SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.11(c) or Sec. 240.14a-12
VEREDUS FUNDS
(Name of Registrant as Specified In Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
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(1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and how it was
determined):
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[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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VEREDUS FUNDS
Veredus Growth Fund
6900 Bowling Blvd., Suite 250
Louisville, Kentucky 40207
__________________, 1998
Dear Shareholder:
On behalf of the Board of Trustees (the "Trustees") of Veredus Funds,
organized as an Ohio business trust ("Veredus Trust"), we are pleased to invite
you to a special meeting of the shareholders of the Veredus Growth Fund (the
"Veredus Fund") to be held on , 1998 at 10:00 a.m., Eastern time, at the offices
of Veredus Trust, 6900 Bowling Blvd., Suite 250, Louisville, Kentucky 40207 (the
"Meeting"). At the Meeting, shareholders of the Veredus Fund will be asked to
consider a proposed reorganization of the Veredus Fund into a corresponding
newly formed portfolio of Alleghany Funds (the "Alleghany Fund").
BACKGROUND. Alleghany Asset Management, Inc. and Veredus Asset
Management LLC ("VAM") agreed on ___________, 1998 that Alleghany Asset
Management would purchase an interest in VAM (the "Purchase Transaction"). VAM
acts as the investment advisor to the Veredus Fund. As described more fully in
the Proxy Statement, the Board of Trustees of Veredus Trust determined that it
would be in the best interests of the shareholders of the Veredus Fund to
approve a reorganization whereby the Veredus Fund becomes one of the funds in
the Alleghany Funds (the "Reorganization"). VAM would manage the Alleghany Fund
in the same manner as the Veredus Fund.
In that regard, at the upcoming Meeting, the Trustees are asking you to
approve a reorganization of the Veredus Fund into the corresponding Alleghany
Fund. If all approvals are obtained, the Veredus Fund would be reorganized into
the corresponding Alleghany Fund on or about , 1998, when your Veredus Fund
shares would be exchanged for an equal number of shares of the corresponding
Alleghany Fund having an equal value.
VEREDUS TRUST'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE PROPOSED REORGANIZATION FOR THE VEREDUS FUND.
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SHAREHOLDERS SHOULD FILL OUT THE PROXY CARD IN ORDER TO VOTE THEIR SHARES.
In considering these matters, you should note:
o SUBSTANTIALLY IDENTICAL OBJECTIVE AND POLICIES
The Veredus Fund is proposed to be reorganized into the newly-formed
Alleghany Fund with investment policies and an investment objective that are
substantially identical to those of the Veredus Fund.
o SAME PORTFOLIO MANAGEMENT
VAM will enter into an investment advisory arrangement with Alleghany
Funds for management of the Alleghany Fund, which arrangement will be
substantially similar to the current arrangement wherein VAM provides management
advisory services to the Veredus Fund.
o SAME VALUE OF SHARES
The total dollar value of the Alleghany Fund shares you receive in the
Reorganization will be the same as the total dollar value of the Veredus Fund
shares that you held immediately before the Reorganization. The Reorganization
will be tax free.
o OPERATING EXPENSE RATIO
The annual fund operating expense ratio (after reimbursements and
waivers) for the shares in the Alleghany Fund after the Reorganization is
expected to be 10 basis points (0.10%) less than the current annual fund
operating expense ratio of the Veredus Fund. In addition, because of the
distribution channels available to the Alleghany Funds, there is a greater
opportunity to increase the Funds' net assets, which should result in lower
expense ratios.
Part of Large Fund Family
The Alleghany Fund is one of ten funds offered by the
Alleghany Fund Family. Shareholders will have the opportunity to exchange their
shares into any of the other funds at no additional cost, as more fully
described in the prospectuses for the Alleghany Fund.
The proposed Reorganization is expected to benefit Veredus Fund
shareholders by:
o offering actual or potential reductions in the total operating expense
ratio;
o offering shareholders the opportunity to continue with a fund managed by
VAM;
o offering shareholders other investment opportunities.
Approval of an Interim Management Agreement. The Purchase Transaction
may be consummated before completion of the Reorganization. The Purchase
Transaction will result in a change in control of VAM and an "assignment" of the
Management Agreement between VAM and Veredus Trust. The Management Agreement
automatically terminates in the event of an assignment. Therefore, the Trustees
are asking you to approve an interim Management Agreement (the "Interim
Agreement") between VAM and Veredus Trust for the interim period between
consummation of the Purchase Transaction and consummation of the Reorganization.
The terms of the Interim Agreement would be identical to the existing Management
Agreement except for the date of the Interim Agreement.
<PAGE>
Ratification of Independent Auditors. The Trustees have selected KPMG
Peat Marwick LLP as independent auditors of Veredus Fund for its fiscal year
ending in 1998 in the event the Reorganization is approved. If the
Reorganization is not approved, Arthur Anderson LLP will continue as Veredus
Fund's independent auditors.
The formal Notice of Special Meeting, a Proxy Statement and a Proxy
Ballot are enclosed. Whether or not you plan to attend the Meeting, you may vote
by proxy in any of the following ways:
PLEASE RESPOND - YOUR VOTE IS IMPORTANT, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND MAIL IN THE ENCLOSED POSTAGE
PAID ENVELOPE, OR FAX TO VAM AT 502-899-4082, THE ENCLOSED PROXY SO THAT YOU
WILL BE REPRESENTED AT THE MEETING.
Shareholders of record on _____________ will be entitled to vote at the
meeting.
The proposed Reorganization, the Interim Agreement, and the reasons for
the Veredus Trust Board of Trustees' unanimous recommendations are discussed in
detail in the enclosed materials, which you should read carefully. If you have
any questions about the Reorganization or the Interim Agreement, please do not
hesitate to call VAM, at 502-899-4080.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
--------------------------
Chairman of the Board
<PAGE>
VEREDUS GROWTH FUND
6900 Bowling Blvd., Suite 250
Louisville, Kentucky 40207
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON , 1998
To Veredus Growth Fund Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the
"Meeting") of the Veredus Growth Fund (the "Veredus Fund"), a series of Veredus
Funds ("Veredus Trust"), will be held at the offices of Veredus Trust, 6900
Bowling Blvd., Suite 250, Louisville, Kentucky 40207, on , 1998 at 10:00 a.m.,
Eastern time, for purpose of considering and voting on the following proposals:
Item 1. To approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") providing for the transfer of the assets and
liabilities of the Veredus Fund to a newly-formed portfolio of Alleghany Funds
in exchange for shares of such corresponding Alleghany Fund (the
"Reorganization") and the subsequent termination of Veredus Fund and Veredus
Trust. Item 1 is described in the attached Proxy Statement. YOUR TRUSTEES
UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
Item 2. To approve an interim Management Agreement between Veredus
Trust and Veredus Asset Management LLC ("VAM") with terms identical to the
existing Management Agreement for the period of time between the purchase by
Alleghany Asset Management, Inc. of an interest in VAM and the consummation of
the Reorganization contemplated by the Reorganization Agreement.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
Item 3. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Veredus Fund for the fiscal year ending in 1998 in the event the
Reorganization is approved. YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN
FAVOR OF RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS IN THE
EVENT THE REORGANIZATION IS APPROVED.
Item 4. Such other business as may properly come before the Meeting or
any adjournment(s).
Shareholders of record as of the close of business on _____________,
1998 are entitled to notice of, and to vote at, the Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY
THE VEREDUS TRUST BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX TO VAM AT 502-899-4082.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
VEREDUS TRUST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR
BY ATTENDING THE MEETING AND VOTING IN PERSON.
By Order of the Trustees,
, 1998
<PAGE>
TABLE OF CONTENTS
PROPOSAL 1. APPROVAL OF THE REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION
INFORMATION RELATING TO THE PROPOSED REORGANIZATION...................
Description of the Reorganization Agreement.....................
Capitalization..................................................
Veredus Trust Board Consideration...............................
Federal Income Tax Consequences.................................
COMPARISON OF VEREDUS TRUST AND ALLEGHANY.............................
Investment Objectives and Policies..............................
Investment Adviser and Other Service Providers..................
Advisory Arrangements...........................................
Other Service Providers ........................................
Share Structure.................................................
Distribution Plans and Shareholder Servicing Arrangements.......
Administration Agreements.......................................
Shareholder Transactions and Services...........................
Forms of Organization...........................................
Principal Risk Factors..........................................
Governing Documents.............................................
Annual Meetings and Shareholder Meetings; Shareholder Proposals
For Future Meetings...........................................
INTERESTS OF CERTAIN PERSONS IN REORGANIZATION........................
PROPOSAL 2. APPROVAL OF INTERIM MANAGEMENT AGREEMENT FOR PERIOD BETWEEN PURCHASE
TRANSACTION AND CONSUMMATION OF REORGANIZATION
Summary of Purchase Transaction ................................
Terms of Current Agreement......................................
Management of Adviser...........................................
Trustees and Officers of Fund...................................
Reasons for an Interim Agreement................................
PROPOSAL 3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS...........
INFORMATION RELATING TO VOTING MATTERS...................................
Voting Information..............................................
Shareholder and Board Approvals.................................
Quorum; Any Adjournments or Required Votes......................
Shareholder Proposals...........................................
VOTING SECURITIES AND PRINCIPAL HOLDERS..................................
OTHER BUSINESS...........................................................
SHAREHOLDER INQUIRIES....................................................
APPENDICES
I Agreement and Plan of Reorganization
II Management Agreement between Veredus Asset Management LLC and
Alleghany Funds
<PAGE>
PROXY STATEMENT
DATED , 1998
VEREDUS FUNDS
6900 Bowling Blvd., Suite 250
Louisville, Kentucky 40207
(502) 899-4080
This Proxy Statement is furnished to shareholders of Veredus Growth
Fund ("Veredus Fund"), in connection with the solicitation of proxies by the
Board of Trustees of Veredus Funds ("Veredus Trust"). The Board of Trustees of
Veredus Trust has called a Special Meeting of Shareholders (the "Meeting") at
10:00 a.m. (Eastern time) on , 1998 at the offices of Veredus Trust, 6900
Bowling Blvd., Suite 250, Louisville, Kentucky 40207. At the Meeting,
shareholders will be asked (i) to approve a proposed Agreement and Plan of
Reorganization dated as of , 1998 (the "Reorganization Agreement") by and
between Veredus Fund and Alleghany Funds ("Alleghany"), (ii) to approve an
interim investment advisory agreement between Veredus Trust and Veredus Asset
Management LLC ("VAM") with terms identical to the existing investment advisory
agreement for the period of time between the purchase by Alleghany Asset
Management, Inc. of an interest in VAM and consummation of the Reorganization,
and (iii) to ratify the selection of KPMG Peat Marwick LLP as independent
auditors of Veredus Fund in the event the Reorganization is approved. A form of
the Reorganization Agreement is attached as Appendix I. See "Proposal 1.
Approval of the Agreement and Plan of Reorganization--Comparison of Veredus Fund
and Alleghany Fund--Advisory Arrangements" for a discussion of the differences
between the current investment advisory agreement between Veredus Trust and VAM
and the investment advisory agreement between Alleghany and VAM to become
effective upon consummation of the Reorganization. Approval of the Agreement and
Plan of Reorganization will constitute approval of the new investment advisory
agreement to become effective upon consummation of the Reorganization. The form
of such new investment advisory agreement is attached as Appendix II.
It is expected that the solicitation of proxies will be primarily by
mail. Officers of VAM and service contractors of Veredus Trust also may solicit
proxies by telephone or telefax. Shareholders may vote by (1) mail, by marking,
signing, dating and returning the enclosed Proxy Ballot in the enclosed
postage-paid envelope; or (2) telefacsimile, by marking, signing, dating and
faxing the enclosed Proxy Ballot to VAM at 502-899-4082 (a confirmation of your
telefacsimile vote will be mailed to you). Any shareholder giving a proxy may
revoke it at any time before it is exercised by submitting to Veredus Trust a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person.
Only shareholders of record at the close of business on [ ,] 1998 will
be entitled to notice of and to vote at the Meeting or any adjournment thereof.
Shareholders are entitled to one vote for each share held, with fractional
shares voting proportionally. On the record date listed above, ___________
Veredus Fund shares were outstanding and entitled to be voted.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting.
Veredus Trust and Alleghany are both registered open-end management
investment companies (mutual funds). Veredus Trust's principal executive office
and telephone number is set forth above. Alleghany offers money market,
tax-exempt, bond and equity investment portfolios and Veredus Trust offers an
equity investment portfolio. Alleghany's principal executive office is located
at 171 North Clark Street, Chicago, Illinois 60601 and its telephone number is
(312) 223-2139. The Reorganization Agreement provides for the transfer of assets
and stated liabilities of the Veredus Fund to a corresponding newly-formed
portfolio of Alleghany (the "Alleghany Fund") in exchange for an equal number of
shares ("Shares") of the Alleghany Fund having an equal value (the
"Reorganization"). As a result of the Reorganization, shareholders of the
Veredus Fund will become shareholders of the Alleghany Fund. The Shares of the
Alleghany Fund received in the Reorganization will be substantially similar to
the shares of the Veredus Fund. The principal difference will be that the Shares
of the Alleghany Fund will be subject to a distribution fee, as more fully
described under "Proposal 1. Approval of the Agreement and Plan of
Reorganization--Comparison of Veredus Trust and Alleghany-- Distribution Plans
and Shareholder Servicing Arrangements."
<PAGE>
This Proxy Statement is expected to be first sent to shareholders on or
about , 1998. -------------------
The cost of preparing and mailing this Proxy Statement, the
accompanying Notice of Special Meeting, and Proxy and any additional material
relating to the meeting and the cost of soliciting proxies will be borne by
[VAM]. In addition to solicitation by mail, Veredus Trust will request banks,
brokers, and other custodial nominees and fiduciaries to supply proxy material
to the beneficial owners of shares of whom they have knowledge, and [VAM] will
reimburse them for their expenses in so doing. Certain officers and employees of
Veredus Trust and [VAM] may solicit proxies in person or by telephone, facsimile
transmission, or mail, for which they will not receive any special compensation.
PROPOSAL 1. APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions of the Reorganization are set forth in the
Reorganization Agreement. Certain provisions of the Reorganization Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Reorganization Agreement, a copy of which is attached as
Appendix I to this Proxy Statement.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization
Agreement provides for: (i) the transfer of all of the assets and liabilities of
the Veredus Fund to the Alleghany Fund in exchange for full and fractional
Shares of the Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares
to the shareholders of the Veredus Fund in liquidation of the Veredus Fund. The
Reorganization is subject to a number of conditions with respect to the Veredus
Fund, including shareholder approval. Following the Reorganization, the Veredus
Fund will cease to operate as a separate fund and will be liquidated.
