<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996
FILE NO. 33-43133
FILE NO. 811-6422
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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. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[ ]
AMENDMENT NO. 9 [X]
AON ASSET MANAGEMENT FUND, INC.
(EXACT NAME OF REGISTRANT)
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (312) 701-3300
MICHAEL A. CONWAY
PRESIDENT
AON ASSET MANAGEMENT FUND, INC.
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)
COPY TO:
ANDREW H. SHAW, ESQ.
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
------------------------
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
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
X 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
on Date pursuant to paragraph (a)(ii) of Rule 485
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective.
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT
ELECTS TO REGISTER AN INDEFINITE AMOUNT OF SECURITIES. THE REGISTRANT FILED A
RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDING OCTOBER 31, 1995 ON DECEMBER 29,
1995.
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<PAGE> 2
AON ASSET MANAGEMENT FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
<TABLE>
<CAPTION>
N-1A
ITEM NO.
AND CAPTION LOCATION
- ----------- -------------------------------------
PART A
LOCATION
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Fund Expenses
3. Condensed Financial Information............ Financial Highlights; Performance
Information
4. General Description of Registrant.......... Organization and Classification;
Investment Objectives and Policies;
Investment Practices; Additional
Information
5. Management of the Fund..................... Management of the Trust
5A. Management's Discussion of Fund
Performance.............................. Included in Annual Report
6. Capital Stock and Other Securities......... Organization and Classification;
Additional Information; Dividends,
Distributions and Taxes; Distribution
of Shares
7. Purchase of Securities Being Offered....... Purchase of Shares; Distribution of
Shares; Net Asset Value; Additional
Services to Shareholders
8. Redemption or Repurchase................... Redemption of Shares; Additional
Services to Shareholders
9. Pending Legal Proceedings.................. Not Applicable
PART B
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information; Additional
Information
13. Investment Objectives and Policies......... Money Market Fund Investments;
Investment Practices and
Restrictions; Additional Investment
Practices and Restrictions; General
Information
14. Management of the Fund..................... Management of the Trust
15. Control Persons and Principal Holders
of Securities.............................. Additional Information
16. Investment Advisory and Other Services..... Management of the Trust; Additional
Information
17. Brokerage and other Allocations............ 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;
Retirement Programs
</TABLE>
<PAGE> 3
CROSS REFERENCE SHEET -- CONTINUED
<TABLE>
<CAPTION>
N-1A
ITEM NO.
AND CAPTION LOCATION
- ----------- -------------------------------------
<C> <S> <C>
20. Tax Status................................. Dividends, Distributions and Taxes
(in the prospectus)
21. Underwriters............................... Distribution of Shares (in the
prospectus)
22. Calculation of Performance Data............ Yield Information
23. Financial Statements....................... Financial Statements
</TABLE>
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> 4
PROSPECTUS
AON FUNDS
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 701-3300 OR (800) 266-3637
Aon Funds (the "Trust") is an open-end, management investment company. The
Trust currently issues six separate series of shares of beneficial interest
(each, a "Fund" and collectively, the "Funds"), each representing a separate
portfolio of securities with its own investment objectives and policies
(commonly known as a mutual fund). The Funds are the Money Market Fund, the
Government Securities Fund, the Asset Allocation Fund, the S&P 500 Index Fund,
the International Equity Fund and the REIT Index Fund. The Funds are grouped
into three general fund types: Fixed Income (including Money Market), Asset
Allocation and Equity. Each Fund has a fundamental investment objective and
certain investment policies which are set forth herein.
The investment objectives of the respective Funds are as follows:
FIXED INCOME AND MONEY MARKET FUNDS:
The investment objective of the Money Market Fund is to maximize current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. This Fund invests in high-quality, short-term money
market instruments.
The investment objective of the Government Securities Fund is to seek high
current income with limited credit risk through investments in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
ASSET ALLOCATION FUND:
The investment objective of the Asset Allocation Fund is to maximize total
return on invested capital, to be derived from capital appreciation, dividends
and interest. To achieve this objective, this Fund follows a flexible asset
allocation strategy that 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 the investment adviser.
EQUITY FUNDS:
The investment objective of the S&P 500 Index Fund is to provide capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange and the
American Stock Exchange and, to a limited extent, in the over-the-counter
markets.
The investment objective of the International Equity Fund is to provide
long-term capital appreciation by investing primarily in equity and
equity-related securities of companies that are organized outside of the U.S. or
whose securities are principally traded outside of the U.S.
The investment objective of the REIT Index Fund is to provide capital
appreciation and accumulation of income that corresponds to the investment
return of the Morgan Stanley REIT Index, a benchmark of U.S. real estate
investment trusts ("REITs"). The Fund will not directly invest in real estate.
Shares of the Trust are distributed through Aon Securities Corporation, a
wholly-owned subsidiary of Aon Corporation ("Aon"), a publicly held insurance
holding company the common stock of which is listed on the New York Stock
Exchange and which, through subsidiaries, is a major provider of insurance,
insurance brokerage and related services. Aon Advisors, Inc. ("AAI"), also a
wholly-owned subsidiary of Aon, serves as each Fund's investment adviser. AAI
has engaged Perpetual Portfolio Management Limited ("Perpetual") to serve as
investment sub-adviser to provide day-to-day portfolio management for the
International Equity Fund. (As used herein, "Adviser" shall refer to AAI and,
where applicable, Perpetual, together in their respective roles.). Aon and its
subsidiaries may, by virtue of their interests as shareholders of the Funds at
any
<PAGE> 5
particular date, be considered controlling persons of the Trust and may be able
to cast a deciding vote on all matters submitted to a vote of the shareholders
of the Trust or one or more Funds (or classes thereof).
By this Prospectus, Class C and Class Y shares of each Fund are being
offered. Class C shares of each Fund are offered without a sales charge, but are
subject to a charge imposed pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as described herein. Class Y shares are offered without a sales
charge and are currently sold only to (i) the shareholders of record of
outstanding shares of any Fund as of the business day immediately prior to the
commencement of distribution under the multiple-class program (including
additional investments by such holders), (ii) investment advisory clients of AAI
and (iii) affiliates of Aon or AAI. Other differences between the classes of
shares include the services offered to and expenses borne by each class and
certain voting rights, as described herein.
This Prospectus sets forth concisely information about the Trust and the
Funds that prospective investors should know before investing. Investors should
retain this Prospectus for future reference. More detailed information about the
Trust and the Funds is contained in a Statement of Additional Information dated
, 1996 that has been filed by the Trust with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. The
Statement of Additional Information is available free of charge upon request
from the Trust at the address and telephone numbers set forth above.
The Money Market Fund intends to maintain its net asset value at $1.00 per
share. An investment in the Money Market Fund is neither insured nor guaranteed
by the U.S. Government, and there can be no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share. See "Net Asset Value."
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.
, 1996
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.................................................................... 1
FUND EXPENSES......................................................................... 4
FINANCIAL HIGHLIGHTS.................................................................. 6
ORGANIZATION AND CLASSIFICATION....................................................... 8
INVESTMENT OBJECTIVES AND POLICIES.................................................... 9
Money Market Fund................................................................... 9
Government Securities Fund.......................................................... 11
Asset Allocation Fund............................................................... 12
S&P 500 Index Fund.................................................................. 13
International Equity Fund........................................................... 14
REIT Index Fund..................................................................... 15
INVESTMENT PRACTICES.................................................................. 18
MANAGEMENT OF THE TRUST............................................................... 27
DISTRIBUTION OF SHARES................................................................ 30
NET ASSET VALUE....................................................................... 31
PURCHASE OF SHARES.................................................................... 31
REDEMPTION OF SHARES.................................................................. 34
ADDITIONAL SERVICES TO INVESTORS...................................................... 36
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................................... 37
PERFORMANCE INFORMATION............................................................... 39
ADDITIONAL INFORMATION................................................................ 40
</TABLE>
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 Trust, the Adviser, or the Distributor. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus. Cross references in this
summary refer to the headings found in the body of the Prospectus.
Aon Funds:................. Aon Funds (the "Trust") is an open-end management
investment company, consisting of six diversified
mutual funds (individually, a "Fund" and
collectively, the "Funds") registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), which collectively offer a range of
investment opportunities. Each Fund represents a
separate and distinct series of the shares of
beneficial interest of the Trust. See
"Organization and Classification" and "Additional
Information."
Investment Objectives:..... Each Fund's investment objective and certain
investment restrictions are "fundamental" and may
be changed only with the approval of the holders
of a majority of the outstanding voting securities
of such Fund, as defined in the 1940 Act. Certain
other investment policies and restrictions reflect
current practices of the Funds and may be changed
by the Board of Trustees of the Trust without the
approval of shareholders. See "Investment
Objectives and Policies" and "Investment
Practices."
Investment Adviser:........ Aon Advisors, Inc. ("AAI") serves as the
investment adviser for each of the Funds.
Perpetual Fund Management Limited serves as the
sub-adviser for the International Equity Fund. See
"Management of the Trust."
Risk Factors:.............. Each Equity Fund, and to the extent invested in
equity securities the Asset Allocation Fund, is
subject to the risks associated with investing in
equity securities. Equity securities may include
common stocks, preferred stocks, convertible
securities and warrants. Common stocks, the most
familiar type, represent an equity (ownership)
interest in a corporation. Although common stocks
and other equity securities have a history of
long-term growth in value, their prices may
fluctuate dramatically in the short term in
response to changes in market conditions, interest
rates and other company, political and economic
developments.
The International Equity Fund invests primarily in
foreign securities. Foreign securities and foreign
currencies may involve risks in addition to the
risks associated with equity securities generally.
These include currency fluctuations, risks
relating to political or economic conditions in
foreign countries and potentially less stringent
investor protection, disclosure standards and
settlement procedures of foreign markets. These
factors could make foreign investments, especially
those in developing countries, more volatile.
The REIT Index Fund invests primarily in the
common stock of equity REITs. Such securities are
strongly linked to the real estate market and
involve real estate industry risk. In general,
real estate values are affected by a variety of
factors, including supply and demand for
properties; the health of the U.S. economy and
that of different regions; and the strength of
specific industries renting properties.
Ultimately, a REIT's performance depends on the
types and locations of the properties it owns and
on how well the REIT manages its properties. REITs
are also subject to interest rate risk because of
the significant amount of dividend income they
generally provide.
<PAGE> 8
The Government Securities Fund and, to the extent
invested in longer-term debt securities the Asset
Allocation Fund, are subject to the risks
associated with investing in longer-term fixed
income securities such as bonds. Bonds are issued
to evidence loans that investors make to
corporations and governments. Bonds in which these
Funds may invest include those issued by U.S.
corporations and by the U.S. Treasury and its
agencies. Foreign companies and governments also
issue bonds available to U.S. investors.
Over time, the level of interest rates available
in the marketplace changes. As prevailing rates
fall, the prices of bonds and other securities
that trade on a yield basis tend to rise. On the
other hand, when prevailing interest rates rise,
bond prices generally will fall. The longer the
maturity of a fixed-income security, the higher
its yield and the greater its price volatility.
Conversely, the shorter the maturity, the lower
the yield but the greater the price stability.
These factors may have an effect on the volatility
of the share price of each Fund investing in
bonds. A change in the level of interest rates
will tend to cause the net asset value per share
of such Funds to change. If sustained over time,
it would also have the effect of raising or
lowering the yield of the Fund.
Fixed-income securities are also subject to credit
risk. When a security is purchased, its
anticipated yield is dependent on the timely
payment by the borrower of each interest and
principal installment. Credit analysis and
resultant bond ratings take into account the
relative likelihood that such timely payment will
result. Therefore, lower-rated bonds tend to sell
at higher yields than top-rated bonds of similar
maturity. Furthermore, as economic, political and
business developments unfold, lowerquality bonds,
which possess lower levels of protection with
respect to timely payment, usually exhibit more
price fluctuation than do higher-quality bonds of
like maturity.
The Funds may engage in certain other investment
techniques to which certain other risks may
pertain. See "Investment Objectives and Policies"
and "Investment Practices."
Share Classes:............. Investors in each Fund may select from two classes
of shares, each with different expense levels.
Class Y shares, however, are available only to
certain eligible purchasers.
Class C:.............. Offered at net asset value and subject to
distribution and service fees at the rate of .25%
of the average daily net assets of the Class C
shares (.10% in the case of the Class C shares of
the Money Market Fund).
Class Y:.............. Offered at net asset value to (i) the shareholders
of record of outstanding shares of any Fund as of
the business day immediately prior to the
commencement of distribution under the
multiple-class program, including additional
investments by such holders, (ii) investment
advisory clients of AAI and (iii) affiliates of
Aon or AAI.
Purchase of Shares:........ Shares may be purchased at the net asset value per
share next determined after receipt and acceptance
of a purchase order. Prospective purchasers should
contact Aon Securities Corporation (the
"Distributor") or the Fund's transfer agent. See
"Purchase of Shares."
2
<PAGE> 9
Initial and Subsequent
Investments:............... $1,000 minimum on initial purchases. See "Purchase
of Shares." Additional investments, including
investments pursuant to the Automatic Investment
Program, can be made at any time for as little as
$100. See "Additional Services to Investors --
Automatic Investment Program." These minimums may
be less for full-time staff employees of Aon and
its subsidiaries.
Exchange Privilege:........ Shares of one Fund may be exchanged for shares of
the corresponding class of shares of any other
Fund at a charge of $5 per exchange. See
"Additional Services to Investors -- Exchange
Privilege."
Redemption of Shares....... Shares may be redeemed directly from a Fund at the
net asset value per share next determined after
receipt of a redemption request in proper order.
Redemptions may be made by mail or telephone.
Shareholders in the Money Market Fund also have a
checkwriting privilege available. See "Redemption
of Shares."
Dividends and
Distributions:............. Dividends are accrued daily and paid monthly on
the Money Market Fund. Dividends are paid monthly
and quarterly, respectively, on the Government
Securities Fund and the Asset Allocation Fund.
Each of the other Funds generally pays dividends
at least annually. Dividends are paid from
available net investment income. Other
distributions, if any, are generally paid annually
from realized net capital gains. See "Dividends,
Distributions and Taxes."
Reinvestment:.............. Unless a shareholder elects to receive income
dividends and capital gains in cash or shares of
the same class of another Fund, distributions on
shares of a Fund will be automatically reinvested
in additional shares of the same class of the
respective distributing Fund. See "Dividends,
Distributions and Taxes."
Net Asset Values:.......... The net asset value per share of each Fund is
calculated at least once on each day the New York
Stock Exchange is open for trading. Each class of
shares of each Fund may be separately quoted in the
financial section of appropriate newspapers. The
net asset values are also available by calling
(800) 266-3637. See "Net Asset Value."
Additional Shareholder
Services:.................. Additional shareholder services available include
purchase by wire and a systematic withdrawal plan.
See "Additional Services to Investors."
Transfer Agent and Dividend
Paying Agent:.............. Firstar Trust Company serves as the Trust's
transfer agent and dividend paying agent and is
located at P.O. Box 701, Milwaukee, Wisconsin
53201-0701.
3
<PAGE> 10
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges investors pay when buying or
selling shares of a Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases.............. None
Maximum Sales Charge Imposed on Reinvested Dividends... None
Maximum Contingent Deferred Sales Charge............... None
Redemption Fees........................................ None
Exchange Fees.......................................... $5 per exchange
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS C SHARES:
EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) expenses (after giving effect to expense reimbursements
or fee waivers) as shown, (2) 5% annual return and (3) redemption at the end of
each time period:
<TABLE>
<CAPTION>
ADVISORY AND OTHER TOTAL
ADMINISTRATION 12B-1 EXPENSES OPERATING
FUND FEES FEES (4) EXPENSES 1 YEAR 3 YEARS
-------------------------------- -------------- ----- -------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund (1)........... .20%(3) .10% .04% .34%(3) $ 3 $11
Government Securities Fund
(2)........................... .50% .25% 1.00% 1.75% $ 18 $55
Asset Allocation Fund (1)....... .70% .25% .26% 1.21% $ 12 $38
S&P 500 Index Fund (2).......... .35% .25% .40% 1.00% $ 10 $32
International Equity Fund (2)... 1.00% .25% .75% 2.00% $ 20 $63
REIT Index Fund (2)............. .65% .25% .85% 1.75% $ 18 $55
</TABLE>
- ---------------
(1) Annual Portfolio Operating Expenses are based on amounts incurred during the
Fund's most recent fiscal year ended October 31, 1995, restated to reflect
Rule 12b-1 fees that took effect with respect to Class C shares on
, 1996 and, with respect to the Money Market Fund, to reflect
the current fee-waived annual aggregate advisory and administration fee rate
of .20% of average daily net assets (which prior to , 1996 was
.10% of average daily net assets).
(2) Advisory, administration and Rule 12b-1 fees are payable based on
percentages of daily net assets. Other expenses are based on estimated
amounts for approximately three months of the 1996 fiscal year during which
these Funds are expected to operate and are projected at the maximum annual
operating expense limitations as hereinafter described.
(3) After giving effect to expense reimbursements or fee waivers. Without such
expense reimbursements or fee waivers, Advisory and Administration Fees and
Total Operating Expenses would have been .35% and .49%, respectively.
(4) "Other Expenses" includes such expenses as custodial, transfer agent and
accounting agent fees and audit, legal, printing, registration and other
business operating expenses, but excludes extraordinary expenses. For
further details, see "Management of the Trust -- Investment Adviser".
4
<PAGE> 11
CLASS Y SHARES:
EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) expenses (after giving effect to expense reimbursements
or fee waivers) as shown, (2) a 5% annual return and (3) redemption at the end
of each time period:
<TABLE>
<CAPTION>
ADVISORY AND OTHER TOTAL
ADMINISTRATION 12B-1 EXPENSES OPERATING
FUND FEES FEES (4) EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------- -------------- ----- -------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund (1)............. .20%(3) -- .04% .24%(3) $ 2 $ 8 $14 $ 31
Government Securities Fund (2).... .50% -- 1.00% 1.50% $ 15 $47 -- --
Asset Allocation Fund (1)......... .70% -- .26% .96% $ 10 $31 $53 $117
S&P 500 Index Fund (2)............ .35% -- .40% .75% $ 8 $24 -- --
International Equity Fund (2)..... 1.00% -- .75% 1.75% $ 18 $55 -- --
REIT Index Fund (2)............... .65% -- .85% 1.50% $ 15 $47 -- --
</TABLE>
- ---------------
(1) Annual Portfolio Operating Expenses are based on amounts incurred during the
Fund's most recent fiscal year ended October 31, 1995, restated with respect
to the Money Market Fund to reflect the current fee-waived annual aggregate
advisory and administration fee rate of .20% of average daily net assets
(which prior to , 1996 was .10% of average daily net assets).
(2) Advisory and administration fees are payable based on percentages of daily
net assets. Other expenses are based on estimated amounts for the
approximately three months of the 1996 fiscal year during which these Funds
are expected to operate and are projected at the maximum annual operating
expense limitations as hereinafter described.
(3) After giving effect to expense reimbursements or fee waivers. Without such
expense reimbursements or fee waivers, Advisory and Administration Fees and
Total Operating Expenses would have been .35% and .39%, respectively.
(4) "Other Expenses" includes such expenses as custodial, transfer agent and
accounting agent fees and audit, legal, printing, registration and other
business operating expenses, but excludes extraordinary expenses. For
further details, see "Management of the Trust -- Investment Adviser."
The purpose of the above tables is to assist investors in understanding the
various costs and expenses that investors will bear, directly or indirectly, in
acquiring and owning shares of each Fund.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. MOREOVER, WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN, EACH FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN
5%.
With respect to each Fund, AAI has undertaken that if, in any fiscal year,
certain expenses of the Fund, including the investment advisory fees (but
excluding interest, taxes, brokerage commissions and extraordinary expenses),
exceed the maximum total annual operating expenses noted in the table below for
such Fund,
5
<PAGE> 12
AAI shall reimburse the Fund to the extent of such excess. The maximum total
annual operating expenses, as a percentage of average daily net assets, that a
Fund may incur pursuant to AAI's undertaking are as follows:
<TABLE>
<CAPTION>
MAXIMUM TOTAL
OPERATING EXPENSES
----------------------------------------
CLASS C CLASS Y
----------------- -----------------
<S> <C> <C>
Money Market Fund....................................... 1.10% 1.00%
Government Securities Fund.............................. 1.75% to 1.50% to
$30 million; $30 million;
1.50% thereafter 1.25% thereafter
Asset Allocation Fund................................... 1.50% 1.25%
S&P 500 Index Fund...................................... 1.00% .75%
International Equity Fund............................... 2.00% to 1.75% to
$30 million; $30 million;
1.75% thereafter 1.50% thereafter
REIT Index Fund......................................... 1.75 % to 1.50% to
$30 million; $30 million;
1.50% thereafter 1.25% thereafter
</TABLE>
FINANCIAL HIGHLIGHTS
Set forth below are per share data, total investment return, ratios and
other supplemental data for a share of the Flexible Asset Allocation Portfolio
and the Money Market Portfolio, respectively, of Aon Asset Management Fund, Inc.
(the predecessor funds of the Asset Allocation Fund and the Money Market Fund,
respectively, of the Trust) for the periods indicated. This information has been
derived from information provided in Aon Asset Management Fund, Inc.'s financial
statements for its Flexible Asset Allocation Portfolio and its Money Market
Portfolio. As of the date of the financial statements, Class C shares had not
been offered and, accordingly, no financial data are available for such class.
The following information for the periods ended on or prior to October 31,
1995 has been audited by Ernst & Young LLP, independent auditors, whose
unqualified report thereon is included in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and notes thereto appearing in the Statement of Additional
Information. The Annual Report to Shareholders of Aon Asset Management Fund,
Inc., which may be obtained upon request from the Trust without charge, contains
further information about the performance of each of the Asset Allocation Fund
and the Money Market Fund (including the predecessor of each thereof).
6
<PAGE> 13
MONEY MARKET FUND
Class Y Shares(1):
<TABLE>
<CAPTION>
FOR THE
PERIOD
JANUARY 23,
1992
(COMMENCEMENT
FOR THE OF
SIX MONTHS FOR THE FISCAL YEAR ENDED OCTOBER 31, OPERATIONS)
ENDED -------------------------------------------- TO OCTOBER
APRIL 30, 1996 1995 1994 1993 31, 1992
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $1.00 $1.00 $1.00 $1.00 $1.00
Investment income........... .03 .06 .04 .03 .03
Expenses(2)................. -- -- -- -- --
----- ----- ----- ----- -----
Net investment income....... .03 .06 .04 .03 .03
Net realized gains (losses)
on investments(2)......... -- -- -- -- --
----- ----- ----- ----- -----
Income from operations...... .03 .06 .04 .03 .03
Dividends paid to
shareholders from:
Net investment
income(2)............ (.03) (.06) (.04) (.03) (.03)
Net realized gains..... -- -- -- -- --
Total Dividends............. (.03) (.06) (.04) (.03) (.03)
----- ----- ----- ----- -----
Net Asset Value at end of
period.................... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return.................... 2.68%(4) 5.79% 3.73% 3.10% 3.57%(4)
Ratios:
Ratio of expenses to average
net assets(3)............. 0.22%(4) 0.14% 0.15% 0.17% 0.25%(4)
Ratio of net investment
income to average net
assets(3)................. 5.38%(4) 5.79% 3.73% 3.10% 3.57%(4)
Net Assets at end of period..... $321,502,053 $420,093,633 $410,912,278 $412,067,947 $399,075,531
</TABLE>
- ---------------
(1) On , 1996, all of the assets and liabilities of the Money Market
Portfolio of Aon Asset Management Fund, Inc. were transferred to the Trust
in exchange for Class Y shares of the Money Market Portfolio of the Fund.
The financial data provided above is for the Money Market Portfolio of Aon
Asset Management Fund, Inc.
(2) Less than $.01 per share.
(3) AAI has waived a portion of its advisory fees through at least ,
1997. Absent this waiver, the ratio of expenses to average net assets and
the ratio of the net investment income to average net assets would have been
.47% and 5.13% (annualized) for six months ended April 30, 1996, .39% and
5.54% for fiscal 1995, .40% and 3.48% for fiscal 1994, .42% and 2.85% for
fiscal 1993 and .50% and 3.32% (annualized) for the period January 23, 1992,
to October 31, 1992, respectively.
(4) Determined on an annualized basis.
7
<PAGE> 14
ASSET ALLOCATION FUND
Class Y Shares(1):
<TABLE>
<CAPTION>
FOR THE
PERIOD
MARCH 1,
1994
FOR THE (COMMENCEMENT
SIX MONTHS FOR THE OF
ENDED FISCAL YEAR OPERATIONS)
APRIL 30, ENDED TO OCTOBER
1996 OCTOBER 31, 31,
(UNAUDITED) 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of period........... $12.04 $ 9.97 $10.00
Investment income........................... .25 .32 .25
Expenses.................................... (.06) (.08) (.08)
---------- ---------- ----------
Net investment income....................... .19 .24 .17
Net realized gains (losses) on
investments............................... .08 .66 (.05)
Net unrealized appreciation (depreciation on
investments).............................. .53 1.75 .06
---------- ---------- ----------
Income from operations...................... .80 2.65 .18
Dividends paid to shareholders from:
Net investment income.................. (.07) (.24) (.16)
---------- ---------- ----------
Net realized gains..................... -- (.34) (.05)
---------- ---------- ----------
Total dividends........................ (.07) (.58) (.21)
Increase (Decrease) in Net Asset Value...... .73 2.07 (.03)
Net Asset Value at end of period................. $12.77 $12.04 $ 9.97
========== ========== ==========
Total Return..................................... 6.65% (2) 26.92% 1.84% (2)
Ratios:
Ratio of operating expenses to average net
assets.................................... 0.86% (2) 0.96% 1.25% (3)
Ratio of net investment income to average
net assets................................ 2.86% (2) 2.73% 2.63% (2)
Portfolio turnover.......................... 79.31% 95.17% 64.36%
Average commission rate paid..................... .0607
Net Assets at end of period...................... $91,568,546 $73,775,235 $10,189,125
</TABLE>
- ---------------
(1) On , 1996, all of the assets and liabilities of the Flexible
Asset Allocation Portfolio of Aon Asset Management Fund, Inc. were
transferred to the Trust in exchange for Class Y shares of the Asset
Allocation Fund of the Trust. The financial data provided above is for the
Flexible Asset Allocation Portfolio of Aon Asset Management Fund, Inc.
(2) Determined on an annualized basis.
(3) Determined on an annualized basis. The ratio of operating expenses to
average net assets is after reimbursement of certain fees and expenses by
Aon Advisors, Inc. (see note 4 to the Fund's financial statements). Had the
reimbursements not been made, the ratio would have been 1.39%.
ORGANIZATION AND CLASSIFICATION
The Trust was organized as a business trust under the laws of the State of
Delaware on May 16, 1996, and is registered with the Securities and Exchange
Commission (the "SEC") under the 1940 Act as an open-end management investment
company of the series type. The Trustees of the Trust are responsible for the
overall management and supervision of the Trust's affairs. Prior to
, 1996, the Trust conducted business as Aon Asset Management Fund, Inc., a
Virginia corporation. Any reference herein and in the Statement of Additional
Information of the Trust, including any financial information and performance
data, relating to such period reflect the Trust's series as constituted prior to
the commencement of operations of the Trust.
Each Fund is a separate series of the Trust and is treated as a separate
entity for certain purposes under the 1940 Act and for certain other purposes. A
shareholder of one Fund has an interest in the assets only of that Fund and is
not deemed to be a shareholder of any other Fund. As described below, for
certain matters shareholders of the Trust vote together as a group; as to others
they vote separately by Fund (or in certain cases by class). Each Fund bears its
own expenses and other liabilities and also a share of the Trust's general
liabilities. See "Additional Information."
8
<PAGE> 15
By this Prospectus, shares of the Trust's six current Funds are being
offered. All six of the Funds are diversified investment companies within the
meaning of the 1940 Act.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has an investment objective and related investment policies and
restrictions and uses various investment practices to pursue its objective.
THERE CAN BE NO ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. Investors should not consider any one Fund alone to be a complete
investment program. All of the Funds are subject to the risk of changing
economic conditions, as well as the risk inherent in the ability of the Adviser
to make changes in the composition of the Funds in anticipation of changes in
economic, business and financial conditions. As with any security, a risk of
loss is inherent in an investment in the shares of any of the Funds.
The different types of securities, investments and investment practices
used by each Fund all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital appreciation
and there is a substantial risk of decline. With respect to debt securities,
there exists the risk that the issuer of a security may not be able to meet its
obligations on interest or principal payments at the time required by the
instrument. In addition, the value of debt instruments generally rises and falls
inversely with changes in prevailing current interest rates. As described below,
an investment in certain of the Funds entails special additional risks as a
result of their ability to invest a substantial portion of their assets in
foreign investments or real estate securities or in certain other types of
investments.
Certain types of investments and investment practices common to one or more
Funds are described in greater detail, including the risks of each, under
"Investment Practices" in this Prospectus and under "Money Market Fund
Investments, Investment Practices and Restrictions" and "Additional Investment
Practices and Restrictions" in the Statement of Additional Information.
The investment objective of each Fund is fundamental and may not be changed
without the approval of a majority of the outstanding shares of that Fund. In
addition, the Trust has adopted certain fundamental investment restrictions that
are enumerated in detail in the Statement of Additional Information and that may
not be changed without approval of a majority of the outstanding shares of that
Fund. A majority of the outstanding shares of a Fund means the lesser of (1) 67%
of the Fund's outstanding shares present at a meeting of shareholders if more
than 50% of the outstanding shares of the Fund are present in person or by
proxy, or (2) more than 50% of the Fund's outstanding shares. In contrast,
certain other investment policies and restrictions, also described in the
Statement of Additional Information, as well as the investment policies of each
Fund described herein, are not fundamental and may be changed by the Trust's
Board of Trustees without shareholder approval.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to maximize current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Fund seeks to achieve its objective by investing
in a portfolio consisting of money market instruments which include:
(1) U.S. Government securities -- obligations issued or guaranteed as
to interest and principal 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).
9
<PAGE> 16
(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.
(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 U.S. Government securities or
instruments 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; 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 Fund 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.
The Money Market Fund will only invest in instruments denominated in U.S.
dollars that the Adviser, under the general oversight of the Board of Trustees
of the Trust, determines present minimal credit risks and are, at the time of
acquisition, either:
(1) rated in the highest rating categories by at least two NRSROs, 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 the Adviser
under the general oversight of the Board of Trustees of the Trust 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 Fund's money market instruments will mature in 13 months or
less. The average maturity of the Fund'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 Fund 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 Fund seeks to limit changes in the value of its assets
resulting from market factors in order to maintain a constant net asset value of
$1.00 per share. See "Net Asset Value."
The Money Market Fund should be subject to less market or financial risk
than any other Fund because it invests in high-quality debt obligations that
have a short time period until maturity. The rate of return to shareholders will
vary with the general levels of interest rates applicable to the short-term debt
instruments in which the Money Market Fund invests. The rate will also be
affected by changes in the Money Market Fund's operating expenses.
Although the Money Market Fund usually will hold securities purchased until
maturity, at which time they are redeemable at their full principal value plus
accrued interest, it may, at times, engage in short-term trading to attempt to
take advantage of yield variations in the short-term market. The Money Market
Fund also may sell portfolio securities prior to maturity based on a revised
evaluation of the issuer or to meet redemptions.
Aon, along with its wholly-owned subsidiaries, is expected to own a
substantial percentage of the outstanding shares of the Money Market Fund. Aon
and its subsidiaries may withdraw all or any portion of their investment in the
Fund at any time. A redemption of a significant percentage of the Fund's shares,
either by Aon or its subsidiaries, due to changes in interest rates or
otherwise, could have an adverse impact on the
10
<PAGE> 17
Fund by requiring the Adviser to sell assets of the Fund prematurely or when it
may be disadvantageous to do so, or to hold assets in cash or cash items in
anticipation of a redemption request. However, management of the Money Market
Fund believes that the Fund and its shareholders will benefit from the
substantial investments of Aon and its subsidiaries in shares of the Fund as a
result of the economies of scale available to a larger fund.
GOVERNMENT SECURITIES FUND
The Government Securities Fund has the investment objective of seeking high
current income with limited credit risk through investment in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Government Securities Fund may also invest in
U.S. Government debt instruments having maturities of less than one year and in
other high quality money market instruments. The Government Securities Fund will
invest at least 80% of its total assets, valued at the time of purchase, in U.S.
Government securities of various maturities.
U.S. Government securities in which the Government Securities Fund may
invest include: (1) U.S. Treasury bills, notes and bonds; and (2) obligations
issued or guaranteed by U.S. Government agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the U.S.
Government (e.g., Government National Mortgage Association ("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.
The Government Securities Fund may invest up to 50% of its net assets in
GNMA securities. Such securities are (along with certain Federal National
Mortgage Association and Federal Home Loan Corporation securities in which the
Government Securities Portfolio may invest) securities whose scheduled monthly
interest and principal 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, the
Government Securities Fund will receive scheduled monthly payments of principal
and interest on its GNMA and other similar securities. In addition, the
Government Securities Fund may receive unscheduled principal payments
representing prepayments on the underlying mortgages. All payments and
unscheduled prepayments of principal will be reinvested in the Government
Securities Fund in instruments consistent with the Fund's investment objective
and investment program. GNMA and other similar securities may not be an
effective means of "locking in" long-term interest rates due to the need for the
Government Securities Fund to reinvest scheduled and unscheduled principal
payments. At the time principal payments or prepayments are received by the
Government Securities Fund, prevailing interest rates may be higher or lower
than the current yield of GNMA and other similar pass-through securities held by
the Fund.
The Government Securities Fund may write covered call and put options on
debt securities, including obligations of the U.S. Government, its agencies and
instrumentalities, whether or not listed on a national securities exchange, and
may purchase call and put options on such debt securities whether or not listed
on an exchange. In addition, the Government Securities Fund may purchase and
sell exchange-traded interest rate futures contracts and may write covered call
options and purchase call and put options on interest rate futures contracts
whether or not traded on or subject to the rules of boards of trade which have
been designated as contract markets. See "Writing Covered Call and Put Options
and Purchasing Call and Put Options" and "Financial Futures Contracts and
Options on Such Contracts" in this Prospectus for more information about these
practices and their risks.
The value of U.S. Government securities owned by the Government Securities
Fund will fluctuate in response to various market forces and will generally vary
inversely with prevailing interest rate levels.
11
<PAGE> 18
Therefore, the value of an investment in the Fund also will fluctuate. In this
regard, any government or agency guarantee of securities held in Government
Securities Fund does not guarantee the value of an investment in the Fund.
It is likely that the annual portfolio turnover rate for the Government
Securities Fund generally will not exceed 100%, although under volatile market
conditions for fixed-income securities such rate could be exceeded.
ASSET ALLOCATION FUND
The investment objective of the Asset Allocation Fund is to maximize total
return on invested capital, to be derived from capital appreciation, dividends
and interest. The Fund will seek to achieve this objective by following a
flexible asset allocation strategy that shifts among a wide range of investments
and markets. The Asset Allocation Fund will invest in equity securities,
long-term debt securities and money market instruments, the proportion of each
being continuously determined by the Adviser (under the general oversight of the
Trust's Board of Trustees). 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. The Asset
Allocation Fund may 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 Fund also may write
covered call options in an effort to increase current income.
Depending upon prevailing economic and market conditions, the Asset
Allocation Fund may at any given time be primarily comprised of equity
securities (including debt securities convertible into equity securities),
corporate bonds and other debt securities, short-term money market securities,
or any combination thereof. For example, during periods when the Adviser
believes that the overall return on equity securities will exceed the return on
debt securities, the Asset Allocation Fund may be fully or substantially
invested in equity securities. In contrast, the Fund may be invested primarily
in debt securities during periods when the Adviser 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 Asset Allocation Fund
will be rated within the four highest grades by a nationally recognized rating
service such as Moody's Investor Services, Inc. or Standard and Poor's
Corporation. Other bonds held in the Fund may be rated below those four highest
grades, and if these lower-rated bonds were held in the Fund in significant
amounts they would increase financial risk. However, the Fund's investment in
these lower-rated fixed-income debt securities (i.e., rated lower than Baa or
BBB) will be limited to no more than 30% of the Fund's total assets measured at
the time of purchase. The lowest rating for debt securities in which the Fund
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 Asset Allocation Fund will be subject to varying levels of market and
financial risk and fluctuation of current income, and may at times be subject to
high levels of market and financial risk and current income volatility. 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 Asset Allocation Fund will be higher than for
other Funds due to the frequent transactions aimed at maximizing total return.
