VEREDUS FUNDS
DEFS14A, 1998-11-18
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                            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:

[   ]    Preliminary Proxy Statement
[    ]  Confidential,  for Use of the  Commission  Only  (as  permitted  by Rule
        14a-6(e)(2))
[ X ]    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.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

         (1)     Title of each class of securities to which transaction applies:
         (2)     Aggregate number of securities to which transaction applies:

                 (3) Per unit price or other  underlying  value of  transaction
                 computed  pursuant  to  Exchange  Act Rule 0-11 (set forth the
                 amount on which the  filing fee is  calculated  and how it was
                 determined):


                  (4) Proposed maximum aggregate value of transaction:


                  (5)      Total fee paid:


[    ]   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.

         (1)      Amount Previously Paid:______________________________________

         (2)      Form, Schedule or Registration Statement No.:________________

         (3)      Filing Party:________________________________________________

         (4)      Date Filed:__________________________________________________

                                          
<PAGE>




                                  VEREDUS FUNDS

                               Veredus Growth Fund
                          6900 Bowling Blvd., Suite 250
                           Louisville, Kentucky 40207
November 16, 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 November 25, 1998 at 9:00 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 September 17, 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 December 4, 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.

   SHAREHOLDERS SHOULD FILL OUT THE PROXY CARD IN ORDER TO VOTE THEIR SHARES.

In considering these matters, you should note:

*     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.

*      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.

*      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.

*      OPERATING EXPENSE RATIO

<PAGE>

     The current  annual fund  operating  expense  ratio of the Veredus  Fund is
1.50%.  The annual  fund  operating  expense  ratio  (after  reimbursements  and
waivers)  for the  shares in the  Alleghany  Fund  after the  Reorganization  is
expected to be 1.40%,  or 10 basis points (0.10%) less than the Veredus Fund. In
addition, because of the distribution channels available to the Alleghany Funds,
there is a greater  opportunity to increase the Fund's 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:

*    offering  actual or potential  reductions  in the total  operating  expense
     ratio;

*    offering  shareholders  the  opportunity to continue with a fund managed by
     VAM;

*    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.

     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 October 30, 1998 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,        

                                             /s/ B. Anthony Weber        
                                             B. Anthony Weber        
                                             President                
<PAGE>

                                            
                               VEREDUS GROWTH FUND
                         6900 Bowling Blvd., Suite 250 
                          Louisville, Kentucky 40207 
                                                     

                    NOTICE OF SPECIAL SHAREHOLDERS MEETING 
                        TO BE HELD ON November 25, 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 November 25, 1998 at
9:00 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 October 30, 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,



/S/ Charles P. McCurdy, Jr., Secretary
- --------------------------------------
November 16, 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 NOVEMBER 16, 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
9:00 a.m.  (Eastern  time) on November 25, 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 November 1, 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
(as defined herein),  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 October 30, 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,
1,469,832.365 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 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  and the  subsequent
liquidation  of the  Veredus  Fund  (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 November 16, 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.  Certai  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 ris 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  December  4,  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.
<PAGE>

         CAPITALIZATION. The Veredus Fund will be reorganized into the Alleghany
Fund.  The  following  table  sets  forth,  as of  October  30,  1998,  (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 minimis  assets and one share was issued  upon
creation of the Alleghany Fund but will be redeemed  contemporaneously  with the
Reorganization.  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.

                                 CAPITALIZATION
<TABLE>
<S>                                 <C>                       <C>                    <C>    

                                       TOTAL NET ASSETS            SHARES            NET ASSET VALUE
                                    (as of October 30, 1998)     OUTSTANDING            PER SHARE
                                    ------------------------     -----------            ---------
Veredus Fund                            $12,669,955              1,469,832             $8.62
Pro Forma Alleghany                     12,669,955               1,469,832              8.62

</TABLE>

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  Alleghany,  and thus become one of
the funds in Alleghany.  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  Alleghany  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  Investment  Company  Act of 1940 (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 Alleghany  are  interested  persons;  accordingly,  solely to
satisfy this  requirement,  one of the trustees  affiliated  with Alleghany will
resign  as a  trustee  of  Alleghany  on the  date  the  Reorganization  becomes
effective,  but remain as an officer of Alleghany.  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
Alleghany 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 Alleghany 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.
<PAGE>

         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 Veredu 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.