The Shares issued by the Alleghany Fund in the Reorganization will be
equal in number to, and have an aggregate dollar value equal to the aggregate
dollar value of, the shares of the Veredus Fund that are outstanding immediately
before the closing of the Reorganization (the "Closing"). Immediately after the
Closing, the Veredus Fund will distribute the Shares of the Alleghany Fund
received in the Reorganization to its shareholders in liquidation of the Veredus
Fund. Each shareholder owning shares of the Veredus Fund at the Closing will
receive Shares of the Alleghany Fund, and will receive any unpaid dividends or
distributions that were declared before the Closing on Veredus Fund shares.
Alleghany will establish an account for each former shareholder of the Veredus
Fund reflecting the appropriate number of Alleghany Fund Shares distributed to
that shareholder. These accounts will be substantially identical to the accounts
currently maintained by Veredus Trust for each shareholder. Shares of the
Alleghany Fund are in uncertificated form.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the related matters described in
this Proxy Statement by Veredus Fund shareholders at the Meeting; the receipt of
certain legal opinions described in the Reorganization Agreement (which include
opinions of counsel to Alleghany that (a) the Alleghany Fund Shares issued in
the Reorganization will be validly issued, fully paid and non-assessable and (b)
the Reorganization will not give rise to recognition of gain or loss for federal
income tax purposes to the Veredus Fund, the Alleghany Fund or their respective
shareholders); the receipt of certain certificates from the parties concerning
the continuing accuracy of the representations and warranties in the
Reorganization Agreement; and the parties' performance in all material respects
of their respective covenants and undertakings in the Reorganization Agreement.
Assuming satisfaction of the conditions in the Reorganization
Agreement, it is anticipated that the Closing will be effective at the close of
business on _________________, 1998 or, in accordance with the Reorganization
Agreement, such other date as agreed to in writing by the officers of the
parties to the Reorganization Agreement.
CAPITALIZATION. The Veredus Fund will be reorganized into the Alleghany
Fund. The following table sets forth, as of ____________________, (i) the
capitalization of the Veredus Fund; and (ii) the pro forma capitalization,
assuming the consummation of the Reorganization of the Alleghany Fund. The
Alleghany Fund was created in anticipation of the Reorganization. Consequently,
the Alleghany Fund will have de minimus assets and one share was issued upon
creation of the Alleghany Fund but will be redeemed contemporaneously with the
Reorganization. Accordingly, the capitalization of the Veredus Fund immediately
prior to its Reorganization, and consequently the capitalization of the
Alleghany Fund immediately following the Reorganization, is likely to be
different than as set forth below as a result of daily share purchase and
redemption activity in the Veredus Fund as well as the Veredus Fund's other
ongoing operations.
<PAGE>
CAPITALIZATION
TOTAL NET ASSETS SHARES NET ASSET VALUE
[(as of _______, 1998)] OUTSTANDING PER SHARE
Veredus Fund
Pro Forma Alleghany
VEREDUS TRUST BOARD CONSIDERATION
On October 26, 1998, VAM informed the Trustees of the Veredus Trust
that VAM had entered into a Subscription Agreement pursuant to which Alleghany
Asset Management, Inc. ("AAM") would purchase an interest in VAM (the "Purchase
Transaction"). VAM recommended to the Board of Trustees that the Veredus Fund be
reorganized and merged into a new series of the Alleghany Fund's, and thus
become one of the funds in the Alleghany Funds (the "Reorganization"). The
Trustees considered the proposed Reorganization and the anticipated effects of
these transactions on the Veredus Fund. The Trustees were provided with copies
of the Annual Report of the Alleghany Funds and Alleghany Corporation, the
parent company of AAM.
Representatives of VAM reviewed the terms of the Purchase Transaction
and the proposed Reorganization, including a discussion of what the
Reorganization would mean to the Veredus Fund and its shareholders. There was
extended discussion of, and questioning by the Trustees about, AAM's plans for
the Fund, including the ongoing investment policies, investment management and
administration of the Veredus Fund. In addition, VAM [and AAM management]
discussed at length the terms of the Reorganization, including financial and
operational aspects relevant to the Veredus Fund.
VAM and AAM assured the Board of Trustees that they intend to comply
with Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser to an investment company or any of its
affiliated persons to receive any amount or benefit in connection with a change
of control of the investment adviser so long as certain conditions are met.
First, for a period of three years after the transaction, at least 75% of the
board members of the investment company must not be interested persons of such
investment adviser. At this time more than 25% of the trustees of the Alleghany
Funds are interested persons; accordingly, solely to satisfy this requirement,
[______________________ will resign as a trustee of Alleghany Funds on the date
the Reorganization becomes effective, but remain as an officer of the Alleghany
Funds] [a shareholder meeting of the Alleghany Funds will be held prior to the
effective date of the Reorganization to elect additional trustees who are not
interested persons]. Second, an "unfair burden" must not be imposed upon the
investment company as a result of such transaction or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair burden"
is defined in Section 15(f) to include any arrangement during the two years
after the transaction whereby the investment adviser, or any interested person
of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its shareholders (other
than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such an investment company). VAM and
AAM are not aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on Veredus Fund as a result
of the Reorganization. VAM and AAM represented to the Board of Trustees that
they, and their affiliates, will take no action that would have the effect of
imposing an "unfair burden" on the Veredus Fund as a result of the
Reorganization. VAM has undertaken to pay the costs of preparing and
distributing proxy materials to the shareholders of the Veredus Fund and holding
the Meeting as well as other fees and expenses in connection with the
Reorganization, including the fees and expenses of legal counsel to the Veredus
Trust.
In considering whether to approve the proposed Reorganization, the
Board of Trustees of Veredus Trust was provided with a variety of information
about the Reorganization, the Veredus Fund, the Alleghany Fund and AAM. These
materials summarized the principal features of the Reorganization including the
intention that the transaction be consummated on a tax-free basis for the
Veredus Fund and its shareholders. In addition, the Veredus Trust Trustees
received comparative information for the Veredus Fund and the Alleghany Fund
with respect to the following matters: (a) investment objectives and policies;
(b) advisory, distribution and
other servicing arrangements; (c) expenses (with and without giving effect to
anticipated expense limitations), including PRO FORMA expenses assuming
consummation of the Reorganization and expenses relative to peer groups; and (d)
performance relative to peer groups. The Veredus Trust Trustees were also
provided with information about AAM and its investment advisory organization,
including information as to how Veredus Trust will relate to AAM and its
affiliates.
<PAGE>
At the Board of Trustees' meeting on October 26, 1998, AAM represented
to the Veredus Trust Trustees that VAM would commit to waive or reimburse
investment management/advisory fees and fund expenses exceeding certain limits.
Based upon this commitment and the current expense ratio information provided
for both the Veredus Fund and the Alleghany Fund and the anticipated expense
limitations committed to by VAM, the Veredus Trust Trustees concluded that, for
the foreseeable future, the Reorganization would likely result in a savings in
expenses to Veredus Fund shareholders.
After consideration of the foregoing and other factors, and with the
advice and assistance of counsel, the Veredus Trust Trustees unanimously
determined that the Reorganization is in the best interests of the shareholders
of the Veredus Fund, and that the shareholders of the Veredus Fund will not be
diluted as a result of such Reorganization.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization
with respect to the Veredus Fund is subject to the condition that Veredus Trust
and Alleghany receive an opinion from Sonnenschein Nath & Rosenthal to the
effect that, for federal income tax purposes, (i) the transfer of all or
substantially all of the Veredus Fund's assets in exchange for the Alleghany
Fund Shares and the assumption by the Alleghany Fund of the liabilities of the
Veredus Fund will constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and the
Alleghany Fund and the Veredus Fund will be a "party to a reorganization" within
the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Veredus Fund upon the transfer of its assets to the Alleghany
Fund solely in exchange for Alleghany Fund Shares or the assumption of the
liabilities of the Veredus Fund by the Alleghany Fund; (iii) no gain or loss
will be recognized by the Alleghany Fund upon (a) its receipt of assets from the
Veredus Fund solely in exchange for Alleghany Fund Shares, (b) the Alleghany
Fund's assumption of the Veredus Fund's liabilities, and (c) the constructive or
actual distribution by the Veredus Fund of Alleghany Fund Shares to the Veredus
Fund shareholders in exchange for their shares of the Veredus Fund; (iv) the
aggregate federal income tax basis of the Veredus Fund's assets received by the
Alleghany Fund pursuant to the Reorganization will be the same as the aggregate
federal income tax basis of those assets in the hands of the Veredus Fund
immediately prior to the Reorganization; (v) the holding period of the Veredus
Fund's assets received by the Alleghany Fund pursuant to the Reorganization will
include the period for which such assets have been held by the Veredus Fund;
(vi) no gain or loss will be recognized by the Veredus Fund on the distribution
to its shareholders of the Alleghany Fund Shares to be received by the Veredus
Fund in the Reorganization; (vii) no gain or loss will be recognized by the
shareholders of the Veredus Fund upon their receipt of the Alleghany Fund Shares
in exchange for such shareholders' shares of the Veredus Fund; (viii) the
federal income tax basis of the Alleghany Fund Shares received by the
shareholders of the Veredus Fund will be the same as the federal income tax
basis of the Veredus Fund shares exchanged by such shareholders pursuant to the
Reorganization; (ix) the holding period for the Alleghany Fund Shares for which
Veredus Fund shares are exchanged pursuant to the Reorganization will include
the period that the Veredus Fund shares have been held by the holder, provided
that the Veredus Fund shares have been held as a capital asset by the holder;
and (x) the Alleghany Fund will succeed to and take into account the tax
attributes described in Section 381(c) of the Code of the Veredus Fund as of the
Closing Date, subject to the conditions and limitations specified in the Code.
In the event that Veredus Trust and Alleghany do not receive the
foregoing opinion of Sonnenschein Nath & Rosenthal in a form satisfactory to
each of them, the Reorganization will not take place and Veredus Trust's
Trustees will consider other alternatives.
Information about the similarities and differences between the
Alleghany Fund and the Veredus Fund regarding: the identity and compensation of
the investment adviser; the voting rights of shareholders, any restrictions or
material obligations associated with ownership of shares; the share structure;
the identity of the distributor; any minimum initial or subsequent investment,
Rule 12b-1 plans, including associated fees and expenses; and shareholder
redemption repurchase and exchange rights, is included in other appropriately
titled sections within this Proxy Statement and the Appendices hereto.
<PAGE>
COMPARISON OF VEREDUS FUND AND ALLEGHANY FUND
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of the
Alleghany Fund is identical to that of the Veredus Fund. However, Alleghany
Fund's investment objective is fundamental (i.e., it may not be changed without
the affirmative vote of a majority of the outstanding shares of the Alleghany
Fund), while Veredus Fund's investment objective is non-fundamental (i.e., it
may be changed without such shareholder vote). Both Funds seek to provide
capital appreciation by investing primarily in equity securities of companies
whose earnings are growing at an accelerating rate. The investment policies and
restrictions of the Alleghany Fund are substantially similar to those of the
Veredus Fund. Both the Alleghany Fund and the Veredus Fund (each a "Fund") may
invest in the following: (i) equity securities (including common stock,
warrants, rights, preferred stock and common stock equivalents (such as
convertible preferred stock and convertible debentures)), provided that the Fund
will not invest more than 5% of its net assets in preferred stock or common
stock equivalents; (ii) foreign equity securities by purchasing American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs") (up to
20% of the Fund's net assets); (iii) U.S. Government securities of any duration;
(iv) repurchase agreements; (v) put and call options (except that Veredus Fund's
investment in options, including premiums and potential settlement obligations,
is limited to 5% of its net assets, while with respect to the purchase of
options, Alleghany Fund will only purchase call or put options to the extent
premiums paid on all outstanding call or put options do not exceed [20%] of its
total assets); and (vi) when issued securities and forward commitments. In
addition, for temporary defensive purposes under abnormal market or economic
conditions, both Veredus Fund and Alleghany Fund may hold all or a portion of
their assets in money market instruments, securities of no-load money market
funds or U.S. government repurchase agreements. Each Fund may also invest in
such instruments at any time to maintain liquidity or pending selection of
investments in accordance with its policies. The Veredus Fund may engage in
short sales, but the percentage of the Veredus Fund's net assets that may be
used as collateral or segregated for short sales is limited to 5%. The Alleghany
Fund may not engage in short sales. The Alleghany Fund may invest in certain
types of securities that the Veredus Fund does not invest in, including reverse
repurchase agreements, 144A securities, other mutual funds and illiquid
securities. Unlike Alleghany Fund, Veredus Fund's current non-fundamental
investment policies do not permit borrowing.
VAM does not believe that the differences in the investment policies of
the Veredus Fund and the Alleghany Fund will affect the manner in which VAM
manages the portfolio.
INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS. VAM, 6900 Bowling Blvd.,
Suite 250, Louisville,
Kentucky 40207, serves as the investment adviser for the Veredus Fund. After the
Reorganization, VAM will serve as the investment adviser to the Alleghany Fund.
The following table (a) compares the estimated fees and expenses for
the current fiscal year of the Veredus Fund and (b) shows the estimated fees and
expenses for the Alleghany Fund on a pro forma basis after giving effect to the
Reorganization. The purpose of these tables is to assist shareholders in
understanding the various costs and expenses that investors in these portfolios
will bear as shareholders. VAM has committed to waive or reimburse expenses
above 1.40% of average net assets for the Alleghany Fund.
VEREDUS FUND
ALLEGHANY/VEREDUS AGGRESSIVE GROWTH FUND
<PAGE>
<TABLE>
<S> <C> <C>
PRO FORMA
ALLEGHANY/VEREDUS
VEREDUS AGGRESSIVE
FUND GROWTH FUND
SHAREHOLDER FEES: (fees paid directly from shareholder
investment)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ None None
Redemption Fees........................................ None None
Exchange Fee .......................................... N/A None
ANNUAL FUND OPERATING EXPENSES: (expenses that
are deducted from fund assets as a percentage of average net
assets)
Management/Advisory Fees (after waivers or
reimbursements)*................................ 1.46% 0.60%
Distribution/12b-1 Fees................................ N/A 0.25%
Other Expenses**....................................... .04% 0.55%
TOTAL FUND OPERATING EXPENSES 1.50% 1.40%
</TABLE>
* The expenses for the Alleghany Fund reflect the adviser's
voluntary undertaking to waive investment management/advisory
fees and/or reimburse the Alleghany Fund's expenses exceeding
the limits shown. Absent such fee waivers and reimbursement of
expenses, the estimated investment advisory fees, 12b-1 fees,
expenses and total operating expenses, respectively, would be
1.00%, 0.25%, 0.55% and 1.80%. Unlike Veredus Fund, Alleghany
Fund pays its own expenses. The fee to VAM is equal to 1.50%
of average daily net assets minus the amount by which the
Fund's total expenses (including organizational expenses, but
excluding brokerage, taxes, interest and extraordinary
expenses) exceed 1.50%.
** Other expenses for the Alleghany Fund will be based on estimated
amounts for the current fiscal year.