This higher portfolio turnover rate generates higher transaction expenses;
however, the objective is that the gain in total return will offset the added
transaction expense.
12
<PAGE> 19
A shareholder of the Asset Allocation Fund confers substantially more
investment discretion on the Adviser than would be the case for a shareholder
investing in a mutual fund with a more narrowly defined investment objective,
thereby enabling the Adviser to invest in a wide variety of investment
securities.
S&P 500 INDEX FUND
The S&P 500 Index Fund has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index"), through investment in common stocks traded on the New York Stock
Exchange and the American Stock Exchange and, to a limited extent, in the
over-the-counter markets.
Standard and Poor's Corporation ("Standard & Poor's" or "S&P"1) chooses the
500 common stocks comprising the S&P 500 Index on the basis of market values,
industry diversification and other factors. Most of the common stocks in the S&P
500 Index are issued by the 500 largest companies, in terms of the aggregate
market value of their outstanding stock, and such companies are generally listed
on the New York Stock Exchange. Additional common stocks that are not among the
500 largest market value stocks are included in the S&P 500 Index for
diversification purposes. S&P may, from time to time, add common stocks to or
delete common stocks from the S&P 500 Index.
The S&P 500 Index Fund will attempt to achieve its objective by replicating
the total return of the S&P 500 Index. To the extent that it can do so
consistent with the pursuit of its investment objective, it will attempt to keep
transaction costs low and minimize portfolio turnover. The Fund's annual
portfolio turnover rate is expected to be less than 50%. To achieve its
investment objective, the Fund purchases equity securities that are expected to
reflect, as a group, the total investment return of the S&P 500 Index. Like the
S&P 500 Index, the Fund will hold both dividend paying and non-dividend paying
common stocks comprising the S&P 500 Index.
Active portfolio management strategies are not used in making investment
decisions for the S&P 500 Index Fund. Rather, the Fund utilizes a passive
investment management approach. The Fund may use statistical selection
techniques to determine which securities to purchase or sell to most efficiently
replicate the investment return of the S&P 500 Index.
The S&P 500 Index Fund may choose not to invest in all the stocks that
comprise the S&P 500 Index, and its holdings may be invested differently by
industry segment than the S&P 500 Index. The Fund may compensate for the
omission from its portfolio of stocks that are included in the S&P 500 Index, or
for purchasing stocks included in the S&P 500 Index in proportions that are
different from their weightings in that Index, by purchasing stocks that may or
may not be included in the S&P 500 Index but which have characteristics similar
to omitted stocks (such as stocks from the same or similar industry groups
having similar market capitalizations and other investment characteristics). In
addition, from time to time adjustments may be made in the Fund's holdings due
to changes in the composition or weighting of issues comprising the S&P 500
Index.
The S&P 500 Index Fund will attempt to achieve a correlation between its
total return and that of the S&P 500 Index of at least 0.95, without taking
expenses into account. A correlation of 1.00 would indicate perfect correlation,
which would be achieved when the Fund's net asset value, including the value of
its dividends and capital gains distributions, increases or decreases in exact
proportion to changes in the S&P 500 Index. Management will monitor the Fund's
correlation to the S&P 500 Index and, to the extent consistent with its goal of
keeping transaction costs low, will attempt to minimize any "tracking error"
(i.e., the statistical measure of the difference between the investment results
of the Fund and that of the S&P 500 Index) in its investment decisions for the
Fund. However, brokerage and other transaction costs, as well as other Fund
expenses, in addition to potential tracking error, will tend to cause the Fund's
return to be lower than the
- ---------------
1 "Standard and Poor's", "S&P", and "S&P 500" are trademarks of Standard and
Poor's Corporation and have been licensed for use. The S&P Index Fund is not
sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation or
warranty, express or implied, to the investors in this Fund or any member of the
public regarding the advisability of investing in this Fund or in securities
generally or the ability of the S&P 500 Index to track general stock market
performance.
13
<PAGE> 20
return of the S&P 500 Index. There can be no assurance as to how closely the
Fund's performance will correspond to the performance of the S&P 500 Index.
The S&P 500 Index Fund will not invest more than 35% of its total assets in
stocks and other securities not included in the S&P 500 Index. In this regard,
the Fund may temporarily invest cash balances, pending withdrawals or
investments, in high quality money market instruments. Nevertheless, the Fund
will not adopt a temporary defensive investment posture in times of generally
declining stock prices, and, therefore, investors will bear the risk of such
general stock market declines.
The S&P 500 Index Fund may write covered call and put options on individual
securities and stock indices which correlate with the Fund's investments and may
purchase call and put options on such securities and stock indices, provided
that such options written or purchased are listed on a national securities
exchange. In addition, the Fund may purchase and sell exchange-traded stock
index futures contracts and may write covered call and put options and purchase
call and put options on stock index futures contracts provided such options
written or purchased are traded on or subject to the rules of boards of trade
which have been designated as contract markets.
Consistent with its investment objective, the S&P 500 Index Fund will
primarily use call and put options and futures contracts, as described above, to
rapidly invest cash balances and to hedge exposure to the S&P 500 Index in
anticipation of investing cash balances or expected cash flow into the Fund in
appropriate common stocks or in anticipation of liquidating appropriate common
stocks to meet expected redemption requests. See "Writing Covered Call and Put
Options and Purchasing Call and Put Options" and "Financial Futures Contracts
and Options on Such Contracts" in this Prospectus for more information about
these practices and their risks.
S&P's only relationship to the S&P 500 Index Fund is the licensing of
certain trademarks and trade names of S&P and of the S&P 500 Index, which is
determined, composed and calculated by S&P without regard to the Fund. S&P has
no obligation to take the needs of the Fund or the investors in the Fund into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the prices
or composition of the S&P 500 Index Fund or the timing of the issuance or sale
of the shares of the Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or any data included therein and S&P shall have no liability for any
errors, omissions or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by the S&P 500 Index Fund, or by investors
in the Fund, or any other person or entity from the use of the S&P 500 Index or
any data included therein. S&P makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect or consequential damages
(including lost profits), even if notified of the possibility of such damages.
INTERNATIONAL EQUITY FUND
The International Equity Fund has the investment objective of providing
long-term capital appreciation by investing primarily in equity and
equity-related securities of companies that are organized outside the United
States or whose securities are principally traded outside the United States
("foreign issuers"). The Fund also may invest in securities (1) of companies
organized in the United States but having their principal activities and
interests outside the United States, (2) denominated or quoted in foreign
currency ("non-dollar securities") and (3) issued by foreign governments or
agencies or instrumentalities of foreign governments (also "foreign issuers").
The International Equity Fund is intended for investors who can accept the
risks involved in investments in equity and equity-related securities of foreign
issuers and in non-dollar securities. See "Investment Practices -- Foreign
Investments and Currency."
14
<PAGE> 21
Under normal market conditions, the International Equity Fund will invest
at least 65% of its total assets in the securities of foreign issuers located
(or, in the case of the securities, traded) in countries other than the United
States.
The equity and equity-related securities in which the International Equity
Fund will invest are common stock, preferred stock, convertible debt
obligations, convertible preferred stock and warrants or other rights to acquire
stock. The Fund also may invest in securities of foreign issuers in the form of
sponsored or unsponsored American depository receipts ("ADRs"), European
depository receipts ("EDRs") and global depository receipts ("GDRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign corporate issuers. EDRs and GDRs
are receipts issued by non-U.S. financial institutions evidencing arrangements
similar to ADRs. Generally, ADRs are in registered form and are designed for
trading in U.S. markets while EDRs are in bearer form and are designed for
trading in European securities markets. GDRs are issued in either registered or
bearer form and are designed for trading on a global basis. See "Investment
Practices -- Foreign Investments and Currency."
Notwithstanding the foregoing, on occasion the International Equity Fund
may, for temporary defensive purposes to preserve capital, hold part or all of
its assets in cash, other money market instruments of the type in which the
Money Market Fund may invest, or, subject to certain tax restrictions, foreign
currencies. The International Equity Fund also may, under normal market
conditions, invest up to 35% of its total assets in dollar denominated and
non-dollar denominated debt securities of foreign issuers and may on occasion,
for temporary purposes to preserve capital, hold part or all of its assets in
foreign currency or in non-dollar securities evidencing short-term debt.
The International Equity Fund may invest in the securities of issuers
located in countries with emerging economies or securities markets. Investment
in such countries involves certain risks that are not present in investments in
more developed countries. See "Investment Practices -- Foreign Investments and
Currency." The International Equity Fund may make investments or engage in
investment practices that involve special risks. These include: convertible
securities, when-issued securities, delayed-delivery securities, options on
securities and securities indices, futures contracts and options thereon,
illiquid or restricted securities, repurchase agreements, lending portfolio
securities and borrowing money for investment purposes. These investment
practices and attendant risks are described under "Investment Practices" in this
Prospectus or under "Additional Investment Practices and Restrictions" in the
Statement of Additional Information.
The International Equity Fund may employ certain currency management
techniques to hedge against currency exchange rate fluctuations and to seek to
increase total return. When used to attempt to increase total return, these
management techniques are speculative. Such currency management techniques
involve risks different from those associated with investing in
dollar-denominated securities of U.S. issuers. These techniques are transactions
in options, futures contracts, options on futures contracts, forward foreign
currency exchange contracts and currency swaps. To the extent that the Fund is
fully invested in securities of foreign issuers or non-dollar securities while
also maintaining currency positions, it may be exposed to greater combined risk.
The Fund's net currency positions may expose it to risks independent of its
securities positions. See "Investment Practices -- Foreign Investments and
Currency."
Portfolio turnover will not necessarily be a limiting factor in making
changes in the portfolio of the International Equity Fund to better achieve its
investment objective. Because the Fund may, if the Adviser believes conditions
affecting various markets or individual issues warrant such action, make
periodic adjustments to the portfolio of the Fund, the Fund will likely have a
higher portfolio turnover rate and pay greater brokerage commissions than other
equity funds. Although it may possibly be lower, the annual portfolio turnover
rate may exceed 100% but, under normal circumstances, is not expected to exceed
200%.
REIT INDEX FUND
The REIT Index Fund has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return o the Morgan Stanley REIT Index, a benchmark of U.S. REITs. The Fund
seeks to achieve this objective by investing primarily in securities of REITs
comprising the
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<PAGE> 22
Morgan Stanley REIT Index, which are principally engaged in or related to the
real estate industry, including ownership of significant real estate assets. The
Fund will not invest directly in real estate.
The REIT Index Fund is intended for investors who can accept the risks,
described below, entailed by indirect investments in real estate.
REITs are pooled investment vehicles that invest primarily in income
producing real estate or real estate-related loans or interests therein. REITs
are generally classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. REITs are not taxed on income distributed to shareholders, provided
that they comply with several requirements of the Internal Revenue Code of 1986,
as amended (the "Code").
The Morgan Stanley REIT Index is made up of the stocks of all publicly
traded equity REITs (except health care REITs) that meet certain criteria. For
example, to be included in the Index, a REIT must have a total market
capitalization of at least $75 million and have enough shares and trading volume
to be considered liquid. The REIT Index Fund invests in equity REITs only.
As of May 21, 1996, 94 equity REITs were included in the Index. The Index
is rebalanced every calendar quarter as well as each time that a REIT is removed
from the Index because of corporate activity such as a merger, acquisition,
leveraged buyout, bankruptcy, Internal Revenue Service ("IRS") removal of REIT
status, fundamental change in business or change in shares outstanding.
Stocks in the Morgan Stanley REIT Index represent a broadly diversified
range of property types and regions. The Index's makeup, as of May 21, 1996, was
as follows.
<TABLE>
<S> <C>
Retail Stores................................................. 34.7%
Residential................................................... 31.2
Office........................................................ 12.1
Industrial.................................................... 12.6
Hotels........................................................ 5.7
Other......................................................... 3.7
</TABLE>
The Index's ten largest stocks are expected to make up about 30% of its
market value. The Index's largest stocks, as of May 21, 1996, were as follows.
<TABLE>
<C> <S>
1. Security Capital Pacific Trust
2. Simon Property Group
3. Equity Residential Properties Trust
4. Security Capital Industrial Trust
5. New Plan Realty Trust
6. Weingarten Realty
7. Vornado Realty Trust
8. Kimco Realty Corporation
9. DeBartolo Realty Corporation
10. Franchise Financial Corporation
</TABLE>
The REIT Index Fund will attempt to achieve its objective by replicating
the total return of the Morgan Stanley REIT Index. To the extent that it can do
so consistent with the pursuit of its investment objective, it will attempt to
keep transaction costs low and minimize portfolio turnover. The Fund's annual
portfolio turnover rate is expected to be less than 50%. To achieve its
investment objective, the Fund will purchase equity securities that are expected
to reflect, as a group, the total investment return of the Morgan Stanley REIT
Index. The Fund generally will hold dividend paying REIT securities.
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<PAGE> 23
Active portfolio management strategies are not used in making investment
decisions for the REIT Index Fund. Rather, the Fund utilizes a passive
investment management approach. The Fund may use statistical selection
techniques to determine which securities to purchase or sell to most efficiently
replicate the investment return of the Morgan Stanley REIT Index.
Although the REIT Index Fund may at times hold each stock in the Morgan
Stanley REIT Index in roughly the same proportions as in the Index itself, it
may alternatively choose at other times not to invest in all the stocks that
comprise the Morgan Stanley REIT Index. The Fund may compensate for the omission
from its portfolio of stocks that are included in the Morgan Stanley REIT Index,
or for purchasing stocks included in the Morgan Stanley REIT Index in
proportions that are different from their weightings in that Index, by
purchasing stocks that may or may not be included in the Morgan Stanley REIT
Index but which have characteristics similar to omitted stocks (such as stocks
representing the same or similar property types or regions or having similar
market capitalizations and other investment characteristics). In addition, from
time to time adjustments may be made in the Fund's holdings due to changes in
the composition or weighting of issues comprising the Morgan Stanley REIT Index.
The REIT Index Fund will attempt to achieve a correlation between its total
return and that of the Morgan Stanley REIT Index of at least 0.95, without
taking expenses into account. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Fund's net asset value, including
the value of its dividends and capital gains distributions, increases or
decreases in exact proportion to changes in the Morgan Stanley REIT Index.
Management will monitor the Fund's correlation to the Morgan Stanley REIT Index
and, to the extent consistent with its goal of keeping transaction costs low,
will attempt to minimize any "tracking error" (i.e., the statistical measure of
the difference between the investment results of the Fund and that of the Morgan
Stanley REIT Index) in its investment decisions for the Fund. However, brokerage
and other transaction costs, as well as other Fund expenses, in addition to
potential tracking error, will tend to cause the Fund's return to be lower than
the return of the Morgan Stanley REIT Index. There can be no assurance as to how
closely the Fund's performance will correspond to the performance of the Morgan
Stanley REIT Index.
The REIT Index Fund will not invest more than 35% of its total assets in
stocks and other securities not included in the Morgan Stanley REIT Index. In
this regard, the Fund may temporarily invest cash balances, pending withdrawals
or investments, in high quality money market instruments. Nevertheless, the Fund
will not adopt a temporary defensive investment posture in times of generally
declining stock prices or prices of REITs, and, therefore, investors will bear
the risk of such general stock market declines or declines in REIT stock prices.
The REIT Index Fund may write covered call and put options on individual
securities and stock indices which correlate with the Fund's investments and may
purchase call and put options on such securities and stock indices whether or
not listed on an exchange. In addition, the Fund may purchase and sell exchange-
traded stock index futures contracts and may write covered call and put options
and purchase call and put options on stock index futures contracts provided such
options written or purchased are traded on or subject to the rules of boards of
trade which have been designated as contract markets.
Consistent with its investment objective, the REIT Index Fund will
primarily use call and put options, and futures contracts, as described above,
to rapidly invest cash balances and to hedge exposure to the Morgan Stanley REIT
Index in anticipation of investing cash balances or expected cash flow into the
Fund in appropriate common stocks or in anticipation of liquidating appropriate
common stocks to meet expected redemption requests. See "Writing Covered Call
and Put Options and Purchasing Call and Put Options" and "Financial Futures
Contracts and Options on Such Contracts" in this Prospectus for more information
about these practices and their risks.
The REIT Index Fund is not sponsored, sold, promoted, or endorsed by Morgan
Stanley. The Morgan Stanley REIT Index is the exclusive property of Morgan
Stanley and is a service mark of Morgan Stanley Group Inc. It has been licensed
for use by the Trust.
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<PAGE> 24
Although the REIT Index Fund generally seeks to invest for the long term,
it retains the right to sell securities regardless of how long they have been
held. Generally, a passively managed portfolio sells securities only to respond
to redemption requests or to adjust the number of shares held to reflect a
change in the Fund's target index. Because of this, the Fund's turnover rate is
expected to be less than 50%.
There are significant risks inherent in the investment objective and
policies of the REIT Index Fund. REITs in the Morgan Stanley REIT Index tend to
be medium-size and small companies; their market capitalizations generally range
from $75 million to $1.3 billion. Like small-capitalization stocks in general,
REIT stocks can be more volatile than -- and at times will perform differently
from -- the large-capitalization stocks such as those found in the S&P 500
Index. In addition, because small-capitalization stocks are typically less
liquid than large-capitalization stocks, REIT stocks may sometimes experience
greater share-price fluctuations than the stocks of larger companies.
Historically, however, the significant amount of dividend income provided by
REITs has tended to soften the impact of this volatility.
Because of its objective of investing in equity REITs, the REIT Index Fund
is also subject to all of the risks associated with the ownership of real
estate. These risks include: declines in the value of real estate, adverse
changes in the climate for real estate, risks related to general and local
economic conditions, over-building and increased competition, increases in
property taxes and operating expenses, changes in zoning laws, casualty or
condemnation losses, limitations on rents, changes in neighborhood values, the
appeal of properties to tenants, leveraging of interests in real estate,
increases in prevailing interest rates and costs resulting from cleanup of
environmental problems or liability to third parties for damages arising from
environmental problems.
In addition to the risks discussed above, equity REITs may be affected by
changes in the value of the underlying property owned by them, are dependent
upon management skill, may not be diversified and can be subject to the risk of
investing in a single or a limited number of projects. Such REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self liquidation
and the possibility of failing to qualify for special tax treatment under
Subchapter M of the Code and to maintain an exemption under the 1940 Act.
Finally, certain REITs may be self-liquidating in that a specific term of
existence is provided for in the trust document. Such REITs run the risk of
liquidating at an economically inopportune time. See "Investment Practices."
INVESTMENT PRACTICES
In pursuing their respective investment objectives, the Funds may engage in
the following investment practices, where so indicated.
LOANS OF PORTFOLIO SECURITIES
Each Fund may from time to time lend securities it holds to brokers,
dealers and financial institutions, up to a maximum of 20% (5% in the case of
the Money Market Fund) of the total value of that Fund's assets. Such loans will
be secured by collateral in the form of cash or U.S. Treasury securities, which
will be maintained in an amount at least equal to the current market value of
the loaned securities. Each Fund will continue to receive interest and dividends
on the loaned securities during the term of its loans, and, in addition, will
receive either a fee from the borrower or interest earned from the securities in
which cash collateral is invested during the term of the loan. Each Fund also
will receive any gain or loss in the market value of its loaned securities. 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 Funds will make loans of securities only to firms
determined by the Adviser (under the general oversight of the Board of Trustees)
to be creditworthy.
SHORT-TERM MONEY MARKET INSTRUMENTS; REPURCHASE AGREEMENTS
All of the Funds may, to varying degrees, also invest in short-term money
market instruments, including repurchase agreements, and when-issued and
delayed-delivery securities. A repurchase agreement is a
18
<PAGE> 25
transaction in which a Fund buys a security at one price and simultaneously
agrees to sell that same security back to the original owner at a higher price.
The yield to a Fund on a repurchase agreement is determined by the difference
between the Fund's purchase price of the underlying obligation and the price at
which the obligation is "repurchased" by the other party. The Adviser (under the
general oversight of the Board of Trustees) reviews the creditworthiness of the
other party to the agreement and must find it satisfactory before engaging in a
repurchase agreement. In the event of the default or bankruptcy of the other
party, the Fund could experience delays in recovering its money, may realize
only a partial recovery or even no recovery, and may also incur disposition
costs.
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 higher interest rates.
When-issued and delayed-delivery securities are discussed in "Additional
Investment Practices and Restrictions" in the Statement of Additional
Information.
FOREIGN INVESTMENTS AND CURRENCY
Each of the Money Market Fund, the Government Securities Fund, the Asset
Allocation Fund, the S&P 500 Index Fund and the REIT Index Fund may invest up to
10% of its total assets, taken at market value at the time of acquisition, in
securities of foreign issuers and in non-dollar securities. In addition, each of
these Funds may invest up to 25% of its total assets in securities of foreign
issuers and in non-dollar securities if certain guarantees exist. Foreign
investments will qualify as "guaranteed" if they are either: (1) issued, assumed
or guaranteed by a foreign government or political subdivision or
instrumentality thereof, or a foreign issuer having a class of securities listed
for trading on the New York Stock Exchange; or (2) assumed or guaranteed by
domestic issuers.
The International Equity Fund may, as described above, invest all of its
assets in the securities of foreign issuers and in non-dollar securities.
FOREIGN INVESTMENTS GENERALLY. Investments in the securities of foreign
issuers or investments in non-dollar securities may offer potential benefits not
available from investments solely in securities of domestic issuers or U.S.
dollar -- denominated securities. Such benefits may include the opportunity to
invest in foreign issuers that appear to offer better opportunity for long-term
capital appreciation or current earnings than investments in domestic issuers,
the opportunity to invest in foreign countries with economic policies or
business cycles different from those of the United States and the opportunity to
reduce fluctuations in portfolio value by taking advantage of foreign securities
markets that do not necessarily move in a manner parallel to U.S. markets.
Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar-denominated securities or in securities of domestic issuers. Such
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws or restrictions applicable to such investments and in exchange control
regulations. For example, a decline in the currency exchange rate might reduce
the value of certain portfolio investments. In addition, if the exchange rate
for the currency in which a Fund receives interest payments declines against the
U.S. dollar before such interest is paid as dividends to shareholders, the Fund
may have to sell portfolio securities to obtain sufficient cash to pay such
dividends. As discussed below, the International Equity Fund may employ certain
investment techniques to hedge its foreign currency exposure; however, such
techniques also entail certain risks.
Some foreign stock markets may have substantially less volume than, for
example, the New York Stock Exchange, and securities of some foreign issuers may
be less liquid than securities of comparable domestic issuers. Commissions and
dealer mark-ups or mark-downs on transactions in foreign investments may be
higher than for similar transactions in the United States. In addition,
clearance and settlement procedures may be different in foreign countries and,
in certain markets, on certain occasions, such procedures have been
19
<PAGE> 26
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions. For example, delays in settlement could
result in temporary periods when a portion of the assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended investments due to settlement problems could cause it to miss
attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Fund due to subsequent declines in the value of the portfolio
investment or, if the Fund has entered into a contract to sell the investment,
could result in possible liability to the purchaser.
Foreign issuers generally are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, dealers and listed and
unlisted issuers in foreign countries than in the United States. Furthermore,
with respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, imposition of withholding taxes on
dividend or interest payments, limitations on the removal of funds or other
assets of the Funds, or political or social instability or diplomatic
developments which could affect investments in those countries. Individual
foreign economies also may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency or balance of payments position.
INVESTMENTS IN ADRS, EDRS AND GDRS. Many securities of foreign issuers are
represented by ADRs, EDRs and GDRS. Each of the S&P 500 Index Fund, Government
Securities Fund, Asset Allocation Fund and International Equity Fund may invest
in ADRs, EDRs and GDRS. ADRs are certificates issued by a U.S. bank or trust
company and represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are issued by domestic banks. ADRs do not eliminate all the
risk inherent in investing in the securities of foreign issuers. To the extent
that a Fund acquires ADRs through banks which do not have a contractual
relationship with the foreign issuer of the security underlying the ADR to issue
and service such ADR (i.e., an unsponsored ADR), 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 or rights offerings involving the foreign
issuer in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments. However, by investing in
ADRs rather than directly in the stock of foreign issuers, a Fund will avoid
currency risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the United States for ADRs quoted on
a national securities exchange or the NASD's national market system. The
information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more exacting than those to
which many foreign issuers may be subject. The Trust generally considers ADRs to
be securities issued, assumed or guaranteed by a foreign issuer.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
INVESTMENTS IN EMERGING MARKETS. The International Equity Fund may invest
in securities of issuers located in countries with emerging economies and/or
securities markets. These countries are located in the Asia-Pacific region,
Eastern Europe, Central and South America and Africa. Political and economic
structures in many of these countries may be undergoing significant evolution
and rapid development, and such countries may lack the social, political and
economic stability characteristic of more developed countries. Certain of these
countries in the past may have failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies. As a
result, the risks of foreign investment, generally including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the values of the
International Equity Fund's investments in those countries and the availability
to the Fund of additional investments in those countries.
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<PAGE> 27
The small size and inexperience of the securities markets in certain of
these countries and the limited volume of trading in securities in these
countries may also make the International Equity Fund's investments in such
countries illiquid and more volatile than investments in Japan or most Western
European countries, and the Fund may be required to establish special custody or
other arrangements before making certain investments in these countries. There
may be little financial or accounting information available with respect to
issuers located in certain of such countries, and it may be difficult as a
result to assess the value or prospects of an investment in such issuers. The
laws of some foreign countries may limit the ability of the Fund to invest in
securities of certain issuers located in those countries.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers
usually will involve currencies of foreign countries, and because the Government
Securities Fund, the Asset Allocation Fund, the S&P 500 Index Fund, the
International Equity Fund and the REIT Index Fund may have currency exposure
independent of their securities positions, the value of the assets of these
Funds as measured in U.S. dollars may be affected by changes in foreign currency
exchange rates. To the extent that a Fund's assets consist of investments quoted
or denominated in a particular currency, the Fund's exposure to adverse
developments affecting the value of such currency will increase. The
International Equity Fund often will have substantial currency exposure both
from investments quoted or denominated in foreign currencies and from its
currency positions.
Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, a Fund's net asset value to fluctuate as
well. Such exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the U.S. or abroad. To the extent that a
substantial portion of a Fund's total assets, adjusted to reflect the Fund's net
position after giving effect to currency transactions, is denominated or quoted
in the currencies of foreign countries, the Fund will be more susceptible to the
risk of adverse economic and political developments within those countries.
In addition to investing in securities denominated or quoted in a foreign
currency, the International Equity Fund may engage in a variety of foreign
currency management practices described below. It also may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the Adviser, it would be beneficial to convert such currency into
U.S. dollars at a later date based on anticipated changes in the relevant
exchange rate. The Fund will incur costs in connection with conversions between
various currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The International Equity Fund
may purchase or sell forward foreign currency exchange contracts for hedging
purposes and to seek to increase total return. When purchased or sold for the
purpose of seeking to increase total return, forward foreign currency exchange
contracts are considered speculative. In addition, the Fund may enter into
forward foreign currency exchange contracts in order to protect against
anticipated changes in future foreign currency exchange rates. The International
Equity Fund also may engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Adviser determines that there is a pattern of correlation between
the two currencies.
The International Equity Fund may enter into contracts to purchase foreign
currencies to protect against an anticipated rise in the U.S. dollar price of
securities it intends to purchase. It may enter into contracts to sell foreign
currencies to protect against the decline in value of its foreign currency
denominated or quoted portfolio securities, or a decline in the value of
anticipated dividends from such securities, due to a decline in the value of
foreign currencies against the U.S. dollar. Contracts to sell foreign currency
could limit any potential gain that might be realized by the Fund if the value
of the hedged currency increases. If the International Equity Fund enters into a
forward foreign currency exchange contract to sell foreign currency to seek to
increase total return or to buy foreign currency for any reason, the Fund will
be required to place cash, U.S. Government securities or high grade liquid debt
securities in a segregated account with the Trust's
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<PAGE> 28
custodian in an amount equal to the value of the Fund's total assets committed
to the consummation of the forward contract. If the value of the securities
placed in the segregated account declines, additional cash or securities will be
placed in the segregated account so that the value of the account will equal the
amount of the Fund's commitment with respect to the contract.
Forward contracts are subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward foreign currency
exchange contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive the Fund of unrealized profits, transaction costs
or the benefits of a currency hedge or force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
OPTIONS ON CURRENCIES. The International Equity Fund may purchase and sell
(write) put and call options on foreign currencies for the purpose of protecting
against declines in the U.S. dollar value of foreign portfolio securities and
anticipated dividends on such securities and against increases in the U.S.
dollar cost of foreign securities to be acquired. The International Equity Fund
may use options on currencies to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different currency, if the Adviser determines that there is a pattern of
correlation between the two currencies. As with other kinds of option
transactions, however, the writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received, while
exposing the Fund to losses which may be unlimited. The Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against exchange rate fluctuations; however, in
the event of exchange rate movements adverse to the Fund's position, the Fund
may forfeit the entire amount of the premium plus related transaction costs. In
addition, the Fund may purchase call or put options on currency to seek to
increase total return when the Adviser anticipates that the currency will
appreciate or depreciate in value, but the securities quoted or denominated in
that currency do not present attractive investment opportunities and are not
held by the Fund. When purchased or sold to increase total return, options on
currencies are considered speculative. Options on foreign currencies to be
written or purchased by the Fund will be traded on U.S. and foreign exchanges or
over-the-counter. See "Writing Covered Call and Put Options and Purchasing Call
and Put Options" for a discussion of the liquidity risks associated with options
transactions.
CURRENCY SWAPS. The International Equity Fund may enter into currency
swaps for both hedging purposes and to seek to increase total return. Currency
swaps involve the exchange by the Fund with another party of their respective
rights to make or receive payments in specified currencies. Since currency swaps
are individually negotiated, the Fund is expected to achieve an acceptable
degree of correlation between its portfolio investments and its currency swap
positions entered into for hedging purposes. Currency swaps usually involve the
delivery of the entire principal value of one designated currency in exchange
for the other designated currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the other party to the swap will
default on its contractual delivery obligations. The Fund will maintain in a
segregated account with the Trust's custodian cash and liquid high-grade debt
securities equal to the net amount of the excess, if any, of the Fund's
obligations over its entitlement with respect to swap transactions. To the
extent that the net amount of a swap is held in a segregated account consisting
of cash and high-grade liquid debt securities, the Trust believes that swaps do
not constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to the Fund's borrowing restrictions.
The use of currency swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Adviser is incorrect in its forecasts
of market values and currency exchange rates, the investment performance of the
International Equity Fund would be less favorable than it would have been if
swaps were not used.
FOREIGN MONEY MARKET INSTRUMENTS. The Money Market Fund may invest in U.S.
dollar-denominated foreign securities, provided that such instruments meet the
standards set forth above in the third and fourth paragraphs under "Money Market
Fund". 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
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<PAGE> 29
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 the Adviser in selecting any foreign
investments for the Fund. For more information, see "Money Market Fund
Investments, Investment Practices and Restrictions -- Foreign Securities" in the
Statement of Additional Information.
WRITING COVERED CALL AND PUT OPTIONS AND PURCHASING CALL AND PUT OPTIONS
The Government Securities Fund, S&P 500 Index Fund, International Equity
Fund and REIT Index Fund may write exchange-traded covered call and put options
on or relating to specific securities in order to earn additional income or, in
the case of a call written, to minimize or hedge against anticipated declines in
the value of its portfolio securities. The Asset Allocation Fund may write
covered call options on its portfolio securities in amounts up to 10% of its
total assets in order to earn additional income or to minimize or hedge against
anticipated declines in the value of those securities, and 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. All call options written
by these Funds are covered, which means that the Fund will own the securities
subject to the option as long as the option is outstanding. All put options
written by these Funds are covered, which means that the Fund has deposited with
the Trust's custodian cash, U.S. Government securities or other high-grade
liquid debt securities with a value at least equal to the exercise price of the
option. Call and put options written by a Fund may also be covered to the extent
that the Fund's liabilities under such options are offset by its rights under
call or put options purchased by the Fund and call options written by a Fund may
also be covered by depositing cash or securities with the Trust's custodian in
the same manner as written puts are covered.
Through the writing of a covered call option, a Fund 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. Through the writing of a covered put option, a Fund
receives premium income but obligates itself to purchase a particular security
underlying the option at a specified price at any time prior to the expiration
of the option period, regardless of market value during the option period.
Each of the S&P 500 Index Fund, the International Equity Fund and the REIT
Index Fund may, in accordance with its investment objective and investment
program, also write exchange-traded covered call and put options on stock
indices. These Funds may write such options for the same purposes as each may
engage in such transactions with respect to individual portfolio
securities -- that is, to generate additional income or as a hedging technique
to minimize anticipated declines in the value of the Fund's securities. In
economic effect, a stock index call or put option is similar to an option on a
particular security, except that the value of the option depends on the weighted
value of the group of securities comprising the index, rather than a particular
security, and settlements are made in cash rather than by delivery of a
particular security.
Each of the Government Securities Fund, the S&P 500 Index Fund, the
International Equity Fund and the REIT Index Fund may also purchase
exchange-traded call and put options with respect to securities and, except for
the Government Securities Fund, with respect also to stock indices that
correlate with its particular portfolio securities. All four Funds may purchase
put options for defensive purposes in order to protect against an anticipated
decline in the value of their portfolio securities. As the holder of a put
option with respect to individual securities, each has the right to sell the
securities underlying the option and to receive a cash payment at the exercise
price at any time during the option period. As the holder of a put option on an
index, a Fund has the right to receive, upon exercise of the option, a cash
payment equal to a multiple of any excess of the strike price specified by the
option over the value of the index. Each of the Government Securities Fund, the
S&P 500 Index Fund, the International Equity Fund and the REIT Index Fund may
purchase call options on individual securities and, except for the Government
Securities Fund, on stock indices in order to take advantage of anticipated
increases in the price of those securities by purchasing the right to acquire
the
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securities underlying the option (or, with respect to options on indices, to
receive income equal to the value of such index over the strike price). As the
holder of a call option with respect to individual securities, the Funds obtain
the right to purchase the underlying securities at the exercise price at any
time during the option period. As the holder of a call option on a stock index,
a Fund obtains the right to receive, upon exercise of the option, a cash payment
equal to the multiple of any excess of the value of the index on the exercise
date over the strike price specified in the option.
Each of the Government Securities Fund, the International Equity Fund and
the REIT Index Fund may also write and purchase unlisted covered call and put
options. Such options are not traded on an exchange and may not be as actively
traded as listed securities, making the valuation of these securities more
difficult. In addition, an unlisted option entails a risk not found in
connection with listed options -- that the party on the other side of the option
transaction will default. This may make it impossible to close out an unlisted
option position in some cases, and profits may be lost thereby. Except as
described below, such unlisted over-the-counter options will generally be
considered illiquid securities. The Government Securities Fund, the
International Equity Fund and the REIT Index Fund will engage in such
transactions only with firms of sufficient credit to minimize these risks. Where
one of these Funds has entered into agreements with primary dealers with respect
to the unlisted options it has written, and such agreements would enable the
Fund to have an absolute right to repurchase, at a pre-established formula
price, the over-the-counter options written by it, the Fund will treat as
illiquid only the amount equal to the formula price described above less the
amount by which the option is "in-the-money."
