As filed with the Securities and Exchange Commission on June 20, 1995
File No. 33-43133
File No. 811-6422
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. _6_ [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _7_ [x]
AON ASSET MANAGEMENT FUND, INC.
(Formerly, Aon Money Market Fund, Inc.)
(Exact Name of Registrant)
6610 West Broad Street
Richmond, Virginia 23230
(Address of Principal Executive Offices)
Registrant's Telephone Number: 1-800-866-3555
John J. Palmer
President
Aon Asset Management Fund, Inc.
6610 West Broad Street
Richmond, Virginia 23230
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
_____________________________________________________________
It is proposed that this filing become effective:
_X_ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on (Date) pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 485
___ on Date pursuant to paragraph (a) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
___ on Date pursuant to paragraph (a)(ii) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
registrant has registered an indefinite amount of securities. The
registrant filed a Rule 24f-2 Notice for its fiscal year ending October 31,
1994 on December 29, 1994.
<PAGE>
AON ASSET MANAGEMENT FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
N-1A
Item No. Caption
PART A INFORMATION REQUIRED IN A PROSPECTUS
PROSPECTUS FOR MONEY MARKET PORTFOLIO
1. Cover Page......................... Cover Page
2. Synopsis........................... Expenses
3. Condensed Financial Information.... Condensed Financial
Information
4. General Description of Registrant.. Organization and
Classification;
Investment
Objective and
Policies;
5. Management of the Fund............. Management of the
Fund
5A Management's Discussion of Performance Not Applicable
6. Capital Stock and Other Securities. Additional Information
7. Purchase of Securities Being Offered Purchase of Shares
8. Redemption or Repurchase........... Redemption of Shares
9. Pending Legal Proceedings.......... Additional Information
<PAGE>
AON ASSET MANAGEMENT FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
N-1A
Item No. Caption
PART A INFORMATION REQUIRED IN A PROSPECTUS
PROSPECTUS FOR FLEXIBLE ASSET ALLOCATION PORTFOLIO
1. Cover Page......................... Cover Page
2. Synopsis........................... Expenses
3. Condensed Financial Information.... Condensed Financial
Information
4. General Description of Registrant.. Organization and
Classification;
Investment
Objective and
Policies
5. Management of the Fund............. Management of the Fund
5A Management's Discussion of Performance Not Applicable
6. Capital Stock and Other Securities. Additional Information
7. Purchase of Securities Being Offered Purchase of Shares;
Distribution of Shares
8. Redemption or Repurchase........... Redemption of Shares
9. Pending Legal Proceedings.......... Legal Matters
PART B INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... General Information;
Additional Information
<PAGE>
CROSS REFERENCE SHEET -- continued
N-1A
Item No. Caption
13. Investment Objectives and Policies. Money Market Portfolio
Investments, etc.;
Flexible Asset Allocation
Portfolio Investments,
etc.; Portfolio Turnover;
Risks of Investing in
Lower Quality Debt;
14. Management of the Registrant....... Management of the Fund;
15. Control Persons and Principal
Holders of Securities............ Additional Information
16. Investment Advisory and
Other Services................... Management of the Fund;
17. Brokerage Allocation and Other
Practices........................ Portfolio Transactions and
Brokerage
18. Capital Stock and Other Securities. Additional Information
19. Purchase, Redemption and Pricing
of Securities Being Offered...... Determination of Net
Asset Value
20. Tax Status......................... Dividends, Distributions
and Taxes (in the
prospectuses)
21. Underwriters....................... Distribution of Shares (in
the prospectuses);
Distribution Plan for
Flexible Asset Allocation
Portfolio
22. Calculation of Performance Data.... Yields (in the Money
Market Portfolio
Prospectus)
23. Financial Statements............... Financial Statements
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
AON ASSET MANAGEMENT FUND, INC.
6610 West Broad Street
Richmond, Virginia 23230
MONEY MARKET PORTFOLIO
Distributor --- Forth Financial Securities Corporation
(804) 281-6049
Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios, each
of which is, in effect, a separate fund (commonly known as a mutual fund)
with its own investment objective and policies. The Fund issues a separate
series of capital stock for each investment portfolio. THIS PROSPECTUS
DESCRIBES THE MONEY MARKET PORTFOLIO (THE "PORTFOLIO") OF THE FUND.
The investment objective of the Portfolio is to maximize current income to
the extent consistent with the preservation of capital and the maintenance
of liquidity. To achieve this objective, the Portfolio invests in a
portfolio of high-quality, short-term money market instruments. There can
be no assurance the Portfolio's objective will be achieved.
Shares in the Portfolio are distributed, without sales charge, through
Forth Financial Securities Corporation, a wholly-owned subsidiary of Forth
Financial Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of
Aon Corporation, a New York Stock Exchange-listed company. Aon Advisors,
Inc., also a wholly-owned subsidiary of Aon Corporation, serves as
investment advisor to the Portfolio. Aon Corporation and its subsidiary
companies may, by virtue of their shareholder interests in the Portfolio at
any particular date, be considered to be controlling persons of the
Portfolio or the Fund and may be able to cast a deciding vote on all
matters submitted to a vote of the Portfolio's or the Fund's shareholders.
This Prospectus sets forth concisely information about the Portfolio and
the Fund that investors should know before investing. The Prospectus
should be read by investors and retained for future reference. More
detailed information about the Portfolio and the Fund is contained in a
Statement of Additional Information, dated June 20, 1995 that has been
filed by the Fund with the Securities and Exchange Commission and
incorporated by reference into this Prospectus. Copies of the Statement of
Additional Information may be obtained without charge by calling or writing
the Fund at the telephone number or address set forth above.
AN INVESTMENT IN THE PORTFOLIO IS NOT GUARANTEED OR INSURED BY THE
U.S.GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
June 20, 1995
<PAGE>
AON ASSET MANAGEMENT FUND, INC.
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained in this Prospectus
and, if given or made, such other information or representations must not
be relied upon as having been authorized by the Fund, the Investment
Advisor, or the Distributor. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
TABLE OF CONTENTS
Page
Expenses
Condensed Financial Information
Organization and Classification
Yield Information
Investment Objective and Policies
Standards Applicable to All Investments
Risks
Investment Restrictions
Management of the Fund
Board of Directors
Investment Advisor
Distributor
Net Asset Value
Purchase of Shares
Redemption of Shares
Regular Redemption
Telephone Redemption
Check Redemption
Other Redemption Information
Additional Services to Investors
Automatic Investment Program
Exchange Privilege
Systematic Withdrawal Plan
Dividends, Distributions and Taxes
Additional Information
Capital Stock and Voting
<PAGE>
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee . . . . . . $5.00
ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of average net assets)
Investment Advisory Fees 0.35%
Other Expenses . . . . . 0.05%
Total Operating Expenses 0.40%
EXAMPLE---The table below shows the amount of expenses a shareholder would
pay on a $1,000 investment, assuming a 5% annual return and the expense
levels shown in the table above. The 5% annual return is a standardized
rate prescribed for the purpose of the example, and does not represent past
or future return of the Portfolio.
1 Year 3 Years 5 Years 10 Years
Expenses $1.50 $4.95 $9.09 $23.12
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses an investor in the Portfolio will bear. All
expenses are borne directly or indirectly by shareholders. (For more
information about Fund expenses, see "Investment Advisor", p. 9.)
Since the Portfolio began operations, Aon Advisors, Inc. ("AAI") has waived
collection of 0.25% of the 0.35% investment advisory fee, resulting in an
investment advisory fee of 0.10% of the Portfolio's average daily net
assets during this period. AAI has agreed to continue waiving this portion
of the investment advisory fee for the indefinite future. In addition, if
in any fiscal year the aggregate expenses of the Portfolio, including the
investment advisory fee (but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceed 1.0% of the value of the
Portfolio's average daily net assets, AAI has agreed to reimburse the
Portfolio for such excess.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The information below has been derived from audited financial statements
and should be read in conjunction with the financial statements of the Fund
found in its annual report.
Years ended October 31, 1993 and October 31, 1994 and for the period from
January 23, 1992 to October 31, 1992
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
Net Asset Value at beginning of period $1.00 $1.00 $1.00
Investment income $.04 $.03 $.03
Expenses * * *
Net investment income .04 .03 .03
Net realized gains(losses) on investments * * *
Dividends paid to shareholders from:
Net investment income (.04) (.03) (.03)
Net realized gain (loss) * * *
(.04) (.03) (.03)
Net asset value at end of period $1.00 $1.00 $1.00
Total Return 3.73% 3.10% *** 3.57%
Ratios:
Ratio of operating expenses
to average net assets ** 0.15% 0.17% *** 0.25%
Ratio of net investment income to
average net assets ** 3.73% 3.10% *** 3.57%
Net assets at end of period $410,912,278 $412,067,947 $399,075,531
</TABLE>
* Less than $.01 per share.
** The AAI has agreed for the first three years of the Portfolio's
operations to waive a portion of its advisory fees. Absent this
agreement, the ratio of expenses to average net assets and the ratio
of net investment income to average net assets would have been between
.40% and 3.48% for 1994, .42% and 2.85% for 1993 and .50% and 3.32%
for 1992, respectively.
*** Determined on an annualized basis.
ORGANIZATION AND CLASSIFICATION
The Fund was incorporated under the laws of the Commonwealth of Virginia on
August 21, 1991, and is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act") as an open-end management investment company. The Fund is organized
as a series type company with two classes or series of capital stock, each
representing an interest in one of the two investment portfolios. Stock
issued with respect to either portfolio (including stock of the Portfolio)
represents a pro-rata interest in the assets of that portfolio and has no
interest in the assets of any other portfolio. Each investment portfolio
(including the Portfolio) bears its own expenses and other liabilities and
also its proportionate share of the Fund's general liabilities. In other
respects, the Fund is treated as a single entity. The Portfolio is
diversified as that term is defined in the 1940 Act.
YIELD INFORMATION
The Fund may advertise from time to time the "yield" and "effective yield"
of the Portfolio. Both yield figures are based on historical earnings and
are not intended to indicate future performance. The "yield" of the
Portfolio refers to the income generated by an investment in the Portfolio
over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized". That is, the amount of income generated
by the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Portfolio is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
For information as to current yield, please call (800) 338-1579 or, in the
Milwaukee area, (414) 765-4124.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Portfolio is to maximize current income to
the extent consistent with the preservation of capital and the maintenance
of liquidity. There is no assurance that the Portfolio's investment
objective will be achieved. The Portfolio's investment objective is
fundamental and may not be changed without the affirmative vote of the
holders of a majority of the Portfolio's outstanding voting securities.
The Portfolio will seek to achieve its objective by investing in a
portfolio consisting of the following types of money market instruments:
(1) United States Government Securities---obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities. These obligations may include instruments that are
supported by the full faith and credit of the United States (such as
Treasury bills, notes, and bonds, and obligations issued by the Government
National Mortgage Association); instruments that are supported by the right
of the issuer to borrow from the Treasury (such as securities of the
Federal Home Loan Banks); instruments that are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage
Association); and instruments that are supported only by the credit of the
instrumentality (such as securities issued by the Federal Farm Credit
Banks, the Student Loan Marketing Association, and the Federal Home Loan
Mortgage Corporation).
<PAGE>
(2) Certificates of deposit and time deposits issued by U.S. banks
which are members of the Federal Deposit Insurance Corporation and have
assets of at least $1 billion. Certificates of deposit ("CDs") are
certificates evidencing the obligation of a bank to repay funds deposited
with it for a specified period of time at a stated interest rate. (If AAI
determines that a CD is not readily marketable, or is otherwise illiquid,
the CD will be included in the 10% limit on illiquid investments described
in "Investment Restrictions" (item (j), p. 11.)
(3) Repurchase agreements with (i) banks or (ii) government securities
dealers recognized as primary dealers by the Federal Reserve System,
provided that:
A) at the time the repurchase agreement is entered into, and
throughout the duration of the repurchase agreement, the collateral has a
market value at least equal to the value of the repurchase agreement;
B) the collateral consists of government securities or instruments
rated in the highest rating category by at least two nationally recognized
statistical rating organizations; and
C) the maturity of the repurchase agreement does not exceed 30
days.
(4) Commercial paper, which consists of unsecured promissory notes
issued by corporations to finance short-term credit needs.
Securities in which the Portfolio invests may not earn as high a level of
current income as long-term or lower quality securities which generally
have less liquidity, greater market risk, and more fluctuation in market
value.
STANDARDS APPLICABLE TO ALL INVESTMENTS
The Portfolio will only invest in instruments denominated in U.S. dollars
that AAI, under the supervision of the Board of Directors of the Fund,
determines present minimal credit risks and are, at the time of
acquisition, either:
1. rated in the highest rating category by at least two nationally
recognized statistical rating organizations as defined under Rule 2a-7, as
amended, under the 1940 Act (an "NRSRO"), or by only one NRSRO if only one
NRSRO has issued a rating with respect to the instrument; or
2. in the case of an unrated instrument, determined by AAI under
the supervision of the Board of Directors to be of comparable quality to
the above; or
3. issued by an issuer that has received a rating of the type
described in 1 above on other securities that are comparable in priority
and security to the instrument.
All of the Portfolio's money market instruments will mature in 13 months or
less. The average maturity of the Portfolio's portfolio securities based
on their dollar value will not exceed 90 days at the time of each
investment. If the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity in excess of 90 days, the
Portfolio will invest its available cash in such a manner as to reduce its
dollar-weighted average portfolio maturity to 90 days or less as soon as
reasonably practicable. By restricting the maturity of its investments,
the Portfolio seeks to limit changes in the value of its assets resulting
from market factors and thereby maintain a constant net asset value of
$1.00 per share. See "Net Asset Value."
<PAGE>
RISKS
The Portfolio only invests in instruments that are deemed to present
minimal credit risks (see "Standards Applicable to All Investments," p. 6);
however, instruments in which the Portfolio invests will vary in terms of
relative credit risk. (For example, commercial paper presents relatively
greater credit risk than obligations issued or guaranteed by the U.S.
Government). A money market instrument held by the Portfolio is subject to
the ability of the issuer of the instrument to make payment at maturity.
AN INVESTMENT IN THE PORTFOLIO IS NOT GUARANTEED OR INSURED BY THE U.S.
GOVERNMENT.
Money market instruments are securities with relatively short maturities
and consequently their value remains relatively stable. However, money
market instruments are sensitive to short-term interest rates such as those
charged by Federal Reserve Banks to member banks and the interest rates for
U.S. Treasury obligations. As a result of the interest rate sensitivity of
these instruments, the value of the portfolio securities will generally
increase when interest rates decline, and decrease when they rise. Thus,
if interest rates increase after a security is purchased, that security, if
sold, might be sold at less than cost.
If, because of a decline in interest rates, money market securities should
become relatively less attractive in relation to other investments, the
Portfolio could experience a large number of redemptions. Substantial
redemptions of Portfolio shares could require the sale of portfolio
investments at a time when a sale might not be desirable. Although the
Portfolio does not expect that such redemptions alone would result in
decreases in net asset value per share, there can be no assurance that the
net asset value of the shares redeemed will be equal to or greater than the
purchase price of the shares.
Repurchase agreements are arrangements involving the purchase by the
Portfolio of money market instruments that the Portfolio is qualified to
purchase and the simultaneous agreement to resell the same instruments back
to the seller at an agreed upon price on demand or at a specified future
date. Repurchase agreements entered into by the Portfolio will be with
Banks or primary government securities dealers. The yield to the Portfolio
on a repurchase agreement is determined by the difference between the
Portfolio's purchase price of the underlying obligation, and the price at
which the obligation is "repurchased" by the bank or dealer.
The risks associated with repurchase agreements include: (i) if the seller
defaults on its obligation to repurchase the instrument, the Portfolio may
incur a loss if the value of the collateral securing the repurchase
agreement declines or the Portfolio may incur disposition costs in
connection with liquidating the collateral; and (ii) if bankruptcy
proceedings are commenced with respect to the seller of the instrument,
liquidation of the collateral by the Portfolio may be delayed or limited.
Accordingly, the Portfolio will only enter into repurchase agreements that
present minimal credit risks and otherwise meet the "Standards Applicable
to All Investments" (see p. 6), and that are with sellers not perceived to
present a serious risk of becoming involved in bankruptcy proceedings
within the time frame contemplated by the repurchase agreement. Repurchase
agreements with maturities of greater than seven days are generally not
negotiable, and therefore are not regarded as liquid investments. Such
repurchase agreements may also be subject to greater risks than repurchase
agreements of shorter maturities in that (i) the seller may experience a
decrease in credit quality during the term of the repurchase agreement, and
(ii) the value of the collateral may decline due to somewhat higher
interest rates.
<PAGE>
The Portfolio may invest in U.S. dollar-denominated foreign securities,
provided that such instruments meet the "Standards Applicable to All
Investments" (see p. 6). Foreign money market instruments are subject to
risks similar to those affecting domestic money market instruments.
Foreign money market instruments are subject to additional risks, such as
international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or
interest, foreign withholding or other taxes on interest income,
difficulties in obtaining or enforcing a judgment against the issuer,
expropriation or nationalization of foreign issuers, the extent and quality
of government regulation of financial markets and institutions, and the
possible impact of interruptions in the flow of international currency
transactions. These factors, along with the liquidity of proposed foreign
investments (including the availability of an active domestic market) is
carefully considered by AAI in selecting any foreign investments for the
Portfolio. For more information, see "Foreign Securities" in the Statement
of Additional Information.
Aon Corporation, along with its wholly-owned subsidiaries, is expected to
own a substantial percentage of the outstanding shares of the Portfolio.
Aon Corporation and its subsidiaries may withdraw all or any portion of
their investment in the Portfolio at any time. A redemption of a
significant percentage of the Portfolio's shares could have an adverse
impact on the Portfolio by requiring AAI to sell assets of the Portfolio
prematurely, or to hold assets in cash or cash items in anticipation of a
redemption request. However, management of the Portfolio believes that the
Portfolio and its shareholders will benefit from the substantial
investments of Aon Corporation and its subsidiaries in shares of the
Portfolio as a result of the economies of scale available to a larger
company.
INVESTMENT RESTRICTIONS
The Portfolio has adopted a number of fundamental policies restricting the
investment of its assets, which may not be changed without the affirmative
vote of the holders of a majority of the Portfolio's outstanding voting
securities. The "affirmative vote of the holders of a majority of the
Portfolio's outstanding securities" means the vote of: (a) 67% or more of
the capital stock of the Portfolio present or represented by proxy at a
meeting of such shareholders, if more than 50% of the Portfolio's
shareholders are present in person or by proxy at such meeting, or (b) more
than 50% of the outstanding capital stock of the Portfolio, whichever is
less. Pursuant to the Portfolio's fundamental investment restrictions, the
Portfolio may not:
(a) issue senior securities (except to the extent that borrowings under
paragraph (h) below exceeding 5% of the value of the Portfolio's total
assets might be deemed to constitute senior securities under the 1940 Act);
(b) purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other interest
in real estate). A security issued by a real estate or mortgage investment
trust is not treated as an interest in real estate;
(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
portfolio securities), or make short sales of securities or maintain a
short position;
(d) underwrite securities of other issuers (except insofar as the Fund
might be deemed to be an underwriter under the Securities Act of 1933 in
certain resales of portfolio securities held by the Portfolio);
<PAGE>
(e) invest more than 25% of the value of its total assets in securities of
issuers having their principal activity in any particular industry, other
than United States Government Securities, as defined in Section 2(a)(16) of
the 1940 Act;
(f) invest more than 5% of the value of the Portfolio's total assets in, or
invest in more than 10% of the outstanding voting securities of, any one
issuer, except that this restriction does not apply to investments in
United States Government Securities;
(g) make loans, except that the Portfolio may enter into repurchase
agreements as described under "Investment Objective and Management
Policies," p. 6, and the Portfolio may lend its portfolio securities, but
not in amounts in excess of 5% of the value of its net assets;
(h) borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 10% of the value of the Portfolio's total assets at the time the
borrowing is made, and the Portfolio will not make additional investments
during any period that borrowings exceed 5% of the value of the Portfolio's
total assets;
(i) pledge, hypothecate, mortgage or transfer as security for indebtedness
any securities held by the Portfolio, except in an amount of not more than
10% of the value of its total net assets, and then only to secure
borrowings permitted by (c) and (h);
(j) enter into repurchase agreements maturing in more than seven days if,
as a result thereof, more than 10% of the value of the Portfolio's total
assets would be invested in such repurchase agreements and any other assets
which are either illiquid or are not readily marketable;
(k) invest in time deposits maturing in more than seven days; in addition,
time deposits maturing in two business days to seven calendar days may not
exceed 10% of the value of the Portfolio's total assets; and
(l) purchase or sell interests in oil, gas, or other mineral explorations
or development programs, commodities, or commodity contracts, except that
the Portfolio may purchase securities of issuers which invest or deal in
any of the above, provided such securities are money market instruments in
which the Portfolio is otherwise permitted to invest.
See the Statement of Additional Information for further discussion of the
Portfolios investment restrictions. If a percentage restriction is adhered
to at the time of an investment, a later increase or decrease in the
investment's percentage of the value of the Portfolio's total assets
resulting from a change in portfolio values or assets will not constitute a
violation of the percentage restriction.
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Fund has a Board of Directors elected by the shareholders. A majority
of the Directors are not affiliated with AAI, FFSC, FFRL or Aon Corporation
or their affiliates. The Board of Directors is responsible for the overall
management of the Fund, including reviewing the results of the investment
portfolios, monitoring investment activities and practices, and receiving
and acting upon future plans for the Fund.
INVESTMENT ADVISOR
Aon Advisors, Inc. ("AAI"), a Virginia corporation with offices at 6604
West Broad Street, Richmond, Virginia 23230, and 123 North Wacker Drive,
Chicago, Illinois 60606, serves as investment advisor of the Portfolio
under the oversight and supervision of the Board of Directors of the Fund,
and pursuant to an investment advisory agreement ("Advisory Agreement")
dated January 27, 1994. AAI, which is registered as an investment advisor
under the Investment Advisers Act of 1940, is a wholly-owned subsidiary of
Aon Corporation, a holding company whose common stock is listed for trading
on the New York Stock Exchange.
As of October 31, 1994, Mr. Patrick G. Ryan, President and Chief Executive
Officer of Aon Corporation, owned directly and beneficially 13,461,930
shares (13.2%) of the outstanding common stock of Aon Corporation.
In addition to the Fund, AAI provides investment advice and management to
Aon Corporation and its subsidiaries and affiliates, including Life of
Virginia Series Fund, Inc., a registered investment company, and the
Flexible Asset Allocation Portfolio of the Fund. The total staff of AAI as
of October 31, 1994, consisted of 46 individuals, including five executive
directors and fourteen portfolio managers. Assets under management include
equity securities, fixed income securities and real estate. As of October
31, 1994, the aggregate assets under AAI's management were $11 billion.
Pursuant to the Advisory Agreement, AAI manages the investment and
reinvestment of the assets of the Portfolio, in accordance with the
Portfolio's investment objective and management policies described above.
The Portfolio pays AAI monthly compensation in the form of an investment
advisory fee. This fee is accrued daily and is equal to an annual rate of
.35% of the average daily net assets of the Portfolio. Since the Portfolio
began operations, AAI has waived collection of .25% of the .35% investment
advisory fee, resulting in an investment advisory fee of .10% of the
Portfolio's average daily net assets. AAI has agreed to continue waiving
this portion of the investment advisory fee for the indefinite future.
Under the Advisory Agreement, AAI is also required, at its own expense, to:
(a) supply internal auditing and internal legal services; (b) supply
stationery and office supplies; (c) prepare reports to shareholders and the
Board of Directors; (d) prepare tax returns; (e) prepare reports to and
filings with the SEC and State Blue Sky authorities; (f) at the Fund's
request, furnish office space, in such place as may be agreed upon from
time to time, and all necessary office facilities; (g) supply clerical,
accounting, bookkeeping, administrative and other similar services
(exclusive of those services relating to and to be performed under any
contract for custodial, transfer, dividend and accounting services entered
into by the Fund with a third party); and (h) furnish persons satisfactory
to the Fund to respond during normal business hours to in-person, written,
and telephone requests for assistance and information from shareholders of
the Portfolio, and provide such facilities and equipment as may be
necessary for such persons to carry out their duties, including, without
limitation, office space and facilities, telephones and CRT terminals and
equipment (including telephone lines) necessary for access to the Fund's
shareholder records.
In order to fulfill its obligation to provide these services, AAI has
entered into an Administration Agreement with Forth Financial Securities
Corporation ("FFSC"), the Fund's distributor, and the Fund, under which
FFSC furnishes substantially all such services for an annual fee of $25,000
plus .05% of the Fund's average daily net assets. This fee is borne by
AAI, and not by the Portfolio or the Fund.
<PAGE>
The Portfolio is responsible for all other expenses, including:
(a) taxes and fees payable by the Fund or the Portfolio to federal, state,
or other government agencies; (b) brokerage fees and commissions, and issue
and transfer taxes; (c) interest; (d) Board of Directors meeting attendance
fees and expenses of directors of the Fund who are not directors, officers
or employees of AAI, FFSC, or of any affiliated person (other than a
registered investment company) of AAI or FFSC; (e) registration,
qualification, filing and other fees in connection with securities
registration requirements of federal and state regulatory authorities; (f)
the charges and expenses for custodial, paying agent, transfer agent,
dividend agent and accounting agent services; (g) outside legal fees and
expenses in connection with the affairs of the Portfolio or the Fund
including, but not limited to, registering and qualifying its shares with
federal and state regulatory authorities; (h) charges and expenses of
independent auditors; (i) costs of meetings of shareholders and directors
of the Fund; (j) costs of maintenance of corporate existence; (k) insurance
premiums; (l) investment advisory fees; (m) costs and fees associated with
printing and delivering registration statements, stockholders' reports and
proxy statements; (n) costs and fees associated with delivering reports to
and filings with the SEC and State Blue Sky authorities; (o) costs relating
to administration of the Fund's general operations; (p) costs relating to
the Fund's own employees, if any; and (q) costs of preparing, printing, and
delivering the Portfolio's prospectus to existing shareholders.
If in any fiscal year the aggregate expenses of the Portfolio (including
the investment advisory fee, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceed 1.0% of the Portfolio's
average daily net assets, AAI has agreed to reimburse the Portfolio for
such excess.
DISTRIBUTOR
The Fund has entered into a Distribution Agreement with Forth Financial
Securities Corporation ("FFSC"), 6610 West Broad Street, Richmond, Virginia
23230, a wholly-owned subsidiary of Forth Financial Resources, Ltd.