ADVISORY ARRANGEMENTS. The Veredus Fund currently receives investment
advisory services from VAM pursuant to a Management Agreement between Veredus
Trust and VAM (the "Current Agreement"). The Alleghany Fund will receive
investment advisory services from VAM pursuant to an Investment Advisory
Agreement between VAM and Alleghany (the "New Agreement"), subject to the
general supervision of Alleghany's Trustees, and in accordance with the
investment policies of the Alleghany Fund.
The material differences between the New Agreement and the Current
Agreement are discussed below. A form of the New Agreement is attached to this
Proxy Statement as Appendix II. The following discussion is qualified in its
entirety by reference to the text of the New Agreement. The New Agreement will
take effect, with respect to the Alleghany Fund, upon consummation of the
related Reorganization.
Advisory Services. Pursuant to both the Current Agreement and the New
Agreement (collectively, the "Advisory Agreements"), VAM (sometimes referred to
hereafter as the "Adviser"), has the responsibility for the management of the
portfolio of, and the making and execution of, investment decisions for the Fund
to which such agreement relates, subject to the investment objectives and
investment policies and restrictions of such Fund and the supervision of the
Board of Trustees of the investment company. Under both Advisory Agreements, the
Adviser is required to pay its own expenses in connection with servicing the
investments of the Fund.
The Current Agreement, however, provides that the Adviser additionally
pays all of the operating expenses of the Veredus Fund except brokerage, taxes,
interest, fees and expenses of non-interested person trustees and extraordinary
expenses. Accordingly, the Veredus Fund does not pay directly for transfer
agency, pricing, custodial, auditing or legal services, nor does the Veredus
Fund pay directly any general administrative or other significant operating
expenses. Under the New Agreement, the Adviser does not pay such expenses, but
rather the Alleghany Fund is responsible for the expenses.
<PAGE>
Compensation. Under the Current Agreement, the Veredus Fund is
obligated to pay the Adviser a monthly fee at the annual rate of 1.50% of the
average daily net assets of the Veredus Fund, minus the amount by which the
Veredus Fund's total expenses (including organizational expenses, but excluding
brokerage, taxes, interest and extraordinary expenses) exceeds 1.50%. The New
Agreement provides that the Adviser will be paid an annual fee of 1.00% of the
average daily net assets of the Alleghany Fund, payable monthly.
Fee and Expense Limitations. The Current Agreement includes a
contractual limitation on the fee to the Adviser. Under the Current Agreement,
the Adviser's fee is reduced by the amount by which the Veredus Fund's total
expenses (including organizational expenses, but excluding brokerage, taxes,
interest and extraordinary expenses) exceeds 1.50%. The New Agreement does not
include any contractual expense limitation provisions. From time to time, VAM
may voluntarily waive or reimburse advisory fees or expenses payable by the
Alleghany Fund [and it has agreed for the first two years following the
Reorganization to waive its advisory fees over 0.60% as set forth in the
preceding table].
Portfolio Manager. B. Anthony Weber is primarily responsible for the
day-to-day management of the Veredus Fund. Mr. Weber is the President of VAM. He
previously served as President and Senior Portfolio Manager of SMC Capital, Inc.
and as the portfolio manager primarily responsible for management of certain
accounts, including three common trust funds, of Shelby County Trust Bank. Mr.
Weber has a Bachelor of Arts degree in Economics and Management from Centre
College of Kentucky. Mr. Weber will continue as the portfolio manager for the
Alleghany Fund following the Reorganization.
Use of Name. The Current Agreement includes a provision that all rights
to the name "Veredus" belong to the Adviser. Veredus Trust is granted a limited
license (without charge) to use the name. Veredus Trust's right terminates upon
90 days' written notice from the Adviser or 90 days following termination of the
Current Agreement.
OTHER SERVICE PROVIDERS. The other service providers for the Veredus Fund
and the Alleghany Fund are different, as forth in the table below.
OTHER SERVICE PROVIDERS
FOR THE VEREDUS FUND AND ALLEGHANY FUND
<TABLE>
<S> <C> <C>
Veredus Fund Alleghany Fund
Distributor Unified Management Corporation First Data Distributors, Inc.
Administrator Unified Fund Services, Inc. The Chicago Trust Company
Sub-Administrator ------- First Data Investor Services Group, Inc.
("First Data")
Transfer Agent Unified Fund Services, Inc. First Data
Custodian Star Bank, N.A. Bankers Trust Company
Independent Accountants Arthur Andersen LLP KPMG Peat Marwick LLP
</TABLE>
SHARE STRUCTURE. Both Veredus Trust and Alleghany are registered as
open-end series management investment companies under the Investment Company Act
of 1940 (the "1940 Act"). Currently, Veredus Trust offers one fund. Immediately
after the Reorganization, Alleghany Fund will offer ten funds.
Shares of both the Veredus Fund and Alleghany Fund are shares of
beneficial interest. Shares of both the Veredus Fund and Alleghany Fund are
entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote separately by individual fund, except (i)
when required to vote in the aggregate by the 1940 Act (or in the case of
Veredus, by Ohio corporate law), and (ii) when the Trustees determine the matter
affects the interest of one or more fund or class, only the shareholders
affected shall vote. Each Fund votes separately with respect to any proposal to
approve its investment advisory agreement, to change its fundamental investment
objectives or policies, or to adopt a plan of reorganization.
<PAGE>
Shares of the Veredus Fund and Alleghany Fund have no pre-emptive
rights and have only such conversion and exchange rights as the Trustees of
Veredus Trust or the Board of Trustees of Alleghany, respectively, may grant in
their discretion. When issued for payment as described in their respective
prospectuses, Alleghany Fund Shares and Veredus Fund shares are fully paid and
non-assessable by either Alleghany or Veredus Trust.
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING ARRANGEMENTS. Shares of the
Veredus Fund are distributed by Unified Management Corporation ("Unified
Management"), 431 North Pennsylvania Street, Indianapolis, Indiana 46204, a
broker-dealer registered with the SEC under the Securities Exchange Act of 1934,
as amended (the "1934 Act"). There is no distribution plan for the Veredus Fund
shares.
Pursuant to the Distribution Agreement between Veredus Trust and
Unified Management, Unified Management has agreed to act as the Veredus Fund's
distributor, but receives no compensation other than an hourly fee for the
review of sales and advertising literature. The Veredus Fund is responsible for
all distribution expenses such as: (i) printing and mailing to prospective
shareholders prospectuses and reports used in connection with offering Veredus
Fund shares; (ii) preparing, printing and mailing any other literature used by
Unified Management in connection with the sale of such shares; and (iii)
reimbursement for NASD advertising compliance expenses advanced by Unified
Management. VAM pays these expenses on behalf of the Veredus Fund pursuant to
the Current Agreement.
Shares of the Alleghany Fund are distributed by First Data
Distributors, Inc. ("First Data"), a broker-dealer registered with the SEC under
the 1934 Act. The Alleghany Fund has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, First Data will receive certain
payments for services rendered for the purpose of selling shares issued by the
Alleghany Fund. Distribution expenses attributable to the Alleghany Fund will be
charged against the Alleghany Fund's assets. Under the Plan, the Alleghany Fund
may reimburse First Data for actual expenses not exceeding, on an annual basis,
0.25% of average daily net assets. Because these payments are paid out of the
Alleghany Fund's assets on an ongoing basis, over time these payments will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
ADMINISTRATION AGREEMENTS. The Veredus Fund has a Mutual Fund Services
Agreement with Unified Fund Services, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204 pursuant to which Unified Fund Services provides
certain transfer agent, fund accounting and administration services with respect
to the Veredus Fund. Administrative services are provided to the Alleghany Fund
by The Chicago Trust Company (the "Alleghany Administrator") and First Data as
sub-administrator.
Unified Fund Services, Inc., as administrator (the "Veredus
Administrator"), provides administrative services for shareholders of the
Veredus Fund, which include clerical help and accounting, bookkeeping, internal
audit services and certain other services required by Veredus Fund, and
preparation of reports to the Veredus Fund's shareholders and regulatory
filings. The Veredus Administrator pays its own expenses in connection with
performing such services except certain expenses which will be paid by Veredus
Fund. The expenses to be paid by Veredus Fund include: SEC and state Blue Sky
registration and qualification fees, levies, fines and other charges; advisory
fees; charges and expenses of custodians; insurance premiums including fidelity
bond premiums; auditing and legal expenses; costs of maintenance of corporate
existence; expenses of typesetting and printing of prospectuses and for
distribution to current shareholders of the Veredus Fund; expenses of printing
and production costs of shareholders' reports and proxy statements and
materials; costs and expenses of Fund stationery and forms; costs and expenses
of special telephone and data lines and devices; costs associated with
corporate, shareholder, and board meetings; and other customary Fund expenses.
VAM pays all of the Veredus Fund's expenses, including those payable to the
Veredus Administrator, but excluding brokerage, taxes, interest and
extraordinary expenses.
<PAGE>
Under the Administration Agreement with the Alleghany Fund, the
Alleghany Administrator is responsible for: (1) coordinating with the custodian
and transfer agent and monitoring the services they provide to the Alleghany
Fund; (2) coordinating with and monitoring any other third parties furnishing
services to the Alleghany Fund; (3) providing the Alleghany Fund with necessary
office space, telephones and other communications facilities and personnel
competent to perform administrative and clerical functions; (4) supervising the
maintenance by third parties of such books and records of the Alleghany Fund as
may be required by applicable federal or state law; (5) preparing or supervising
the preparation by third parties of all federal, state and local tax returns and
reports of the Alleghany Fund required by applicable law; (6) preparing and,
after approval by the Alleghany Fund, filing and arranging for the distribution
of proxy materials and periodic reports to shareowners of the Alleghany Fund as
required by applicable law; (7) preparing and, after approval by Alleghany,
arranging for the filing of such registration statements and other documents
with the SEC and other federal and state regulatory authorities as may be
required by applicable law, (8) reviewing and submitting to the officers of
Alleghany for their approval invoices or other requests for payment of the
Alleghany Fund's expenses and instructing the custodian to issue checks in
payment thereof; and (9) taking such other action with respect to Alleghany or
the Alleghany Fund as may be necessary in the opinion of the Alleghany
Administrator to perform its duties under the Administration Agreement.
The accrued expenses of the Alleghany Fund are deducted from accrued
income before dividends are declared. The Alleghany Fund's expenses include, but
are not limited to: fees paid to VAM and First Data; interest; trustees' fees;
federal and state securities registration and qualification fees; brokerage fees
and commissions; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; charges of the custodian
and transfer agent; certain insurance premiums; outside auditing and legal
expenses; costs of shareholder reports and shareholder meetings; other expenses
which are not expressly assumed by VAM, or the Alleghany Administrator under
their respective agreements with Alleghany; and any extraordinary expenses. Any
general expenses of Alleghany that are not readily identifiable as belonging to
a particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Alleghany or in
such other manner as Alleghany's Board of Trustees deem appropriate.
As compensation for services performed under the Administration
Agreement, the Alleghany Administrator receives a fee payable monthly at an
annual rate of _______ of the average daily net assets of the Alleghany Fund.
Star Bank, National Association ("Star Bank") is custodian for Veredus
Trust's assets pursuant to a Custody Agreement. Under such agreement, Star Bank:
(i) maintains a separate bank account or accounts in the United States as to
each Veredus Trust fund in the name of Veredus Trust coupled with the name of
such fund; (ii) holds and transfers portfolio securities on account of each
fund; (iii) accepts receipts and makes disbursements of money on behalf of each
Veredus Trust fund; (iv) collects and receives all income and other payments and
distributions on account of each Veredus Trust fund's securities; and (v) makes
periodic reports to Veredus Trust's Board of Trustees concerning each Veredus
Trust fund's operations.
Bankers Trust Company ("Bankers Trust") serves as Custodian of
Alleghany's assets pursuant to a Custodian Agreement. Under such agreement,
Bankers Trust: (i) maintains a separate account or accounts in the name of each
Alleghany fund; (ii) holds and transfers portfolio securities on account of each
Alleghany fund; (iii) accepts receipts and makes disbursements of money on
behalf of each Alleghany fund; (iv) collects and receives all income and other
payments and distributions on account of each Alleghany fund's securities; and
(v) makes periodic reports to Alleghany's Board of Trustees concerning each
Alleghany fund's operations.
SHAREHOLDER TRANSACTIONS AND SERVICES. The Veredus Fund and the
Alleghany Fund offer generally similar shareholder services and transactions.
There are however, some differences. For example, the Veredus Fund and the
Alleghany Fund have different minimum investment requirements. In addition, the
Alleghany Fund provides additional methods of making subsequent purchases of
Alleghany Fund Shares by telephone or exchange which are not available with the
Veredus Fund. In addition, the Alleghany Fund offers a systematic withdrawal
program which is not offered by the Veredus Fund. Information about shareholder
transactions and services is set forth in the table below.
<PAGE>
SHAREHOLDER TRANSACTIONS AND SERVICES OF
THE ALLEGHANY FUND AND THE VEREDUS FUND
A. PURCHASE POLICIES
ALLEGHANY FUND VEREDUS FUND
Minimum Initial Investment $2,500,* except IRAs, and $10,000, except qualified
UGMAs retirement accounts and
medical savings accounts
$500 for IRAs and UGMAs $2,000 for qualified
retirement accounts and
medical savings accounts
$50 under Alleghany's $100 under Veredus
Automatic Investment Plan Fund's Automatic
Investment Plan
Minimum Subsequent Investment $50* $500
Purchase Methods
By Exchange Yes*** No
By Mail Yes** Yes
By Wire Yes Yes
By Telephone Yes*** No
Through Dealer or Broker Yes Yes
* For accounts opened through a fund network, the network minimums will
apply.
** Checks drawn only on banks located in the U.S.
*** Not available for initial investment.
B. REDEMPTION PROCEDURES
Both Alleghany Fund and Veredus Fund allow redemption of Fund shares
through an authorized selling or servicing agent, or by mail, telephone or wire.
There is a $20 charge for redemptions by wire from the Alleghany Fund. Unlike
Veredus Fund, Alleghany Fund also allows redemption through an automatic
withdrawal plan where the net asset value of the applicable account is $50,000
or more.
Alleghany may, upon 60 days' notice, close a shareholder's account and
send the shareholder the proceeds if the balance falls below $50. Veredus Fund
may, upon 30 days' notice, close a shareholder's account and send the
shareholder the proceeds if the balance falls below $10,000 ($2,000 for
qualified retirement accounts and medical savings accounts).
C. ADDITIONAL SHAREHOLDER SERVICES
The Alleghany Fund provides share exchange privileges for shares of the
same class of any of the other funds within Alleghany. The Alleghany Fund also
has a Systematic Withdrawal Program, for accounts of $50,000 or more which
allows for a designated distribution ($50 or more) paid monthly, quarterly,
semi-annually or annually to the investor.
