified Growth 38,097 1,944 36,153 106,578
Equity Index 203,920 10,500 193,420 542,944
Focused Growth 22,474 2,733 19,741 94,302
International Growth 8,829 6,914 1,915 137,565
Small Company Index 23,090 10,430 12,660 100,206
- ---------------------------------------------------------------------
</TABLE>
9. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
Interest expense for the year ended November 30, 1996 was approximately
$2,000, $53,000, $3,000, $9,000 and $7,000 for the Diversified Growth, Equity
Index, Focused Growth, International Growth, and Small Company Index Portfo-
lios, respectively. These amounts are included in other expenses on the State-
ments of Operations.
As of November 30, 1996, there were no outstanding borrowings.
10. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 989 93 911 171
Diversified Growth 1,187 290 3,615 (2,138)
Equity Index 22,992 1,743 19,101 5,634
Focused Growth 2,500 117 2,151 466
International Growth 2,737 230 5,018 (2,051)
Small Company Index 2,188 516 1,933 771
- -----------------------------------------------------------------
</TABLE>
66
<PAGE>
- --------------------------------------------------------------------------------
Transactions in Class A units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Net
Reinvested increase
Sales distributions Redemptions (decrease)
- -----------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 1,054 114 959 209
Diversified Growth 3,123 128 7,920 (4,669)
Equity Index 17,925 1,174 11,059 8,040
Focused Growth 2,560 10 1,605 965
International Growth 6,479 97 4,573 2,003
Small Company Index 1,491 451 1,736 206
- -----------------------------------------------------------------
</TABLE>
Transactions in Class C units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- --------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 548 11 69 490
Equity Index 3,499 70 1,685 1,884
Focused Growth 529 0 46 483
- --------------------------------------------------------
</TABLE>
Transactions in the Class C units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- ------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Equity Index 1,353 7 31 1,239
</TABLE>
- --------------------------------------------------------------------------------
Transactions in Class D units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- --------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balanced 20 -- 1 19
Diversified
Growth 17 1 6 12
Equity Index 436 6 24 418
Focused Growth 13 1 7 7
International Growth 7 -- -- 7
Small Company Index 17 -- 1 16
</TABLE>
- --------------------------------------------------------------------------------
Transactions in Class D units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Reinvested Net
Sales distributions Redemptions increase
- ------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Diversified Growth 17 -- 3 14
Equity Index 58 1 1 58
Focused Growth 39 -- -- 39
Small Company
Index 3 -- -- 3
</TABLE>
- --------------------------------------------------------------------------------
67
<PAGE>
The Benchmark Funds
Equity Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Equity Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Balanced, Diversified Growth,
Equity Index, Focused Growth, International Growth and Small Company Index
Portfolios, comprising the Equity Portfolios of The Benchmark Funds, as of
November 30, 1996, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended and financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Balanced, Diversified Growth, Equity Index, Focused Growth, International
Growth and Small Company Index Portfolio, comprising the Equity Portfolios of
The Benchmark Funds, at November 30, 1996, the results of their operations for
the year then ended and the changes in their net assets for each of the two
years in the period then ended and financial highlights for the periods
indicated therein, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
January 21, 1997
68
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management, expenses and other
information.
The
Benchmark
Funds
Equity
Portfolios
Annual Report
November 30, 1996
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
None
Incorporated by reference in the Statement of Additional Information**:
Statement of Investments as of November 30, 1996 for the Short Duration, U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond,
International Bond, Balanced, Diversified Growth, Equity Index, Focused Growth,
International Growth and Small Company Index Portfolios.
Statement of Assets and Liabilities as of November 30, 1996 for the Short
Duration, U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury
Index, Bond, International Bond, Balanced, Diversified Growth, Equity Index,
Focused Growth, International Growth and Small Company Index Portfolios.
Statement of Operations for the year ended November 30, 1996 for the Short
Duration, U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury
Index, Bond, International Bond, Balanced, Diversified Growth, Equity Index,
Focused Growth, International Growth and Small Company Index Portfolios.
Statement of Changes in Net Assets for the years ended November 30, 1996 and
November 30, 1995 for the Short Duration, U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, International Bond, Balanced,
Diversified Growth, Equity Index, Focused Growth, International Growth and Small
Company Index Portfolios.
Statement of Investments as of November 30, 1997 (unaudited) for the
Intermediate Bond Portfolio.
Statement of Assets and Liabilities as of November 30, 1997 (unaudited) for the
Intermediate Bond Portfolio.
Statement of Operations for the period ended November 30, 1997 (unaudited) for
the Intermediate Bond Portfolio.
Statement of Changes in Net Assets for the period ended November 30, 1997
(unaudited) for the Intermediate Bond Portfolio.
* Financial Statements for the periods indicated are included for the Short
Duration Portfolio as they were prepared jointly with the financial statements
for the other Portfolios. The Short Duration Portfolio terminated operations on
June 30, 1997.
** Audited financial statements relating to all funds will be filed by
amendment.
<PAGE>
(b)Exhibits
The following exhibits are incorporated herein by reference to Registrant's
Registration Statement on Form N-1A as initially filed (Reference A), to Pre-
Effective Amendment No. 1 (Reference B), to Post-Effective Amendment No. 1 to
such Registration Statement (Reference C), to Post-Effective Amendment No. 2 to
such Registration Statement (Reference D), to Post-Effective Amendment No. 4 to
such Registration Statement (Reference E), to Post-Effective Amendment No. 7 to
such Registration Statement (Reference F), to Post-Effective Amendment No. 11 to
such Registration Statement (Reference G), to Post-Effective Amendment No. 12 to
such Registration Statement (Reference H), to Post-Effective Amendment No. 13 to
such Registration Statement (Reference I), to Post-Effective Amendment No. 16 to
such Registration Statement (Reference J), to Post-Effective Amendment No. 17 to
such Registration Statement (Reference K), to Post-Effective Amendment No. 19 to
such Registration Statement (Reference L), to Post-Effective Amendment No. 20 to
such Registration Statement (Reference M), to Post-Effective Amendment No. 21 to
such Registration Statement (Reference N), to Post-Effective Amendment No. 22 to
such Registration Statement (Reference O) , to Post-Effective Amendment No. 23
to such Registration Statement (Reference P), to Post-Effective Amendment No. 25
to such Registration Statement (Reference Q), to Post-Effective Amendment No. 26
to such Registration Statement (Reference R), to Post-Effective Amendment No. 27
to such Registration Statement (Reference S), to Post-Effective Amendment No. 28
to such Registration Statement (Reference T), to Post Effective Amendment No. 31
to such Registration Statement (Accession No. 0000950130-96-001086), to Post-
Effective Amendment No. 32 to such Registration Statement (Accession No.
0000950130-97-000170), to Post-Effective Amendment No. 33 to such Registration
Statement (Accession No. 0000950130-97-001306), to Post-Effective Amendment No.
34 to such Registration Statement (Accession No. 0000950130-97-002471) and to
Post-Effective Amendment No. 35 to such Registration Statement (Accession No.
0000950131-97-005862).
C-2
<PAGE>
5- Advisory Agreement dated October 5, 1990 between Registrant and The
Northern Trust Company (Accession No. 0000950130-96-001086).
5(a)- Addendum No. 1 to Advisory Agreement between Registrant and The Northern
Trust Company (Reference I).
5(b)- 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(c)- Addendum No. 2 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(d)- Addendum No. 3 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(e)- Addendum No. 4 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-96-001086).
5(f)- Addendum No. 5 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950130-97-002471).
5(g)- Addendum No. 6 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company (Accession No. 0000950131-97-005862).
6- Distribution Agreement dated June 8, 1992 between Registrant and Goldman,
Sachs & Co. (Reference I).
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(c)- Addendum No. 3 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co. (Reference T).
C-3
<PAGE>
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 - Custodian Agreement dated June 8, 1992 between Registrant and The
Northern Trust Company (Reference I).
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(e)- Foreign Custody Agreement between the Registrant and The Northern Trust
Company (Reference T).
8(f)- Addendum No. 1 to Foreign Custody Agreement between the Registrant and
The Northern Trust Company (Accession No. 0000950130-97-002471).
9 - Agreement and Plan of Reorganization between Registrant and The Benchmark
Tax-Exempt Fund (Reference G).
9(a)- Revised and Restated Transfer Agency Agreement between Registrant and The
Northern Trust Company, dated January 8, 1993 (Reference J).
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(f)- Administration Agreement dated June 8, 1992 between Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
C-4
<PAGE>
9(g)- Amendment dated August 1, 1992 to Administration Agreement dated June 8,
1992 between Registrant and Goldman, Sachs & Co. (Accession No.
0000950130-96-001086).
9(h)- Addendum No. 1 to Administration Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
9(i)- Addendum No. 2 to Administration Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
9(j)- Addendum No. 3 to Administration Agreement between the Registrant and
Goldman, Sachs & Co. (Accession No. 0000950130-96-001086).
9(k)- Addendum No. 4 to Administration Agreement between the Registrant and
Goldman, Sachs & Co(Accession No. 0000950130-97-002471).
9(l)- Addendum No. 5 to Administration Agreement between the Registrant and
Goldman, Sachs & Co (Accession No. 0000950131-97-005862).
9(m)- Form of Amended and Restated Administration Agreement between the
Registrant and Goldman Sachs & Co (Accession No. 0000950131-97-005862).
9(n)- 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.
0000950130-97-002471).
12- Not Applicable.
13- Subscription Agreement with Goldman, Sachs & Co. (Reference B).
13(a)- Amendment No. 1 to Subscription Agreement with Goldman, Sachs & Co.
(Reference B).
13(b)- Amendment No. 2 to Subscription Agreement with Goldman, Sachs & Co.
(Reference C).
13(c)- Amendment No. 3 to Subscription Agreement with Goldman, Sachs & Co.
(Reference E).
14- Not Applicable.
15- Not Applicable.
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 (Reference L).
16(a)- Schedule for computation of performance data for Diversified Assets
Portfolio, Government Portfolio, Government Select Portfolio, Tax-
C-5
<PAGE>
Exempt Portfolio and California Municipal Portfolio (Reference M).
16(b)- Schedule for computation of performance data for U.S. Government
Securities Portfolio (Reference N).
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 (Reference Q).
18- Plan entered into by Registrant pursuant to Rule 18f-3 (Accession No.
0000950130-97-002471).
27- Financial Data Schedules.
The following exhibits relating to The Benchmark Funds are filed herewith
electronically pursuant to EDGAR rules:
1- Agreement and Declaration of Trust dated July 1, 1997.
2- By-Laws of the Registrant dated July 8, 1997.
4- Instruments Defining Rights of Shareholders (Articles IV, V and VII of
the Agreement and Declaration of Trust dated July 1, 1997, is
incorporated by reference to Exhibit 1 hereof).
5(h)- Form of Addendum No. 7 to Investment Advisory Agreement between the
Registrant and The Northern Trust Company.
5(i)- Form of Assumption Agreement between The Northern Trust Company and
Northern Trust Quantitative Advisors, Inc.
6(f)- Form of Addendum No. 6 to Distribution Agreement between the Registrant
and Goldman, Sachs & Co.
8(e)- Form of Addendum No. 5 to Custodian Agreement between Registrant and The
Northern Trust Company.
8(f)- Form of Addendum No. 6 to Custodian Agreement between the Registrant and
The Northern Trust Company.
8(g)- Form of Addendum No. 2 to Foreign Custody Agreement between the
Registrant and the Northern Trust Company.
8(h)- Form of Foreign Custody Monitoring Agreements between Registrant and The
Northern Trust Company.
9(f)- Form of Addendum No. 5 to Transfer Agency Agreement between the
Registrant and The Northern Trust Company.
9(o)- Form of Addendum No.1 to Amended and Restated Administration Agreement
between the Registrant and Goldman Sachs & Co.
9(n)- Form of Unitholder Servicing Plan for Subseries B,C, and D Units and
Related Form of Servicing Agreement for Subseries B, C, and D Units.