Option-related investment practices involve certain risks that are
different in some respects from investment risks associated with similar funds
which do not engage in such activities. These risks include incurrence of higher
brokerage costs, as well as the following: writing covered call options -- the
inability to effect closing transactions at a particular time or at favorable
prices and the inability to participate in the appreciation of the underlying
securities above an amount equal to the exercise price plus the premium; writing
covered put options -- the inability to effect closing transactions at a
particular time or at favorable prices and the obligation to purchase the
specified securities or to make a cash settlement on a stock index at prices
that may not reflect current market values; and purchasing put and call
options -- possible loss of the entire premium paid.
In addition, the effectiveness of hedging activities of the S&P 500 Index
Fund, the International Equity Fund and the REIT Index Fund through the purchase
or sale (writing) of stock index options will depend upon the extent to which
price movements in the Fund's holdings being hedged correlate with price
movements in the selected stock index. Perfect correlation may not be possible
because the securities held or to be acquired by the Fund may not exactly match
the composition of the stock index on which options are purchased or written.
As to all options, if the Adviser's forecasts regarding movements in
securities prices or interest rates are incorrect, a Fund's investment results
might have been more favorable had a transaction not been effected. Because of
these risks, the use of "options" related investment practices requires special
skills in addition to those needed to select portfolio securities. A more
detailed description of these investment practices and their associated risks is
contained in the Statement of Additional Information.
FINANCIAL FUTURES CONTRACTS AND OPTIONS ON SUCH CONTRACTS
To the extent described below, each of the Government Securities Fund, the
S&P 500 Index Fund, the International Equity Fund and the REIT Index Fund may
purchase and sell exchange-traded financial futures contracts and may write
covered call options and purchase put and call options on financial futures
contracts as a hedge to protect against anticipated changes in prevailing
interest rates, currency exchange rates or overall prices of securities in which
each may invest, or to earn additional income. The S&P 500 Index Fund and the
REIT Index Fund may write covered put options on financial futures contracts for
the same purposes.
Financial futures contracts consist of interest rate futures contracts,
stock index futures contracts and currency futures contracts. An interest rate
futures contract is a contract to buy or sell specified debt securities at a
future time for a fixed price. Some interest rate futures contracts are based on
a particular interest rate or
24
<PAGE> 31
rate index and are cash settled at expiration by applying the rate or rate index
to a prescribed notional principal amount. A stock index futures contract is
based on a specified index of stocks and not the stocks themselves. A currency
futures contract is a contract to purchase or sell a specific amount of foreign
currency at a future time at a fixed price.
To hedge against the possibility that increases in interest rates or other
factors may result in a general decline in prices of securities owned by it, the
Government Securities Fund and the REIT Index Fund may sell interest rate
futures contracts. To hedge against the possibility of a general decline in the
prices of securities owned by it, the S&P 500 Index Fund, the International
Equity Fund and the REIT Index Fund may sell stock index futures contracts. To
hedge against the possibility of an adverse change in currency exchange rates,
the International Equity Fund may sell currency futures contracts. Assuming that
any decline in the securities or currency being hedged is accompanied by a
decline in the debt instrument, interest rate, stock index or currency chosen as
a hedge, the sale of a futures contract on that debt instrument, interest rate,
stock index or currency may generate gains that can wholly or partially offset
any decline in the value of the Fund's securities or currency exposure which
have been hedged.
To hedge against the possibility of lower long-term interest rates and
likely concomitant increase in prices of securities to be purchased by it, the
Government Securities Fund and the REIT Index Fund may purchase interest rate
futures contracts. Likewise, to hedge against increases in equity prices, the
S&P 500 Index Fund, the International Equity Fund and the REIT Index Fund may
purchase stock index futures contracts. To hedge against the possibility of an
adverse change in currency exchange rates, the International Equity Fund may
purchase currency futures contracts. For these Funds, such a strategy is
intended to secure a position in the futures market intended to approximate the
economic equivalent of a position in the securities market. When used as hedges,
the Funds will purchase appropriate financial futures contracts only when each
intends to purchase the underlying securities that may be affected by such
decreases in interest rates or increases in equity prices or decline in value of
the dollar versus the currency in which the security to be purchased is
denominated (as the case may be) and will purchase such financial futures
contracts in approximately the amount being hedged. When used as hedges, the
Adviser expects that purchases of the underlying securities will, in fact, be
made a substantial majority of the time.
Each of the Government Securities Fund, the S&P 500 Index Fund, the
International Equity Fund and the REIT Index Fund may purchase and sell
exchange-traded financial futures contracts for non-hedging purposes such as
seeking additional income or otherwise seeking to increase total return.
Each of the Government Securities Fund, the S&P 500 Index Fund, the
International Equity Fund and the REIT Index Fund may write covered call options
and may purchase put and call options on futures contracts of the types which
that Fund is permitted to purchase and sell in accordance with its investment
objective and investment program, and may enter into closing transactions with
respect to such options on futures contracts. The S&P 500 Index Fund and the
REIT Index Fund also may write covered put options on stock index futures
contracts. An option to acquire a financial futures contract gives the purchaser
thereof the right to assume a position in the underlying futures contract, and
therefore, can serve the same hedging function as owning the futures contract
directly.
The S&P 500 Index Fund and the REIT Index Fund may seek to close out (at
its market price in the secondary market) such put option before the option has
expired. If the secondary market is not liquid for that option, however, the
Fund must continue to be prepared to pay the strike price while the option
remains outstanding, regardless of price changes, and must continue to set aside
liquid assets to cover this position.
None of the Funds will enter into any financial futures contract or
purchase any option thereon if, immediately thereafter, the total amount of its
assets required to be on deposit as initial margin to secure its obligations
under open futures contracts, plus the amount of premiums paid by the Fund for
outstanding options to purchase futures contracts (less any in-the-money amount
at the time of purchase) would exceed 5% of the market value of the Fund's total
assets (after taking into account unrealized profits and losses on any such
futures contracts or options it has entered into).
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<PAGE> 32
The use of futures contracts and options thereon by these Funds entails
certain risks, including but not limited to the following: no assurance that
futures contract transactions can be offset at favorable prices; possible
reduction of a Fund's income due to the use of hedging; possible reduction in
value of both the securities hedged and the hedging instrument; possible lack of
liquidity due to daily limits on price fluctuations; imperfect correlation
between the futures contract and the securities being hedged; and potential
losses in excess of the amount initially invested in the futures contracts
themselves. If expectations regarding movements in securities prices or interest
rates are incorrect, a Fund might have experienced better investment results
without hedging. The use of futures contracts and options on futures contracts
requires special skills in addition to those needed to select portfolio
securities. A further discussion of futures contracts and their associated risks
is contained in the Statement of Additional Information.
RESTRICTED SECURITIES AND OTHER ILLIQUID INVESTMENTS
The Adviser is responsible for determining the value and liquidity of
investments held by each Fund. Investments may be illiquid because of the
absence of a trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. Each of the Money Market Fund, the
Government Securities Fund and the S&P 500 Index Fund will not purchase or
otherwise acquire any investment if, as a result, more than 10% of its net
assets (taken at current value) would be invested in instruments that are
illiquid by virtue of the absence of a readily available market. Each of the
Asset Allocation Fund, the International Equity Fund and the REIT Index Fund
will not purchase or otherwise acquire any investment if, as a result, more than
15% of its net assets (taken at current value) would be invested in instruments
that are illiquid by virtue of the absence of a readily available market.
Illiquid investments include most repurchase agreements maturing in more
than seven days, currency swaps, time deposits with a notice or demand period of
more than seven days, certain over-the-counter option contracts (and segregated
assets used to cover such options), participation interests in loans, and
restricted securities. A restricted security is one that has a contractual
restriction on resale or cannot be resold publicly until it is registered under
the Securities Act of 1933.
The foregoing illiquid investment restrictions do not apply to purchases of
restricted securities eligible for sale to qualified institutional purchasers in
reliance upon Rule 144A under the Securities Act of 1933 that are determined to
be liquid by the Trust's Board of Trustees or by the Adviser under the general
oversight of the Trustees. Such determination would take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. To the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities,
a Fund's holdings of those securities may become illiquid. The foregoing
investment restrictions also do not apply to purchases of securities of foreign
issuers offered and sold outside the United States in reliance upon the
exemption from registration provided by Regulation S under the Securities Act of
1933.
LOWER-RATED SECURITIES
The Asset Allocation Fund may invest in debt securities with lower ratings
which generally carry greater risk of default and are generally subject to
greater market value fluctuations. If held by the Asset Allocation Fund in
significant amounts, such securities would increase financial risk and income
fluctuation. Lower-rated debt and convertible 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 (i.e., investment grade) debt securities. In some cases,
lower-rated debt and convertible securities may be highly speculative, have poor
prospects of reaching investment grade standing or even be in default. See the
Statement of Additional Information for a description of securities ratings and
of lower-rated securities, including further discussion of the risks of
investing in such instruments.
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<PAGE> 33
BORROWING
From time to time, the International Equity Fund may increase its ownership
of investments by borrowing from banks and investing the borrowed funds (on
which the Fund pays interest). The Fund may borrow only up to 10% of the value
of its total assets, subject to the 300% asset coverage requirement under the
1940 Act. Purchasing investments with borrowed funds is a speculative investment
method known as "leverage," that may subject the Fund to relatively greater
risks and costs (which may include commitment fees and/or the cost of
maintaining minimum average balances with the lender) than would otherwise be
the case, including possible reduction of income and increased fluctuation of
net asset value per share. A further discussion of borrowing is contained in the
Statement of Additional Information.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust has a Board of Trustees, the members of which are generally
elected by the shareholders. A majority of the Trustees are not affiliated with
AAI or Aon or their affiliates. The Board of Trustees is responsible for the
overall management of the Trust, including reviewing the results of the
investment portfolios, monitoring investment activities and practices, and
receiving and acting upon future plans for the Trust.
INVESTMENT ADVISER
Aon Advisors, Inc. ("AAI"), 123 North Wacker Drive, Chicago, Illinois
60606, a wholly-owned subsidiary of Aon Corporation ("Aon"), is the investment
adviser for the Fund. AAI is registered as an investment adviser under the
Investment Advisers Act of 1940. As of February 28, 1996, Mr. Patrick G. Ryan,
President and Chief Executive Officer of Aon, owned directly and beneficially
13,463,051 shares (12.4%) of the outstanding common stock of Aon.
In addition to the Trust, AAI provides investment advice and management to
other investment companies, pension plans, corporations and other organizations.
Assets under management include equity securities, fixed income securities and
real estate. As of May 1, 1996, the aggregate assets under AAI's management were
approximately $5 billion.
AAI has entered into investment advisory agreements (collectively, the
"Advisory Agreements") with the Trust on behalf of each of the Funds. With
respect to the Money Market Fund, the Government Securities Fund, the Asset
Allocation Fund, the S&P 500 Index Fund and the REIT Index Fund, AAI provides
day-to-day portfolio management, determining which securities to buy and sell
for each, selecting the brokers and dealers to effect the transactions and
negotiating commissions. In placing orders for securities transactions, AAI's
policy is to attempt to obtain the most favorable price and efficient execution
available. Subject to this policy, AAI may also allocate brokerage to
broker-dealers based upon their sale of shares of the Trust. AAI has engaged an
investment sub-adviser to provide the day-to-day portfolio management of the
International Equity Fund.
Effective , 1996, pursuant to a separate administration
agreement (the "Administration Agreement") between the Trust and Aon Securities
Corporation ("ASC"), a wholly owned subsidiary of Aon, ASC has agreed, 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 Trustees; (d) prepare tax returns; (e) prepare reports to and
filings with the SEC and State Blue Sky authorities; (f) at the Trust'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 Trust with a third party); and (h) furnish persons satisfactory
to the Trust to respond during normal business hours to in-person, written
and telephone requests for
27
<PAGE> 34
assistance and information from shareholders of the Trust, 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 Trust shareholder records.
The Trust is responsible for all other expenses, including:
(a) taxes and fees payable by the Trust to federal, state, or other
government agencies; (b) brokerage fees and commissions, and issue and
transfer taxes; (c) interest; (d) Board of Trustees meeting attendance and
annual retainer fees and expenses of trustees of the Trust who are not
directors, officers or employees of AAI, or of any affiliated person (other
than a registered investment company) of AAI; (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 Trust 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 trustees of the Trust; (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, shareholders' 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 Trust's general operations; (p) costs relating to the
Trust's own employees, if any; and (q) costs of preparing, printing, and
delivering the Trust's Prospectus and Statement of Additional Information
to existing shareholders.
AAI has agreed to reimburse the Trust for any amount by which the total
expenses of (i) the Class C or Class Y shares of the Money Market Fund in any
fiscal year exceed 1.10% or 1.00%, respectively, of the aggregate average daily
net assets of those classes of that Fund; (ii) the Class C or Class Y shares of
the Government Securities Fund in any fiscal year exceed 1.75% or 1.50%,
respectively, of the first $30 million of aggregate average daily net assets of
such classes of that Fund and 1.50% or 1.25%, respectively, of average daily net
assets of such classes of that Fund in excess of $30 million; (iii) the Class C
or Class Y shares of the Asset Allocation Fund in any fiscal year exceed 1.50%
or 1.25%, respectively, of the aggregate average daily net assets of such
classes of that Fund; (iv) the Class C or Class Y shares of the S&P 500 Index
Fund in any fiscal year exceed 1.00% or .75%, respectively, of the aggregate
average daily net assets of such classes of that Fund; (v) the Class C or Class
Y shares of the International Equity Fund in any fiscal year exceed 2.00% or
1.75%, respectively, of the first $30 million of aggregate average daily net
assets of such classes of that Fund and 1.75% or 1.50%, respectively, of average
daily net assets of such classes of that Fund in excess of $30 million; and (vi)
the Class C or Class Y shares of the REIT Index Fund in any fiscal year exceed
1.75% or 1.50%, respectively, of the first $30 million of aggregate average
daily net assets of such classes of that Fund and 1.50% or 1.25%, respectively,
of average daily net assets of such classes of that Fund in excess of $30
million. For purposes of this reimbursement formula, "expenses" do not include
interest, taxes, brokerage commissions or extraordinary expenses. Reimbursement
of excess expenses, as described above, cannot be changed without shareholder
approval.
During the fiscal year ended October 31, 1995, the total operating expenses
incurred by the Funds (including the advisory fee paid to AAI), before
reimbursement or fee waivers, represented .39% of the average net assets of the
Class Y shares of the Money Market Fund and .96% of the average net assets of
the Class Y shares of the Asset Allocation Fund. The remaining classes and Funds
did not commence operations until after the end of such fiscal year. During the
fiscal year ended October 31, 1995, AAI was not required to reimburse the Trust
for expenses under the provisions described in the preceding paragraph.
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<PAGE> 35
The Trust pays AAI compensation in the form of investment advisory fees.
The fees are accrued daily but paid to AAI monthly. Effective ,
1996, the investment advisory fee for each Fund is based upon the average daily
net assets of such Fund (see "Net Asset Value"), at the following annual rates:
Money Market Fund: .30%.
Government Securities Fund: .45% of the first $100,000,000; .40% of the
next $100,000,000; .35% of the next $100 million; .30% of the next $100,000,000;
and .25% of amounts in excess of $400,000,000.
Asset Allocation Fund: .65% of the first $250 million; .55% of the
next $250 million; and .45% of amounts in excess of $500 million.
S&P 500 Index Fund: .30%.
International Equity Fund: .95% of the first $100,000,000; .90% of the
next $100,000,000; and .85% of amounts in excess of $200,000,000.
REIT Index Fund: .60% of the first $100,000,000; .55% of the next
$100,000,000; and .50% of amounts in excess of $200,000,000.
Since the Money Market Fund began operations, AAI has waived collection of
.25% of its annual investment advisory fee (which fee, prior to ,
1996, was at an annual rate of .35% and included fees payable under the
Administration Agreement which are now borne directly by the Trust). AAI has
agreed to continue waiving half of its .30% annual investment advisory fee until
at least , 1997.
During the fiscal year ended October 31, 1995, the Trust paid AAI
investment advisory fees in an amount representing .10% of the average net
assets of the Money Market Fund and .70% of the average net assets of the Asset
Allocation Fund. The remaining Funds did not commence operations until after the
end of such fiscal year.
Effective as of , 1996, the Trust also pays ASC an annual fee
of .05% of the Fund's average daily net assets under the Administration
Agreement.
INVESTMENT SUB-ADVISER
Perpetual Fund Management Limited ("Perpetual"), a wholly-owned subsidiary
of Perpetual plc, is the investment sub-adviser for the International Equity
Fund. It is registered under the Investment Advisers Act of 1940 as an
investment adviser and has its principal offices at 48 Hart Street,
Henley-on-Thames, Oxfordshire, England RG9 2AZ. In addition to the International
Equity Fund, Perpetual provides investment advice and management to pension
plans, corporations and other institutional and individual clients. Perpetual is
currently the sub-advisor to one other U.S. mutual fund, and it and its
affiliates currently manage over 29 unit trusts (the British term for mutual
funds) in the United Kingdom and overseas. As of December 31, 1995, Perpetual
and its affiliates managed approximately $7.5 billion in assets. As of December
31, 1995, Mr. Martyn Abib, Chairman of Perpetual plc, owned directly and
beneficially approximately 7,375,000 (26.57%) of the ordinary shares (i.e.,
common stock) of Perpetual plc; Perpetual plc has the same address as Perpetual.
Perpetual manages the investments of the International Equity Fund,
determining which securities or other investments to buy and sell for each,
selecting the brokers and dealers to effect the transactions, and negotiating
commissions. In placing orders for securities transactions, Perpetual follows
AAI's policy of seeking to obtain the most favorable price and efficient
execution available.
For its services, AAI pays Perpetual monthly compensation in the form of an
investment sub-advisory fee. The fee is based upon the average daily net assets
of the International Equity Fund at the rate of .50% of the first $100,000,000;
.475% of the next $100,000,000; and .45% of amounts in excess of $200,000,000 of
such average daily net assets.
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<PAGE> 36
FUND MANAGERS
Michael A. Conway has been President of AAI since 1990. In that capacity he
oversees the investment management of all portfolios of the Trust. From 1985 to
1990, Mr. Conway was president of Manhattan National Corporation. Mr. Conway
holds a B.A. degree from the University of Illinois. He is a Chartered Financial
Analyst and a charter member of the International Society of Financial Analysts.
Keith C. Lemmer, portfolio manager of the Money Market Fund since its
inception in 1992, has been employed as Senior Portfolio Manager of AAI since
1992. Prior to 1992, Mr. Lemmer was employed by AAI as a Portfolio Manager (from
1991 to 1992) and a Fixed Income Analyst (from 1987 to 1991). Mr. Lemmer holds a
B.A. degree from Western Illinois University and an M.B.A. degree from DePaul
University. He is a Certified Public Accountant and a Chartered Financial
Analyst. He is a member of the Association for Investment Management and
Research and the Investment Analysts Society of Chicago.
Janet S. Henry, portfolio manager of the Government Securities Fund, has
been employed by AAI since 1987. She is currently a Senior Portfolio Manager
responsible for managing over $1.5 billion in taxable fixed income investments
for Aon and its subsidiaries and other insurance company clients of AAI. Ms.
Henry received her B.A. in History from DePauw University in 1974 and is a
Chartered Financial Analyst. Ms. Henry is a member of the Financial Analysts
Federation and the Investment Analysts Society of Chicago.
John G. Lagedrost, portfolio manager of the Asset Allocation Fund since
December 1995, has been employed as Senior Portfolio Manager of AAI since 1995.
From 1991 to 1995, Mr. Lagedrost was Vice President in the Asset Management
Group of The First National Bank of Chicago, and from 1987 to 1990, he was Vice
President in the Mezzanine Finance Group of such bank. Mr. Lagedrost holds a
B.S. degree from Marquette University and M.M. degree from Northwestern
University.
John C. DeCaro, II, portfolio manager of the S&P 500 Index Fund, joined AAI
in 1995 as an Investment Analyst. He is a member of the Financial Risk
Management Group, and also serves as assistant portfolio manager for the Life of
Virginia Series Fund Common Stock Index Portfolio. Prior to joining AAI, Mr.
DeCaro was employed as a Quantitative Analyst for Morningstar, Inc. (1992-1995).
Mr. DeCaro was awarded his B.S. in Finance from the University of South Carolina
in 1991. He received his M.S. in Financial Markets and Trading from the Illinois
Institute of Technology in 1995. Mr. DeCaro is a Chartered Financial Analyst
candidate and has passed the Level I examination.
Robert E. Dunn, portfolio manager of the REIT Index Fund, joined AAI in
August 1994 as Senior Portfolio Manager, concentrating on exchange-traded and
over-the-counter derivative hedges for Aon and its subsidiary companies. Prior
to joining AAI, Mr. Dunn was a Derivative Product Sales Associate for National
Westminster Bank, Plc. (1993-1994) and a Capital Markets Research Analyst for
Continental Bank (1989-1993). He was awarded his B.A. in Economics from the
University of Notre Dame in 1986. He received his M.B.A. in Finance from the
University of Chicago in 1993.
No single person or persons acts as portfolio managers(s) for the
International Equity Fund. All investment decisions for the International Equity
Fund are made by an investment committee of Perpetual.
DISTRIBUTION OF SHARES
The Trust has entered into a Distribution Agreement with Aon Securities
Corporation (the "Distributor"), 123 North Wacker Drive, Chicago, Illinois
60606, a wholly-owned subsidiary of Aon, under which ASC will act as principal
underwriter and distributor of the shares of each Fund.
The Distributor is paid a distribution fee and service fee with respect to
Class C shares of the Funds at the annual rate of 0.25% (.10% in the case of the
Money Market Fund) of the value of the average daily net assets attributable to
that class of shares of each Fund. The fees are authorized pursuant to a Plan of
Distribution for Class C shares (the "Plan") adopted by the Funds pursuant to
Rule 12b-1 under the 1940 Act and are used by the Distributor to pay third
parties for maintaining or servicing shareholder accounts and also to cover
expenses primarily intended to result in the sale of those shares of the Funds
or the provision of services to holders of those shares. These expenses may
include costs of printing and distributing the Trust's Prospectus,
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Statement of Additional Information and sales literature to prospective
investors in Class C shares; and payments to and expenses of registered
representatives and other persons who provide distribution or support services
in connection with the distribution or servicing of the Class C shares.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred, and the payments may exceed
distribution or service expenses actually incurred. The Trust's Board of
Trustees will evaluate the appropriateness of the Plan and its payment terms on
a continuing basis and in doing so will consider all relevant factors, including
expenses and the amounts paid under the Plan.
NET ASSET VALUE
The net asset value per share of each Fund is determined by subtracting the
liabilities of such Fund from the value of its assets and dividing the remainder
by the number of outstanding shares of such Fund. Net asset value is calculated
separately for each class of shares of each Fund once each day that the Trust is
open for business at the close of regular trading on the New York Stock Exchange
(currently 3:00 p.m., Central Time) on each such day, except that, in the case
of the Money Market Fund, such net asset value is calculated twice each such
day, once at 12:30 p.m., Central Time, and again at the close of regular trading
on the New York Stock Exchange, on each such day.
The Trust is open business on each day that the New York Stock Exchange is
open for trading, except that shares of the Trust may not be purchased or
redeemed, and 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, Veterans' Day, Thanksgiving Day,
and Christmas Day.
With the exception of the Money Market Fund, securities of each Fund are
valued based upon market quotations or, if not readily available, at fair value
as determined in good faith under procedures established by the Trust's Board of
Trustees. See "Net Asset Value" in the Statement of Additional Information.
The Trust intends to use its best efforts to maintain the net asset value
of the Money Market Fund at $1.00 per share although it cannot assure that it
will be able to do so on a continuous basis. The Money Market Fund's net asset
value is computed using the amortized cost method to value its portfolio
securities. This method involves valuing an instrument at cost and thereafter
assuming a constant amortization to maturity of any discount or premium
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Money Market Fund would receive if it sold the
instrument. During these periods, the yield to an existing shareholder may
differ somewhat from that which could be obtained from a similar portfolio which
marks its portfolio securities to market each day. A more detailed description
of net asset value computation and amortized cost method is contained in the
Statement of Additional Information.
Although the legal rights of holders of Class C and Class Y shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset value of Class C
shares will generally be lower than that of Class Y shares as a result of the
distribution and service fees charged. It is expected, however, that the net
asset value per share of each of the classes will tend to converge immediately
after the recording of dividends since the dividends will differ by
approximately the amount of the distribution expense accrual differential
between the classes.
PURCHASE OF SHARES
Shares of the Trust are offered and sold on a 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. If you did not receive a proper Account
Application with this Prospectus, please contact the transfer agent at (800)
266-3637. Subsequent purchase orders may be placed by submitting orders to the
Trust's transfer agent (Firstar Trust Company). The minimum initial investment
for shares of each Fund is $1,000, and subsequent investments must be at least
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$100. Investors in Class Y shares must meet other purchase requirements. 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 and its affiliates.
The Trust makes available a retirement plan for self-employed individuals
(Keogh Plan) and individual retirement accounts (IRAs) for all individuals.
Additional information concerning these plans and accounts may be obtained from
the transfer agent, telephone (800) 266-3637.
Investors may purchase shares of a Fund at net asset value through a
broker, who may charge a transaction fee for this service, no part of which is
paid by or received by the Fund, the Adviser or the Distributor.
CLASSES OF SHARES
The Trust offers two classes of shares for each of its Funds:
Class C shares are not subject to an initial or deferred sales charge,
but are subject to an annual distribution fee under the Plan of .25% (.10%
in the case of the Money Market Fund) of the average daily net asset value
of the Class C shares.
Class Y shares are not subject to an initial or deferred sales charge,
or annual distribution or service fees. Class Y shares are available only
to (i) the shareholders of record of outstanding shares of a Fund as of the
business day immediately prior to the commencement of distribution under
the multiple-class program, including additional investments by such
holders, (ii) investment advisory clients of AAI and (iii) affiliates of
Aon or AAI.
The two classes of shares with respect to a particular Fund represent an
interest in the same portfolio of investments and have the same rights, except
that each class bears the separate expenses of its Rule 12b-1 distribution and
service plan, if any, and has exclusive voting rights with respect to such plan.
The two classes also have separate exchange privileges. The net income
attributable to each class and the dividends payable on the shares of each class
will be reduced by the amount of the distribution and service fees of each
class. Class C shares bear the expense of a higher distribution and service fee
that are expected to cause the Class C shares to have a higher expense ratio and
pay lower dividends than the Class Y shares.
PURCHASE BY CHECK
Investors desiring to purchase shares of any Fund may obtain an Account
Application from the transfer agent. The Application should be completed
(indicating the Fund and class of shares) and mailed, together with a check or
money order (payable to Aon Funds), to the Trust, at Firstar Trust Company, P.O.
Box 701, Milwaukee, Wisconsin 53261-0701. 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 Trust 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 Trust as shown above, along with either
(1) the detachable form that regularly accompanies the confirmation of a prior
transaction, or (2) a letter stating the amount of the investment, the name of
the Fund in which the investor wants to invest, the class alternative (Class C
or Class Y shares) and the account number in which the investment is to be made.
A $20 fee will be imposed by the transfer agent if any check deposited on behalf
of the Trust does not clear, and the investor involved will be responsible for
any loss incurred by the Trust.
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PURCHASE BY WIRE
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 # 1 12-952-137
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Aon Funds -- [Name of Fund]
[Class alternative (Class C shares or Class Y shares)]
[investor's account number and the title of the account]
When making an initial wire purchase, please call the transfer agent at
(800) 266-3637 with the appropriate account information prior to sending the
wire. Investors should be sure to specify the name of the Fund in which they
want to invest and whether they are purchasing Class C or Class Y shares.
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 the Trust.
Subsequent purchase orders are accepted by the transfer agent at its
Milwaukee office. The Trust may allow certain securities dealers or financial
institutions with which it and the Distributor have entered into agreements to
purchase shares of the Funds for next day settlement. Otherwise, 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 the close of trading
on the New York Stock Exchange (currently 3:00 p.m., Central Time) (12:30 p.m.
or 3:00 p.m., Central Time, in the case of the Money Market Fund) on a business
day will be executed at the price per share next calculated as of such time.
Purchase orders received and accepted after such time will be executed at the
price per share next calculated following receipt and acceptance of the purchase
order by the transfer agent.
The Trust 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 Taxpayer Identification
Number has been applied for will not be accepted. If a Taxpayer Identification
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.
In the case of the Money Market Fund, if the transfer agent receives and
accepts a purchase order by 12:30 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 12:30 p.m. (Central Time), an
investor's shares will begin to accrue dividends on the following business day.
The Trust reserves the right to reject any purchase order for any reason.
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<PAGE> 40
REDEMPTION OF SHARES
REGULAR REDEMPTION
An investor may redeem shares in any amount at their next determined net
asset value after receipt of a written redemption request by Aon Funds, P.O. Box
701, Milwaukee, WI 53201-0701.
The Trust 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 Trust. 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 Trust by overnight courier must be
delivered to the offices of the transfer agent 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 Taxpayer
Identification Number. If the amount of the redemption request exceeds $10,000,
or if the proceeds are to be sent elsewhere than the address of record, each
signature must be guaranteed by an eligible signature guarantee institution,
such as 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. 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 Trust 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 Trust 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 (800) 266-3637, and providing the
account name, account number, Fund name, class of shares to be redeemed 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
next business day (the same business day in the case of redemptions as of 12:30
p.m., Central Time, from the Money Market Fund), provided the redemption order
is received by the transfer agent before the close of regular trading on the New
York Stock Exchange (currently 3:00 p.m., Central Time) (or before 12:30 p.m.,
Central Time, in the case of same-day redemption from the Money Market Fund). If
a redemption order is received by the transfer agent after the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m., Central Time)
(after 12:30 p.m., Central Time, in the case of the Money Market Fund), or on a
non-business day, payment for the redeemed shares will, at the investor's
request, normally be wired in federal funds one business day later.
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 $10.00 fee for each payment of redemption
proceeds made by wire. The Trust imposes the wire transfer fee directly upon
redeeming shareholders requesting wire transfers.
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 Funds at P.O. Box 701,
Milwaukee, WI 53201-0701. The request must be signed by each shareholder of the
account
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<PAGE> 41
with the signatures guaranteed as described above. Further documentation may be
requested from corporations, executors, administrators, trustees and guardians.
The Trust 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 Trust at any time. In addition, neither the
Trust 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
Trust 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 FOR MONEY MARKET FUND
An investor may request on the Account Application or by later written
request that the Money Market Fund provide to the investor Redemption Checks
("Checks") which may be drawn on the Fund. Checks will be sent only to the
registered owner(s) of shares of the Money Market Fund 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 Fund 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 $20 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 Money Market Fund 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 Trust's transfer agent
in proper form before the close of regular trading on the New York Stock
Exchange (currently 3:00 p.m., Central Time) (before 12:30 p.m., Central Time,
in the case of the Money Market Fund) on a business day will not receive any
Fund dividend declared that day. If the request is received in proper form after
the close of regular trading on the New York Stock Exchange (currently 3:00
p.m., Central Time) (after 12:30 p.m., Central Time, in the case of the Money
Market Fund), the shares to be redeemed will be credited with that day's
dividend.
Each 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 otherwise be permitted by the SEC. Payment may be delayed (1) for any period
during which the New York Stock Exchange is closed (other than customary weekend
or holiday closings) or trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists, as determined by the SEC,
and it is not reasonably practicable for such Fund to dispose of its securities,
or to determine the value of its net assets; or (3) for other periods as
permitted by the SEC for the protection of the Fund'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
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<PAGE> 42
purchasing shares by wire must file an Account Application before payment is
made on any redemption requests for shares purchased by wire.
Each 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
redemption 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 bank checking account for investment each month or
quarter in shares of a Fund in a minimum amount of $100. (This minimum may be
less for full-time staff employees of Aon 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 Trust 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 any Fund of the Trust which have been registered in the
shareholder's name for at least 15 days may be exchanged for shares of the same
class of any other Fund of the Trust, 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 this Prospectus as it relates to
the Fund the shares of which are being acquired.
Under the exchange privilege, each Fund offers to exchange its shares for
shares of the same class as another Fund on the basis of relative net asset
values per share. In order to exercise an exchange without further approval of
the Trust, 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 at (800) 266-3637 and request the exchange. The shareholder will
be charged $5.00 for each exchange resulting in a redemption out of any Fund.
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 adviser.
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 Trust reserves the right to limit the number of
exchanges in excess of four per year.
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 a
Fund on a regular basis under a Systematic Withdrawal Plan (the "Withdrawal
Plan"). Under the Withdrawal Plan, a shareholder can elect fixed dollar monthly,
quarterly or annual payments of at least $100 each.
Under the Withdrawal Plan, shareholders must elect to reinvest dividends
and other distributions in additional Fund shares. All payments are made by
redeeming shares, and when all the shares under the Withdrawal Plan have been
redeemed, no more payments are made. Withdrawal Plan participation may be
terminated at any time by the shareholder or the Trust. To initiate the
Withdrawal Plan, please complete the
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Supplemental Application, which is attached to the Application. For information
on obtaining an Application, see "Purchase of Shares."
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Money Market Fund accrues dividends from net investment income and
usually distributes such accrued dividends to shareholders monthly. The
Government Securities Fund and the Asset Allocation Fund generally declare and
distribute to shareholders dividends from net investment income monthly or
quarterly, respectively. The S&P 500 Index Fund, the International Equity Fund
and the REIT Index Fund declare and distribute to shareholders dividends from
net investment income at least annually. All capital gains, if any, are
distributed at least annually, usually in December. When a dividend or
distribution is declared, the net asset value per share is reduced by the amount
thereof. Investors considering buying shares of one of the Funds just prior to a
record date for a taxable dividend or capital gain distribution should be aware
that the amount of the forthcoming dividend or distribution payment will be a
taxable dividend or distribution payment. Unless a shareholder otherwise
directs, dividends and distributions are reinvested in additional full and
fractional shares of the same class of the Fund with respect to which they were
paid based on the net asset value of such shares on the payment date. A
shareholder may instead elect (1) to receive all dividends and distributions in
cash, (2) to reinvest capital gains distributions and receive net investment
income dividends in cash, or (3) to invest all dividends and distributions in
full and fractional shares of the same class of another Fund at the net asset
value next determined after the time of payment. Elections may be made by
notifying the transfer agent in writing of the election at least 30 days prior
to the day on which the election is to be effective, and will remain in effect
until revoked by similar notice to the transfer agent.
Each Fund intends to qualify and to continue to qualify as a regulated
investment company ("RIC") under the Code. As a RIC, a Fund is not subject to
federal income taxes on its income and gains distributed to shareholders,
provided that the Fund distributes to its shareholders at least 90% of its net
investment income (i.e., net income and gains, exclusive of net long-term
capital gains) each year. Each Fund intends to distribute annually to its
shareholders substantially all of its net investment income and net long-term
capital gains, if any.
Shareholders (except those who are not subject to tax on their income) are
subject to federal income tax on distributions of net investment income and net
long-term capital gains, regardless of whether such distributions are paid in
cash or reinvested in additional shares of the distributing Fund or another
Fund. The per share dividends and distributions on Class Y shares will generally
be higher than the per share dividends and distributions on Class C shares as a
result of lower distribution and service fees applicable to Class Y shares.
Distributions by a Fund of its net investment income will be taxable to
shareholders as ordinary income, and will qualify for the 70% dividends received
deduction available to corporations only to the extent the Fund's net investment
income consists of qualifying dividend income from U.S. corporations.
Distributions by a Fund of its net long-term capital gains will be taxable to
shareholders as long-term capital gain, regardless of the length of time a
shareholder has owned shares of the Fund. Distributions in excess of a Fund's
current and accumulated earnings and profits will be treated first as a return
of capital to the extent of a shareholder's tax basis in his shares and
thereafter as gain from the sale of such shares. Distributions may be subject to
state and local tax. Shareholders will be advised of the amount and nature of
any income or gains distributed to shareholders.
Any gain or loss realized upon the sale or exchange of shares of a Fund
(including an exchange of shares of one Fund for shares of a different Fund) by
a shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. Any loss realized by a shareholder
upon the sale of shares held for six months or less will be treated as long-term
capital loss, however, to the extent of any distributions of net long-term
capital gains received on such shares. Additionally, any loss realized on the
sale or exchange of shares of a Fund will be disallowed to the extent the shares
disposed of are replaced, through the reinvestment of dividends or otherwise,
during the 61-day period beginning 30 days before and ending 30 days after the
shares are sold or exchanged.