D. DIVIDENDS AND DISTRIBUTIONS
The Funds' policies concerning the declaration and payment of dividends
and net capital gains are substantially identical. Both Alleghany Fund and
Veredus Fund pay dividends from the respective Fund's net income from interest
and dividends quarterly and from the net capital gain from sale of portfolio
securities at least annually unless they are used to offset losses carried
forward from prior years, in which case no such gain is distributed. Dividends
from dividend income and capital gain are reinvested in Fund Shares unless the
investor instructs the Fund otherwise. Neither Alleghany Fund nor Veredus Fund
imposes a sales charge for reinvesting dividends.
<PAGE>
FORMS OF ORGANIZATION. Veredus Trust and Alleghany are open-end series
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Veredus Trust is organized as an
Ohio business trust and is governed by the provisions of its Agreement and
Declaration of Trust (the "Declaration of Trust"), By-Laws, a Board of Trustees
and Ohio law. Alleghany is organized as a Delaware business trust and is
governed by the provisions of its Trust Instrument, as amended and supplemented,
By-Laws, Board of Trustees and Delaware law.
Under Ohio law, shareholders are not liable for any act, omission or
obligation of a business trust or its trustees. In addition, the Declaration of
Trust of Veredus Trust disclaims shareholder liability for acts or obligations
of Veredus Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by Veredus Trust or
the Board of Trustees of Veredus Trust; however, the omission of such a
disclaimer will not operate to create personal liability for any shareholders.
The Declaration of Trust also provides for indemnification out of a fund's
property for all loss and expense of any shareholder of that fund held liable on
account of being or having been a shareholder.
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. Not all states have similar statutory or other
authority limiting business trust shareholder liability. As a result, to the
extent that Alleghany, a series thereof or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law,
and may thereby subject shareholders of a Delaware trust to liability. To guard
against this risk, the Trust Instrument of Alleghany, (a) provides that any
written obligation of Alleghany may contain a statement that such obligation may
only be enforced against the assets of Alleghany or the particular series in
question and the obligation is not binding upon the shareholders of Alleghany;
however, the omission of such a disclaimer will not operate to create personal
liability for any shareholders; and (b) provides for indemnification out of
trust property of any shareholder held personally liable for the obligations of
Alleghany.
Accordingly, the risk of a shareholder of Alleghany or Veredus Trust
incurring financial loss beyond that shareholder's investment because of
shareholder liability is limited to circumstances in which: (i) the court
refuses to apply Delaware or Ohio law (or the law of a state with similar
limitation of personal liability); (ii) no contractual limitation of liability
was in effect; and (iii) Alleghany or Veredus Trust, as the case may be, itself
would be unable to meet its obligations. In light of applicable state law, the
nature of Alleghany's and Veredus Trust's business, and the nature of their
assets, the risk of personal liability to a shareholder of Alleghany or Veredus
Trust is remote.
PRINCIPAL RISK FACTORS. Because of the substantially identical nature
of the investment objectives, policies and restrictions of the Veredus Fund and
the Alleghany Fund, an investment in the Alleghany Fund involves risks that are
similar to those of the Veredus Fund. These investment risks, in general,
include those typically associated with investing in a portfolio of equity
securities of companies whose earnings are growing at an accelerating rate.
GOVERNING DOCUMENTS.
Trustees. Each of Veredus Trust and Alleghany are governed by their
respective trust documents, in the case of Veredus Trust its Declaration of
Trust and, in the case of Alleghany its Trust Instrument (each a "Governing
Document" and collectively the "Governing Documents"). Each such Governing
Document requires that the affairs of Veredus Trust or Alleghany, as
appropriate, be administered by a Board of Trustees (the "Board"). Both Veredus
Trust's and Alleghany's Governing Documents allow their Boards to consist of one
Trustee. The Alleghany Board is elected by the shareholders of Alleghany.
Pursuant to Veredus Trust's Governing Document, the shareholders of Veredus
Trust elect Trustees, however, such Trustees may elect their own successors. The
Trustees of both Veredus Trust and Alleghany may appoint Trustees to fill
vacancies on their respective Boards. Shareholders of Veredus Trust may also
elect Trustees to fill vacancies on the Veredus Trust Board. If Veredus Trust
<PAGE>
Trustees appoint a Trustee to fill any vacancy (or elect their own successors),
at least two-thirds of the Trustees (including such appointed Trustee) must have
been elected by the shareholders of Veredus Trust. Both Veredus Trust and
Alleghany Trustees serve until they resign or are removed. The Governing
Documents each contain provisions protecting third-parties relying on the
authority of Trustees apparently acting in their capacities as Trustees, and
each of Veredus Trust and Alleghany are consequently liable for the actions of
their Trustees. Pursuant to the Veredus Trust Governing Document, Trustees are
entitled to receive compensation for their services to Veredus Trust, which
compensation is set by the Board. Similarly, the Alleghany Board has the
authority, pursuant to the Alleghany Governing Document, to set the
compensation, if any, of officers and Trustees. Trustees of Veredus Trust or
Alleghany may be removed at any time by two-thirds of their respective Trustees
or shareholders.
Personal Liability; Indemnification. Trustees and officers of both
Veredus Trust and Alleghany are relieved from personal liability for any actions
taken in their capacities as Trustees or officers, as long as those actions do
not constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties as Trustees or officers. The indemnity provided by
both Governing Documents requires Veredus Trust or Alleghany, as appropriate, to
pay expenses for the defense of and reimburse the indemnified party for any
liability arising out of any lawsuit or other action brought against a Trustee
or officer for actions taken in their capacities as officers or Trustees,
subject to the limitations set forth above. Each of Veredus Trust and Alleghany
are also permitted, in the case of Alleghany, and required, in the case of
Veredus Trust, to advance expenses of defense prior to a final disposition of
the action, provided that the party receiving the advance provides an
undertaking to reimburse such payment in the event that it is found that the
liability arose out of actions taken for which indemnification is prohibited by
the relevant Governing Document. Both Governing Documents provide that a
shareholder is not personally liable by virtue of having been a shareholder, and
that such shareholder is entitled to indemnification out of the assets of the
series in which his shares are held, for indemnification from such liability.
Redemption of Shares. Both Governing Documents allow shareholders to
make requests for redemptions. With respect to Alleghany, such requests may be
made at any time. With respect to Veredus Trust, such requests may be made at
times permitted by the Trust, but no less frequently than once each week. Both
Governing Documents also allow the Trustees to postpone payment of the
redemption price as permitted under the 1940 Act and to suspend the right to
redemptions at any time for an indefinite period of time. The Alleghany Trustees
may also elect to make redemptions to the extent such redemptions are deemed
necessary by the Trustees to maintain Alleghany's qualifications as a regulated
investment company under the Internal Revenue Code. The Governing Document for
Veredus Trust also allows Veredus Trust to make certain optional redemptions of
shares if (a) the Trustees determine that a failure to redeem such shares may
have materially adverse consequences to all or any of the holders of shares, or
any series or class of shares, of Veredus Trust, or (b) upon such other
conditions as determined by the Trustees and set forth in the then current
Prospectus of Veredus Trust with respect to maintenance of a minimum amount in
shareholders' accounts.
Assets of Trust. The Governing Documents of both Alleghany and Veredus
Trust provide that each series of shares represents a beneficial interest in
only the assets of that series, for which separate accounts are kept. In
addition, the Alleghany and Veredus Trust Governing Documents both specify that
creditors of a particular series are entitled to look to the assets of only that
series to satisfy indebtedness of that series. Both Veredus Trust and Alleghany
Trustees may, in their sole discretion, allocate assets and liabilities among
series, if such assets and liabilities are not readily identifiable as allocable
to a particular series.
Determination of Net Asset Value. The net asset value for any series of
Alleghany is determined by subtracting the liabilities of that particular series
from the assets thereof (such assets to be valued at market value, if a market
is readily identifiable, or fair value if no market can be identified). The
Trustees of Alleghany may, however, adopt an alternative method of valuation. If
the net income of any Alleghany series is a negative number, the Trustees are
permitted, pursuant to the Governing Document, to (a) offset the negative sum
pro rata against the accrued dividends of the shareholders of such series, (b)
reduce the outstanding shares of such series, and/or (c) reduce the payment of
declared dividends until such net number reaches zero.
<PAGE>
The net asset value for any series of Veredus Trust is determined by
dividing the value of the assets (less any liabilities) of that series by the
total number of shares of that series or class outstanding, all determined in
accordance with methods and procedures established by the Veredus Trust
Trustees. Net asset value is determined separately for each class of a series.
The Veredus Trust Trustees may determine to maintain the net asset value per
share of any Veredus Trust series or class at a designated constant dollar
amount and may adopt procedures, consistent 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 handling of any losses attributable to that
series or class. Such procedures may provide that in the event of any loss each
Veredus Trust shareholder will be treated as having contributed to the capital
of Veredus 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.
Custodian. Alleghany is at all times required by its Governing Document to
employ a Custodian for the accounts of Alleghany. Veredus Trust is subject to a
similar requirement pursuant to its By-laws.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS; SHAREHOLDER PROPOSALS FOR FUTURE
MEETINGS. Neither Alleghany nor Veredus Trust presently intends to hold annual
meetings of shareholders for the election of Trustees and other business unless
otherwise required by the 1940 Act. Under certain circumstances, however,
shareholders of the Veredus Fund have the right to call a meeting of
shareholders. If the Trustees fail to call or give notice of a meeting of
shareholders for a period of 30 days after written request by shareholders
holding at least 25% of the shares then outstanding requesting a meeting be
called for any other purpose requiring action by the shareholders pursuant to
the Veredus Trust Declaration of Trust, then shareholders holding at least 25%
of the shares then outstanding may call and give notice of such meeting.
Similarly, under certain circumstances, shareholders may request that the
Trustees of Alleghany call a shareholder meeting; the Secretary of Alleghany
shall call a meeting upon the written request of shareholders owning at least
10% of the outstanding Shares entitled to vote and upon payment by such
shareholders of the estimated cost of preparing and mailing a notice of the
meeting. All shareholder proposals for inclusion in a proxy statement for any
subsequent meeting of shareholders must be received by the relevant Fund a
reasonable period of time prior to any such meeting.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF APPROVAL
OF THE AGREEMENT AND PLAN OF REORGANIZATION.
PROPOSAL 2. APPROVAL OF INTERIM MANAGEMENT AGREEMENT FOR PERIOD BETWEEN PURCHASE
TRANSACTION AND CONSUMMATION OF REORGANIZATION
Veredus Trust shareholders are being asked to approve an interim
Management Agreement between Veredus Trust and VAM for the period between the
purchase by AAM of a substantial interest in VAM (the "Purchase Transaction")
and consummation of the Reorganization (the "Interim Agreement"). The Interim
Agreement will be identical in all respects to the Current Agreement except that
the Interim Agreement will be dated the date of shareholder approval of the
Interim Agreement.
SUMMARY OF PURCHASE TRANSACTION. VAM, AAM and the members of VAM
entered into a Subscription Agreement dated September _____, 1998 (the
"Subscription Agreement"). Pursuant to this agreement, AAM will acquire a 40%
interest, and three options to acquire an additional 10% interest each, in VAM,
for an aggregate subscription cost payable to VAM of $1,125,000. The purchase
price is payable at closing of the transaction in immediately available funds.
The options are exercisable in calendar year 2003, 2005 and 2007, respectively.
The exercise price for each of the options will be the fair market value at the
time of exercise of the units of membership interest. VAM will enter into
employment agreements with B. Anthony Weber and Charles P. McCurdy, Jr. at the
same time the Subscription Agreement is executed. Consummation of the purchase
is subject to a number of conditions.
<PAGE>
Pursuant to the Subscription Agreement, AAM will be entitled to
designate two of the five directors of VAM. Mr. Weber will be entitled to
designate three of the directors. If and when AAM acquires 50% of VAM pursuant
to the options granted to it, AAM will be entitled to designate a majority of
the directors of the Board of VAM.
Mr. Weber, a Trustee of Veredus Trust, is the controlling member of VAM
and, as a result, will benefit from AAM's purchase of an interest in VAM.
TERMS OF CURRENT AGREEMENT. Under the Current Agreement, the Adviser
provides the Veredus Fund investment advice and furnishes a continuous
investment program for the Veredus Fund. The Adviser bears all of the operating
expenses of the Veredus Fund except brokerage fees and commissions, taxes,
interest, fees and expenses of the non-interested trustees and extraordinary or
non-recurring expenses.
The Adviser selects brokers or dealers with whom to place purchase and
sale orders for portfolio securities, subject to the periodic review of Veredus
Trust. In such selection and placement of orders, the Adviser must seek the best
qualitative execution, taking into account such factors as price, the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the brokerage and research services provided by the broker or dealer.
The Current Agreement provides that the Adviser is not liable for any
act or omission in connection with services rendered under the Current
Agreement, unless there has been willful misfeasance, bad faith or gross
negligence on the Adviser's part in performing, or by reckless disregard of, its
duties under the Current Agreement.
The Current Agreement also provides that it will remain in effect until
two years from the date of its execution and will continue in effect from year
to year thereafter only if approved annually by (i) the vote of the Veredus
Trust Board or by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Veredus Fund, and (ii) a majority of the
independent Trustees, by a vote cast in person at a meeting called for that
purpose. The Current Agreement terminates automatically in the event of its
assignment. It may also be terminated without penalty on 60 days' written notice
by the Board, by the vote of a majority of the outstanding voting securities of
the Veredus Fund, or by the Adviser.
Under the Current Agreement, all rights to the name "Veredus" belong to
the Adviser and Veredus Trust is granted a limited license (without charge) to
use "Veredus" in the Fund or any class name. Veredus Trust's right to use the
name automatically ceases 90 days following termination of the Current
Agreement. The Adviser may also withdraw the right to the name while the Current
Agreement is in effect upon 90 days' written notice to Veredus Trust.
The Current Agreement provides that the Trustees, officers and
shareholders are not liable for the obligations of Veredus Trust.
For its services under the Current Agreement, the Adviser receives
monthly a fee at the annual rate of 1.50% of the average daily net assets minus
the amount by which the Veredus Fund's total expenses (including organizational
expenses, but excluding brokerage, taxes, interest and extraordinary expenses)
exceeds 1.50%. The Current Agreement is dated June 10, 1998 and was approved by
the sole shareholder of Veredus Fund on June 23, 1998 in connection with the
establishment of the Veredus Fund. As of the date hereof, Veredus Fund has paid
$______ in management fees to VAM since the Fund was established in June 1998.
MANAGEMENT OF ADVISER. The following table sets forth the name, address
and principal occupation of the principal executive officer and manager of the
Adviser. The Adviser is a manager-managed limited liability company.
<PAGE>
<TABLE>
<S> <C> <C>
Name and Address Position with Adviser Principal Occupation
B. Anthony Weber President and Chief Investment Officer, President and Chief Executive Officer of
6900 Bowling Blvd., Suite 250 Manager VAM, LLC
Louisville, Kentucky 40207
</TABLE>
TRUSTEES AND OFFICERS OF FUND
The name of the Trustees and executive officers of Veredus Trust are
shown below. Each Trustee who is an "interested person" of Veredus Trust, as
defined in the 1940 Act, is indicated by an asterisk.