10- Opinion of Hale & Dorr LLP
11(a)- Consent of Counsel
11(b)- Consent of Ernst & Young LLP
27- Financial Data Schedule (unaudited schedule relating to the
Intermediate Bond Portfolio for the six months ended November 30, 1997*)
* Financial Data Schedules realting to all funds will be filed by amendment
Item 25. Persons Controlled by or Under Common Control with Registrant
C-6
<PAGE>
Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class January 12, 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....1 N/A 1
Short-Intermediate Bond Portfolio Units.1 N/A 1
Bond Portfolio Units .................. 1 1 1
Intermediate Bond Portfolio.............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....4 N/A N/A
</TABLE>
Item 27. Indemnification
Section 6.4, 6.5 and 6.6 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 Registrant's Registration Statement on Form N-1A as
initially filed and a copy of Section 6.5 thereof (as amended) was filed as
Exhibit 1(d) to Pre-Effective Amendment No. 1 to such Registration Statement.
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 is filed as Exhibit 5(b) to Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A.
Paragraph 7 of the Form of 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. Copies of the Administration Agreement was filed as Exhibit 9(m)
to Post-Effective Amendment No. 35 to Registrant's Registration Statement on
Form N-1A.
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
C-7
<PAGE>
The Northern Trust Company, Registrant's investment adviser, is a full 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.
C-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>
Duane L. Burnham Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
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 None
Senior Vice President
Robert S. Hamada Northern Trust Director
Director Corporation
50 S. LaSalle Street
Chicago, IL 60675
The University Dean, 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>
C-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 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 & Director
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>
C-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>
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>
C-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>
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
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
Avenue
Chicago, IL 60603
</TABLE>
C-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>
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
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>
C-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>
Perry R. Pero Northern Futures Director
Senior Executive Vice Corporation
Vice President, 50 South LaSalle Street
Chief Financial Chicago, IL 60675
Officer and
Cashier 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 CT 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
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
</TABLE>
C-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>
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
Abbott Laboratories Director
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 None
Executive Vice
President
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ---------------- -------------
<S> <C> <C>
Bide L. Thomas Northern Trust 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 60008
R. R. Donnelley Director
& Sons Company
77 West Wacker Drive
Chicago, IL 60601
* Name change
</TABLE>
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 Money Market Trust, Goldman Sachs Trust, Goldman Sachs Equity
Portfolios, Inc. 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.
(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
C-16
<PAGE>
(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.
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.
(b) The Registrant undertakes to file a post-effective amendment with respect
to the Global Asset Portfolio within four to six months from the effective
date of the Post-Effective Amendment to the Registrant's Registration
Statement relating to the registration of such Portfolio.
C-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registration Statement has duly caused this Post-
Effective Amendment No. 36 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 16th day of January, 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 January 16, 1998
- --------------------- and Chief
Scott M. Gilman Executive Officer
WILLIAM H. SPRINGER * Trustee January 16, 1998
- ---------------------
William H. Springer
RICHARD G. CLINE * Trustee January 16, 1998
- ---------------------
Richard G. Cline
EDWARD J. CONDON * Trustee January 16, 1998
- ---------------------
Edward J. Condon
JOHN W. ENGLISH * Trustee January 16, 1998
- ---------------------
John W. English
SANDRA P. GUTHMAN * Trustee January 16, 1998
- ---------------------
Sandra P. Guthman
FREDERICK T. KELSEY * Trustee January 16, 1998
- ---------------------
Frederick T. Kelsey
RICHARD P. STRUBEL * Trustee January 16, 1998
- ---------------------
Richard P. Strubel
*By: /s/ Michael J. Richman January 16, 1998
- ---------------------------------
Michael J. Richman,
Attorney-in-fact
</TABLE>
C-18
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
THE BENCHMARK FUNDS
4900 Sears Tower
Chicago, Illinois 60606
Dated: July 1, 1997
AGREEMENT AND DECLARATION OF TRUST made this 1st day of July, 1997 by the
undersigned Trustee (together with all other persons from time to time duly
elected, qualified and serving as Trustees in accordance with the provisions of
Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
WHEREAS, the Trustees declare that all money and property contributed to
the trust established hereunder shall be held and managed in trust for the
benefit of the holders, from time to time, of the shares of beneficial interest
issued hereunder and subject to the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the Trustees of the
Trust, hereby declare as follows:
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1. Name. The name of the Trust created by this Agreement and
Declaration of Trust is "The Benchmark Funds."
Section 2. Definitions. Unless otherwise provided or required by the
context:
(a) "Administrator" means the party, other than the Trust, to the contract
described in Article III, Section 3 hereof.
(b) "By-laws" means the By-laws of the Trust adopted by the Trustees, as
amended from time to time, which By-laws are expressly herein incorporated by
reference as part of the "governing instrument" within the meaning of the
Delaware Act.; provided that in the event of
<PAGE>
a conflict between the provisions of this Declaration and the By-laws, the
provisions of this Declaration shall control.
(c) "Class" means any class of Shares of a Series established pursuant to
Article V.
(d) "Commission," "Interested Person" and "Principal Underwriter" have the
meanings provided in the 1940 Act. Except as such term may be otherwise defined
by the Trustees in conjunction with the establishment of any Series of Shares,
the term "vote of a majority of the Shares outstanding and entitled to vote" or
"Shares representing a majority of the votes entitled to be cast" shall have the
same meaning as is assigned to the term "vote of a majority of the outstanding
voting securities" in the 1940 Act (except as shall be necessary to give effect
to voting on a net asset basis in accordance with Article VII, Section 1).
(e) "Covered Person" means a person so defined in Article IV, Section 3.
(f) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(g) "Declaration" shall mean this Agreement and Declaration of Trust, as
amended or restated from time to time. Reference in this Agreement and
Declaration of Trust to "Declaration," "hereof," "herein," and "hereunder" shall
be deemed to refer to this Declaration rather than exclusively to the article or
section in which such words appear.
(h) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(i) "Distributor" means the party, other than the Trust, to the contract
described in Article III, Section 1 hereof.
(j) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(k) "Investment Adviser" means the party, other than the Trust, to the
contract described in Article III, Section 2 hereof.
(l) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article VI, Section 3.
(m) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures, estates and other entities, and
governments and agencies and political subdivisions, thereof, whether domestic
or foreign.
(n) "Series" means a series of Shares established pursuant to Article V.
(o) "Shareholder" means a record owner of Outstanding Shares.
<PAGE>
(p) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class is divided from time
to time (including whole Shares and fractions of Shares). "Outstanding Shares"
means Shares shown in the books of the Trust or its transfer agent as then
issued and outstanding, but does not include Shares which have been repurchased
or redeemed by the Trust and which are held in the treasury of the Trust.
(q) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(r) "Trust" means The Benchmark Funds established hereby, and reference to
the Trust, when applicable to one or more Series, refers to such Series.
(s) "Trustees" means the person who has signed this Declaration of Trust,
so long as she shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
Trustees hereunder.
(t) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the Trust or any Series or the
Trustees on behalf of the Trust or any Series.
(u) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
----------
THE TRUSTEES
------------
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by or under the direction of the Trustees, and they shall have
all powers necessary or desirable to carry out that responsibility. The Trustees
may execute all instruments and take all action they deem necessary or desirable
to promote the interests of the Trust. Any determination made by the Trustees in
good faith as to what is in the interests of the Trust shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees.
Section 2. Powers. The Trustees in all instances shall act as principals,
free of the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any
3
<PAGE>
way be bound or limited by current or future laws or customs applicable to trust
investments, but shall have full power and authority to make any investments
which they, in their sole discretion, deem proper to accomplish the purposes of
the Trust. The Trustees may exercise all of their powers without recourse to any
court or other authority. Subject to any applicable limitation herein or in the
By-laws or resolutions of the Trust, the Trustees shall have power and
authority, without limitation:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash, including
foreign currencies; securities, including common, preferred and preference
stocks; warrants; subscription rights; profit- sharing interests or
participation and all other contracts for or evidence of equity interests;
bonds, debentures, bills, time notes and all other evidences of indebtedness;
negotiable or non-negotiable instruments; government securities, including
securities of any state, municipality or other political subdivision thereof, or
any governmental or quasi-governmental agency or instrumentality; and money
market instruments including bank certificates of deposit, finance paper,
commercial paper, bankers' acceptances and all kinds of repurchase agreements,
of any corporation, company, trust, association, firm or other business
organization however established, and of any country, state, municipality or
other political subdivision, or any governmental or quasi-governmental agency or
instrumentality; or any other security, property or instrument in which the
Trust or any of its Series shall be authorized to invest.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend and to pledge any such securities, to enter into
repurchase agreements, reverse repurchase agreements, firm commitment agreements
and forward foreign currency exchange contracts, to purchase and sell options on
securities, securities indices, currency and other financial assets, futures
contracts and options on futures contracts of all descriptions and to engage in
all other types of transactions in which the Trust or any of its Series shall be
authorized to engage.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities, repurchase agreements and other property and instruments
included in the Trust Property, including the right to vote thereon and
otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such securities and
repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money or other property in the name of the Trust or any of
its Series exclusively for Trust purposes and in this connection issue notes or
other evidence of
4
<PAGE>
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To adopt By-laws not inconsistent with this Declaration providing for
the conduct of the business of the Trust and to amend and repeal them to the
extent such right is not reserved to the Shareholders.
(i) To elect and remove such officers and appoint and terminate such agents
as they deem appropriate.
(j) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such.
(k) To retain one or more transfer agents and shareholder servicing agents,
or both.
(l) To provide for the distribution of Shares either through a Principal
Underwriter as provided herein or by the Trust itself, or both, or pursuant to a
distribution plan of any kind and to adopt on behalf of any Series or Class
distribution, authorized dealer service, administration, service or other plans
providing for the compensation by such Series or Class for distribution,
administration, shareholder liaison or similar services.
(m) To set record dates in the manner provided for herein or in the By-
laws.
(n) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, independent contractor, manager, investment
adviser, custodian, underwriter or other Person.
(o) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form, or
(ii) either in the Trust's or Trustees' own name or in the name of a custodian
or a nominee or nominees, subject to safeguards according to the usual practice
of business trusts or investment companies.
(p) To establish separate and distinct Series with separately defined
investment
5
<PAGE>
objectives and policies and distinct investment purposes, and with separate
Shares representing beneficial interests in such Series, and to establish
separate Classes, all in accordance with the provisions of Article V.
(q) To the full extent permitted by Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series
and assets, liabilities and expenses to a particular Class or to apportion the
same between or among two or more Series or Classes, provided that any
liabilities or expenses incurred by a particular Series or Class shall be
payable solely out of the assets belonging to that Series or Class as provided
for in Article V, Section 4.
(r) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust.
(s) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(t) To make distributions of income, capital gains, returns of capital (if
any) and redemption proceeds to Shareholders in the manner hereinafter provided
for.
(u) To establish committees for such purposes, with such membership, and
with such responsibilities as the Trustees may consider proper.
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles V and VI, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series or Class with respect to which
such Shares are issued.
(w) To invest part or all of the Trust Property (or part or all of the
assets of any Series), or to dispose of part or all of the Trust Property (or
part or all of the assets of any Series) and invest the proceeds of such
disposition, in interests issued by one or more other investment companies or
pooled portfolios (including investment by means of transfer of part or all of
the Trust Property in exchange for an interest or interests in such one or more
investment companies or pooled portfolios) all without any requirement of
approval by Shareholders. Any such other investment company or pooled portfolio
may (but need not) be a trust (formed under the laws of any state or
jurisdiction) which is classified as a partnership for federal income tax
purposes.
(x) To sell or exchange any or all of the assets of the Trust, subject to
Article IX,
6
<PAGE>
Section 4.
(y) To enter into joint ventures, partnerships and other combinations and
associations.