("FFRL"), which is in turn a wholly-owned subsidiary of Aon Corporation,
under which FFSC will act as principal underwriter of the shares of the
Portfolio. Mr. John J. Palmer, president of the Fund, and Mr. Scott R.
Reeks, treasurer of the Fund, are both affiliated with FFSC. FFSC has
agreed to use its best efforts, consistent with its other business, to sell
shares of the Portfolio and to pay all expenses relating to selling and
distributing the Portfolio's shares, including preparing, printing, and
mailing sales material. The Fund and the Portfolio pays no compensation to
FFSC for services performed by FFSC under the Distribution Agreement. AAI
may, in its discretion, reimburse FFSC for certain expenses it may incur in
connection with the distribution of the Portfolio's shares. Such
reimbursement shall be made out of AAI's own resources (including, but not
limited to, AAI's profit under the Advisory Agreement). The Portfolio's
shares are continuously offered.
<PAGE>
NET ASSET VALUE
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading as well as on Good Friday, except that shares
of the Portfolio may not be purchased or redeemed, and shares of the
Portfolio will not be priced, on the following days: New Year's Day,
Martin Luther King, Jr. Day, President's Day, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas
Day. The net asset value of the Portfolio's shares for purposes of pricing
orders for purchase and redemption of shares is determined as of 1:30 p.m.
(Central Time) on each day that the Fund is open for business. Net asset
value per share is calculated for purchases and redemptions by dividing the
value of all securities and other assets of the Portfolio, less the
liabilities of the Portfolio, by the number of the Portfolio's outstanding
shares.
The Fund intends to use its best efforts to maintain the net asset value of
the Portfolio at $1.00 per share although it cannot assure that it will be
able to do so on a continuous basis. The Portfolio's net asset value is
computed using the amortized cost method to value its portfolio securities.
A more detailed description of net asset value computation and amortized
cost method, is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Portfolio are offered and sold on a continuous basis without
a sales charge at the net asset value per share next calculated after a
purchase order is received and accepted. Initial investments may only be
made by submitting a completed Account Application as described below.
Subsequent purchase orders may be placed by submitting orders to the
transfer agent (Firstar Trust Company). The minimum initial investment for
shares of the Portfolio is $1,000, and subsequent investments must be at
least $100. The minimum purchase requirements do not apply to reinvested
dividends. The minimum initial investment and subsequent investment
amounts may be less than the foregoing for full time staff employees of Aon
Corporation and its subsidiaries.
Investors desiring to purchase shares of the Portfolio may obtain an
Account Application from FFSC. The Application should be completed and
mailed, together with a check or money order (payable to Aon Asset
Management Fund, Inc.), to the Fund, at 6610 West Broad Street, Richmond,
Virginia 23230. All checks must be drawn on a bank located within the
United States and must be payable in U.S. dollars. Subsequent investments
in an existing account in the Portfolio may be made at any time by sending
to Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53261-0701, a
check or money order payable to the Fund as shown above, along with either
(a) the detachable form that regularly accompanies the confirmation of a
prior transaction, or (b) a letter stating the amount of the investment,
the name of the Portfolio and the account number in which the investment is
to be made. A $15 fee will be imposed by the transfer agent if any check
deposited on behalf of the Fund does not clear, and the investor involved
will be responsible for any loss incurred by the Fund or the Portfolio.
An investor may also purchase shares by directing his bank to transmit
immediately available funds by wire in the amount of the purchase price to:
Firstar Bank, Milwaukee, N.A.
Account of Firstar Trust Company
ABA #0750-00022
For credit to Account #112-952-137
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
For further credit to Account # 60-245-0000
Aon Asset Management Fund, Inc. - Money Market Portfolio
[the investor's account number and the title of the account]
<PAGE>
When making an initial wire purchase, please call FFSC at (804) 281-6049
with the appropriate account information prior to sending the wire.
Investors making initial investments by wire must promptly complete an
Account Application and forward it to FFSC. Amounts redeemed pursuant to
redemption requests received before the completed Application has been
received and accepted by the transfer agent will not be paid until the
completed Application has been received and accepted by FFSC.
Subsequent purchase orders are accepted by the transfer agent at its
Milwaukee office. The transfer agent will not accept an order from
securities dealers or financial institutions unless the dealer or
institution undertakes to pay for the order in immediately available funds
wired to the transfer agent by the close of business the same day. The
transfer agent will not accept an order from other investors unless they,
at the time they place an order, have a creditworthy financial institution
guarantee payment in immediately available funds wired to the transfer
agent by the close of business the same day.
Purchase orders that are received and accepted before 1:30 p.m. (Central
Time) on a business day will be executed at the price per Fund share
calculated as of 1:30 p.m. (Central Time). Orders received and accepted
after 1:30 p.m. (Central Time), will be executed at the price per Portfolio
share calculated as of 1:30 p.m. on the next business day. Purchase orders
received and accepted after the regular close of trading on the Exchange,
or on non- business days, will be executed on the next business day,
following receipt and acceptance of the purchase order by the transfer
agent.
The Fund will not accept payment in cash for the purchase of shares.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. Applications
without a Taxpayer Identification Number or an indication that a Number has
been applied for will not be accepted. If a Number has been applied for,
the Number must be provided and certified within 60 days of the date of the
Application. See the Account Application for further information about
this requirement.
If the transfer agent receives and accepts a purchase order by 1:30 p.m.
(Central Time) on a business day, the investor will receive the Portfolio
dividend declared that day. If an order is received and accepted by the
transfer agent after 1:30 p.m. (Central Time), an investor's shares will
begin to accrue dividends on the following business day.
The Fund reserves the right to reject any purchase order for any reason.
REDEMPTION OF SHARES
REGULAR REDEMPTION
An investor may redeem shares in any amount by sending a written request to
Aon Asset Management Fund, Inc. P.O. Box 701, Milwaukee, WI 53201-0701.
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with
such services, or receipt at the transfer agent's post office box, of
purchase applications or redemption requests does not constitute receipt by
the transfer agent or the Fund. Do not send letters by overnight courier
to the post office box address. Except as described below under "Telephone
Redemption," redemption requests and correspondence sent to the Fund by
overnight courier must be delivered to the offices of the transfer agent at
615 E. Michigan Street, Third Floor, Milwaukee, WI 53202.
<PAGE>
Redemption requests must be signed by each owner of the shares to be
redeemed, including each joint owner on redemption requests for joint
accounts, in the exact manner as the share account is registered, and must
state the amount of redemption and identify the shareholder account number
and tax identification number. If the amount of the redemption request
exceeds $5,000, or if the proceeds are to be sent elsewhere than the
address of record, each signature must be guaranteed by either a commercial
bank that is a member of the FDIC, a trust company, or a member firm of a
national securities exchange. The transfer agent will not accept
guarantees from notaries public, savings and loan associations, or savings
banks. Guarantees must be signed by an authorized signatory of the bank,
trust company or member firm and "Signature Guaranteed" must appear with
the signature. The Fund may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received
until the transfer agent receives all required documents in proper form.
TELEPHONE REDEMPTION
Currently, shareholders may redeem shares of the Portfolio by telephone.
To redeem shares by telephone, an investor must check the appropriate box
on the Account Application. Once this feature has been requested, shares
may be redeemed by calling Investor Services at 1-800-338-1579, or in the
Milwaukee area, (414) 765-4124, and providing the account name, account
number and amount of redemption. Proceeds of shares redeemed by telephone
will be mailed or wired only to an investor's address or bank of record as
shown on the records of the transfer agent.
If an investor redeems shares by telephone and requests wire payment,
payment of the redemption proceeds will normally be made in federal funds
on the same business day provided the redemption order is received by the
transfer agent before 1:30 p.m. (Central Time). If a redemption order is
received by the transfer agent after 1:30 p.m. (Central Time), or on a
non-business day, payment for the redeemed shares will, at the investor's
request, normally be wired in federal funds on the next business day. As
stated, the transfer agent will wire redemption proceeds only to the bank
and account designated on the Account Application or in written
instructions subsequently received by the transfer agent, and only if the
investor's bank is a commercial bank located within the United States. The
transfer agent currently charges a $7.50 fee for each payment of redemption
proceeds made by wire. The Fund's current policy is to pay this wire
transfer fee to the transfer agent as an expense of the Portfolio, in order
to facilitate shareholder redemptions. The Fund reserves the right, should
its experience warrant it, to change this policy and to impose the wire
transfer fee directly upon redeeming shareholders requesting wire
transfers. In such event, the Fund will provide shareholders at least
thirty days written notice of the policy change.
In order to arrange for telephone redemptions after an account has been
opened or to change the bank account or address designated to receive
redemption proceeds, a written request must be sent to "Aon Asset
Management Fund, Inc." at P.O. Box 701, Milwaukee, WI 53201-0701. The
request must be signed by each shareholder of the account with the
signatures guaranteed as described above. Further documentation may be
requested from corporations, executors, administrators, trustees and
guardians.
<PAGE>
The Fund reserves the right to refuse a telephone redemption if it believes
it is advisable to do so. Procedures for redeeming shares by telephone may
be modified or terminated by the Fund at any time. In addition, neither
the Fund nor its transfer agent will be responsible for the authenticity of
redemption instructions received by telephone. Nevertheless, the transfer
agent has established certain reasonable procedures to confirm that
instructions communicated by telephone are genuine ( in the absence of such
procedures the Fund or the transfer agent may be liable for any
unauthorized or fraudulent instructions). Such procedures may include,
among others, requiring forms of personal identification prior to acting
upon instructions received by telephone, providing written confirmation of
such instructions or transactions and/or tape recording telephone
instructions. Thus, a shareholder would bear any losses resulting from
unauthorized telephone redemption instructions with respect to the
shareholder's account.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If an investor is unable to
contact the transfer agent by telephone, shares may also be redeemed by
delivering the redemption request to the transfer agent in person or by
mail as described above under "Regular Redemption."
CHECK REDEMPTION
An investor may request on the Account Application or by later written
request that the Fund provide to the investor Redemption Checks ("Checks")
which may be drawn on the Portfolio. Checks will be sent only to the
registered owner(s) of Portfolio shares and only to the address of record.
Checks may be made payable to the order of any person in the amount of $500
or more. Dividends are earned on amounts drawn until the Check clears the
transfer agent. When a Check is presented to the transfer agent for
payment, the transfer agent, as the investor's agent, will cause the
Portfolio to redeem a sufficient number of the investor's shares to cover
the amount of the Check. Checks will not be returned to shareholders after
clearance. There is no charge to the investor for the use of the Checks;
however, the transfer agent will impose a $15 charge for stopping payment
of a Check upon the request of the investor, or if the transfer agent
cannot honor a Check due to insufficient funds or other valid reason.
Because dividends on the Portfolio accrue daily, Checks may not be used to
close an account, as a small balance is likely to result.
OTHER REDEMPTION INFORMATION
Share redemption requests are effected at the net asset value next
determined after receipt of a request in proper form by the transfer agent.
Shares for which redemption requests are received by the Fund's transfer
agent in proper form before 1:30 p.m. (Central Time) on a business day will
not receive the Portfolio dividend declared that day. If the request is
received in proper form after 1:30 p.m. (Central Time), the shares to be
redeemed will be credited with that day's dividend.
The Fund ordinarily will make payment for redeemed shares within seven days
after receipt by the transfer agent of a request in proper form, except as
may be permitted by the SEC. Payment may be delayed (i) for any period
during which the NYSE is closed (other than customary weekend or holiday
closings) or trading on the NYSE is restricted; (ii) for any period during
which an emergency exists, as determined by the SEC, and it is not
reasonably practicable for the Fund to dispose of its securities, or to
determine the value of its net assets; or (iii) for other periods as
permitted by the SEC for the protection of the Portfolio's shareholders.
Shares purchased by check will not be redeemed until the check has cleared,
which may take up to fifteen days. During the period prior to the time the
shares are redeemed, dividends on such shares will accrue and be payable,
and an investor will be entitled to exercise all other rights of beneficial
ownership. An investor purchasing shares by wire must file an Account
Application before payment is made on any redemption requests for shares
purchased by wire.
<PAGE>
The Fund reserves the right to redeem involuntarily, upon not less than 30
days' notice, any shareholder account which is reduced as a result of a
withdrawal by an investor to a value of less than $500.
ADDITIONAL SERVICES TO INVESTORS
AUTOMATIC INVESTMENT PROGRAM
When opening an account, a shareholder may authorize deductions to be made
from his or her personal checking account with a bank for investment each
month or quarter in shares of the Portfolio in a minimum amount of $100.
(This minimum may be less for full-time staff employees of Aon Corporation
and its subsidiaries). There is no obligation to continue automatic
investment program purchases, and the program may be terminated at any time
by the shareholder, the Fund, or Firstar Trust Company. To initiate this
program, please complete the Supplemental Application, which is attached to
the Application. For information on obtaining an application, see
"Purchase of Shares."
EXCHANGE PRIVILEGE
Shares of the Portfolio which have been registered in the shareholder's
name for at least 15 days may be exchanged for shares of any other Aon
Asset Management Fund, Inc. portfolio provided that the shares acquired in
the exchange are qualified for sale in the jurisdiction of residence of the
shareholder at the time of the exchange. Before initiating an exchange,
the shareholder should obtain and carefully read the prospectus relating to
the portfolio the shares of which are being acquired.
Under the exchange privilege, each Aon Asset Management Fund, Inc.
portfolio offers to exchange its shares for shares of another Aon Asset
Management Fund, Inc. portfolio on the basis of relative net asset value
per share. In order to exercise an exchange without further approval of
the Fund, the shares being exchanged must have a net asset value of at
least $1,000 but not more than $500,000.
To elect the exchange privilege, the shareholder must check the appropriate
box on the Account Application. To exercise the exchange privilege, the
shareholder must contact the Transfer Agent in writing, or telephone the
Transfer Agent (1-800-338-1579, or in the Milwaukee area, (414) 765-4124)
and request the exchange. The shareholder will be charged $5.00 for each
exchange resulting in a redemption out of the Portfolio. This charge will
be deducted from the amount being exchanged.
An exchange of shares is treated as a sale for federal income tax purposes
and, depending upon the circumstances, a short or long-term capital gain or
loss may be realized. If you have questions as to the tax consequences of
an exchange, you should consult your tax advisor.
The exchange privilege may be modified or terminated at any time upon 60
days prior written notice. Although an investor may make up to four
exchanges in any one calendar year, the Fund reserves the right to limit
the number of exchanges in excess of four per year.
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares having a value of $7,500 or more may receive
regular monthly, quarterly, or annual payments by arranging to redeem
shares of the Portfolio on a regular basis under a Systematic Withdrawal
Plan. Under such a Plan, a shareholder can elect fixed dollar monthly,
quarterly, or annual payments of at least $100 each.
Under this Withdrawal Plan, Portfolio dividends must be reinvested. All
payments are made by redeeming shares, and when all the shares under a
Systematic Withdrawal Plan have been redeemed, no more payments are made.
A Systematic Withdrawal Plan may be terminated at any time by the
shareholder or the Fund. To initiate this Plan, please complete the
Supplemental Application, which is attached to the Application. For
information on obtaining an Application, see "Purchase of Shares."
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Portfolio's net income is determined on each day that the Portfolio's
net asset value is determined. Net income includes: (i) accrued interest
and amortized discount on the portfolio investments of the Portfolio, plus
or minus (ii) realized gains and losses, and minus (iii) amortized premium
and all accrued expenses of the Portfolio.
The Portfolio's net income is determined immediately before the Portfolio's
computation of net asset value at 1:30 p.m. (Central Time), and is declared
as a dividend to shareholders of record at that time. Each month dividends
are paid and are reinvested in additional shares of the Portfolio based on
their net asset value on the payment date or, if a shareholder elects, paid
in cash. A cash election may be made by notifying the transfer agent in
writing of the election 10 days prior to the last business day of any month
in which the election is to be effective, and will remain in effect until
revoked by similar notice to the transfer agent. Shareholders who withdraw
their entire account at any time during the month are paid all dividends
accrued through the date of withdrawal, together with the proceeds of the
withdrawal.
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code") in order to be
relieved of payment of Federal income taxes on amounts distributed to
shareholders. To do so, it must pay out substantially all of its net
income, including any short-term capital gains.
Income dividends (and distributions, if any, paid from short-term capital
gains) will be taxable to shareholders at ordinary income rates under the
Code. (Shareholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them.) The tax treatment of
dividends and distributions is the same whether they are received in cash
or reinvested in additional shares.
Dividends and distributions may also be subject to state and local taxes.
Interest on direct obligations of the U.S. and paid to individuals is not
subject to tax in most states, and dividends and distributions of the
Portfolio attributable to such interest may also be exempt from state
taxes. Statements as to the percentage of dividends and distributions that
is attributable to interest income from direct obligations of the U.S. will
be mailed to each shareholder.
<PAGE>
Shareholders are urged to consult their tax advisors regarding taxation of
investments in the Portfolio.
ADDITIONAL INFORMATION
CAPITAL STOCK AND VOTING
Each share of each class of stock has the same rights as the other shares
of that class to dividends, to vote and to receive assets upon liquidation
of the investment portfolio related to that class. Each fractional share
has the same rights, in proportion, as a full share. When issued and paid
for, shares of all classes are fully paid and nonassessable. Shareholders
have no preemptive or conversion rights. Each shareholder is entitled to
require the Fund to redeem, to the extent that it may lawfully effect such
redemption under the laws of the State of Virginia, all or any part of his
or her shares at the net asset value per share computed as described
herein. Payment of the aggregate price may be made in cash or, at the
option of the Fund, wholly or partly in such portfolio securities of the
Portfolio as the Fund shall select.
The Fund's bylaws provide that, unless otherwise required by the 1940 Act,
it shall not be required to hold an annual meeting of its stockholders. The
Fund intends to hold shareholder meetings only when required by law and at
such times as may be deemed appropriate by its Board of Directors. In
addition, if requested to do so by the holders of at least 10% of it's
outstanding shares, the Fund will call a meeting of shareholders for the
purpose of voting upon any question of removal of a director or directors,
and it will assist in facilitating shareholder communications as required
by Section 16(c) of the 1940 Act.
Matters that affect all of the investment portfolios in an identical manner
(such as the election of directors or ratification of the selection of
independent accountants) will be voted on by all of the shareholders of the
Fund. Matters that do not affect all of the investment portfolios or that
affect different portfolios in different ways will be voted on separately
by the shareholders of the class of stock relating to that investment
portfolio. Matters requiring such separate shareholder voting on an
investment portfolio by investment portfolio basis, shall have been
effectively acted upon with respect to a portfolio (including the
Portfolio) if a majority of the outstanding shares of the class related to
that portfolio vote for approval or disapproval of that matter,
notwithstanding that: (1) that matter has not been approved or disapproved
by a majority of the outstanding shares of any other class of stock, or (2)
the matter has not been approved or disapproved by a majority of the
outstanding shares of all classes of the Fund's stock.
Aon Corporation, along with its wholly-owned subsidiaries, owns, or is
expected to own, a substantial percentage of the outstanding shares of the
Portfolio. These shareholders will be affiliated persons of the Fund. Aon
Corporation and its subsidiaries may be able to cast a deciding vote on
matters submitted to a vote of shareholders, which may include proposed
changes in the Portfolio's investment objective and fundamental investment
restrictions and in terms of its Advisory Agreement.
<PAGE>
Aon Asset Management Fund, Inc.
MONEY MARKET PORTFOLIO
June 20, 1995
INVESTMENT ADVISOR
Aon Advisors, Inc.
123 North Wacker Drive
Chicago, Illinois 60606
ADMINISTRATOR AND DISTRIBUTOR
Forth Financial Securities Corporation
6610 West Broad Street
Richmond, Virginia 23230
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING AGENT
Firstar Trust Company
615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53202
INDEPENDENT AUDITORS
Ernst & Young LLP
One James Center
Suite 1000
Richmond, VA 23219
LEGAL COUNSEL
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
<PAGE>
PROSPECTUS
AON ASSET MANAGEMENT FUND, INC.
6610 West Broad Street
Richmond, Virginia 23230
FLEXIBLE ASSET ALLOCATION PORTFOLIO
Distributor --- Forth Financial Securities Corporation
(804) 281-6049
Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios, each
of which is in effect, a separate fund (commonly known as a "mutual fund")
with its own investment objective and policies. The Fund issues a separate
series of capital stock for each investment portfolio. THIS PROSPECTUS
DESCRIBES THE FLEXIBLE ASSET ALLOCATION PORTFOLIO (THE "PORTFOLIO").
The investment objective of the Aon Flexible Asset Allocation Portfolio is
maximum total return on invested capital, to be derived from capital
appreciation, dividends, and interest. It will pursue this objective by
following a flexible asset allocation strategy that shifts among a wide
range of investments and markets. Assets are invested in common stocks and
bonds and money market instruments, the proportion of each being
continuously determined by the investment adviser.
Shares of the Portfolio are distributed, without a sales charge, through
Forth Financial Securities Corporation, a wholly owned subsidiary of Forth
Financial Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of
Aon Corporation, a New York Stock Exchange-listed company. Aon Advisors,
Inc., also a wholly-owned subsidiary of Aon Corporation, serves as
investment advisor to the Portfolio. Aon Corporation and its subsidiary
companies may, by virtue of their shareholder interests in the Portfolio at
any particular date, be considered to be controlling persons of the
Portfolio and may be able to cast a deciding vote on all matters submitted
to a vote of the Portfolio's shareholders.
This prospectus concisely sets forth the information prospective investors
should know about the Portfolio and the Fund before investing. Investors
should retain this Prospectus for future reference. More detailed
information about the portfolios is contained in a Statement of Additional
Information, dated June 20, 1995 that has been filed by the Fund with the
Securities and Exchange Commission and incorporated by reference into this
Prospectus. The Statement of Additional Information is available free of
charge from the Fund at the telephone number or address set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
June 20, 1995
AON ASSET MANAGEMENT FUND, INC.
<PAGE>
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained in this Prospectus
and, if given or made, such other information or representations must not
be relied upon as having been authorized by the Fund, the investment
advisor, or the distributor. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
Table of Contents
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Condensed Financial Information . . . . . . . . . . . . . . .
Organization and Classification . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . .
Investment Practices . . . . . . . . . . . . . . . . . . . .
Loans of Portfolio Securities . . . . . . . . . . . . . . .
Covered Call Options . . . . . . . . . . . . . . . . . . .
American Depository Receipts . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . . . .
Fixed Income Obligations . . . . . . . . . . . . . . . . .
Short-Term Money Market Securities . . . . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . .
Distribution of Shares . . . . . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . . . . . . .
Regular Redemption . . . . . . . . . . . . . . . . . . . .
Telephone Redemption . . . . . . . . . . . . . . . . . . .
Other Redemption Information . . . . . . . . . . . . . . .
Additional Services to Investors . . . . . . . . . . . . . .
Automatic Investment Program . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . .
Systematic Withdrawal Plan . . . . . . . . . . . . . . . .
Dividends, Distributions, and Taxes . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . .
Board of Directors . . . . . . . . . . . . . . . . . . . .
Investment Advisor . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . .
Capital Stock and Voting Rights . . . . . . . . . . . . . .
<PAGE>
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee . . . . . . . . . . . . . . $5.00
ESTIMATED ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of average
net assets)
Investment Advisory Fee . . . 0.70%
Other Expenses . . . . . . . . 0.25%
Total Operating Expenses . . . 0.95%
EXAMPLE ---The table below shows the amount of expenses a shareholder would
pay on a $1,000 investment, assuming a 5% annual return and the expense
levels shown in the table above. The 5% annual return is a standardized
rate prescribed for the purpose of the example, and does not represent past
or future return of the Portfolio.
1 Year 3 Years 5 Years 10 Years
Expenses $10 $31 $57 $142
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses an investor in the Portfolio will bear. All
expenses are borne directly or indirectly by shareholders. (For more
information about Portfolio expenses, see "Investment Advisor", p. 15.)
The investment advisory Fee of .70% became effective April 26, 1995. Previously
the fee was .75%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The information below has been derived from audited financial statements
and should be read in conjunction with the financial statements of the Fund
found in its annual report.
For the period from March 31, 1994 to October 31, 1994
1994
Net Asset Value at beginning of period $10.00
Investment income .25
Expenses (.08)
Net investment income .17
Net realized (losses) on investments (.05)
Net unrealized appreciation .06
(depreciation) on investments
Income (loss) from operations .18
Dividends paid to shareholders from:
Net investment income (.16)
Net realized loss (.05)
(.21)
Decrease in net asset value (.03)
Net asset value at end of period $9.97
Total Return 1.84%*
Ratios:
Ratio of operating expenses to 1.25%**
average net assets
Ratio of net investment income to 2.63%*
average net assets
Portfolio turnover 64.36%
Net assets at end of period $10,189,125
*Determined on an annualized basis.
**Ratio of operating expenses to average net assets is after reimbursement of
certain fees and expenses by Aon Advisor's Inc. (See Note 4 to The Fund's
financial statements). Had the reimbursement not been made, the ratio would
have been 1.39%.
<PAGE>
AON ASSET MANAGEMENT FUND, INC.
ORGANIZATION AND CLASSIFICATION
The Fund was incorporated under the laws of the Commonwealth of Virginia on
August 21, 1991, and is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act") as an open-end management investment company. The Fund is organized
as a series type company with two classes or series of capital stock each
representing an interest in one of the two investment portfolios. Aon
Advisor's, Inc ("AAI") is the investment advisor for the Portfolio. The
Portfolio is diversified as that term is defined in the 1940 Act.
Stock issued with respect to either portfolio (including the Portfolio)
represents a pro-rata interest in the assets of that portfolio and has no
interest in the assets of any other portfolio. Each investment portfolio
(including the Portfolio) bears its own expenses and other liabilities and
also its proportionate share of general liabilities of the Fund. In other
respects, the Fund is treated as one corporate entity.
INVESTMENT OBJECTIVE AND POLICIES
The Flexible Asset Allocation Portfolio has the investment objective of
maximum total return on invested capital, to be derived from capital
appreciation, dividends, and interest. There can be no assurance that this
objective will be met. The investment objective of the Portfolio is
fundamental and may not be changed without the approval of a majority of
the Portfolio's outstanding voting shares. A majority means the lesser of
(1) 67% of the Portfolio's outstanding shares present at a meeting of the
Portfolio's shareholders if more than 50% of the outstanding shares are
present in person or by proxy, or (2) more than 50% of the Portfolio's
outstanding shares. Any change in the investment objective may result in
the Portfolio having an investment objective which is different from that
which an investor deemed appropriate to his or her objectives at the time
of investment.