Name and Address Position With Veredus Trust
B. Anthony Weber* (1) Trustee, President and
6900 Bowling Blvd., Suite 250 Treasurer
Louisville, Kentucky 40207
Charles P. McCurdy, Jr.* (2) Trustee and Secretary
6900 Bowling Blvd., Suite 250
Louisville, Kentucky 40207
James R. Jenkins* (3) Chief Financial Officer
6900 Bowling Blvd., Suite 250
Louisville, Kentucky 40207
Michael B. Mountjoy Trustee
2300 Waterfront Plaza
Louisville, Kentucky 40202
Michael J. Kelley Trustee
3170 Wasson Road
Cincinnati, Ohio 45209
J. Sherman Henderson, III Trustee
9931 Corporate Campus, Suite 3000
Louisville, Kentucky 40223
- ----------
(1) Mr. Weber is the President and Chief Investment Officer of the Adviser. Mr.
Weber controls the Adviser, holding 70% of membership interests in the
Adviser.
(2) Mr. McCurdy is the Executive Vice President and Director of Research of the
Adviser. He owns 10% of the membership interests in the Adviser.
(3) Mr. Jenkins is the Vice President and Chief Operating Officer of the
Adviser. He owns 5% of the membership interests in the Adviser.
REASONS FOR AN INTERIM AGREEMENT.
Under the 1940 Act, any "assignment" of the adviser's existing advisory
agreement results in a termination of such agreement. Under the 1940 Act, the
Purchase Transaction will result in an assignment and will terminate the Current
Agreement.
The Trustees considered, among other factors, the services provided by
VAM under the Current Agreement, the fact that terms of the Current Agreement
and the proposed Interim Agreement will be identical (except for the date of the
Interim Agreement), the financial condition of VAM, and that the Reorganization
may not be fully completed when the Purchase Transaction is consummated.
<PAGE>
As a result, the Trustees, including the disinterested Trustees,
determined that it was in the best interests of the shareholders of the Veredus
Fund that the proposed Interim Agreement be adopted. At a meeting on October 26,
1998, the disinterested Trustees and the Board of Trustees as a whole approved
the adoption of the Interim Agreement and voted to submit approval of the
Interim Agreement to a vote of the shareholders of Veredus Fund, and recommend
its approval. If approved by the shareholders, the Interim Agreement will take
effect upon shareholder approval and remain in effect until the Reorganization
is consummated. Upon consummation of the Reorganization, the New Agreement will
become effective. The terms of the New Agreement are discussed under Proposal 1.
See "Comparison of Veredus Fund and Alleghany Fund--Advisory Arrangements."
Under the 1940 Act, the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund is required for approval of
the Interim Agreement.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF APPROVAL
OF THE INTERIM AGREEMENT.
PROPOSAL 3. RATIFICATION OF INDEPENDENT AUDITORS
The Trustees, including a majority of the Trustees who are not "interested
persons" (as defined by the 1940 Act) of Veredus Fund, have selected the firm of
KPMG Peat Marwick LLP, independent auditors, to examine the financial statements
for the fiscal year of Veredus Fund ending in 1998. Such appointment is subject
to approval of the Reorganization, and to ratification of such appointment, by
the shareholders of Veredus Fund. Veredus Fund knows of no direct or indirect
financial interest of such firm in such Fund. In the event the Reorganization is
not approved, such appointment will not become effective, and Arthur Andersen
LLP shall continue as Veredus Fund's independent auditors.
[Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting, will be available to respond to questions from shareholders and will
have the opportunity to make a statement if they so desire.]
The affirmative vote of a majority of the shares of Veredus Fund present at
the Meeting in person or by proxy is required to ratify the selection of
independent auditors.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF RATIFICATION
OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS IN THE EVENT THE REORGANIZATION
IS APPROVED.
INFORMATION RELATING TO VOTING MATTERS
VOTING INFORMATION. This Proxy Statement is being furnished in connection
with the solicitation of proxies by Veredus Trust's Board of Trustees for the
Meeting. Only shareholders of record at the close of business on October 30,
1998 will be entitled to vote at the Meeting. Each whole or fractional share is
entitled to a whole or fractional vote. Shares represented by a properly
executed proxy will be voted in accordance with the instructions thereon or, if
no specification is made, the persons named as proxies will vote in favor of
each proposal set forth in the Notice of Meeting. Proxies may be revoked at any
time before they are exercised by submitting to Veredus Trust a written notice
of revocation or a subsequently executed proxy or by attending the Meeting and
voting in person.
The Alleghany Fund is a newly organized _______ of Alleghany. As part of
its organization, the Alleghany Fund assigned one share to Alleghany.
Accordingly, Alleghany is the sole shareholder of the Alleghany Fund.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement and
related matters, the Interim Agreement, and ratification of the independent
auditors are being submitted for approval at the Meeting to Veredus Trust's
shareholders pursuant to the provisions of Veredus Trust's Declaration of Trust.
Approval of both the Reorganization Agreement and the Interim Agreement require
the approval of a majority (as defined in the 1940 Act) of the outstanding
shares of the Veredus Fund. Ratification of the independent auditors requires
the affirmative vote of a majority of the shares of Veredus Fund present at the
Meeting in person or by proxy.
<PAGE>
The approval of the Reorganization Agreement by the Trustees of Veredus
Trust is discussed above under "Information Relating to the Proposed
Reorganization--Board Consideration." The Reorganization Agreement was approved
by the Trustees of Alleghany at a meeting held on [__________, 1998]. Approval
of the Interim Agreement by the Trustees of Veredus Trust is discussed above
under "Reasons for an Interim Agreement." Ratification of KPMG Peat Marwick LLP
as the independent auditors of Veredus Fund is discussed above under
"Ratification of Independent Auditors."
QUORUM; ANY ADJOURNMENTS OR REQUIRED VOTES. In the event that a quorum, or
a majority of the shares of the Veredus Fund entitled to vote at the Meeting, is
not present at the Meeting, or in the event that a quorum is present at the
Meeting but sufficient votes to approve the Reorganization Agreement or the
Interim Agreement are not received by the Veredus Fund, one or more
adjournment(s) may be proposed and approved by a majority of the shareholders
represented at the meeting to permit further solicitation of proxies. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice. If a
meeting is adjourned with respect to a proposal, any other proposal may still be
acted on by shareholders. The persons named as proxies will vote in favor of
such adjournment those proxies which are entitled to vote in favor of the
proposal. They will vote against any such adjournment those proxies required to
be voted against the proposal. A majority of the shares voted, at a shareholder
meeting at which a quorum is present, shall decide any questions, except when a
higher number is required or permitted by any provision of the 1940 Act or other
applicable law or by the Veredus Trust Agreement and Declaration of Trust or
By-Laws. Under the 1940 Act, the vote of a majority of shares means the vote (i)
of 67% or more of the shares present at the meeting, if holders of more than 50%
of the outstanding shares are present in person or by proxy, or (ii) of more
than 50% of the outstanding Shares, whichever is less. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions will be treated as shares that are present at the Meeting but which
have not been voted. Abstentions will have the effect of a "no" vote for
purposes of obtaining the requisite approvals. Broker "non-votes" (that is,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as abstentions, the effect of which is
described above. SHAREHOLDER PROPOSALS To be considered for presentation at a
shareholders' meeting, rules promulgated by the SEC require that, among other
things, a shareholder's proposal must be received at the offices of the Fund a
reasonable time before a solicitation is made. Timely submission of a proposal
does not necessarily mean that such proposal will be included. Any shareholder
who wishes to submit a proposal for consideration at a meeting of the Fund
should send such proposal to the Fund at 6900 Bowling Blvd., Suite 250,
Louisville, Kentucky 40207.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of , 1998, the officers and Trustees of Veredus Trust as a group
owned less than 1% of the Veredus Fund. The following table shows the name,
address and share ownership of each person known to Veredus Trust to have
beneficial or record ownership with respect to 5% or more of the shares of
Veredus Fund as of October 30, 1998. As a result of the Reorganization, it is
anticipated that the following persons shall have the same ownership in the
Alleghany Fund.
Amount of
Shares Owned; Percentage
NAME AND ADDRESS Type of Ownership of Fund
*Shares are believed to be held only as nominee.
For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder or more than 25% of the Veredus Fund shares, or is identified as the
holder of record of more than 25% of the Veredus Fund shares and has voting
and/or investment power, it may be presumed to control the Veredus Fund.
<PAGE>
OTHER BUSINESS
Veredus Trust's Board of Trustees knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the VAM in writing at the
addresses, or by phone at the phone numbers, on the cover page of this Proxy
Statement.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFACSIMILE.
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") is made as of this ___ day of _______, 1998, by and between
Alleghany Funds ("Alleghany"), a Delaware business trust, for itself and on
behalf of Alleghany/Veredus Aggressive Growth Fund (the "Acquiring Fund"), and
Veredus Funds ("Veredus"), an Ohio business trust, for itself and on behalf of
Veredus Growth Fund (the "Acquired Fund").
In accordance with the terms and conditions set forth in this
Reorganization Agreement, the parties desire that substantially all of the
assets of the Acquired Fund be transferred to the Acquiring Fund, in exchange
for shares of the Acquiring Fund ("Acquiring Fund Shares") and the assumption by
the Acquiring Fund of substantially all of the liabilities of the Acquired Fund,
and that such Acquiring Fund Shares be distributed immediately after the
Closing, as defined in this Reorganization Agreement, by the Acquired Fund to
its shareholders in liquidation of the Acquired Fund. It is intended that the
reorganization described in this Reorganization Agreement shall qualify as a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1 REORGANIZATION OF ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, the Acquired Fund
shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2 and identified in Schedule A (the "Fund Assets") to the Acquiring
Fund, and the Acquiring Fund shall, as consideration therefor, on the Closing
Date (as defined in paragraph 3.1), (i) deliver to the Acquired Fund a number
Shares of beneficial interest of the Acquiring Fund having an aggregate net
asset value equal to the value of the Fund Assets attributable to shares of the
Acquired Fund transferred to the Acquiring Fund on such date less the value of
the liabilities of the Acquired Fund assumed by the Acquiring Fund on that date,
and (ii) assume the Acquired Fund's liabilities as described in paragraph 1.3
("Liabilities"). Such transfer, delivery and assumption shall take place at the
closing provided for in paragraph 3.1 (hereinafter sometimes referred to as the
"Closing"). Promptly after the Closing, the Acquired Fund shall distribute the
Acquiring Fund Shares to the shareholders of the Acquired Fund in liquidation of
the Acquired Fund as provided in paragraph 1.4 hereof. Such transaction is
hereinafter sometimes collectively referred to as the "Reorganization."
1.2. With respect to the Acquired Fund, the Fund Assets shall consist
of all property and assets of any nature whatsoever, including, without
limitation, all cash, cash equivalents, securities, claims and receivables
(including dividend and interest receivables) owned by the Acquired Fund, and
any prepaid expenses shown as an asset on the Acquired Fund's books on the
Closing Date. Notwithstanding the foregoing, the assets to be acquired will not
include cash or cash equivalents in the amount necessary to pay the dividends or
other distributions contemplated by paragraph 1.4.
1.3 Except as otherwise provided herein, as of the Closing Date, the
Acquiring Fund will assume from the Acquired Fund all debts, liabilities,
obligations and duties of the Acquired Fund of whatever kind or nature, whether
absolute, accrued, contingent or otherwise, arising in the ordinary course of
business, whether or not determinable as of the Closing Date and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing, the
Acquiring Fund will not assume any Acquired Fund's obligation to pay certain
expenses incurred by the Acquired Fund in connection with the transactions
contemplated by this Agreement, or assume such Acquired Fund's obligation to pay
the dividends and/or other distributions contemplated by paragraph 1.4; and
further provided that the Acquired Fund agrees to utilize its best efforts to
discharge all of its known debts, liabilities, obligations and duties (other
than pursuant to paragraph 1.4) prior to the Closing Date. Without limiting the
generality of the foregoing, it is understood that recourse for the Acquired
Fund's Liabilities assumed by the Acquiring Fund shall, at and after the Closing
Date, be limited to the assets of the Acquiring Fund.
<PAGE>
1.4 Prior to the Closing Date, the Acquired Fund will declare a
dividend and/or other distribution to be paid within 30 days after the Closing
Date to its shareholders of record so that, upon such payment, it will have
distributed all of its investment company taxable income (computed without
regard to any deduction for dividends paid) and realized net capital gains, if
any, through and including the Closing Date.The Acquired Fund will endeavor to
discharge all of its known Liabilities and obligations prior to the Closing
Date.
1.5. Promptly after the Closing with respect to the Acquired Fund, the
Acquired Fund will distribute the Acquiring Fund Shares received by the Acquired
Fund pursuant to paragraph 1.1 PRO RATA (in accordance with the relation that
the number of Acquiring Fund Shares held by each shareholder bears to the total
number of Acquiring Fund Shares then outstanding) to holders of Acquired Fund
Shares, the holders entitled to such distributions being the shareholders of
record determined as of the close of business on the Closing Date ("Acquired
Fund Investors") in complete liquidation of the Acquired Fund. Such distribution
will be accomplished by an instruction, signed by an appropriate officer of
Veredus, to transfer the Acquiring Fund Shares then credited to the Acquired
Fund's account on the books of the Acquiring Fund to open accounts on the books
of the Acquiring Fund established and maintained by the Acquiring Fund's
transfer agent in the names of record of the Acquired Fund Investors and
representing the respective PRO RATA number of shares of the Acquiring Fund due
such Acquired Fund Investor. In exchange for Acquiring Fund Shares distributed,
all issued and outstanding shares of beneficial interest of the Acquired Fund
will be redeemed and canceled simultaneously therewith on the Acquired Fund's
books.
1.6. If a request shall be made for a change of the registration of
shares of the Acquiring Fund to another person from the account of the
shareholder in which name the shares are registered in the records of the
Acquired Fund it shall be a condition of such registration of shares that there
be furnished the Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in proper form for
transfer, and that the person requesting such registration shall pay to the
Acquiring Fund any transfer or other taxes required by reason of such
registration or establish to the reasonable satisfaction of the Acquiring Fund
that such tax has been paid or is not applicable. None of the outstanding shares
of Acquired Fund are in certificated form.
1.7. Following the transfer of assets by the Acquired Fund to the
Acquiring Fund, the assumption of the Acquired Fund's Liabilities as set forth
herein by the Acquiring Fund, and the distribution by the Acquired Fund of the
Acquiring Fund Shares received by it pursuant to paragraph 1.5, the Acquired
Fund shall, as soon as reasonably practicable, terminate the qualification,
classification and registration of the Acquired Fund at all appropriate federal
and state agencies. All reporting and other obligations of Veredus with respect
to the Acquired Fund shall remain the exclusive responsibility of Veredus up to
and including the date on which the Acquired Fund is terminated and
deregistered, subject to any reporting or other obligations described in
paragraph 4.10.