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FOREIGN INVESTMENTS
Each Fund investing in foreign securities, currencies or other investments
may be required to pay withholding or other taxes to foreign governments.
Foreign tax withholding from dividends and interest, if any, is generally at a
rate between 10% and 35%. The investment yield of any Fund that invests in
foreign securities, currencies or other investments will be reduced by these
foreign taxes and, in general, shareholders of such a Fund will bear the cost of
any such foreign taxes.
If, however, more than 50% of the value of a Fund's total assets as the
close of its taxable year consists of stocks or securities of foreign
corporations, such Fund will be eligible to make an election to "pass through"
to such Fund's shareholder's the amount of foreign taxes paid by such Fund. It
is not expected that any of the Funds other than the International Equity Fund
will be eligible to make such an election. To the extent the International
Equity Fund is eligible to make such an election, it may elect to do so. If such
an election is made, a shareholder will be required to: (1) include in gross
income (in addition to taxable dividends actually received) his or her pro rata
share of the foreign taxes paid by the electing Fund; (2) treat his or her pro
rata share of such foreign taxes as having been paid by him or her; and (3)
either deduct his or her pro rata share of foreign taxes in computing his or her
taxable income or, subject to numerous limitations, use it as a foreign tax
credit against U.S. income taxes. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions. Generally, no deduction or
credit will be available to a shareholder who is exempt from federal income tax.
Each shareholder of a Fund eligible to make an election for a taxable year will
be notified within 60 days after the close of the Fund's taxable year whether
the foreign taxes paid by the Fund will "pass through" for that year and, if so,
such notification will designate (a) the shareholder's portion of the foreign
taxes paid to each country and (b) the portion of dividends that represents
income derived from sources within each such country.
The amount of foreign taxes for which a shareholder may claim a credit in
any year will be subject to an overall limitation which is applied separately to
"passive income", which includes, among other types of income, dividends and
interest. The foregoing is only a general description of the foreign tax credit
under current law. Because application of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If an investor has not furnished a certified correct Taxpayer
Identification Number (generally a Social Security number) and has not certified
that withholding does not apply, or if the IRS has notified the Trust that the
Taxpayer Identification Number listed on the investor's account is incorrect
according to their records or that the investor is subject to backup
withholding, federal law generally requires the Trust to withhold 31% from any
dividends and/or redemptions (including exchange redemptions). Amounts withheld
are applied to the investor's federal tax liability; a refund may be obtained
from the IRS if withholding results in overpayment of taxes.
REITs do not provide complete information about the taxability of their
distributions until after the calendar year end. As a result, the Trust may not
be able to determine how much of the REIT Index Fund's annual distributions is
taxable to shareholders until after the traditional January 31 deadline for
issuing Form 1099-DIV ("1099"). Therefore, the Trust may request permission each
year from the IRS for an extension. If the Trust's request is approved, it will
mail Form 1099-DIVs to REIT Index Fund shareholders with non-retirement accounts
in February.
THE FOREGOING IS ONLY A SUMMARY OF SOME OF THE IMPORTANT TAX CONSIDERATIONS
GENERALLY AFFECTING EACH FUND AND ITS SHAREHOLDERS. INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISERS REGARDING FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAXATION OF INVESTMENTS IN ANY FUND. IN PARTICULAR, INVESTORS THAT ARE NOT U.S.
PERSONS FOR U.S. FEDERAL INCOME TAX PURPOSES, AND OTHER INVESTORS SUBJECT TO
SPECIAL RULES UNDER THE CODE, SHOULD CONSULT THEIR TAX ADVISERS.
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PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, the Money Market Fund may advertise its yield and
effective yield. Both yield figures are based on historical earnings and are not
intended to indicate future performance. It can be expected that these yields
will fluctuate substantially. The yield of the Fund refers to the income
generated by an investment in the Fund 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 Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
GOVERNMENT SECURITIES FUND AND ASSET ALLOCATION FUND
For purposes of advertising, performance of each class of the Government
Securities Fund and Asset Allocation Fund may be calculated on several bases,
including current yield, average annual total return and/or total return.
Current yield refers to the Fund's annualized net investment income per share
over a 30-day period, expressed as a percentage of the net asset value per share
at the end of the period. For purposes of calculating current yield, the amount
of net investment income per share during that 30-day period, computed in
accordance with regulatory requirements, is compounded by assuming that it is
reinvested at a constant rate over a six-month period. An identical result is
then assumed to have occurred during a second six-month period which, when added
to the result for the first six months, provides an "annualized" yield for an
entire one-year period.
S&P 500 INDEX FUND, INTERNATIONAL EQUITY FUND AND REIT INDEX FUND
For purposes of advertising, performance of each class of the S&P 500 Index
Fund, the International Equity Fund and the REIT Index Fund may be calculated on
the basis of average annual total return and/or total return. Average annual
total return is calculated pursuant to a standardized formula which assumes that
an investment in such class was purchased with an initial payment of $1,000 and
that the investment was redeemed at the end of a stated period of time, after
giving effect to the reinvestment of dividends and distributions during the
period. The return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of the investment
at the end of the period. Advertisements of the performance of a class of these
Funds will include the average annual total return for such class for one, five
and ten year periods, or for shorter time periods, depending upon the length of
time during which the class has operated. Computations of average annual total
return for periods of less than one year represent an annualization of actual
total return for the applicable period.
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the maximum offering price per
share at the beginning of the period. Advertisements may include the percentage
rate of total return or may include the value of a hypothetical investment at
the end of the period which assumes the application of the percentage rate of
total return.
Average annual total return and total return will be calculated as
described above.
INFORMATION APPLICABLE TO ALL FUNDS
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of the type and quality of portfolio securities held
by a Fund and is affected by operating expenses. No adjustment is made in
reporting performance for taxes payable by shareholders on reinvested dividends
and distributions. Yield and performance information, such as that described
above, may not provide a basis for comparison with other investments or other
39
<PAGE> 46
investment companies using a different method of calculating performance.
Performance for each class will be calculated separately.
Comparative performance information may be used from time to time in
reports or other communications to shareholders or in advertising or marketing a
Fund's shares, including data from Lipper Analytical Services, Inc., and other
industry or financial publications. The performance of the Funds may be compared
to that of other mutual funds with similar investment objectives and to relevant
equity, debt or other indices. From time to time, articles about the Trust or
the Funds regarding their performance or ranking may appear in various
publications. Some of these publications may publish their own rankings or
performance reviews of mutual funds, including the Trust or the Funds. Reference
to or reprints of such articles may be used in promotional literature.
ADDITIONAL INFORMATION
To date, the Trust's Board of Trustees has authorized the creation of six
separate series of shares for the Trust. All consideration received by the Trust
for shares of one of the series and all assets in which such consideration is
invested will belong to that series and will be subjected to the liabilities
related thereto. The income attributable to, and the expenses of, one series
(and classes within a series) are treated separately from those of the other
series (and classes). The Trust has the ability to create, from time to time,
new series without shareholder approval which may be sold pursuant to other
offering documents.
As of May 31, 1996, Aon, itself and through its subsidiaries, owned
beneficially and of record 95.72% and 98.81% of the outstanding shares of
beneficial interest of the Money Market Fund and the Asset Allocation Fund,
respectively. Aon, along with its subsidiaries, is also expected to own a
substantial percentage of the outstanding shares of each other Fund. These
shareholders will be affiliated persons of such Fund. Aon 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 any Fund's investment
objective and fundamental investment restrictions and in the terms of its
investment advisory agreement.
It is possible that a Fund might become liable for any misstatement in this
Prospectus about another Fund. The Trust's Board of Trustees has considered this
factor in approving the use of this single combined Prospectus.
SHAREHOLDER MEETINGS AND VOTING
The Trust will not hold annual shareholder meetings. Shareholders under
certain circumstances have the right to call a meeting of shareholders for the
purpose of voting to remove Board members. In addition, shareholders of the
respective Funds will have the power to vote at special meetings with respect
to, among other things, changes in fundamental investment policies and
restrictions of such Funds, approval of changes to investment advisory
agreements and such additional matters relating to the Trust or such Funds (or
classes of shares thereof) as might be required by the 1940 Act. As to any
matter on which shareholders of the Trust are entitled to vote, they shall be
entitled to one noncumulative vote for each full share and to a proportionate
fractional vote for each fractional share, irrespective of class, standing in
the shareholder's name on the books of the Trust. In no event shall holders of
shares of a series or class be entitled to vote such shares with respect to any
matter that does not affect any interest of such series or class, as the case
may be, unless otherwise required by the 1940 Act. All shares then issued and
outstanding and entitled to be voted shall be voted on a series by series basis,
except that (1) shares shall be voted in the aggregate without differentiation
among the separate series and classes in the case of the election or removal of
Trustees and where otherwise required by the 1940 Act or the Trust's Agreement
and Declaration of Trust, (2) shares shall be voted by class where required by
the 1940 Act, and (3) the Trustees in their sole discretion may determine that,
in situations where the shares of more than one series or class are entitled to
be voted with respect to a matter, such shares shall be voted as a single class
with respect to such matter if and to the extent permitted under the 1940 Act.
Shares do not have preemptive or subscription rights.
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<PAGE> 47
CUSTODIAN
Firstar Trust Company acts as Custodian of the assets of the Fund and also
acts as its transfer and dividend paying agent. The principal office of Firstar
Trust Company is located at 777 E. Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Pursuant to a sub-custody agreement with Firstar Trust Company, Chase Manhattan
Bank, N.A., 1211 6th Avenue, New York, NY 10036, serves as custodian for the
foreign assets of the International Equity Fund.
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<PAGE> 48
INVESTMENT ADVISOR
Aon Advisors, Inc.
123 North Wacker Drive
Chicago, Illinois 60606
ADMINISTRATOR
Aon Securities Corporation
123 North Wacker Drive
Chicago, Illinois 60606
DISTRIBUTOR
Aon Securities Corporation
123 North Wacker Drive
Chicago, Illinois 60606
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING AGENT
Firstar Trust Company
615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53202
INDEPENDENT AUDITORS
Ernst & Young LLP
Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
LEGAL COUNSEL
Sidley & Austin
One First National Plaza
Chicago, IL 60603
<PAGE> 49
AON FUNDS
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
DISTRIBUTOR -- AON SECURITIES CORPORATION
STATEMENT OF ADDITIONAL INFORMATION
, 1996
This Statement of Additional Information is not a Prospectus. Much of the
information contained in this Statement of Additional Information expands upon
matters discussed in the Prospectus of Aon Funds and should, therefore, be read
in conjunction with the Prospectus. To obtain a copy of the Prospectus with the
same date as this Statement of Additional Information, send a written request to
the Trust at 123 North Wacker Drive, Chicago, Illinois 60606, or call (800)
266-3637.
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................................... 4
Prior History....................................................................... 4
Portfolio Turnover.................................................................. 4
Money Market Fund Investments, Investment Practices and Restrictions.................. 5
General Standards................................................................... 5
U.S. Government Securities.......................................................... 5
Certificates of Deposit and Time Deposits........................................... 5
Commercial Paper.................................................................... 5
Repurchase Agreements............................................................... 6
Foreign Securities.................................................................. 6
Lending Portfolio Securities........................................................ 7
Investment Restrictions............................................................. 7
Additional Investment Practices and Restrictions...................................... 8
When-Issued and Delayed Delivery Securities......................................... 9
Loans of Portfolio Securities....................................................... 9
Convertible Securities.............................................................. 9
Warrants............................................................................ 10
Risks of Foreign Investments........................................................ 10
Forward Foreign Currency Exchange Contracts......................................... 11
Writing and Purchasing Currency Call and Put Options................................ 12
Special Risks Associated With Options on Currency................................... 13
Currency Swaps...................................................................... 13
Options on Securities and Securities Indices........................................ 14
Financial Futures Contracts......................................................... 15
Options on Financial Futures Contracts.............................................. 17
Certain Additional Risks of Options and Financial Futures Contracts................. 17
Borrowing........................................................................... 18
Lower-Rated, Lower Quality Debt Instruments......................................... 19
Risks of Lower-Rated, Lower Quality Debt Instruments................................ 19
Covered Call Options................................................................ 20
GNMA Certificates................................................................... 20
Investment Restrictions............................................................. 21
Management of the Trust............................................................... 24
Trustees and Officers............................................................... 24
Investment Advisers................................................................. 25
Investment Advisory and Administration Fees......................................... 26
Investment Sub-Adviser.............................................................. 26
Investment Sub-Advisory Agreement................................................... 26
Investment Sub-Advisory Fees........................................................ 27
Reimbursement of Excess Operating Expenses.......................................... 27
Securities Activities of the Advisers............................................... 27
Control Persons and Principal Holders of Securities................................. 29
Portfolio Transactions and Brokerage.................................................. 29
Determination of Net Asset Value...................................................... 30
General............................................................................. 30
Money Market Fund................................................................... 30
Non-Money Market Funds.............................................................. 31
Retirement Programs................................................................... 32
</TABLE>
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<PAGE> 51
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Information..................................32Taxes.................................. 33
Additional Information................................................................ 35
Custodian, Transfer Agent and Accounting Agent...................................... 35
Independent Auditors................................................................ 35
Legal Counsel....................................................................... 35
Shares of Beneficial Interest....................................................... 35
Reports............................................................................. 36
Other Information................................................................... 36
Appendix A............................................................................ 37
</TABLE>
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<PAGE> 52
GENERAL INFORMATION
Aon Funds (the "Trust") is an open-end management investment company
created as a Delaware business trust on May 16, 1996 and registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust currently issues six
series of shares (each, a "Fund" and collectively, the "Funds"), each
representing a separate portfolio of securities with its own investment
objectives and policies (commonly known as a mutual fund). The Funds which are
currently offered are the Money Market Fund, the Government Securities Fund, the
Asset Allocation Fund, the S&P 500 Index Fund, the International Equity Fund and
the REIT Index Fund. The Trust issues a separate series of shares for each Fund
representing fractional beneficial undivided interests in that Fund. An
investor, by investing in a Fund, becomes entitled to a pro rata share of all
dividends and distributions arising from the net income and capital gains on the
investments of that Fund, subject to any special expenses associated with a
particular class of shares within such Fund. Likewise, an investor shares pro
rata in any losses of that Fund.
Trust shares are distributed through Aon Securities Corporation ("ASC"), a
wholly-owned subsidiary of Aon Corporation, a publicly held insurance holding
company the common stock of which is listed on the New York Stock Exchange and
which, through subsidiaries, is a major provider of insurance, insurance
brokerage and related services. Aon Advisors, Inc. ("AAI"), also a wholly-owned
subsidiary of Aon Corporation, serves as investment adviser to the Trust. AAI
has engaged Perpetual Portfolio Management Limited ("Perpetual") as the
investment sub-adviser to provide day-to-day portfolio management for the
International Equity Fund. (As used herein, "Adviser" shall refer to AAI and,
where applicable, Perpetual, or both, in their respective roles.) Aon
Corporation and its subsidiary companies may, by virtue of their shareholder
interests in any Fund at any particular date, be considered to be controlling
persons of the Trust and such Fund and may be able to cast a deciding vote on
all matters submitted to a vote of the Trust's or such Fund's shareholders.
PRIOR HISTORY
Prior to , 1996, the Trust conducted business as Aon Asset
Management Fund, Inc., a Virginia corporation. Any reference herein to the
Trust, including any financial information and performance data, relating to
such period reflects the Trust's portfolios as constituted prior to the
commencement of operations of the Trust.
PORTFOLIO TURNOVER
The turnover rate for any Fund is calculated by dividing the lesser of
purchases or sales of Fund securities during the fiscal year by the monthly
average of the value of such Fund's securities (excluding from the computation
all securities, including options, with maturities at the time of acquisition of
one year or less). For example, a portfolio turnover rate of 100% would mean
that all of a Fund's securities (except those excluded from the calculation)
were replaced once in a period of one year. A high rate of portfolio turnover
generally involves correspondingly greater transaction 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 a Fund's shares and by
certain requirements which the Trust must satisfy to receive certain 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 judgment or
Fund operations make a sale advisable. As a result, the annual portfolio
turnover rates in future years may exceed the percentages shown below. 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 Fund, and none of the Government Securities Fund, S&P 500 Index
Fund, International Equity Fund or REIT Index Fund was in existence prior to
October 31, 1995.
The annual turnover rate for the Asset Allocation Fund for the period from
March 31, 1994 (commencement of operations) through October 31, 1994 and the
fiscal year ended October 31, 1995 was 64.36% and 95.17% respectively. Stocks in
the Fund had a turnover rate of 64.05% and bonds in the Fund had a turnover rate
of 21.36% for the period from March 31, 1994 (commencement of operations)
through October 31, 1994. Stocks in the Fund had a turnover rate of 141.09% and
bonds in the Fund had a turnover rate of 15.60% for the fiscal year ended
October 31, 1995.
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<PAGE> 53
The Government Securities, Asset Allocation, S&P Index, REIT Index
International Equity and International Equity Funds generally do not trade in
securities with the goal of obtaining short-term profits, but when circumstances
warrant, securities will be sold without regard to the length of time the
security has been held.
MONEY MARKET FUND INVESTMENTS,
INVESTMENT PRACTICES AND RESTRICTIONS
The investment objective of the Money Market Fund 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 Fund may invest and
certain investment practices that it may use and augments the explanation found
in the Prospectus.
GENERAL STANDARDS
The Money Market Fund may invest only in U.S. dollar-denominated
instruments maturing in 13 months or less which the Adviser, under the general
oversight of the Board of Trustees of the Trust, 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 1940 Act, 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 the Adviser
under the general oversight of the Board of Trustees 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.
The types of securities in which the Money Market Fund 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
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 ("GNMA")), (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 nonnegotiable 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.
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<PAGE> 54
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 Fund 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, the Adviser 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 Fund may invest in them only if at
the time of an investment the issuer meets the criteria set forth above and in
the Prospectus for all other issuers of instruments that the Money Market Fund
may purchase. Because master demand notes are immediately repayable by the
borrower on demand, they are considered by the Money Market Fund 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 Fund is qualified to purchase, and the
Fund'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 Fund 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 Fund to
earn a return on cash which is only temporarily available.
The Money Market Fund will only enter into repurchase agreements when the
Adviser, under the general oversight of the Board of Trustees of the Trust
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 Fund will only enter into
repurchase agreements with banks and primary government securities dealers whom
the Adviser (under the general oversight of the Trust's Board of Trustees and
using the same criteria used to evaluate the credit risk of all instruments
considered for purchase by the Fund) 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 Fund 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 Fund will only invest in
foreign securities that meet its general standards described above. Investments
by the Fund in foreign securities entail certain risks not shared by domestic
securities of the same type.
Securities of foreign issuers, particularly nongovernmental 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 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.
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<PAGE> 55
With respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, or diplomatic developments which could
affect investment certain foreign issuers; in those situations, it may be
difficult for the Fund to obtain or to enforce a judgment against the issuer.
LENDING PORTFOLIO SECURITIES
In order to further the Money Market Fund's investment objective of seeking
a high level of current income, it may lend its portfolio securities to brokers,
dealers, and financial institutions. The amount of loaned securities will not
exceed 5% of the Fund's net assets. Securities lending activities, if and when
engaged in by the Money Market Fund, 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 Non-Money Market Funds.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS . The Money Market Fund 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 Fund's outstanding voting securities. The "affirmative vote of the holders
of a majority of a Fund's outstanding voting securities" means the vote of: (1)
67% or more of the shares of the Fund present or represented by proxy at a
meeting of the Fund's shareholders, if more than 50% of the outstanding shares
of such Fund are present in person or by proxy at such meeting, or (2) more than
50% of the outstanding shares of such Fund, whichever is less. Pursuant to the
Money Market Fund'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 Money Market
Fund's total assets are 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 Money Market Fund 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
Money Market Fund or the Trust might be deemed an underwriter under the
Securities Act of 1933 in certain resales of portfolio securities held by
the Fund);
(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 Money Market Fund'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 Money Market Fund may enter into
repurchase agreements as described above or in the Prospectus, and the Fund
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 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 Money Market Fund's total
assets at the time the borrowing is made, and the Fund will not make
additional investments during any period that borrowings exceed 5% of the
value of its total assets;
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<PAGE> 56
(i) pledge, hypothecate, mortgage or transfer as security for
indebtedness any securities held by the Money Market Fund, 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 Money Market
Fund'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 Fund's total assets; and
(1) purchase or sell interests in oil, gas, or other mineral
explorations or development programs, commodities, or commodity contracts,
except that the Money Market Fund may purchase securities of issuers which
invest or deal in any of the above, provided such securities are money
market instruments in which the Fund is otherwise permitted to invest.
NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, the Money Market Fund is subject to the following
restrictions in implementing its investment policy. These additional
restrictions are not fundamental and may be changed by the Trustees without
shareholder approval. The Fund 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 Money Market Fund 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 ("NYSE");
(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 Funds,
with individually managed accounts, or with registered investment companies
advised or sponsored by the Money Market Fund's investment adviser or any
of its affiliates to reduce brokerage commissions or otherwise to achieve
best overall execution);
(d) alone, or together with any other Fund or Funds, 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 Money Market Fund's total assets will not constitute a
violation of the percentage restriction.
ADDITIONAL INVESTMENT PRACTICES AND RESTRICTIONS
The respective investment objectives of the Asset Allocation Fund, S&P 500
Index Fund, Government Securities Fund, International Equity Fund and REIT Index
Fund (the "Non-Money Market Funds") and the policies by which such Funds will
pursue their objectives are generally set forth in the Prospectus. This section
describes in more detail certain securities in which such Funds (and in certain
cases the Money Market Fund) may invest and certain investment practices they
may use and is intended to augment the explanation found in the Prospectus.
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<PAGE> 57
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, each Fund 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 date of the
transaction. The securities so purchased are subject to market fluctuation, and
no interest accrues to the purchaser during this period. At the time a Fund
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. Each Fund will also establish a segregated account with the Trust's
custodian bank in which it will maintain cash or cash equivalents or other
liquid Fund 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 each Fund 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
Each Non-Money Market Fund 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, and the Money Market Fund may so lend securities up to a maximum of
5% of its assets. This percentage may not be increased without approval of a
majority of the outstanding voting securities of the respective Funds. Such
loans will be secured by the collateral in the form of cash or U.S. Treasury
securities, which at all times during which the loan is outstanding will be
maintained in an amount at least equal to the current market value of the loaned
securities. Each Fund will continue to receive interest and dividends on the
loaned securities during the term of its loans and, in addition, will receive
either a fee from the borrower or interest earned from the 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 appropriate Fund. A Fund 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 Fund intends to 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 collateral
is insufficient to replace the full amount of the loaned securities. The
borrower would be liable for the shortage, but a Fund 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, the Funds will make loans of
securities only to firms that the Adviser (under the general oversight of the
Board of Trustees of the Trust) deems creditworthy.
CONVERTIBLE SECURITIES
The Asset Allocation Fund and International Equity Fund may each invest in
convertible securities. Convertible securities may include corporate notes or
preferred stock but are ordinarily a long-term debt obligation of the issuer
convertible at a stated exchange rate into common stock of the issuer. As with
all debt securities, the market value of convertible securities tends to decline
as interest rates increase and, conversely, to increase as interest rates
decline. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality. However, when the
market price of the common stock underlying a convertible security exceeds the
conversion price, the price of the convertible security tends to reflect the
value of the underlying common stock. As the market price of the underlying
common stock declines, the convertible security tends to trade increasingly on a
yield basis, and thus may not depreciate to the same extent as the underlying
common stock. Convertible securities generally rank senior to common stock in an
issuer's capital structure and are consequently of higher quality and entail
less risk of declines in market value than the
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issuer's common stock. However, the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed-income security. In evaluating a convertible security, the
Adviser usually gives primary emphasis to the attractiveness of the underlying
common stock. The convertible debt securities in which these Funds may invest
are subject to the same rating criteria as each Fund's investment in
non-convertible debt securities.
WARRANTS
The Asset Allocation Fund and the International Equity Fund may each invest
up to 5% of its total assets, calculated at the time of purchase, in warrants or
rights (other than those acquired in units or attached to other securities)
which entitle the holder to buy equity securities at a specific price for a
specific period of time. These Funds will not invest more than 2% of their total
assets, calculated at the time of purchase, in warrants or rights which are not
listed on the NYSE or American Stock Exchange. Warrants and rights have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
RISKS OF FOREIGN INVESTMENTS
Investing in the securities of companies that are organized outside the
United States or whose securities are principally traded outside the United
States ("foreign issuers") or investing in securities denominated or quoted in a
foreign currency ("non-dollar securities") involves certain special
considerations, including those set forth below, which are not typically
associated with investing in securities of domestic issuers or U.S. dollar
denominated securities.
Since investments in foreign issuers may involve currencies of foreign
countries and since a Non-Money Market Fund may temporarily hold funds in bank
deposits in foreign currencies during completion of investment programs and
since a Fund may be subject to currency exposure independent of its securities
positions, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations and may incur costs in
connection with conversions between various currencies.
Since foreign issuers are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers, there may be less publicly available information
about a foreign issuer than about a domestic issuer. Volume and liquidity in
most foreign securities markets are less than in the United States and
securities of many foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on U.S.
exchanges, although a Non-Money Market Fund may endeavor to achieve the most
favorable net results on its portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers, dealers
and listed and unlisted issuers than in the United States. Mail service between
the United States and foreign countries may be slower or less reliable than
within the United States, thus increasing the risk of delayed settlements of
portfolio transactions or loss of certificates for portfolio securities.
Foreign investment markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of transactions, making it difficult to
conduct such transactions. Such delays in settlement could result in temporary
periods when a portion of the assets of a Non-Money Market Fund are uninvested
and no return is earned on such assets. The inability of a Fund to make intended
securities purchases due to settlement problems could cause such Fund to miss
attractive investment opportunities. Inability to dispose of Fund investments
due to settlement problems could result either in losses to a Fund due to
subsequent declines in value of the portfolio securities or, if the Fund has
entered into a contract to sell the securities, could result in possible
liability to the purchaser. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect a
Fund's investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency or balance of payments position.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The International Equity Fund may enter into forward foreign currency
exchange contracts. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are generally charged at any stage for
trades. At the maturity of a forward contract, the Fund may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing purchase transaction involving the purchase or
sale of an offsetting contract. Closing purchase transactions with respect to
forward contracts are usually effected with the currency trader who is a party
to the original forward contract.
The International Equity Fund may enter into forward foreign currency
exchange contracts in several circumstances. First, when it purchases or enters
into a fixed price contract for the purchase or sale of a security denominated
or quoted in a foreign currency, or when it anticipates the receipt in a foreign
currency of dividend or interest payments on such a security which it holds, the
Fund may desire to "lock in" the U.S. dollar price or value of the security or
the U.S. dollar equivalent of such dividend or interest payment, as the case may
be. By entering into a forward contract for the purchase or sale, for a fixed
amount of dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will attempt to protect itself against an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date on which the security is proposed to be
purchased and the date on which the security is actually purchased, or the
period during which the security is held (including the period after sale but
prior to the conversion of the proceeds into dollars), or the period between the
declaration of the dividend or interest payment and the date on which such
payments are made or received (and converted into dollars).
When the Adviser believes that the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, it may enter into a
forward contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the International Equity
Fund's portfolio securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward contracts to
protect the value of the Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which the Fund can
achieve at some future point in time. The precise projection of short-term
currency market movements is not possible, and short-term hedging provides a
means of fixing the dollar value of only a portion of the Fund's foreign assets.
The International Equity Fund may engage in cross-hedging by using forward
contracts in one currency to hedge against fluctuations in the value of
securities quoted or denominated in a different currency if the Adviser
determines that there is a pattern of correlation between the two currencies.
The Fund also may purchase and sell forward contracts to seek to increase total
return when the Adviser anticipates that the foreign currency will appreciate or
depreciate in value, but securities denominated or quoted in that currency do
not present attractive investment opportunities and are not held by the Fund.
The Trust's custodian will place cash or high grade liquid debt securities
(i.e., securities rated in one of the top three ratings categories by Standard &
Poor's Corporation ("S&P") or by Moody's Investors Service, Inc. ("Moody's") or,
if unrated, deemed by the Adviser to be of comparable credit quality) into a
segregated account of the International Equity Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
foreign currency exchange contracts. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts. The segregated
account will be marked-to-market on a daily basis. Although the contracts are
not presently regulated by the Commodity Futures Trading Commission ("CFTC"),
the CFTC may in the future assert
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authority to regulate these contracts. In such event, the Fund's ability to
utilize forward foreign currency exchange contracts may be restricted.
While the International Equity Fund will enter into forward contracts to
reduce currency exchange rate risks, transactions in such contracts involve
certain other risks. Therefore, while the Fund may benefit from such
transactions, unanticipated changes in currency prices may result in a poorer
overall performance for the Fund than if it had not engaged in any such
transactions. Moreover, there may be imperfect correlation between the Fund's
portfolio holdings of securities quoted or denominated in a particular currency
and forward contracts entered into by the Fund. Such imperfect correlation may
cause the Fund to sustain losses that will prevent the Fund from achieving a
complete hedge or expose the Fund to risk of foreign exchange loss.
WRITING AND PURCHASING CURRENCY CALL AND PUT OPTIONS
The International Equity Fund may write covered put and call options and
purchase put and call options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. The Fund also
may use options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different currency if the Adviser determines that there is a pattern of
correlation between the values of the currencies. In addition, the Fund may
purchase call or put options on a currency when the Adviser anticipates that the
foreign currency will appreciate or depreciate in value, but securities
denominated or quoted in that currency do not present attractive opportunities
and are not held by the Fund.
A call option written by the International Equity Fund obligates the Fund
to sell specified currency to the holder of the option at a specified price at
any time before the expiration date. A put option written by the Fund would
obligate the Fund to purchase specified currency from the option holder at a
specified price at any time before the expiration date. The writing of currency
options involves a risk that the Fund will, upon exercise of the option, be
required to sell currency subject to a call at a price that is less than the
currency's market value or be required to purchase currency subject to a put at
a price that exceeds the currency's market value.
The International Equity Fund may terminate its obligations under a call or
put option by purchasing an option identical to the one it has written. Such
purchases are referred to as "closing purchase transactions." The Fund would
also be able to enter into closing sale transactions in order to realize gains
or minimize losses on options purchased by it.
The International Equity Fund would normally purchase call options in
anticipation of an increase in the U.S. dollar value of currency in which
securities to be acquired by the Fund are quoted or denominated. The purchase of
a call option would entitle the Fund, in return for the premium paid, to
purchase specified currency at a specified price during the option period. The
Fund would ordinarily realize a gain if, during the option period, the value of
such currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise, the Fund would realize either no gain or a loss on
the purchase of the call option.
The International Equity Fund would normally purchase put options in
anticipation of a decline in the dollar value of currency in which securities in
its portfolio are quoted or denominated ("protective puts"). The purchase of a
put option would entitle the Fund, in exchange for the premium paid, to sell
specified currency at a specified price during the option period. The purchase
of protective puts is designed merely to offset or hedge against a decline in
the dollar value of the Fund's portfolio securities due to currency exchange
rate fluctuations. The Fund would ordinarily realize a gain if, during the
option period, the value of the underlying currency decreased below the exercise
price sufficiently to more than cover the premium and transaction costs;
otherwise, the Fund would realize either no gain or a loss on the purchase of
the put option. Gains and losses on the purchase of protective put options would
tend to be offset by countervailing changes in the value of underlying currency.
In addition to using options for the hedging purposes described above, the
International Equity Fund may use options on currency to seek to increase total
return. It may write (sell) covered put and call options on any
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currency in order to realize greater income than would be realized on portfolio
securities transactions alone. However, in writing covered call options for
additional income, the Fund may forgo the opportunity to profit from an increase
in the market value of the underlying currency. Also, when writing put options,
the Fund accepts, in return for the option premium, the risk that it may be
required to purchase the underlying currency at a price in excess of the
currency's market value at the time of purchase.
The International Equity Fund would normally purchase call options to seek
to increase total return in anticipation of an increase in the market value of a
currency. It would ordinarily realize a gain if, during the option period, the
value of such currency exceeded the sum of the exercise price, the premium paid
and transaction costs. Otherwise, the Fund would realize either no gain or a
loss on the purchase of the call option. Put options may be purchased by the
Fund for the purpose of benefiting from a decline in the value of currencies
which it does not own. It would ordinarily realize a gain if, during the option
period, the value of the underlying currency decreased below the exercise price
sufficiently to more than cover the premium and transaction costs. Otherwise, it
would realize either no gain or a loss on the purchase of the put option.
SPECIAL RISKS ASSOCIATED WITH OPTIONS ON CURRENCY
An exchange traded options position may be closed out only on an options
exchange which provides a secondary market for an option of the same series.
Although the International Equity Fund will generally purchase or write only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. For some options no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that a Fund
would have to exercise its options in order to realize any profit and would
incur transaction costs upon the sale of underlying securities pursuant to the
exercise of put options. If the Fund as a covered call option writer is unable
to effect a closing purchase transaction in a secondary market, it may not be
able to sell the underlying currency (or security quoted or denominated in that
currency) until the option expires or it delivers the underlying currency upon
exercise.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities of
the Options Clearing Corporation inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders.
The International Equity Fund may purchase and write over-the-counter
options to the extent consistent with its limitation on investments in illiquid
investments. Trading in over-the-counter options is subject to the risk that the
other party will be unable or unwilling to perform under or close out options
purchased or written by the Fund.
CURRENCY SWAPS
The International Equity Fund may enter into currency swaps for both
hedging purposes and to seek to increase total return. To the extent that swaps
are entered into for good faith hedging purposes (or are offset by a segregated
account as described below), the Trust and the Adviser believe that swaps do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Fund's borrowing restrictions. The net
amount of the excess, if any, of the Fund's obligations over its entitlement
with respect to each currency swap will be accrued on a daily basis and an
amount of cash or liquid high grade debt securities (i.e., securities rated in
one of the top three ratings categories by Moody's or S&P, or, if unrated,
deemed by the Adviser to be of comparable credit quality) having an aggregate
net asset value at least equal to such accrued excess will be maintained in a
segregated account by the Trust's custodian. The Fund will not enter into any
currency swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be investment
grade by the Adviser. If there is a default by the other party to such a
transaction, the Trust will have contractual remedies pursuant to the agreement
applicable to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid in comparison with the markets for
other similar
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instruments which are traded in the interbank market. Nevertheless, the staff of
the Securities and Exchange Commission ("SEC") takes the position that currency
swaps are illiquid investments subject to the Fund's limitation on such
investments.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Government Securities, S&P 500 Index, International Equity and REIT
Index Funds may write exchange-traded covered call and put options on or
relating to specific securities in order to earn additional income or, in the
case of a call written, to minimize or hedge against anticipated declines in the
value of its portfolio securities. The Asset Allocation Fund may write covered
call options on its portfolio securities in amounts up to 10% of its total
assets in order to earn additional income or to minimize or hedge against
anticipated declines in the value of those securities. All call options written
by these Funds are covered, which means that the Fund will own the securities
subject to the option as long as the option is outstanding. All put options
written by these Funds are covered, which means that the Fund has deposited with
the Trust's custodian cash, U.S. Government securities or other high-grade
liquid debt securities with a value at least equal to the exercise price of the
option. Call and put options written by a Fund may also be covered to the extent
that the Fund's liabilities under such options are offset by its rights under
call or put options purchased by the Fund and call options written by a Fund may
also be covered by depositing cash or securities with the Trust's custodian in
the same manner as written puts are covered.
Through the writing of a covered call option, a Fund 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. Through the writing of a covered put option, a Fund
receives premium income but obligates itself to purchase a particular security
underlying the option at a specified price at any time prior to the expiration
of the option period, regardless of market value during the option period.