(z) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such Committee, depositary or trustee as the Trustees shall deem
proper;
(aa) To purchase and pay for entirely out of Trust Property such insurance
as the Trustees may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust or payment of distributions and principal on its portfolio
investments, and, subject to applicable law and any restrictions set forth in
the By-laws, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, Principal Underwriters, or independent
contractors of the Trust, individually, against all claims and liabilities of
every nature arising by reason of holding Shares, holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, Principal Underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;
(bb) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;
(cc) To enter into contracts of any kind and description;
(dd) To interpret the investment policies, practices or limitations of any
Series or Class;
(ee) To guarantee indebtedness and contractual obligations of others;
(ff) To take any other action that may be taken by a Board of Directors of
a business corporation organized under the laws of the State of Delaware; and
(gg) To carry on any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary or desirable to accomplish
any purpose or to further any of the foregoing powers, and to take every other
action incidental to the foregoing
7
<PAGE>
business or purposes, objects or powers.
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
Section 3. Certain Transactions. Except as prohibited by applicable law,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
Section 4. Initial Trustees; Election and Number of Trustees. The initial
Trustees shall be the persons initially signing this Declaration. The number of
Trustees (other than the initial Trustees) shall be fixed from time to time by a
majority of the Trustees; provided, that there shall be at least one (1)
Trustee. The Trustee (other than the initial Trustees) shall be appointed by the
Trustees pursuant to Section 6 of this Article II, provided that the Trustees
shall be elected by the Shareholders as and to the extent required under the
1940 Act on such dates as the Trustees may fix from time to time.
Section 5. Term of Office of Trustees. Each Trustee shall hold office for
life (or until the attainment of any mandatory retirement age or term limits
established by a majority of the Trustees) or until his successor is elected or
the Trust terminates; except that (a) any Trustee may resign by delivering to
the other Trustees or to any Trust officer a written resignation effective upon
such delivery or a later date specified therein; (b) any Trustee may be removed
with or without cause at any time by a written instrument signed by at least a
majority of the then Trustees, specifying the effective date of removal; (c) any
Trustee who requests to be retired, or who is declared bankrupt or has become
physically or mentally incapacitated or is otherwise unable to serve, may be
retired by a written instrument signed by a majority of the other Trustees,
specifying the effective date of retirement; and (d) any Trustee may be removed
at any meeting of the Shareholders by a vote of at least two-thirds of the
Outstanding Shares.
Section 6. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the
8
<PAGE>
Board of Trustees, regardless of the reason for such vacancy, the remaining
Trustees may appoint any person as they determine in their sole discretion to
fill that vacancy, consistent with the limitations under the 1940 Act, unless
the remaining Trustees determine to decrease the size of the Board to the number
of remaining Trustees. Such appointment shall be made by a written instrument
signed by a majority of the Trustees or by a resolution of the Trustees, duly
adopted and recorded in the records of the Trust, specifying the effective date
of the appointment. The Trustees may appoint a new Trustee as provided above in
anticipation of a vacancy expected to occur because of the retirement,
resignation or removal of a Trustee, or an increase in number of Trustees,
provided that such appointment shall become effective only at or after the
expected vacancy occurs. As soon as any such Trustee has accepted his
appointment in writing, the trust estate shall vest in the new Trustee, together
with the continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee hereunder. The Trustees' power of appointment is
subject to Section 16(a) of the 1940 Act. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in this Article
II, the Trustees in office, regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by the Declaration.
Section 7. Temporary Vacancy or Absence. Whenever a vacancy in the Board of
Trustees shall occur, until such vacancy is filled, or while any Trustee is
absent from his domicile (unless that Trustee has made arrangements to be
informed about, and to participate in, the affairs of the Trust during such
absence), or is physically or mentally incapacitated, the remaining Trustees
shall have all the powers hereunder and their certificate as to such vacancy,
absence, or incapacity shall be conclusive. Any Trustee may, by power of
attorney, delegate his powers as Trustee for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees.
Section 8. Chairman. The Trustees may, but need not, appoint from among
their number a Chairman. When present he may preside at the meetings of the
Shareholders and of the Trustees. He may call meetings of the Trustees and of
any committee thereof whenever he deems it necessary. The Chairman shall have
such other powers and duties as from time to time may be conferred upon or
assigned to him by this Declaration, the By-laws or the Trustees, but shall not
by reason of performing and executing those powers and duties be deemed an
officer or employee of the Trust.
Section 9. Action by the Trustees. Except as otherwise provided by law or
as provided below with respect to action taken by any Trustee or Trustees or
committee pursuant to delegation by a majority vote of the Trustees, the
Trustees shall act by majority vote at a meeting duly called at which a quorum
is present, including a meeting held by conference telephone, teleconference or
other electronic media or communication equipment by means of which all persons
participating in the meeting can communicate with each other; or by written
consent of a majority of Trustees (or such greater number as may be required by
applicable law) without a meeting. A majority of the Trustees shall constitute a
quorum at any meeting. Meetings of the Trustees may be called orally or in
writing by the President or by any one of
9
<PAGE>
the Trustees. Notice of the time, date and place of all Trustees' meetings shall
be given to each Trustee as set forth in the By-laws. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. Subject to applicable law, the Trustees by majority vote may delegate to
any Trustee or Trustees or committee (which may, in addition to or in lieu of
Trustees, include officers of the Trust) authority to approve particular matters
or take any particular actions on behalf of the Trust including action for and
binding upon the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding pending or threatened. Approval of any particular matter or
the taking of any particular action on behalf of the Trust pursuant to any such
delegation shall be taken by a majority of the Trustees or committee to whom the
authority is delegated (unless a single Trustee is delegated to act with respect
thereto or unless the Trustees in delegating such responsibility shall specify a
different standard or a different standard is otherwise required by applicable
law). Any written consent or waiver may be provided and delivered to the Trust
by facsimile or other similar electronic mechanism.
Section 10. Ownership of Trust Property. The Trust Property of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in and beneficial ownership of all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees may cause legal title in and beneficial ownership of
any Trust Property to be held by, or in the name of one or more of the Trustees
acting for and on behalf of the Trust, or in the name of any person as nominee
acting for and on behalf of the Trust. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have, as
provided in Article V, a proportionate undivided beneficial interest in the
Trust or Series or Class thereof represented by Shares. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument. The Trust, or at the determination of the Trustees one or more of
the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed
to hold legal title and beneficial ownership of any income earned on securities
of the Trust issued by any business entities formed, organized, or existing
under the laws of any jurisdiction, including the laws of any foreign country.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee (other than as a result of his death or incapacity), he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 11. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity or inability or refusal to serve of the
Trustees, or any one or more or all of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration.
10
<PAGE>
Section 12. Trustees, etc. as Shareholders. Subject to any restrictions in
the By-laws, any Trustee, officer, agent or independent contractor of the Trust
may acquire, own and dispose of Shares to the same extent as any other
Shareholder; and the Trustees may issue and sell Shares to and buy Shares from
any such person or any firm or company in which such person is interested,
subject only to any general limitations herein.
Section 13. Series of Trustees. In connection with the establishment of one
or more Series or Classes, the Trustees establishing such Series or Class may
appoint, to the extent permitted by the Delaware Act, separate Trustees with
respect to such Series or Classes (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, the 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 hereunder
with respect to such Series or Class, including, without limitation, the power
to appoint additional or successor Series Trustees; and/or (c) may have no power
or authority with respect to any other Series or Class. Any provision of this
Declaration relating to election of Trustees by Shareholders only shall entitle
the Shareholders of a Series or Class for which Series Trustees have been
appointed to vote with respect to the election of such Series Trustees and the
Shareholders of any other Series or Class shall not be entitled to participate
in such vote. In the event that Series Trustees are appointed, the Trustees
initially appointing such Series Trustees shall, without the approval of any
Outstanding Shares, amend either the Declaration or the By-laws to provide for
the respective rights, duties, powers, authorities and responsibilities of the
Trustees and the Series Trustees in circumstances where an action of the
Trustees or Series Trustees affects all Series of the Trust or two or more
Series represented by different Trustees.
11
<PAGE>
ARTICLE III
-----------
CONTRACTS WITH SERVICE PROVIDERS
--------------------------------
Section 1. Underwriting Contract. The Trustees may in their discretion from
time to time approve an exclusive or non-exclusive distribution contract or
contracts providing for the sale of the Shares whereby the Trust may either
agree to sell the Shares to the other party to the contract or appoint such
other party as the Trust's sales agent for the Shares, and in either case on
such terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trust.
Section 2. Advisory or Management Contract. The Trustees may in their
discretion from time to time approve one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers or persons to whom the Investment Adviser
delegates certain or all of their duties, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees may
from time to time adopt), including duties relating to purchases, sales, loans
or exchanges of portfolio securities and other investments of the Trust or may
authorize any officer, employee or Trustee to effect such duties, including
those relating to purchases, sales, loans or exchanges pursuant to
recommendations of such Investment Advisers, or any of them (and all without
further action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees.
Section 3. Administration Agreement. The Trustees may in their discretion
from time to time approve an administration agreement or, if the Trustees
establish multiple Series or Classes, separate administration agreements with
respect to each Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or of a Series or Class
thereof of the Trust and furnish the Trust or a Series or a Class thereof with
office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 4. Service Agreements. The Trustees may in their discretion from
time to time approve service agreements with respect to one or more Series or
Classes of Shares whereby the other parties to such service agreements will
provide or arrange for the provision
12
<PAGE>
of distribution, administration and/or support services pursuant to
distribution, authorized dealer service, administration, service or similar
plans, and all upon such terms and conditions as the Trustees in their
discretion may determine.
Section 5. Transfer Agent. The Trustees may in their discretion from time
to time approve one or more transfer agency and shareholder service contracts
whereby the other party to such contracts shall undertake to furnish transfer
agency and shareholder services to the Trust or one or more Classes of Shares.
The contracts shall have such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the Declaration. Such services may be
provided by one or more Persons.
Section 6. Custodian. The Trustees may appoint or otherwise engage one or
more banks or trust companies, or any other entity, to serve as Custodian with
authority as the Trust's agent, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in the By-laws of the Trust.
The Trustees may also authorize the Custodian to employ one or more sub-
custodians, including such foreign banks and securities depositories, upon such
terms and conditions as may be agreed upon between the Custodian and such sub-
custodian, to hold securities and other assets of the Trust and to perform the
acts and services of the Custodian, subject to applicable provisions of law and
resolutions adopted by the Trustees.
Section 7. Other Contracts. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, approve other contracts
with any one or more corporations, trusts, associations, partnerships, limited
partnerships, other type of organizations, or individuals to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth above as the Trustees may determine to be
appropriate.
Section 8. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or any
Series thereof is a shareholder, director, officer, partner, trustee,
employee, manager, adviser or distributor of or for any partnership,
corporation, trust, association or other organization or of or for any
parent or affiliate of any organization, with which a contract of the
character described in Sections 1, 2, 3, or 4 of this Article III, or for
services as Custodian, Transfer Agent, disbursing agent or for any other
services approved by the Trustees with respect to any Series or Class may
have been or may hereafter be made, or that any such organization, or any
parent or affiliate thereof, is a Shareholder of or has an interest in the
Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in Sections
1, 2, 3 or 4 of this
13
<PAGE>
Article III or for services as Custodian, Transfer Agent or disbursing
agent or for any other services approved by the Trustees with respect to
any Series or Class may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships,
corporations, trusts, associations or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
----------
COMPENSATION, LIMITATION OF LIABILITY AND INDEMNIFICATION
---------------------------------------------------------
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the Trust or a
Shareholder of the Trust for any act, omission or obligation of the Trust or any
Trustee. All persons contracting with or having any claim against the Trust or a
particular Series shall look only to the assets of the Trust or such particular
Series for payment under such contract or claim; and neither the Trustees nor,
when acting in such capacity, any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. The
Trustees and officers of the Trust shall not be responsible or liable for any
act or omission or for neglect or wrongdoing of themselves or any officer,
agent, employee, investment adviser or independent contractor of the Trust, or
of any other Person, but nothing contained in this Declaration or in the
Delaware Act shall protect any Trustee or officer of the Trust against liability
to the Trust or to Shareholders to which he 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 office.