2. VALUATION
2.1. With respect to the Acquired Fund, the value of the Fund Assets
shall be the value of such assets computed as of the time at which its net asset
value is calculated pursuant to the valuation procedures set forth in the
Acquiring Fund's then current prospectus and statement of additional information
on the Closing Date (such time and date being herein called the "Applicable
Valuation Date").
2.2. The net asset value of a share of the Acquiring Fund shall be the
net asset value per share computed on the Applicable Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then current prospectus
and statement of additional information.
3. CLOSING AND CLOSING DATE
3.1. The Closing for the Reorganization shall occur on , 1998, or on
such other date as may be mutually agreed upon in writing by the officers of the
parties hereto (the "Closing Date"). The Closing shall be held at
______________________
__________________________________________________________or at such other
location as is mutually agreeable to the parties. All acts taking place at the
Closing shall be deemed to take place simultaneously as of _____ _____.m.
__________ time on the Closing Date unless otherwise provided.
<PAGE>
3.2. The Acquiring Fund's custodian shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired Fund's
portfolio securities, cash and any other assets have been delivered in proper
form to the Acquiring Fund on the Closing Date and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, have
been paid, or provision for payment shall have been made, by the Acquired Fund
in conjunction with the delivery of portfolio securities. Proper delivery of
cash shall be by wire to ___________________________, pursuant to instruction to
be delivered prior to the Closing.
3.3. Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of Alleghany and Veredus, accurate appraisal of the value of the
net assets of the Acquiring Fund or the Acquired Fund is impracticable, the
Applicable Valuation Date and Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed without
restriction or disruption and reporting shall have been restored.
3.4. With respect to the Acquired Fund, Veredus shall provide Alleghany
and its transfer agents with immediate access from and after the Closing Date to
(a) the computer, electronic or such other forms of records containing the
names, addresses and taxpayer identification numbers of all of the Acquired Fund
investors (each an "Acquired Fund Investor," and collectively, "Acquired Fund
Investors") and the number and percentage ownership of outstanding Acquired Fund
shares owned by each Acquired Fund Investor, all as of the Applicable Valuation
Date, and (b) all original documentation (including all applicable Internal
Revenue Service forms, certificates, certifications and correspondence) relating
to the Acquired Fund Investors' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Acquiring Fund shall
issue and deliver to the Secretary or Assistant Secretary of Veredus, acting on
behalf of the Acquired Fund, a confirmation evidencing the Acquiring Fund Shares
credited on the Closing Date or shall provide evidence satisfactory to the
Acquired Fund that the Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents of transfer, assignment or
conveyance as such other party or its counsel may reasonably request.
3.5. Within thirty (30) days after the Closing Date, the Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the Acquiring Fund a
statement of the Fund Assets and Liabilities, together with a list of the
Acquired Fund's portfolio securities and other assets showing the respective
adjusted bases and holding periods thereof for income tax purposes, as of the
Closing Date, certified by an appropriate officer of Veredus.
3.6 The Acquiring Fund will cause a confirmation statement to be mailed
or delivered to each Acquired Fund Investor setting forth the number of
Acquiring Fund Shares registered in such Acquired Fund Investor's name.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUND AND THE ACQUIRED FUND
4.1. The Acquired Fund has called or will call a meeting of its
shareholders to consider and act upon this Reorganization Agreement, and to take
all other actions reasonably necessary to obtain the approval of the
transactions contemplated herein, including approval for the Acquired Fund's
liquidating distribution of the Acquiring Fund Shares contemplated hereby, and
for Veredus to terminate the Acquired Fund's qualification, classification and
registration if requisite approvals are obtained with respect to the Acquired
Fund. Alleghany and Veredus will jointly prepare the notice of meeting, form of
proxy and proxy statement (collectively, "Proxy Materials") to be used in
connection with such meeting; provided that Alleghany has furnished or will
furnish Veredus with information relating to the shares of the Acquiring Fund to
be issued to the shareholders of the Acquired Fund as is reasonably necessary
for the preparation of the Proxy Materials.
4.2. Veredus, on behalf of the Acquired Fund, covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Reorganization Agreement.
4.3. Veredus, on behalf of the Acquired Fund, will provide the
Acquiring Fund with all such information as the Acquiring Fund reasonably
requests concerning the record and beneficial ownership of shares of the
Acquired Fund.
<PAGE>
4.4. Subject to the provisions hereof, Alleghany, on its own behalf and
on behalf of the Acquiring Fund; and Veredus, on its own behalf and on behalf of
the Acquired Fund, will take, or cause to be taken, all actions, and do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated herein.
4.5. Veredus, on behalf of the Acquired Fund, shall furnish to the
Acquiring Fund on the Closing Date, a final statement of the total amount of the
Acquired Fund's assets and Liabilities as of the Closing Date, which statement
shall be certified by an appropriate officer of Veredus as being determined in
accordance with generally accepted accounting principles consistently applied
and as being valued in accordance with paragraph 2.1 hereof. As promptly as
practicable, but in any case within sixty (60) days after the Closing Date,
Veredus, on behalf of the Acquired Fund, shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to Alleghany, on behalf of the Acquiring
Fund, a statement certified by an officer of Veredus of the Acquired Fund's
federal income tax attributes that will be carried over to the Acquiring Fund in
the Reorganization pursuant to Section 381 of the Code.
4.6. As soon after the Closing Date as is reasonably practicable,
Veredus, on behalf of the Acquired Fund: (a) shall prepare and file all federal
and other tax returns and reports of the Acquired Fund required by law to be
filed with respect to all periods ending on or before the Closing Date but not
theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were due and unpaid as of the
Closing Date.
4.7. With respect to the Acquiring Fund, Alleghany agrees to operate in
accordance with its then current prospectus and statement of additional
information prepared in accordance with Form N- 1A, including qualifying as a
regulated investment company under Subchapter M of the Code.
4.8. Following the transfer of assets by the Acquired Fund to the
Acquiring Fund in exchange for Acquiring Fund Shares and the assumption of the
Liabilities of the Acquired Fund as contemplated herein, Veredus will file any
required final regulatory reports, including but not limited to any Form N-SAR
and Rule 24f-2 filings with respect to such Acquired Fund, promptly after the
Closing Date and also will take all other steps as are necessary and proper to
effect the termination or declassification of the Acquired Fund of Veredus in
accordance with the laws of the State of Ohio and other applicable requirements.
4.10. The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any interest, cash or such dividends, rights and other payments received by
it on or after the Closing Date with respect to the investments and other
properties and assets of the Acquired Fund, whether accrued or contingent,
received by it on or after the Closing Date. Any such distribution shall be
deemed included in the assets transferred to the Acquiring Fund at the Closing
Date and shall not be separately valued unless the securities in respect of
which such distribution is made shall have gone "ex" such distribution prior to
the Applicable Valuation Date, in which case any such distribution which remains
unpaid at the Closing Date shall be included in the determination of the value
of the assets of the Acquired Fund acquired by the Acquiring Fund.
5. REPRESENTATIONS AND WARRANTIES
5.1 Alleghany, on behalf of itself and the Acquiring Fund, represents and
warrants to the Veredus as follows:
5.1.a. Alleghany was duly created pursuant to its Trust Instrument by the
Trustees for the purpose of acting as a management investment company
under the 1940 Act and is validly existing under the laws of the State
of Delaware, and the Trust Instrument directs the Trustees to manage
the affairs of Alleghany and grants them all powers necessary or
desirable to carry out such responsibility, including administering
Alleghany business as conducted by Alleghany and as described in the
current prospectuses of Alleghany; Alleghany is duly registered as an
investment company classified as an open-end management company, under
the 1940 Act and its registration with the SEC as an investment
company is in full force and effect;
<PAGE>
5.1.b. The Acquiring Fund is not in violation of, and the execution,
delivery and performance of this Reorganization Agreement by Alleghany
for itself and on behalf of the Acquiring Fund will not (i) violate
Alleghany's Trust Instrument or By-laws or (ii) result in a breach or
violation of, or constitute a default under any material Agreement or
material instrument, to which Alleghany is a party or by which its
properties or assets are bound;
5.1.c. Except as previously disclosed in writing to the Veredus, no
litigation or administrative proceeding or investigation of or before
any court or governmental body is presently pending or, to Alleghany's
knowledge, threatened against Alleghany or its business, the Acquiring
Fund or any of their properties or assets, which, if adversely
determined, would materially and adversely affect Alleghany or the
Acquiring Fund's financial condition or the conduct of their business,
and Alleghany knows of no facts that might form the basis for the
institution of any such proceeding or investigation, and the Acquiring
Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially
and adversely affects, or is reasonably likely to materially and
adversely affect, its business or its ability to consummate the
transactions contemplated herein;
5.1.d. All shares to be issued in connection with the Reorganization of the
Acquiring Fund will, as of the Closing Date, be duly authorized and
validly issued and outstanding, fully paid and non-assessable by
Alleghany and the Acquiring Fund has no outstanding options, warrants
or other rights to subscribe for or purchase any of its shares;
5.1.e. The execution, delivery and performance of this Reorganization
Agreement on behalf of the Acquiring Fund will have been duly
authorized prior to the Closing Date by all necessary action on the
part of Alleghany and the Trustees, and this Reorganization Agreement
constitutes a valid and binding obligation of Alleghany and the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
5.1.f. The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Investors, pursuant to the
terms hereof, will have been duly authorized as of the Closing Date
and, when so issued and delivered, will be duly and validly issued,
fully paid and non-assessable, and the shares of the Acquiring Fund
issued and outstanding prior to the Closing Date were offered and sold
in compliance with the applicable registration requirements, or
exemptions therefrom, of the 1933 Act, and all applicable state
securities laws, and the regulations thereunder;
5.1.g. On the effective date of the Registration Statement, at the time of
the meeting of the Acquired Fund shareholders and on the Closing Date,
any written information furnished by Alleghany with respect to
Acquiring Fund for use in the Proxy Materials or any other materials
provided in connection with the Reorganization does not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the information provided not
misleading, and the Registration Statement will comply in all material
respects with the applicable provisions of the Securities Exchange Act
of 1934 (the "1934 Act") and the 1940 Act;
5.1.h. No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware
law for the execution of this Reorganization Agreement by Alleghany,
for itself and on behalf of the Acquiring Fund, or the performance of
the Reorganization Agreement by Alleghany, for itself and on behalf of
the Acquiring Fund, except for such consents, approvals,
authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date;
<PAGE>
5.1.i. All federal and other tax returns and reports of Alleghany and the
Acquiring Fund required by law to be filed on or before the Closing
Date have been or will be filed, and all federal and other taxes owed
by Alleghany on behalf of the Acquiring Fund have been or will be paid
so far as due, and to the best of Alleghany's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to any such return;
5.1.j. At the Closing Date, the Acquiring Fund will have good and
marketable title to their assets and full right, power and authority
to assign, deliver and otherwise transfer such assets;
5.1.k. The Acquiring Fund was established by the Trustees of Alleghany in
order to effect the transactions described in this Reorganization
Agreement. The Acquiring Fund has not yet filed its first federal
income tax returns and, thus, has not yet elected to be treated as a
"regulated investment company" for federal income tax purposes.
However, upon filing its first income tax return at the completion of
its first taxable year, the Acquiring Fund will elect to be a
"regulated investment company" and until such time will take all steps
necessary to ensure that its qualifies for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code;
5.1.l. Immediately following consummation of the Reorganization, Acquiring
Fund will hold the same assets except for assets distributed to
shareholders who receive cash or other property - and be subject to
the same Liabilities that Acquired Fund held or was subject to
immediately prior thereto, plus any Liabilities and expenses of the
parties incurred in connection with the Reorganization;
5.1.m. Acquiring Fund has not commenced operations and will not commence
operations until after the Closing;
5.1.n. Prior to the Closing, there will be no issued and outstanding
Acquiring Fund Shares or any other securities issued by Acquiring
Fund, except one share issued at the creation of the Acquiring Fund
which will be redeemed contemporaneously with the Closing;
5.1.o. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for
the Fund Assets in the Reorganization;
5.1.p. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an
open-end investment company; nor does Acquiring Fund have any plan or
intention to redeem or otherwise reacquire any Acquiring Fund Shares
issued pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of such business;
5.1.q. Acquiring Fund (a) will actively continue Acquired Fund's business
in substantially the same manner that Acquired Fund conducted that
business immediately before the Reorganization, (b) has no plan or
intention to sell or otherwise dispose of any of the Fund Assets,
except for dispositions made in the ordinary course of that business
and dispositions necessary to maintain its status as a RIC, and (c)
expects to retain substantially all the Fund Assets in the same form
as it receives them in the Reorganization, unless and until subsequent
investment circumstances suggest the desirability of change or it
becomes necessary to make dispositions thereof to maintain such
status; and
5.1.r. There is no plan or intention for Acquiring Fund to be dissolved or
merged into another corporation or business trust or "fund" thereof
(within the meaning of Section 851(h)(2) of the Code) following the
Reorganization;
<PAGE>
5.2. Veredus, on behalf of itself and the Acquired Fund, represents and
warrants to Alleghany as follows:
5.2.a. Veredus was duly created pursuant to its Agreement and Declaration
of Trust by the Trustees for the purpose of acting as a management
investment company under the 1940 Act and is validly existing under
the laws of the State of Ohio, and the Agreement and Declaration of
Trust directs the Trustees to manage the affairs of Veredus and grants
them all powers necessary or desirable to carry out such
responsibility, including administering Veredus business as currently
conducted by Veredus and as described in the current prospectus of
Veredus; Veredus is registered as an investment company classified as
an open-end management company, under the 1940 Act and its
registration with the SEC as an investment company is in full force
and effect;
5.2.b. All of the issued and outstanding shares representing units of
beneficial interest of the Acquired Fund have been offered and sold in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws;
5.2.c. The Acquired Fund is not in violation of, and the execution and the
performance of the Reorganization Agreement by Veredus for itself and
on behalf of the Acquired Fund does not and will not (i) violate
Veredus' Agreement and Declaration of Trust or By-Laws, or (ii) result
in a breach or violation of, or constitute a default under, any term
of any material agreement or material instrument to which Veredus is a
party or by which its properties or assets are bound, except as
otherwise disclosed in writing to the Acquiring Fund;
5.2.d. No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to
Veredus' knowledge, threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially
and adversely affect the Acquired Fund's financial condition or the
conduct of its business, and Veredus knows of no facts that might form
the basis for the institution of any such proceeding or investigation,
and the Acquired Fund is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body
that materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
[5.2.e. The Statement of Assets and Liabilities, Statement of Operations
and Statement of Changes in Net Assets of the Acquired Fund as of and
for the year ended _____________, audited by Arthur Andersen LLP
(copies of which have been or will be furnished to the Acquiring Fund)
fairly present, in all material respects, the financial condition of
the Acquired Fund as of such date and its results of operations for
such period in accordance with generally accepted accounting
principles consistently applied, and as of such date there were no
Liabilities of the Acquired Fund (contingent or otherwise) known to
Veredus that were not disclosed therein but that would be required to
be disclosed therein in accordance with generally accepted accounting
principles;]
[5.2.f. Since the date of the most recent audited financial statements,
there has not been any material adverse change in the Acquired Fund's
financial condition, assets, Liabilities or business, other than
changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed in writing to and accepted by the Acquiring Fund, prior to
the Closing Date (for the purposes of this subparagraph (f), neither a
decline in the Acquired Fund's net asset value per share nor a
decrease in the Acquired Fund's size due to redemptions shall be
deemed to constitute a material adverse change);]
<PAGE>
5.2.g. All federal and other tax returns and reports of Veredus and the
Acquired Fund required by law have been or will be filed, and all
federal and other taxes owed by Veredus and the Acquired Fund shall,
with respect to all periods ending on or before the Closing Date, have
been or will be paid so far as due, and to the best of Veredus'
knowledge, no such return is currently under audit and no assessment
has been asserted with respect to any such return;
5.2.h. For the partial taxable year from its inception through the Closing
Date, the Acquired Fund has not taken any action that would prevent
its qualification as a separate regulated investment company under
Subchapter M of the Code and will take all necessary and required
actions to maintain such status;
5.2.i. All issued and outstanding shares of the Acquired Fund are, and on
the Closing Date will be, duly authorized and validly issued and
outstanding, and fully paid and non-assessable by Veredus, and all
such shares will, at the time of the Closing, be held by the persons
and in the amounts set forth in the list of Acquired Fund Investors
provided to the Acquiring Fund, pursuant to paragraph 3.4, and the
Acquired Fund has no outstanding options, warrants or other rights to
subscribe for or purchase any of its shares, nor is there outstanding
any security convertible into any of its shares;
5.2.jAt the Closing Date, the Acquired Fund will have good and marketable
title to its Fund Assets and full right, power and authority to
assign, deliver and otherwise transfer such Fund Assets hereunder, and
upon delivery and payment for such Fund Assets as contemplated herein,
the Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the ownership or transfer thereof other
than such restrictions as might arise under the 1933 Act;
5.2.k. The execution, delivery and performance of this Reorganization
Agreement on behalf of the Acquired Fund will have been duly
authorized prior to the Closing Date by all necessary action on the
part of Veredus and the Trustees thereof, and this Reorganization
Agreement constitutes a valid and binding obligation of Veredus and
the Acquired Fund enforceable in accordance with its terms, subject as
to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
5.2.l. The Proxy Materials, insofar as it relates to materials provided by
Veredus or the Acquired Fund, (i) will comply in all material respects
with the applicable provisions of the 1934 Act and the 1940 Act and
the regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and as of such dates and times, any written information
furnished by Veredus, on behalf of the Acquired Fund, for use in the
Proxy Materials or in any other manner that may be necessary in
connection with the transactions contemplated hereby does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the information provided not misleading; and
5.2.m. No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Ohio law
for the execution of this Reorganization Agreement by Veredus, for
itself and on behalf of the Acquired Fund, or the performance of the
Reorganization Agreement by Veredus for itself and on behalf of the
Acquired Fund, except for the effectiveness of the Registration
Statement, and except for such other consents, approvals,
authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date.