The S&P 500 Index, International Equity and REIT Index Funds may each, in
accordance with its investment objective and investment program, also write
exchange-traded covered call and put options on stock indices. These Funds may
write such options for the same purposes as each may engage in such transactions
with respect to individual portfolio securities -- that is, to generate
additional income or as a hedging technique to minimize anticipated declines in
the value of the Fund's securities. In economic effect, a stock index call or
put option is similar to an option on a particular security, except that the
value of the option depends on the weighted value of the group of securities
comprising the index, rather than a particular security, and settlements are
made in cash rather than by delivery of a particular security.
If a Fund writes an option which expires unexercised or is closed out by
such Fund at a profit, it will retain the premium received for the option, which
will represent a capital gain to the Fund. If the price of the underlying
security moves adversely to the Fund's position, the option may be exercised and
the Fund, as the writer of the option, will be required to sell or purchase the
underlying security at a disadvantageous price, which may only be partially
offset by the amount of premium received.
When a Fund writes an option on an index, and the underlying index moves
adversely to its position, the option may be exercised. Upon such exercise, the
Fund, as the writer of the option, will be required to pay in cash an amount
equal to the difference between the exercise settlement value of the underlying
index and the exercise price of the option, multiplied by a specified index
"multiplier."
Call or put options on a stock index may be written at an exercise or
"strike" price which is either below or above the current value of the index. If
the exercise price at the time of writing the option is below the current value
of the index for a call option or above the current value of the index for a put
option, the option is considered to be "in the money." In such a case, a Fund
will cover such options written by segregating with its custodian or pledging to
its futures commission merchant ("FCM") as collateral cash, U.S. Government or
other high-grade, short-term debt obligations equal in value to the amount by
which the option written is in the money, times the multiplier, times the number
of contracts.
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Stock indices for which options are currently traded include the S&P 500
Index, Value Line Index, National OTC Index, Major Market Index, and NYSE Beta
Index. The Funds may also use options on such other indices as may now or in the
future be available.
The S&P 500 Index, International Equity and REIT Index Funds may also
purchase put or call options on securities indices in order to (i) hedge against
anticipated changes in stock prices generally that may adversely affect the
prices of securities that they intend to purchase at a later date, (ii) hedge
their investments against an anticipated decline in value, or (iii) attempt to
reduce the risk of missing a general market advance. In the event that the
anticipated changes in stock prices occur, these Funds may be able to offset the
resulting adverse effect, in whole or in part, through the options purchased.
The premium paid for a put or call option plus any transaction costs will
reduce the benefit, if any, realized by a Fund upon exercise or liquidation of
the option, and, unless the price of the underlying securities index changes
sufficiently, the option may expire without value to the Fund. To close option
positions purchased by it, the S&P 500 Index, International Equity and REIT
Index Funds may sell put or call options identical to options previously
purchased, which could result in a net gain or loss depending on whether the
amount received on the sale, less all transaction costs, is more or less than
the premium paid on the put or call option purchased.
All the Non-Money Market Funds may use options traded on a national
securities exchange. Only the Government Securities Fund, the International
Equity Fund and the REIT Index Fund, however, may use over-the-counter (i.e.,
unlisted) options. Options traded in the over-the-counter market may not be as
actively traded as those on an exchange. Accordingly, it may be more difficult
to value such options. In addition, it may be more difficult to enter into
closing transactions with respect to options traded over-the-counter. In this
regard, each of the Government Securities Fund, the International Equity Fund
and the REIT Index Fund may enter into contracts with the primary dealers with
which it writes over-the-counter options. The contracts will provide that each
such Fund has the absolute right to repurchase an option it writes at any time
at a repurchase price which represents the fair market value of such option, as
determined in good faith through negotiations between the parties, but which in
no event will exceed a price determined pursuant to a formula contained in the
contract. Although the specific details of the formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by the Fund, plus the amount, if any, of the
option's intrinsic value (i.e., the amount the option is "in-the-money"). The
formula will also include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written "out-of-the-money." Although the specific details of the formula may
vary with different primary dealers, each contract will provide a formula to
determine the maximum price at which the Fund can repurchase the option at any
time. The Adviser has established standards of creditworthiness for these
primary dealers.
FINANCIAL FUTURES CONTRACTS
The Government Securities, S&P 500 Index, International Equity and REIT
Index Funds, each in accordance with its investment objective, investment
program, policies, and restrictions, may purchase and sell exchange-traded
financial futures contracts as a hedge to protect against anticipated changes in
prevailing interest rates or overall stock prices, or to efficiently and in a
less costly manner implement either increases or decreases in exposure to the
equity or government bond markets. Likewise, the International Equity Fund may
purchase and sell exchange-traded currency futures contracts as a hedge to
protect against anticipated adverse changes in currency exchange rates. All of
these Funds also may purchase and sell exchange-traded financial futures
contracts to earn additional income or otherwise seek to increase total return.
Financial futures contracts consist of interest rate futures contracts,
stock index futures contracts and currency futures contracts. An interest rate
futures contract is a contract to buy or sell specified debt securities at a
future time for a fixed price. Some interest rate futures contracts are based on
a particular interest rate or rate index and are cash settled at expiration by
applying the rate or rate index to a prescribed notional principal amount. A
stock index futures contract is based on a specified index of stocks and not the
stocks themselves. A
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currency futures contract is a contract to purchase or sell a specific amount of
foreign currency at a future time at a fixed price.
An interest rate futures contract binds the seller either to deliver to the
purchaser on a specified future date a specified quantity on one of several
listed financial instruments, against payment of a settlement price specified in
the contract, or the parties to settle in cash based upon the interest rate or
rate index at the expiration of the contract. A public market currently exists
for futures contracts the prices of which are related to interest rates on,
among other instruments, long-term U.S. Treasury Bonds, three-month U.S.
Treasury Bills, short-term U.S. Treasury Notes and bank certificates of deposit.
Stock index futures contracts bind purchaser and seller to deliver, at a
future date specified in the contract, a cash amount equal to a multiple of the
difference between the value of a specified stock index on that date and the
settlement price specified by the contract. That is, the seller of the futures
contract must pay and the purchaser would receive a multiple of any excess of
the value of the index over the settlement price, and conversely, the purchaser
must pay and the seller would receive a multiple of any excess of the settlement
price over the value of the index. A public market currently exists for stock
index futures contracts based on, among other indices, the S&P 500 Index, the
New York Stock Exchange Composite Index, the Value Line Stock Index and the
Major Market Index. It is expected that financial instruments related to
broad-based indices, in addition to those for which futures contracts are
currently traded, will in the future be the subject of publicly-traded futures
contracts. Each Non-Money Market Fund (except the Asset Allocation Fund) may use
those indices which are appropriate to its hedging strategies.
A financial futures contract is an agreement to buy or sell a security or
currency (or deliver a final cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery of a
specified security) for a set price in the future. Exchange-traded futures
contracts are traded on or subject to the rules of boards of trade which have
been designated "contracts markets" by the CFTC.
Positions taken in the futures markets are not normally held until delivery
or cash settlement is required, but instead are liquidated through offsetting
transactions which may result in a gain or a loss. While futures positions taken
by a Non-Money Market Fund (except the Asset Allocation Fund) are usually
liquidated in this manner, a Fund may instead make or take deliver of underlying
securities whenever it appears economically advantageous to do so. A clearing
organization associated with the relevant exchange assumes responsibility for
closing out transactions and guarantees that, as between the clearing members of
the exchange, the sale and purchase obligations will be performed with regard to
all positions that remain open at the termination of the contract.
When financial futures contracts are entered into by a Non-Money Market
Fund (except the Asset Allocation Fund), either as the purchaser or the seller
of such contracts, the Fund is required to deposit with its custodian in a
segregated account in the name of the FCM an initial margin of cash or U.S.
Treasury bills equal to as much as 5% to 10% or more of the contract settlement
price. The nature of initial margin requirements in futures transactions differs
from traditional margin payments made in securities transactions in that initial
margins for financial futures contracts do not involve the borrowing of funds by
the customer to finance the transaction. Instead, a customer's initial margin on
a financial futures contract represents a good faith deposit securing the
customer's contractual obligations under the financial futures contract. The
initial margin deposit is returned, assuming these obligations have been met,
when the financial futures contract is terminated. In addition, subsequent
payments to and from the FCM, called "variation margin," are made on a daily
basis as the price of the underlying security or stock index fluctuates
reflecting the change in value in the long (purchase) or short (sale) positions
in the financial futures contract, a process known as "marking to market."
Financial future contracts generally are not entered into to acquire the
underlying asset and generally are not held to term. Prior to the contract
settlement date, a Non-Money Market Fund will normally close all futures
positions by entering into an off-setting transaction which operates to cancel
the position held, and which usually results in a profit or loss.
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<PAGE> 65
OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Government Securities, S&P 500 Index, International Equity and REIT
Index Funds may also purchase call and put options on financial futures
contracts and write covered call options on financial futures contracts of the
types which the particular Fund is authorized to enter into. The S&P 500 Index
and REIT Index Funds also may write covered put options on stock index futures
contracts. Covered put and call options on futures contracts will be covered in
the same manner as covered options on securities and securities indices. The
Funds may invest in such options for the same hedging purposes as they may each
purchase or sell financial futures contracts or in order to earn additional
income or otherwise seek to increase total return.
Options on financial futures contracts are traded on exchanges that are
licensed and regulated by the CFTC. A call option on a financial futures
contract gives the purchaser the right, in return for the premium paid, to
purchase a financial futures contract (similar to a "long" position) at a
specified exercise price at any time before the option expires. A put option
gives the purchaser the right, in return for the premium paid, to sell a
financial futures contract (similar to a "short" position), for a specified
exercise price, at any time before the option expires.
Unlike entering into a financial futures contract itself, purchasing
options on financial futures contracts allows a buyer to decline to exercise the
option, thereby avoiding any loss beyond foregoing the purchase price (or
"premium") paid for the options and transaction costs. Therefore, the purchase
of options on financial futures contracts may be a preferable hedging strategy
when a Fund desires maximum flexibility. Whether, in order to achieve a
particular objective, a Fund enters into a financial futures contract, on the
one hand, or an option contract on a financial futures contract, on the other,
will depend on all the circumstances, including the relative costs, liquidity,
availability and capital requirements of such financial futures and options
contracts. Each Fund will consider the relative risks involved, which may be
quite different. These factors, among others, will be considered in light of
market conditions and the particular objective to be achieved.
CERTAIN ADDITIONAL RISKS OF OPTIONS AND FINANCIAL FUTURES CONTRACTS
In addition to the risks described in the Prospectus, the use of options
and financial futures contracts may entail the following risks. First, although
such instruments when used by a Fund are intended to correlate with the Fund's
portfolio securities, in many cases the options or financial futures contracts
used may be based on securities or currencies which, or stock indices the
components of which, are not identical to the portfolio securities owned or
intended to be acquired by the Fund. Second, due to supply and demand imbalances
and other market factors, the price movements of financial futures contracts,
options thereon, and stock index options may not necessarily correspond exactly
to the price movements of the securities, currencies or stock indices on which
such instruments are based. Accordingly, there is a risk that a Fund's
transactions in those instruments will not in fact offset the impact on the Fund
of adverse market developments in the manner or to the extent contemplated or
that such transactions will result in losses to the Fund which are not offset by
gains with respect to corresponding portfolio securities owned or to be
purchased by that Fund.
To some extent, these risks can be minimized by careful management of
hedging activities. For example, where price movements in a financial futures or
option contract are expected to be less volatile than price movements in the
related portfolio securities owned or intended to be acquired by a Fund, it may,
in order to compensate for this difference, use an amount of financial futures
or option contracts which is greater than the amount of such portfolio
securities. Similarly, where the price movement of a financial futures or option
contract is anticipated to be more volatile, a Fund may use an amount of such
contract which is smaller than the amount of portfolio securities to which such
contracts relate.
The risk that the hedging technique used will not actually or entirely
offset an adverse change in the value of a Fund's securities is particularly
relevant to financial futures contracts and options written on stock indices. A
Fund entering into a futures purchase contract potentially could lose any or all
of an amount equal to the contract's settlement price multiplied by the
contract's multiplier. In entering into a futures sale contract, a Fund could
potentially lose an amount equal to the excess of the contract's value (marked
to market daily) over the contract's settlement price multiplied by the
contract's multiplier. In writing options on stock indices, a Fund could
potentially lose a sum equal to the excess of the value of the index (marked to
market daily)
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<PAGE> 66
over the exercise price or the excess of the exercise price over the value of
the index. In addition, because financial futures contracts require delivery at
a future date of either a specified security or an amount of cash equal to a
multiple of the difference between the value of a specified stock index on that
date and the settlement price, an algebraic relationship exists between any
price movement in the underlying security or index and the potential cost of
settlement to a Fund. A small increase or decrease in the value of the
underlying security or stock index can, therefore, result in a much greater loss
to the Fund.
Stock index call options written also pose another risk as hedging tools.
Because exercises of stock index options are settled in cash, there is an
inherent timing risk that the value of a Fund's securities "covering" a stock
index call option written by it may decline during the time between exercise of
the option by the option holder and notice to the Fund of such exercise (usually
one day or more), thereby requiring the Fund to use additional assets to settle
the transaction. This risk is not present in the case of covered call options on
individual securities, which are settled by delivery of the actual securities.
Although the Funds intend to establish positions in these instruments only
when there appears to be an active market, there is no assurance that a liquid
market for such instruments will exist when they seek to "close out" (i.e.
terminate) a particular financial futures contract or option position. This is
particularly relevant for over-the-counter options. Trading in such instruments
could be interrupted, for example, because of a lack of either buyers or
sellers. In addition, the futures and options exchanges may suspend trading
after the price of such instruments has risen or fallen more than the maximum
amount specified by the exchange. Exercise of options could also be restricted
or delayed because of regulatory restrictions or other factors. A Fund may be
able, by adjusting investment strategy in the cash or other contract markets, to
offset to some extent any adverse effects of being unable to liquidate a hedge
position. Nevertheless, in some cases, a Fund may experience losses as a result
of such inability. Therefore it may have to liquidate other more advantageous
investments to meet its cash needs.
In addition, FCMs or brokers in certain circumstances will have access to
each Fund's assets posted as margin in connection with these transactions as
permitted under the 1940 Act. The Funds will use only FCMs or brokers in whose
reliability and financial soundness they have full confidence and have adopted
certain other procedures and limitations to reduce the risk of loss with respect
to any assets which brokers hold or to which they may have access. Nevertheless,
in the event of a broker's insolvency or bankruptcy, it is possible that a Fund
could experience a delay or incur costs in recovering such assets or might
recover less than the full amount due. Also, the value of such assets could
decline by the time the Fund could effect such recovery.
The success of any Fund in using hedging techniques depends, among other
things, on the Adviser's ability to predict the direction and volatility of
price movements in both the futures and options markets as well as the
securities markets and on its ability to select the proper type, time and
duration of hedges. There can be no assurance that these techniques will produce
their intended results. In any event, the Adviser will use financial futures
contracts, options thereon and stock index options only when it believes the
overall effect is to reduce, rather than increase, the risks to which a Fund is
exposed. Hedging transactions also, of course, may be more, rather than less,
favorable to a Fund than originally anticipated.
BORROWING
From time to time the International Equity Fund may increase its ownership
of investments by borrowing from banks on an unsecured basis and investing the
borrowed funds, subject to the restrictions stated in the Prospectus. The Fund
may not borrow more than 10% of the value of its assets for this purpose and may
not borrow unless the value of its assets, less its liabilities other than
borrowing, is equal to at least 300% of all borrowings, including any additional
proposed borrowings. If the value of the Fund's assets so computed should fail
to meet the 300% asset coverage requirement, the Fund must, within three days,
reduce its borrowing to the extent necessary to meet the coverage requirement
and may have to sell a portion of its investments at an inopportune time.
Borrowing for investment increases both investment opportunity and risk.
Interest on borrowed money is an expense that the Fund would not otherwise
incur, so that it may have little or no net investment income during periods of
borrowing. Since substantially all of the Fund's assets fluctuate in value
whereas borrowing obligations are fixed, when the Fund has outstanding
borrowings, its net asset
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<PAGE> 67
value tends to increase and decrease more when portfolio investments increase
and decrease, respectively, than would otherwise be the case.
LOWER-RATED, LOWER QUALITY DEBT INSTRUMENTS
Up to 30% of the total assets of the Asset Allocation Fund may be invested
in debt instruments that are unrated or are rated lower than the four highest
rating categories assigned by Moody's or S&P. Furthermore, debt instruments that
are rated in the four highest categories assigned by Moody's or S&P (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 S&P) may,
after purchase by the Fund, have their ratings lowered due to the deterioration
of the issuer's financial position.
RISKS OF LOWER-RATED, LOWER QUALITY DEBT INSTRUMENTS
Lower-rated fixed income securities (i.e., those rated Ba or lower by
Moody's or BB or lower by S&P) 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 the Adviser'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 values of
such securities tend 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
securities. To the extent the Asset Allocation Fund invests in these securities,
factors adversely affecting the market value of high-yielding securities will
adversely affect the Fund's net asset value. In addition, the Asset Allocation
Fund 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.
High yielding 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 a part of a corporate takeover. Companies that issue such
high-yielding 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
high-yielding 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 issuer's 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 such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.
High yielding securities frequently have call or buy-back features that
would permit an issuer to call or repurchase the security from the Fund. If a
call were exercised by the issuer during a period of declining interest rates,
the Fund would likely have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund.
The Asset Allocation Fund may have difficulty disposing of certain
high-yielding securities for which there is a thin trading market. Because not
all dealers maintain markets in all high-yielding securities, there is no
established retail secondary market for many of these securities, and the Trust
anticipates that they could be sold only to a limited number of dealers or
institutional investors. To the extent there is a secondary trading
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<PAGE> 68
market for high-yielding securities, it is generally not as liquid as that for
higher-rated securities. The lack of a liquid secondary market for certain
securities may make it more difficult for the Trust to obtain accurate market
quotations for purposes of valuing the Fund's assets. Market quotations are
generally available on many high-yield 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 Board of Trustees
of the Trust. This valuation is more difficult and judgment plays a greater role
in such valuation when there is less reliable objective data available.
The Asset Allocation Fund may acquire high-yielding securities that are
sold without registration under the federal securities laws and therefore carry
restrictions on resale. This Fund may incur special costs in disposing of such
securities, but will generally incur no costs when the issuer is responsible for
registering the securities. The Fund also may acquire high-yielding securities
during an initial underwriting. Such securities involve special risks because
they are new issues. The Trust has no arrangement with any person concerning the
acquisition of such securities, and the 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 high-yielding 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 issuers of high-yield securities by removing or reducing a source
of future financing, and could negatively affect the value of specific
high-yield issues. However, the likelihood of any such legislation or the effect
thereof is uncertain.
COVERED CALL OPTIONS
The Asset Allocation Fund may write covered call options that are traded on
a national securities exchange with respect to securities in the Fund (ensuring
that at all times the Fund will have the securities which it may be obligated to
deliver if the option is exercised). The Fund 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 Fund 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 Fund 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 Asset Allocation Fund 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
Fund 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 Fund, especially during periods when market prices of the
underlying securities appreciate, which could affect brokerage costs.
GNMA CERTIFICATES
The Asset Allocation and Government Securities Funds may each invest up to
50% of its net assets in 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-
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<PAGE> 69
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 Asset Allocation and the Government Securities Funds
may each use principal payments it receives to purchase additional GNMA
Certificates or other permitted investments. Prepayments of any mortgages in the
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 Asset Allocation and the
Government Securities Funds may each 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. Each Non-Money Market Fund 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 such Fund's outstanding voting securities. The "affirmative vote
of the holders of a majority of such Fund's outstanding securities" has the
meaning set forth under "Money Market Fund Investments, Investment Policies and
Restrictions -- Investment Restrictions" above. Pursuant to the fundamental
investment restrictions of each Non-Money Market Fund other than the Asset
Allocation Fund, except where otherwise noted, each such Fund may not:
(a) issue senior securities except: (i) to the extent that borrowing
under paragraph (h) below exceeding 5% may be deemed to be senior
securities under the 1940 Act, or (ii) in connection with investments of
certain Funds in options, futures and swap contracts;
(b) as to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer (other than U.S. Government
securities, as defined in Section 2(a)(16) of the 1940 Act) or invest in
more than 10% of the outstanding voting securities of any one issuer;
(c) invest more than 25% of its total assets in the securities of
issuers primarily engaged in the same industry, other than U.S. Government
securities; utilities will be divided according to their services; for
example, gas, gas transmission, electric and telephone each will be
considered a separate industry for purposes of this restriction. This
restriction does not apply to the REIT Index Fund;
(d) 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;
(e) purchase any securities on margin except: (i) that a Fund may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, or (ii) that in connection
with investments of the Government Securities Fund, the S&P 500 Index Fund,
the International Equity Fund and the REIT Index Fund, in options, futures
and swap contracts;
(f) make loans, except as provided in (g) below and except through the
purchase of obligations in private placements (the purchase of
publicly-traded obligations not being considered the making of a loan);
(g) lend its portfolio securities in excess of 20% of its total
assets, taken at market value at the time of the loan; and
(h) borrow amounts in excess of 10% (20% in the case of the S&P 500
Index Fund and the REIT Index Fund) of its total assets, taken at market
value at the time of the borrowing, and then only from banks as a temporary
measure for extraordinary or emergency purposes or to meet redemption
requests that might otherwise require the untimely disposition of
securities, and not for investment or leveraging. The International Equity
Fund, however, may borrow amounts up to an additional 10% of its net asset
value from banks to increase its holdings of portfolio investments;
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<PAGE> 70
(i) mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by such Fund
except: (i) as may be necessary in connection with borrowing mentioned in
(h) above, and then such mortgaging, pledging or hypothecating may not
exceed 10% of the Fund's total assets, taken at market value at the time
thereof, or (ii) in connection with investment of certain Funds in options,
futures and swap contracts. In order to comply with certain state statutes,
such Funds will not, as a matter of operating policy, mortgage, pledge or
hypothecate their portfolio securities to the extent that at any time the
percentage of the value of pledged securities plus the maximum sales charge
will exceed 10% of the value of such Fund's shares at the maximum offering
price;
(j) underwrite securities of other issuers except insofar as the Trust
may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities; and
(k) invest more than 10% of its net assets (15% for the International
Equity Fund and REIT Index Fund) in repurchase agreements maturing in more
than seven days and other illiquid investments.
Pursuant to the fundamental investment restrictions of the Asset Allocation
Fund, such Fund may not:
(a) issue senior securities (except to the extent that borrowings
under paragraph (h) below exceeding 5% of the value of the Fund's total
assets may be deemed to constitute senior securities under the 1940 Act);
however, this prohibition shall not limit the Fund'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 Fund 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 Fund ability to
write covered call options;
(d) underwrite securities of other issuers (except insofar as the Fund
or the Trust might be deemed an underwriter under the Securities Act of
1933 in certain resales of portfolio securities held by the Fund;
(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;
(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 Fund may enter into repurchase
agreements as described above or in the Prospectus, and the Fund 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 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 Fund's total assets at the
time the borrowing is made, and the Fund 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 Fund's
ability to write covered call options;
(i) pledge, hypothecate, mortgage or transfer as security for
indebtedness any securities held by the Fund, 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);
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<PAGE> 71
(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 Fund'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 Fund's total assets; and
(l) purchase or sell interests in oil, gas, or other mineral
exploration or development programs, commodities, or commodity contracts,
except that the Fund may purchase securities of issuers which invest or
deal in any of the above, provided that such securities meet the Fund other
investment criteria.
NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, each Non-Money Market Fund is subject to the
following additional restrictions in implementing its investment policy. These
additional restrictions are not fundamental and may be changed by the Trustees
without shareholder approval. These Funds are subject to the same
non-fundamental investment restrictions as apply to the Money Market Fund
(described above) except as modified below.
(a) each Non-Money Market Fund will not purchase securities of other
investment companies if, as a result thereof, the Fund would own more than
3% of the total outstanding voting stock of any one investment company, or
more than 5% of the Fund's assets would be invested in any one investment
company, or more than 10% of the Fund's total assets would be invested in
securities of investment companies. These limitations do not apply to
securities acquired in connection with a merger, consolidation, acquisition
or reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's commission
or profit, other than customary broker's commission, is involved, and so
long as immediately thereafter not more than 10% of such Fund's total
assets, taken at market value, would be invested in such securities;
(b) each Non-Money Market Fund 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 or S&P or are unrated. This restriction shall
apply to such unrated securities as the Adviser may determine, pursuant to
procedures adopted by the Trustees to be of comparable quality to those
securities assigned a rating in one of the four highest categories;
(c) each Non-Money Market Fund (other than the S&P 500 Index Fund and
the REIT Index Fund) will not purchase or retain the securities of any
issuer if any officer or Trustee of the Trust, the Adviser or any
affiliated person of the Trust or the Adviser 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;
(d) each Non-Money Market Fund will not purchase or sell interests in
oil, gas or other mineral exploration or development programs, commodities,
or commodity contracts, except that certain Funds may invest in financial
contracts and related options. This restriction does not apply to the Asset
Allocation Fund;
(e) the Common Stock Index Fund, Government Securities Fund,
International Equity Fund and REIT Index Fund will not enter into a
financial futures contract (by exercise of any option or otherwise) or
acquire any options thereon, if, immediately thereafter, the total of the
initial margin deposits required with respect to all open futures
positions, plus the sum of the premiums paid for all unexpired options on
futures contracts (less any in-the-money amount at the time of purchase)
would exceed 5% of the market value of its total assets (after taking into
account unrealized profits and losses on any such futures contracts or
options it has entered into);
(f) Non-fundamental investment restriction (a) of the Money Market
Fund is not applicable to the Government Securities, S&P 500 Index, REIT
Index or International Equity Fund; and
(g) Non-fundamental investment restriction (b) of the Money Market
Fund is not applicable to the International Equity Fund.
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MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their addresses, ages, and their
principal occupations for the last five years are set forth below. Those
individuals designated with an asterisk are "interested persons" of the Trust,
as the term is defined in Section 2 (a)(19) of the 1940 Act.
<TABLE>
<CAPTION>
NAME POSITION AGE BUSINESS EXPERIENCE
- -------------------------------- -------------- --- -----------------------------------------------
<S> <C> <C> <C>
Michael A. Cavataio............. Trustee 52 Director and Vice-Chairman and Adviser, Pioneer
1750 East Golf Road Financial Services. President, Rockford
Schaumburg, IL 60173 Lillian's Inc., 1984 to 1995. Real estate
developer. Director, Today's Bancorp. Director,
Today's Bank East.
Michael A. Conway*.............. President and 49 President, Aon Advisors, Inc., Senior Vice
123 North Wacker Drive Trustee President and Senior Investment Officer, Aon
29th Floor Corporation
Chicago, IL 60606
Carleton D. Pearl............... Trustee 52 Senior Vice President & Treasurer, McDonald's
McDonald's Corporation Corporation
McDonald's Plaza
Oak Brook, IL 60521
Richard J. Peters............... Trustee 48 Vice President, Treasurer and Director, Penske
13400 W. Outer Drive Corporation. President and Director, Penske
Detroit, MI 48239 Motorsports, Inc.
Donald W. Phillips.............. Trustee 47 Chairman, Equity Institutional Investors, Inc.
2 North Riverside Plaza and Executive Vice President, Equity Group
Chicago, IL 60606 Investments, Inc. Director, Capsure, Inc.
Director, Sit Mutual Funds
Paul Rabin*..................... Treasurer 57 Treasurer, Aon Advisors, Inc., Combined
123 North Wacker Drive Insurance Company of America, and Assistant
29th Floor Treasurer of Aon Corporation
Chicago, IL 60606
Karl W. Krause*................. Secretary 45 Counsel, Aon Corporation, Secretary, Aon
123 North Wacker Drive Securities Corporation and Aon Management
29th Floor Funds, Inc.
Chicago, IL 60606
Andrew Kubeck*.................. Controller 43 Assistant Vice President -- Finance, Project
123 North Wacker Drive Manager, Aon Corporation in 1987 and 1995,
29th Floor Manager, Investment Accounting Department, Aon
Chicago, IL 60606 Corporation, since 1992
</TABLE>
Trustees or officers who are interested persons of the Trust do not receive
any compensation from the Trust for their services to the Trust. Effective as of
April 26, 1996, Trustees who are not interested persons of the Trust receive
compensation at a rate of $10,000 annually, plus $500 per board or committee
meeting attended. In addition, Trustees who are not interested persons of the
Trust also are reimbursed for any out-of-pocket expenses incurred in connection
with affairs of the Trust. Prior to such date, members of the Trust's prior
board of directors (the "Directors") who were not interested persons of the
Trust received a fee of $4,000 annually plus $250 per Board or committee meeting
attended. In addition, Trustees who are compensated by the Trust are also
reimbursed for any out-of-pocket expenses incurred in connection with attendance
at such meetings or otherwise in connection with the affairs of the Trust.
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<PAGE> 73
Set forth below is a compensation table listing, for each prior Director of
the Trust entitled to receive compensation, the aggregate compensation received
from the Trust for the fiscal year ended October 31, 1995, and the total
compensation received from the Trust and its Fund complex.
TABLE OF DIRECTORS' COMPENSATION
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM TRUST AND
NAME OF DIRECTOR FROM THE TRUST FUND COMPLEX(1)
- --------------------------------------------------------- ---------------------- ------------------
<S> <C> <C>
Wallace L. Chandler...................................... $4,700 $7,500
John E. Leard............................................ $5,000 $8,000
Robert P. Martin......................................... $5,000 $8,000
J. Clifford Miller....................................... $5,000 $8,000
Lee A. Putney............................................ $5,000 $8,000
</TABLE>
- ---------------
(1) In addition to the Trust, "Fund Complex" includes the Life of Virginia
Series Fund, an open-end investment company for which AAI services as
investment adviser.
INVESTMENT ADVISERS
Aon Advisors, Inc., 123 North Wacker Drive, Chicago, Illinois, serves as an
investment adviser to the Trust pursuant to separate investment advisory
agreements related to each Fund ("Advisory Agreements") each dated ,
1996. Information concerning AAI and the basic provisions of the Advisory
Agreements are described in the Prospectus under the caption "Investment
Adviser."
The duties and responsibilities of AAI are specified in the Advisory
Agreements. Each of the Advisory Agreements was approved by the Trustees of the
Trust (including a majority of trustees who are not parties to the Advisory
Agreement or interested persons, as defined by the 1940 Act, of any such party)
at a meeting held on May 22, 1996. The Advisory Agreements are not assignable
and may be terminated without penalty upon 60 days written notice at the option
of either the Trust or AAI or by a vote of shareholders of each Fund. Each
provides that it can be continued year to year thereafter so long as such
continuance is specifically approved annually (a) by the Trustees of the Trust
or by a majority of the outstanding shares of the Fund and (b) by a majority
vote of the Trustees who are not parties to the Advisory Agreements or
interested persons of any such party to cast in person at a meeting.
AAI (under the general oversight of the Trustees) continuously furnishes an
investment program for each Fund, is responsible for the actual managing of the
investments of each Fund 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
Fund, AAI performs research and obtains and evaluates pertinent economic,
statistical and financial data relevant to the investment policies of each Fund.
The Advisory Agreements provide that AAI shall not be liable to the Trust
or to any shareholder for any error of judgment or mistake of law or for any
loss suffered by the Trust or by any shareholder in connection with matters to
which the Advisory 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.
As described below, AAI has engaged Perpetual at the investment sub-adviser
provide day-to-day portfolio management for the International Equity Fund.
25
<PAGE> 74
Effective , 1996, pursuant to a separate administration
agreement between the Trust and Aon Securities Corporation ("ASC"), a wholly
owned subsidiary of Aon (the "Administration Agreement"), ASC has agreed, 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 Trustees; (d) prepare tax returns; (e) prepare reports to and
filings with the SEC and State Blue Sky authorities; (f) at the Trust'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 Trust with a third party); and (h) furnish persons satisfactory
to the Trust to respond during normal business hours to in-person, written
and telephone requests for assistance and information from shareholders of
the Trust, 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 Trust shareholder
records.
INVESTMENT ADVISORY AND ADMINISTRATION FEES
The Money Market Fund paid the following in investment advisory fees,
inclusive of administration fees (net of reimbursements) during the last three
fiscal years: 1995, $487,553; 1994, $410,817; and 1993, $420,563. The Asset
Allocation Fund paid the following in investment advisory fees (net of
reimbursements) during the last fiscal year and previous fiscal period (from
March 31, 1994 to October 31, 1994): 1995, $218,580 and 1994, $49,839. The
Government Securities, S&P 500 Index, International Equity and REIT Index Funds
were not in existence during these periods.
INVESTMENT SUB-ADVISER
Pursuant to a separate sub-advisory agreement described below, AAI has
engaged Perpetual as the investment subadviser to provide day-to-day portfolio
management for the International Equity Fund.
Perpetual, a wholly-owned subsidiary of Perpetual plc, is the investment
sub-adviser for the International Equity Fund. It is registered under the
Investment Advisers Act of 1940 as an investment adviser and has its principal
offices at 48 Hart Street, Henley-on-Thames, Oxfordshire, England RG9 2AZ. In
addition to the International Equity Fund, Perpetual provides investment advice
and management to pension plans, corporations and other institutional and
individual clients. Perpetual serves as a sub-adviser for the Life of Virginia
Series Fund, and it and its affiliates currently manage over 29 unit trusts (the
British term for mutual funds) in the United Kingdom and overseas. As of
December 31, 1995, Perpetual and its affiliates managed approximately $7.5
billion in assets. As of December 31, 1995, Mr. Martyn Abib, Chairman of
Perpetual plc, owned directly and beneficially approximately 7,375,000 (26.57%)
of the ordinary shares (i.e., common stock) of Perpetual plc. Perpetual plc has
the same address as Perpetual.
INVESTMENT SUB-ADVISORY AGREEMENT
AAI has entered into a separate sub-advisory agreement (the "Sub-Advisory
Agreement") with Perpetual for the day-to-day portfolio management of the
International Equity Fund. The Sub-Advisory Agreement was approved by a vote of
the majority of the Trustees of the Trust (including a majority of trustees who
are not parties to such Agreement or interested persons, as defined by the 1940
Act, or any such party) at a meeting held for that purpose on May 22, 1996. The
Sub-Advisory Agreement was also approved by the initial shareholder of the
International Equity Fund on , 1996. The Sub-Advisory Agreement is
not assignable and may be terminated without penalty upon 60 days written notice
at the option of AAI or Perpetual by a vote of the majority of the Trustees of
the Trust or by a vote of a majority of the outstanding shares of the
International Equity Fund. The Sub-Advisory Agreement provides that it shall
continue in effect for two years and can than thereafter be continued from year
to year so long as such continuance is specifically approved annually (a) by the
Trustees of the Trust or by a majority of the
26
<PAGE> 75
outstanding shares of the International Equity Fund and (b) by a majority vote
of the Trustees who are not parties to the Agreement, or interested persons of
any such party, cast in person at a meeting held for that purpose.
INVESTMENT SUB-ADVISORY FEES
Perpetual manages the investments of the International Equity Fund,
determining which securities or other investments to buy and sell, selecting the
brokers and dealers to effect the transactions, and negotiating commissions. In
placing orders for securities transactions, Perpetual follows AAI's policy of
seeking to obtain the most favorable price and efficient execution available.
For its services, AAI pays Perpetual monthly compensation in the form of an
investment sub-advisory fee. The fee is paid by AAI monthly and is based upon
the average daily net assets (see "Purchase and Redemption of Trust Shares") of
the Fund that the sub-adviser manages, at the following annual rates:
International Equity Fund: .50% of the first $100,000,000; .475% of
the next $100,000,000; and .45% of amounts in excess of $200,000,000.