     At the  Board  of  Trustees'  meeting  on  October  26,  1998,  VAM and AAM
represented  to the Veredus Trust  Trustees  that VAM, for the  Alleghany  Fund,
would commit to waive or reimburse investment  management/advisory fees and fund
expenses  exceeding  certain  limits  for at least two  years.  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,  which will
be based on certain  representations  made by Veredus  Trust,  Alleghany and the
Adviser and on certain assumptions,  that, for federal income tax purposes,  (i)
the Alleghany Fund and the Veredus Fund will be treated as corporations separate
from the other series of Alleghany  and Veredus  Trust,  respectively;  (ii) the
transfer  by the  Veredus  Fund of all or  substantially  all of its  assets  in
exchange for Alleghany Fund Shares and the  assumptions by the Alleghany Fund of
all of the Veredus  Fund's  liabilities  and the  subsequent  liquidation of the
Veredus Fund pursuant to the  Reorganization  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 each be
"a party to a reorganization"  within the meaning of Section 368(b) of the Code;
(iii) the Veredus  Fund will not  recognize  any gain or loss as a result of the
Reorganization;  (iv) the Alleghany  Fund will not recognize any gain or loss on
the receipt of the assets of the Veredus  Fund in exchange  for  Alleghany  Fund
Shares in the  Reorganization;  (v) the Alleghany  Fund's adjusted tax basis and
holding   period  in  the  assets   received   from  the  Veredus  Fund  in  the
Reorganization  will be the same as the  adjusted tax basis and will include the
holding  period,  respectively,  of such assets in the hands of the Veredus Fund
immediately  prior to the  Reorganization;  (vi) the shareholders of the Veredus
Fund who exchange shares of the Veredus Fund solely for Alleghany Fund Shares in
the Reorganization  will not recognize any gain or loss; (vii) the aggregate tax
basis of the Alleghany Fund Shares  received by each  shareholder of the Veredus
Fund in the Reorganization will be the same as the aggregate tax basis of shares
of the  Veredus  Fund  exchanged  therefor;  (viii)  each  former  Veredus  Fund
shareholder's  holding  period of the  Alleghany  Fund  shares  received  in the
Reorganization  will be determined by including the period for which such shares
of  the  Veredus  Fund  were  held  by  such  shareholder  at  the  time  of the
Reorganization  provided that such shareholder held the Veredus Fund shares as a
capital asset; and (ix) the Alleghany Fund will succeed to and take into account
the tax  attributes of the Veredus Fund described in the Code and subject to the
conditions and limitations contained therein.

         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.
<PAGE>

         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.

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 th Alleghany Fund for at least two years.


<PAGE>






                                  VEREDUS FUND

                    ALLEGHANY/VEREDUS AGGRESSIVE GROWTH FUND


<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)
         Maximum Sales Load Imposed on                                         None                            None
                  Reinvested Dividends
         Maximum Deferred Sales Load                                           None                            None
         Redemption Fees                                                       None                            None
         Exchange Fee                                                          None                            None
                                                                               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)*

         Distribution/12b-1 Fees**
         Other Expenses***                                                    1.46%                           0.60%
                                                                               N/A                            0.25%
                                                                               .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%.
                          
     **   Long-term Alleghany Fund shareholders could pay more than the economic
          equivalent  of the maximum  front-end  sales  charge  under the NASD's
          sales load limits.
                 
     ***  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.
<PAGE>

     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.

     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  fee or  reimburse  expenses to the extent
total operating expenses exceed 1.40%.

     Portfolio Manager. B. Anthony Weber has been primarily  responsible for the
day-to-day  management  of the Veredus  Fund since the Fund's  inception in June
1998.  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>
<PAGE>

         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 funds or classes,  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.