Section 3. Indemnification. (a) Subject to the exceptions and limitations
contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer of the Trust
or any Series (including any individual who serves at its request as
director, officer, partner, trustee or the like of another organization in
which it has any interest as a shareholder, creditor or otherwise) and such
person's heirs, executors, administrators and other legal representatives
("Covered Person") shall be indemnified by the Trust or the
14
<PAGE>
appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Covered Person
and against amounts paid or incurred by him in the settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal
or other, including appeals before any court or administrative or
legislative body), actual or threatened, and the words "liability" and
"expenses" shall include, without limitation, reasonable attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office, or (B) not
to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, (A) by the court or other body approving the
settlement; (B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); (C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); or (D) by a vote of a majority of the Outstanding Shares entitled
to vote (excluding any Outstanding Shares owned of record or beneficially
by such individual).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, and shall inure to the benefit of the heirs, executors and
administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or
applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of
15
<PAGE>
any such advance payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry) that there is reason to believe that such Covered Person will not be
disqualified from indemnification under this Section.
(e) Any repeal or modification of this Article IV by the Shareholders, or
adoption or modification of any other provision of the Declaration or By-laws
inconsistent with this Article, shall be prospective only, to the extent that
such repeal, or modification would, if applied retrospectively, adversely affect
any limitation on the liability of any Covered Person or indemnification
available to any Covered Person with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
(f) The right of indemnification provided by this Section 3 shall not be
exclusive of or affect any other rights to which any Covered Person may be
entitled.
Section 4. Indemnification of Shareholders. If any Shareholder or former
Shareholder of any Series shall be held personally liable solely by reason of
his being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of any
entity, its general successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such liability out of the
assets belonging to the applicable Series whose Shares were held by such
Shareholder at the time the act or event occurred and to which the liability
against the Shareholder relates. The Trust, on behalf of the affected Series,
shall, upon request by such Shareholder, assume the defense of any claim made
against such Shareholder for any act or obligation of the Series and satisfy any
judgment thereon from the assets of such Series.
Section 5. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 6. No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust or a Series thereof shall be bound
to make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series or Class thereof or undertaking made
16
<PAGE>
or issued by the Trustees may recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that the
obligations of the Trust or a Series or Class thereof under any such instrument
are not binding upon any of the Trustees, officers or Shareholders individually,
but bind only the Trust Property or the Trust Property of the applicable Series
or Class, and may contain any further recital which they may deem appropriate,
but the omission of such recital shall not operate to bind the Trustees,
officers or Shareholders individually. The Trustees may maintain insurance for
the protection of the Trust Property or the Trust Property of the applicable
Series, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees, officers or Shareholders shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable and as required by the 1940 Act.
Section 7. Reliance on Experts, Etc. Each Trustee, officer or employee of
the Trust or a Series thereof shall, in the performance of his duties, powers
and discretion hereunder be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust or a Series or Class
thereof, upon an opinion of counsel, or upon reports made to the Trust or a
Series or Class thereof by any of its officers or employees or by the Investment
Adviser, the Administrator, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or other Person may also be a Trustee.
Section 8. No Accounting. Except to the extent required by the 1940 Act,
or by the other Trustees if determined by them to be necessary or appropriate
under circumstances which would justify his removal for cause, no person ceasing
to be a Trustee for reasons including, but not limited to, death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall be
required to make an accounting to the Shareholders or remaining Trustees upon
such cessation.
ARTICLE V
---------
SERIES; CLASSES; SHARES
-----------------------
Section 1. Establishment of Series or Class. The Trust shall consist of
one or more Series. Without limiting the authority of the Trustees to establish
and designate any further Series, the Trustees hereby establish the following 17
Series: 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, Government Select Portfolio, Government Portfolio, Diversified Assets
Portfolio and Tax-Exempt Portfolio (the "Existing Series"). Each additional
Series shall be established and is effective upon the
17
<PAGE>
adoption of a resolution of a majority of the Trustees or any alternative date
specified in such resolution. The Trustees may designate the relative rights and
preferences of the Shares of each Series. The Trustees may divide the Shares of
any Series into Classes. Without limiting the authority of the Trustees to
establish and designate any further Classes of any Existing Series or future
Series, the Trustees hereby establish the following Classes of Shares with
respect to the Series set forth below:
Class A, Class B, Class C U.S. Government Securities Portfolio, Short-
and Class D Shares: 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
and International Growth Portfolio
Shares: Government Select Portfolio, Government Portfolio,
Diversified Assets Portfolio and Tax-Exempt Portfolio
(the "Existing Classes"). The Shares of the Existing Series and each Class
thereof herein established and designated and any Shares of any further Series
and Classes that may from time to time be established and designated by the
Trustees shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
for such variations as shall be fixed and determined between different Series or
Classes by the Trustees in establishing and designating such Class or Series. In
connection therewith with respect to the Existing Classes, the purchase price,
the method of determining the net asset value and allocating expenses, and the
relative dividend and voting rights of holders shall be as set forth in the
Trust's Registration Statement on Form N-1A under the Securities Act of 1933
and/or the 1940 Act, as amended from time to time.
All references to Shares in this Declaration shall be deemed to be Shares
of any or all Series or Classes as the context may require. The Trust shall
maintain separate and distinct records for each Series and hold and account for
the assets thereof separately from the other assets of the Trust or of any other
Series. A Series may issue any number of Shares or any Class thereof and need
not issue Shares. Each Share of a Series shall represent a proportionate
beneficial interest in the net assets of such Series, subject to the liabilities
charged to a particular Class. Each holder of Shares of a Series or a Class
thereof shall be entitled to receive his pro rata share of all distributions
made with respect to such Series or Class. Upon redemption of his Shares, such
Shareholder shall be paid solely out of the funds and property of such Series.
The Trustees may adopt and change the name of any Series or Class.
Section 2. Shares. The beneficial interest in the Trust shall be divided
into transferable Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall
18
<PAGE>
have no par value per Share or such other amount as the Trustees may establish.
All Shares issued hereunder shall be fully paid and nonassessable. Shareholders
shall have no preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust. The Trustees shall have full power and
authority, in their sole discretion and without obtaining Shareholder approval,
to issue original or additional Shares at such times and on such terms and
conditions and for such consideration as they deem appropriate; to issue
fractional Shares and Shares held in the treasury; to establish and to change in
any manner Shares of any Series or Classes with such preferences, terms of
conversion, voting powers, rights and privileges as the Trustees may determine;
to divide or combine the Shares of any Series or Classes into a greater or
lesser number; to classify or reclassify any unissued Shares of any Series or
Classes into one or more Series or Classes of Shares; to abolish any one or more
Series or Classes of Shares; to issue Shares to acquire other assets (including
assets subject to, and in connection with, the assumption of liabilities) and
businesses; and to take such other action with respect to the Shares as the
Trustees may deem desirable. Shares held in the treasury shall not confer any
voting rights on the Trustees and shall not be entitled to any dividends or
other distributions declared with respect to the Shares.
Section 3. Investment in the Trust. Subject to applicable law, the
Trustees shall accept investments in any Series or Class from such persons and
on such terms as they may from time to time authorize. Without limiting the
generality of the foregoing, at the Trustees' discretion, such investments may
be in the form of cash or securities in which that Series is authorized to
invest, valued as provided in Article VI, Section 3. The value of an investment
in a Class or a Series shall be credited to each Shareholder's account in the
form of full Shares at the Net Asset Value per Share next determined after the
investment is received or accepted as may be determined by the Trustees;
provided, however, that the Trustees may, in their sole discretion, (a) impose a
sales charge upon investments in any Series or Class, (b) issue fractional
Shares, (c) determine the Net Asset Value per Share of the initial capital
contribution or (d) authorize the issuance of Shares at a price other than Net
Asset Value to the extent permitted by the 1940 Act or any rule, order or
interpretation of the Commission thereunder. The Trustees shall have the right
to refuse to accept investments in any Series at any time without any cause or
reason therefor whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof (including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be), shall
be held and accounted for separately from the assets of every other Series and
are referred to as "assets belonging to" that Series. The assets belonging to a
Series shall belong only to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. Any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more Series as the Trustees
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all
19
<PAGE>
Series for all purposes, and such assets, earnings, income, profits or funds, or
payments and proceeds thereof shall be referred to as assets belonging to that
Series. The assets belonging to a Series shall be so recorded upon the books of
the Series, and shall be held by the Trustees in trust for the benefit of the
Shareholders of that Series. The assets belonging to a Series shall be charged
with the liabilities of that Series and all expenses, costs, charges and
reserves attributable to that Series, except that liabilities, expenses, costs,
charges and reserves allocated by the Trustees solely to a particular Class
shall be borne by that Class. Any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as belonging to any
particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series or Classes in such manner as the
Trustees deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series and Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally, including the assets of any other Series. Notice of this
contractual limitation on liabilities among Series may, in the Trustees'
discretion, be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
liabilities among Series (and the statutory effect under Section 3804 of setting
forth such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with or
having any claim against any Series may look only to the assets of that Series
to satisfy or enforce any debt, with respect to that Series. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust or a transfer or
similar agent for the Trust shall maintain a register containing the names and
addresses of the Shareholders of each Series and Class thereof, the number of
Shares of each Series and Class held by such Shareholders, and a record of all
Share transfers. The register shall be conclusive as to the identity of
Shareholders of record and the number of Shares held by them from time to time.
The Trustees may authorize the issuance of certificates representing Shares and
adopt rules governing their use. The Trustees may make rules governing the
transfer of Shares, whether or not represented by certificates. Except as
otherwise provided by the Trustees, Shares shall be transferable on the books of
the Trust only by the record holder thereof or by his duly authorized agent upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate if one is outstanding,
and such evidence or the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery, and subject to any further requirements specified by the Trustees or
contained in the By-laws, the transfer shall be
20
<PAGE>
recorded on the books of the Trust. Until a transfer is so recorded, the
Shareholder of record of Shares shall be deemed to be the holder of such Shares
for all purposes hereunder and neither the Trustees nor the Trust, nor any
transfer agent or registrar or any officer, employee or agent of the Trust,
shall be affected by any notice of a proposed transfer.
Section 6. Status of Shares; Limitation of Shareholder Liability. Shares
shall be deemed to be personal property giving Shareholders only the rights
provided in this Declaration. Every Shareholder, by virtue of having acquired a
Share, shall be held expressly to have assented to and agreed to be bound by the
terms of this Declaration and to have become a party hereto. No Shareholder
shall be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
any Series. The death, incapacity, dissolution, termination or bankruptcy of a
Shareholder during the existence of the Trust shall not operate to terminate the
Trust, nor entitle the representative of any such Shareholder to an accounting
or to take any action in court or elsewhere against the Trust or the Trustees,
but entitles such representative only to the rights of such Shareholder under
this Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust Property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders as partners. Neither the Trust nor the
Trustees shall have any power to bind any Shareholder personally or to demand
payment from any Shareholder for anything, other than as agreed by the
Shareholder. Shareholders shall have the same limitation of personal liability
as is extended to shareholders of a private corporation for profit incorporated
in the State of Delaware.
21
<PAGE>
ARTICLE VI
----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 1. Distributions. The Trustees or a committee of one or more
Trustees and/or one or more officers may declare and pay dividends and other
distributions, including dividends on Shares of a particular Series and other
distributions from the assets belonging to that Series. No dividend or
distribution, including, without limitation, any distribution paid upon
termination of the Trust or of any Series (or Class) with respect to, nor any
redemption or repurchase of, the Shares of any Series (or Class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any particular Series otherwise have any
right or claim against the assets held with respect to any other Series except
to the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders. The amount and payment of dividends or distributions and their
form, whether they are in cash, Shares or other Trust Property, shall be
determined by the Trustees. Dividends and other distributions may be paid
pursuant to a standing resolution adopted once or more often as the Trustees
determine. All dividends and other distributions on Shares of a particular Class
shall be distributed pro rata to the Shareholders of that Class in proportion to
the number of Shares of that Class they held on the record date established for
such payment, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order and/or
payment in the prescribed form has not been received by the time or times
established by the Trustees under such program or procedure. The Trustees may
adopt and offer to Shareholders such dividend reinvestment plans, cash dividend
payout plans or similar plans as the Trustees deem appropriate.