This Portfolio will pursue this objective by following a flexible asset
allocation strategy that shifts among a wide range of investments and
markets. The Portfolio will invest in common stocks, bonds, and money
market instruments, the proportion of each being continuously determined by
AAI (under the supervision of the Board of Directors). Total return
consists of current income, including dividends, interest and discount
accruals and realized and unrealized capital appreciation and/or realized
and unrealized capital depreciation. This portfolio will invest in equity
securities of domestic and foreign issuers, including common stocks,
preferred stocks, convertible securities, and warrants; debt securities of
domestic and foreign issuers, including bonds, debentures, and notes; and
short-term money market securities. The portfolio may also write covered
call options in an effort to increase current income and for hedging
purposes.
Depending upon prevailing economic and market conditions, the Portfolio may
at any given time be primarily comprised of equity securities (including
debt securities convertible into equity securities), short-term money
market securities, corporate bonds and other debt securities, or any
combination thereof. For example, during periods when AAI believes that the
overall return on equity securities will exceed the return on debt
securities, the Portfolio may be fully or substantially invested in equity
securities. In contrast, the Portfolio normally would be invested primarily
in debt securities during periods when AAI believes that the total return
from investing in debt securities will exceed the return on equity
securities. Also, the Portfolio may be primarily invested in short-term
money market securities. These may include, to a limited extent, repurchase
agreements and money market instruments purchased on a "when-issued" or
delayed-delivery basis.
At least 60% of the value of any bonds held by the Portfolio will be
rated within the four highest grades by a nationally recognized rating
service such as Moody's Investor Services, Inc. or Standard & Poor's
Corporation. The balance of the value of the bonds held in the Portfolio
may be rated below those four highest grades, and if these
<PAGE>
lower-rated bonds were held in the Portfolio in significant amounts they
would increase financial risk and income fluctuation. At the current
time, the Fund has adopted a non- fundamental investment restriction
limiting the Portfolio's investment in these lower-rated fixed-income
debt securities (i.e., rated less than Baa or BBB) to no more than 30%
of the Portfolio's total assets measured at the time of purchase. The
lowest rating for debt securities in which the Portfolio may invest is
B. Such a rating indicates that a security generally lacks the
characteristics of a desirable investment and is predominantly
speculative with respect to the issuer's capacity to pay interest and
repay principal. See the Statement of Additional Information for a
complete description of ratings.
The Portfolio will be subject to varying levels of market and financial
risk and fluctuation of current income. The market value of non-convertible
fixed-income securities usually reflects yields generally available on
securities of similar quality and type. When such yields decline, the
market value of a portfolio already invested at higher yields can be
expected to rise, if such securities are protected against early call.
Similarly, when such yields increase, the market value of a portfolio
already invested at lower yields can be expected to decline. It is likely
that the portfolio turnover rate for the Portfolio will be higher than for
other mutual funds due to the frequent transactions aimed at maximizing
total return. This higher portfolio turnover rate generates higher
brokerage expenses; however, it is expected that the gain in total return
will more than offset the added brokerage expense. It is estimated that the
Portfolio will have an annual turnover rate that will not exceed 100%.
A shareholder of the Portfolio confers substantially more investment
discretion on AAI than would be the case for a shareholder investing in a
mutual fund with a more narrowly defined investment objective, thereby
enabling AAI to invest in a wide variety of investment securities.
INVESTMENT PRACTICES
In pursuing the investment objective, the Portfolio may engage in the
following investment practices.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may from time to time lend securities it holds to brokers,
dealers, and financial institutions. The Portfolio may lend up to a
maximum of 20% of the total value of it's assets. Such loans will be
secured by collateral in the form of cash or United States Treasury
securities, which will be maintained in an amount at least equal to the
current market value of the loaned securities. The Portfolio also will
receive a fee from the borrower or interest earned from the securities in
which cash collateral is invested during the term of the loan. Where voting
or consent rights with respect to loaned securities pass to the borrower,
management will follow the policy of calling the loan, in whole or in part
as may be appropriate, to permit the exercise of such voting or consent
rights if the issues involved have a material effect on the Portfolio's
investment in the securities loaned.
The primary risk involved in lending securities is that the borrower will
fail financially and not return the loaned securities at a time when the
collateral is insufficient to replace the full amount of the loaned
securities. In order to minimize this risk, the Portfolio will make loans
of securities only to firms determined by AAI (under the supervision of the
Board of Directors) to be creditworthy. A more detailed description of this
practice, and the associated risks are contained in the Statement of
Additional Information.
<PAGE>
COVERED CALL OPTIONS
For the purpose of minimizing or hedging against anticipated declines in
the value of its portfolio securities, the Portfolio may write covered call
options which are tradeable on a national securities exchange with respect
to securities it owns in an amount not in excess of 10% of the value of the
Portfolio's net assets at the time such options are written. So long as the
Portfolio remains obligated as a writer of a call, it forgoes the
opportunity to profit from increases in the market prices of the underlying
security above the call price.
Through the writing of a covered call option, the Portfolio receives
premium income but obligates itself to sell to the purchaser of such an
option the particular security underlying the option at a specified price
at any time prior to the expiration of the option period, regardless of the
market value of the security during this period.
The Portfolio may also enter into "closing purchase transactions" in order
to terminate its obligation as a writer of a call option prior to the
expiration of the option. Although writing only those call options which
are traded on a national securities exchange increases the likelihood of
being able to make closing purchase transactions, there is no assurance
that the Portfolio will be able to effect such a transaction at any
particular time or at any acceptable price. The writing of call options
could result in a profit or a loss to the Portfolio and could result in
higher brokerage costs.
Covered call options entail certain risks that are different in some
respects from investment risks associated with similar funds which do not
write such options. These risks include the inability to effect closing
transactions at favorable prices and the inability to participate in the
appreciation of the underlying securities above the exercise price plus the
premium. Because of these risks, the writing of options requires special
skills in addition to those needed to select portfolio securities. A more
detailed description of this practice and the associated risks is contained
in the Fund's Statement of Additional Information.
AMERICAN DEPOSITORY RECEIPTS
The Portfolio may purchase foreign securities including American Depository
Receipts ("ADRs"). ADRs are certificates issued by a U.S. bank or trust
company and represent the right to receive securities of a foreign issuer
deposited in a domestic bank or foreign branch of a domestic bank and
traded on a U.S. exchange or on the U.S. over-the-counter market.
Generally, ADRs are in registered form. ADRs do not eliminate all of the
risk inherent in investing in foreign issuers. To the extent that the
Portfolio acquires ADRs through banks that do not have a contractual
relationship with the foreign issuer of the security underlying the ADR to
issue and service the ADRs (i.e., unsponsored ADRs), there may be an
increased possibility that the Fund would not become aware of and be able
to respond to corporate actions such as stock splits and rights offerings
involving the foreign issuer in a timely manner. In addition, the lack of
this information may result in inefficiencies in the valuation of such
ADRs. Investment in ADRs has certain advantages over direct investment in
the underlying foreign securities because: (1) they are U.S. dollar
denominated investments that are generally easily transferable and for
which market quotations are readily available, (2) issuers whose securities
are represented by ADRs are subject to the same auditing, accounting and
financial reporting standards as are domestic issuers, and (3) currency
risks are avoided during the settlement period for either purchases or
sales.
Investment in foreign securities involves considerations which are not
ordinarily associated with investing in domestic issuers. These include
changes in currency rates or currency exchange control regulations that
affect the dollar-value of the underlying security, the possibility of
expropriation of the foreign issuer's assets or confiscatory taxation of
the issuer, the unavailability of financial or economic information
about the country or its markets, less liquidity and more volatility in
foreign markets, the impact of political, social or diplomatic
developments, the extent and quality of government regulation of
financial markets and institutions, greater difficulty pursuing legal
claims against foreign issuers, and the fact that individual foreign
economies may differ favorably or unfavorably from the U.S. economy
<PAGE>
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The Flexible Asset Allocation Portfolio will limit its investment in ADRs
to 10% of its total assets, taken at market value at the time of
acquisition. The above factors will be considered before investments in
foreign securities are made. No investment in ADRs will be made unless such
investments meet the standards and objectives of the Portfolios.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements involving the purchase by the
Portfolio of money market instruments that the Portfolio is qualified to
purchase and the simultaneous agreement to resell the same instruments back
to the seller at an agreed upon price on demand or at a specified future
date. Repurchase agreements entered into by the Portfolio will be with
Banks or primary government securities dealers. The yield to the Portfolio
on a repurchase agreement is determined by the difference between the
purchase price of the underlying obligation, and the price at which the
obligation is "repurchased" by the bank or dealer.
The risks associated with repurchase agreements include: (i) if the seller
defaults on the obligation to repurchase the instrument, the Portfolio may
incur a loss if the value of the collateral securing the repurchase
agreement declines or the Portfolio may incur disposition costs in
connection with liquidating the collateral; and (ii) if bankruptcy
proceedings are commenced with respect to the seller of the instrument,
liquidation of the collateral by the Portfolio may be delayed or limited.
Accordingly, the Portfolio will only enter into repurchase agreements that
present minimal credit risks and that are with sellers not perceived to
present a serious risk of becoming involved in bankruptcy proceedings
within the time frame contemplated by the repurchase agreement.
Repurchase agreements with maturities of greater than seven days are
generally not negotiable, and therefore are not regarded as liquid
investments. Such repurchase agreements may also be subject to greater
risks than repurchase agreements of shorter maturities that (i) the seller
may experience a decrease in credit quality during the term of the
repurchase agreement, and (ii) the value of the collateral may decline due
to somewhat higher interest rates.
The Portfolio will only enter into repurchase agreements with banks or
government securities dealers recognized as primary dealers by the Federal
Reserve System, and then only if:
(1) at the time the repurchase agreement is entered into, and throughout
the duration of the repurchase agreement, the collateral has a market value
at least equal to the value of the repurchase agreement;
(2) the collateral consists of U.S. Government securities or instruments
rated in the highest rating category by at least two nationally recognized
statistical rating organizations; and
(3) the maturity of the repurchase agreement does not exceed 30 days.
FIXED-INCOME OBLIGATIONS
The value of Fixed-income securities owned by the Portfolio will fluctuate
in response to various market forces and will vary inversely with changes
in prevailing interest rate levels.
U.S. GOVERNMENT SECURITIES. The Portfolio may invest in intermediate
(maturities of 1 to 10 years) and long-term (maturities in excess of 10
years) debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Such U.S. Government securities include:
(1) U.S. Treasury notes, and bonds; and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are
supported by any one of the following: (a) the full faith and credit of
the U.S. Government (e.g., Government National Mortgage Association
<PAGE>
("GNMA") Certificates); (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury (e.g., debt
of each of the Federal Home Loan Banks); (c) the discretionary authority
of the U.S. Government or GNMA to purchase certain financial obligations
of the agency or instrumentality (e.g., Federal National Mortgage
Association); or (d) the credit of the issuing agency or instrumentality
(e.g., Federal Land Banks, Farmers Home Administration or Student Loan
Marketing Association). No assurance can be given that the U.S.
Government will provide support to such U.S. Government sponsored
agencies or instrumentalities in the future, since it is not required to
do so by law.
MORTGAGE PASS-THROUGH SECURITIES. GNMA securities are (along with certain
Federal National Mortgage Association and Federal Home Loan Corporation
securities in which the Portfolio may invest) securities whose scheduled
monthly interest and principle payments relating to mortgages in the pool
are "passed through" to investors. GNMA and other similar pass-through
securities differ from conventional bonds in that principal is paid back to
the certificate holders over the life of the loan rather than at maturity.
As a result, when investments are made in such securities, the Portfolio
may receive unscheduled principal payments representing prepayments on the
underlying mortgages. All payments and unscheduled prepayments of principal
will be reinvested in the Portfolio in instruments consistent with the
Portfolio's stated investment objective and policies. GNMA and other
similar securities may not be an effective means of "locking in" long term
interest rates due to the need for the Portfolio to reinvest scheduled and
unscheduled principal payments. At the time principal payments or
prepayments are received by the Portfolio, prevailing interest rates may be
higher or lower than the current yield of GNMA and other similar pass-
through securities held by the Portfolio.
INVESTMENT GRADE DEBT. The Portfolio may also invest in fixed-income
obligations such as marketable straight corporate or government debt
securities rated at the time of purchase within the four highest ratings
(BBB or better) assigned by Moody's Investor Service, Inc., ("Moody's") or
(Baa or better) assigned by Standard & Poor's Corporation ("Standard &
Poor's") or which, although not rated by one of the foregoing
organizations, are determined by AAI as being of investment quality
equivalent to securities rated BBB or Baa or better. See the Statement of
Additional Information for a description of such ratings. Also, the
Portfolio may invest in securities issued by the Canadian Government or its
Provinces, or their respective agencies or instrumentalities.
LOWERED-RATED DEBT. In addition the Portfolio may invest in debt securities
with lower ratings which generally carry greater risk of default and are
generally subject to greater market fluctuations. If held by the Portfolio
in significant amounts they would increase financial risk and income
fluctuation. Lower-rated debt securities have speculative characteristics
and changes in economic conditions and other circumstances are more likely
to weaken the capacity of issuers of such securities to make principal and
interest payments than would be the case as to issuers of higher rated debt
securities. See the Statement of Additional Information for a description
of lower-rated debt securities, including further discussion of the risks
of investing in such instruments.
SHORT-TERM MONEY MARKET SECURITIES
The Portfolio may invest in the following high quality short-term money
market securities:
U.S. GOVERNMENT SECURITIES. These are obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. These obligations
may include instruments that are supported by the full faith and credit of
the United States (such as Treasury bills, notes, and bonds, and
obligations issued by the Government National Mortgage Association);
instruments that are supported by the right of the issuer to borrow from
the Treasury (such as securities of the Federal Home Loan Banks);
instruments that are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations (such as securities of the
Federal National Mortgage Association); and instruments that are supported
only by the credit of the instrumentality (such as securities issued by the
Federal Farm Credit Banks, the Student Loan Marketing Association, and the
Federal Home Loan Mortgage Corporation).
<PAGE>
BANK OBLIGATIONS. The Portfolio may invest in certificates of deposit and
time deposits issued by the U.S. banks which are members of the Federal
Deposit Insurance Corporation and have assets of at least $1 billion.
Certificates of deposits ("CDs") are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified
period of time at a stated interest rate. Time deposits are interest
bearing bank obligations payable at a stated maturity date. Certain CDs and
time deposits may not be readily marketable or otherwise illiquid. Such
instruments will be treated as illiquid investments for purposes of the
Portfolio's investment restrictions.
REPURCHASE AGREEMENTS. Repurchase agreements are described above.
COMMERCIAL PAPER. Commercial paper consists of unsecured promissory notes
issued by corporations to finance short-term credit needs. See the
Statement of Additional Information for a complete description of
commercial paper ratings.
NET ASSET VALUE
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading, except that shares of the Portfolio may not
be purchased or redeemed, and such shares will not be priced, on the
following days: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day.
The net asset value of the Portfolio's shares for the purposes of pricing
orders for purchase and redemption of shares is determined as of the close
of regular trading (currently, 3:00 p.m. Central Time) on the NYSE, on each
day that the Fund is open for business.
Net asset value per share is calculated for purchases and redemptions by
dividending the value of all securities and other assets of the Portfolio,
less the liabilities of the Portfolio, by the number of the Portfolio's
outstanding shares.
DISTRIBUTION OF SHARES
The Fund has entered into a Distribution Agreement with Forth Financial
Securities Corporation ("FFSC"), 6610 West Broad Street, Richmond, Virginia
23230, a wholly-owned subsidiary of Forth Financial Resources, Ltd.
("FFRL"), which is in turn a wholly-owned subsidiary of Aon Corporation,
under which FFSC will act as principal underwriter of the Portfolio's
shares. Mr. John J. Palmer, president of the Fund, and Mr. Scott R. Reeks,
treasurer of the Fund, are both affiliated with FFSC. FFSC has agreed to
use its best efforts, consistent with its other business, to sell
Portfolio's shares and to pay all expenses relating to selling and
distributing such shares, including preparing, printing, and mailing sales
material. The Fund pays no compensation to FFSC for services performed by FFSC
under the Distribution Agreement. AAI may, in its discretion, reimburse
FFSC for certain expenses it may incur in connection with the distribution
of the shares. Such reimbursement shall be made out of AAI's own resources
(including, but not limited to, AAI's profit under the Advisory
Agreements). Shares are continuously offered.
<PAGE>
PURCHASE OF SHARES
Shares of the Portfolio are offered and sold on continuous basis at the net
asset value per share next calculated after a purchase order is received
and accepted. Initial investments may only be made by submitting a
completed Account Application as described below. Subsequent purchase
orders may be placed by submitting orders to the transfer agent (Firstar
Trust Company). The minimum initial investment for shares is $1,000.00 and
subsequent investments must be at least $100.00. The minimum purchase
requirements do not apply to reinvested dividends. The minimum initial
investment and subsequent investment amounts may be less than the foregoing
for full time staff employees of Aon Corporation and its affiliates.
Investors desiring to purchase shares of the Portfolio may obtain an
Account Application from Forth Financial Securities Corporation ("FFSC"),
the Fund's distributor. The application should be completed and mailed,
together with a check or money order (payable to "Aon Asset Management
Fund, Inc."), to the Fund, at 6610 West Broad Street, Richmond, Virginia
23230. All checks must be drawn on a bank located within the United States
and must be payable in U.S. dollars. Subsequent investments in an existing
account in the Portfolio may be made at any time by sending to Firstar
Trust Company, P.O. Box 701 Milwaukee, Wisconsin 53201-0701 a check or
money order payable to the Fund as shown above, along with their (a) the
detachable form that regularly accompanies the confirmation of a prior
transaction, or (b) a letter stating the amount of the investment, the name
of the Portfolio and the account number in which the investment is to be
made. A $15 fee will be imposed by the transfer agent if any check from an
investor does not clear, and the investor involved will be responsible for
any loss incurred by the Fund or Portfolio.
An investor may also purchase shares by directing his or her bank to
transmit immediately available funds by wire in the amount of the purchase
price to:
Firstar Bank, Milwaukee, N.A.
Account of Firstar Trust Company
ABA #0750-00022
For credit to Account # 112-950-027
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
For further credit to Account # _____
Aon Asset Management Fund Inc.--Flexible Asset Allocation Portfolio
{the investor's account number and the title of the account}
<PAGE>
When making an initial wire purchase, please call FFSC at (804) 281-6049
with the appropriate account information prior to sending the wire.
Investors making initial investments by wire must promptly complete an
Account Application and forward it to the transfer agent. Amounts redeemed
pursuant to redemption requests received before the completed Application
has been received and accepted by the transfer agent will not be paid until
the completed Application has been received and accepted by FFSC.
Subsequent Purchase orders are accepted by the transfer agent at its
Milwaukee office. The transfer agent will not accept an order from
securities dealers or financial institutions, unless the dealer or
institution undertakes to pay for the order in immediately available funds
wired to the transfer agent by the close of business the same day. The
transfer agent will not accept an order from other investors unless they,
at the time they place the order, have a creditworthy financial institution
guarantee payment in immediately available funds wired to the transfer
agent by the close of business the same day.
Purchase orders received and accepted before the close of regular trading
on the NYSE, currently 3:00 p.m. (Central Time), will be executed at the
price per share calculated as of the close of regular trading on the NYSE.
Purchase orders received and accepted after the close of regular trading on
the NYSE, or on non-business days, will be executed on the next business
day following receipt and acceptance of the purchase order by the transfer
agent.
The Fund will not accept payment in cash for the purchase of shares.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. Applications
without a Taxpayer Identification Number or an indication that a Number has
been applied for will not be accepted. If a Number has been applied for,
the Number must be approved and certified within 60 days of the date of
Application. See the Account Application for further information about this
requirement. The Fund reserves the right to reject any purchase order for
any reason.
REDEMPTION OF SHARES
REGULAR REDEMPTION
An investor may redeem shares in any amount by sending a written request to
Aon Asset Management Fund, Inc. P.O. Box 701, Milwaukee, WI 53201-0701.
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with
such services, or receipt at the transfer agent's post office box, of
purchase applications or redemption requests does not constitute receipt by
the Transfer Agent. Do not send letters by overnight courier to the post
office box address. Except as described below under "Telephone Redemption",
redemption requests and correspondence sent to the Fund by overnight
courier must be delivered to the offices of the Transfer Agent, Firstar
Trust Company, at 615 E. Michigan Street, Third Floor, Milwaukee, WI 53202.
Redemption requests must be signed by each owner of the shares to be
redeemed, including each joint owner on redemption requests for joint
accounts, in the exact manner as the share account is registered, and must
state the amount of redemption and identify the shareholder account number
and tax identification number. If the amount of the redemption request
exceeds $5,000 or if the proceeds are to be sent elsewhere than the address
of record, each signature must be guaranteed by a commercial bank that is a
member of the FDIC, a trust company, or a member firm of a national
securities exchange. The Transfer Agent will not accept guarantees from
notary public, savings and loan associations, or savings banks. Guarantees
must be signed by an authorized signatory of the bank, trust company or
member firm and "Signature Guaranteed" must appear with the signature. The
Fund may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form.
<PAGE>
TELEPHONE REDEMPTION
Currently, shareholders may redeem shares of the Fund by telephone. To
redeem shares by telephone, an investor must check the appropriate box on
the Account Application. Once this feature has been requested, shares may
be redeemed by calling Investor Services at 1-800-338-1579, or in the
Milwaukee area, (414) 765-4124, and providing the account name, account
number, and amount of redemption. Proceeds of shares redeemed by telephone
will be mailed or wired only to an investor's address or bank of record as
shown on the records of the transfer agent.
If an investor redeems shares of the Portfolio by telephone and requests
wire payment, payment of the redemption proceeds will normally be made in
federal funds on the next business day provided that the redemption order
is received by the transfer agent by the close of regular trading on the
NYSE (currently 3:00 pm, Central Time). If a redemption order is received
by the transfer agent after 3:00 pm (Central Time), or on a non- business
day, payment for the redeemed shares will, at the investor's request,
normally be wired in federal funds on the business day following the next
business day.
As stated above, the Transfer Agent will wire redemption proceeds only to
the bank and account designated on the Account Application or in written
instructions subsequently received by the transfer agent, and only if the
investor's bank is a commercial bank located within the United States. The
transfer agent currently charges a $7.50 fee for each payment of redemption
proceeds made by wire. The Fund's current policy is to pay this wire
transfer fee to the transfer agent as an expense of the Portfolio, in order
to facilitate shareholder redemptions. The Fund reserves the right, should
its experience warrant it, to change this policy and to impose the wire
transfer fee directly upon redeeming shareholders requesting wire
transfers. In such event, the Fund will provide shareholders at least
thirty days written notice of the policy change.
In order to arrange for telephone redemptions after an account has been
opened or to change the bank account or address designated to receive
redemptions proceeds, a written request must be sent to Aon Asset
Management Fund, Inc. at P.O. Box 701, Milwaukee, WI 53201-0701. The
request must be signed by each shareholder of the account with the
signature guaranteed as described above. Further documentation may be
requested from corporations, executors, administrators, trustees and
guardians.
The Fund reserves the right to refuse telephone redemption if it believes
it is advisable to do so. Procedures for redeeming shares by telephone may
be modified or terminated by the Fund at any time. In addition, neither the
Fund nor its transfer agent will be responsible for the authenticity of
redemption instructions received by telephone. Nevertheless, the transfer
agent has established certain reasonable procedures to confirm that the
instructions communicated by telephone are genuine (in the absence of such
procedures, the Fund or the transfer agent may be liable for any
unauthorized or fraudulent instructions). Such procedures may include,
among others, requiring forms or personal identification prior to acting
upon instructions received by telephone, providing written confirmation of
such instructions or transactions and/or tape recording telephone
instructions. Thus, a shareholder would bear any losses resulting from
unauthorized telephone redemption instructions with respect to the
shareholders account.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If an investor is unable to
contact the transfer agent by telephone, shares may also be redeemed by
delivering the redemption request to the transfer agent in person or by
mail as described above under "Regular Redemption".
OTHER REDEMPTION INFORMATION
Share redemption requests are effected at the net asset value next
determined after receipt of a request in proper form by the transfer agent.
Shares for which redemption requests are received by the transfer agent in
proper form before 3:00 p.m. (Central Time) on a business day will not
receive any dividend, if any, declared that day. If the request is received
in proper form after 3:00 p.m. (Central Time), the shares to be redeemed
will be credited with that day's dividend.
<PAGE>
The Fund ordinarily will make payment for redeemed shares within seven days
after receipt by the transfer agent of a request in proper form, except as
may be permitted by the SEC. Payment may be delayed (i) for any period
during which the NYSE is closed (other than customary weekend or holiday
closing) or trading on the NYSE is restricted; (ii) for any period during
which an emergency exists, as determined by the SEC, and it is not
reasonably practicable for the Portfolio to dispose of its securities, or
to determine the value of its net assets; or (iii) for other periods as
permitted by the SEC for the protection of shareholders.
Proceeds from the redemption of shares purchased by check will not be paid
until the check has cleared, which may take up to fifteen days. An investor
purchasing shares by wire must file an Account Application before payment
is made on any redemption requests for shares purchased by wire.
The Fund reserves the right to redeem involuntarily, upon not less than 30
day's notice, any shareholder account which is reduced as a result of a
withdrawal by an investor to a value of less than $500.00.
ADDITIONAL SERVICES TO INVESTORS
AUTOMATIC INVESTMENT PROGRAM
When opening an account, a shareholder may authorize deductions to be made
from his or her personal checking account with a bank for investment each
month or quarter in shares of the Portfolio in a minimum amount of $100.
(This minimum may be less for full time staff employees of Aon Corporation
and its subsidiaries.) There is no obligation to continue automatic
investment program purchases, and the program may be terminated at any time
by the shareholder, the Fund or Firstar Trust Company. To initiate this
program, please complete the Supplemental Application, which is attached to
the Application. For information on obtaining an application, see "Purchase
of Shares".
EXCHANGE PRIVILEGE
Shares of the Portfolio which have been registered in the shareholder's
name for at least 15 days may be exchanged for shares of any other Aon
Asset Management Fund, Inc. portfolio provided that the shares acquired in
the exchange are qualified for sale in the jurisdiction of residence of the
shareholder at the time of the exchange. Before initiating an exchange, the
shareholder should obtain and carefully read the prospectus relating to the
portfolio the shares of which are being acquired.
Under the exchange privilege, each Aon Asset Management Fund, Inc.
portfolio offers to exchange its shares for shares of another Aon Asset
Management Fund, Inc. portfolio on the basis of relative net asset value
per share. In order to exercise an exchange without further approval of the
Fund, the shares being exchanged must have a net asset value of at least
$1,000 but not more than $500,000.