5.2.n. There are no material contracts outstanding to which the Acquired
Fund is a party, other than as disclosed in the Proxy Materials or
prospectus relating to Veredus.
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUND
The obligations of Veredus to consummate the Reorganization with
respect to the Acquired Fund shall be subject to the performance by Alleghany,
for itself and on behalf of the Acquiring Fund, of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions with respect to the Acquiring Fund:
6.1. All representations and warranties of Alleghany with respect to
the Acquiring Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated herein, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2. Alleghany, on behalf of the Acquiring Fund, shall have delivered
to Veredus at the Closing a certificate executed on behalf of the Acquiring Fund
by Alleghany's President, Secretary, Assistant Secretary, or other authorized
officer, in a form reasonably satisfactory to the Veredus and dated as of the
Closing Date, to the effect that the representations and warranties of Alleghany
with respect to the Acquiring Fund made herein are true and correct at and as of
the Closing Date, except as they may be affected by the transactions
contemplated herein, and as to such other matters as the Acquired Fund shall
reasonably request.
6.3. The Acquired Fund shall have received at the Closing a favorable
opinion of Sonnenschein Nath & Rosenthal, counsel to Alleghany (based upon or
subject to such representations, assumptions, limitations or opinions of local
counsel as such
counsel may deem appropriate or necessary), dated as of the Closing Date, in a
form (including the representations, assumptions, limitations or opinions of
local counsel upon which it is based or to which it is subject) reasonably
satisfactory to the Acquired Fund, substantially to the effect that:
6.3.a. Alleghany is a duly registered, open-end, management
investment company, and its registration with the SEC as an
investment company under the 1940 Act is in full force and
effect;
6.3.b. the Acquiring Fund is a duly established and designated
portfolio of Alleghany, which is a business trust duly created
pursuant to its Trust Agreement, validly existing and in good
standing under the laws of the State of Delaware, and the
Trust Agreement directs the Trustees thereof to manage the
affairs of Alleghany and grants them all powers necessary or
desirable to carry out such responsibility, including
administering Alleghany's business as described in the current
prospectuses of Alleghany;
6.3.c. this Reorganization Agreement has been duly authorized,
executed and delivered on behalf of Alleghany and the
Acquiring Fund and, assuming due authorization, execution and
delivery of this Reorganization Agreement on behalf of the
Acquiring Fund, is a valid and binding obligation of Alleghany
enforceable against Alleghany in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
6.3.d. the Acquiring Fund Shares to be issued to the Acquired Fund
Investors pursuant to this Reorganization Agreement are duly
registered under the 1933 Act on the appropriate form, and are
duly authorized and upon such issuance will be validly issued
and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof;
6.3.e. the Registration Statement has become effective with the SEC
and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or threatened;
<PAGE>
6.3.f. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation by Alleghany of the
Reorganization with respect to the Acquiring Fund;
6.3.g. to such counsel's knowledge, the execution and delivery of the
Reorganization Agreement and the performance of its terms by
Alleghany, and the Acquiring Fund, do not violate or result in
a violation of the Alleghany Trust Agreement or By-laws or any
judgment, order or decree known to such counsel, of any court
or arbiter, to which Alleghany is a party, and, to such
counsel's knowledge, will not constitute a material breach of
the terms, conditions or provisions of, or constitute a
default under, any contract, undertaking, indenture or other
agreement by which Alleghany is now bound or to which it is
now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials, involving Alleghany or the Acquiring Fund,
are required to be described in the Proxy Materials which are
not described as required and (b) there are no contracts or
documents relating to Alleghany or the Acquiring Fund, known
to such counsel, of a character required to be described in
the Proxy Materials or Registration Statements to be filed as
an exhibit to the Registration Statement that are not
described or filed as required; and
6.3.i. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Alleghany or the Acquiring Fund or any of their properties or
assets and neither Alleghany nor the Acquiring Fund is a party
to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business.
6.4. As of the Closing Date with respect to the Reorganization of the
Acquired Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any material change in the investment
management fees, fee levels payable pursuant to the 12b-1 plan of distribution,
other fees payable for services provided to the Acquiring Fund, fee waiver or
expense reimbursement undertakings, of the Acquiring Fund from those fee
amounts, undertakings described in the prospectus of the Acquiring Fund
delivered to the Acquired Fund pursuant to paragraph 4.1 and in the Proxy
Materials.
6.5. With respect to the Acquiring Fund, the Board of Trustees of
Alleghany, including a majority of the "non- interested" Trustees, has
determined that the Reorganization is in the best interests of the Acquiring
Fund and that the interests of the existing shareholders of the Acquiring Fund
would not be diluted as a result of the Reorganization.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUND
The obligations of Alleghany to consummate the Reorganization with
respect to the Acquiring Fund shall be subject to the performance by Veredus of
all the obligations to be performed by it hereunder, with respect to the
Acquired Fund, on or before the Closing Date and, in addition thereto, the
following conditions:
<PAGE>
7.1. All representations and warranties of Veredus with respect to the
Acquired Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Reorganization Agreement, as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date.
7.2. Veredus, on behalf of the Acquired Fund, shall have delivered to
the Acquiring Fund at the Closing a certificate executed on behalf of the
Acquired Fund, by Veredus' President, Secretary or Assistant Secretary, or other
authorized officer, in form and substance satisfactory to the Acquiring Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of Veredus with respect to the Acquired Fund made herein are true and
correct at and as of the Closing Date, except as they may be affected by the
transactions contemplated herein and as to such other matters as the Acquiring
Fund shall reasonably request.
7.3. The Acquiring Fund shall have received at the Closing a favorable
opinion from Brown, Cummins & Brown Co., L.P.A., counsel to Veredus (based upon
or subject to such representations, assumptions, limitations or opinions of
local counsel as such counsel may deem appropriate or necessary), dated as of
the Closing Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or to which it
is subject) reasonably satisfactory to the Acquiring Fund, substantially to the
effect that:
7.3.a. Veredus is a duly registered, open-end investment company, and
its registration with the SEC as an investment company under
the 1940 Act is in full force and effect;
7.3.b. the Acquired Fund is a duly established and designated
portfolio of Veredus, Veredus is a business trust duly created
pursuant to its Agreement and Declaration of Trust, validly
existing and in good standing under the laws of the State of
Ohio, and the Agreement and Declaration of Trust directs the
Trustees to manage the affairs of Veredus and grants them all
powers necessary or desirable to carry out such
responsibility, including administering Veredus' business as
described in the current prospectus of Veredus;
7.3.c. this Reorganization Agreement has been duly authorized,
executed and delivered by Veredus on behalf of Veredus and the
Acquired Fund and, assuming due authorization, execution and
delivery of this Reorganization Agreement on behalf of the
Acquiring Fund, is a valid and binding obligation of Veredus,
enforceable against Veredus in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
7.3.d. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any state
is required for the consummation of the Reorganization with
respect to the Acquired Fund, except for such consents,
approvals, authorizations and filings as have been made or
received, and except for such consents, approvals, authorizations
and filings as may be required subsequent to the Closing Date;
7.3.e. to such counsel's knowledge, the execution and delivery of the
Reorganization Agreement and the performance of its terms by
Veredus, and the Acquired Fund, do not violate or result in a
violation of the Veredus' Agreement and Declaration of Trust
or By-Laws, or any judgment, order or decree known to such
counsel, of any court or arbiter, to which Veredus is a party,
and, to such counsel's knowledge, will not constitute a
material breach of the terms, conditions or provisions of, or
constitute a default under, any contract, undertaking,
indenture or other agreement by which Veredus is now bound or
to which it is now a party;
<PAGE>
7.3.f. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials involving Veredus or the Acquired Fund, are
required to be described in the Proxy materials which are not
described as required and (b) there are no contracts or
documents relating to Veredus or the Acquired Fund, known to
such counsel, of a character required to be described in the
Proxy Materials or Registration Statement to be filed as an
exhibit to the Registration Statement that are not described
or filed as required; and
7.3.g. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Veredus or the Acquired Fund or any of their properties or
assets and neither Veredus nor the Acquired Fund is a party to
or subject to the provisions of any order, decree or judgment
of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business.
7.4 Veredus shall have delivered to the Acquiring Fund, pursuant to
paragraph 5.2(e), copies of audited financial statements of the Acquired Fund as
of October 31, 1998.
7.5. With respect to the Acquired Fund, the Board of Trustees of
Veredus, including a majority of "non-interested" Trustees, has determined that
the Reorganization is in the best interests of the Acquired Fund and that the
interests of the existing investors in the Acquired Fund would not be diluted as
a result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
The obligations of the Acquiring Fund and of the Acquired Fund herein
are the subject to the further conditions that on or before the Closing Date:
8.1. This Reorganization Agreement and the transactions contemplated
herein shall have been approved by the requisite vote of the holders of the
outstanding shares of beneficial interest in the Acquired Fund in accordance
with the provisions of Veredus' Agreement and Declaration of Trust and the
requirements of the 1940 Act, and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Reorganization Agreement or any of the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC and of state securities
authorities) deemed necessary by Alleghany, on behalf of the Acquiring Fund, or
by Veredus, on behalf of the Acquired Fund, to permit consummation, in all
material respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or permit would
not, in the opinion of the party asserting that the condition to closing has not
been satisfied, involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund.
8.4. The Registration Statement of Acquiring Fund shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated under
the 1940 Act, the Acquired Fund shall have declared a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to the Acquired Fund's shareholders substantially all of its
investment company taxable income for all taxable years ending on or prior to
the Closing Date (computed without regard to any deduction for dividends paid)
and substantially all of its net capital gain for all taxable years ending on or
prior to the Closing Date (after reduction for any capital loss carry forward).
<PAGE>
8.6. The Acquiring Fund and the Acquired Fund shall have received from
KPMG Peat Marwick LLP a letter dated as of the Closing Date, in form and
substance satisfactory to Alleghany and to Veredus, to the effect that on the
basis of limited procedures agreed upon by Alleghany, on behalf of the Acquiring
Fund and Veredus, on behalf of the Acquired Fund (but not an examination in
accordance with generally accepted auditing standards): (i) the data utilized in
the calculations of the projected expense ratio appearing in the Proxy Materials
agree with underlying accounting records of the Acquiring Fund and the Acquired
Fund and (ii) certain other procedures as considered necessary by Alleghany.
8.7. Alleghany and Veredus shall have received an opinion of [Sonnenschein Nath
& Rosenthal] addressed to both the Acquiring Fund and the Acquired Fund
substantially to the effect that, for federal income tax purposes:
8.7.a. the transfer of all or substantially all of the Acquired Fund's
assets in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of the Liabilities as set forth
herein of the Acquired Fund will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code and the
Acquiring Fund and the Acquired Fund will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
8.7.b. no gain or loss will be recognized by the Acquired Fund upon
(i) the transfer of its assets to the Acquiring Fund solely in
exchange for the Acquiring Fund Shares, (ii) the assumption of
the Acquired Fund's Liabilities, and (iii) the constructive or
actual distribution by the Acquired Fund of the Acquiring Fund
Shares to the Acquired Fund shareholders in exchange for their
shares of the Acquired Fund;
8.7.c. no gain or loss will be recognized by the Acquiring Fund upon
(i) its receipt of assets from the Acquired Fund solely in
exchange for the Acquiring Fund Shares, (ii) the Acquiring
Fund's assumption of the Acquired Fund's Liabilities, and
(iii) the constructive or actual distribution by the Acquired
Fund of the Acquiring Fund Shares to the Acquired Fund
shareholders in exchange for their shares of the Acquired
Fund;
8.7.d. the aggregate federal income tax basis of the Acquired Fund's
assets received by the Acquiring Fund pursuant to the
Reorganization will be the same as the aggregate federal
income tax basis of those assets in the hands of the Acquired
Fund immediately prior to the Reorganization;
8.7.e. the holding period of the Acquired Fund's assets received by
the Acquiring Fund pursuant to the Reorganization will include
the period for which such assets have been held by the
Acquired Fund;
8.7.f. no gain or loss will be recognized by the Acquired Fund on the
distribution to its shareholders of the Acquiring Fund Shares
to be received by the Acquired Fund in the Reorganization;
8.7.g. no gain or loss will be recognized by the shareholders of the
Acquired Fund upon their receipt of the Acquiring Fund Shares
in exchange for such shareholders' shares of the Acquired
Fund;
8.7.h. the federal income tax basis of the Acquiring Fund Shares
received by the shareholders of the Acquired Fund will be the
same as the federal income tax basis of the Acquired Fund
shares exchanged by such shareholders pursuant to the
Reorganization;
<PAGE>
8.7.i the holding period for the Acquiring Fund Shares for which
shares of the Acquired Fund are exchanged pursuant to the
Reorganization will include the period that the Acquired Fund
shares have been held by the holder, provided that the
Acquired Fund shares have been held as a capital asset by the
holder; and
8.7.j the Acquiring Fund will succeed to and take into account the
tax attributes described in Section 381(c) of the Code of the
Acquired Fund as of the Closing Date, subject to the
conditions and limitations specified in the Code.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the condition set forth in this paragraph
8.7.