Section 2. Redemptions. Unless the Trustees otherwise determine with
respect to a particular Series or Class at the time of establishing and
designating the same, each Shareholder of a Series shall have the right at such
times as may be permitted by the Trustees to require the Series to redeem all or
any part of his Shares at such redemption price and at such times as the
Trustees shall prescribe by resolution to the extent permitted by the 1940 Act.
In the absence of such resolution, the redemption price per Share shall be the
Net Asset Value next determined after receipt by the Series of a request for
redemption in proper form less such charges as are determined by the Trustees
and described in the Trust's Registration Statement for that Series, as from
time to time in effect, under the Securities Act of 1933. The Trustees may
specify conditions, prices, and places of redemption, may specify binding
requirements for the proper form or forms of requests for redemption and may
specify the amount of any deferred sales charge to be withheld from redemption
proceeds. Payment of the redemption price may be wholly or partly in securities
or other assets at the value of such securities or assets used in such
determination of Net Asset Value, or may be in cash, as determined in the sole
discretion of the Trustees or their delegate. Upon redemption, Shares
22
<PAGE>
may be reissued from time to time. Unless the Trustees otherwise determine with
respect to a particular Series or Class at the time of establishing and
designating the same, the Trustees may require Shareholders to redeem Shares for
any reason at the redemption price which would be applicable if such Shares were
then being redeemed by the Shareholder pursuant to this Section 2 under terms
set by the Trustees, including, but not limited to: (a) the failure of a
Shareholder to supply a taxpayer identification number, or to have the minimum
investment required (which may vary by Series or Class), or to pay when due for
the purchase of Shares issued to him or to pay any charge relating to a
transaction effected for the benefit of such Shareholder as provided in the
prospectus relating to such Shares; or (b) the determination by the Trustees in
their sole discretion that failure to so redeem may have materially adverse
consequences to the Shareholders of any Series or Class of the Trust. To the
extent permitted by law, the Trustees may retain the proceeds of any redemption
of Shares required by them for payment of amounts due and owing by a Shareholder
to the Trust or any Series or Class or any governmental authority.
Notwithstanding the foregoing, the Trustees may postpone payment of the
redemption price and may suspend the right of the Shareholders to require any
Series or Class to redeem Shares during any period of time when and to the
extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause the
Net Asset Value of Shares of each Series or Class to be determined from time to
time in a manner consistent with applicable laws and regulations. The Trustees
may delegate the power and duty to determine Net Asset Value per Share to one or
more Trustees or officers of the Trust or to a custodian, depository or other
agent appointed for such purpose. The Net Asset Value of Shares shall be
determined separately for each Series or Class at such times as may be
prescribed by the Trustees or, in the absence of action by the Trustees, as of
the close of regular trading on the New York Stock Exchange on each day for all
or part of which such Exchange is open for unrestricted trading.
The Trustees may determine to maintain the Net Asset Value per Share of any
Series or Class at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declarations of income attributable to that Series or Class as
dividends payable in additional Shares of that Series or Class at the designated
constant dollar amount and for the handling of any losses attributable to that
Series or Class. Such procedures may provide that in the event of any loss each
Shareholder of a Series or Class shall be deemed to have contributed to the
capital of the Trust attributable to that Series or Class his pro rata portion
of the total number of Shares required to be cancelled in order to permit the
Net Asset Value per Share of that Series or Class to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each Shareholder
of the Trust shall be deemed to have agreed, by his investment in the Trust, to
make the contribution referred to in the preceding sentence in the event of any
such loss.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees suspend the right of Shareholders to
redeem their Shares, such suspension
23
<PAGE>
shall take effect at the time the Trustees shall specify. Thereafter,
Shareholders shall have no right of redemption or payment until the Trustees
declare the end of the suspension. If the right of redemption is suspended, any
Shareholder having tendered a redemption request may either withdraw his request
for redemption or receive payment based on the Net Asset Value per Share next
determined after the suspension terminates.
Section 5. Repurchase by Agreement. In addition to the redemption of
Shares otherwise provided in this Article VII, the Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the Net
Asset Value per Share determined as of the time when the purchase or contract of
purchase is made or the Net Asset Value as of any time which may be later
determined.
ARTICLE VII
-----------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
Section 1. Voting Powers. The Shareholders shall have power to vote only
with respect to (a) the election of Trustees to the extent and as provided in
Section 4 of Article II; (b) the removal of Trustees as provided in Article II,
Section 5(d); (c) any matter required to be approved by Shareholders of the
Trust or any Series or Class thereof under the 1940 Act; (d) any termination of
the Trust to the extent and as provided in Article IX, Section 4; (e) the
amendment of this Declaration to the extent and as provided in Article IX,
Section 8; (f) the matters referred to in Article IX, Section 12; and (g) such
additional matters relating to the Trust as may be required or authorized by
law, this Declaration, or the By-laws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, unless the Trustees
determine otherwise, all Shares shall be voted in the aggregate not by
individual Series or Class, except (a) when required by the 1940 Act, other
applicable law or the attributes applicable to any Series or Class, Shares shall
be voted by individual Series or Class, and (b) when the Trustees have
determined that the matter affects the interests of only one or more Series or
Class, then only the Shareholders of all such Series or Classes shall be
entitled to vote thereon. As determined by the Trustees without the vote or
consent of Shareholders, on any matter submitted to a vote of Shareholders,
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of Net Asset Value (number of
Shares owned times Net Asset Value per share of such Series or Class, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. Without limiting the power of the Trustees in any
way to designate otherwise in accordance with the preceding sentence, the
Trustees hereby establish that each whole Share shall be entitled to one vote as
to any matter on which
24
<PAGE>
it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy or in any manner
provided for in the By-laws. The By-laws may provide that proxies may be given
by any electronic or telecommunications device or in any other manner, but if a
proposal by anyone other than the officers or Trustees is submitted to a vote of
the Shareholders of any Series or Class, or if there is a proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees, Shares may be voted only in person or by written proxy. Until Shares
of a Series are issued, as to that Series the Trustees may exercise all rights
of Shareholders and may take any action required or permitted to be taken by
Shareholders by law, this Declaration or the By-laws. Meetings of Shareholders
(including meetings involving only the holders of Shares of one or more but less
than all Series or Classes) may be called by the Trustees from time to time to
be held at such place within or without the State of Delaware, and on such date
as may be designated in the call thereof for the purpose of taking action upon
any matter as to which the vote or authority of the Shareholders is required or
permitted as provided in this Declaration. Special meetings of the Shareholders
shall be called by the Trustees upon the written request of Shareholders owning
at least a majority of the Shares outstanding and entitled to vote, except to
the extent that a lesser percentage is prescribed by the 1940 Act. Notice
thereof and record dates therefor shall be given and set as provided in the By-
laws.
Section 2. Quorum; Required Vote. Except when a larger vote is required by
law, this Declaration, the By-laws or the Trustees, holders of Shares of the
Trust, Series or Class, as applicable, representing one-third of the votes
entitled to be cast at the meeting in person or by proxy shall be a quorum for
the transaction of business at a Shareholders' meeting. Any lesser number shall
be sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Declaration, the By-laws or the Trustees,
holders of Shares representing a majority of votes present and entitled to be
cast at a Shareholders' meeting in person or by proxy shall decide any matters
to be voted upon with respect to the entire Trust except that a plurality of
such votes shall elect a Trustee; provided, that if this Declaration or
applicable law permits or requires that Shares be voted on any matter by
individual Series or Classes, then holders, except when a larger vote is
required by law, this Declaration, the By-laws or the Trustees, of Shares of
that Series or Class representing a majority of the votes present or entitled to
be cast voting at a Shareholders' meeting in person or by proxy on the matter
shall decide that matter insofar as that Series or Class is concerned, except
that a plurality of such votes shall elect a Series Trustee. With respect to any
matter presented to the Shareholders for approval, the Shareholders may act as
to the Trust or any Series or Class by the written consent of holders of Shares
of the Trust, Series or Class, as the case may be, representing a majority (or
such other amount as may be required by applicable law) of the votes entitled to
be cast on the matter subject to such consent. Such consent shall be treated for
all purposes as a vote taken at a meeting of Shareholders.
Section 3. Additional Provisions. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters.
25
<PAGE>
ARTICLE VIII
------------
EXPENSES OF THE TRUST AND SERIES
--------------------------------
Section 1. Payment of Expenses by the Trust. Subject to Article IV, Section
4, and Article IV, Section 3, the Trust or a particular Series shall pay, or
shall reimburse the Trustees from the assets belonging to all Series or the
particular Series, for their expenses (or the expenses of a Class of such
Series) and disbursements, including, but not limited to, interest charges,
taxes, brokerage fees and commissions; expenses of issue, repurchase and
redemption of Shares; insurance premiums; applicable fees, interest charges and
expenses of third parties, including the Trust's investment advisers, managers,
administrators, distributors, custodians, transfer agents and fund accountants;
fees of pricing, interest, dividend, credit and other reporting services; costs
of membership in trade associations; telecommunications expenses; funds
transmission expenses; auditing, legal and compliance expenses (including, if
approved by the Trustees, an allocated portion of the legal, accounting and
compliance expenses incurred by the Investment Adviser, Administrator or other
service provider to the Trust); costs of forming the Trust and its Series and
maintaining its existence; costs of preparing and printing the prospectuses of
the Trust and each Series, statements of additional information and Shareholder
reports and delivering them to Shareholders; expenses of meetings of
Shareholders and proxy solicitations therefor; costs of maintaining books and
accounts; costs of reproduction, stationery and supplies; fees and expenses of
the Trustees; compensation of the Trust's officers and employees and costs of
other personnel performing services for the Trust or any Series; costs of
Trustee meetings; Commission registration fees and related expenses; state or
foreign securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust. The
Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto,
for the reimbursement to them of such expenses, disbursements, losses and
liabilities.
Section 2. Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series of Class, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
26
<PAGE>
ARTICLE IX
----------
MISCELLANEOUS
-------------
Section 1. Trust Not a Partnership. This Declaration creates a trust and
not a partnership. No Trustee shall have any power to bind personally either the
Trust's officers or any Shareholder.
Section 2. Trustee Action. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article IV, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law.
Section 3. Record Dates. The Trustees may close the Share transfer books of
the Trust or any Series or Class for a period not exceeding one hundred twenty
(120) days preceding the date of any meeting of Shareholders, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date not exceeding one hundred
twenty (120) days before the scheduled date of any Shareholders' meeting, or the
date for the payment of any dividends or other distributions, or the date for
the allotment of rights, or the date when any change or conversion or exchange
of Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders shall be Shareholders of record on the
date so fixed and entitled to such notice of, and to vote at, such meeting, or
to receive payment of such dividend or other distribution, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after any
such record date fixed as aforesaid. Nothing in this Section shall be construed
as precluding the Trustees from setting different record dates for, or from
closing the register or transfer books with respect to, different Series (or
Classes).
Section 4. Termination of the Trust. (a) This Trust shall have perpetual
existence. Subject to the provisions of subsection (b) below, upon the vote of a
majority of the Shares Outstanding and entitled to vote of the Trust or of each
Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of all Series or
any affected Series or Class to another Series or to another trust,
partnership, association, corporation or other entity, or to a separate
series or class thereof, organized under the laws of any jurisdiction, for
adequate consideration, which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
27
<PAGE>
Trust or any affected Series or Class, and which may include shares of or
interests in such Series, trust, partnership, association, corporation or
other entity, or series or class thereof; or
(ii) at any time sell and convert into money all or substantially all of
the assets of all Series or any affected Series or Class.
Subject to the provisions of Article IX, Section 12, upon paying or making
reasonable provision for the payment of all known liabilities of all Series or
any affected Series or Class in either (i) or (ii), by such assumption or
otherwise, the Shareholders of each Class of a Series involved in such sale or
conversion shall be entitled to receive, as a Class, when and as declared by the
Trustees, the excess of the assets belonging to that Series that are allocated
to such Class over the liabilities belonging to that Series that are allocated
to such Class. The assets so distributable to the Shareholders of any particular
Class of a Series shall be distributed among such Shareholders in proportion to
the number of Shares of that Class held by them and recorded on the books of the
Trust.