To elect the exchange privilege, the shareholder must check the appropriate
box on the Account Application. To exercise the exchange privilege, the
shareholder must contact the Transfer Agent in writing, or telephone the
Transfer Agent (1-800-338-1579, or in the Milwaukee area, (414) 765-4124)
and request the exchange. The shareholder will be charged $5.00 for each
exchange resulting in a redemption out of the Portfolio. This charge will
be deducted from the amount being exchanged.
An exchange of shares is treated as a sale for federal income tax purposes
and, depending upon the circumstances, a short or long-term capital gain or
loss may be realized. If you have questions as to the tax consequences of
an exchange, you should consult your tax advisor.
<PAGE>
The exchange privilege may be modified or terminated at any time upon 60
days prior written notice. Although an investor may make up to four
exchanges in any one calendar year, the Fund reserves the right to limit
the number of exchanges in excess of four per year.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares having value of $7,500 or more may receive
regular monthly, quarterly, or annual payments by arranging to redeem
shares of the Portfolio on a regular basis under a Systematic Withdrawal
Plan. Under such a Plan, a shareholder can elect fixed dollar monthly,
quarterly or annual payments of at least $100.
Under this Withdrawal Plan, dividends on shares must be reinvested. All
payments are made by redeeming shares, and when all the shares under a
Systematic Withdrawal Plan have been redeemed, no more payments are made. A
Systematic Withdrawal Plan may be terminated at any time by the shareholder
or the Fund. To initiate this Plan, please complete the Supplemental
Application, which is attached to the Application. For information on
obtaining an Application, see "Redemption of Shares".
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Portfolio's net income is determined immediately before its computation
of net asset value at the close of the NYSE (currently 3:00 p.m., Central
Time) and is declared as a dividend at the end of each fiscal quarter. Net
income includes: (i) accrued interest and amortized discount on the
portfolio investments of the Portfolio, plus or minus (ii) realized gains
and losses, and minus (iii) amortized premium and all accrued expenses of
the Portfolio. Each quarter dividends are paid and are reinvested in
additional shares of the Portfolio based on their net asset value on the
payment date or, if a shareholder elects, paid in cash. A cash election
may be made by notifying the Transfer Agent in writing of the election 10
days prior to the last business day of any quarter in which the election is
to be effective, and will remain in effect until revoked by similar notice
to the Transfer Agent. Shareholders who withdraw their entire account at
any time during the quarter are paid all dividends accrued through the date
of withdrawal, together with the proceeds of the withdrawal.
The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code in order to be relieved of
payment of federal income taxes on amounts distributed to shareholders. To
do so, it must pay out substantially all of its net income, including any
short-term capital gains.
Income dividends (and distributions, if any, paid from short-term capital
gains) will be taxable to shareholders at ordinary income rates under the
Internal Revenue Code. (Shareholders not subject to tax on their income
will not be required to pay tax on amounts distributed to them.) The tax
treatment of dividends and distributions is the same whether they are
received in cash or reinvested in additional shares.
Dividends and distributions may also be subject to state and local taxes.
Interest on direct obligations of the U.S. Government and paid to
individuals is not subject to tax in most states, and dividends and
distributions of the Portfolio attributable to such interest may also be
exempt from state taxes. Statements as to the percentage of dividends and
distributions that is attributable to interest income from direct
obligations of the U.S. will be mailed to each shareholder.
Shareholders are urged to consult their tax advisers regarding taxation of
investments in the Portfolio.
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Fund has a Board of Directors elected by the shareholders. A majority
of the directors are not affiliated with AAI, FFSC, FFRL or Aon Corporation
or their affiliates. The Directors are responsible for the overall
management of the Fund and their duties include reviewing the results of
the Portfolio, monitoring investment activities and practices, and
receiving and acting upon future plans for the Portfolio.
INVESTMENT ADVISOR
Aon Advisors, Inc. ("AAI"), a Virginia corporation with offices at 6604
West Broad Street, Richmond, Virginia 23230, and 123 North Wacker Drive,
Chicago, Illinois 60606, serves as investment advisor of the Portfolio
under the oversight and supervision of the Board of Directors of the Fund
and pursuant to an investment advisory agreement for the Portfolio
("Advisory Agreement") dated April 26, 1995. AAI, which is registered as
an investment advisor under the Investment Advisers Act of 1940, is a
wholly-owned subsidiary of Aon Corporation, a holding company whose common
stock is listed for trading on the New York Stock Exchange.
As of October 31, 1994, Mr. Patrick G. Ryan, President and Chief Executive
Officer of Aon Corporation, owned directly and beneficially 13,461,930
shares (13.2%) of the outstanding common stock of Aon Corporation.
In addition to the Portfolio, AAI provides investment advice and management
to the Money Market Portfolio of the Fund and Aon Corporation and its
subsidiaries and affiliates, including Life of Virginia Series Fund, Inc.,
a registered investment company. The total staff of AAI as of October 31,
1994, consisted of 46 individuals, including five executive directors and
fourteen portfolio managers. Assets under management include equity
securities, fixed-income securities and real estate. As of October 31,
1994, the aggregate assets under AAI's management were $11 billion.
The Flexible Asset Allocation Portfolio is managed by Rimas M. Milaitis, a
portfolio manager with AAI Mr. Milaitis has been employed in the investment
industry in varying capacities since 1987. Having received a B.S. in
Economics from Illinois State University in 1984, he went on to earn an
M.B.A. with a concentration in Finance from DePaul University in 1991. The
principle occupations held by Mr. Milaitis for the last five years are set
forth below.
Senior Portfolio Manager, AAI since 1993. Portfolio Manager, AAI from 1991
to 1993 and Equity Trader, AAI from 1990 to 1991. Equity Portfolio
Assistant, Illinois State Board of Investment, from 1987 to 1990.
Pursuant to the Advisory Agreement, AAI manages the investment and
reinvestment of the assets of the Portfolio, in accordance with the
investment objective and management policies described above. The Portfolio
pays AAI monthly compensation in the form of an investment advisory fee.
This fee is deducted daily but is paid to the Advisor monthly. The
investment advisory fee is based upon the average daily net assets of the
Portfolio, at the following annual rates:
.70% of the first $250 million, .65% of the next $250 million, and .50% of
the assets in excess of $500 million.
Under the Advisory Agreement, AAI is also required, at its own expense, to:
(a) supply internal auditing and internal legal services; (b) supply
stationery and office supplies; (c) prepare reports to shareholders and the
Board of Directors; (d) prepare tax returns; (e) prepare reports to and
filings with the SEC and State Blue Sky authorities; (f) at the Fund's
request, furnish office space, in such place as may be agreed upon from
time to time, and all necessary office facilities; (g) supply clerical,
accounting, bookkeeping, administrative and other similar services
(exclusive of those services relating to and to be performed under any
contract for custodial, transfer, dividend and accounting services entered
into by the Fund with a third party); and (h) furnish persons satisfactory
<PAGE>
to the Fund to respond during normal business hours to in-person, written,
and telephone requests for assistance and information from shareholders of
the Portfolio, and provide such facilities and equipment as may be
necessary for such persons to carry out their duties, including, without
limitation, office space and facilities, telephones and CRT terminals and
equipment (including telephone lines) necessary for access to the
shareholder records.
In order to fulfill its obligation to provide these services, AAI has
entered into an Administration Agreement with FFSC, the Fund's distributor,
and the Fund under which FFSC furnishes substantially all such services for
an annual fee of $25,000 plus .05% of the Fund's average daily net assets.
This fee is borne by AAI, and not by the Portfolio or the Fund.
The Portfolio is responsible for all other expenses, including:
(a) taxes and fees payable by it to federal, state, or other governmental
agencies; (b) brokerage fees and commissions, and issue and transfer taxes;
(c) interest; (d) Board of Directors meeting attendance fees and expenses
of directors of the Fund who are not directors, officers or employees of
AAI, FFSC, or of any affiliated person (other than a registered investment
company) of AAI or FFSC; (e) registration, qualification, filing and other
fees in connection with securities registration requirements of federal and
state regulatory authorities; (f) the charges and expenses for custodial,
paying agent, transfer agent, dividend agent and accounting agent services;
(g) outside legal fees and expenses in connection with the affairs of the
Fund or the Portfolio including, but not limited to, registering and
qualifying its shares with federal and state regulatory authorities; (h)
charges and expenses of independent auditors; (i) costs of meetings of
shareholders and directors of the Fund or the Portfolio (j) costs of
maintenance of corporate existence; (k) insurance premiums; (l) investment
advisory fees; (m) costs and fees associated with printing and delivering
registration statements, stockholders' reports and proxy statements; (n)
costs and fees associated with delivering reports to and filings with the
SEC and State Blue Sky authorities; (o) costs relating to administration of
the Fund's general operations; (p) costs relating to the Fund's own
employees, if any; and (q) costs of preparing, printing, and delivering the
Portfolio's prospectus to existing shareholders.
If in any fiscal year the aggregate expenses of Portfolio (including the
investment advisory fee, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceed 1.25% of the Portfolio's
average daily net assets, AAI has agreed to reimburse the Portfolio for
such excess.
ADDITIONAL INFORMATION
CAPITAL STOCK AND VOTING RIGHTS
Each share of each class of stock has the same rights as the other shares
of the class to dividends, to vote and to receive assets upon liquidation
of the investment portfolio related to that class. Each fractional share
has the same rights, in proportion, as a full share. When issued and paid
for, shares of all classes are fully paid and nonassessable. Shareholders
have no preemptive or conversion rights. Each shareholder is entitled to
require the Fund to redeem, to the extent that it may lawfully effect such
redemption under the laws of the State of Virginia, all or any part of his
or her shares at the net asset value per share computed as described
herein. Payment of the aggregate price may be made in cash or, at the
option of the Fund, wholly or partly in such portfolio securities of the
Portfolio as the Fund shall select.
The Fund's bylaws provide that, unless otherwise required by the 1940 Act,
it shall not be required to hold an annual meeting of its stockholders. The
Fund intends to hold shareholder meetings only when required by law and at
such times as may be deemed appropriate by its Board of Directors. In
addition, if requested to do so by the holders of at least 10% of the
Fund's outstanding shares, it will call a meeting of shareholders for the
purpose of voting upon any question of removal of a director or directors,
and it will assist in facilitating shareholder communications as required
by Section 16(c) of the 1940 Act.
<PAGE>
Matters that affect all of the investment portfolios in an identical manner
(such as election of directors or ratification of the selection of
independent accountants) will be voted on by all of the shareholders of the
Fund. Matters that do not affect all of the investment portfolios or that
affect different portfolios in different ways will be voted on separately
by the shareholders of the class of stock relating to that portfolio.
Matters requiring such separate shareholder voting on an investment
portfolio by investment portfolio basis, shall have been effectively acted
upon with respect to a portfolio (including the Portfolio) if a majority of
the outstanding shares of the class related to that portfolio vote for
approval or disapproval of the matter, notwithstanding that: (1) that
matter has not been approved or disapproved by a majority of the
outstanding shares of any other class of stock, or (2) the matter has not
been approved or disapproved by a majority of the outstanding shares of all
classes of the Fund's stock.
Aon Corporation, along with its wholly-owned subsidiaries, is expected to
own a substantial percentage of the outstanding shares of the Portfolio.
These prospective shareholders will be affiliated persons of the Fund. Aon
Corporation and its subsidiaries may be able to cast a deciding vote on
matters submitted to a vote of shareholders, which may include proposed
changes in the Portfolio's investment objective and fundamental investment
restrictions and in the terms of its Advisory Agreement.
<PAGE>
Aon Asset Management Fund, Inc.
FLEXIBLE ASSET ALLOCATION PORTFOLIO
June 20, 1995
INVESTMENT ADVISOR
Aon Advisors, Inc.
123 North Wacker Drive
Chicago, Illinois 60606
ADMINISTRATOR AND DISTRIBUTOR
Forth Financial Securities Corporation
6610 West Broad Street
Richmond, Virginia 23230
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING AGENT
Firstar Trust Company
615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53202
INDEPENDENT AUDITORS
Ernst & Young LLP
One James Place
Suite 1000
Richmond, Virginia 23219
LEGAL COUNSEL
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue N.W.
Washington, D.C. 20004
<PAGE>
Aon Asset Management Fund, Inc.
6610 West Broad Street
Richmond, Virginia 23230
DISTRIBUTOR--Forth Financial Securities Corporation
STATEMENT OF ADDITIONAL INFORMATION
June 20, 1995
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement expands upon matters discussed in
the prospectuses for the Money Market Portfolio and the Flexible Asset
Allocation Portfolio of Aon Asset Management Fund, Inc. and should,
therefore, be read in conjunction with the prospectuses. To obtain a copy
of either prospectus with the same date as this Statement of Additional
Information, send a written request to Aon Asset Management Fund, Inc.,
6610 West Broad Street, Richmond, Virginia 23230, or call (804) 281-6000.
<PAGE>
TABLE OF CONTENTS
General Information . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Portfolio Investments, Investment Practices
and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . .
General Standards . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Government Securities . . . . . . . . . . . . . . . . . . . .
Certificates of Deposit and Time Deposits . . . . . . . . . . . .
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . .
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . .
Lending Portfolio Securities . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . .
Flexible Asset Allocation Portfolio Investments, Investment Practices and
Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
When-Issued and Delayed Delivery Securities . . . . . . . . . . .
Loans of Portfolio Securities . . . . . . . . . . . . . . . . . .
Covered Call Options . . . . . . . . . . . . . . . . . . . . . . .
GNMA Certificates . . . . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . .
Risks of Investing in Lower Quality Debt Instruments . . . . . . . . .
Lower Quality Debt Instruments Entail Certain Risks . . . . . . .
Management of Fund . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Officers . . . . . . . . . . . . . . . . . . . . .
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . .
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . .
Flexible Asset Allocation Portfolio . . . . . . . . . . . . . . .
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . . . .
Custodian, Transfer Agent, and Accounting Agent . . . . . . . . .
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
GENERAL INFORMATION
Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios (the
"Portfolios"), each of which is, for investment purposes, in effect a
separate fund (commonly known as a "mutual fund") with its own investment
objective and objective policies. The Fund is organized as a series
company, with eight classes of capital stock. Currently, only two classes
of capital stock are being issued representing interests in the Money
Market Portfolio and the Flexible Asset Allocation Portfolio.
Fund shares are distributed, without sales charge, through Forth Financial
Securities Corporation ("FFSC"), a wholly-owned subsidiary of Forth
Financial Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of
Aon Corporation, a holding company organized under the laws of the state of
Delaware and listed on the New York Stock Exchange. Aon Advisors, Inc.
("AAI"), also a wholly-owned subsidiary of Aon Corporation, serves as
investment advisor to the Fund. Aon Corporation and its subsidiary
companies, may, by virtue of their shareholder interests in either
Portfolio at any particular date, be considered to be controlling persons
of the Portfolio and may be able to cast a deciding vote on all matters
submitted to a vote of the Portfolio's shareholders.
The Money Market Portfolio has the investment objective of maximizing
current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. To achieve this objective, the Portfolio
invests in a portfolio of high-quality, short-term, money market
instruments.
The Flexible Asset Allocation Portfolio has the investment objective of
providing maximum total return on invested capital, to be derived primarily
from capital appreciation, dividends, and interest. To achieve this
objective the Portfolio will follow a flexible asset allocation strategy
that contemplates shifts among a wide range of investments and markets.
Assets are invested in common stocks, bonds, and money market instruments,
the proportion of each being continuously determined by AAI.
PORTFOLIO TURNOVER
The annual turnover rate for the Flexible Asset Allocation Portfolio for
the year ended October 31, 1994 was 64.36% and is calculated by dividing
the lesser of purchases or sales of portfolio securities during the fiscal
year by the monthly average of the value of such securities (excluding from
the computation all securities, including options, with maturities at the
time of acquisition of one year or less). A portfolio turnover rate of 100%
would mean that all of the Portfolio's securities (except those excluded
from the calculation) were replaced once in a period of one year. Stocks in
the Portfolio had a turnover rate of 64.05% and bonds in the Portfolio had
a turnover rate of 20.61% for the year ended October 31, 1994. A high rate
of portfolio turnover generally involves correspondingly greater brokerage
commission expenses. Turnover rates may vary greatly from year to year as
well as within a particular year and may also be affected by cash
requirements for redemptions of the Portfolio's shares and by requirements,
the satisfaction of which enable the Portfolio to receive favorable tax
treatment. Because the rate of portfolio turnover is not a limiting factor,
however, particular holdings may be sold at any time, if investment
judgement or portfolio operations make a sale advisable. As a result, the
<PAGE>
annual portfolio turnover rate in future years may exceed the percentage
shown above.
Since short term instruments are excluded from the calculation of a
portfolio turnover rate, no meaningful portfolio turnover rate can be
estimated or calculated for the Money Market Portfolio. Nevertheless, the
Money Market Portfolio may, to a limited degree, engage in short-term
trading to attempt to take advantage of short-term market variations or may
dispose of a portfolio security prior to its maturity if it believes such
disposition advisable. In such cases, the Money Market Portfolio may
realize a gain or loss. These practices, as well as the relative short
maturity of obligations to be purchased by the Portfolio, may result in
frequent changes in its portfolio (a high turnover rate). However, there
are usually no brokerage commissions as such paid by the Money Market
Portfolio in connection with the purchase of securities of the type in
which it invests.
MONEY MARKET PORTFOLIO INVESTMENTS, INVESTMENT PRACTICES AND
RESTRICTIONS
The investment objective of the Money Market Portfolio and the policies by
which it pursues that objective are set forth in the prospectus. This
section describes in more detail certain securities in which the Portfolio
may invest and certain investment practices that it may use and augments
the explanation found in the prospectus.
GENERAL STANDARDS
The Money Market Portfolio may invest only in U.S. dollar-denominated
instruments maturing in 13 months or less which AAI, under the supervision
of the Fund's Board of Directors, determines present minimal credit risks
and are, at the time of acquisition, either:
1. rated in the highest rating category by at least two nationally
recognized statistical rating organizations (an "NRSRO") as defined under
Rule 2a-7, as amended, under the Investment Company Act of 1940, or by only
one NRSRO if only one NRSRO has issued a rating with respect to the
instrument; or
2. in the case of an unrated instrument, determined by AAI under the
supervision of the Board of Directors to be of comparable quality to the
above; or
3. issued by an issuer that has received a rating of the type described in
1 above on other securities that are comparable in priority and security to
the instrument.
<PAGE>
The types of securities in which the Money Market Portfolio may invest are
more fully described below:
U.S. GOVERNMENT SECURITIES
U.S. Government Securities are obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities. Some U.S. Government
Securities, such as Treasury bills, notes, and bonds (which differ only in
their interest rates, maturities, and times of issuance), are supported by
the full faith and credit of the United States. Others, such as obligations
issued or guaranteed by the U.S. Government agencies or instrumentalities,
are supported either by (a) the full faith and credit of the U.S.
Government (such as securities of the Government National Mortgage
Association), (b) the right of the issuer to borrow from the Treasury (such
as securities of the Federal Home Loan Banks), (c) the discretionary
authority of the U.S. Government to purchase the agency's obligations (such
as securities of the Federal National Mortgage Association), or (d) only
the credit of the issuer. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future.
CERTIFICATES OF DEPOSIT AND TIME DEPOSITS
Certificates of deposit include time deposits and negotiable certificates
of deposit. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time ( in no event longer
than seven days) at a stated interest rate. Certificates of deposit are
certificates issued against funds deposited in a bank for a specified
period of time. Bank obligations may be purchased only if (i) the issuing
bank is a U.S. bank with total assets of at least $1 billion, and (ii) the
bank is a member of the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER
Commercial paper consists of unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is issued
in bearer form with maturities generally not exceeding nine months.
Commercial paper obligations may include variable amount master demand
notes. Variable amount master demand notes are obligations that permit the
investment of fluctuating amounts at varying interest rates pursuant to
arrangements between the issuer and a commercial bank acting as agent for
the payees of such notes. The Money Market Portfolio has the right to
increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the borrower
may prepay up to the full amount of the note without penalty. Because
variable amount master demand notes are direct lending arrangements between
the lender and borrower, it is not generally contemplated that such
instruments will be traded, and there is no secondary market for these
notes, although they are redeemable (and thus immediately repayable by the
borrower) at face value, plus accrued interest, at any time. In connection
with the master demand note arrangements, AAI will monitor on an ongoing
basis the earning power, cash flow, and other liquidity ratios of the
issuer, and the borrower's ability to pay principal and interest on demand.
While the master demand notes, as such, are not typically rated by credit
rating agencies, if not so rated the Money Market Portfolio may invest in
them only if at the time of an investment the issuer meets the criteria set
<PAGE>
forth above and in the prospectus for all other issuers of instruments that
the Portfolio may purchase. Because master demand notes are immediately
repayable by the borrower on demand, they are considered by the Money
Market Portfolio to have a maturity of one business day.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements involving the purchase of money
market instruments which the Money Market Portfolio is qualified to
purchase, and the Portfolio's simultaneous agreement to sell the same
instruments back to their original seller on demand or at a specified
future date at an agreed upon price. A repurchase agreement can be viewed
as a loan made by the Portfolio to the seller of the instrument, with such
instrument serving as collateral for the seller's agreement to repay the
amount borrowed with interest. In effect, the repurchase price reflects an
agreed upon interest rate unrelated to the stated rate on the purchased
instrument. Such transactions afford an opportunity for the Portfolio to
earn a return on cash which is only temporarily available.
The Money Market Portfolio will only enter into repurchase agreements when
AAI, under the supervision of the Fund's Board of Directors, determines
that such agreements present minimal credit risks. For repurchase
agreements, minimal credit risk determination relates to both the quality
of the instrument serving as collateral as well as the creditworthiness of
the original seller during the time frame contemplated by the repurchase
agreement. Accordingly, as explained in the prospectus, the Portfolio will
only enter into repurchase agreements with banks and primary government
securities dealers whom AAI (under the supervision of the Fund's Board of
Directors and using the same criteria used to evaluate the credit risk of
all instruments considered for purchase by the Portfolio) determines do not
present a serious risk of becoming involved in bankruptcy proceedings
within the time frame contemplated by the agreement.
FOREIGN SECURITIES
The Money Market Portfolio may invest in U.S. dollar-denominated money
market instruments (including commercial paper) that are issued or
guaranteed by foreign issuers, including foreign corporations or other
business organizations, foreign governments and foreign government agencies
or instrumentalities, and foreign financial institutions. The Money Market
Portfolio will only invest in foreign securities that meet its general
standards described above. Investments by the Portfolio in foreign
securities entail certain risks not shared by domestic securities of the
same type.
Securities of foreign issuers, particularly non-governmental issuers,
involve risks which are not ordinarily associated with investing in
domestic issuers. These risks include political or economic instability in
the country involved, the difficulty of predicting international trade
patterns and the possibility of imposition of exchange controls. Foreign
securities may also be subject to greater fluctuations in price than
similar securities of domestic issuers. In addition, there may be less
<PAGE>
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable
to domestic issuers. In many countries, there is less government regulation
of stock exchanges, brokers and listed companies than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, or diplomatic developments which
could affect investment in those obligation, it may be difficult for the
Portfolios to obtain or to enforce a judgment against the issuer. Where
the fund invests in securities denominated in currencies other than United
States dollars, such securities may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and costs
may be incurred in connection with conversions between various currencies.
LENDING PORTFOLIO SECURITIES
In order to further the Money Market Portfolio's investment objective of
seeking a high level of current income, it may lend its portfolio
securities to brokers, dealers, and financial institutions, although it has
no present intention of doing so.
The amount of loaned securities will not exceed 5% of the Portfolio's net
assets. Securities lending activities, if and when engaged in by the Money
Market Portfolio, will be carried out in the manner described and subject
to the conditions described in the caption "Lending Portfolio Securities"
in the next section dealing with the Flexible Asset Allocation Portfolio.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The Money Market Portfolio has adopted
a number of fundamental policies restricting the investment of its assets,
which may not be changed without the affirmative vote of the holders of a
majority of the Portfolio's outstanding voting securities. The "affirmative
vote of the holders of a majority of the Portfolio's outstanding
securities" means the vote of: (a) 67% or more of the class of stock
representing an interest in the Portfolio present or represented by proxy
at a meeting of the Portfolio's shareholders, if more than 50% of the
outstanding shares of that class are present in person or by proxy at such
meeting, or (b) more than 50% of the outstanding shares of that class of
stock, whichever is less. Pursuant to the Money Market Portfolio's
fundamental investment restrictions, it may not:
(a) issue senior securities (except to the extent that borrowings under
paragraph (h) below exceeding 5% of the value of the Portfolio's total
assets are deemed to constitute senior securities under the Investment
Company Act of 1940 (the "1940 Act"));
(b) purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other interest
<PAGE>
in real estate). A security issued by a real estate or mortgage investment
trust is not treated as an interest in real estate;
(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
Portfolio securities), or make short sales of securities or maintain a
short position;
(d) underwrite securities of other issuers (except insofar as the Portfolio
or the Fund might be deemed an underwriter under the Securities Act of 1933
in certain resales of portfolio securities held by the Portfolio);
(e) invest more than 25% of the value of its total assets in the securities
of issuers having their principal activity in any particular industry,
other than U.S. Government Securities, as defined in Section 2(a)(16) of
the 1940 Act;
(f) invest more than 5% of the value of the Portfolio's total assets in, or
invest in more than 10% of the outstanding voting securities of, any one
issuer, except that this restriction does not apply to investments in U.S.
Government Securities;
(g) make loans, except that the Portfolio may enter into repurchase
agreements as described above or in the prospectus, and the Portfolio may
lend its portfolio securities, but not in amounts in excess of the 5% of
the value of its assets;
(h) borrow money, except from banks for temporary or emergency purposes,
including the meeting or redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 10% of the value of the Portfolio's total assets at the time the
borrowing is made, and the Portfolio will not make additional investments
during any period that borrowings exceed 5% of the value of its total
assets;
(i) pledge, hypothecate, mortgage or transfer as security for indebtedness
any securities held by the Portfolio, except in an amount of not more than
10% of the value of its total net assets, and then only to secure
borrowings permitted by (c) and (h);
(j) enter into repurchase agreements maturing in more than seven days if,
as a result thereof, more than 10% of the value of the Portfolio's total
assets would be invested in such repurchase agreements and any other assets
which are either illiquid or are not readily marketable;
(k) invest in time deposits maturing in more than seven days. In addition,
time deposits maturing in two business days to seven calendar days may not
exceed 10% of the value of the Portfolio's total assets; and
(l) purchase or sell interests in oil, gas, or other mineral explorations
or development programs, commodities, or commodity contracts, except that
<PAGE>
the Portfolio may purchase securities of issuers which invest or deal in
any of the above, provided such securities are money market instruments in
which the Portfolio is otherwise permitted to invest.
NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, the Money Market Portfolio is subject to the
following restrictions in implementing its investment policy. These
additional restrictions are not fundamental and may be changed by the Board
of Directors without shareholder approval. The Portfolio may not:
(a) write, purchase or sell puts, calls (other than covered call options)
or combinations thereof;
(b) invest in securities of foreign issuers if at the time of acquisition
more than 10% of its total assets, taken at market value at the time of the
investment, would be invested in such securities. However, up to 25% of the
total assets of the Portfolio may be invested in securities (i) issued,
assumed or guaranteed by foreign governments, or political subdivisions or
instrumentalities thereof, (ii) assumed or guaranteed by domestic issuers,
including Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on the New
York Stock Exchange;
(c) participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not include the "bunching" of orders
for the sale or purchase of portfolio securities with other portfolios,
with individually managed accounts, or with registered investment companies
advised or sponsored by the Portfolio's investment advisor or any of its
affiliates to reduce brokerage commissions or otherwise to achieve best
overall execution);
(d) alone, or together with any other portfolio or portfolios, make
investments for the purpose of exercising control over, or management of,
any issuer; and
(e) purchase securities of other investment companies.
COMPUTATION RULE. If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in the investment's percentage
of the value of the Portfolio's total assets will not constitute a
violation of the percentage restriction.
FLEXIBLE ASSET ALLOCATION PORTFOLIO INVESTMENTS, INVESTMENT
PRACTICES AND RESTRICTIONS
The investment objective of the Flexible Asset Allocation Portfolio and the
policies by which it pursues that objective are set forth in the
prospectus. This section describes in more detail certain securities in
which the Portfolio may invest and certain investment practices that it may
use and augments the explanation found in the prospectus.
<PAGE>
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, the Flexible Asset
Allocation Portfolio may purchase securities on a when-issued basis or
delayed-delivery basis, i.e., delivery and payment can take place a month
or more after the transaction. The securities so purchased are subject to
market fluctuation, and no interest accrues to the purchaser during this
period. At the time the Portfolio makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value, each day, of such security in
determining its net asset value. At the time of delivery of the securities,
the value may be more or less than the purchase price. The Portfolio will
also establish a segregated account with the Fund's custodian bank in which
it will maintain cash or cash equivalents or other liquid portfolio
securities equal in value, marked to market on a daily basis, to
commitments for such when-issued or delayed-delivery securities. As a
general matter Flexible Asset Allocation Portfolio will hold less than 5%
of its assets in commitments to purchase securities on a delayed-delivery
or when-issued basis and will not, under any circumstances, purchase
securities on a when-issued basis or delayed-delivery basis if, as a
result, more than 10% of its net assets would be so invested.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may from time to time lend securities it holds to brokers,
dealers and financial institutions, up to a maximum of 20% of its total
value. Likewise, the Money Market Portfolio may lend its securities up to a
maximum of 5% of the Money Market Portfolio's net assets. This percentage
may not be increased without approval of a majority of the outstanding
voting securities of the respective Portfolios. Such loans will be secured
by the collateral in the form of cash or U.S. Treasury securities, which at
all times the loan is outstanding, will be maintained in an amount at least
equal to the current market value of the loaned securities. The Portfolios
will continue to receive interest and dividends on the loaned securities
during the term of the loans, and in addition, will receive a fee from the
borrower or interest earned from investment of cash collateral in short-
term securities in which cash collateral is invested during the term of the
loan.
The right to terminate a loan of securities, subject to appropriate notice,
will be given to either party. When a loan is terminated, the borrower will
return the loaned securities to the lender. A Portfolio will not have the
right to vote securities on loan, but would terminate the loan and regain
the right to vote if that were important with respect to the investment.
Each Portfolio will limit the amount of securities lending so that the
aggregate amount of interest received attributed to securities loaned, if
considered "other income" for federal tax purposes, will not cause it to
lose its tax status as a regulated investment company.
The primary risk involved in lending securities is that the borrower will
fail financially and not return the loaned securities at a time when
<PAGE>
collateral is insufficient to replace the full amount of the loaned
securities. The borrower would be liable for the shortage, but the
Portfolio would be an unsecured creditor with respect to such shortage and
might not be able to recover all or any of it. In order to minimize this
risk, Portfolios will make loans of securities only to firms that AAI
(under the supervision of the Board of Directors) deems creditworthy.
COVERED CALL OPTIONS
The Flexible Asset Allocation Portfolio may write covered call options that
are traded on a national securities exchange with respect to securities in
the Portfolio (ensuring that at all times the Portfolio will have the
securities which it may be obligated to deliver if the option is
exercised). The Portfolio may write call options on its securities in an
attempt to realize a greater current return than would be realized on the
securities alone or to provide greater flexibility in disposing of such
securities. As the writer of a call option, the Portfolio receives a
premium for undertaking the obligation to sell the underlying security at a
fixed price during the option period if the option is exercised. So long
as the Portfolio remains obligated as a writer of a call, it forgoes the
opportunity to profit from increases in the market price of the underlying
security above the call price of the option, except insofar as the premium
represents such a profit.
The Flexible Asset Allocation Portfolio may also enter into "closing
purchase transactions" in order to terminate its obligation as a writer of
a call option prior to the expiration of the option. Although writing only
those call options that are traded on a national securities exchange
increases the likelihood of being able to make closing purchase
transactions, there is no assurance that the Portfolio will be able to
effect such transactions at any particular time or at any acceptable price.
The writing of call options could result in increases in the turnover rate
of the Portfolio, especially during periods when market prices of the
underlying securities appreciate, which could affect brokerage costs.
GNMA CERTIFICATES
The Flexible Asset Allocation Portfolio may invest up to 50% of its net
assets in Government National Mortgage Association ("GNMA") Certificates.
GNMA Certificates are securities representing part ownership of a pool of
mortgage loans. These loans, issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations, are insured either by
the Federal Housing Administration or by the Veterans Administration. Each
pool of mortgage loans is assembled and, after being approved by GNMA, is
sold to investors through broker-dealers in a form of certificates
representing participation in the pool. GNMA guarantees the timely payment
of principal and interest of each mortgage in the pool and its guarantee is
backed by the full faith and credit of the U.S. Government. GNMA
Certificates differ from bonds in that a borrower pays the principal over
the term of the loan rather than in a lump sum at maturity. GNMA
Certificates are called "pass-through" certificates because both principal
and interest payments on the mortgages (including prepayments) are passed
through to the holder of the certificate.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgages. The Flexible Asset Allocation Portfolio may use
principal payments it receives to purchase additional GNMA Certificates or
other investments permitted to it. Prepayments of any mortgages in the
<PAGE>
pool will usually result in the return of the greatest part of principal
invested well before the maturity of the mortgages in the pool. The volume
of such prepayments of principal in a given pool of mortgages will
influence the actual yield of the GNMA Certificate. Also, the Flexible
Asset Allocation Portfolio may reinvest principal repaid to it in
instruments whose yield may be higher or lower than that of the GNMA
Certificate had such prepayments not been made.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Flexible Asset Allocation
Portfolio has adopted a number of fundamental policies restricting the
investment of its assets, which may not be changed without the affirmative
vote of the holders of a majority of the Portfolio's outstanding voting
securities. The "affirmative vote of the holders of a majority of the
Portfolio's outstanding securities" means the vote of: (a) 67% or more of
the class of stock representing an interest in the Portfolio present or
represented by proxy at a meeting of the Portfolio's shareholders, if more
than 50% of the outstanding shares of that class are present in person or
by proxy at such meeting, or (b) more than 50% of the outstanding shares of
that class of stock, whichever is less. Pursuant to the Flexible Asset
Allocation Portfolio's fundamental investment restrictions, it may not:
(a) issue senior securities (except to the extent that borrowings under
paragraph (h) below exceeding 5% of the value of the Portfolio's total
assets be deemed to constitute senior securities under the Investment
Company Act of 1940 (the "1940 Act")) however, this prohibition shall not
limit the Portfolio's ability to write covered call options;
(b) purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other interest
in real estate). A security issued by a real estate or mortgage investment
trust is not treated as an interest in real estate;
(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
Portfolio securities), or make short sales of securities or maintain a
short position. However, this prohibition shall not limit the Portfolio's
ability to write covered call options;
(d) underwrite securities of other issuers (except insofar as the Portfolio
or the Fund might be deemed an underwriter under the Securities Act of 1933
in certain resales of portfolio securities held by the Portfolio);
(e) invest more than 25% of the value of its total assets in the securities
of issuers having their principal activity in any particular industry,
other than U.S. Government Securities, as defined in Section 2(a)(16) of
the 1940 Act. For the purpose of defining the term "particular industry,"
utilities will be divided according to their services. For example, gas,
gas transmission, electric and telephone each will be considered a separate
industry;
<PAGE>
(f) as to 75% of its total assets, invest more than 5% of its total assets
in the securities of any one issuer (except that this restriction shall
not apply to U.S. Government Securities) or invest in more than 10% of the
outstanding voting securities of any one issuer;
(g) make loans, except that the Portfolio may enter into repurchase
agreements as described above or in the prospectus, and the Portfolio may
lend its portfolio securities in amounts up to 20% of the value of its
total assets;
(h) borrow money, except from banks for temporary or emergency purposes,
including the meeting or redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 10% of the value of the Portfolio's total assets at the time the
borrowing is made, and the Portfolio will not make additional investments
during any period that borrowings exceed 5% of the value of its total
assets. This limitation on borrowing money shall not limit the Portfolio's
ability to write covered call options;
(i) pledge, hypothecate, mortgage or transfer as security for indebtedness
any securities held by the Portfolio, except in an amount of not more than
10% of the value of its total net assets, and then only to secure
borrowings permitted by (c) and (h);
(j) invest in illiquid securities, including repurchase agreements maturing
in more than seven days, if, as a result thereof, more than 15% of the
value of the Portfolio's total assets would be invested in such illiquid
securities;
(k) invest in time deposits maturing in more than seven days. In addition,
time deposits maturing in two business days to seven calendar days may not
exceed 10% of the value of the Portfolio's total assets; and
(l) purchase or sell interests in oil, gas, or other mineral explorations
or development programs, commodities, or commodity contracts, except that
the Portfolio may purchase securities of issuers which invest or deal in
any of the above, provided that such securities meet the Portfolio's other
investment criteria.
NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, the Flexible Asset Allocation Portfolio is
subject to the following additional restrictions in implementing its
investment policy. These additional restrictions are not fundamental and
may be changed by the Board of directors without shareholder approval. The
Flexible Asset Allocation Portfolio is subject to the same non-fundamental
investment restrictions as apply to the Money Market Portfolio (described
above) except as modified below.
(e) the Flexible Asset Allocation Portfolio will not purchase securities of
other investment companies if, a result thereof, the Portfolio would own
more than 3% of the total outstanding voting stock of any one investment
company, or more than 5% of the Portfolio's assets would be invested in any
one investment company, or more than 10% of the Portfolio's total assets
would be invested in securities of investment companies.
<PAGE>
(f) the Flexible Asset Allocation Portfolio will not invest more than 30%
of its total assets, measured at the time of investment, in debt securities
(other than U.S. Government Securities) that are rated lower than the four
highest rating categories by Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("Standard & Poor's") or are unrated. This
restriction shall apply to such unrated securities as AAI may determine,
pursuant to procedure adopted by the Board of Directors to be of comparable
quality to those securities assigned a rating in one of the four highest
categories.
(g) the Flexible Asset Allocation Portfolio will not purchase or retain the
securities of any issuer if any officer or director of the Fund, AAI or any
affiliated person of the Fund or AAI beneficially own more than 0.5% of the
securities of such issuer or together in the aggregate own more than 5% of
the securities of such issuer.
RISKS OF INVESTING IN LOWER QUALITY DEBT INSTRUMENTS
Up to 30% of the total assets of the Total Return Portfolio may be invested
in debt instruments that are unrated or are rated lower than the four
highest rating categories assigned by Moody's or Standard & Poor's.
Furthermore, debt instruments that are rated in the four highest categories
assigned by Moody's or Standard & Poor's (i.e. investment grade debt
instruments), and especially those which are investment grade but are not
high quality (i.e. rated Baa by Moody's or BBB by Standard & Poor's) may,
after purchase by the Portfolio, have their ratings lowered due to the
deterioration of the issuer's financial position.
LOWER QUALITY DEBT INSTRUMENTS ENTAIL CERTAIN RISKS
Lower-rated fixed income securities (i.e. those rated Ba or lower by
Moody's or BB or lower by Standard & Poor's) are considered, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and will
generally involve more credit risk than securities in the higher rated
categories. Reliance on credit ratings entails greater risks with regard to
lower rated securities than it does with regard to higher-rated securities
and AAI's success is more dependent upon its own credit analysis with
regard to lower-rated securities than is the case with regard to higher-
rated securities. The market value of such securities tends to reflect
individual corporate developments to a greater extent than do higher-rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also tend to be more sensitive
to economic conditions than are higher-rated securities. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis,
regarding lower rated bonds may depress prices and liquidity for such
<PAGE>
securities. To the extent the Flexible Asset Allocation Portfolio invests
in such securities, factors adversely affecting the market value of lower
rated securities will adversely affect the Flexible Asset Allocation
Portfolio's net asset value. In addition, the Flexible Asset Allocation
Portfolio may incur additional expenses to the extent it is required to
seek recovery upon a default in the payment of principal or interest on
its portfolio holdings. Although some risk is inherent in all securities
ownership, holders of fixed-income securities have a claim on the assets of
the issuer prior to the holders of common stock. Therefore, an investment
in fixed-income securities generally entails less risk than an investment
in common stock of the same issuer.
Lower-rated debt securities may be issued by corporations in the growth
stage of their development. They may also be issued in connection with
corporate reorganization or as part of a corporate takeover. Companies that
issue such lower-rated securities are often highly leveraged and may not
have available to them more traditional methods of financing. Therefore,
the risk associated with acquiring the securities of such issuers generally
is greater than is the case with higher-rated securities. For example,
during an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of lower-rated securities may experience financial
stress. During such periods, such issuers may not have sufficient revenues
to meet their interest payment obligations. The issuer's ability to service
its debt obligations may also be adversely affected by specific corporate
developments or the issuers inability to meet specific projected business
forecasts, or the unavailability of additional financing. The risk of loss
due to default by the issuer is significantly greater for the holders of
high-yielding securities because securities are generally unsecured and are
often subordinated to other creditors of the issuer.
Lower-rated debt securities have call or buy-back features that would
permit an issuer to call or repurchase the security from the Flexible Asset
Allocation Portfolio. If a call were exercised by the issuer during a
period of declining interest rates, the Flexible Asset Allocation Portfolio
would likely have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Flexible Asset
Allocation Portfolio.
The Flexible Asset Allocation Portfolio may have difficulty disposing of
certain lower-rated debt securities for which there is a thin trading
market. Because not all dealers maintain markets in all lower-rated debt
securities, there is no established retail secondary market for many of
these securities, and the Portfolio anticipates that they could be sold
only to a limited number of dealers or institutional investors. To the
extent there is a secondary trading market for such securities, it is
generally not as liquid as that for higher-rated securities. The lack of a
<PAGE>
liquid secondary market for certain securities may make it more difficult
for the Portfolio to obtain accurate market quotations for purposes of
valuing the Flexible Asset Allocation Portfolio's assets. Market quotations
are generally available on many lower-rated issues only from a limited
number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. When market quotations are not readily
available, lower-rated securities must be valued by (or under the direction
of) the Fund's Board of Directors. This valuation is more difficult and
judgment plays a greater role in such valuation when there is less reliable
objective data available.
The Flexible Asset Allocation Portfolio may acquire lower-rated securities
that are sold without registration under the federal securities laws and
therefore carry restrictions on resale. The Flexible Asset Allocation
Portfolio may incur special costs on disposing of such securities, but will
generally incur no costs when the issuer is responsible for registering the
securities.
The Flexible Asset Allocation Portfolio also may acquire lower-rated
securities during an initial underwriting. Such securities involve special
risks because they are new issues. The Portfolio has no arrangement with
any person concerning the acquisition of such securities, and the
investment adviser will carefully review the credit and other
characteristics pertinent to such new issues.
From time to time, there have been proposals for legislation designed to
limit the use of certain lower-rated securities in connection with
leveraged buy-outs, mergers and acquisitions, or to limit the deductibility
of interest payments on such securities. Such proposals if enacted into law
could reduce the market for such securities generally, could negatively
affect the financial condition of the issuers of lower-rated securities by
removing or reducing a source of future financing, and could negatively
affect the value of specific lower-rated issues. However, the likelihood of
any such legislation or the effect thereof is uncertain.
<PAGE>
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the
address of each director and officer is 6610 West Broad Street, Richmond,
Virginia 23230. Those individuals designated with an asterisk are
"interested Persons" of the Fund, as the term is defined in Section 2(a)
(19) of the Investment Company Act of 1940.
John J. Palmer, President & Director*
Director, Aon Advisors, Inc., since 1987. Director, The Life Insurance
Company of Virginia ("Life of Virginia"), since 1986. Senior Vice
President, Life of Virginia, since 1980. President, Life of Virginia Series
Fund, Inc. since 1986. President, Forth Financial Securities Corporation,
since 1992.
Wallace L. Chandler, President & Director
P.O. Box 25099
Richmond, VA 23260
Director, Universal Corporation since 1986. Vice Chairman, Universal
Corporation until December 31, 1988. Director, Lawyer's Title Corporation
since 1991. Director, Regency Financial Shares, Inc., since 1989 and
Chairman since 1992. Director and Vice Chairman, Regency Bank, from 1987
to 1992.
John E. Leard, Director
6207 Monument Ave.
Richmond, VA 23226
Retired-Vice President, Richmond Newspapers, Inc. Retired Executive
Editor, the Richmond Times-Dispatch and The Richmond News Leader.
Robert P. Martin, Jr., Director
P.O. Box 12085
Richmond, Va 23241
Self-employed investment consultant since 1985. Managing Director,
Continental Investment Advisors, Ltd., 1984 to 1985.
J. Clifford Miller, III, Director
7103 Glen Parkway
Richmond, VA 23229
Account Executive, Davenport & Co. of Virginia, Inc., Richmond,
Virginia, since 1992. Owner, Miller Farms. Consultant since 1988. Head--
Upper School, Collegiate Schools, until 1988. Director, Miller
Manufacturing Co., Inc. General Partner, Miller Land Fund, since 1987.
<PAGE>
Lawrence R. Miller, Vice President & Director*
123 North Wacker Drive
Chicago, IL 60606
Vice-President-Investments, Combined Insurance Company of America,
since 1986. Senior Executive Director, Aon Advisors, Inc., since 1991.
Executive Director, Aon Advisors, Inc., 1987-1990. Executive Director,
Continental Investment Advisors, Ltd., from 1986 to 1987.
J. Garnett Nelson, Director*
Director, Life of Virginia, 1989-1995. Senior Vice President, Life of
Virginia, 1988-1995. Executive Director, Aon Advisors, Inc., 1986-1995.
Director, RAC Income Fund, Inc., Director, Lawyers Title Corporation, since
1992.
Lee A. Putney, Director
4208 Sulgrave Road
Richmond, VA 23221
Director, Regency Financial Shares, Inc., since 1989. Director,
Regency Bank, since 1987. Managing Partner, KPMG Peat Marwick, from 1964
to 1985.
Jerry G. Overman, Vice President*
Treasurer and Director of Investment Services of Aon Advisors, Inc.,
since 1985. Treasurer, Life of Virginia, since 1988. Second Vice
President and Treasurer of Continental Investment Advisors, Ltd., from 1984
to 1986.
Linda L. Lanam, Secretary*
Corporate Secretary for Life of Virginia and for a number of Life of
Virginia affiliates since 1992. Vice President and Senior Counsel of Life
of Virginia since 1989. Vice President and Senior Counsel, Union Fidelity
Life Insurance Company from 1986 to 1989.
Scott R. Reeks, Treasurer*
Director of Marketing Administration and Equity Operations, Life of
Virginia, since 1991. Manager-Equity Operations, Life of Virginia, 1986-
1991. Treasurer, Vice President and Manager of Operations, Forth Financial
Securities Corporation, since 1985. Treasurer, Life of Virginia Series
Fund, since 1985.
Each of the Directors, except Lawrence R. Miller, also serves as a director
of Life of Virginia Series Fund, Inc. ("LOVSF"). Directors or officers who
are interested persons of the Fund do not receive any compensation from the
Fund for their services to the Fund. The Directors who are not interested
persons of the Fund receive compensation at a rate of $4,000.00 annually,
plus $250.00 per board or committee meeting attended. In addition,
Directors who are not interested persons of the Fund also are reimbursed
for any out-of-pocket expenses incurred in connection with affairs of the
Fund.
<PAGE>
TABLE OF DIRECTORS COMPENSATION
Aggregate Compensation Total Compensation From
Name of Director From the Fund the Fund and LOVSF
Mr. Chandler $5,000 $8,250
Mr. Leard $5,000 $8,250
Mr. Martin $5,000 $8,250
Mr. C. Miller $5,000 $8,250
Mr. L. Miller 0 0
Mr. G. Nelson 0 0
Mr. J. Palmer 0 0
Mr. L. Putney $5,000 $8,250
Directors and officers of the Fund do not receive any benefits from the
Fund upon retirement nor does the Fund accrue any expenses for pension or
retirement benefits.
INVESTMENT ADVISOR
Aon Advisors, Inc. ("AAI"), a Virginia corporation with offices in
Richmond, Virginia and Chicago, Illinois, serves as an investment
advisor to both Portfolios pursuant to an investment advisory agreement
related to each Portfolio ("Advisory Agreements") dated April 26, 1995
for Flexible Asset Allocation Portfolio and January 27, 1994 for Money
Market Portfolio. AAI is a wholly-owned subsidiary of Aon Corporation,
a holding company whose common stock is listed for trading on the New
York Stock Exchange. Information concerning AAI and the basic
provisions of the Advisory Agreement are described in the Prospectus
under the caption "Investment Advisor."
The duties and responsibilities of the Investment Advisor are specified
in the Advisory Agreements. The Agreements were both approved by the
Board of Directors of the Fund (including a majority of directors who
are not parties to the Agreement or interested persons, as defined by
the 1940 Act, of any such party) at meetings held on October 27, 1993
(Money Market Portfolio) and April 26, 1995 (Flexible Asset Allocation
Portfolio). The agreements are not assignable and may be terminated
without penalty upon 60 days written notice at the option of either the
Fund or AAI or by a vote of shareholders of each Portfolio. Each
provides that it can be continued from year to year so long as such
continuance is specifically approved annually (a) by the Board of
Directors of the Fund or by a majority of the outstanding shares of the
Portfolio and (b) by a majority vote of the Directors who are not
parties to the Agreement or interested persons of any such party cast in
person at a meeting.
<PAGE>
AAI (under the supervision of the Board of Directors) continuously
furnishes an investment program for each Portfolio, is responsible for the
actual managing of the investments of each Portfolio and has responsibility
for making decisions governing whether to buy, sell or hold any particular
security. In carrying out its obligations to manage the investment and
reinvestment of the assets of each Portfolio, AAI performs research and
obtains and evaluates pertinent economic, statistical and financial data
relevant to the investment policies of each Portfolio.
In addition to performing management duties and providing the investment
advice described above, AAI is responsible for the administrative services
in connection with the management of the Fund and the Portfolios, including
financial reporting.
The Agreements also provide that the AAI shall not be liable to the Fund or
to any shareholder for any error of judgement or mistake of law or for any
loss suffered by the Fund or by any shareholder in connection with matters
to which the Agreements relate, except for a breach of fiduciary duty or a
loss resulting from willful misfeasance, bad faith, gross negligence, or
reckless disregard on the part of AAI in the performance of its duties
thereunder.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AAI determines which securities to buy and sell for the Portfolios, selects
brokers and dealers to effect the transactions, and negotiates commissions.
Transactions in equity securities will usually be executed through brokers
who will receive a commission paid by the Portfolios. Fixed income
securities are generally traded with dealers acting as principals for their
own accounts without a stated commission. The dealer's margin is reflected
in the price of the security. Money market instruments may be traded
directly with the issuer. Underwritten offerings of stock or fixed-income
securities may be purchased at a price that includes compensation to the
underwriter.
Decisions with respect to the purchase and sale of portfolio securities,
including allocation of portfolio business and the negotiation of the price
of the securities and commissions, if any, are made by AAI. Neither AAI
nor any company affiliated with it will act as a broker or dealer for the
purposes of executing portfolio transactions for the Portfolios.
The primary consideration in allocating transactions to brokers or dealers
is prompt and effective execution of orders at the most favorable security
prices obtainable ("best execution"). When this primary consideration of
best execution has been met, consideration may be given to additional
<PAGE>
factors, such as furnishing of supplemental research and other services
deemed to be of value to the Fund or to AAI. AAI is authorized to execute
orders with dealers or brokers that provide research and security and
economic analysis that supplements the research and analysis of AAI, even
through the spread of commission at which an order is executed may be
higher than that which another dealer or broker might charge, provided AAI
determines in good faith that the amount of the spread or commission is
reasonable in relation to the value of the services provided. Such
research and services include advice as to the value of securities, and
advisability of securities or purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The research may be
useful at AAI in serving both the Portfolios and other accounts managed by
AAI and, conversely, supplemental research obtained by the placement of
business of such other accounts may be useful to AAI in carrying out its
obligations to the Portfolios. The receipt of such supplemental research
and other services is not expected to reduce AAI's expenses in advising the
Portfolios.
Securities held by the Portfolios may also be held by insurance company
separate accounts or other mutual funds or private investment accounts for
which the AAI acts as an advisor. Because of different investment
objectives or other factors, a particular security may be bought by the AAI
or for one or more of its clients, when one or more other clients are
selling the same security. If purchases or sales of securities for the
Portfolios or other clients of AAI arise for consideration at or about the
same time, transactions in such securities will be made, insofar as
feasible, for the Portfolio, and other clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more than one client
of AAI during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.
Investment decisions for the Portfolios will be made independently from
those of other accounts that may be managed by AAI. If, however, accounts
managed by AAI are simultaneously engaged in purchases of the same
securities, then pursuant to the authorization of the Fund's Board of
Directors, available securities may be allocated to each account and may be
averaged as to price in whatever manner AAI deems to be fair. In some
cases, this system might adversely affect the price paid by the Portfolios
or limit the size of the position obtainable for the Portfolios.
DETERMINATION OF NET ASSET VALUE
GENERAL
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading, except that shares of the Portfolios may not
be purchased or redeemed, and such shares will not be priced, on the
following days: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day. The Money Market
Portfolio will also be open for business on Good Friday.