     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 and payments made 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  compensate  First Data for such  services  and payments 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.
<PAGE>

     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.

         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 the
annual rate of: .06% of the first $2 billion of the average  daily net assets of
the Alleghany Fund; .045% of the average daily net assets between $2 billion and
$3.5 billion,  and .04% of the average  daily net assets over $3.5 billion.  The
Alleghany  Administrator  also receives a custody liaison fee equal to an annual
fee of $10,000 for  average  daily net assets of the  Alleghany  Fund up to $100
million,  $15,000 for average  daily net assets  between  $100  million and $500
million,  and $20,000 for  average  daily net assets in excess of $500  million.
Pursuant to a Sub-Administration Agreement, First Data (the "Sub-Administrator")
acts as  Sub-Administrator  and receives a fee from the Alleghany  Administrator
equal to that received by the Alleghany  Administrator  as set forth above.  The
Sub-Administrator  also  receives  a  custody  liaison  fee from  the  Alleghany
Administrator equal to that received by the Alleghany Administrator as set forth
above.  In addition to the services  listed above,  the  Sub-Administrator  also
performs  certain  accounting  and  pricing  services  for the  Alleghany  Fund,
including the daily calculation of the Alleghany Fund's net asset value.
<PAGE>

         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 an 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
<TABLE>
<S>                             <C>                            <C>   


                                    ALLEGHANY FUND                      VEREDUS FUND
Minimum Initial Investment         $2,500,* except IRAs,      $10,000, except qualified
                                   and 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 Fund's Automatic Investment Plan
                                   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.
</TABLE>


     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 provision 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 holders of two-thirds of the Shares.

     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 Veredus Trust,  but no less frequently than once each week (the
Veredus  Trust  presently  permits  redemptions  at any  time).  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 contribute 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 o 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  17,  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.

     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 and Mr. McCurdy, each a Trustee and officer of Veredus Trust, and
James R.  Jenkins,  an officer of Veredus  Trust,  are  members of VAM and, as a
result, will benefit from AAM's purchase of an interest in VAM.
<PAGE>

     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 October  31,  1998,  VAM has earned
$49,425 in management fees since the Veredus 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.

<TABLE>
<S>                            <C>                                     <C>    

    Name and Address                         Position with Adviser                 Principal Occupation
    ----------------                         ---------------------                 --------------------
    B. Anthony Weber                     President and Chief Investment Officer,   President and Chief Executive 
                                         Manager                                   Officer of VAM
    6900 Bowling Blvd., Suite 250
    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.
<PAGE>

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.  

     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.
<PAGE>

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 not expected to be present at
the Meeting.  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  mutual fund of Alleghany  (created
as a separate series 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  Fund'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 voted at the Meeting in person
or by proxy.

     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 November 5, 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."
<PAGE>

     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 October 30, 1998,  the  officers  and Trustees of Veredus  Trust as a
group owned  3.17% 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
Family Physician Associates            136,761            9.30%
515 Hospital Drive                     (record)
Shelbyville, Kentucky 40065
John W. O'Neil                          80,400            5.47%
2712 Outer Loop                      (beneficial)
Louisville, Kentucky 40219
Felicity Polio and Joseph Polio, MD    101,343            6.89%
2211 Mayfair Drive, Suite 306        (beneficial)
Owensboro, Kentucky 42301

<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 1st day of November,  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, b 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,  whether  or not  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. 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.
<PAGE>

     1.4 Prior to the Closing  Date,  the Acquired  Fund will declare a dividend
and/or  other  distribution,  if any,  to the extent  necessary  to comply  with
Subchapter  M of the Code,  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 December 4, 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 the
offices of Sonnenschein Nath & Rosenthal,  8000 Sears Tower,  Chicago,  Illinois
60606,  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 [10:00]  a.m.  Central  Standard  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 the  Acquiring  Fund  pursuant  to  instruction  to be
delivered by Acquiring Fund 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 Fun 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 wit 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.
<PAGE>

     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.