(b) Subject to the provisions of Article IX, Section 12, the Trustees may
take any of the actions specified in subsection (a) (i) and (ii) above without
obtaining the vote of a majority of the Shares Outstanding and entitled to vote
of the Trust or any Series or Class if a majority of the Trustees determines, in
their sole discretion, that the continuation of the Trust or such Series or
Class is not in the best interests of the Trust, such Series, such Class or
their respective Shareholders. In reaching such determination, the Trustees may
consider such factors as the Trustees, in their sole discretion, deem to be
appropriate, which factors may include the inability of the Trust or a Series or
Class to maintain its assets at an appropriate size, changes in laws or
regulations governing the Trust or the Series or Class or affecting assets of
the type in which the Trust or such Series invests, or economic developments or
trends having a significant adverse impact on the business or operations of the
Trust or such Series or Class.
(c) Upon completion of the distribution of the remaining proceeds or assets
pursuant to subsection (a), the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged of any and all
further liabilities and duties hereunder with respect thereto and the right,
title and interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Section 5. Reorganization and Master/Feeder. (a) Notwithstanding anything
else herein other than the provisions of Article IX, Section 12, , a majority of
the Trustees may, without Shareholder approval unless such approval is required
by applicable federal law, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations, corporations or other
entities organized under the laws of any jurisdiction,
28
<PAGE>
(ii) cause the Shares to be exchanged under or pursuant to any state or federal
statute to the extent permitted by law, or (iii) cause the Trust to incorporate
under the laws of Delaware or any other jurisdiction. Any agreement of merger
or consolidation or certificate of merger may be signed by a majority of
Trustees and facsimile signatures conveyed by electronic or telecommunication
means shall be valid.
(b) Pursuant to and in accordance with the provisions of Section 3815(f)
of the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the
Declaration or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
(c) The Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all or
portion of the Trust Property or the Trust Property allocated or belonging to
such Series or to carry on any business in which the Trust shall directly or
indirectly have any interest, or to sell, convey and transfer all or a portion
of the Trust Property or the Trust Property allocated or belonging to such
Series to any such corporation, trust, association or organization in exchange
for the shares or securities thereof or otherwise, and to lend money to,
subscribe for the shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association, or organization or any
corporation, partnership, trust, association or organization in which the Trust
or such Series holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring all or a portion of the
Trust Property to such organization or entities.
(d) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, invest
all or a portion of the Trust Property of any Series, or dispose of all or a
portion of the Trust Property of any Series, and invest the proceeds of such
disposition in interests issued by one or more other investment companies or
pooled portfolios. Any such other investment company or pooled portfolio may
(but need not) be a trust (formed under the laws of any state or jurisdiction)
(or subtrust thereof) which is classified as a partnership for federal income
tax purposes. Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, cause a
Series that is organized in the master/feeder fund structure to withdraw or
redeem its Trust Property from the master fund and cause such Series to invest
its Trust Property directly in securities and other financial instruments or in
another master fund.
29
<PAGE>
Section 6. Declaration of Trust. The original or a copy of this Declaration
of Trust and of each amendment hereto or Declaration of Trust supplemental shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Declaration of Trust or any
such amendments or supplements and as to any matters in connection with the
Trust. Headings herein are for convenience only and shall not affect the
construction of this Declaration of Trust. This Declaration of Trust may be
executed in any number of counterparts, each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration and the Trust created hereunder
are governed by and construed and administered according to the Delaware Act and
the applicable laws of the State of Delaware; provided, however, that there
shall not be applicable to the Trust, the Trustees or this Declaration of Trust
(a) the provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any
provisions of the laws (statutory or common) of the State of Delaware pertaining
to trusts which relate to or regulate (i) the filing with any court or
governmental body or agency of trustee accounts or schedules of trustee fees and
charges, (ii) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Declaration. The Trust shall be of the type commonly called a Delaware
business trust, and, without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote,
amend or otherwise supplement this Declaration by making an amendment, a
Declaration of Trust supplemental hereto or an amended and restated trust
instrument; provided, that Shareholders shall have the right to vote on any
amendment (a) which would adversely affect the voting rights of Shareholders
granted in Article VII, Section l, (b) to this Section 8, (c) required to be
approved by Shareholders by law or by the Trust's registration statement(s)
filed with the Commission, and (d) submitted to them by the Trustees in their
discretion. Any amendment submitted to Shareholders which the Trustees determine
would affect the Shareholders of one or more Series or Classes shall be
authorized by vote of the Shareholders of each Series or Class affected and no
vote shall be required of Shareholders of a Series or Class not affected.
Notwithstanding anything else herein, any amendment to Article IV which would
have the
30
<PAGE>
effect of reducing the indemnification and other rights provided thereby to
Trustees or officers of the Trust or to Shareholders or former Shareholders, and
any repeal or amendment of this sentence shall each require the affirmative vote
of the holders of two-thirds of the Outstanding Shares of the Trust entitled to
vote thereon.
Section 9. Derivative Actions. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder 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 the
Delaware Act 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, shall 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
Trustees shall be entitled to retain counsel or other advisers in considering
the merits of the request and shall 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.
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.
Section 10. Fiscal Year. The fiscal year of the Series shall end on a
specified date as set forth in the By-laws; provided that different Series may
have different fiscal years. The Trustees may change the fiscal year of any
Series without Shareholder approval.
Section 11. Severability. The provisions of this Declaration are severable.
If the Trustees determine, with the advice of counsel, that any provision hereof
conflicts with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination. If any provision hereof
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of this Declaration.
Section 12. Special Treatment of Holders of Shares of Same Class.
Notwithstanding anything else herein, in connection with the termination or
reorganization of the Trust or any Series or Class by way of merger,
consolidation, the sale of all or substantially all of the assets, or otherwise,
the Trustees may classify the holders of Shares of a Class into one or
31
<PAGE>
more separate groups by reference to any facts or circumstances that the
Trustees deem relevant in their sole discretion and may provide for the
mandatory treatment for Shares of the Class held by particular groups of
Shareholders that differs materially from the treatment accorded other groups of
Shareholders holding Shares of the same Class, provided that (a) each group of
holders of any Shares of a Class so classified who are to receive the same
treatment shall be entitled to vote as a special class in respect of such
termination or reorganization regardless of any limitations stated in this
Declaration or the By-laws on the voting rights of any Class, and (b) such
termination or reorganization shall be approved by a majority of the outstanding
voting securities (as defined in the 1940 Act) of each such special class.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
date first written above.
_______________________________________________
Valerie A. Zondorak
as sole initial Trustee and not individually
32
<PAGE>
BY-LAWS
OF
THE BENCHMARK FUNDS
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Agreement and Declaration of Trust of Goldman Sachs Trust dated July 8, 1997, as
amended or restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the Trust shall be in Chicago, Illinois. A separate principal office
may be designated with respect to any Series of the Trust.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the State of Delaware as the Trustees may from time to
time determine.
Section 3. Registered Office and Registered Agent. The Board of Trustees
shall establish a registered office in the State of Delaware and shall appoint
as the Trust's registered agent for service of process in the State of Delaware
an individual resident of the State of Delaware or a Delaware corporation or a
corporation authorized to transact business in the State of Delaware; in each
case the business office of such registered agent for service of process shall
be identical with the registered Delaware office of the Trust.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a Series
or Class thereof shall be held as provided in the Declaration at such place
within or without the State of Delaware as the Trustees shall designate.
1
<PAGE>
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail or telegraphic or electronic means to each Shareholder at his
address as recorded on the register of the Trust mailed or transmitted at least
seven (7) days before the meeting provided, however, that notice of a meeting
need not be given to a Shareholder to whom such notice need not be given under
the proxy rules of the Commission under the 1940 Act and the Securities Exchange
Act of 1934, as amended. Any adjourned meeting may be held as adjourned without
further notice. No notice need be given to any Shareholder who shall have failed
to inform the Trust of his current address or if a written waiver of notice,
executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Organization. The Chairman of the Board, any Vice Chairman or
the President, and in their absence, any Vice President, and in their absence,
any person chosen by the Shareholders present shall call all meetings of the
Shareholders to order and shall act as chairman of such meetings, and the
Secretary, and in his absence any Assistant Secretary, shall act as secretary of
all meetings of the Shareholders but, in the absence of the Secretary and all
Assistant Secretaries, the presiding officer may appoint any other person to act
as secretary of any meeting.
Section 4. Proxies. Subject to the provisions of the Declaration, every
Person entitled to vote for Trustees or on any other matter shall have the right
to do so either in person or by proxy, provided that either (i) an instrument
authorizing such a proxy to act is executed by the Shareholder in writing and
dated not more than eleven (11) months before the meeting, unless the instrument
specifically provides for a longer period or (ii) the Trustees adopt an
electronic, telephonic, computerized or other alternative to execution of a
written instrument authorizing the proxy to act which authorization is received
not more than eleven (11) months before the meeting. A proxy shall be deemed
executed by a Shareholder if the Shareholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or otherwise
by the Shareholder or the Shareholder's attorney-in- fact or other authorized
agent. A valid proxy that does not state that it is irrevocable shall continue
in full force and effect unless (i) revoked by the person executing it before
the vote pursuant to that proxy by a writing delivered to the Trust stating that
the proxy is revoked by a subsequent proxy executed by, or attendance at the
meeting and voting in person by, the person executing that proxy or revoked by
such person using any electronic, telephonic, computerized or other alternative
means authorized by the Trustees for authorizing the proxy to act; or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the Trust before the vote pursuant to that proxy is counted. A proxy with
respect to Shares held in the name of two or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Proxies shall be delivered to the
Secretary of the Trust or other person responsible for recording the proceedings
before being voted. Unless otherwise specifically limited by their terms,
proxies shall entitle the
2
<PAGE>
holder thereof to vote at any adjournment of a meeting. At all meetings of the
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualifications of voters, the validity of proxies, and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Except as otherwise provided herein or in the Declaration, all matters
relating to the giving, voting or validity of proxies shall be governed by the
General Corporation Law of the state of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware corporation
and the Shareholders were shareholders of a Delaware corporation.
Section 5. Abstentions and Broker Non-Votes. Outstanding Shares represented
in person or by proxy (including Shares which abstain or do not vote with
respect to one or more of any proposals presented for Shareholder approval) will
be counted for purposes of determining whether a quorum is present at a meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the number of Shares that are present and entitled to
vote with respect to any particular proposal, but will not be counted as a vote
in favor of such proposal. If a broker or nominee holding Shares in "street
name" indicates on the proxy that it does not have discretionary authority to
vote as to a particular proposal, those Shares will not be considered as present
and entitled to vote with respect to such proposal.
Section 6. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Delaware business corporation.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, the Chairman
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be given by telephone, cable, wireless, facsimile or other
electronic mechanism to each Trustee at his business address (or such other
location designated by the Trustee to an officer of the Trust), or personally
delivered to him at least one day before the meeting. Such notice may, however,
be waived by any Trustee. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
Participation in a meeting held by telephone conference (or any other means
provided in the Declaration) shall constitute presence in person at such
meeting, and participation by such means (or any other means provided in the
Declaration) shall be deemed
3
<PAGE>
to have been held at a place designated by the Trustees at the meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if a majority of the Trustees consent to
the action in writing and the written consents are filed with the records of the
Trustees' meetings. Such consents shall be treated as a vote for all purposes.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not fewer than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series or Class thereof,
and such other powers of the Trustees as the Trustees may delegate to them, from
time to time, except those powers which by law, the Declaration or these By-laws
they are prohibited from delegating. The Trustees may also elect from their own
number and from the officers of the Trust other Committees from time to time;
the number composing such Committees, the powers conferred upon the same
(subject to the same limitations as with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of such
designation the Committee may elect its own Chairman. The creation of other
committees, including committees comprised of persons other than Trustees, and
the delegation of specific authority to one or more Trustees, may also be
accomplished as provided in the Declaration.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees, or in the
absence of action by the Trustees, the members of the particular Committee, may
(1) provide for stated meetings of a Committee, (2) specify the manner of
calling and notice required for special meetings of a Committee, (3) authorize
the making of decisions to exercise specified powers by written assent of the
requisite number of members of a Committee without a meeting, and (4) authorize
the members of a Committee to meet by means of conference telephone,
teleconference or other electronic media or communication equipment by means of
which all persons participating in the meeting can communicate with each other.