<PAGE>
The net asset value of the Money Market Portfolio's shares for purposes of
pricing orders for purchase and redemption of shares is determined as of
1:30 p.m. (Central Time). The net asset value of the Flexible Asset
Allocation Portfolio's shares for the purposes of pricing orders for
purchase and redemption of shares is determined as of the close of regular
trading (currently 3:00 p.m. Central Time) on the NYSE, on each day that
the Fund is open for business.
For each Portfolio, net asset value per share is calculated for purchases
and redemptions by dividing the value of all securities and other assets of
the Portfolio, less the liabilities of the Portfolio, by the number of the
Portfolio's outstanding shares.
MONEY MARKET PORTFOLIO
The Fund intends to use its best efforts to maintain the Money Market
Portfolio's net asset value at $1.00 per share, although there is no
assurance that it will be able to do so on a continuous basis. Net asset
value is computed using the amortized cost method. The Board of Directors
will take such action as it deems appropriate to eliminate or reduce, to
the extent reasonably practicable, any material dilution or other unfair
results that might arise from differences between net asset value per share
based on market value and net asset value per share based on amortized
cost. Such action may include redemption in kind, selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten the average portfolio maturity, withholding dividends, or utilizing
a net asset value per share as determined by using available market
quotation, if available, or, if not available, at a fair value as
determined in good faith by the Board of Directors. The Fund may also
reduce the number of the Money Market Portfolio's outstanding shares by
redeeming proportionately from shareholders, without the payment of any
monetary consideration, such number in full and fractional shares as is
necessary to maintain the net asset value per share at $1.00. By investment
in the Money Market Portfolio, shareholders are deemed to have agreed to
such redemption.
FLEXIBLE ASSET ALLOCATION PORTFOLIO
Equity securities (including common stocks, preferred stocks, convertible
securities and warrants) and call options written on all portfolio
securities, listed or traded on a national exchange are valued at their
last sale price on the exchange prior to the time when assets are valued.
In the absence of any exchange sales on that day and for unlisted equity
securities, such securities are valued at the last sale price on the NASDAQ
(National Association of Securities Dealers Automated Quotations) National
Market System. In the absence of any National Market System sales on that
day, equity securities are valued at the last reported bid price.
Debt securities traded on a national exchange are valued at their last sale
price on that exchange prior to the time when assets are valued, or,
lacking any sales, at the last reported bid price. Debt securities other
than money market instruments traded in the over-the-counter market are
<PAGE>
valued at the last reported bid price or at yield equivalent as obtained
from one or more dealers that make markets in the securities. Debt
securities traded in both the over-the-counter market and on a national
exchange are valued according to the broadest and most representative
market, and it is expected that this ordinarily will be the over-the-
counter market.
Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations provided by a pricing
service retained for this purpose.
Debt instruments held with a remaining maturity of 60 days or less are
generally valued on an amortized cost basis. Under the amortized cost
basis method of valuation, the security is initially valued at its purchase
price (or in the case of securities purchased with more than 60 days
remaining to maturity, the market value on the 61st day prior to maturity),
and thereafter by amortizing any premium or discount uniformly to maturity.
If for any reason the Fund. Directors believe the amortized cost method of
valuation does not fairly reflect the fair value of any security, fair
value will be determined in good faith by or under the direction of the
Board of Directors of the Fund as in the case of securities having a
maturity of more than 60 days.
YIELD INFORMATION
The Aon Money Market Portfolio provides a current yield quotation based on
a seven-day period. This yield quotation is computed by determining the
net change (exclusive of realized gains and losses from the sale of
securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, dividing the net change in account value by the value
of the account at the beginning of the period to obtain the base period
return, and analyzing this quotient on a 365-day basis (i.e., multiplying
the base period return by 365/7). The net change in account value reflects
the value of additional shares purchased with dividends from the original
share and dividends declared on both the original share and any such
additional shares during this period. The Money Market Portfolio may also
quote an effective yield for a seven-day period, which is computed by 1 to
the base period return (calculated as described above), raising that sum to
a power equal to 365 divided by 7, and subtracting 1 from the result. (The
current annualized effective yield is computed by expressing the annualized
return on a compounded, annualized basis).
The current yields quoted will be for a recent seven-day period. Current
yields will fluctuate from time to time and are not necessarily
representative of future results. The yield is a function of the type and
quality of the instruments in the portfolio, portfolio maturity and
operating expenses.
Current yield information may not provide a basis for comparison with bank
deposits or other investments which pay a fixed yield for a stated period
of time. From time to time, advertisements for the Money Market Portfolio
may include comparison of the Portfolio's performance to that of various
market indices.
<PAGE>
TAXES
Each Portfolio intends to qualify and to continue to qualify as a regulated
invested company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, each
Portfolio must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of
net investment income, net short-term capital gain, and net gains from
certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. These requirements include the
following: (1) the Portfolio must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business
of investing in securities or those currencies ("Income Requirement"); (2)
the Portfolio must derive less than 30% of its gross income each taxable
year from the sale or other disposition of securities, or any of the
following, that were held for less than three months -- options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Portfolio's principal business of investing in
securities (or options and futures with respect thereto) ("Short-Short
Limitation"); (3) at the close of each quarter of the Portfolio's taxable
year, at least 50% of the value of its total assets must be represented by
cash and cash items, U.S. Government securities, securities of other RICs,
and other securities that, with respect to any one issuer, do no exceed 5%
of the value of the Portfolio's total assets and that do not represent more
than 10% of the outstanding voting securities of the issuer; and (4) at the
close of each quarter of the Portfolio's taxable year, not more than 25% of
the value of its total assets may be invested in securities (other than
U.S. Government securities or the securities of other RICs) of any one
issuer.
Each Portfolio will be subject to a nondeductible 4% excise tax on amounts
not distributed to shareholders on a timely basis. Each Portfolio intends
to make sufficient distributions to avoid this 4% excise tax.
Dividends and interest received by each Portfolio may be subject to income,
withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and foreign countries generally do not impose
taxes on capital gains in respect of investment by foreign investors.
The Portfolios may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general,
meets either of the following tests: (2) at least 75% of its gross income
is passive or (2) an average of at least 50% of its assets produce, or are
<PAGE>
held for the production of, passive income. Under certain circumstances,
the Portfolio would be subject to Federal income tax on a portion of any
"excess distribution" received on the stock of a PFIC or of any gain on
disposition of that stock (collectively "PFIC income"), plus interest
thereon, even if the Portfolio distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income would be
included in the Portfolio's investment company taxable income, and
accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders. If a Portfolio invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of
the foregoing tax and interest obligation, that Portfolio will be required
to include income each year its pro rata share of the qualified electing
fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss), even if they are
not distributed to the Portfolio; those amounts would be subject to the
Distribution Requirement. The ability of the Portfolio to make this
election may be limited.
The foregoing is only a general summary of some of the important Federal
income tax considerations generally affecting the Portfolio and its
shareholders. No attempt is made to present a complete explanation of the
Federal tax treatment of the Portfolios' activities. Potential investors
are urged to consult their own tax advisors for more detailed information
and for information regarding any applicable state, local, or foreign
taxes.
ADDITIONAL INFORMATION
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING AGENT
Firstar Trust Company ("FTC") is the custodian, transfer agent, and
accounting agent for the Fund. Under the custodian agreement between the
Fund and FTC, the bank may appoint a subcustodian bank with the approval of
the Fund's directors. FTC will also calculate the net asset value per
share on each day that the New York Stock Exchange is open for trading,
except that shares of the Fund will not be priced on the following days:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Thanksgiving Day,
Veteran's Day, and Christmas Day. FTC has no part in determining the
investment policies of the Fund or the securities to be purchased or sold
by the Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP acts as independent auditors for the Fund. Its
offices are at One James Center, Suite 1000, Richmond, Virginia 23219.
Ernst & Young LLP performs an audit of the financial statements of the Fund
annually.
LEGAL COUNSEL
Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue, NW, Washington, DC
20004-2404, is counsel for the Fund.
<PAGE>
CAPITAL STOCK
Aon Asset Management Fund, Inc. is a Virginia corporation, incorporated on
August 27, 1991. It has authorized capital of three billion shares of
common stock, par value one mill ($.001) per share. All of the shares of
the authorized capital stock have been divided into and may be issued in a
designated class as follows: 750 million shares have been designated as
Class A shares, representing interests in the Money Market Portfolio; 450
million shares have been designated Class B shares, representing interests
in the Flexible Asset Allocation Portfolio and 400 million shares each have
been designated classes C and D and 250 million shares each for classes E,
F, G, H.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective class and, upon
liquidation or dissolution, in net assets allocated to such class remaining
after satisfaction of outstanding liabilities. The shares of each class,
when issued, will be fully paid and non-assessable and have no preemptive
or conversion rights.
REPORTS
The Fund will issue unaudited semi-annual reports showing each Portfolio's
investments and other information, and it will issue audited annual reports
containing financial statements audited by the Fund's independent auditors.
OTHER INFORMATION
This Statement of Additional Information and the prospectuses for the
Portfolios do not contain all the information set forth in the registration
statement and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Act of 1933 and the 1940 Act, to which reference is hereby made.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICES, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade obligation
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
The ratings from "AA" to "B" may be modified by the addition of a plus
or minus sign to indicate relative standing within the major rating
categories.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small
degree.
A: Bonds rated A have a very strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in higher
rated categories.
BB-B-CCC-CC: Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Unrated: Indicates that no public rating has been requested, that
there is insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of policy.
Notes: Bonds which are unrated expose the investor to risks with
respect to capacity to pay interest or repay principal which are similar to
the risks of lower-rated speculative obligations. The Fund is dependent on
the Adviser's judgment, analysis and experience in the evaluation of such
bonds.
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY's INVESTORS SERVICE, INC. ("MOODY'S"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months), are
judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
PRIME-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions
in well-established industries; (b) high rates of return on funds employed;
(c) conservative capitalization structures with moderate reliance on debt
and ample asset protection; (d) broad margins in earning coverage of fixed
financial charges and high internal cash generation; and (e) well
established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
STANDARD & POOR'S CORPORATION ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no
more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
FITCH INVESTORS SERVICE, INC. ("FITCH"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned
"F-1+" or "F-1" ratings.
<PAGE>
DUFF & PHELPS, INC. ("DUFF & PHELPS"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including
bankers' acceptance and letters of credit):
DUFF 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
DUFF 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
IBCA LIMITED OR ITS AFFILIATE IBCA INC. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as
follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.
THOMSON BANKWATCH, INC. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less:
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
AUDITED FINANCIAL STATEMENTS
AON ASSET MANAGEMENT FUND, INC.
YEAR ENDED OCTOBER 31, 1994
(MONEY MARKET PORTFOLIO)
PERIOD FROM MARCH 1, 1994 TO OCTOBER 31, 1994
(FLEXIBLE ASSET ALLOCATION PORTFOLIO)
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Aon Asset Management Fund, Inc.
Audited Financial Statements
Year ended October 31, 1994
(Money Market Portfolio)
Period from March 1, 1994 to October 31, 1994
(Flexible Asset Allocation Portfolio)
TABLE OF CONTENTS
Report of Independent Auditors......................1
Financial Statements
Statements of Assets and Liabilities................2
Statements of Operations............................3
Statements of Changes in Net Assets.................4
Schedule of Investments.............................5
Notes to Financial Statements......................22
Financial Highlights...............................27
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Aon Asset Management Fund, Inc.
We have audited the statements of assets and liabilities, including the
schedules of investments, of Aon Asset Management Fund, Inc., formerly
Aon Money Market Fund, Inc., (comprising, the Money Market and Flexible
Asset Allocation Portfolios) as of October 31, 1994, and the related
statements of operations for the year then ended (Money Market
Portfolio) and for the period from March 1, 1994 to October 31, 1994
(Flexible Asset Allocation Portfolio), the statements of changes in net
assets for each of the two years in the period then ended (Money Market
Portfolio) and for the period from March 1, 1994 to October 31, 1994
(Flexible Asset Allocation Portfolio), and financial highlights for each
of the fiscal periods since 1992. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1994, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios constituting the
Aon Asset Management Fund, Inc. at October 31, 1994, the results of
their operations for the year then ended (Money Market Portfolio) and
for the period from March 1, 1994 to October 31, 1994 (Flexible Asset
Allocation Portfolio), and the changes in their net assets for each of
the two years in the period then ended (Money Market Portfolio) and for
the period from March 1, 1994 to October 31, 1994 (Flexible Asset
Allocation Portfolio), and their financial highlights for each of the
fiscal periods since 1992, in conformity with generally accepted
accounting principles.
Richmond, Virginia
December 9, 1994
<PAGE>
Statements of Assets and Liabilities
Aon Asset Management Fund, Inc.
<TABLE>
October 31, 1994
Flexible Asset
Money Market Allocation
Portfolio Portfolio
<S> <C> <C>
ASSETS
Investments in securities at fair value
(cost - $10,154,243) $ - $ 10,214,639
Investments in securities at amortized cost which
approximates fair value 412,719,131 -
Cash 205 -
Dividends receivable - 8,717
Interest receivable 132,687 62,106
Due from affiliates - 9,187
Total Assets 412,852,023 10,294,649
LIABILITIES
Dividends payable 1,684,698 -
Accrued expenses payable 255,047 59,324
Payable for securities purchased - 46,200
Total Liabilities 1,939,745 105,524
NET ASSETS $ 410,912,278 $ 10,189,125
OUTSTANDING SHARES 410,912,278.000 1,021,494.102
Net Asset Value Per Share $ 1.00 $ 9.97
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Statements of Operations
Aon Asset Management Fund, Inc.
<TABLE>
Flexible Asset
Allocation
Portfolio
Period from
Money Market Portfolio March 1, 1994
Year Ended to
October 31, 1994 October 31, 1994
<S> <C> <C>
INVESTMENT INCOME
Interest $15,927,354 $ 206,056
Dividends - 51,969
15,927,354 258,025
EXPENSES
Investment advisory fee (Note 4) 1,437,838 49,839
Directors' fees 16,952 8,049
Audit fees 16,952 8,049
Registration fees 36,264 -
Custodian, transfer and accounting fees 102,999 26,315
Other 24,997 -
1,636,002 92,252
Less expense waiver (Note 4) 1,027,021 -
Less expense reimbursement (Note 4) - 9,187
608,981 83,065
NET INVESTMENT INCOME 15,318,373 174,960
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments (Note 4) (605,310) (46,231)
Change in net unrealized appreciation on investments - 60,396
Net realized and unrealized gain (loss) on
investments (605,310) 14,165
INCREASE IN NET ASSETS FROM OPERATIONS $14,713,063 $ 189,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Statements of Changes in Net Assets
Aon Asset Management Fund, Inc.
<TABLE>
Flexible Asset
Allocation Portfolio
Period from
Money Market Portfolio March 1, 1994
Years Ended October 31, to October 31,
1994 1993 1994
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income $ 15,318,373 $ 9,934,424 $ 174,960
Net realized gain (loss) on investments (605,310) 1,263 (46,231)
Change in unrealized appreciation on
investments - - 60,396
Net increase in net assets from
operations 14,713,063 9,935,687 189,125
DIVIDENDS PAID TO SHAREHOLDERS
FROM:
Net investment income (15,318,373) (9,934,424) (174,960)
Net realized gain on investments (1,940) (1,263) -
Distribution in excess of realized gains - - (36,041)
(15,320,313) (9,935,687) (211,001)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 4,231,505,926 3,520,851,510 10,000,000
Contribution of capital (Note 4) 607,250 - -
Net asset value of shares issued
upon reinvestment of dividends 3,932,861 2,974,189 211,001
Cost of redemption of shares (4,236,594,456) (3,510,833,283) -
Increase (decrease) in net assets
from capital transactions (548,419) 12,992,416 10,211,001
Increase (decrease) in net assets (1,155,669) 12,992,416 10,189,125
Net assets at beginning of period 412,067,947 399,075,531 -
Net assets at end of period $ 410,912,278 $ 412,067,947 $10,189,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Schedule of Investments
Aon Asset Management Fund, Inc.
October 31, 1994
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
COMMERCIAL PAPER
Automobile - 4.8%
Ford Motor Credit Co.
4.72% due November 2, 1994 8,000,000 $ 7,998,951 $ 7,998,951
4.80% due November 8, 1994 6,924,000 6,917,538 6,917,538
5.00% due November 14, 1994 5,000,000 4,990,972 4,990,972
19,907,461 19,907,461
Banking - 4.5%
International Lease Finance Corp.
4.80% due November 9, 1994 5,000,000 4,994,667 4,994,667
4.82% due November 9, 1994 4,518,000 4,513,161 4,513,161
4.87% due November 28, 1994 4,000,000 3,985,390 3,985,390
4.90% due November 30, 1994 5,000,000 4,980,264 4,980,264
18,473,482 18,473,482
Banking- Foreign - 4.9%
Canadian Imperial Holdings, Inc.
4.76% due November 1, 1994 10,000,000 10,000,000 10,000,000
5.10% due December 28, 1994 5,000,000 4,959,625 4,959,625
5.08% due December 28, 1994 5,000,000 4,959,783 4,959,783
19,919,408 19,919,408
Beverage - 2.9%
Coca Cola Co.
4.95% due December 7, 1994 7,000,000 6,965,350 6,965,350
Pepsico, Inc.
5.335% due April 13, 1995 5,000,000 5,000,000 5,000,000
11,965,350 11,965,350
Conglomerates - 9.7%
Intel Corp.
5.15% due December 30, 1994 6,401,000 6,346,974 6,346,974
5.10% due December 30, 1994 3,589,000 3,568,918 3,568,918
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
(CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Conglomerates --Continued
Motorola Credit Corp.
4.89% due November 14, 1994 5,000,000 4,991,171 4,991,171
Melville Corp.
4.84% due November 21, 1994 5,000,000 4,986,556 4,986,556
Philip Morris Companies, Inc.
4.80% due November 1, 1994 11,300,000 11,300,000 11,300,000
Pitney Bowes Credit Corp.
4.80% due November 16, 1994 5,000,000 4,990,000 4,990,000
5.04% due December 22, 1994 3,760,000 3,733,154 3,733,154
39,916,773 39,916,773
Defense - 4.3%
PHH Corp.
4.85% due November 18, 1994 7,545,000 7,527,720 7,527,720
4.92% due November 28, 1994 5,000,000 4,981,550 4,981,550
4.91% due November 29, 1994 5,000,000 4,980,906 4,980,906
17,490,176 17,490,176
Drugs - 5.6%
Abbott Labs
4.95% due December 6, 1994 10,000,000 9,951,875 9,951,875
Merck & Co.
4.95% due November 2, 1994 10,000,000 9,998,625 9,998,625
Unilever Capital Corp.
5.03% due November 28, 1994 3,070,000 3,058,418 3,058,418
23,008,918 23,008,918
Electric - 3.6%
General Electric Capital Corp.
4.80% due November 9, 1994 5,000,000 4,994,667 4,994,667
5.02% due December 19, 1994 5,000,000 4,966,533 4,966,533
5.50% due January 9, 1995 5,000,000 4,947,292 4,947,292
14,908,492 14,908,492
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
(CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Finance-Miscellaneous - 15.9%
American Express Credit Corp.
4.76% due November 10, 1994 5,305,000 5,298,687 5,298,687
4.90% due November 25, 1994 10,000,000 9,967,333 9,967,333
4.71% due November 1, 1994 2,235,000 2,235,000 2,235,000
American General Finance
5.00% due December 19, 1994 5,000,000 4,966,667 4,966,667
Associates Corp. of North America
5.20% due December 5, 1994 5,000,000 4,975,444 4,975,444
5.12% due December 12, 1994 5,000,000 4,970,844 4,970,844
4.80% due November 1, 1994 5,000,000 5,000,000 5,000,000
Beneficial Corp.
4.72% due November 3, 1994 10,000,000 9,997,378 9,997,378
5.00% due November 7, 1994 5,000,000 4,995,833 4,995,833
Household Finance
5.31% due January 20, 1995 5,000,000 4,941,000 4,941,000
Merrill Lynch & Co.
4.80% due November 7, 1994 5,000,000 4,996,000 4,996,000
5.05% due November 28, 1994 3,045,000 3,033,467 3,033,467
65,377,653 65,377,653
Finance-Retail - 9.7%
Bankers Trust
4.94% due June 20, 1995 5,000,000 5,000,000 5,000,000
Goldman Sachs Group L.P.
5.025% due November 16, 1994 5,000,000 4,989,531 4,989,531
4.98% due November 16, 1994 5,000,000 4,989,625 4,989,625
4.88% due November 21, 1994 5,000,000 4,986,444 4,986,444
Fleet Mortgage Group, Inc.
5.10% due December 20, 1994 10,000,000 9,930,583 9,930,583
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
(CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Finance-Retail --Continued
Morgan Stanley Group, Inc.
4.98% due November 10, 1994 5,000,000 4,993,775 4,993,775
5.60% due May 17, 1995 5,000,000 5,000,000 5,000,000
39,889,958 39,889,958
Food - 2.4%
Sara Lee Corp.
5.05% due December 27, 1994 10,000,000 9,921,444 9,921,444
Government - 2.4%
Federal Home Loan Banks
5.04% due December 29, 1994 5,000,000 4,959,400 4,959,400
Federal Home Loan Mortgage Corp.
5.27% due January 3, 1995 5,000,000 4,953,888 4,953,888
9,913,288 9,913,288
Leisure - 1.2%
Walt Disney Co.
5.11% due December 9, 1994 5,000,000 4,973,031 4,973,031
Lodging - 2.3%
Hilton Hotels
4.87% due November 17, 1994 9,337,000 9,316,791 9,316,791
Miscellaneous - 6.6%
Asset Securitization Cooperative Corp.
4.83% due November 10, 1994 10,000,000 9,987,925 9,987,925
Comerica Bank
4.80% due December 20, 1994 5,000,000 5,000,000 5,000,000
First of America
4.75% due November 8, 1994 2,000,000 2,000,000 2,000,000
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
(CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Miscellaneous --Continued
Preferred Receivables Funding Corp.
4.82% due November 3, 1994 10,000,000 9,997,322 9,997,322
26,985,247 26,985,247
Oil - 3.6%
Mobil Corp.
4.85% due November 18, 1994 15,000,000 14,965,646 14,965,646
Retail - 2.5%
Limited Inc.
4.73% due November 7, 1994 5,000,000 4,996,058 4,996,058
May Department Stores Co.
4.85% due November 8, 1994 5,112,000 5,107,179 5,107,179
10,103,237 10,103,237
Utility-Communication -10.3%
AT & T Capital Corp.
4.80% due November 8, 1994 10,000,000 9,990,667 9,990,667
Ameritech Capital Funding Corp.
5.01% December 14, 1994 10,000,000 9,940,158 9,940,158
SouthwestBell Capital Corp.
4.83% due November 22, 1994 10,000,000 9,971,825 9,971,825
5.05% due December 16, 1994 5,000,000 4,968,438 4,968,438
US West Capital Funding Co.
4.93% due November 2, 1994 5,000,000 4,999,315 4,999,315
5.00% due November 4, 1994 2,500,000 2,498,958 2,498,958
42,369,361 42,369,361
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal Fair
Value Cost Value
<S> <C> <C> <C>
MONEY MARKET PORTFOLIO
(CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Utilities-Electric - 3.2%
Baltimore Gas & Electric Co.
4.80% due November 4, 1994 8,338,000 8,334,665 8,334,665
5.10% due December 1, 1994 5,000,000 4,978,750 4,978,750
13,313,415 13,313,415
TOTAL INVESTMENTS - 100.4% $412,719,131 412,719,131
Liabilities, less cash and other assets - (.4%) (1,806,853)
NET ASSETS - 100% $410,912,278
</TABLE>
<PAGE>
Schedule of Investments
Aon Asset Management Fund, Inc.