REIMBURSEMENT OF EXCESS OPERATING EXPENSES
AAI has agreed to reimburse the Trust for any amount by which the total
expenses of (i) the Class C or Class Y shares of the Money Market Fund in any
fiscal year exceed 1.25% or 1.00%, respectively, of the aggregate average daily
net assets of those classes of that Fund; (ii) the Class C or Class Y shares of
the Asset Allocation Fund in any fiscal year exceed 1.50% or 1.25%,
respectively, of the aggregate average daily net assets of such classes of that
Fund; (iii) the Class C or Class Y shares of the Government Securities Fund in
any fiscal year exceed 1.75% or 1.50%, respectively, of the first $30 million of
aggregate average daily net assets of such classes of that Fund and 1.50% or
1.25% , respectively, of average daily net assets of such classes of that Fund
in excess of $30 million; (iv) the Class C or Class Y shares of the S&P 500
Index Fund in any fiscal year exceed 1.00% or .75%, respectively of the
aggregate average daily net assets of such classes of that Fund; (v) the Class C
or Class Y shares of the International Equity Fund in any fiscal year exceed
2.00% or 1.75%, respectively, of the first 30 million of aggregate average daily
net assets of such classes of that Fund and 1.75% or 1.50%, respectively, of
average daily net assets of such classes of that Fund in excess of $30 million;
and (vi) the Class C or Class Y shares of the REIT Index Fund in any fiscal year
exceed 1.75% or 1.50%, respectively, of the first $30 million of aggregate daily
net assets of such classes of that Fund in excess of $30 million. For purposes
of this reimbursement formula, "expenses" do not include interest, taxes,
brokerage commissions or extraordinary expenses. Reimbursement of excess
expenses, as described above, cannot be changed without shareholder approval.
During the fiscal year ended October 31, 1995, the total operating expenses
incurred by the Funds (including the advisory fee paid to AAI), before
reimbursement or fee waivers, represented .39% of the average net assets of the
Class Y shares of the Money Market Fund and .96% of the average net assets of
the Class Y shares of the Asset Allocation Fund. The remaining classes and Funds
did not commence operations until after the end of such fiscal year. During the
fiscal year ended October 31, 1995, AAI was not required to reimburse the Trust
for expenses under the provisions described in the preceding paragraph.
SECURITIES ACTIVITIES OF THE ADVISERS
Securities held by the Trust may also be held by Aon Corporation, or by
accounts or mutual funds for which AAI acts as an adviser. Because of different
investment objectives or other factors, a particular security may be bought by
Aon Corporation or by 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 a Fund or other client of AAI or Aon Corporation arise for consideration at
or about the same time, transactions in such securities will be made, insofar as
feasible, for the Trust, Aon Corporation, 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.
27
<PAGE> 76
On occasions when AAI (under the general oversight of the Trustees of the
Trust) deems the purchase or sale of a security to be in the best interests of
the Trust as well as other accounts or companies, it may, to the extent
permitted by applicable laws and regulations, but will not be obligated to,
aggregate the securities to be sold or purchased for the Trust with those to be
sold or purchased for other accounts or companies in order to obtain favorable
execution and low brokerage commissions. In that event, allocation of the
securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by AAI in the manner it considers to be most equitable
and consistent with its fiduciary obligations to the Trust and to such other
accounts or companies. In some cases this procedure may adversely affect the
size of the position obtainable for a Fund. Likewise, Perpetual may, to the
extent permitted by applicable laws and regulations, but will not be obligated
to, aggregate the securities to be sold or purchased for the Trust with those to
be sold or purchased for other accounts or companies in order to obtain
favorable execution and low brokerage commissions. Like AAI, Perpetual allocates
the securities purchased or sold, as well as the expenses incurred in the
transaction, in the manner that it considers to be most equitable and consistent
with its fiduciary obligations to the Trust and to such other accounts or
companies.
In performing their functions, AAI and Perpetual will not execute private
sales of securities among the Funds or between a Fund and any other investment
account it manages.
28
<PAGE> 77
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The table below sets forth certain information as to all persons known to
the Fund who, as of May 31, 1996, owned of record or beneficially 5% or more of
either Portfolio's outstanding shares. Money Market Portfolio:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF CLASS
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (%)
- ------------------------- ------------------------------- ---------------------- ----------------
<S> <C> <C> <C>
Money Market Fund Aon Risk Services 113,256,000 38.77
(Class Y shares) Controller, 7th Floor directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606
Money Market Fund Rollins Hudig Hall Co. 104,352,000 35.72
(Class Y shares) Controller, 22nd Floor directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606
Money Market Fund Virginia Surety Company, Inc. 20,344,987 6.96
(Class Y shares) 123 N. Wacker Dr. directly owned shares
Chicago, IL 60606
Money Market Fund Rollins Hudig Hall-NY 16,355,000 5.60
(Class Y shares) Suite 22 directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606
Asset Allocation Fund Combined Insurance Company of 5,443,722 75.35
(Class Y shares) America directly owned shares
Investment Accounting Mgr.
27th Floor
123 N. Wacker Dr.
Chicago, IL 60606
Asset Allocation Fund Virginia Surety Company Inc. 1,692,190 23.42
(Class Y shares) Investment Accounting Mgr. directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606
</TABLE>
Aon Corporation and its wholly-owned subsidiaries may, by virtue of their
interests as shareholders of the Trust at any particular site, be considered
controlling persons of the Trust and may be able to cast a deciding vote on all
matters submitted to a vote of the shareholders of the Trust or one or more of
the Fund's (or classes thereof). As of May 31, 1996, Aon and its subsidiaries
owned in excess of 95.79% of the outstanding securities in each of the Funds. On
that date, the Trustees and officers of the Trust owned less than 1% of the
outstanding shares of each of the Funds.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser determines which securities to buy and sell for each Fund,
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 such Fund. Fixed income securities
are generally traded with dealers acting as principal 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 Fund portfolio,
including allocation of portfolio business and the negotiation of the price of
the securities and commissions, if any, are made by the Adviser. Neither the
Adviser nor any company affiliated with it will act as a broker or dealer for
the purposes of executing portfolio transactions for the Funds.
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<PAGE> 78
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 factors, such
as furnishing of supplemental research and other services deemed to be of value
to the Trust or to the Adviser; the Adviser 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 Adviser, even through the spread or
commission at which an order is executed may be higher than that which another
dealer or broker might charge, provided the Adviser 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 to the Adviser in serving all the Funds and other accounts managed by the
Adviser and, conversely, supplemental research obtained by the placement of
business of such other accounts may be useful to the Adviser in carrying out its
obligations to the Funds. The receipt of such supplemental research and other
services is not expected to reduce the Adviser's expenses in advising the Funds.
During the fiscal year ended October 31, 1995, the Asset Allocation Fund
paid brokerage commissions of $70,214, based on $72,078,788 of transactions.
During the fiscal period from March 1, 1994 (commencement of operations) through
October 31, 1994, the Asset Allocation Fund paid brokerage commissions of
$13,437, based on $10,710,108 of transactions.
DETERMINATION OF NET ASSET VALUE
GENERAL
The Trust is open for business on each day that the NYSE is open for
trading, except that shares of the Funds 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, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas
Day.
The net asset value of the Money Market Fund's shares for purposes of
pricing orders for purchase and redemption of shares is determined twice daily,
once as of 12:30 p.m. (Central Time) and again as of the close of regular
trading (currently 3:00 p.m. Central Time) on the NYSE, on each day the Trust is
open for business. The net asset value of the Non-Money Market Funds' 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 Trust is open for business.
The net asset value per share of each Fund is determined by subtracting the
liabilities of such Fund from the value of its assets and dividing the remainder
by the number of outstanding shares of such Fund.
Although the legal rights of holders of Class C and Class Y shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset value of Class C
shares will generally be lower than Class Y shares as a result of the
distribution and service fees charged. It is expected, however, that the net
asset value per share of each of the classes will tend to converge immediately
after the recording of dividends since the dividends will differ by
approximately the amount of the distribution expense accrual differential
between the classes.
MONEY MARKET FUND
The Trust intends to use its best efforts to maintain the Money Market
Fund'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 Trustees of the Trust will take such action
as they deem appropriate to eliminate or reduce, to the extent reasonably
practicable, any material dilution or other unfair
30
<PAGE> 79
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 quotations, if available, or, if
not available, at a fair value as determined in good faith by the Trustees. The
Trust may also reduce the number of the Money Market Fund'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 Fund, shareholders are deemed to have agreed to such
redemption.
NON-MONEY MARKET FUNDS
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 Stock Market's National Market.
In the absence of any Nasdaq National Market 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 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 that are primarily traded on foreign securities exchanges are
generally valued at the last sale price on the exchange where they are primarily
traded. All foreign securities traded on the over-the-counter market are valued
at the last sale quotation, if market quotations are available, or the last
reported bid price if there is no active trading in a particular security on a
given day. Quotations of foreign securities in foreign currencies are converted,
at current exchange rates, to their U.S. dollar equivalents in order to
determine their current value. In addition, because of the need to value foreign
securities (other than ADRs) as of the close of trading on various exchanges and
over-the-counter markets throughout the world, the calculation of the net asset
value of Funds investing in foreign securities may not take place
contemporaneously with the valuation of such foreign securities in such Fund.
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
Trustees of the Trust, including valuations provided by a pricing service
retained for this purpose.
Exchange listed put options written and options purchased are valued on the
primary exchange on which they are traded. Over-the-counter options written or
purchased by a Fund are valued based upon prices provided by market-makers in
such securities. Exchange-traded financial futures contracts are valued at their
settlement price established each day by the board of trade or exchange on which
they are traded.
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
Trustees of the Trust 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 Trustees of the Trust as in the case
of securities having a maturity of more than 60 days.
31
<PAGE> 80
RETIREMENT PROGRAMS
The Trust expects to make available a Retirement Plan for Self-Employed
Individuals ("Keogh Plan") with both money purchase pension plan and profit
sharing plan options, Simplified Employee Pension Plans ("SEPs") and Individual
Retirement Accounts ("IRAs"). Contributions to each are invested, and dividends
and distributions are automatically reinvested, in shares of the appropriate
Fund. Generally, the maximum contribution allowable each year to an IRA is the
lesser of $2,000 and 100% of compensation includible in gross income for the
year, and the maximum annual contribution allowable to a Keogh Plan is the
lesser of (i) $30,000 and (ii) 25% of an employee's compensation or a
self-employed individuals' earned income (net earnings reduced by Keogh Plan
contributions) for the year. Additionally, the maximum deduction allowable each
year for contribution to the profit sharing option of a Keogh Plan is,
generally, 15% of an employee's compensation or a self-employed individual's
earned income (net earnings reduced by Keogh Plan contributions) for the year.
Under a SEP, an employer, or self-employed individual, is permitted to
contribute a discretionary amount each year up to the lesser of $30,000 or 15%
of an employee's compensation for the year, or a self-employed individual's
earned income (net earnings reduced by SEP contributions) for the year, into an
individual IRA for each employee or selfemployed individual. The annual
compensation of each employee and the earned income of each self-employed
individual which can be taken into account under the Keogh Plan and a SEP for
any year cannot exceed $150,000 as increased by the cost-of-living adjustments
for the calendar year after 1994 as determined by the Internal Revenue Service.
A selfemployed individual may contribute to either a Keogh Plan or a SEP and, in
either case, may also contribute to and IRA. The custodial agreements for the
Keogh Plan and IRAs provide that Firstar Trust Company, Milwaukee, Wisconsin,
will provide the custodial service unless a different custodian is specified.
Firstar Trust Company will receive as compensation from the participant
under the Keogh Plan an annual maintenance fee of $12.50 per participant.
Special services not contemplated in the annual maintenance fee will be rendered
by Firstar Trust Company for such additional charges as will reasonably
compensate it for the services provided. Fees may be changes with at least 30
days' prior written notice. The annual maintenance fee payable to Firstar Trust
Company with respect to an IRA, including each individual IRA established under
a SEP, is presently $12.50 and may be changed at any time. Fees under any of
these types of accounts remaining unpaid may be charged against the accounts. If
a custodian other than Firstar Trust Company is specified, fees will be
determined by such custodian.
The employer or individual, as the case may be, should consult his or her
tax adviser or attorney as to the applicability of the Keogh Plan, SEP or IRA to
his or her particular circumstances. Additionally, since these retirement
programs involve commitments covering future years, the investment objectives of
each Fund, as described in the Prospectus and in this Statement of Additional
Information, should be carefully considered.
For further details, including the right to appoint a successor custodian,
see the Keogh Plan, Keogh Custodial Agreement and Keogh Application Form and the
IRA Application Form, IRA Custodial Agreement and IRA Disclosure Statement which
are available from the Trust, telephone (800) 266-3637.
For a discussion of income tax withholding on certain distributions from
qualified retirement plans or taxsheltered annuity plans, see "Taxes" below.
YIELD AND PERFORMANCE INFORMATION
The yield of the Class Y shares of Money Market Fund for the seven-day
period ended April 30, 1996 was 5.12%. 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
effective yield of the Class Y shares of
32
<PAGE> 81
Money Market Fund for the seven-day period, ended April 30, 1996 was 5.26%. The
effective yield is computed by adding 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).
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 Fund, 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 Fund may include
comparison of the Fund's performance to that of various market indices.
The compound annual rates of return of Class Y shares of the Asset
Allocation Fund for the one year period ended April 30, 1996 and for the period
March 1, 1994 (commencement of operations and ended April 30, 1996 were 26.44%
and 15.97%, respectively, computed in accordance with the rules for standardized
computation of performance as established by the SEC. Such rules for
standardized computation of performance provide for determining compound annual
rates of return by taking the total return of the Fund over the period in
question calculated as described in the Prospectus and "annualizing" such total
return -- i.e., computing the annual rate of return which, if earned in each
year of such period, would produce the total return actually earned over such
period.
Inasmuch as the Asset Allocation Fund has no sales load on purchases or
reinvested dividends, no deferred sales load or redemption fee, no adjustments
are made for such items in calculating performance.
TAXES
Each Fund intends to qualify and to continue to qualify as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"). In order to qualify for that treatment, among other things, (1)
the Fund 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 stock or securities or foreign currencies, or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies, (2) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following held for
less than three months (i) stock or securities, (ii) options, futures or forward
contracts (other than those on foreign currencies), or (iii) foreign currencies
(or options, futures or forward contracts thereon) that are not directly related
to the Fund's principal business of investing in stock or securities (or options
and futures with respect to stock or securities); (3) at the close of each
quarter of the Fund's taxable year, (i) 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 Fund's total assets and that do not
represent more than 10% of the outstanding voting securities of the issuer, and
(ii) not more than 25% of the value of the Fund's total assets may be invested
in securities (other than U.S. Government securities or the securities of other
RICS) of any one issuer. The 90% and 30% gross income requirements described
above will limit the ability of a Fund to engage in certain options, futures,
and forward transactions, and the 30% gross income requirement also will limit a
Fund's ability to engage in certain foreign currency transactions. Also, for
purposes of the 90% gross income requirement, the IRS is authorized to issue
regulations treating as nonqualifying income foreign currency gains which are
not directly related to a Fund's principal business of investing in stock or
securities (or options and futures with respect to stock or securities), and
under such regulations a Fund may likewise be limited in its ability to engage
in certain foreign currency transactions.
Assuming a Fund qualifies as a RIC, it will not be subject to federal
income tax on its income and gains distributed to shareholders, provided the
Fund distributes to its shareholders at least 90% of its net investment income
(i.e., net income exclusive of net long-term capital gains) each year.
33
<PAGE> 82
The risk of a Fund failing the 30% test described in the second preceding
paragraph is increased to some extent by trading in stock index options, stock
index futures contracts and options on such contracts. For example, in certain
publicized cases, regulated investment companies holding "short" positions in
stock index futures contracts on October 19, 1987 (at which time there was a
sharp drop in the values of publicly traded equity securities) unexpectedly
realized large gains on those contracts, some of which had been held for less
than three months. For purposes of the 30% test described above, losses on
offsetting positions with respect to those contracts, would not have been taken
into account. Therefore, although those contracts might have effectively hedged
a company's loss on the offsetting positions, the resulting gain on those
contracts could have caused the company to lose its status as a regulated
investment company under Subchapter M of the Code.
In the event a Fund does not qualify in any year as a regulated investment
company under Subchapter M of the Code, its income would be taxed to a Fund
whether or not distributed, and distributions to shareholders would generally be
treated as ordinary dividend income.
If a Fund purchases shares in a foreign corporation treated for U.S.
federal income tax purposes as a "passive foreign investment company" ("PFIC"),
however, the Fund may be subject to U.S. federal income tax, and an additional
charge in the nature of interest, on a portion of distributions from such
foreign corporation and on gain from the disposition of such shares
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. In certain
limited circumstances, the Fund may be eligible to make a "qualified electing
fund electing" with respect to certain PFICs in which it owns shares. Such an
election would enable the Fund to avoid the taxes and additional charge on
excess distributions by including in income each year the Fund's pro rata share
of the PFIC's income and gains for that year (whether or not the Fund's share of
such income and gains are distributed to the Fund). Alternatively, pursuant to
Proposed Treasury Regulations (which are not yet effective), the Fund may be
eligible to elect under certain circumstances to treat its stock in certain
PFICs as having been sold on the last business day of each taxable year of the
Fund for the stock's fair market value, in which case the Fund would, subject to
certain exceptions, generally avoid the taxes on excess distributions. These
elections, therefore, may cause the Fund to recognize income in a particular
year in excess of the distributions it received in that year from the PFIC.
A nondeductible 4% excise tax will be imposed on a Fund to the extent the
Fund does not distribute during each calendar year (i) 98% of its ordinary
income for such calendar year, (ii) 98% of its capital gain net income for the
one-year period ending on October 31 of such calendar year (or, in certain
circumstances, ending with the Fund's taxable year), and (iii) certain other
amounts not distributed in previous years. The Fund intends to distribute its
income and gains in a manner so as to avoid the imposition of such 4% excise
tax.
For purposes of applying the distribution requirements described above, and
for purposes of determining the taxable income of shareholders each year,
dividends declared by a Fund in October, November or December of a year, payable
to shareholders as of a record date in such a month, and paid during the
following January, will be treated for federal income tax purposes as paid by
the Fund and received by shareholders as of December 31 of the calendar year
declared.
If the net asset value of shares is reduced below a shareholder's cost by a
distribution, such distribution would be taxable as described in the Prospectus,
even though the distribution might be viewed in economic terms as a return of
capital. For federal income tax purposes, the shareholder's original cost
continues as his tax basis and on redemption his gain or loss is the difference
between such basis and the redemption price.
Income tax withholding at a rate of 20% is applicable to any distribution
from a qualified retirement plan, such as the Keogh Plan, or a tax-sheltered
annuity plan where the distribution is eligible for tax-free rollover treatment
but is not transferred directly to a specified retirement vehicle such as
another qualified plan or an IRA. Also, all qualified plans must provide
participants and certain other distributees with an election to have an eligible
rollover distribution transferred directly to certain specified retirement
vehicles. If a shareholder receives a distribution which is subject to the 20%
withholding requirement and wishes to roll the distribution into another vehicle
such as an IRA within 60 days, the shareholder will have to contribute to the
IRA the amount of the distribution (after withholding) plus an amount equal to
the amount withheld. The amount
34
<PAGE> 83
withheld can be applied to reduce the shareholder's Federal income tax liability
and may be refunded to the shareholder upon filing a Federal income tax return
if it exceeds such tax liability. If the amount withheld is not rolled over into
the IRA, it will be subject to income taxes plus, if the shareholder has not
attained age 59 1/2, an additional 10% penalty tax.
The rules broadly define distributions which qualify for rollover
treatment. Shareholders who expect to receive distributions which may qualify
for rollover treatment and therefore may be subject to 20% withholding should
consult their own tax advisers for a complete discussion on the impact of these
rules on such distributions.
The foregoing discussion, together with the related discussion in the
Prospectus, are only general summaries of certain provisions of the Internal
Revenue Code and current Treasury regulations applicable to each Fund and its
shareholders. The Internal Revenue Code and such regulars are subject to change
by legislative or administrative action.
Distributions to shareholder may also be subject to state and local taxes.
Investors are urged to consult their own tax advisers regarding the application
of federal, state, local, and foreign tax laws.
ADDITIONAL INFORMATION
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING AGENT
Firstar Trust Company ("Firstar") is the custodian, transfer agent, and
accounting agent for the Trust. Under the custodian agreement between the Trust
and Firstar, the bank may appoint a subcustodian bank with the approval of the
Trust's Trustees. Firstar will also calculate the net asset value per share on
each day that the NYSE is open for trading, except that shares of the Trust 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, Veterans' Day, and Christmas Day. Firstar has no
part in determining the investment policies of the Trust or the securities to be
purchased or sold by the Trust.
INDEPENDENT AUDITORS
Ernst & Young LLP acts as independent auditors for the Trust. Its offices
are at Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606. Ernst &
Young LLP performs an audit of the financial statements of the Trust annually.
LEGAL COUNSEL
Sidley & Austin, One First National Plaza, Chicago, IL 60603 is counsel for
the Trust.
SHARES OF BENEFICIAL INTEREST
Aon Funds is a Delaware business trust, formed on May 16, 1996. It is
authorized to issue an unlimited number of shares of beneficial interest. The
Trustees of the Trust may, at any time and from time to time, by resolution,
authorize the division of shares into an unlimited number of series and the
division of any series into two or more classes.
By this offering, Class C and Class Y shares of each are being offered.
Class C shares of each Fund are offered without a sales charge, but are subject
to a charge imposed pursuant to Rule 12b-1 under the 1940 Act. Class Y shares
are offered without a sales charge and are sold only to (i) the shareholders of
record of outstanding shares of any Fund as of the business day immediately
prior to the commencement of distribution under the multiple-class program
(including additional investments by such holders), (ii) investment advisory
clients of AAI and (iii) affiliates of Aon or AAI. Other differences between the
classes of shares include the services offered to and expenses borne by each
class and certain voting rights, as described above.
35
<PAGE> 84
Shareholders of the Trust are entitled to one vote for each full share and
to a proportionate fractional vote for each fractional share, irrespective of
class, standing in the shareholder's name on the books of the Trust. All shares
then issued and outstanding and entitled to be voted shall be voted on a series
by series basis, except that (1) shares shall be voted in the aggregate without
differentiation among the separate series and classes in the case of the
election or removal of Trustees and where otherwise required by the 1940 Act or
the Trust's Agreement and Declaration of Trust, (2) shares shall be voted by
class where required by the 1940 Act, and (3) the Trustees in their sole
discretion may determine that, in situations where the shares of more than one
series or class are entitled to be voted with respect to a matter, such shares
shall be voted as a single class with respect to such matter if and to the
extent permitted under the 1940 Act. Shares do not have preemptive or
subscription rights.
REPORTS
The Trust will issue unaudited semi-annual reports showing each of the
Funds' investments and other information, and it will issue audited annual
reports containing financial statements audited by the Trust's independent
auditors.
OTHER INFORMATION
This Statement of Additional Information and the Prospectus for the Trust
do not contain all the information set forth in the registration statement and
exhibits relating thereto, which the Trust 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.
36
<PAGE> 85
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICES, INC. ("MOODY'S")
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.
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 ("S&P")
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
37
<PAGE> 86
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 Trust is dependent on the Adviser's
judgment, analysis and experience in the evaluation of such bonds.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.: 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: 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-l+" or "F-1" ratings.
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
38
<PAGE> 87
paper, and certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including bankers'
acceptances 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:
AL+: Obligations supported by the highest capacity for timely
repayment.
AL: 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."
39
<PAGE> 88
AUDITED FINANCIAL STATEMENTS
AON ASSET MANAGEMENT FUND, INC.
YEAR ENDED OCTOBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 89
Aon Asset Management Fund, Inc.
Audited Financial Statements
Year ended October 31, 1995
TABLE OF CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2
Financial Statements
Statements of Assets and Liabilities................................................. F-3
Statements of Operations............................................................. F-4
Statements of Changes in Net Assets.................................................. F-5
Schedule of Investments.............................................................. F-6
Notes to Financial Statements........................................................ F-19
Financial Highlights................................................................. F-23
</TABLE>
F-1
<PAGE> 90
[LETTERHEAD]
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. (comprising, the
Money Market and Flexible Asset Allocation Portfolios) as of October 31, 1995,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended
(Money Market Portfolio) and for the year ended October 31, 1995 and for the
period from March 1, 1994 to October 31, 1994 (Flexible Asset Allocation
Portfolio), and the 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, 1995, 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, 1995, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended (Money Market Portfolio) and for the year ended October 31, 1995 and
for the period from March 1, 1994 to October 31, 1994 (Flexible Asset Allocation
Portfolio), and the financial highlights for each of the fiscal periods since
1992, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
December 1, 1995
F-2
<PAGE> 91
Statements of Assets and Liabilities
Aon Asset Management Fund, Inc.
October 31, 1995
<TABLE>
<CAPTION>
FLEXIBLE
MONEY ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------ -------------
<S> <C> <C>
ASSETS
Investments in securities at fair value
(cost -- $68,299,794)...................................... $ -- $ 73,267,471
Investments in securities at amortized cost which approximates
fair value................................................. 426,399,125 --
Cash.......................................................... 737 70,680
Dividends receivable.......................................... -- 13,886
Interest receivable........................................... 714,883 442,838
Receivable for securities sold................................ -- 690,993
Due from affiliates........................................... -- 9,432
-------------- ----------
Total Assets.................................................... 427,114,745 74,495,300
LIABILITIES
Dividends payable............................................. 2,017,109 --
Accrued expenses payable...................................... 4,784 184,233
Payable for securities purchased.............................. 4,999,219 535,832
-------------- -------
Total Liabilities............................................... 7,021,112 720,065
-------------- -------
NET ASSETS...................................................... $420,093,633 $ 73,775,235
============== =============
OUTSTANDING SHARES.............................................. 420,093,633 6,126,826.738
============== =============
Net Asset Value Per Share....................................... $1.00 $12.04
===== ======
</TABLE>
See notes to financial statements.
F-3
<PAGE> 92
Statements of Operations
Aon Asset Management Fund, Inc.
Year ended October 31, 1995
<TABLE>
<CAPTION>
FLEXIBLE ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------ --------------
<S> <C> <C>
INVESTMENT INCOME
Interest......................................................... $28,920,423 $ 940,057
Dividends........................................................ -- 194,292
----------- ----------
28,920,423 1,134,349
EXPENSES
Investment advisory fee (Note 4)................................. 1,706,435 218,580
Custodian, transfer and accounting fees.......................... 146,539 40,874
Directors' fees.................................................. 12,501 12,501
Audit fees....................................................... 12,501 12,501
Registration fees................................................ 5,988 10,136
Other............................................................ 11,136 --
----------- ----------
1,895,100 294,592
Less expense waiver (Note 4)....................................... 1,218,882 --
----------- ----------
676,218 294,592
----------- ----------
NET INVESTMENT INCOME.............................................. 28,244,205 839,757
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments......................... 4,758 1,835,265
Change in net unrealized appreciation on investments............. -- 4,907,281
----------- ----------
Net realized and unrealized gain on investments.................. 4,758 6,742,546
----------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS............................. $28,248,963 $7,582,303
=========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 93
Statements of Changes in Net Assets
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
FLEXIBLE
ASSET
FLEXIBLE ALLOCATION
ASSET PORTFOLIO
ALLOCATION PERIOD FROM
MONEY MARKET PORTFOLIO PORTFOLIO MARCH 1,
YEARS ENDED OCTOBER 31, YEAR ENDED 1994 TO
---------------------------------- OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income............ $ 28,244,205 $ 15,318,373 $ 839,757 $ 174,960
Net realized gain (loss) on sale
of investments................ 4,758 (605,310) 1,835,265 (46,231)
Change in unrealized appreciation
on investments................ -- -- 4,907,281 60,396
-------------- -------------- ----------- ----------
Net increase in net assets from
operations.................... 28,248,963 14,713,063 7,582,303 189,125
DIVIDENDS PAID TO SHAREHOLDERS
FROM:
Net investment income............ (28,244,205) (15,318,373) (835,923) (174,960)
Net realized gain on
investments................... (4,758) (1,940) (1,835,265) --
Distribution in excess of
realized gains................ -- -- (162,706) (36,041)
-------------- -------------- ----------- ----------
(28,248,963) (15,320,313) (2,833,894) (211,001)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares..... 4,368,158,454 4,231,505,926 56,003,807 10,000,000
Contribution of capital (Note
4)............................ -- 607,250 -- --
Net asset value of shares issued
upon reinvestment of
dividends..................... 7,851,993 3,932,861 2,833,894 211,001
Cost of redemption of shares..... (4,366,829,092) (4,236,594,456) -- --
-------------- -------------- ----------- ----------
Increase (decrease) in net assets
from capital transactions........ 9,181,355 (548,419) 58,837,701 10,211,001
-------------- -------------- ----------- ----------
Increase (decrease) in net
assets........................... 9,181,355 (1,155,669) 63,586,110 10,189,125
Net assets at beginning of
period........................... 410,912,278 412,067,947 10,189,125 --
-------------- -------------- ----------- ----------
Net assets at end of period........ $ 420,093,633 $ 410,912,278 $73,775,235 $10,189,125
============== ============== =========== ==========
Undistributed net investment
income........................... $ -- $ -- $ 3,834 $ --
============== ============== =========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 94
Schedule of Investments
Aon Asset Management Fund, Inc.
October 31, 1995
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO
COMMERCIAL PAPER
Agricultural Product........................ 3.59%
Weyerhauser Co.
5.73% due November 2, 1995................ 3,090,000 $ 3,089,508 $ 3,089,508
5.74% due November 6, 1995................ 12,000,000 11,990,433 11,990,433
------------ ------------
15,079,941 15,079,941
Auto & Truck................................ 0.38%
Fluor Corp.
5.78% due November 14, 1995............... 1,580,000 1,576,702 1,576,702
Ford Motor Credit Co.
5.67% due November 17, 1995............... 5,000,000 4,987,400 4,987,400
5.73% due December 8, 1995................ 5,000,000 4,970,554 4,970,554
5.70% due January 12, 1996................ 5,000,000 4,943,000 4,943,000
General Mtrs Accep Corp.
5.79% due November 17, 1995............... 5,000,000 4,987,133 4,987,133
5.72% due January 31, 1996................ 10,000,000 9,855,411 9,855,411
------------ ------------
31,320,200 31,320,200
Banking -- Foreign.......................... 7.05%
Canadian Imperial
5.67% due November 27, 1995............... 5,000,000 4,979,525 4,979,525
5.72% due December 1, 1995................ 5,000,000 4,976,167 4,976,167
5.73% due January 4, 1996................. 5,000,000 4,949,067 4,949,067
International Lease Financial Corp.
5.66% due November 15, 1995............... 5,000,000 4,988,994 4,988,994
5.68% due November 21, 1995............... 5,000,000 4,984,222 4,984,222
5.70% due January 2, 1996................. 4,797,000 4,749,909 4,749,909
------------ ------------
29,627,884 29,627,884
Conglomerate................................ 1.29%
Avco Financial Services Inc.
5.75% due January 12, 1996................ 5,500,000 5,436,750 5,436,750
Consumer Cyclical........................... 1.18%
General Electric Co.
5.70% due December 18, 1995............... 5,000,000 4,962,792 4,962,792
Finance -- Miscellaneous.................... 29.56%
American Express
5.60% due November 8, 1995................ 5,000,000 4,994,556 4,994,556
5.65% due November 22, 1995............... 5,000,000 4,983,521 4,983,521
5.70% due January 26, 1996................ 5,000,000 4,931,917 4,931,917
American General Finance
5.73% due November 28, 1995............... 5,000,000 4,978,513 4,978,513
5.70% due December 22, 1995............... 5,000,000 4,959,625 4,959,625
</TABLE>
F-6
<PAGE> 95
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
COMMERCIAL PAPER (continued)
Finance -- Miscellaneous (continued)
Associates Corp. of North America
5.70% due December 28, 1995............... 10,000,000 $ 9,909,750 $ 9,909,750
5.70% due January 22, 1996................ 5,000,000 4,935,083 4,935,083
Beneficial Corp.
5.67% due December 8, 1995................ 5,000,000 4,970,863 4,970,863
5.65% due February 7, 1996................ 10,000,000 9,846,194 9,846,194
Comerica Bank
5.75% due April 8, 1996................... 5,000,000 5,000,000 5,000,000
Du Pont E I DE Nemours & Co.
5.70% due November 14, 1995............... 5,000,000 4,989,708 4,989,708
First Natl Bank of Chicago
6.17% due August 26, 1996................. 10,000,000 10,000,000 10,000,000
Fleet Mortgage Group
5.74% due January 22, 1996................ 10,000,000 9,869,256 9,869,256
General Electric Capital
5.70% due December 8, 1995................ 5,000,000 4,970,708 4,970,708
5.68% due January 16, 1996................ 5,000,000 4,940,044 4,940,044
Household Finance Corp.
5.73% due November 16, 1995............... 15,000,000 14,964,188 14,964,188
Preferred Receivables FDG Co.
5.80% due November 8, 1995................ 5,000,000 4,994,361 4,994,361
5.70% due December 6, 1995................ 10,000,000 9,944,583 9,944,583
------------ ------------
124,182,870 124,182,870
Finance -- Service.......................... 7.11%
Merrill Lynch & Co.
5.75% due November 2, 1995................ 5,000,000 4,999,201 4,999,201
5.75% due November 3, 1995................ 10,000,000 9,996,806 9,996,806
Morgan Stanley Group
5.73% due November 10, 1995............... 7,000,000 6,989,973 6,989,973
5.73% due January 25, 1996................ 8,000,000 7,891,767 7,891,767
------------ ------------
29,877,747 29,877,747
Insurance................................... 2.97%
Prudential Funding
5.70% due November 3, 1995................ 7,500,000 7,497,625 7,497,625
5.73% due November 15, 1995............... 5,000,000 4,988,858 4,988,858
------------ ------------
12,486,483 12,486,483
Miscellaneous............................... 8.28%
Asset Securitization Corp.
5.70% due January 16, 1996................ 5,000,000 4,939,833 4,939,833
5.63% due January 17, 1996................ 10,000,000 9,879,581 9,879,581
</TABLE>
F-7
<PAGE> 96
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
COMMERCIAL PAPER (continued)
Miscellaneous (continued)
PHH Corp.
5.72% due November 15, 1995............... 15,000,000 $ 14,966,633 $ 14,966,633
Raytheon Co.
5.72% due November 3, 1995................ 5,000,000 4,998,411 4,998,411
------------ ------------
34,784,458 34,784,458
Oil & Gas................................... 3.57%
Mobil Corp.
5.75% due November 7, 1995................ 15,000,000 14,985,625 14,985,625
Retail...................................... 3.56%
Goldman Sachs Group
5.72% due November 22, 1995............... 5,000,000 4,983,317 4,983,317
5.73% due November 22, 1995............... 10,000,000 9,966,575 9,966,575
------------ ------------
14,949,892 14,949,892
Technology.................................. 3.56%
IBM Credit
5.73% due November 14, 1995............... 15,000,000 14,968,963 14,968,963
Telecommunication........................... 1.18%
Ameritech Cap. FDG. Corp.
5.60% due January 19, 1996................ 5,000,000 4,938,556 4,938,556
Utility -- Communication.................... 7.22%
AT&T Cap. Corp.
5.86% due November 1, 1995................ 5,000,000 5,000,000 5,000,000
Bell Atlantic Financial Svcs.
5.71% due November 30, 1995............... 10,369,000 10,321,305 10,321,305
Bell So. Capital Funding C/P
5.65% due November 1, 1995................ 15,000,000 15,000,000 15,000,000
------------ ------------
30,321,305 30,321,305
Utility -- Electric......................... 3.57%
Pacific Gas & Electric
5.72% due November 10, 1995............... 15,000,000 14,978,550 14,978,550
------------ ------------
TOTAL COMMERCIAL PAPER...................... 91.15% 382,902,016 382,902,016
REPURCHASE AGREEMENTS....................... 1.19%
First Bank America SE MI
5.80% due January 4, 1996................. 2,000,000 2,000,000 2,000,000
Harris Nesbit Thompson Repo
5.70% due November 1, 1995................ 2,994,000 2,994,000 2,994,000
------------ ------------
TOTAL REPURCHASE AGREEMENTS................. 1.19% 4,994,000 4,994,000
</TABLE>
F-8
<PAGE> 97
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies.................... 7.14%
Federal Farm Credit Bank
6.10% due November 1, 1995................ 10,000,000 $ 10,000,000 $ 10,000,000
5.94% due December 1, 1995................ 5,000,000 5,000,000 5,000,000
5.72% due February 1, 1996................ 10,000,000 10,000,000 10,000,000
5.66% due February 1, 1996................ 5,000,000 4,999,219 4,999,219
------------ ------------
29,999,219 29,999,219
------------ ------------
TOTAL U.S. GOVERNMENT SECURITIES............ 7.14% 29,999,219 29,999,219
CORPORATE BONDS
Asset Back Security......................... 2.02%
Corporate Asset Fndg. Co.