The Executive Committee, if constituted, shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the office of the
Trust.
4
<PAGE>
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration or these By-laws, the President, the Treasurer, the
Secretary and any other officer shall each hold office at the pleasure of the
Board of Trustees or until his successor shall have been duly elected and
qualified. The Secretary and the Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Secretary and Treasurer shall not be held by the
same person. The President shall hold no other office. Except as above provided,
any two offices may be held by the same person. Any officer may be but none need
be a Trustee or Shareholder.
Section 3. Removal. The Trustees may remove any officer with or without
cause, by a vote of a majority of the Trustees then in office. Any officer or
agent appointed by an officer or committee may be removed with or without cause
by such appointing officer or committee.
Section 4. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and to the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust and shall be
the chief executive officer of the Trust. He shall have the power to employ
attorneys and counsel for the Trust or any Series or Class thereof and to employ
such subordinate officers, agents, clerks and employees as he may find necessary
to transact the business of the Trust or any Series or Class thereof. He shall
also have the power to grant, issue, execute or sign such powers of attorney,
proxies or other documents as may be deemed advisable or necessary in
furtherance of the interests of the Trust or any Series thereof. The President
shall have such other powers and duties as from time to time may be conferred
upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
5
<PAGE>
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust or any Series or Class thereof which may come into his hands
to such Custodian as the Trustees may employ. He shall render a statement of
condition of the finances of the Trust or any Series or Class thereof to the
Trustees as often as they shall require the same and he shall in general perform
all the duties incident to the office of a Treasurer and such other duties as
from time to time may be assigned to him by the Trustees and the President.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he shall have custody of the seal of the Trust;
he shall have charge of the Share transfer books, lists and records unless the
same are in the charge of a transfer agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provisions of these
By-laws and as required by law; and subject to these By-laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees and the
President.
Section 8. Powers and Duties of Assistant Officers. In the absence or
disability of the Treasurer, any Assistant Treasurer or other officer designated
by the Trustees shall perform all the duties, and may exercise any of the
powers, of the Treasurer. Each Assistant Treasurer or other officer shall
perform such other duties as from time to time may be assigned to him by the
Trustees and the Treasurer. Each officer performing the duties and exercising
the powers of the Treasurer, if any, and any Assistant Treasurer, shall give a
bond for the faithful discharge of his duties, if required so to do by the
Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 9. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees or the Secretary.
Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of an advisory board shall
be fixed from time to time by the Trustees or, in the case of officers, by any
Committee or officer upon whom such power may be conferred by the Trustees. No
officer shall be prevented from receiving such compensation as such officer by
reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal years of the Series of the Trust shall end on the date in each
year as set forth
6
<PAGE>
in the Trust's Registration Statement on Form N-1A, as amended from
time to time; provided that in the absence of such designation, the fiscal year
of any Series shall end on November 30th of each year; provided, however, that
the Trustees may from time to time change the fiscal years of any one or more
Series. The taxable year of each Series of the Trust shall be as determined by
the Trustees or officers of the Trust from time to time.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
SUFFICIENCY OF NOTICE
A notice shall be deemed to have been sent by mail, telegraph, cable,
wireless, facsimile or other electronic means for the purposes of these By-laws
when it has been deposited with the U.S. Postal Service with prepaid postage or
delivered to a representative of any company holding itself out as capable of
sending notice by such means with instructions that it be so sent.
ARTICLE X
AMENDMENTS
Except as otherwise provided by applicable law or by the Declaration, these
By-laws may be amended, restated, supplemented or repealed by the Trustees.
END OF BY-LAWS
7
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 7 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the ____ day of ________, ____, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY (the "Investment Adviser"), an 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.
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 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
1
<PAGE>
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:
-------------------- ----------------------------
Name: Nancy L. Mucker
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By:
-------------------- ----------------------------
Name: Thomas L. Mallman
[Corporate Seal] Title: Senior Vice President
2
<PAGE>
Exhibit 5(i)
ASSUMPTION AGREEMENT
AGREEMENT made as of __________, 1998 between THE NORTHERN TRUST
COMPANY, an Illinois state bank ("Northern"), and NORTHERN TRUST QUANTITATIVE
ADVISORS, INC. ("NTQA"), a wholly-owned, indirect subsidiary of THE NORTHERN
TRUST CORPORATION.
WHEREAS, The Benchmark Funds is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, Northern has been previously appointed as investment adviser
to the U.S. Treasury Index, Equity Index, International Equity Index and Small
Company Index Portfolios (the "Portfolios") of The Benchmark Funds pursuant to
an Investment Advisory Agreement between Northern and The Benchmark Funds dated
October 5, 1990 (as subsequently amended) (the "Investment Advisory Agreement");
and
WHEREAS, Northern and NTQA desire to have NTQA be the investment
adviser with respect to the each Portfolio pursuant to the Investment Advisory
Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. NTQA hereby assumes all rights and obligations of Northern under
the Investment Advisory Agreement with respect to the Portfolios.
2. Northern hereby represents that (i) the management personnel of
Northern responsible for providing investment advisory services to the
Portfolios under the Investment Advisory Agreement, including the portfolio
managers and the supervisory personnel, are employees of NTQA where they will
continue to provide such services for the Portfolios, and (ii) both Northern and
NTQA remain wholly-owned subsidiaries of The Northern Trust Corporation.
Consequently, Northern believes that the proposed assumption does not involve a
change in actual control or actual management with respect to the investment
adviser or the Portfolios.
3. Both parties hereby agree that this Assumption Agreement shall be
attached to and made a part of the Investment Advisory Agreement.
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.
Attest: THE NORTHERN TRUST COMPANY
____________________ By ______________________________
(Authorized Officer)
Attest: NORTHERN TRUST QUANTITATIVE
ADVISORS, INC.
____________________ By _______________________________
(Authorized Officer)
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 6 TO THE DISTRIBUTION AGREEMENT
--------------------------------------------
This Addendum No. 6, dated as of the ______ day of __________, 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:
------------------- -------------------------------
Name: Nancy L. Mucker
Title: Vice President
GOLDMAN, SACHS & CO.
Attest: By:
------------------- -------------------------------
Name: John P. McNulty
Title: Managing Director
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum No. 5, dated as of the _______ day of _______, 19__, 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
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, Intermediate Bond
Portfolio and Balanced Portfolio (collectively, the "Portfolios"); and
WHEREAS, the Trust is establishing the Global Asset Portfolio (the
"Portfolio"), and it desires to retain Northern to act as the custodian
therefor, and Northern is willing to so act; and
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 Portfolio for the period and on the terms set forth in
the Custodian Agreement. Northern hereby accepts such appointment and
agrees to render the services set forth in the Custodian Agreement for
the compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term
"Portfolios" as used in the Custodian 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 and Balanced
Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Custodian Agreement.
<PAGE>
4. Miscellaneous. Except to the extent supplemented hereby, the
Custodian 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:
------------------ ------------------------------
Name: Nancy L. Mucker
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By:
------------------ ------------------------------
Name: Thomas L. Mallman
Title: Senior Vice President
<PAGE>
Exhibit 8(f)
THE BENCHMARK FUNDS
ADDENDUM NO. 6 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum No. 6, dated as of the ___ day of _____________, 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, Intermediate Bond
Portfolio, Balanced 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:__________________
By:______________________________
Name:
Title:
NORTHERN TRUST COMPANY
Attest:__________________
By:______________________________
Name:
Title:
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 2 TO THE FOREIGN CUSTODY AGREEMENT
-----------------------------------------------
This Addendum No. 2, dated as of the ____ 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 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
Attest: By:
----------------------- --------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest: By:
----------------------- --------------------------------
Name:
Title:
<PAGE>
Exhibit 8(h)
FOREIGN CUSTODY MONITORING AGREEMENT
AGREEMENT made as of ___________, 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____________________________
(Authorized Officer)
THE NORTHERN TRUST COMPANY
By____________________________
(Authorized Officer)
-3-
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE REVISED
AND RESTATED TRANSFER AGENCY AGREEMENT
--------------------------------------
This Addendum, dated as of the _______ day of ___________, 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:
--------------------------- ---------------------------
Name: Nancy L. Mucker
Title: Vice President
THE NORTHERN TRUST COMPANY
Attest: By:
--------------------------- ---------------------------
Name: Thomas L. Mallman
[SEAL] Title: Senior Vice President
3
<PAGE>
THE BENCHMARK FUNDS
ADDENDUM NO. 1 TO THE AMENDED AND RESTATED ADMINISTRATION AGREEMENT
-------------------------------------------------------------------
This Addendum, dated as of the _____day of ___________, 19__ 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:
------------------- --------------------------------
Name: Nancy L. Mucker
Title: Vice President
GOLDMAN, SACHS & CO.
Attest: By:
------------------- --------------------------------
Name: John P. McNulty
Title: Managing Director
<PAGE>
THE BENCHMARK FUNDS
UNITHOLDER SERVICING PLAN
FOR SUBSERIES B, C AND D UNITS
Section 1. Upon the recommendation of The Northern Trust Company, the
Trust's investment adviser ("Northern"), any officer of The Benchmark Funds (the
"Trust") is authorized to execute and deliver, in the name and on behalf of the
Trust, written agreements in substantially the forms attached hereto or in any
other forms duly approved by the Board of Trustees ("Servicing Agreements") with
various financial institutions and other organizations ("Servicing Agents") of
Subseries B, C and/or D Units of the Equity Index, Small Company Index,
Diversified Growth, Focused Growth, U.S. Treasury Index, U.S. Government
Securities, Short-Intermediate Bond, Bond, Intermediate Bond, Balanced,
International Growth, International Bond, International Equity Index and Global
Asset Portfolios (collectively the "Funds" or individually, a "Fund"). Such
Servicing Agreements shall require the Servicing Agents to provide, or to
arrange to provide, support services as set forth therein to their customers,
clients, employees and others ("Clients") who beneficially own Units of
beneficial interest in Subseries B, C and/or D of one or more of the Funds
("Fund Units") in consideration for a fee, computed daily and paid monthly in
the manner set forth in the Servicing Agreements, at the annual rate of up to
.10%, .15% and .25% of the average daily net asset value of Subseries B, C
and/or D Units of a Fund, respectively, held by the Servicing Agents on behalf
of their Clients. All expenses incurred by the Trust in connection with
Servicing Agreements for Subseries B, C and/or D Units of a particular Fund
shall be allocated entirely to such Subseries B, C and/or D Units of that
particular Fund. The fee allocated to the Subseries B, C and/or D Units of a
particular Fund shall be the several (and not joint or joint and several)
obligation of each such Subseries of such Fund.
Section 2. Northern shall monitor the arrangements pertaining to the
Trust's Servicing Agreements with Servicing Agents. Northern shall not, however,
be obliged by this Plan to recommend, and the Trust shall not be obliged to
execute, any Servicing Agreement with any qualifying Servicing Agent.
Section 3. So long as this Plan is in effect, Northern shall provide to the
Trust's Board of Trustees, and the Trustees shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan and the purposes
for which such expenditures were made.
Section 4. This Plan shall become effective with respect to Subseries B, C
and/or D Units of a particular Fund upon the approval of the Plan (and the
relevant form of Servicing Agreement attached hereto) by a majority of the Board
of Trustees, including a majority of the Trustees who are not "interested
persons" as defined in the Investment Company Act of 1940 (the "Act") of the
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any Servicing Agreements or other agreements related to this Plan
(the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and relevant form
of Servicing Agreement) with respect to such Subseries B, C and/or D Units,
respectively.
Section 5. Unless sooner terminated, this Plan shall continue until April
30, 1994 and thereafter shall continue automatically for successive annual
periods ending on April 30, provided such continuance is approved at least
annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board of Trustees,
provided that any material amendments of the terms of this Plan shall become
effective only upon the approval set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of the
Disinterested Trustees.
Section 8. While this Plan is in effect, the selection and nomination of
those Trustees who are not "interested persons" (as defined in the Act) of the
Trust shall be committed to the discretion of the Disinterested Trustees.