     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  sixt (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 declassificatio 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;

     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;
<PAGE>

     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  by
          Acquired Fund to Acquired Fund shareholders 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 a
          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;

     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;
<PAGE>

     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 on or before
          November 14, 1998;

     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  October  31,  1998,  audited by KPMG Peat  Marwick 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 principle
          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);

     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 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;
<PAGE>

     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  simila  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.

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.
<PAGE>

         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;

          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
<PAGE>

          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:

     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;
<PAGE>

          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 (for purposes of this opinion,  a termination of a contract
               or agreement in connection with the  Reorganization  shall not be
               deemed a breach or default);

          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 adversel affects,
               or would materially and adversely affect, its business.

     7.4 the Acquiring Fund shall have received,  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
<PAGE>

         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).

         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
which  will be  based  upon  certain  representations  made by  Acquiring  Fund,
Acquired  Funds and the Advisor,  substantially  to the effect that, for federal
income tax purposes:
                          
     8.7.a. the Acquiring Fund and Acquired Fund will be treated as corporations
          separate  from the other  series of the  Alleghany  Funds and  Veredus
          Funds, respectively;

     8.7.b. the transfer by the Acquired Fund of all or substantially all of its
          assets in exchange for  Acquiring  Fund shares and the  assumption  by
          Acquiring  Fund  of  all  of  Acquired  Fund's   liabilities  and  the
          subsequent   liquidation   of  the  Acquired   Fund  pursuant  to  the
          Reorganization will constitute a reorganization  within the meaning of
          Section  368(a) of the Code, and Acquiring Fund and Acquired Fund will
          each be "a party to a  reorganization"  within the  meaning of Section
          368(b) of the Code;
<PAGE>

     8.7.c. the Acquired Fund will not recognize any gain or loss as a result of
          the Reorganization;

     8.7.d. the  Acquiring  Fund  will  not  recognize  any  gain or loss on the
          receipt  of the  assets of  Acquired  Fund in  exchange  for shares of
          Acquiring Fund in the Reorganization;

     8.7.e. the Acquiring  Fund's  adjusted tax basis and holding  period in the
          assets received from Acquired Fund in the  Reorganization  will be the
          same as the adjusted  tax basis and will  include the holding  period,
          respectively,  of  such  assets  in the  hands  of the  Acquired  Fund
          immediately prior to the Reorganization;

     8.7.f. the  shareholders  of Acquired Fund who exchange  shares of Acquired
          Fund solely for shares of Acquiring  Fund in the  Reorganization  will
          not recognize any gain or loss;

     8.7.g. the aggregate tax basis of Acquiring Fund's common stock received by
          each  shareholder of Acquired Fund in the  Reorganization  will be the
          same  as the  aggregate  tax  basis  of  Acquired  Fund  common  stock
          exchanged therefor; and

     8.7.h. each former Acquired Fund shareholder's  holding period of Acquiring
          Fund common stock received in the Reorganization will be determined by
          including the period for which  Acquired Fund common stock was held by
          such shareholder at the time of the Reorganization  provided that such
          shareholder held the Acquired Fund common stock as a capital asset.

     8.7.i. the  Acquiring  Fund will  succeed to and take into  account the tax
          attributes  of the Acquired  Fund  described in Section  381(c) of the
          Code,  subject to the conditions and  limitations  contained  therein.
          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 March 31, 1999; or
<PAGE>

     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) th 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.

     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 t 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:                                                                      



Gerald Dillenburg                            By:Stuart Bilton
- -----------------                               ----------------
  Secretary                                      Stuart Bilton
                                                 Chairman of the Board


                                                  VEREDUS FUNDS
                                                  for itself and on behalf of
ATTEST:                                           the Acquired Fund


Charles P. McCurdy, Jr.                           By: B. Anthony Weber 
- -----------------------                           -------------------- 
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.

<PAGE>

         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 25, 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 25,
1998 at  9:00  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.


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