5.72% due November 21, 1995............... 8,531,000 8,503,890 8,503,890
------------ ------------
TOTAL CORPORATE BONDS....................... 2.02% 8,503,890 8,503,890
------------ ------------
TOTAL INVESTMENTS........................... 101.50% $426,399,125 426,399,125
===========
Liabilities, less cash and other assets..... -1.50% (6,305,492)
------------
NET ASSETS.................................. 100.00% $420,093,633
===========
</TABLE>
F-9
<PAGE> 98
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO
COMMON STOCKS -- BANKING & FINANCIAL SERVICE
Bank & Bank Holding Co......................... 0.53%
NationsBank Corp. ............................. 6,000 $ 315,547 $ 394,500
Financial Service.............................. 1.22%
First Investors Financial Service Group (A).... 7,000 77,000 67,375
Green Tree Financial Corp. (A)................. 24,000 642,936 639,000
PMT Services Inc. (A).......................... 5,000 112,500 134,375
Pioneer Financial Services Inc. ............... 4,000 56,240 56,000
----------- -----------
888,676 896,750
Insurance...................................... 1.98%
American General Corp. ........................ 8,500 297,947 279,438
American International Group................... 14,000 1,059,597 1,181,250
----------- -----------
1,357,544 1,460,688
Real Estate.................................... 0.44%
Centerpoint Properties Corp. .................. 4,000 74,120 90,500
Glimcher Realty Trust.......................... 5,000 105,000 90,000
JDN Realty Corp. (A)........................... 7,000 141,750 142,625
----------- -----------
320,870 323,125
----------- -----------
TOTAL COMMON STOCKS -- BANKING & FINANCIAL
SERVICE...................................... 4.17% 2,882,637 3,075,063
COMMON STOCKS -- CAPITAL GOODS
Production..................................... 0.24%
Illinois Tool Works............................ 3,000 134,805 174,375
Electrical Equipment........................... 0.06%
California Microwave Inc. (A).................. 2,000 57,000 44,000
----------- -----------
TOTAL COMMON STOCKS -- CAPITAL GOODS........... 0.30% 191,805 218,375
COMMON STOCKS -- CONSUMER CYCLICAL
Apparel........................................ 0.38%
Gucci Group (A)................................ 500 11,000 15,000
Tommy Hilfiger Corp. (A)....................... 7,000 151,860 266,875
----------- -----------
162,860 281,875
Auto & Truck................................... 1.19%
Ford Motor Co. ................................ 2,000 58,245 57,500
Harley Davidson (A)............................ 15,000 384,275 401,250
Oxford Resources Corp. CL A (A)................ 16,000 416,416 420,000
----------- -----------
858,936 878,750
</TABLE>
F-10
<PAGE> 99
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER CYCLICAL (continued)
Auto Parts..................................... 0.60%
Magna International (A)........................ 10,200 $ 439,015 $ 441,150
Household Products............................. 0.71%
Aptargroup, Inc. (A)........................... 2,000 51,000 68,500
Dept 56, Inc. (A).............................. 10,000 406,037 453,750
----------- -----------
457,037 522,250
Retail -- Specialty............................ 1.79%
General Nutrition Co. (A)...................... 40,000 591,969 995,000
Pep Boys -- Manny, Mo, Jack.................... 4,000 122,490 87,500
Talbots Inc. (A)............................... 6,300 258,294 152,775
Walgreen Co. .................................. 3,000 67,144 85,500
----------- -----------
1,039,897 1,320,775
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER CYCLICAL....... 4.67% 2,957,745 3,444,800
COMMON STOCKS -- CONSUMER NON-DURABLE
Communications & Media......................... 3.07%
Clear Channel Communications (A)............... 4,000 230,240 328,000
Cox Communications Inc. A NEW (A).............. 35,000 707,130 656,250
Evergreen Media Corp. CL A (A)................. 5,300 151,050 144,425
Panamsat Corp. (A)............................. 22,000 356,500 332,750
SFX Broadcasting Inc. -- CL A (A).............. 15,000 392,212 405,000
Time Warner Inc. .............................. 4,000 163,677 146,000
Tribune Co. ................................... 4,000 252,184 252,500
----------- -----------
2,252,993 2,264,925
Cosmetic & Soap................................ 0.38%
Procter & Gamble............................... 3,500 245,248 283,500
Drugs.......................................... 6.51%
Abbott Labs.................................... 16,000 625,336 636,000
Becton Dickinson Co. .......................... 10,000 574,350 650,000
Johnson & Johnson Co. ......................... 16,000 1,067,710 1,304,000
Merck & Co. ................................... 8,000 341,855 460,000
Pfizer Inc. ................................... 14,000 672,167 803,250
Schering Plough Corp. ......................... 6,000 230,805 321,750
Watson Pharmaceuticals Inc. (A)................ 14,000 450,413 626,500
----------- -----------
3,962,636 4,801,500
Entertainment & Leisure........................ 0.45%
Viacom Inc. Class A (A)........................ 1,000 44,966 49,750
Viacom Inc. Class B (A)........................ 5,600 251,561 280,000
----------- -----------
296,527 329,750
</TABLE>
F-11
<PAGE> 100
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER NON-DURABLE (continued)
Food, Beverage & Tobacco....................... 1.14%
Archer-Daniels-Midland Company................. 13,125 $ 237,625 $ 211,641
Pepsico, Inc. ................................. 12,000 546,706 633,000
----------- -----------
784,331 844,641
Health Care.................................... 0.71%
Medisense Inc. (A)............................. 7,000 140,437 149,625
Omega Healthcare Investors..................... 2,000 48,500 50,750
Orthodontic Centers of America (A)............. 10,000 173,750 320,000
----------- -----------
362,687 520,375
Health Care Service............................ 0.92%
Medpartners Inc. (A)........................... 2,500 32,500 70,000
Occusystems Inc. (A)........................... 9,400 149,274 194,463
United Healthcare Corp. (A).................... 7,800 358,978 414,375
----------- -----------
540,752 678,838
Hospital Supply & Service...................... 0.48%
Emcare Holdings Inc. (A)....................... 3,000 33,000 69,000
Inphynet Medical Management (A)................ 16,000 272,375 288,000
----------- -----------
305,375 357,000
Office Product................................. 0.19%
BT Office Products (A)......................... 11,000 131,790 141,625
Printing & Publishing.......................... 0.23%
Mail-Well Inc. (A)............................. 15,000 210,000 172,500
Travel & Recreation............................ 1.25%
Walt Disney Co. ............................... 16,000 879,969 922,000
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER NON-DURABLE.... 15.34% 9,972,308 11,316,654
COMMON STOCKS -- ENERGY
Oil & Gas -- Domestic.......................... 0.61%
Amoco Corp. ................................... 7,000 447,982 447,125
Oil & Gas -- International..................... 0.36%
Mobil Corp. ................................... 2,000 178,745 201,500
Royal Dutch Petroleum -- ADR................... 500 53,030 61,438
----------- -----------
231,775 262,938
----------- -----------
TOTAL COMMON STOCKS -- ENERGY.................. 0.96% 679,757 710,063
</TABLE>
F-12
<PAGE> 101
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- MANUFACTURING
Chemical....................................... 1.01%
Dupont De Nemours & Co. ....................... 12,000 $ 765,795 $ 748,500
Computer....................................... 0.55%
EMC Corp. Massachusetts (A).................... 19,200 332,259 297,600
MICROCOM Inc. (A).............................. 5,000 78,000 109,375
----------- -----------
410,259 406,975
Miscellaneous.................................. 1.51%
Applied Materials Inc. (A)..................... 10,000 518,026 501,250
Silicon Valley Group Inc. (A).................. 14,000 404,338 453,250
WATSCO Inc. ................................... 3,750 40,171 62,344
WATSCO Inc. Class B............................ 6,000 63,740 98,250
----------- -----------
1,026,275 1,115,094
Non Ferrous Metal.............................. 0.41%
Reynolds Metals................................ 6,000 309,949 302,250
Office Equipment............................... 0.47%
Boise Cascade Office Products (A).............. 9,500 248,920 343,185
----------- -----------
TOTAL COMMON STOCKS -- MANUFACTURING........... 3.95% 2,761,198 2,916,004
COMMON STOCKS -- SERVICE
Business....................................... 0.46%
Avid Tech Inc. (A)............................. 7,800 302,025 341,250
Distributor.................................... 0.66%
Alco Standard Corp. ........................... 5,500 392,080 486,750
Miscellaneous.................................. 0.61%
ADT, Ltd. (A).................................. 28,000 386,680 392,000
ITT Corp. ..................................... 500 41,071 61,250
----------- -----------
427,751 453,250
----------- -----------
TOTAL COMMON STOCKS -- SERVICE................. 1.74% 1,121,856 1,281,250
COMMON STOCKS -- TECHNOLOGY
Aerospace Aircraft............................. 0.13%
Simula Inc. (A)................................ 4,500 57,180 98,438
Business -- Mechanics & Software............... 3.27%
Compaq Computers Corp. (A)..................... 5,500 218,892 306,625
Network General Corp. (A)...................... 10,500 305,315 435,750
</TABLE>
F-13
<PAGE> 102
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- TECHNOLOGY (continued)
Business -- Mechanics & Software (continued)
Sun Microsystems (A)........................... 8,100 $ 485,675 $ 631,800
Xerox Corp. ................................... 8,000 952,455 1,038,000
----------- -----------
1,962,337 2,412,175
Business -- Service............................ 1.28%
First Data (A)................................. 14,273 709,415 943,809
Electronics.................................... 2.76%
Charter Power Systems Inc. (A)................. 8,000 216,000 200,000
Gemstar International Group (A)................ 11,500 138,000 240,063
Hewlett-Packard Co. ........................... 10,000 809,978 926,250
Motorola Inc. ................................. 9,000 670,165 590,625
Nimbus Co International Inc. (A)............... 10,000 70,000 80,000
----------- -----------
1,904,143 2,036,938
Miscellaneous.................................. 0.13%
Cherry Corp. Class A (A)....................... 500 6,250 6,250
Keane, Inc. (A)................................ 1,400 31,891 37,800
Three Five Systems Inc. (A).................... 3,000 79,429 54,375
----------- -----------
117,570 98,425
Software....................................... 3.32%
HCIA Inc. (A).................................. 7,900 225,150 215,275
Informix Corp. (A)............................. 15,000 372,810 436,875
Intersolv (A).................................. 8,500 178,626 133,875
Mcafee Associates Inc. (A)..................... 12,700 636,511 739,775
SPSS Inc. (A).................................. 8,000 125,504 135,000
Sterling Software, Inc. (A).................... 16,000 663,900 738,000
Transaction Systems Archit-A (A)............... 2,000 30,000 52,000
----------- -----------
2,232,501 2,450,800
Telecommunication.............................. 2.98%
Bell & Howell Holdings Co. (A)................. 39,000 809,793 975,000
Echostar Communications -- A (A)............... 8,000 139,000 116,000
U S Robotics (A)............................... 12,000 646,655 1,110,000
----------- -----------
1,595,448 2,201,000
----------- -----------
TOTAL COMMON STOCKS --
TECHNOLOGY................................... 13.88% 8,578,594 10,241,585
COMMON STOCKS -- TRANSPORTATION
Railroad....................................... 0.09%
Union Pacific Corp. ........................... 1,000 62,660 65,375
----------- -----------
TOTAL COMMON STOCKS -- TRANSPORTATION.......... 0.09% 62,660 65,375
</TABLE>
F-14
<PAGE> 103
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- TRANSPORTATION (continued)
COMMON STOCKS -- UTILITY
Telephone...................................... 0.31%
AT&T Corp. .................................... 500 $ 26,217 $ 32,000
Worldcom Inc. (A).............................. 6,000 181,500 195,750
----------- -----------
TOTAL COMMON STOCKS -- UTILITY................. 0.31% 207,717 227,750
----------- -----------
COMMON STOCKS -- GRAND TOTAL................... 45.40% 29,416,277 33,496,919
DEMAND NOTES
Utility -- Electrical.......................... 0.04%
Wisconsin Electric Demand Note
5.5082% due December 31, 2031................ 32,235 32,235 32,235
----------- -----------
TOTAL DEMAND NOTES............................. 0.04% 32,235 32,235
COMMERCIAL PAPER
Asset Back Security............................ 0.68%
Asset Securitization Corp.
5.73% due November 15, 1995.................. 500,000 498,886 498,886
Auto & Truck................................... 1.83%
Associates Corp. of North Amer.
5.7445% due November 29, 1995................ 350,000 350,000 350,000
General Electric Capital Corp.
5.7639% due November 17, 1995................ 500,000 500,000 500,000
Household Finance Corp.
5.7666% due November 2, 1995................. 500,000 500,000 500,000
----------- -----------
1,350,000 1,350,000
Finance -- Miscellaneous....................... 1.26%
American Express CR. Corp. CP
5.7906% due November 15, 1995................ 530,000 530,000 530,000
Ford Motor Credit
5.7455% due November 6, 1995................. 100,000 100,000 100,000
5.7657% due December 1, 1995................. 300,000 300,000 300,000
----------- -----------
930,000 930,000
Household Product.............................. 0.72%
Illinois Tool Works
5.73% due November 7, 1995................... 535,000 534,489 534,489
----------- -----------
TOTAL COMMERCIAL PAPER......................... 4.49% 3,313,375 3,313,375
</TABLE>
F-15
<PAGE> 104
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENTS
Beneficial Corp................................ 0.68%
5.7888% due November 10, 1995................ 500,000 $ 500,000 $ 500,000
----------- -----------
TOTAL REPURCHASE AGREEMENTS.................... 0.68% 500,000 500,000
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies....................... 9.54%
FHLMC Disc Notes
5.63% due November 1, 1995................... 1,535,000 1,535,000 1,535,000
5.62% due November 6, 1995................... 2,785,000 2,782,826 2,782,826
5.64% due November 30, 1995.................. 2,735,000 2,722,574 2,722,574
----------- -----------
7,040,400 7,040,400
U.S. Treasury.................................. 35.95%
Treasury Notes
6.00% due August 31, 1997.................... 2,500,000 2,509,294 2,514,842
7.1250% due September 30, 1999............... 200,000 198,991 209,312
7.75% due January 31, 2000................... 500,000 502,092 535,938
6.875% due March 31, 2000.................... 2,500,000 2,500,543 2,603,125
6.25% due May 31, 2000....................... 500,000 506,128 508,438
6.125% due July 31, 2000..................... 2,000,000 1,997,034 2,024,374
6.25% due August 31, 2000.................... 3,000,000 3,027,648 3,051,560
6.375% due August 15, 2002................... 100,000 97,513 102,500
7.25% due August 15, 2004.................... 2,000,000 2,014,058 2,165,624
7.8750% due November 15, 2004................ 450,000 453,647 507,234
6.50% due May 15, 2005....................... 2,500,000 2,522,911 2,588,280
6.50% due August 15, 2005.................... 4,500,000 4,636,918 4,660,313
Treasury Bills
6.25% due August 15, 2023.................... 500,000 410,592 489,063
7.625% due February 15, 2025................. 3,000,000 3,367,642 3,484,685
6.875% due August 15, 2025................... 1,000,000 997,983 1,073,437
----------- -----------
25,742,994 26,518,725
----------- -----------
TOTAL U.S. GOVERNMENT SECURITIES............... 45.49% 32,783,394 33,559,125
CORPORATE BONDS
Bank & Bank Holding Co......................... 0.27%
Huntington National
6.75% due June 15, 2003...................... 100,000 93,763 100,079
NationsBank Corp.
5.375% due December 1, 1995.................. 100,000 99,940 99,940
----------- -----------
193,703 200,019
Chemical....................................... 0.14%
Rhone-Poulenc
6.75% due October 15, 1999................... 100,000 97,210 100,958
</TABLE>
F-16
<PAGE> 105
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CORPORATE BONDS (continued)
Communications & Media......................... 0.16%
Bell Atlantic
5.37% due July 13, 1998...................... 120,000 $ 114,776 $ 117,965
Electronics.................................... 0.21%
Union Pacific
7.00% due June 15, 2000...................... 150,000 148,940 153,981
Finance Company................................ 0.34%
Commercial Credit
6.00% due June 15, 2000...................... 150,000 142,531 148,334
Norwest Financial Inc.
6.25% due February 15, 1997.................. 100,000 99,542 100,215
----------- -----------
242,073 248,549
Food, Beverage & Tobacco....................... 0.13%
Canandaigua Wine
8.75% due December 15, 2003.................. 100,000 98,748 99,250
Health Care.................................... 0.13%
Gillette Company
5.75% due October 15, 2005................... 100,000 87,526 95,562
Investment Company............................. 0.14%
Dean Witter Discover
6.875% due March 1, 2003..................... 100,000 93,944 102,027
Metal & Mineral................................ 0.27%
Aluminum Co. of America
5.75% due February 1, 2001................... 100,000 93,327 97,580
Federated Dept. Stores
9.72% due February 15, 2004.................. 100,000 99,077 99,500
----------- -----------
192,404 197,080
Miscellaneous.................................. 0.65%
Ann Taylor, Inc. Sub Notes
8.75% due June 15, 2000...................... 100,000 97,349 81,000
Argosy Gaming Co.
12.00% due June 1, 2001...................... 100,000 100,000 97,750
CitiCorp Sub NTS
7.1250% due March 15, 2004................... 100,000 98,878 102,842
Merck & Co.
7.75% due May 1, 1996........................ 100,000 100,631 100,983
</TABLE>
F-17
<PAGE> 106
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CORPORATE BONDS (continued)
Miscellaneous (continued)
Pep Boys Notes Non-Callable
6.6250% due May 15, 2003..................... 100,000 $ 91,838 $ 99,454
----------- -----------
488,696 482,029
Paper & Forest Product......................... 0.14%
International Paper Co.
7.50% due May 15, 2004....................... 100,000 98,759 106,202
Retail Trade................................... 0.14%
Black & Decker -- Notes nonCall
6.625% due November 15, 2000................. 100,000 95,057 100,325
----------- -----------
TOTAL CORPORATE BONDS.......................... 2.72% 1,951,836 2,003,947
CONVERTIBLE SECURITIES
Liberty Property SSB Deb. conv
8.00% due July 1, 2001....................... 50,000 50,000 50,620
Morgan Stanley 7.0% "CSCO" PFO (A)............. 7,500 252,677 311,250
----------- -----------
TOTAL CONVERTIBLE SECURITIES................... 0.49% 302,677 361,870
----------- -----------
TOTAL INVESTMENTS.............................. 99.31% $68,299,794 73,267,471
==========
Cash and other assets less liabilities......... 0.69% 507,764
-----------
NET ASSETS..................................... 100.00% $73,775,235
==========
</TABLE>
- ---------------
(A) Non income producing security
F-18
<PAGE> 107
Notes to Financial Statements
Aon Asset Management Fund, Inc.
Year ended October 31, 1995
1. DESCRIPTION OF ENTITY
Aon Asset Management 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 sold
principally 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 -- 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 and debt instruments held by the Flexible Asset Allocation
Portfolio that mature in 60 days or less are stated at amortized cost,
which approximates fair value. The remaining investments held by the
Flexible Asset Allocation Portfolio are stated at 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 or
cost of securities.
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, 1995 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 Corporation, 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. Effective April 26, 1995,
the investment advisory contract was amended to change the investment advisory
fees in the Flexible
F-19
<PAGE> 108
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
Asset Allocation Portfolio. The amended investment advisory fees are equal to
0.70% of average daily net assets up to $250 million, 0.60% 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"), an affiliate of Aon Corporation, 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 The Life Insurance Company of Virginia an indirect
wholly-owned subsidiary of Aon and parent company of FFSC. During the year ended
October 31, 1995, the Fund made payments totaling $25,002 ($12,501 per
portfolio) to unaffiliated directors of the Money Market Portfolio and the
Flexible Asset Allocation Portfolio.
During 1994, an affiliate of the Investment Advisor purchased securities
from the Money Market Portfolio, at an amount less 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, 1995, net assets of the Flexible Asset Allocation Portfolio
consisted of:
<TABLE>
<S> <C>
Common shares.......................................................... $68,849,955
Accumulated net realized loss on sales of investments.................. (46,231)
Unrealized appreciation on investments................................. 4,967,677
Undistributed net investment income.................................... 3,834
-----------
Net assets............................................................. $73,775,235
===========
</TABLE>
F-20
<PAGE> 109
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
6. CAPITAL SHARE TRANSACTIONS
At October 31, 1995, 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:
<TABLE>
<CAPTION>
CLASS SHARES
-----------
<S> <C>
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
</TABLE>
A summary of capital stock transactions follows:
<TABLE>
<CAPTION>
FLEXIBLE
ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------------ -------------
<S> <C> <C>
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 redeemed.................................... (4,236,594,456.020) --
------------------ -------------
Net change in shares............................... (1,155,668.420) 1,021,494.102
------------------ -------------
Balance at October 31, 1994........................ 410,912,278.330 1,021,494.102
Shares sold........................................ 4,368,158,454.020 4,865,217.717
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 7,851,992.89 240,114.919
------------------ -------------
Total issued....................................... 4,376,010,446.91 5,105,332.636
Shares redeemed.................................... (4,366,829,092.71) --
------------------ -------------
Net change in shares............................... 9,181,354.20 5,105,332.636
------------------ -------------
Balance at October 31, 1995........................ 420,093,632.53 6,126,826.738
================== =============
</TABLE>
F-21
<PAGE> 110
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>
<CAPTION>
FLEXIBLE
MONEY ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
-------------- ------------
<S> <C> <C>
PURCHASES
U.S. Government and Agency Obligations............... $ -- $ 34,194,530
Corporate bonds...................................... -- 199,000
Commercial paper..................................... 9,874,922,480 193,988,108
Common stock......................................... -- 47,796,532
-------------- ------------
Total purchases........................................ $9,874,922,480 $276,178,170
============== ============
SALES
U.S. Government and Agency Obligations............... $ -- $ 1,105,000
Corporate bonds...................................... -- 618,015
Commercial paper..................................... 174,419,896 16,081,762
Common stock......................................... -- 24,282,256
-------------- ------------
Total Sales............................................ $ 174,419,896 $ 42,087,033
============== ============
</TABLE>
At October 31, 1995, based on cost for federal income tax purposes, net
unrealized appreciation of portfolio securities consisted of the following:
<TABLE>
<CAPTION>
FLEXIBLE ASSET
ALLOCATION
PORTFOLIO
--------------
<S> <C>
Appreciated Securities.................................................. $5,619,765
Depreciated Securities.................................................. (652,088)
----------
Net unrealized appreciation............................................. $4,967,677
==========
</TABLE>
8. OTHER MATTERS
In September 1995, Aon Corporation announced its intention to sell The Life
Insurance Company of Virginia. The sale of The Life Insurance Company of
Virginia will probably include other Richmond based operations, including Forth
Financial Securities Corporation, the fund's principal underwriter.
F-22
<PAGE> 111
Financial Highlights
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
***
MONEY MARKET PORTFOLIO 1995 1994 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value at beginning
of period.................. $1.00 $1.00 1.00 1.00
Investment income............ .06 .04 .03 .03
Expenses..................... * * * *
----- ----- ----- -----
Net investment income........ .06 .04 .03 .03
Net realized gains (losses)
on sale of investments..... * * * *
----- ----- ----- -----
Income from operations....... .06 .04 .03 .03
Dividends paid to
shareholders from:
Net investment income...... (.06) (.04) (.03) (.03)
Net realized gain (loss)... * * * *
----- ----- ----- -----
(.06) (.04) (.03) (.03)
Contribution of capital...... -- * -- --
----- ----- ----- -----
Increase in net asset
value...................... .00 .00 .00 .00
Net asset value at end of
period..................... $1.00 $1.00 $1.00 $1.00
Total return................. 5.79% 3.73% 3.10% 3.57%
Ratios:
Ratio of operating expenses
to average net assets...... 0.14%** 0.15%** 0.17%** 0.25%**
Ratio of net investment
income to average net
assets..................... 5.79%** 3.73%** 3.10** 3.57**
Net assets at end of
period..................... $420,093,633 $410,912,278 $412,067,947 $399,075,531
</TABLE>
- ---------------
* Less than $0.01 per share
** The Investment Advisor has agreed for the first four 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 .39% and 5.54% for
1995, .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. Amounts for 1992 have been determined on an annualized basis.
F-23
<PAGE> 112
Financial Highlights (continued)
Aon Asset Management Fund, Inc.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1,
YEAR ENDED 1994 TO
OCTOBER 31, OCTOBER 31,
FLEXIBLE ASSET ALLOCATION PORTFOLIO 1995 1994
----------- -----------
<S> <C> <C>
Net asset value at beginning of period.......................... $ 9.97 $10.00
Investment income............................................... .32 .25
Expenses........................................................ (.08) (.08)
------ ------
Net investment income........................................... .24 .17
Net realized gains (losses) on sale of investments.............. .66 (.05)
Net unrealized appreciation (depreciation) on investments....... 1.75 .06
------ ------
Income from operations.......................................... 2.65 .18
Dividends paid to shareholders from:
Net investment income......................................... (.24) (.16)
Net realized gains (loss)..................................... (.34) (.05)
------ ------
(.58) (.21)
------ ------
Increase (decrease) in net asset value.......................... 2.07 (.03)
Net asset value at end of period................................ 12.04 9.97
Total return.................................................... 26.92% 1.84%
Ratios:
Ratio of operating expenses to average net assets............. .96% 1.25%*
Ratio of net investment income to average net assets.......... 2.73% 2.63%*
Portfolio turnover............................................ 95.17% 64.36%
Net assets at end of period..................................... $73,775,235 $10,189,125
</TABLE>
- ---------------
* Ratios have been determined on an annualized basis.
F-24
<PAGE> 113
UNAUDITED FINANCIAL STATEMENTS
AON ASSET MANAGEMENT FUND, INC.
SIX MONTHS ENDED APRIL 30, 1996
F-25
<PAGE> 114
Aon Asset Management Fund, Inc.
Unaudited Financial Statements
Six Months ended April 30, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Statements
Statements of Assets and Liabilities................................................. F-27
Statements of Operations............................................................. F-28
Statements of Changes in Net Assets.................................................. F-29
Schedule of Investments.............................................................. F-30
Notes to Financial Statements........................................................ F-42
Financial Highlights................................................................. F-46
</TABLE>
F-26
<PAGE> 115
Statements of Assets and Liabilities
Aon Asset Management Fund, Inc.
April 30, 1996
Unaudited
<TABLE>
<CAPTION>
MONEY FLEXIBLE ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------ --------------
<S> <C> <C>
ASSETS
Investments in securities at fair value (cost -- $83,523,907)... $ -- $ 92,011,773
Investments in securities at amortized cost which approximates
fair value................................................... 323,137,647 --
Cash............................................................ 3,458 17,884
Dividends receivable............................................ -- 42,881
Interest receivable............................................. 32,282 280,235
Receivable for securities sold.................................. -- 18,175
------------ -------------
Total Assets...................................................... 323,173,387 92,370,948
LIABILITIES
Dividends payable............................................... 1,438,283 --
Accrued expenses payable........................................ 233,051 365,327
Payable for securities purchased................................ -- 437,075
------------ -------------
Total Liabilities................................................. 1,671,334 802,402
------------ -------------
NET ASSETS........................................................ $321,502,053 $ 91,568,546
============ =============
OUTSTANDING SHARES................................................ 321,502,053 7,172,966
============ =============
$1.00 $12.77
Net Asset Value Per Share......................................... ============ =============
</TABLE>
See notes to financial statements.
F-27
<PAGE> 116
Statements of Operations
Aon Asset Management Fund, Inc.
Six months ended April 30, 1996
Unaudited
<TABLE>
<CAPTION>
MONEY FLEXIBLE ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
----------- --------------
<S> <C> <C>
INVESTMENT INCOME
Interest......................................................... $10,792,666 $1,323,529
Dividends........................................................ -- 287,035
----------- ----------
Total Investment Income............................................ 10,792,666 1,610,564
EXPENSES
Investment Advisory Fee (Note 4)................................. 674,895 302,972
Custodian, transfer and accounting fees.......................... 194,969 31,433
Directors' fees.................................................. 6,215 6,215
Audit fees....................................................... 10,063 7,757
Legal fees....................................................... 10,677 5,528
Registration fees................................................ 2,983 17,591
Other............................................................ 282 282
----------- ----------
Total Expenses..................................................... 900,084 371,778
Less: Fee Waiver................................................... 482,068 --
----------- ----------
Net Expenses....................................................... 418,016 371,778
----------- ----------
NET INVESTMENT INCOME.............................................. 10,374,650 1,238,786
----------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain (loss) on sale of investments.................. (10,062) 569,094
Change in net unrealized appreciation on investments............. -- 3,520,189
----------- ----------
Net realized and unrealized gain (loss) on investments........... (10,062) 4,089,283
----------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS............................. $10,364,588 $5,328,069
=========== ==========
</TABLE>
See notes to financial statements.
F-28
<PAGE> 117
Statements of Changes in Net Assets
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO FLEXIBLE ASSET
----------------------------------- ALLOCATION PORTFOLIO
SIX MONTHS ------------------------------------
ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995 APRIL 30, 1996 OCTOBER 31, 1995
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income.......... $ 10,374,650 $ 28,244,205 $ 1,238,786 $ 839,757
Net realized gain (loss) on
sale of investments......... (10,062) 4,758 569,094 1,835,265
Change in unrealized
appreciation on
investments................. -- -- 3,520,189 4,907,281
--------------- ---------------- ------------ ------------
Net increase in net assets from
operations.................. 10,364,588 28,248,963 5,328,069 7,582,303
DIVIDENDS PAID TO SHAREHOLDERS
FROM:
Net investment income.......... (10,374,650) (28,244,205) (498,978) (835,923)
Net realized gain (loss) on
investments................. 10,062 (4,758) -- (1,835,265)
Distributions in excess of
realized gains.............. -- -- -- (162,706)
--------------- ---------------- ------------ ------------
(10,364,588) (28,248,963) (498,978) (2,833,894)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares... 2,008,014,887 4,368,158,454 16,081,588 56,003,807
Net asset value of shares
issued upon reinvestment of
dividends................... 2,737,573 7,851,993 498,978 2,833,894
Cost of redemption of shares... (2,109,344,040) (4,366,829,092) (3,616,346) --
--------------- ---------------- ------------ ------------
Increase (decrease) in net
assets from capital
transactions................ (98,591,580) 9,181,355 12,964,220 58,837,701
--------------- ---------------- ------------ ------------
Increase (decrease) in net
assets...................... (98,591,580) 9,181,355 17,793,311 63,586,110
Net assets at beginning of
period...................... 420,093,633 410,912,278 73,775,235 10,189,125
--------------- ---------------- ------------ ------------
Net assets at end of period.... $ 321,502,053 $ 420,093,633 $ 91,568,546 $ 73,775,235
=============== ================ =========== ============
Undistributed net investment
income...................... $ -- $ -- $ 743,642 $ 3,845
=============== ================ ============ ============
</TABLE>
See notes to financial statements.
F-29
<PAGE> 118
Schedule of Investments
Aon Asset Management Fund, Inc.
April 30, 1996
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO
COMMERCIAL PAPER
Agricultural Product......................... 3.09%
Weyerhauser Co.
5.28% due June 7, 1996..................... 10,000,000 $ 9,945,733 $ 9,945,733
Auto & Truck................................. 17.04%
American Information
5.28% due May 28, 1996..................... 10,000,000 9,960,400 9,960,400
General Motors Acceptance Corp.
5.13% due May 13, 1996..................... 5,000,000 4,991,450 4,991,450
5.34% due July 18, 1996.................... 10,000,000 9,884,300 9,884,300
PHH Corp.
5.30% due May 17, 1996..................... 10,000,000 9,976,444 9,976,444
Preferred Receivable FDG Corp.
5.27% due May 13, 1996..................... 5,000,000 4,991,217 4,991,217
SouthwesternBell Capital Corp.
5.12% due May 9, 1996...................... 10,000,000 9,988,622 9,988,622
5.09% due May 30, 1996..................... 5,000,000 4,979,499 4,979,499
------------ ------------
54,771,932 54,771,932
Banking -- Foreign........................... 4.61%
International Ls
5.30% due July 19, 1996.................... 15,000,000 14,825,542 14,825,542
Conglomerate................................. 7.74%
Avco Financial Services Inc.
5.06% due May 20, 1996..................... 8,000,000 7,978,636 7,978,636
5.30% due June 21, 1996.................... 7,000,000 6,947,442 6,947,442
Philip Morris
5.30% due May 23, 1996..................... 10,000,000 9,967,611 9,967,611
------------ ------------
24,893,689 24,893,689
Finance -- Miscellaneous..................... 25.31%
AIG Funding
5.35% due May 1, 1996...................... 5,000,000 5,000,000 5,000,000
American Express
5.27% due May 10, 1996..................... 10,000,000 9,986,825 9,986,825
5.30% due May 31, 1996..................... 5,000,000 4,977,917 4,977,917
Associates Corp. of North America
5.05% due June 10, 1996.................... 5,000,000 4,971,944 4,971,944
Comerica Bank
5.03% due June 7, 1996..................... 5,000,000 5,000,000 5,000,000
Fleet Mortgage Group
5.40% due May 1, 1996...................... 10,000,000 10,000,000 10,000,000
</TABLE>
F-30
<PAGE> 119
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
(CONTINUED)COMMERCIAL PAPER (continued)
Ford Motor Credit Co.
5.30% due May 31, 1996..................... 5,000,000 $ 4,977,917 $ 4,977,917
5.25% due June 14, 1996.................... 10,000,000 9,935,833 9,935,833
General Electric Capital
5.32% due May 3, 1996...................... 5,000,000 4,998,522 4,998,522
5.28% due July 2, 1996..................... 8,600,000 8,521,797 8,521,797
Household Finance Corp.
5.24% due May 1, 1996...................... 10,000,000 10,000,000 10,000,000
Suntrust Bank
5.31% due May 13, 1996..................... 3,000,000 2,994,690 2,994,690
------------ ------------
81,365,445 81,365,445
Finance -- Service........................... 11.57%
Goldman Sachs
5.25% due July 12, 1996.................... 15,000,000 14,842,500 14,842,500
Merrill Lynch
5.29% due June 25, 1996.................... 7,500,000 7,439,385 7,439,385
5.30% due July 24, 1996.................... 5,000,000 4,938,167 4,938,167
Morgan Stanley
5.28% due May 6, 1996...................... 5,000,000 4,996,333 4,996,333
5.16% due May 13, 1996..................... 5,000,000 4,991,400 4,991,400
------------ ------------
37,207,785 37,207,785
Insurance.................................... 3.10%
Prudential Funding
5.29% due May 8, 1996...................... 5,000,000 4,994,857 4,994,857
5.25% due June 28, 1996.................... 5,000,000 4,957,708 4,957,708
------------ ------------
9,952,565 9,952,565
Miscellaneous................................ 1.54%
Associates Corp
5.26% due July 24, 1996.................... 5,000,000 4,938,633 4,938,633
Oil & Gas.................................... 4.41%
Baltimore Gas & Electric Co.
5.03% due May 21, 1996..................... 8,300,000 8,276,806 8,276,806
5.28% due June 6, 1996..................... 5,945,000 5,913,610 5,913,610
------------ ------------
14,190,416 14,190,416
Printing & Publishing........................ 1.53%
McGraw-Hill Inc.