October 31, 1994
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO
STOCKS
Air Transportation - .7%
Antec Corp. 2500 $ 54,375 $ 71,250
Apparel - .8%
Fruit of the Loom, Inc. 3000 89,930 85,875
Auto & Truck - .5%
Reliance Steel & Aluminum 3500 54,680 51,188
Banks - .5%
NationsBank Corp. 1000 47,373 49,500
Building & Housing - 1.0%
Bay Apartments Communities 2000 40,000 39,000
Grupo Mexicanoe De Desarrollo 2870 58,032 58,118
98,032 97,118
Business Mechanics & Software - .5%
Tower Semiconductors Ltd. 3300 46,200 46,200
Business Service - 1.3%
Career Horizons, Inc. 3500 61,250 65,625
Cisco Systems, Inc. 2500 81,313 75,313
First Data 1000 42,685 50,125
First Financial Management 1500 86,078 84,000
271,326 275,063
Chemicals - 1.5%
Air Products & Chemicals, Inc. 1000 41,185 47,750
Dupont De Nemours & Co. 1700 92,614 101,363
133,799 149,113
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Conglomerate- .4%
ITT Corp. 500 41,072 44,125
Consumer Durable - .4%
Leggett and Platt 1000 43,310 37,250
Consumer Products - .5%
Mikasa 3500 49,000 56,000
Container - 1.4%
Crown Cork & Seal 2000 78,433 77,750
Sonoco Products, Inc. 3000 69,837 66,000
148,270 143,750
Diversified - 4.3%
Comcast Corp. Class A Special 3000 46,430 49,125
Comcast UK Cable Partners Ltd. 5000 75,000 100,000
Ericsson Tel ADR 1000 54,613 60,938
Grupo Televisa SA de CV GLBL 800 47,423 35,500
Harcourt General, Inc. 1700 60,739 62,900
Infinity Broadcasting 1500 43,888 45,563
Tele-Communications Class A - New 2000 47,600 45,250
Time Warner, Inc. 1000 36,810 35,500
412,503 434,776
Drugs - 1.8%
Johnson & Johnson Co. 1000 49,935 54,625
Merck & Co. 1500 48,277 53,625
Schering Plough Corp. 1000 58,810 71,250
157,022 179,500
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Electrical Equipment - 1.2%
California Microwave, Inc. 3000 67,201 93,000
Integrated Device Technology 1000 25,112 28,375
92,313 121,375
Electronics - 1.6%
Motorola, Inc. 1000 55,685 58,875
Reptron Electronics, Inc. 3000 39,000 30,750
Sensormatic Electronics Corp. 2000 58,390 75,250
153,075 164,875
Energy Raw Material- .5%
Valero Energy Corp. 3.125% Pfd. 1000 50,000 48,875
Engineering & Construction - .6%
Greenfield Industries 2500 49,375 59,375
Entertainment & Leisure - .3%
Viacom Inc. Class A 80 3,051 3,210
Viacom Inc. Class B 606 22,047 23,786
Viacom Rights 1000 1,236 1,313
26,334 28,309
Financial Services - .2%
Duke Realty Investments Inc. 1000 25,250 24,625
Food, Beverage. & Tobacco - .7%
Pepsico, Inc. 2000 75,245 70,000
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Gold - .2%
Homestake Mining Co. 1000 22,560 18,750
Health Care - .8%
Dentsply International, Inc. 1000 35,250 31,000
Omega Healthcare Investors 2000 48,500 48,500
83,750 79,500
Health Care Service - .8%
Integrated Health Services 2100 72,251 85,575
Hospital Supply & Service - 1.6%
Coastal Healthcare Group 2000 61,250 63,000
Healthcare Realty Trust 2500 51,400 50,938
Inphynet Medical Management 4000 48,000 47,000
160,650 160,938
Household Products - .5%
Aptargroup, Inc. 2000 51,000 54,500
Insurance - 1.4%
American General Corp. 1500 43,027 41,250
American International Group 1100 92,666 102,988
135,693 144,238
Liquor - .2%
Anheuser Busch Companies, Inc. 500 26,280 25,375
Machinery-Industrial - .9%
Watson Pharaceuticals, Inc. 3500 69,300 92,094
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Metals & Minerals - 1.7%
Freeport McMoran Copper & Gold 3100 79,561 71,300
Reynolds Metals Pfd. 1900 98,602 99,750
178,163 171,050
Miscellaneous - .6%
International Game Technology 500 11,780 9,250
Storage USA 2000 52,000 50,250
63,780 59,500
Miscellaneous Technology - .7%
Cherry Corp. Class A 500 6,250 7,875
Triple S Plastics 4700 58,750 58,750
65,000 66,625
Oil - Domestic - .6%
Amoco Corp. 1000 52,435 63,375
Oil - International - .8%
Mobil Corp. 1000 82,810 86,000
Railroad -1.4%
Conrail, Inc. 1200 72,697 65,250
Norfolk Southern Co. 1300 87,778 81,900
160,475 147,150
Real Estate - 2.7%
Beacon Office Property 2500 42,500 47,188
Equity Residential Properties Trust 1500 46,875 44,813
Federal Realty Investment Trust 2000 52,000 42,250
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Real Estate --Continued
First Industrial Realty Trust 2000 47,000 39,000
Macerich Co. 3000 57,000 60,000
Paragon Group, Inc. 2000 42,500 40,250
287,875 273,501
Retail-Food & Drugs - .5%
General Nutrition Co. 2000 44,600 51,000
Retail-General - 1.9%
Prime Retail 8.5% Pfd Ser B 4000 100,000 94,000
Tandy Corp. Pfd 1500 54,115 55,500
Tommy Hilfiger Corp. 1000 41,560 44,125
195,675 193,625
Service Distributor - 1.0%
Alco Standard 1800 95,308 102,600
Software - 2.5%
Amtel Corp. 1500 42,938 55,313
Compuware Corp 2000 72,350 78,250
Sterling Software, Inc. 2500 84,587 78,125
System Software Assoc. Inc. 3300 47,415 41,044
247,290 252,732
Telecommunication -.7%
National Wireless Holdings 1300 16,250 10,075
US Robotics 1500 60,887 60,375
77,137 70,450
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
STOCKS (CONTINUED)
Telephone - 1.8%
AT&T Corp. 1000 54,750 55,000
Blyth Industries 4000 66,000 92,000
US West, Inc. 1000 40,185 37,625
160,935 184,625
Transportation - .5%
Harley Davidson 2000 48,948 56,000
Transportation Equipment - .6%
Consolidated Freightways Pfd Ser C 3000 68,555 66,375
Travel & Recreation - .9%
Promus 300 14,268 8,888
Walt Disney Co. 2000 92,620 78,750
106,888 87,638
Trucking - 1.0%
Allied Holdings, Inc. 3200 64,797 42,400
MTL, Inc. 4000 60,000 62,000
124,797 104,400
TOTAL STOCKS - 48.4% 4,800,639 4,935,758
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
CORPORATE BONDS
Bank & Bank Holding - 2.8%
Huntington National
6.75% due June 15, 2003 $100,000 92,945 89,236
NationsBank Corp.
5.375% due December 1, 1995 $100,000 99,212 98,658
NationsBank Corp.
5.125% due September 15, 1998 $100,000 93,244 91,143
285,401 279,037
Chemical - .9%
Rhone Poulenc
6.75% due October 15, 1999 $100,000 96,505 94,819
Communications & Media - 1.1%
Bell Atlantic
5.37% due July 13, 1998 $120,000 112,840 110,993
Conglomerate - 3.8%
Ann Taylor, Inc. - Sub Notes
8.75% due June 15, 2000 $100,000 96,776 98,125
Argosy Gaming Co.
12.00% due June 1, 2001 $100,000 100,000 109,500
Citicorp. - Sub. Notes
7.125% due March 15, 2004 $100,000 98,745 90,775
Pep Boys
6.625% due May 15, 2003 $100,000 90,755 88,915
386,276 387,315
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
CORPORATE BONDS (CONTINUED)
Electronics - 3.3%
Union Pacific
7.0% due June 15, 2000 $150,000 148,710 143,167
Xerox
7.01% due April 30, 1999 $200,000 198,379 192,670
347,089 335,837
Finance Company - 2.3%
Commercial Credit
6.00% due June 15, 2000 $150,000 140,916 135,894
Norwest Financial, Inc.
6.25% due February 15, 1997 $100,000 99,187 97,859
240,103 233,753
Food - .9%
Canadaigua Wine
8.85% Due December 15, 2003 $100,000 98,594 90,000
Health Care - .8%
Gillette Company
5.75% due October 15, 2005 $100,000 86,274 82,122
Investment Company - 2.3%
AVCO Financial Services
7.25% due July 15, 1999 $150,000 149,400 145,785
Dean Witter Discover
6.875% due March 1, 2003 $100,000 93,119 90,795
242,519 236,580
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
CORPORATE BONDS (CONTINUED)
Metal & Mineral - .9%
Aluminum Co. of America
5.75 % due February 1, 2001 $100,000 92,058 88,424
Miscellaneous - 1.9%
Lockheed Corp. - Notes noncall
5.875% due March 15, 1998 $100,000 96,178 94,691
Merck & Co.
7.75% due May 1, 1996 $100,000 101,895 101,882
198,073 196,573
Paper & Forest Products - .9%
International Paper Co.
7.50% due May 15, 2004 $100,000 98,614 94,271
Retail Trade - .9%
Black & Decker - Notes noncall
6.625% due November 15, 2000 $100,000 94,077 89,981
TOTAL CORPORATE BONDS - 22.8% 2,378,423 2,319,705
CONVERTIBLE SECURITIES
Liberty Property SSB Deb. conv
8.00% due July 1, 2001 $ 50,000 50,000 47,438
TOTAL CONVERTIBLE SECURITIES - .5% 50,000 47,438
</TABLE>
<PAGE>
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
Principal
Amount or Fair
Shares Cost Value
<S> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION
PORTFOLIO (CONTINUED)
U.S. GOVERNMENT SECURITIES
US Treasury Note
7.125% due September 30, 1999 $200,000 198,733 197,374
6.375% due August 15, 2002 $100,000 97,147 92,343
US Treasury Bond
6.25% due August 15, 2023 $500,000 407,376 400,155
TOTAL U.S. GOVERNMENT
SECURITIES - 6.8% 703,256 689,872
SHORT-TERM SECURITIES
Ameritech Capital Funding Corp.
5.01% due December 14, 1994 $500,000 496,984 496,983
FNMA Disc Note
5.33% due January 19, 1995 $500,000 494,152 494,096
General Mills Demand Note
4.63% due December 31, 2031 $432,642 432,642 432,641
Southwestern Bell Capital Corp.
5.08% due December 14, 1994 $300,000 298,147 298,146
University of Chicago
4.92% due November 1, 1994 $500,000 500,000 500,000
TOTAL SHORT-TERM SECURITIES - 21.8% 2,221,925 2,221,866
TOTAL INVESTMENTS - 100.3% $10,154,243 $10,214,639
Liabilities, less cash and other assets - (.3%) (25,514)
NET ASSETS - 100% $10,189,125
</TABLE>
<PAGE>
Notes to Financial Statements
Aon Asset Management Fund, Inc.
1. DESCRIPTION OF ENTITY
Aon Asset Management Fund, Inc. (formerly Aon Money Market Fund, Inc.) (the
Fund) incorporated in Virginia on August 27, 1991 is registered under the
Investment Company Act of 1940, as an open-end, diversified management
investment company whose shares are currently sold only to affiliates of Aon
Corporation. The Fund consists of two portfolios: the Money Market Portfolio
and the Flexible Asset Allocation Portfolio. The Money Market Portfolio of the
Fund is designated as a "Money Market Fund", and must adhere to the
guidelines governing such funds as described in Rule 2a-7 of the
Investment Company Act of 1940. Pursuant to that rule, the Money Market
Portfolio maintains a constant net asset value of $1.00 per share on a
daily basis. Dividends are declared daily and paid monthly for the Money
Market Portfolio and declared and paid quarterly for the Flexible Asset
Allocation Portfolio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the Fund
used in the preparation of its financial statements.
a) Security Valuation - Security transactions are recorded on the
trade date. Securities traded on a national securities exchange
are valued at the last reported sales price on the last business
day of the period. Securities traded in the over-the-counter
market are stated at the last quoted bid price. The investments
held by the Money Market Portfolio are stated at amortized cost,
which approximates fair value.
b) Investment Transactions and Income - Security transactions are
accounted for on the trade date (the date the order to buy or sell
is executed). Interest income is recorded on the accrual basis
and dividend income is reported on the ex-dividend date. Realized
gains and losses on investment are determined on the first-in,
first-out basis. Discounts and premiums on securities purchased
are amortized over the life of the respective securities.
c) Distributions to Shareholders - Distributions of net investment
income and capital gains are determined in accordance with income
tax regulations. The Fund has no material differences in book and
tax income.
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
3. INCOME TAXES
The Fund intends to qualify as a "regulated investment company" under
the provision of Sub-chapter M of the Internal Revenue Code of 1986 as
amended, and thereby, under the provisions of the income tax laws
available to regulated investment companies, be relieved of
substantially all income taxes. Therefore, no provision has been made
for Federal or state income taxes. The Flexible Asset Allocation
Portfolio's accumulated net realized loss on sales of investments for
the Federal income tax purposes at October 31, 1994 of $46,231 is
available to offset future tax gains. If unused this loss carryover
expires in 2002.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory contract with Aon Advisors,
Inc., (Investment Advisor), a subsidiary of Aon, investment advisory
fees will be deducted from the Fund daily and paid monthly at a rate of
0.35% of average daily net assets in the Money Market Portfolio and
0.75% of average daily net assets up to $250 million, 0.65% of average
daily net assets on the next $250 million, and 0.50% of average daily
net assets in excess of $500 million in the Flexible Asset Allocation
Portfolio. The Investment Advisor has agreed to waive 0.25% of the
advisory fee for the Money Market Portfolio for a net rate of 0.10% on a
daily basis.
The Investment Advisor provides administrative services to the Fund and
manages its business affairs, including personnel, facilities and
equipment and all legal, accounting and other costs incurred in the
organization of the Fund. Expenses of the Fund are subject to
reimbursement to the extent that ordinary business expenses of the Fund
(including the advisory fees but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) in any year exceed 1.0% of the
aggregate average daily net assets of the Money Market Portfolio, and
1.25% of the aggregate net asset in the Flexible Asset Allocation
Portfolio.
To assist in the administration of the Fund, the Investment Advisor has
entered into an administrative contract with Forth Financial Securities
Corporation ("FFSC"), to provide certain administrative services for the
Fund. Under this agreement, the Investment Advisor will pay FFSC an
annual fee of $25,000 plus 0.05% of the average daily net assets of the
Fund's portfolios.
Certain officers and directors of the Fund were also officers and
directors of the Investment Advisor and Life of Virginia an indirect
wholly-owned subsidiary of Aon Corp. During the period ended October
31, 1994, the Fund made payments to certain directors of the Money
<PAGE>
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
Market Portfolio and the Flexible Asset Allocation Portfolio of $16,952
and $8,049, respectively.
During 1994, an affiliate of the Investment Advisor purchased securities
from the Money Market Portfolio, at an amount greater than their current
fair value resulting in a capital loss of $607,250. The Investment
Advisor made a capital contribution of $607,250.
5. COMPOSITION OF NET ASSETS
At October 31, 1994 net assets of the Flexible Asset Allocation
Portfolio consisted of:
<TABLE>
<S> <C>
Common Shares $ 10,174,960
Accumulated net realized loss on sales of
investments (46,231)
Unrealized appreciation on investments 60,396
Net assets $ 10,189,125
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
At October 31, 1994, there were 3,000,000,000 shares of no par value
common stock authorized in the Fund. The shares will be issued in the
following classes and have the following designations:
Class Shares
Class A (Money Market Portfolio) 750,000,000
Class B (Flexible Asset Allocation Portfolio) 450,000,000
Class C 400,000,000
Class D 400,000,000
Class E 250,000,000
Class F 250,000,000
Class G 250,000,000
Class H 250,000,000
<PAGE>
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
A summary of capital stock transactions follows:
<TABLE>
FLEXIBLE ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
<S> <C> <C>
Balance at October 31, 1992 $ 399,075,531.200 $ -
Shares sold 3,520,851,509.380 -
Shares issued to shareholders in reinvestment
of dividends and distributions 2,974,188.960 -
Total issued 3,523,825,698.340 -
Shares reacquired (3,510,833,282.790) -
Net change in shares 12,992,415.550 -
Balance at October 31, 1993 412,067,946.750 -
Shares sold 4,231,505,926.180 1,000,000.000
Shares issued to shareholders in
reinvestment of dividends and distributions 3,932,861.420 21,494.102
Total issued 4,235,438,787.600 1,021,494.102
Shares reacquired (4,236,594,456.020) -
Net change in shares (1,155,668.420) (1,021,494.102)
Balance at October 31, 1993 $ 410,912,278.330 $ 1,021,494.102
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
7. INVESTMENTS
Purchases and sales of investment securities, excluding maturities,
during the periods were as follows:
<TABLE>
Money Flexible Asset
Market Allocation
Portfolio Portfolio
<S> <C> <C>
PURCHASES
U.S. Government and Agency
Obligations 1,562,531
Corporate bonds 2,823,638
Commercial paper 8,547,432,265 47,661,125
Common stock - 7,781,461
Total purchases 8,547,432,265 59,828,755
SALES
U.S. Government and Agency
Obligations - 908,569
Corporate bonds - 493,374
Commercial paper 103,480,650 9,663,781
Common stock - 2,928,647
Total Sales 103,480,650 13,994,371
</TABLE>
At October 31, 1994, based on cost for federal income tax purposes, net
unrealized appreciation of portfolio securities consisted of the
following:
<TABLE>
Flexible Asset
Money Market Allocation
Portfolio Portfolio
<S> <C> <C>
Appreciated Securities - 334,415
Depreciated Securities - (274,019)
Net unrealized appreciation $ - 60,396
</TABLE>
<PAGE>
Financial Highlights
Aon Asset Management
Fund, Inc
MONEY MARKET PORTFOLIO ***
Financial Highlights
Aon Asset Management Fund, Inc
<TABLE>
MONEY MARKET PORTFOLIO ***
1994 1993 1992
<S> <C> <C> <C>
Net asset value at beginning of period $ 1.00 1.00 1.00
Investment income .04 .03 .03
Expenses * * *
Net investment income .04 .03 .03
Net realized gains (losses) on investments * * *
Income from operations .04 .03 .03
Dividends paid to shareholders from:
Net investment income (.04) (.03) (.03)
Net realized gain (loss) * - -
(.04) (.03) (.03)
Contribution of capital * * *
Increase in net asset value .00 .00 .00
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
Total return 3.73% 3.10% 3.57%
Ratios:
Ratio of operating expenses to average net assets 0.15%** 0.17%** 0.25%**
Ratio of net investment income to average net assets 3.73%** 3.10** 3.57**
Net assets at end of period $410,912,278 $412,067,947 $399,075,531
</TABLE>
* Less than $0.01 per share
** The Investment Advisor has agreed for the first three years of the
Portfolio's operations to waive a portion of its advisory fees.
Absent this agreement, the ratio of expenses to average net assets
and the ratio of net investment income to average net assets would
have been .40% and 3.48% for 1994, .42% and 2.85% for 1993 and .50%
and 3.32% for 1992, respectively.
*** For the period January 23, 1992(commencement of operations) to
October 31, 1992. Ratios for 1992 have been determined on an
annualized basis.
<PAGE>
Financial Highlights (continued)
Aon Asset Management Fund, Inc
<TABLE>
FLEXIBLE ASSET ALLOCATION PORTFOLIO Period from
March 31, 1994 to
October 31, 1994
<S> <C>
Net asset value at beginning of period $ 10.00
Investment income .25
Expenses (.08)
Net investment income .17
Net realized (losses) on investments (.05)
Net unrealized appreciation (depreciation) on investments .06
Income (loss) from operations .18
Dividends paid to shareholders from:
Net investment income (.16)
Net realized loss (.05)
(.21)
Decrease in net asset value (.03)
Net asset value at end of period $ 9.97
Total return 1.84%
Ratios:
Ratio of operating expenses to average net assets 1.25%*
Ratio of net investment income to average net assets 2.63%*
Portfolio turnover 64.36%
Net assets at end of period $10,189,125
</TABLE>
*Ratios have been determined on an annualized basis.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
1. Report of the Independent Auditors
2. Statement of Assets and Liabilities.
3. Statement of Operations.
4. Statement of Changes in Net Assets.
5. Portfolio of Investments.
6. Notes to Financial Statements.
(b) Exhibits:
1. Amended and Restated Articles of Incorporation.*/
2. Amended and Restated By-Laws of Registrant.*/
3. None.
4. None.
5. (a) Investment Advisory Agreement for the Money Market
Portfolio.**/
(a) Investment Advisory Agreement for the Flexible
Asset Allocation Portfolio.**/
6. Amended Distribution Agreement between Registrant and
Forth Financial Securities Corporation. **/
7. None.
8. Amended Custody Agreement between Registrant and First
Star Trust Company. **/
<PAGE>
9. (a) Amended Administration Agreement among Registrant,
Aon Advisors, Inc., and Forth Financial Securities
Corporation. **/
(b) Amended Transfer Agency Agreement between
Registrant and First Star Trust Company. **/
(c) Amended Accounting Servicing Agreement between
Registrant and First Star Trust Company. **/
10. Opinion and Consent of George H. Parsons, Esq.
concerning the legality of the securities to be
issued.***/
11. (a) Consent of Ernst & Young LLP.
(b) Consent of Sutherland, Asbill & Brennan.
12. None.
13. Form of Investment Commitment Letter for Initial
Capital.***/
14. None.
15. Plan of Distribution for Flexible Asset Allocation
Portfolio Shares.
16. Schedule for Computation of Performance Calculations.
***/
17. Powers of Attorney.***/
*/ Incorporated herein by reference to post-effective amendment No. 3 to
the Registrant's registration statement on Form N-1A, file No. 33-43133,
filed with the Commission on December 16, 1993.
**/ Incorporated herein by reference to post-effective amendment No. 4 to
Registrant's registration statement on Form N-1A, file No. 33-43133, filed
with the Commission on February 25, 1994.
***/ Incorporated herein by reference to pre-effective amendment No. 1 to
the Registrant's registration statement on Form N-1A, File No. 33-43133,
filed with the Securities and Exchange Commission on December 5, 1991.
Item 25. Persons Controlled by or under Common Control with
Registrant.
The Registrant is a Virginia corporation organized on August
27, 1991. Aon Corporation, a corporation organized under the laws of the
State of Delaware, and its wholly-owned subsidiaries, have provided the
initial investment in both Portfolios of the Fund and own a substantial
percentage of each class of the outstanding shares of the Fund. The
information regarding persons under common control with the Registrant is
provided in the following organization chart for Aon Corporation.
<PAGE>
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class As of December 31, 1994
Capital Stock -- Class A 43
(Money Market Portfolio)
Capital Stock -- Class B 1
(Flexible Asset Allocation Portfolio)
Item 27. Indemnification.
See Article NINTH of the Registrant's Amended and Restated
Articles of Incorporation, filed as Exhibit 1 to this Registration
Statement, which provision is incorporated herein by reference, and Article
VII of the By-Laws of the Registrant, filed as Exhibit 2 to the
Registration Statement, which provision is incorporated herein by
reference.
The Investment Advisory Agreements between the Registrant
and AON Advisers, Inc. ("Advisor") both provide that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties on the part of the Advisor (or its officers,
directors, agents, employees, controlling persons, shareholders, and any
other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under the
Investment Advisory Agreements), neither the Advisor nor any of its
officers, directors, employees or agents shall be subject to liability to
the Registrant or to any shareholder or to any other person with a
beneficial interest in the Registrant for any act or omission in the course
of, or connected with, rendering services under the Investment Advisory
Agreements, including without limitation any error of judgment or mistake
of law or for any loss suffered by the Registrant or any shareholder or
other person in connection with the matters to which these Agreements
relate, except to the extent specified in Section 36(b) of the 1940 Act
concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
In addition, the Registrant intends to maintain a directors
and officers "errors and omissions" liability insurance policy under which
the Registrant and its directors and officers are named insureds.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
<PAGE>
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of such action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of the Investment Advisor
The Registrant's investment advisor, Aon Advisors, Inc., is
a wholly-owned subsidiary of Aon Corporation. Aon Advisors, Inc. offers
its investment advisory services to subsidiaries and affiliates of Aon
Corporation.
Set forth below is a list of the principal officers of Aon
Advisors, Inc., indicating each business, profession, vocation, or
employment of a substantial nature in which each person has been engaged at
any time during the past two fiscal years, for his or her own account or in
the capacity of director, officer, partner or trustee.
Name and Position With Other Business, Profession,
Aon Advisors, Inc. Vocation, or Employment
Michael A. Conway Director and President, Aon
Director and President Advisors, Inc., since 1990; Director and
Senior Vice President - Investments, Combined
Insurance Company of America, since
1990; Senior Vice Presi- dent and
Senior Investment Officer, Aon
Corporation, since 1990.
Lawrence R. Miller Executive Director, Aon
Senior Executive Director Advisors, Inc., since 1987; Vice
President - Investments,
Combined Insurance Company of
America, since 1978.
John J. Palmer Director, Life of Virginia, Director
since 1986; President, Life of Virginia
Series Fund, Inc., since 1986; Senior
Vice President, Life of Virginia, since
1980; President, Aon Asset Management
Fund, Inc. since 1991; President, Forth
Financial Securities Corporation, since
1992.
<PAGE>
Jerry G. Overman Vice President, Life of
Treasurer Virginia Series Fund, Inc., since 1986;
Director of Investment Services, Aon
Advisors, Inc., since 1985; Treasurer,
Life of Virginia, since 1988.
Mark B. Burka Executive Director, Aon
Executive Director Advisors, Inc., since 1990; Vice President -
Investments, Combined Insurance Company
of America, since 1984.
Pendleton M. Shiflett, III Vice President, Life of
Executive Director Virginia, since 1988; Executive Director,
Aon Advisors, Inc., since 1990.
Jerome I. Baer Vice President - Taxes of Aon
Director - Taxes Corporation since 1989. Mr. Baer also
holds executive positions with a number
of Aon Corporation subsidiaries.
Linda L. Lanam Corporate Secretary, Life of Secretary
Virginia and other Aon Corporation
affiliates since 1992; Vice President
and Senior Counsel, Life of Virginia
since 1989.
Item 29. Principal Underwriters.
(a) Forth Financial Securities Corporation, the principal
underwriter for Registrant, also acts as the principal
underwriter for Life of Virginia Separate Account I, Life of
Virginia Separate Account II, Life of Virginia Separate
Account III, and Life of Virginia Separate Account 4.
<PAGE>
(b) Affiliations of Directors and Officers:
Positions With Positions With
Name Principal Underwriter Registrant
John J. Palmer President and President and
Director Director
Wallace L. Chandler No position held Director
John E. Leard No position held Director
Robert P. Martin, Jr. No position held Director
J. Clifford Miller, III No position held Director
Lawrence R. Miller No position held Vice President
and Director
J. Garnett Nelson No position held Director
Lee A. Putney No position held Director
(c) Inapplicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder and Rule 2a-7 under the 1940 Act will be maintained at the
offices of the Registrant, the Registrant's custodian, Firstar Trust Com-
pany, 615 East Michigan Street, Third Floor, Milwaukee, Wisconsin 53202, or
the Registrant's investment advisor, Aon Advisors, Inc., 123 North Wacker
Drive, Chicago, Illinois 60606.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
(a) Inapplicable.
(b) Inapplicable.
(c) The Registrant hereby undertakes to furnish, upon request
and without charge, to each person to whom a prospectus for
the Flexible Asset Allocation Portfolio is delivered a copy
of the Registrant's latest annual report to shareholders.
(d) The Registrant hereby undertakes, if requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon any question of removal of a director or
directors, and to assist in communications with other share-
holders as required by Section 16(c) of the Investment
Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies that
it meets all requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 6 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the County of Henrico, Commonwealth of Virginia,
on the 15, day of June, 1995.
AON ASSET MANAGEMENT FUND, INC.
By /s/ John J. Palmer
John J. Palmer
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the date indicated.
/s/ John J. Palmer In his own capacity as 6/15/95
John J. Palmer President and Director, (dated)
and as Attorney-in-Fact
for each of the following
Directors and Officers of
the Registrant
J. Garnett Nelson Director 6/ /95
(dated)
/s/ Scott R. Reeks Principal Accounting Officer, 6/15/95
Scott R. Reeks Principal Financial Officer (dated)
and Treasurer
* Director 6/ /95
Wallace L. Chandler (dated)
* Director 6/ /95
John E. Leard (dated)
* Director 6/ /95
Robert P. Martin (dated)
* Director 6/ /95
J. Clifford Miller, III (dated)
* Director 6/ /95
Lawrence R. Miller (dated)
* Director 6/ /95
Lee A. Putney (dated)
<PAGE>
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this 26th day of
April, 1995 by and between AON ASSET MANAGEMENT FUND, INC., a Virginia
corporation (hereinafter the "Fund"), an open-ended management company
registered under the Investment Company Act of 1940 (hereinafter the "1940
Act"), and AON ADVISORS, INC., a Virginia corporation (hereinafter the
"Advisor"), an investment advisor registered under the Investment Advisers
Act of 1940.