9. BROKERAGE FEES AND EXPENSES
9.1. Alleghany, for itself and on behalf of the Acquiring Fund, and
Veredus, on behalf of itself and on behalf of the Acquired Fund, represent and
warrant that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. Except as otherwise provided herein, Alleghany will bear the
expenses incurred in connection with entering into and carrying out the
provisions of this Reorganization Agreement, provided that Veredus shall be
responsible for all legal and accounting fees incurred by it or its affiliates
in connection with entering into and carrying out this Reorganization Agreement.
10. ENTIRE REORGANIZATION AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Reorganization Agreement constitutes the entire agreement
between the parties and supersedes any prior or contemporaneous understanding or
arrangement with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Reorganization Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated herein.
11. TERMINATION
11.1. This Reorganization Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
11.1.a. by the mutual written consent of Alleghany and Veredus;
11.1.b. by either Alleghany or Veredus by notice to the other, without
liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
default or breach of this Reorganization Agreement by such
terminating party) if such Closing shall not have occurred on
or before _________, 199__; or
11.1.c by either of Alleghany or Veredus, in writing without
liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
material default or breach of this Reorganization Agreement by
such terminating party), if (i) the other party shall fail to
perform in any material respect its agreements contained
herein required to be performed prior to the Closing Date,
(ii) the other party materially breaches or shall have
breached any of its representations, warranties or covenants
contained herein, or (iii) any other express condition
precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot
be met.
<PAGE>
11.2. Termination of this Reorganization Agreement pursuant to
paragraphs 11.1(a) or (b) shall terminate all obligations of the parties
hereunder with respect to the Acquired Fund and Acquiring Fund, or with respect
to Alleghany and Veredus, as the case may be, and there shall be no liability
for damages on the part of Alleghany or Veredus or the Trustees or officers of
Alleghany or Veredus, to any other party or its Trustees or officers on account
of termination pursuant to paragraphs 11.1(a) or (b); provided, however, that
notwithstanding any termination of this Reorganization Agreement pursuant to
paragraph 11.1, such termination shall not relieve either party of its
respective obligations pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Reorganization Agreement may be amended, modified or supplemented
in such manner as may be mutually agreed upon in writing by the authorized
officers of Alleghany, acting on behalf of the Acquiring Fund and the authorized
officers of Veredus, acting on behalf of the shareholders of the Acquired Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Fund, no such amendment may have the effect of changing the provisions
for determining the number of shares of the Acquiring Fund to be issued to the
Acquired Fund Investors under this Reorganization Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
the Acquired Fund, without the Acquired Fund obtaining the Acquired Fund
Investors' further approval except that nothing in this paragraph 12 shall be
construed to prohibit the Acquiring Fund and the Acquired Fund from amending
this Reorganization Agreement to change the Closing Date or Applicable Valuation
Date by mutual agreement.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Reorganization Agreement shall be in writing and shall be
given by prepaid telegraph, telecopy, certified mail or overnight express
courier addressed to:
For Alleghany, on behalf of itself and the Acquiring Fund:
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
Attention: President
with copies (which shall not constitute notice) to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Arthur J. Simon
For Veredus, on behalf of itself and the Acquired Fund:
Veredus Funds
6900 Bowling Blvd.
Suite 250
Louisville, KY 40207
Attention: President
with copies (which shall not constitute notice) to:
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower
Cincinnati, OH 45202
Attention: Donald S. Mendelsohn
<PAGE>
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Reorganization Agreement All references herein to
Articles, paragraphs, subparagraphs or Exhibits shall be construed as referring
to Articles, paragraphs or subparagraphs hereof or Exhibits hereto,
respectively. Whenever the terms hereto, hereunder, herein or hereof are used in
this Reorganization Agreement, they shall be construed as referring to this
entire Reorganization Agreement, rather than to any individual Article,
paragraph, subparagraph or sentence.
14.2. This Reorganization Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3. This Reorganization Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
14.4. This Reorganization Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other parties. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Reorganization Agreement
14.5. It is expressly agreed that the obligations of Alleghany
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of Alleghany personally, but shall bind only the
assets and the property of the Acquiring Fund of Alleghany, as provided in its
Trust Agreement. The execution and delivery by such officers shall not be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the assets and the property of the
Acquiring Fund of Alleghany as provided in its Trust Agreement.
14.6.It is expressly agreed that the obligations of Veredus hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of Veredus personally, but shall bind only the assets and
the property of the Acquired Fund of Veredus, as provided in its Agreement and
Declaration of Trust. The execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose any liability
on any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and the property of the Acquired Fund
of Veredus as provided in its Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Reorganization Agreement to be duly executed by its authorized officer, and
attested by its Secretary.
ALLEGHANY FUNDS, for itself and on
behalf of the Acquiring Fund
ATTEST:
________________________________ By: ________________________________
Secretary Stuart Bilton
Chairman of the Board
VEREDUS FUNDS
for itself and on behalf of
ATTEST: the Acquired Fund
________________________________ By: ________________________________
Secretary B. Anthony Weber
President
<PAGE>
APPENDIX II
FORM OF INVESTMENT ADVISORY AGREEMENT
Alleghany Veredus Aggressive Growth Fund
AGREEMENT made this _____ day of __________________, 1998 by and
between Alleghany Funds, a Delaware business trust (the "Trust") on behalf of
Alleghany Veredus Aggressive Growth Fund (the "Fund") and Veredus Asset
Management LLC (the "Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund.
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Fund and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
------------
adviser to the Fund for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to furnish the services herein
set forth, for the compensation herein provided.
2. Duties of Adviser. As investment adviser, the Adviser shall: (i) manage
-----------------
the investment and reinvestment of the assets of the Fund, (ii) continuously
review, supervise and administer the investment program of the Fund, (iii)
determine in its discretion, the assets to be held uninvested, (iv) provide the
Trust with records concerning the Adviser's activities which are required to be
maintained by the Trust, and (v) render regular reports to the Trust's officers
and Board of Trustees concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Fund's then effective prospectus and statement of additional information. The
Adviser accepts such employment and agrees to render such services and to
provide, at its own expense, the office space, furnishings, equipment and the
personnel required by it to perform such services on the terms and for the
compensation provided herein.
3. Portfolio Transactions. The Adviser shall select and monitor the
---------
selection of the brokers or dealers that will execute the purchases and sales of
securities for the Fund and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities transactions
for the Fund are obtained. Subject to policies established by the Board of
Trustees and communicated to the Adviser, it is understood that the Adviser will
not be deemed to have acted unlawfully, or to have breached a fiduciary duty to
the Trust or in respect of the Fund, or be in breach of any obligation owing to
the Trust or in respect of the Fund under this Agreement, or otherwise, solely
by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction for the Fund in excess of the amount of commission another member of
an exchange, broker or dealer would have charged if the Adviser determines in
good faith that the commission paid was reasonable in relation to the brokerage
or research services provided by such member, broker or dealer, viewed in terms
of that particular transaction or the Adviser's overall responsibilities with
respect to the accounts, including the Fund, as to which it exercises investment
discretion. The Adviser will promptly communicate to the officers and Trustees
of the Trust such information relating to Fund transactions as they may
reasonably request.
4. Compensation of the Adviser. For the services to be rendered by the
------------
Adviser as provided in Section 2 and 3 of this Agreement, the Fund shall pay to
the Adviser within five business days after the end of each calendar month, a
monthly fee of one twelfth of 1.00% of the Fund's average daily net assets for
that month. In the event of termination of this Agreement, the fee provided in
this Section 4 shall be paid on a pro-rata basis, based on the number of days
during which this Agreement was in effect.
5. Reports. The Fund and the Adviser agree to furnish to each other such
--------
information regarding their operations with regard to their affairs as each may
reasonably request.
6. Status of Adviser. The services of the Adviser to the Fund are not to be
------------------
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services to the Fund are not impaired thereby.
7. Liability of Adviser. In the absence of willful misfeasance, bad faith,
---------------------
gross negligence or reckless disregard by the Adviser of its obligations and
duties hereunder, the Adviser shall not be subject to any liability whatsoever
to the Fund, or to any shareholder of the Fund, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Fund.
8. Duration and Termination. The term of this Agreement shall commence on
--------------------------
the date which an amendment to the Trust's registration statement establishing
the Fund becomes effective (the "Effective Date"), provided that first it is
approved by the Board of Trustees of the Trust, including a majority of those
Trustees who are not parties to this Agreement or interested persons of any
party hereto, in the manner provided in Section 15(c) of the 1940 Act, and by
the holders of a majority of the outstanding voting securities of the Fund; and
shall continue in effect for two years thereafter. This Agreement may continue
in effect after its initial term only if such continuance is approved at least
annually by, (i) the Board of Trustees or, (ii) by the vote of a majority of the
outstanding voting securities of the Fund; and in either event by a vote of a
majority of those Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party in the manner provided in Section 15(c) of
the 1940 Act. Notwithstanding the foregoing, this Agreement may be terminated:
(a) at any time without penalty by the Fund upon the vote of a majority of the
Trustees or by vote of the majority of the Fund's outstanding voting securities,
upon sixty (60) days' written notice to the Adviser or (b) by the Adviser at any
time without penalty, upon sixty (60) days' written notice to the Fund. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed postpaid, to the other party at the
principal office of such party. As used in this Section 8, the terms
"assignment", "interested person", and "a vote of a majority of the outstanding
voting securities" shall have the respective meanings set forth in Section
2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2
thereunder.
9. Severability. If any provisions of this Agreement shall be held or made
--------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. Amendments. No provision of this Agreement may be changed, waived,
----------
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Trustees, including a
majority of the Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law. IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the day and
year first above written. ALLEGHANY FUNDS for ATTEST ALLEGHANY VEREDUS
AGGRESSIVE GROWTH FUND
______________________________ By:___________________________
, President
ATTEST VEREDUS ASSET MANAGEMENT LLC
______________________________ By:_____________________________
B. Anthony Weber, President
<PAGE>
PROXY
VEREDUS FUNDS
VEREDUS GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS
November __, 1998
The undersigned shareholder of the Veredus Growth Fund (the "Fund"), a
portfolio of Veredus Funds (the "Trust"), hereby nominates, constitutes and
appoints Charles P. McCurdy, Jr. and B. Anthony Weber, and each of them, the
attorney, agent and proxy of the undersigned, with full powers of substitution,
to vote all the stock of the Fund which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund to be held at the offices of the
Trust, 6900 Bowling Blvd., Suite 250, Louisville, Kentucky 40207 on November __,
1998 at 10:00 a.m. Eastern Standard Time and at any and all adjournments
thereof, as fully and with the same force and effect as the undersigned might or
could do if personally present as follows:
Proposal I. Approval of the Agreement and Plan of Reorganization.
Approval or disapproval of the new Agreement and Plan of
Reorganization providing for the transfer of the assets and liabilities of the
Fund to a newly-formed portfolio of Alleghany Funds in exchange for shares of
such corresponding Alleghany Fund and the subsequent termination of the Fund and
the Trust.
___ FOR ____ AGAINST ____ ABSTAIN
Proposal II. Approval of the Interim Management Agreement.
Approval or disapproval of an interim Management Agreement
between the Trust and Veredus Asset Management LLC.
____ FOR ____ AGAINST _____ ABSTAIN
Proposal III. Ratification of Selection of Independent Accountants.
Ratification of the selection of KPMG Peat Marwick LLP as
independent public accountants of the Trust for the fiscal year ending in 1998.
____ FOR ____ AGAINST _____ ABSTAIN
The Board of Trustees recommends a vote of "FOR" on Proposals I, II and
III. The Proxy shall be voted in accordance with the recommendations of the
Board of Trustees unless a contrary instruction is indicated, in which case the
Proxy shall be voted in accordance with such instructions. In all other matters,
if any, presented at the meeting, this Proxy shall be voted in the discretion of
the proxy holders, in accordance with the recommendations of the Board of
Trustees, if any.
________________ DATED:______________
-------------------------------
(Number of Shares) (Please Print Your Name)
---------------------------------
(Signature of Shareholder)
---------------------------------
(Please Print Your Name)
---------------------------------
(Signature of Shareholder)
(Please date this proxy and sign your name as it appears on the label.
Executors, administrators, trustees, etc. should give their full titles. All
joint owners should sign.)
This Proxy is solicited on behalf of the Trust's Board of Trustees, and may be
revoked prior to its exercise by filing with the President of the Trust an
instrument revoking this Proxy or a duly executed Proxy bearing a later date, or
by appearing in person and voting at the meeting.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY.
<PAGE>
BROWN, CUMMINS & BROWN CO., L.P.A
ATTORNEYS AND COUNSELORS AT LAW
3500 CAREW TOWER
J.W. BROWN (1911-1995) 441 VINE STREET
JAMES R. CUMMINS CINCINNATI, OHIO 45202
ROBERT S BROWN TELEPHONE (513) 381-2121
DONALD S. MENDELSOHN TELECOPIER (513) 3 OF COUNSEL
LYNNE SKILKEN GILBERT BETTMAN
AMY G. APPLEGATE
MELANIE S. CORWIN
JOANN M. STRASSER
PAMELA L. KOGUT
October 29, 1998
VIA: Electronic Transmission
Securities and Exchange Commission
Public Filing Desk
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies & Gentleman:
On behalf of Veredus Funds, we hereby submit, via electronic filing,
the preliminary Proxy Statement for a special meeting to be help on November 23,
1998. It is anticipated that the proxy statement will first be mailed to
shareholders on November 10, 1998.
If you have any questions or comments please contact Donald S.
Mendelsohn at (513) 381-2121.
Very truly yours,
BROWN, CUMMINS & BROWN CO., L.P.A.