Section 9. The Trust has adopted this Shareholder Services Plan as of April
27, 1993 and revised this Plan as of January 27, 1998.
<PAGE>
Section 10. All persons dealing with the Trust must look solely to the
Trust's property for the enforcement of any claims against the Trust, as neither
the Trustees, officers, agents nor unitholders of the Trust assume any personal
liability for obligation entered into on the Trust's behalf.
2
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries B Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries B one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds", and individually a
"Fund") offered by The Benchmark Funds ("Fund Units").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or more
of the following services to Clients who may from time to time beneficially own
Fund Units: (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 Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units 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 Fund units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other Investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) maintaining appropriate management reporting and
statistical information; (13) paying expenses related to the preparation of
educational and other explanatory materials in connection with the development
of investor services; (14) developing and monitoring investment programs; or
(15) providing such other similar services as the Trust may reasonably request
to the extent the Institutions are permitted to do so under applicable law,
rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Fund Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings. You will assume sole responsibility for your compliance with applicable
Federal and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance of your
duties hereunder complies with such laws and regulations. You shall perform your
duties hereunder in a manner consistent with the customs and practices of other
financial institutions that provide similar services.
<PAGE>
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide such services to
Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .10% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Fund Units issued
by us; (ii) the compensation payable to you hereunder, together with any other
compensation payable to you by Clients in connection with the investment of
their assets in the Funds, will be disclosed by you to your Clients, will be
authorized by your Clients and will not result in an excessive or unreasonable
fee to you; (iii) in the event an issue pertaining to this Agreement or our
Unitholder Servicing Plan related hereto is submitted for approval, you will
vote any Fund Units held for your own account in the same proportion as the vote
of the Fund Units held for your Clients' benefit; and (iv) you will not engage
in activities pursuant to this Agreement which
2
<PAGE>
constitute acting as a broker or dealer under state law unless you have obtained
the licenses required by such law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until April 30, 1994, and thereafter
will continue automatically for successive annual periods ending on April 30,
provided such continuance is specifically approved at least annually by us in
the manner described in Section 15 hereof. This Agreement is terminable, without
penalty, at any time by us (which termination may be by vote of a majority of
our Disinterested Trustees as defined in Section 15 hereof, or by you upon
notice to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws of
the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940) of us and have no direct or
indirect financial interest in the operation of the unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee or agent of The Benchmark Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date: By:
----------------------- ------------------------
Authorized Officer
Accepted and Agreed to:
Date: By:
----------------------- ------------------------
Authorized Officer
4
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries B Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[_] 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
[_] Global Asset Portfolio
5
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries C Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries C of one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds" and individually a "Fund")
offered by the Benchmark Funds ("Fund Units").
The terms and conditions of the Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or more
of the following services to Clients why may from time to time beneficially own
Fund Units: (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 Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units 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 Fund Units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to be 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 Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) providing such office space, facilities and personnel
as may be required to answer questions and respond to inquiries; (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; or (16) providing such other
similar services as the Trust may reasonably request to the extent the
Institutions are permitted to do so under applicable law, rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will, perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Funds Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings. You will assume sole responsibility for your compliance with applicable
Federal and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance of your
duties hereunder complies with such laws and regulations. You shall perform your
duties hereunder in a manner consistent with the customs and practices of other
financial institutions that provide similar services.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which
<PAGE>
may be any part of the space, equipment and facilities currently used in your
business, or any personnel employed by you) as may be reasonably necessary or
beneficial in order to provide such services to Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units, except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be and
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you and your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .15% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filing that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other persons without your consent.
Section 10. By your written acceptance of the Agreement, you represent,
warrant and agree that (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Fund Units issued
by us; (ii) the compensation payable to your hereunder, together with any other
compensation payable to you by Clients in connection with the investment of
their assets in the Funds, will be disclosed by you to your Clients, will be
authorized by your Clients and will not result in an excessive or unreasonable
fee to you; (iii) in the event an issue pertaining to this Agreement or our
Unitholder Servicing Plan related hereto is submitted for approval, you will
vote any Funds Units held for our own account in the same proportion as the vote
of the Fund Units held for your Clients benefits; and (iv) you will not engage
in activities pursuant to the Agreement which constitute acting as a broker or
dealer under state law unless you have obtained the licenses required by such
law.
2
<PAGE>
Section 11. This Agreement will become effective on the date a fully
executed copy of the Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until the next April 30, and thereafter
will continue automatically for successive annual periods ending on April 30,
provided such continuance is specifically approved at least annually by us in
the manner described in Section 15 hereof. This Agreement is terminable, without
penalty, at any time by us (which termination may be by vote of a majority of
our Disinterested Trustees as defined in Section 15 hereof or by you upon notice
to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws of
the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company act of 1940) of us and have no direct or
indirect financial interest in the operation of the Unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together will all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee, or agent of The Benchmark Funds,
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date:______________________ By:______________________
Authorized Officer
Accepted and Agreed to:
Date:______________________ By:______________________
Authorized Officer
3
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries C Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[_] 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
[_] Global Asset Portfolio
4
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries D Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries D of one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds" and individually a "Fund")
offered by The Benchmark Funds ("Fund Units").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or more
of the following services to Clients who may from time to time beneficially own
Fund Units: (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 Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units 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 Fund Units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other Investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) displaying and making prospectuses available on an
institution's premises; (13) providing such office space, facilities and
personnel as may be required to answer questions of potential investors and
respond to inquiries of Customers and other Investors; (14) maintaining
appropriate management reporting and statistical information; (15) paying
expenses related to the preparation of educational and other explanatory
materials in connection with the development of investor services; (16)
developing and monitoring investment programs; or (17) providing such other
similar services as the Trust may reasonably request to the extent the
Institutions are permitted to do so under applicable law, rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
<PAGE>
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Fund Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings. You will assume sole responsibility for your compliance with applicable
Federal and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance of your
duties hereunder complies with such laws and regulations. You shall perform your
duties hereunder in a manner consistent with the customs and practices of other
financial institutions that provide similar services.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide such services to
Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .25% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no
2
<PAGE>
event will any of the services provided by you hereunder be primarily intended
to result in the sale of any Fund Units issued by us; (ii) the compensation
payable to you hereunder, together with any other compensation payable to you by
Clients in connection with the investment of their assets in the Funds, will be
disclosed by you to your Clients, will be authorized by your Clients and will
not result in an excessive or unreasonable fee to you; (iii) in the event an
issue pertaining to this Agreement or our Unitholder Servicing Plan related
hereto is submitted for approval, you will vote any Fund Units held for your own
account in the same proportion as the vote of the Fund Units held for your
Clients' benefit; and (iv) you will not engage in activities pursuant to this
Agreement which constitute acting as a broker or dealer under state law unless
you have obtained the licenses required by such law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until April 30, 1994, and thereafter
will continue automatically for successive annual periods ending on April 30,
provided such continuance is specifically approved at least annually by us in
the manner described in Section 15 hereof. This Agreement is terminable, without
penalty, at any time by us (which termination may be by vote of a majority of
our Disinterested Trustees as defined in Section 15 hereof, or by you upon
notice to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws of
the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940) of us and have no direct or
indirect financial interest in the operation of the unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee or agent of The Benchmark Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date: By:
_________________________ ----------------------------
Authorized Officer
Accepted and Agreed to:
Date: By:
_________________________ ----------------------------
Authorized Officer
4
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries B Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[_] 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
[_] Global Asset Portfolio
5
<PAGE>
[LOGO OF HALE AND DORR LLP]
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 . fax 617-526-5000
January 12, 1998
The Benchmark Funds
c/o Goldman, Sachs & Co.
4900 Sears Tower
Chicago, Illinois 60606
Ladies and Gentlemen:
The Benchmark Funds (the "Trust") is a Massachusetts business trust created
under a written Agreement and Declaration of Trust dated, executed and delivered
in Boston, Massachusetts on July 15, 1982, as amended from time to time (as so
amended, the "Trust Agreement").
The Trustees have the powers set forth in the Trust Agreement, subject to
the terms, provisions and conditions therein provided. Under Article IV, Section
4.1 of the Trust Agreement, the beneficial interest in the Trust is represented
by an unlimited number of units without par value. Under Article IV, Section
4.1, the Trustees are authorized from time to time to divide the units into any
number of series of units and the Trustees are empowered in their discretion to
issue units of any series for such consideration and on such terms as the
Trustees may determine (or for no consideration if pursuant to a unit dividend
or split-up), all without action of the unitholders.
Pursuant to Article IV, Section 4.2 of the Trust Agreement, the Trustees
established seventeen series of units designated "Diversified Assets Units",
"Government Units", "Government Select Units", "Tax-Exempt Units", "U.S.
Treasury Index Units", "Short-Intermediate Bond Units", "Bond Units", "U.S.
Government Securities Units", "Equity Index Units", "Small Company Index Units",
"Diversified Growth Units", "Focused Growth Units", "Balanced Units",
"International Growth Units", "International Bond Units", "International Equity
Index Units" and "Intermediate Bond Units".
The Trustees have voted to authorize the officers of the Trust to issue and
sell to the public an unlimited number of units of beneficial interest of the
Trust.
<PAGE>
The Benchmark Funds
January 12, 1998
Page 2
We have examined the Declaration of Trust and By-Laws, each as amended from
time to time, of the Trust, resolutions of the Board of Trustees relating to the
authorization and issuance of units of beneficial interest of the Trust, and
such other documents as we have deemed necessary or appropriate for the purposes
of this opinion, including, but not limited to, originals, or copies certified
or otherwise identified to our satisfaction, of such documents, Trust records
and other instruments. In our examination of the above documents, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as certified of photostatic copies.
For purposes of this opinion letter, we have not made an independent review
of the laws of any state or jurisdiction other than The Commonwealth of
Massachusetts and express no opinion with respect to the laws of any
jurisdiction other than the laws of The Commonwealth of Massachusetts. Further,
we express no opinion as to compliance with any state or federal securities
laws, including the securities laws of The Commonwealth of Massachusetts.
Our opinion below, as it relates to the non-assessability of the units of
the Trust, is qualified to the extent that under Massachusetts law, unitholders
of a Massachusetts business trust may be held personally liable for the
obligations of the Trust. In this regard, however, please be advised that the
Trust Agreement disclaims unitholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each note, bond,
contract, certificate or undertaking made or issued by the Trustees or officers
of the Trust. Also, the Trust Agreement provides for indemnification out of
Trust property for all loss and expense of any unitholder held personally liable
for the obligations of the Trust.
We are of the opinion that all necessary Trust action precedent to the
issuance of the units of beneficial interest of the Trust has been duly taken,
and that all such units may legally and validly be issued for among other
things, cash, and when sold will be fully paid and non-assessable by the Trust
upon receipt by the Trust or its agent of consideration therefor in accordance
with terms described in the Trust's Declaration of Trust, subject to compliance
with the Securities Act of 1933, as amended, the Investment Company Act of 1940,
as amended, and the applicable state laws regulating the sale of securities.
<PAGE>
The Benchmark Funds
January 12, 1998
Page 3
We consent to your filings this opinion with the Securities and Exchange
Commission as an exhibit to any of the Trust's filing with the Commission.
Except as provided in this paragraph, this opinion may not be relied upon by, or
filed with, any other party or used for any other purpose.
Very truly yours,
/s/Hale and Dorr LLP
Hale and Dorr LLP
The Benchmark Funds
January 12, 1998
<PAGE>
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
Statements of Additional Information included in Post-Effective Amendment No. 36
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, and 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
January 16, 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 21, 1997 in this
Post-Effective Amendment No. 36 to the Registration Statement under the
Securities Act of 1933 (Registration No. 2-80543) and in this Amendment No. 37
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-3605).
ERNST & YOUNG LLP
Chicago, Illinois
January 13, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS DATED NOVEMBER 30, 1997 OF THE BENCHMARK
INTERMEDIATE BOND PORTFOLIO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 019
<NAME> INTERMEDIATE BOND PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-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> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,045
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 48
<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> 594
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 9
<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> 9
<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>