1. Furnishing of Documents.
1.1 The Fund has furnished the Advisor with copies of each of the
following documents:
(a) Articles of Incorporation of the Fund;
(b) Bylaws of the Fund as in effect on the date hereof;
(c) The Fund's effective registration statement on Form N-1A as
filed with the Securities and Exchange Commission ("SEC"),
which shall include all statements of the investment
objectives, policies and restrictions of the Fund.
1.2 The Fund will furnish the Advisor, from time to time, with copies
of all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all such furnishings.
2. Investment Advisory Services.
2.1 Subject to the supervision and approval of the Fund's Board of
Directors, the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's Flexible Asset Allocation Portfolio
(hereinafter the "Portfolio").
2.2 The Advisor hereby agrees to manage the investment and
reinvestment of the assets of the Portfolio, at its own expense in
accordance with the Portfolio's investment objective, policies, and
restrictions as stated in documents referred to in 1(a), (b) and (c)
hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided.
<PAGE>
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic,
statistical and financial data and information and
undertake such additional investment research as it shall
believe necessary or advisable;
(b) conduct a continuous program of investment and
reinvestment with respect to the Portfolio's assets and,
with respect thereto, the Advisor is hereby granted full
authority by the Fund to place orders for purchases,
sales, exchanges or other dispositions of securities for
the Portfolio's account and to manage the investments and
any other property of the Portfolio, and to provide or
obtain such services as may be necessary in managing,
acquiring or disposing of investments;
(c) consult with and report to the Fund's Board of
Directors, or any committees or officers acting
pursuant to authority of the Board, at such times
and in such manner as the Board may deem
appropriate, with respect to the implementation of
the investment objective and policies of the
Portfolio; and
(d) at the Fund's request, provide persons to serve as
directors and officers of the Fund.
3. Administrative Services.
3.1 The Advisor hereby agrees to provide, at its own expense, the
following administrative services to the Fund and the Portfolio:
(a) supply internal auditing and internal legal services;
(b) supply stationery and office supplies;
(c) prepare reports to shareholders of the Portfolio and
the Board of Directors of the Fund;
(d) prepare tax returns for the Portfolio;
(e) prepare reports to and filings with the SEC and State
Blue Sky authorities;
(f) at the Fund's request, furnish office space, in such
place as may be agreed upon, from time to time, and all
necessary office facilities;
<PAGE>
(g) supply clerical, accounting, bookkeeping, administrative
and other similar services, exclusive of those services
relating to and to be performed under any contract for
custodial, transfer, dividend and accounting services
entered into by the Fund with a third party,; and
(h) furnish persons satisfactory to the Fund to respond
during normal business hours to in person, written and
telephone requests for assistance and information from
shareholders of the Portfolio, and provide such
facilities and equipment as may be necessary for such
persons to carry out their duties, including, without
limitation, office space and facilities, telephone and
computer terminals and equipment, including telephone
lines, necessary for access to the Fund's shareholder
records.
3.2 Nothing contained herein shall be construed to restrict the
Fund's right to hire its own employees or to contract for services to be
performed by third parties.
4. Investment Advisory Fee.
4.1 In consideration of all services rendered pursuant to Sections 2
and 3 of this Agreement, the Fund shall pay to the Advisor, on behalf of
the Portfolio, after the end of each calendar month, a fee, accrued daily
and based upon the values placed on the net assets of the Portfolio each
day the net asset value is determined throughout the month at the following
annual rates: 0.70% of the first $250 million dollars, .60% on the next
$250 million dollars and .50% of the amount in excess of $500 million
dollars.
4.2 If there is no determination of the net asset value of the
Portfolio as a result of a suspension of the right of redemption of
Portfolio shares, then for the purpose of this Section 4, the value of the
net assets of the Portfolio as last determined will be deemed to be the
value of the net assets for each day that such suspension continues.
5. Expenses.
5.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
5.2 The Fund or the Portfolio will assume and pay, or enter into
arrangements providing for the direct payment subject to reimbursement of,
all other expenses incurred in the operation of the Portfolio or the Fund
that are allocated to the Portfolio, including:
<PAGE>
(a) taxes and fees payable by the Portfolio or the Fund
to federal, state or other government agencies;
(b) brokerage fees and commissions, and issue and
transfer taxes;
(c) interest;
(d) Board of Directors meeting attendance fees and
expenses of directors of the Fund who are not
directors, officers or employees of the Advisor or
of any affiliated person, other than a registered
investment company, of the Advisor;
(e) registration, qualification, filing and other fees
in connection with securities registration
requirements of federal and state regulatory
authorities;
(f) the charges and expenses for custodial, paying
agent, transfer agent, dividend agent and accounting
agent services;
(g) outside legal fees and expenses in connection with
the affairs of the Fund including, but not limited
to, registering and qualifying its shares with
federal and state regulatory authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and directors of
the Fund;
(j) costs of maintenance of corporate existence;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, stockholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
filings with the SEC and State Blue Sky authorities;
(o) costs relating to administration of the Fund's
general operations;
(p) costs relating to the Fund's own employees, if any;
<PAGE>
(q) costs of preparing, printing and delivering the
Fund's prospectuses to existing shareholders of the
Portfolio.
6. Reimbursement.
6.1 If in any fiscal year, the aggregate expense of the Portfolio,
including fees pursuant to this Agreement, but excluding interest, taxes,
brokerage commissions and extraordinary expenses, exceeds 1.25% of the
value of the Portfolio's average daily net assets, the Advisor will
reimburse the Portfolio for such excess. This expense reimbursement
obligation is not limited to the amount of the fees received hereunder and
will be estimated, reconciled and paid on a monthly basis.
7. Portfolio Transactions and Brokerage.
7.1 The Portfolio's transactions in equity securities will usually be
executed through brokers that will receive a commission paid by the
Portfolio. The Portfolio's transactions in fixed-income and money market
securities shall usually be effected with the issuer or with the dealer in
such instruments acting as principal on a net basis. The Portfolio may
also purchase underwritten issues, which involve an underwriting discount
or commission. Decisions with respect to the purchase and sale of
portfolio securities, including allocation of portfolio business and the
negotiation of the price of the securities and commissions, if any, are to
be made by the Advisor.
7.2 Neither the Advisor nor any company affiliated with it shall act
as a broker or dealer for the purpose of executing portfolio transactions
for the Portfolio.
7.3 The primary consideration in allocating transactions to dealers
shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration may also be
given to additional factors, such as furnishing of supplemental research
and other services deemed to be of value to the Fund, the Portfolio or to
the Advisor. The Advisor is authorized to execute orders with dealers or
brokers that provide research and security and economic analysis that
supplements the research and analysis of the Advisor, even though the
spread or commission at which an order is executed may be higher than that
which another dealer or broker might charge, provided that the Advisor
determines in good faith that the amount of the spread or commission is
reasonable in relation to the value of the services provided. Such
research and services include advice as to the value of securities, the
advisability of investment in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities;
<PAGE>
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement. The research may be
useful to the Advisor in serving other Portfolios of the Fund, the
Portfolio and other accounts managed by the Advisor.
8. Similar Activities For Others.
8.1 The services of the Advisor to the Portfolio under this Agreement
are not to be deemed exclusive and the Advisor will be free to render
similar services to others so long as its services under this Agreement are
not impaired. Investment decisions for the Portfolio will be made
independently from those of other accounts that may be managed by the
Advisor. If, however, accounts managed by the Advisor are simultaneously
engaged in purchases of the same securities, then, pursuant to the
authorization of the Fund's Board of Directors, available securities may be
allocated to each account and may be averaged as to price in whatever
manner the Advisor deems to be fair.
8.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Portfolio, or limit the size of the
position obtainable for the Portfolio. To the extent that transactions on
behalf of more than one client of the Advisor during the same period may
increase the demand for securities being purchased or the supply of
securities being sold, the Fund and the Portfolio recognizes that there may
be an adverse effect on price.
9. Compliance and Maintenance of Records.
9.1 The Advisor agrees to manage the investment and reinvestment of
the Portfolio's assets in compliance with the 1940 Act and rules and
regulations thereunder. The Advisor agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 31a-2 adopted under the 1940 Act, books and records with
respect to the Portfolio's securities transactions required to be
maintained by Rule 31a-1 under the 1940 Act.
9.2 The Advisor further agrees that all records which it maintains
for the Portfolio are the Fund's property and that the Advisor will
surrender them to the Fund, its independent auditors, the Board of
Directors of the Fund, or as may be required by any government agency
having jurisdiction over the Fund, promptly upon written request. The
provisions of this Section 9 shall survive any termination of this
Agreement.
<PAGE>
10. Dual Interests.
10.1 It is understood by both parties that any of the shareholders,
directors, officers, employees and agents of the Fund may be a director,
officer, employee or agent of, or be otherwise interested in the Advisor,
any affiliated person of the Advisor, or any organization in which the
Advisor may have an interest; and that the Advisor, and any such affiliated
person or any such organization may have an interest in the Fund or the
Portfolio.
10.2 It is also understood by both parties that the existence of any
such dual interest shall not affect the validity of any transactions
hereunder, except as otherwise provided in the Articles of Incorporation of
the Fund and of the Advisor, or by specific provisions of applicable law,
including the 1940 Act.
11. Duration, Termination and Amendment of this Agreement.
11.1 This Agreement shall not become effective, and the Advisor shall
not serve or act as the Portfolio's investment advisor, unless and until
this Agreement is approved by the Fund's Board of Directors, including a
majority of directors who are not parties to this Agreement or interested
persons of any such party to this Agreement, and by the shareholders of the
Portfolio.
11.2 If approved by the vote of a majority of the outstanding voting
securities of the Portfolio, this Agreement shall continue in effect from
year to year, but only so long as such continuance is specifically approved
at least annually either:
(i) by the Board of Directors of the Fund or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance must also be approved by the vote of a
majority of the directors who are not parties to this Agreement or
interested persons of the Fund or of the Advisor, cast in person at a
meeting called for the purpose of voting on such approval.
11.3 This Agreement may, on sixty days' written notice, be terminated
at any time, without the payment of any penalty, by the Board of Directors
of the Fund, by a vote of a majority of the Portfolio's outstanding voting
securities or by the Advisor.
11.4 This Agreement shall automatically terminate in the event of its
assignment.
11.5 In interpreting the provisions of this Section 11, the
definitions contained in Section 2(a) of the Investment Company Act of
1940, particularly the definitions of "interested person" and "assignment"
and the majority of outstanding "voting securities", shall be applied.
<PAGE>
11.6 This Agreement shall not be amended without specific approval of
such amendment by:
(i) the vote of a majority of the outstanding voting
securities of the Portfolio, and
(ii) the vote of a majority of the Fund's directors,
including a majority of directors who are not parties to
this Agreement and who are not interested persons of the
Fund or of the Advisor, cast in person at a meeting
called for the purpose of voting on such approval.
12. Liability of the Advisor.
12.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of
the Advisor, or its officers, directors, agents, employees, controlling
persons, shareholders, and any other person or entity affiliated with the
Advisor or retained by it to perform or assist in the performance of its
obligations under this Agreement, neither the Advisor nor any of its
officers, directors, employees or agents shall be subject to liability to
the Fund or the Portfolio or to any shareholder of the Portfolio or to any
other person with a beneficial interest in the Portfolio or the Fund for
any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation any error of judgment or mistake of
law or for any loss suffered by the Fund or the Portfolio or any
shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the
1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services.
13. Use of Name "Aon"; Marks or Symbols.
13.1 If the Advisor ceases to act as the investment advisor, or, in
any event, if the Advisor so requests in writing, the Fund agrees it will
take all necessary action to change the name of the Fund to a name not
including the word "Aon".
<PAGE>
14. Miscellaneous.
14.1 Persons employed by the Advisor. The Advisor may, from time to
time, employ or associate with any person or persons it may believe to be
particularly fitted to assist it in the performance of this Agreement. The
compensation of any such persons will be paid by the Advisor, and no
obligation will be incurred by, or on behalf of, the Fund with respect to
them. In addition, the Fund understands that the persons employed by the
Advisor to assist in the performance of its duties hereunder will not
devote their full time to those duties, and that nothing contained herein
will be deemed to limit or restrict the Advisor's right or the right of any
of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
14.2 Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
14.3 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an original, but all
of which together will constitute one and same instrument.
14.4 Governing Law. It is intended by the parties that this Agreement
be governed by the law of the Commonwealth of Virginia; however, this
Agreement is also governed by, and subject to, the 1940 Act, and rules
thereunder, including such exemptions therefrom as the SEC may grant.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Asset Management Fund, Inc.
____________________ ____________________________
Assistant Secretary President
Attest: Aon Advisors, Inc.
____________________ ____________________________
Assistant Secretary President
<PAGE>
DISTRIBUTION AGREEMENT
This AGREEMENT (the "Agreement") is made this 26th day of April, 1995,
by and between AON ASSET MANAGEMENT FUND, INC., a Virginia corporation (the
"Fund"), and FORTH FINANCIAL SECURITIES CORPORATION, a Virginia corporation
(the "Distributor").
1. Furnishing of Documents and Information.
1.1 The Fund has furnished the Distributor with copies of each of the
following:
(a) Articles of Incorporation of the Fund;
(b) By-laws of the Fund as in effect on the date hereof;
(c) The Fund's effective registration statement on Form
N-1A ("Registration Statement"), as filed with the
Securities and Exchange Commission ("SEC");
(d) The most recent Prospectuses of the Fund.
1.2 The Fund will furnish the Distributor, from time to time, copies
of all amendments of or supplements to the items referred to in Section 1.1
hereof.
1.3 The Fund will also furnish any other information for use in
connection with the Distributor's duties hereunder that the Distributor
reasonably requests regarding the Fund or shares of the Fund's Common Stock
("Shares"), including the Fund's Prospectuses and Statement of Additional
Information.
1.4 The Fund will not, however, pay the cost of reproducing its
Prospectuses and Statement of Additional Information for use by the
Distributor as sales material.
1.5 The Distributor will pay the costs of reproducing any other Fund
documents, such as the Fund's Prospectuses, Staement of Additional
Information and semi-annual reports, used as sales material.
1.6 The Fund represents to the Distributor that the Prospectuses and
Statement of Additional Information relating to the Fund contained in its
Registration Statement or any amendments thereto, as of their respective
effective dates, contain all statements and information which are required
to be stated therein by the Securities Act of 1933 (the "1933 Act") and in
all respects conform to the requirements thereof. Neither the Fund
Prospectuses nor the Statement of Additional Information include any untrue
<PAGE>
statement of material fact or omit any material fact required to be stated
therein, or omit any material fact necessary to make the statements therein
not misleading. However, the foregoing representations will not apply to
information contained in or omitted from the Fund Prospectuses and
Statement of Information in reliance upon, and in conformity with, written
information furnished by the Distributor specifically for use in the
preparation thereof.
1.7 The Fund will advise the Distributor promptly of:
(a) any action of the SEC or any authorities of any
State or Territory, of which the Fund may be
advised, affecting registration or qualification of
the Fund or the Shares, or the right to offer the
Shares for sale; or,
(b) the happening of any event which makes untrue any
statement in the Registration Statement or
Prospectuses or which requires the making of any
change in the Registration Statement or Prospectuses
in order to make the statements therein not misleading.
1.8 The Distributor will furnish to the Fund reports as to any sales
made pursuant to this Agreement. These reports may be combined with any
similar report prepared for the Fund by the Distributor or any affiliate of
the Distributor.
2. Distribution Services.
2.1 The Fund and Distributor hereby agree that the Distributor will
act as the principal underwriter of the Shares in accordance with the
Fund's Registration Statement and Prospectuses. In connection therewith,
it is specifically agreed that:
(a) the Distributor will use its best efforts in
soliciting such orders and accompanying funds for
the purchase of Shares for prompt remittal to the
Fund's transfer agent ("Transfer Agent"), or any
successor Transfer Agent, as to which the Fund has
notified the Distributor; and,
(b) the Distributor will not be obligated to solicit
any minimum number of orders in connection with its
duties hereunder; and,
(c) the Distributor will have authority to accept orders
for the purchase of Shares and to accept funds on the Fund's
behalf; however, no order for the purchase of Shares will be
binding upon the Fund until accepted by the Fund's Transfer
Agent; and,
(c) the Distributor will undertake such advertising and
promotion as it deems reasonable in connection with its duties
hereunder; and,
<PAGE>
(d) the Distributor is not authorized to give any
information or make any representations regarding
the Fund or its Shares, other than those contained in the
Registration Statement or the Prospectuses, as may be
amended from time to time, other than such sales
literature, information or representations as the
Fund may authorize in writing; and,
(e) the Fund reserves the right to direct the Distributor or
the Fund's Transfer Agent to decline to accept any orders
for, or make any sales of, the Shares until such time as
the officers of the Fund deem it advisable to accept such
orders and to make such sales. The Fund will promptly
advise the Distributor of any such determination; and
(f) no orders for the purchase of Shares will be
solicited by the Distributor or by the Fund, if and so
long as the effectiveness of the Registration Statement
or any necessary amendments thereto will be suspended
under any of the provisions of the 1993 Act, or if and so
long as the current prospectuses, as required by Section
10(a) of such Act, are not on file with the SEC, provided
that the Distributor may continue to act under this
Agreement until it has been notified in writing, which
may include written notice transmitted by facsimile, of
the occurrence of any of the foregoing events; and,
(g) no order for the purchase of Shares will be
solicited by the Distributor or by the Fund, if the
redemption rights of shareholders have been suspended
under any of the circumstances specified in Section 22(e)
of the Investment Company Act of 1940 (the "1940 Act"),
provided nothing in this Section will affect the Fund's
obligation to redeem Shares from any shareholder in
accordance with the provisions of the Fund's Articles of
Incorporation, By-Laws or Prospectuses, and provided that
the Distributor may continue to act under this Agreement
until it has been notified in writing, which may
include written notice transmitted by facsimile, of
the occurrence of any of the foregoing events.
3. Distribution Fees.
3.1 The Fund and the Distributor, respectively, recognize that
pursuant to an Administration Agreement ("Administration Agreement") among
the Distributor, the Fund, and Aon Advisors, Inc.("Aon Advisors"), Aon
Advisors has agreed to compensate the Distributor for administrative
services rendered to the Fund pursuant to the terms of the Administration
Agreement.
<PAGE>
3.2 In addition, the Fund understands that Aon Advisors may, in its
discretion, reimburse the Distributor for certain expenses the Distributor
may incur in connection with the distribution of the Shares. Such
reimbursement will be made out of Aon Advisors' own resources, including,
but not limited to, Aon Advisors' profit under the Investment Advisory
Agreement between Aon Advisors and the Fund.
3.3 The Fund and Distributor agree that the Fund will not be
obligated to pay the Distributor any compensation for any services
rendered, or reimburse the Distributor for any expenses it may incur in
connection with the distribution of the Shares under this Agreement, except
for the Fund's payment to the Distributor of an account creation fee in the
amount of $50.00, the receipt of which is hereby acknowledged.
4. Compliance.
4.1 The Distributor represents that it is duly registered as a
broker-dealer under the Securities Exchange Act of 1934 (the "1934 Act")
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"). The Distributor further represents that, to the
extent necessary to distribute the Shares, it will be duly registered or
otherwise qualified under the securities laws of any state or other
jurisdiction.
4.2 The Distributor will be responsible for the fulfillment of its
obligations under this Agreement, by itself and by its agents, in continued
compliance with the NASD Rules of Fair Practice, and all rules and
regulations made or adopted pursuant to the 1933 Act, the 1934 Act, or the
1940 Act.
4.3 The Distributor agrees to maintain all required books of account
and related financial records, and make all required reports, in connection
with the distribution of the Shares. All such books of account, records,
and reports will be maintained, preserved, and submitted to the SEC (and
any other required supervisory authority, including the NASD) pursuant to
the 1934 Act, and rules and regulations thereunder, including, but not
limited to, Rules 17a-3, 17a-4, and 17a-5.
4.4 The Distributor will maintain records of sales commissions, if
any, paid to agents of the Distributor in connection with sales of Shares
of the Fund. All such books, records, and reports will be the property of
the Distributor, and will at all times be subject to reasonable periodic,
special or other examination by the Fund, and by the SEC and all other
supervisory authorities, including the NASD, having jurisdiction.
<PAGE>
4.5 The Distributor agrees to send to purchasers of Shares all
required confirmations for customer transactions.
5. Registration, Qualification and Expenses.
5.1 The Fund agrees, at its own expense, to execute such papers and
to do such acts and things as will, from time to time, be reasonably
requested by the Distributor for the purpose of qualifying and maintaining
qualification of the Shares for sale under any state securities laws or for
maintaining the registration of the Fund and of the Shares under the 1933
Act and the 1940 Act. The Fund will pay all registration, filing and other
fees in connection with qualifying itself under applicable federal and
state securities laws and any costs of preparing and filing its
Registration Statements.
5.2 The Distributor will pay, or cause to be paid, all expenses
relating to its qualification as a broker-dealer in any state in which it
qualifies in connection with the distribution of Shares. The Distributor
will pay, or cause to be paid, all expenses relating to the selling and the
distribution of the Shares, including preparing sales materials and
printing and distributing copies of the Prospectuses and sales materials,
exclusive of typesetting expenses for the Prospectuses, used in
distributing the Shares to prospective investors.
6. Similar Activities For Others.
6.1 The services of the Distributor under this Agreement are not to
be deemed exclusive and the Distributor will be free to render similar
services to others so long as its services under this Agreement are not
impaired.
7. Liability of the Distributor.
7.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of
the Distributor, or its officers, directors, agents, employees, controlling
persons, shareholders, and any other person or entity affiliated with the
Distributor or retained by it to perform or assist in the performance of
its obligations under this Agreement, neither the Distributor nor any of
its officers, directors, employees or agents will be subject to liability
to the Fund or to any shareholder or to any other person with a beneficial
interest in the Fund for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error
of judgment or mistake of law or for any loss suffered by the Fund or any
shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the
1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services.
<PAGE>
8. Dual Interests.
8.1 The Fund and the Distributor understand that any of the
shareholders, directors, officers, employees and agents of the Fund may be
a director, officer, employee or agent of, or be otherwise interested in
the Distributor, any affiliated person of the Distributor, any organization
in which the Distributor may have an interest, or any organization which
may have an interest in the Distributor; that the Distributor, and any such
affiliated person or any such organization may have an interest in the
Fund; and that the existence of any such dual interest will not affect the
validity hereof, or of any transactions hereunder, except as otherwise
provided in the Articles of Incorporation of the Fund and of the
Distributor, respectively, or by specific provisions of applicable law,
including the 1940 Act.
9. Duration, Termination and Amendment of this Agreement.
9.1 This Agreement will not become effective, and the Distributor
will not serve or act as the Fund's principal underwriter, unless and until
this Agreement is approved by the Fund's Board of Directors, including a
majority of directors who are not parties to this Agreement or interested
persons of any such party to this Agreement, and, who have no direct or
indirect financial interest in this Agreement ("Disinterested Directors").
To approve the Agreement, votes must be cast in person at a meeting called
for the purpose of voting on such approval.
9.2 The Agreement will remain in force from year to year thereafter
only so long as such continuance is specifically approved at least annually
either:
(a) by the Board of Directors of the Fund or
(b) by a vote of a majority of the outstanding voting
securities of the Fund,
provided, however, that in either event such continuance will also be
approved by the vote of a majority of the Disinterested Directors. Votes
to continue the Agreement must be cast in person at a meeting called for
the purpose of voting on such approval.
9.3 This Agreement may, on sixty days' written notice, be terminated
at any time, without the payment of any penalty, by the Board of Directors
of the Fund, by a vote of a majority of the Fund's outstanding voting
securities, or by the Distributor.
9.4 This Agreement also may be terminated at any time, without
payment of any penalty, by a vote of a majority of the Fund's Disinterested
Directors.
<PAGE>
9.5 This Agreement will automatically terminate in the event of its
assignment.
9.6 In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person", "assignment" and the "vote of a majority of the
outstanding voting securities", will be applied.
10. Miscellaneous.
10.1 The Distributor may from time to time employ or associate with
any person or persons it may believe to be particularly fitted to assist it
in the performance of this Agreement. The compensation of any such persons
will be paid by the Distributor, and no obligation with respect to
providing compensation, or otherwise, will be incurred by, or on behalf of,
the Fund with respect to such persons. In addition, the Fund understands
that the persons employed by the Distributor to assist in the performance
of its duties hereunder may not devote their full time to those duties and
that nothing contained herein will be deemed to limit or restrict the
Distributor's right or the right of any of the Distributor's affiliates to
engage in and devote time and attention to other businesses or to render
other services of whatever kind or nature.
10.2 The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof
or otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the
same instrument.
10.3 It is intended by the parties that this Agreement be governed by
the law of the Commonwealth of Virginia; however, this Agreement is also
governed by, and subject to, the 1940 Act, and rules thereunder, including
such exemptions therefrom as the SEC may grant.
10.4 This Agreement will not be amended without specific approval of
such amendment by the vote of:
(a) a majority of the outstanding voting securities
of the Fund, or
(b) a majority of the Fund's directors, including a
majority of the Disinterested Directors;
cast in person at a meeting called for the purpose of voting on such
approval.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Asset Management Fund, Inc.
______________________ ______________________________
Assistant Secretary President
Attest: Forth Financial Securities
Corporation
_____________________ ______________________________
Assistant Secretary President
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report with respect to Aon Asset
Management Fund, Inc. dated December 9, 1994, in the Registration
Statement (Form N-1A) and related Prospectuses of Aon Asset Management
Fund, Inc. filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 6 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-43133) and in this Amendment
No. 7 to the Registration Statement under the Investment Company Act of
1940 (Registration No. 811-6422).
ERNST & YOUNG LLP
Richmond, Virginia
June 19, 1995
Exhibit 11(b)
Consent of Messrs. Sutherland, Asbill & Brennan
Sutherland, Asbill & Brennan
1275 PENNSYLVANIA AVENUE, N. W.
WASHINGTON, D.C. 20004-2404
TEL: (202) 383-0100
FAX: (202) 637-3593
June 15, 1995
Board of Directors
Life of Virginia Series Fund, Inc.
6610 West Broad Street
Richmond, Virginia 23230
Re: Aon Asset Management Fund, Inc.
File No. 33-43133/811-6422
Gentlemen:
We hereby consent to the reference to our name under
the caption "Legal Matters" in the Prospectus and Statement of
Additional Information filed as part of the Post-Effective
Amendment No. 6 to Form N-lA for Aon Asset Management Fund, Inc.
(File No. 33-43133/811-6422). In giving this consent, we do not admit that
we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: Steven B. Boehm
Steven B. Boehm
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