5.23% due July 30, 1996.................... 5,000,000 4,934,625 4,934,625
Technology................................... 7.77%
Pitney-Bowes Credit Corp.
5.29% due May 16, 1996..................... 10,000,000 9,977,958 9,977,958
</TABLE>
F-31
<PAGE> 120
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
(CONTINUED)COMMERCIAL PAPER (continued)
Raytheon Co.
5.25% due May 6, 1996...................... 15,000,000 $ 14,989,063 $ 14,989,063
------------ ------------
24,967,021 24,967,021
Telecommunication............................ 1.55%
Ameritech Cap. FDG Corp.
5.29% due May 14, 1996..................... 5,000,000 4,990,449 4,990,449
Utility -- Communication..................... 1.18%
Bellsouth Telcommunications
5.31% due May 3, 1996...................... 3,787,000 3,785,883 3,785,883
Utility -- Electric.......................... 3.11%
Pacific Gas & Electric
5.32% due May 3, 1996...................... 10,000,000 9,997,044 9,997,044
------------ ------------
TOTAL COMMERCIAL PAPER....................... 93.6% 300,766,762 300,766,762
REPURCHASE AGREEMENTS
Savings Passbook............................. 2.17%
Associates Corp
5.29% due June 12, 1996.................... 5,000,000 4,969,142 4,969,142
First Bank America SEMI
5.10% due May 3, 1996...................... 2,000,000 2,000,000 2,000,000
------------ ------------
TOTAL REPURCHASE AGREEMENTS.................. 2.17% 6,969,142 6,969,142
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies..................... 1.79%
Federal Home Loan Mortgage Corp.
5.20% due July 3, 1996..................... 490,000 485,541 485,541
Federal Home Loan Bank
5.17% due May 28, 1996..................... 5,000,000 4,980,613 4,980,613
------------ ------------
TOTAL U.S. GOVERNMENT SECURITIES............. 1.79% 5,466,154 5,466,154
CORPORATE BONDS
Asset Back Security.......................... 3.10%
Corp Asset Fndg Co.
5.27% due June 14, 1996.................... 10,000,000 9,935,589 9,935,589
------------ ------------
TOTAL CORPORATE BONDS........................ 3.10% 9,935,589 9,935,589
------------ ------------
TOTAL INVESTMENTS............................ 100.51% $323,137,647 $323,137,647
===========
Liabilities, less cash and other assets...... -0.51% (1,635,594)
------------
NET ASSETS................................... 100.00% $321,502,053
===========
</TABLE>
F-32
<PAGE> 121
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO
COMMON STOCKS -- BANKING & FINANCIAL SERVICE
Bank & Bank Holding Co. ....................... 2.28%
Barnett Bank Inc............................... 10,000 $ 577,894 $ 633,750
First Chicago NBD(A)........................... 12,000 461,307 495,000
NationsBank Corp. ............................. 12,000 729,107 957,000
----------- -----------
1,768,308 2,085,750
Finance Company................................ 0.60%
Household International........................ 8,000 510,144 553,000
Financial Service.............................. 3.00%
Cityscape Financial(A)......................... 25,000 450,000 1,093,750
Green Tree Financial Corp.(A).................. 34,000 939,466 1,147,500
Onyx Acceptance Corp.(A)....................... 19,000 236,060 361,000
PMT Services Inc.(A)........................... 5,000 135,000 144,375
----------- -----------
1,760,526 2,746,625
Investment Company............................. 4.73%
S&P 500 Depositary Receipt..................... 66,200 4,123,749 4,328,859
Insurance...................................... 1.72%
American General Corp. ........................ 8,500 297,948 298,563
American International Group................... 14,000 1,059,597 1,279,250
----------- -----------
1,357,545 1,577,813
Real Estate.................................... 1.87%
Colonial Properties............................ 31,000 770,600 744,000
First Industrial Realty(A)..................... 27,500 587,764 656,563
Spieker Properties............................. 11,900 303,450 309,400
----------- -----------
1,661,814 1,709,963
----------- -----------
TOTAL COMMON STOCKS -- BANKING & FINANCIAL
SERVICE...................................... 14.20% 11,182,086 13,002,010
COMMON STOCKS -- CAPITAL GOODS
Machinery -- Agriculture....................... 0.64%
Case Equipment(A).............................. 11,600 626,898 585,800
Pollution Control.............................. 1.10%
Allied Waste Industries(A)..................... 99,100 808,783 966,225
Philip Environmental(A)........................ 5,000 36,875 40,625
----------- -----------
845,658 1,006,850
Production..................................... 1.28%
Deere & Co. ................................... 25,000 933,688 971,875
Illinois Tool Works............................ 3,000 134,805 201,750
----------- -----------
1,068,493 1,173,625
----------- -----------
TOTAL COMMON STOCKS -- CAPITAL GOODS........... 3.02% 2,541,049 2,766,275
</TABLE>
F-33
<PAGE> 122
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER CYCLICAL
Appliance...................................... 0.74 %
Interface Inc.................................. 51,800 $ 640,853 $ 673,400
Auto & Truck................................... 0.08%
Ford Motor Co. ................................ 2,000 58,245 71,750
Household Product.............................. 0.49%
Williams--Sonoma Inc.(A)....................... 18,000 358,884 450,000
Retail--General................................ 2.14%
Cost Plus Inc.(A).............................. 1,300 19,500 30,875
Kroger(A)...................................... 29,000 1,035,952 1,192,625
Tommy Hilfiger Corp.(A)........................ 14,000 460,154 637,000
Walgreen Co. .................................. 3,000 67,145 96,000
----------- -----------
1,582,751 1,956,500
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER
CYCLICAL..................................... 3.44% 2,640,733 3,151,650
COMMON STOCKS -- CONSUMER NON-DURABLE
Communications & Media......................... 4.17%
Cox Communications Inc.(A)..................... 35,000 707,130 717,500
Evergreen Media Corp.(A)....................... 11,900 338,346 467,075
Outdoor Systems(A)............................. 3,000 45,000 69,000
Paging Network Inc.(A)......................... 3,000 752,742 641,550
Panamsat Corp.(A).............................. 22,000 356,500 731,500
Time Warner Inc. .............................. 4,000 163,677 163,500
Tribune Co. ................................... 5,200 328,594 362,700
Turner Broadcasting............................ 25,000 654,351 668,750
----------- -----------
3,346,340 3,821,575
Cosmetic & Soap................................ 0.78%
Colgate Palmolive Co. ......................... 5,500 407,704 421,438
Procter & Gamble............................... 3,500 245,249 295,750
----------- -----------
652,953 717,188
Drugs.......................................... 6.05%
Abbott Labs.................................... 16,000 625,336 650,000
Becton Dickinson Co. .......................... 10,000 574,350 806,250
Humana Inc. ................................... 23,000 600,714 566,375
Johnson & Johnson Co. ......................... 16,000 1,067,710 1,480,000
Merck & Co. ................................... 12,000 587,847 726,000
Pfizer Inc. ................................... 14,000 672,167 964,250
Schering Plough Corp. ......................... 6,000 230,805 344,250
----------- -----------
4,358,929 5,537,125
</TABLE>
F-34
<PAGE> 123
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER NON-DURABLE (continued)
Entertainment & Leisure........................ 0.62%
Livent(A)...................................... 5,000 $ 41,875 $ 41,875
Viacom Inc. Class A(A)......................... 1,960 88,521 78,400
Viacom Inc. Class B(A)......................... 11,000 515,135 451,000
----------- -----------
645,531 571,275
Food, Beverage, & Tobacco...................... 1.31%
Archer--Daniels--Midland....................... 13,125 237,625 247,734
Pepsico Inc. .................................. 15,000 711,886 952,500
----------- -----------
949,511 1,200,234
Health Care.................................... 0.06%
Omega Healthcare Investors..................... 2,000 48,500 56,000
Health Care Service............................ 2.05%
Living Centers(A).............................. 3,500 131,250 129,500
Meditrust...................................... 30,000 1,020,600 1,016,250
United Healthcare Corp.(A)..................... 12,500 648,146 731,250
----------- -----------
1,799,996 1,877,000
Hospital Supply & Service...................... 0.64%
Housecall Medical Resources(A)................. 7,600 125,875 165,300
Respironics(A)................................. 19,400 406,604 424,072
----------- -----------
532,479 589,372
Retail -- Food and Drugs....................... 0.85%
General Nutrition(A)........................... 40,000 591,969 780,000
Travel & Recreation............................ 1.08%
Walt Disney Co. ............................... 16,000 879,969 992,000
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER NON-DURABLE.... 17.63% 13,806,177 16,141,769
COMMON STOCKS -- ENERGY
Oil & Gas -- Domestic.......................... 0.56%
Amoco Corp. ................................... 7,000 447,982 511,000
Oil & Gas -- International..................... 0.33%
Mobil.......................................... 2,000 178,745 230,000
Royal Dutch Petroleum.......................... 500 53,030 71,621
----------- -----------
231,775 301,621
----------- -----------
TOTAL COMMON STOCKS -- ENERGY.................. 0.88% 679,758 812,621
</TABLE>
F-35
<PAGE> 124
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- MANUFACTURING
Chemical....................................... 1.05%
Dupont De Nemours.............................. 12,000 $ 765,795 $ 964,500
Computer....................................... 0.82%
EMC Corp. Massachusetts(A)..................... 36,500 627,582 748,250
Metal & Mineral................................ 1.29%
AK Steel Holding Corp.(A)...................... 9,100 364,695 348,075
Century Aluminum Company(A).................... 23,900 310,700 352,525
Worthington Inds Inc........................... 23,500 489,215 478,813
----------- -----------
1,164,610 1,179,413
Miscellaneous Metals........................... 0.85%
Watsco Inc. ................................... 14,550 277,771 412,856
Watsco Inc. Class B............................ 6,000 63,740 170,250
York Group(A).................................. 10,800 140,400 198,450
----------- -----------
481,911 781,556
----------- -----------
TOTAL COMMON STOCKS -- MANUFACTURING........... 4.01% 3,039,899 3,673,719
COMMON STOCKS -- SERVICE
Business....................................... 0.02%
Superior Services(A)........................... 1,000 11,500 14,000
Distributor.................................... 0.70%
Alco Standard.................................. 11,000 392,080 636,625
Miscellaneous.................................. 0.11%
Centerpoint Properties Corp. .................. 4,000 74,120 96,500
----------- -----------
TOTAL COMMON STOCKS -- SERVICE................. 0.82% 477,700 747,125
COMMON STOCKS -- TECHNOLOGY
Aerospace Aircraft............................. 1.85%
Boeing......................................... 7,500 607,777 615,938
Sundstrand Corp................................ 12,500 448,250 459,375
United Technologies............................ 5,600 635,036 618,800
----------- -----------
1,691,063 1,694,113
Business Mechanics & Software.................. 5.03%
Compaq Computers Corp.(A)...................... 20,500 985,231 955,813
Digital Equipment(A)........................... 10,500 642,839 627,375
Network General Corp.(A)....................... 10,500 310,915 463,313
Sun Microsystems(A)............................ 20,000 687,175 1,085,000
Techforce Corp.(A)............................. 25,000 275,000 300,000
Xerox Corp..................................... 8,000 952,455 1,172,000
----------- -----------
3,853,615 4,603,501
</TABLE>
F-36
<PAGE> 125
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- TECHNOLOGY (continued)
Business Service............................... 1.28%
CSG Systems International(A)................... 2,700 $ 40,500 $ 86,400
First Data(A).................................. 14,273 709,410 1,084,748
----------- -----------
749,910 1,171,148
Electronics.................................... 2.63%
Gemstar International(A)....................... 2,500 63,125 82,813
Hewlett-Packard................................ 12,000 982,138 1,270,500
Sipex Corp.(A)................................. 8,100 87,750 166,050
Tektronix Inc.................................. 22,500 1,009,475 891,563
----------- -----------
2,142,488 2,410,926
Software....................................... 1.20%
Axent Technologies(A).......................... 300 4,200 5,400
Compuserve Corp.(A)............................ 5,100 160,562 145,350
Microware Systems(A)........................... 4,000 40,000 48,500
Saville Systems(A)............................. 30,000 362,505 817,500
Sterling Commerce(A)........................... 500 12,000 17,500
Transition Systems(A).......................... 2,500 45,000 60,625
----------- -----------
624,267 1,094,875
Telecommunications............................. 1.15%
American Portable Telecom(A)................... 25,000 422,188 375,000
Echostar Communications(A)..................... 18,800 344,900 629,800
Lucent Technologies(A)......................... 1,300 35,100 45,663
----------- -----------
802,188 1,050,463
----------- -----------
TOTAL COMMON STOCKS -- TECHNOLOGY.............. 13.13% 9,863,531 12,025,026
COMMON STOCKS -- TRANSPORTATION
Railroad....................................... 0.58%
Conrail Inc.................................... 6,700 475,192 467,325
Union Pacific.................................. 1,000 62,660 68,125
----------- -----------
537,852 535,450
Miscellaneous.................................. 0.86%
Harley Davidson(A)............................. 15,000 384,275 661,875
Hub Group Inc.(A).............................. 5,400 75,600 125,550
----------- -----------
459,875 787,425
----------- -----------
TOTAL COMMON STOCKS -- TRANSPORTATION.......... 1.44% 997,727 1,322,875
</TABLE>
F-37
<PAGE> 126
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- UTILITY
Miscellaneous.................................. 0.66%
Vanguard Cellular(A)........................... 28,000 $ 600,191 $ 602,000
TOTAL COMMON STOCKS -- UTILITY................. 0.66% 600,191 602,000
----------- -----------
COMMON STOCKS -- GRAND TOTAL................... 59.24% 45,828,851 54,245,070
DEMAND NOTES
Utility -- Electrical.......................... 0.02%
Wisconsin Electric Demand Note
5.0742% due December 31, 2031................ 18,165 18,165 18,165
----------- -----------
TOTAL DEMAND NOTES............................. 0.02% 18,165 18,165
COMMERCIAL PAPER
Finance -- Miscellaneous....................... 6.74%
American Express Credit Corp.
5.3521% due May 10, 1996..................... 3,450,000 3,450,000 3,450,000
Beneficial Corp.
5.3446% due May 30, 1996..................... 1,900,000 1,900,000 1,900,000
Ford Motor Credit
5.3532% due May 3, 1996...................... 355,000 355,000 355,000
Ford Motor Credit
5.3548% due May 29, 1996..................... 470,000 470,000 470,000
----------- -----------
TOTAL COMMERCIAL PAPER......................... 6.74% 6,175,000 6,175,000
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies....................... 15.77%
Federal National Mortgage Association Discount
Notes
5.28% due May 15, 1996....................... 4,275,000 4,266,239 4,266,239
5.24% due June 11, 1996...................... 4,010,000 3,986,389 3,986,389
----------- -----------
8,252,628 8,252,628
</TABLE>
F-38
<PAGE> 127
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
U.S. GOVERNMENT SECURITIES (continued)
U.S. Treasury.................................. 21.79%
Treasury Notes
6.000% due August 31, 1997................... 2,500,000 $ 2,506,766 $ 2,503,125
5.125% due February 28, 1998................. 4,000,000 3,950,566 3,937,500
5.000% due February 15, 1999................. 4,000,000 3,896,747 3,880,000
7.125% due September 30, 1999................ 200,000 199,119 204,937
7.750% due January 31, 2000.................. 500,000 501,846 522,968
6.875% due March 31, 2000.................... 2,500,000 2,500,482 2,543,750
6.250% due May 31, 2000...................... 500,000 505,461 497,656
6.125% due July 31, 2000..................... 1,000,000 998,673 990,625
6.250% due August 31, 2000................... 2,000,000 2,020,601 1,989,374
6.375% due August 15, 2002................... 100,000 97,696 99,188
5.625% due February 15, 2006................. 3,000,000 2,818,063 2,780,625
----------- -----------
19,996,020 19,949,748
----------- -----------
TOTAL U.S. GOVERNMENT SECURITIES............... 30.80% 28,248,648 28,202,376
CORPORATE BONDS
Bank & Bank Holding Co......................... 0.11%
Huntington National
6.75% due June 15, 2003...................... 100,000 94,170 97,630
Chemical....................................... 0.11%
Rhone-Poulenc
6.75% due October 15, 1999................... 100,000 97,562 99,511
Communications & Media......................... 0.13%
Bell Atlantic
5.37% due July 13, 1998...................... 120,000 115,741 117,427
Drugs.......................................... 0.11%
Merck & Co.
7.75% due May 1, 1996........................ 100,000 100,000 100,000
Electronics.................................... 0.16%
Union Pacific
7.0% due June 15, 2000....................... 150,000 149,054 150,678
Finance Company................................ 0.27%
Commercial Credit
6.00% due June 15, 2000...................... 150,000 143,336 145,914
Norwest Financial
6.25% due February 15, 1997.................. 100,000 99,718 100,282
----------- -----------
243,054 246,196
</TABLE>
F-39
<PAGE> 128
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CORPORATE BONDS (continued)
Food........................................... 0.11%
Canadaigua Wine
8.75% due December 15, 2003.................. 100,000 $ 98,825 $ 99,500
Health Care.................................... 0.10%
Gillette Company
5.75% due October 15, 2005................... 100,000 88,151 90,626
Investment Company............................. 1.64%
Cityscape Financial
19.048% due May 1, 2006...................... 390,000 390,000 390,000
Cobb Theatres
10.625% due March 1, 2003.................... 500,000 500,000 512,500
Dean Witter Discover
6.875% due March 1, 2003..................... 100,000 94,356 98,692
Southdown Inc.
10.00% due March 1, 2006..................... 500,000 500,000 500,000
----------- -----------
1,484,356 1,501,192
Metal & Mineral................................ 0.10%
Aluminum Co. of America
5.75% due February 1, 2001................... 100,000 93,960 95,284
Miscellaneous.................................. 0.21%
Citicorp Sub Notes
7.125% due March 15, 2004.................... 100,000 98,945 99,044
Pep Boys
6.625% due May 15, 2003...................... 100,000 92,378 95,251
----------- -----------
191,323 194,295
Paper & Forest Products........................ 0.11%
International Paper Co.
7.50% due May 15, 2004....................... 100,000 98,832 101,600
Retail Trade................................... 0.11%
Black & Decker
6.625% due November 15, 2000................. 100,000 95,546 98,473
----------- -----------
TOTAL CORPORATE BONDS.......................... 3.27% 2,950,573 2,992,412
</TABLE>
F-40
<PAGE> 129
Schedule of Investments (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CONVERTIBLE SECURITIES
Liberty Property LP SBB Deb. Conv.
8.00% due July 1, 2001....................... 50,000 $ 50,000 $ 52,500
Morgan Stanley(A)
7.0% "CSCO" PFD.............................. 7,500 252,670 326,250
----------- -----------
TOTAL CONVERTIBLE SECURITIES................... 0.41% 302,670 378,750
----------- -----------
TOTAL INVESTMENTS.............................. 100.48% 83,523,907 92,011,773
==========
LIABILITIES, less cash and other assets........ -.48% (443,227)
-----------
NET ASSETS..................................... 100.00% $91,568,546
==========
</TABLE>
- ---------------
(A) Non income producing security.
F-41
<PAGE> 130
Notes to Financial Statements
Aon Asset Management Fund, Inc.
For the period ended April 30, 1996
Unaudited
1. DESCRIPTION OF ENTITY
Aon Asset Management 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 principally 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. The policies are in
conformity with generally accepted accounting principles:
a) Security Valuation -- 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 and debt instruments held by the Flexible Asset Allocation
Portfolio that mature in 60 days or less are stated at amortized cost,
which approximates fair value. The remaining investments held by the
Flexible Asset Allocation Portfolio are stated at 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 or
cost of securities.
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
Federal income tax purposes at October 31, 1995 of $46,231 is available to
offset future tax gains. If unused, this loss carryforward 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 Corporation, 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 .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
F-42
<PAGE> 131
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
Unaudited
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
daily net assets in excess of $500 million in the Flexible Asset Allocation
Portfolio. Effective April 26, 1995, the investment advisory contract was
amended to change the investment advisory fees in the Flexible Asset Allocation
Portfolio. The amended investment advisory fees are .70% of average daily net
assets up to $250 million, 0.60% 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 assets 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"), an affiliate of Aon Corporation 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 The Life Insurance Company of Virginia, an
indirect wholly-owned subsidiary of Aon and parent Company of FFSC. During the
six months ended April 30, 1996, the Fund made payments totalling $12,430
($6,215 per portfolio) to unaffiliated directors of the Fund.
5. COMPOSITION OF NET ASSETS
At April 30, 1996, net assets of the Flexible Asset Allocation Portfolio
consisted of:
<TABLE>
<S> <C>
Common shares........................................................... $81,814,175
Accumulated net realized gain on sales of investments................... 522,863
Unrealized appreciation on investments.................................. 8,487,866
Undistributed net investment income..................................... 743,642
Net assets.............................................................. $91,568,546
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
At April 30, 1996, there were 3,000,000,000 shares of $.001 par value
common stock authorized in the fund. The shares will be issued in the following
classes and have the following designations:
<TABLE>
<CAPTION>
CLASS SHARES
------------------------------------------------------------------------ -----------
<S> <C>
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
</TABLE>
F-43
<PAGE> 132
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
Unaudited
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
A summary of capital stock transactions follows:
<TABLE>
<CAPTION>
FLEXIBLE ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------------ --------------
<S> <C> <C>
Balance at October 31, 1994........................ 410,912,278.330 1,021,494.102
Shares sold........................................ 4,368,158,454.020 4,865,217.717
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 7,851,992.890 240,114.919
------------------ --------------
Total issued....................................... 4,376,010,446.910 5,105,332.636
Shares redeemed.................................... (4,366,829,092.710) --
------------------ --------------
Net change in shares............................... 9,181,354.200 5,105,332.636
------------------ --------------
Balance at October 31, 1995........................ 420,093,632.530 6,126,826.738
Shares sold........................................ 2,008,014,887.540 1,294,858.824
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 2,737,572.560 39,664.527
------------------ --------------
Total issued....................................... 2,010,752,460.100 1,334,523.351
Shares redeemed.................................... (2,109,344,040.040) (288,384.497)
------------------ --------------
Net change in shares............................... (98,591,579.940) 1,046,138.854
------------------ --------------
Balance at April 30, 1996.......................... 321,502,052.590 7,172,965.592
================ ============
</TABLE>
7. INVESTMENTS
Purchases and sales, excluding maturities, of investment securities during
the six months ended April 30, 1996 were as follows:
<TABLE>
<CAPTION>
MONEY FLEXIBLE ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
-------------- ---------------
<S> <C> <C>
PURCHASES
U.S. Government and Agency Obligations............... $ -- $ 31,999,375
Corporate bonds...................................... -- 2,190,000
Commercial paper..................................... 3,351,494,350 113,838,847
Common stock......................................... -- 35,554,926
------------ -----------
Total purchases........................................ $3,351,494,350 $ 183,583,148
============ ===========
SALES
U.S. Government and Agency Obligations............... $ -- $ 36,997,516
Corporate bonds...................................... -- 975,250
Commercial paper..................................... 160,404,000 28,637,221
Common stock......................................... -- 20,460,928
------------ -----------
Total Sales............................................ $ 160,404,000 $ 87,070,915
============ ===========
</TABLE>
F-44
<PAGE> 133
Notes to Financial Statements (continued)
Aon Asset Management Fund, Inc.
Unaudited
7. INVESTMENTS (CONTINUED)
At April 30, 1996, based on cost for federal income tax purposes, net
unrealized appreciation of portfolio securities consisted of the following:
<TABLE>
<CAPTION>
FLEXIBLE ASSET
ALLOCATION
PORTFOLIO
---------------
<S> <C>
Appreciated securities................................................. $ 9,026,249
Depreciated securities................................................. (538,383)
----------
Net unrealized appreciation (depreciation)............................. $ 8,487,866
==========
</TABLE>
8. OTHER MATTERS
On December 26, 1995, Aon Corporation entered into an agreement with
General Electric Capital Corporation to sell The Life Insurance Company of
Virginia, including Forth Financial Securities Corporation ("FFSC"), the Fund's
principal underwriter and administrator. The sale was finalized on April 1,
1996. Pursuant to the terms of the Distribution Agreement, a change in control
of FFSC resulted in a technical assignment and the termination of the agreement.
On April 2, 1996, the Fund's Board of Directors entered into a new Distribution
Agreement with FFSC.
Pursuant to a call for a special shareholders meeting by Aon Corporation, the
Fund's majority shareholder, on April 24, 1996, the shareholders replaced the
Fund's existing board of directors and elected a new slate of directors. On
April 26, 1996, the Fund's new board terminated the Distribution Agreement with
FFSC and entered into a new Distribution Agreement with Aon Securities
Corporation, an affiliate of Aon Corporation and Aon Advisors, Inc., the Fund's
Investment Advisor.
F-45
<PAGE> 134
Financial Highlights
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED JANUARY 23, 1992
ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
MONEY MARKET PORTFOLIO APRIL 30, 1996 1995 1994 1993 1992
-------------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period............................ $1.00 $1.00 $1.00 $1.00 $1.00
Investment income................... .03 .06 .04 .03 .03
Expenses............................ * * * * *
--------- ------- ------- ------- ----------
Net investment income............... .03 .06 .04 .03 .03
Net realized gains on investments... * * * * *
--------- ------- ------- ------- ----------
Income (loss) from operations....... .03 .06 .04 .03 .03
Dividends paid to shareholders from:
Net investment income............. .03 .06 .04 .03 .03
Net realized gain................. * * * * *
--------- ------- ------- ------- ----------
.03 .06 .04 .03 .03
--------- ------- ------- ------- ----------
Increase in net asset value......... .00 .00 .00 .00 .00
Net asset value at end of period.... $1.00 $1.00 $1.00 $1.00 $1.00
Total return........................ 2.68%** 5.79% 3.73% 3.10% 3.57%**
Ratios:
Ratio of operating expenses to
average net assets................ 0.22%+ 0.14+ 0.15+ 0.17+ 0.25+
Ratio of net investment income to
average net assets................ 5.38%+ 5.79+ 3.73+ 3.10+ 3.57+
Net assets at end of period (in
millions)......................... $321.5 $ 420.1 $ 410.9 $ 412.1 $399.1
</TABLE>
- ---------------
* Less than $.01 per share
+ The Investment Advisor has agreed 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 .47% and
5.13% for 1996, .39% and 5.54% for 1995, .40% and 3.48% for 1994, .42% and
2.85% for 1993 and .50% and 3.32% for 1992, respectively. Ratios for the
period from January 23, 1992 to October 31, 1992 and the six months ended
April 30, 1996 have been determined on an annualized basis.
** Ratios for the period from January 23, 1992 to October 31, 1992 and the six
months ended April 30, 1996 have been determined on an annualized basis.
F-46
<PAGE> 135
Financial Highlights (continued)
Aon Asset Management Fund, Inc.
Unaudited
<TABLE>
<CAPTION>
11/1/95 11/1/94 3/1/94
FLEXIBLE ASSET ALLOCATION PORTFOLIO 4/30/96 10/31/95 10/31/94
------- --------- ---------
<S> <C> <C> <C>
Net asset value at beginning of period............................. $ 12.04 $ 9.97 $ 10.00
Investment income.................................................. .25 .32 .25
Expenses........................................................... (.06) (.08) (.08)
------ ------ ------
Net investment income.............................................. .19 .24 .17
Net realized gains on investments.................................. .08 .66 (.05)
Net unrealized appreciation (depreciation) on investments.......... .53 1.75 .06
------ ------ ------
Income (loss) from operations...................................... .80 2.65 .18
Dividends paid to shareholders from:
Net investment income............................................ (.07) (.24) (.16)
Net realized gain................................................ -- (.34) (.05)
------ ------ ------
(.07) (.58) (.21)
Change in net asset value.......................................... .73 2.07 (.03)
Net asset value at end of period................................... 12.77 12.04 9.97
Total return....................................................... 6.65% 26.92% 1.84%
Ratios:
Ratio of operating expenses to average net assets................ 0.86%* 0.96% 1.25%*
Ratio of net investment income to average net assets............. 2.86%* 2.73% 2.63%*
Portfolio turnover............................................... 79.31% 95.17% 64.36%
Average commission paid............................................ .0607
Net assets at end of period (in millions).......................... 91.6 73.8 10.2
</TABLE>
- ---------------
* Annualized
F-47
<PAGE> 136
PART C
ADDITIONAL INFORMATION
<PAGE> 137
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<S> <C> <C>
(a) Financial Statements (included in Part B):
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. (a) Agreement and Declaration of Trust of Aon Funds ("the Trust").
(b) Resolutions Authorizing Six Series of Shares (and Classes Within Series)
2. By-Laws of the Trust.
3. None.
4. None.
5. (a) Form of Investment Advisory Agreement between AAI and the Trust, covering the
Money Market Fund.
(b) Form of Investment Advisory Agreement between AAI and the Trust, covering the
Government Securities Fund.
(c) Form of Investment Advisory Agreement between AAI and the Trust covering the
Asset Allocation Fund.
(d) Form of Investment Advisory Agreement between AAI and the Trust, covering the
S&P 500 Index Fund.
(e) Form of Investment Advisory Agreement between AAI and the Trust, covering the
REIT Index Fund.
(f) Form of Investment Advisory Agreement between AAI and the Trust, covering the
International Equity Fund.
(g) Form of Investment Sub-Advisory Agreement between AAI and Perpetual Portfolio
Management, Limited, covering the International Equity Fund.
6. Form of Distribution Agreement between the Trust and Aon Securities Corporation.
7. None.
8. (a) Form of domestic Custodian Agreement between the Trust and Firstar Trust Company
("Firstar").
(b) Form of Global Custody Agreement between Firstar and Chase Manhattan Bank
("Chase"), covering the overseas assets of the International Equity Fund.
(c) Form of Sub-Custodian Agreement between Chase and foreign sub-custodians.
9. (a) Form of Administration Agreement between the Trust and Aon Securities
Corporation ("ASC").
(b) Form of Administration Agreement among the Registrant, AAI and ASC, effective
July 1, 1996.
(c) Form of Administration Agreement among the Registrant, AAI and Forth Financial
Securities Corporation, effective April 2, 1996.
(d) Form of Transfer Agency Agreement between the Trust and Firstar.
(e) Form of Accounting Servicing Agreement between the Trust and Firstar.
(f) S&P 500 Index License Agreement.
(g) Morgan Stanley REIT Index License Agreement.
</TABLE>
<PAGE> 138
<TABLE>
<S> <C> <C>
(h) Agreement and Plan of Reorganization.
(i) Limited Powers of Attorney.
10. Opinion and Consent of Prickett, Jones, Elliott, Kristol & Schnee concerning the
legality of the securities to be issued*
11. Consent of Ernst & Young LLP
12. None.
13. (a) Form of Investment Commitment Letter for Initial Capital of Money Market and
Asset Allocation Funds.**
(b) Form of Subscription Agreement between Registrant and Combined Insurance Company
of America ("Combined") relating to Class C of the Money Market and Asset Allocation
Funds.
(c) Form of Subscription Agreement between Registrant and Combined relating to the
Government Securities, S&P 500 Index, REIT Index and International Equity Funds.
14. None.
15. Form of Distribution Plan (Rule 12b-1 Plan).
16. Schedule for Computation of Performance Calculations.
17. Financial Data Schedule.***
18. Form of Registrant's Plan pursuant to Rule 18f-3(d).
25. Aon Corporation List of Subsidiaries.
</TABLE>
- ---------------
* To be filed by amendment.
** 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.
*** Incorporated by reference to post-effective amendment No. 7 to the
Registrant's registration statement on form N-1A, file No. 33-43133, filed
with the Securities and Exchange Commission on February 28, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Trust is a Delaware business trust organized on May 16, 1996. Aon
Corporation, a corporation organized under the laws of the State of Delaware,
and its wholly-owned subsidiaries, have provided or will provide the initial
investment in each of Funds of the Trust and own a substantial percentage of
each series of the outstanding shares of the Trust. The information regarding
persons under common control with the Trust is provided in the list of
subsidiaries of Aon Corporation attached as Exhibit 25 hereto.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF SERIES AS OF MARCH 20, 1996
-------------------------------------------------------- ------------------------
<S> <C>
Money Market Fund....................................... 167
Asset Allocation Fund................................... 31
</TABLE>
ITEM 27. INDEMNIFICATION.
See Article VII of the Trust's Agreement and Declaration of Trust, filed as
Exhibit 1 to this Registration Statement, which provision is incorporated herein
by reference.
The Investment Advisory Agreements between the Trust and Aon Advisers, Inc.
("Adviser") each provide that, in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties on the part of
the Adviser (or its officers, directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Adviser or
retained by it to perform or
2
<PAGE> 139
assist in the performance of its obligations under the Investment Advisory
Agreements), neither the Adviser nor any of its officers, directors, employees
or agents shall be subject to liability to the Trust or to any shareholder or to
any other person with a beneficial interest in the Trust 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 Trust 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 Trust intends to maintain a directors and officers "errors
and omissions" liability insurance policy under which the Trust 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
Trust pursuant to the foregoing provisions, or otherwise, the Trust 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 the payment by the Trust of expenses incurred or
paid by a director, officer or controlling person of the Trust 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 Trust 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 the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR
The Trust's investment advisor, Aon Advisors, Inc., is a wholly-owned
subsidiary of Aon Corporation. Aon Advisors, Inc. provides investment advice and
management to other investment companies, pension plans, corporations and other
organizations. Assets under management include equity securities, fixed income
securities and real estate.
Set forth below is a list of the directors and 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.
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION,
AON ADVISORS, INC. VOCATION, OR EMPLOYMENT
- ------------------------- -----------------------------------------------------------------
<S> <C>
Michael A. Conway Director and President, Aon Advisors, Inc., since 1990; Director
Director and President and Senior Vice President -- Investments, Combined Insurance
Company of America, since 1990; Senior Vice President and Senior
Investment Officer, Aon Corporation, since 1990.
Lawrence R. Miller Executive Director, Aon Advisors, Inc., since 1987; Vice
Senior Executive Director President -- Investments, Combined Insurance Company of America,
since 1978.
Mark B. Burka Executive Director, Aon Advisors, Inc., since 1990; Vice
Executive Director President -- Investments, Combined Insurance Company of America,
since 1984.
Ivan Berk Executive Director, Aon Advisers, Inc.
Executive Director
James White Vice President and Controller, Aon Corporation since 1985,
Executive Director Director and Vice President Finance, Combined Insurance Company
of America.
Paul Rabin Treasurer, Combined Insurance Company of America; Assistant
Treasurer Treasurer, Aon Corporation.
</TABLE>
3
<PAGE> 140
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) None
(b) Affiliations of Directors and Officers:
Set forth below is a list of directors and principal officers of Aon
Securities Corporation, indicating the positions and officers held with ASC and
with the Registrant. The principal business address of each person listed below
is 123 N. Wacker Drive, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
- ------------------------- --------------------------------------- -------------------------
<S> <C> <C>
Michael A. Conway Chairman of the Board of Directors President and Director
Lawrence E. Harb President and General Securities None
Principal
Brian H. Lawrence Controller and Financial Operations None
Principal
Stephen Barrett General Securities Principal None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder and Rule 2a-7 under the
1940 Act will be maintained at the offices of the Trust, the Trust's custodian,
Firstar Trust Company, 615 East Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202 , or the Trust's investment adviser, Aon Advisors, Inc., 123
North Wacker Drive, Chicago, Illinois 60606.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) To the extent required by Item 32(b) of Form N-1A, the Trust hereby
undertakes to file a post-effective amendment, using financial statements which
need not be certified, for the REIT Index, International Equity, Government
Securities and S&P 500 Index Funds, within four to six months from the effective
date of Registrant's Securities Act of 1933 registration statement.
(c) The Trust hereby undertakes to furnish, upon request and without
charge, to each person to whom a prospectus for the Fund is delivered a copy of
the Trust's latest annual report to shareholders.
(d) Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to directors, officers and
controlling persons of the Trust pursuant to the foregoing provisions, or
otherwise, the Trust has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Trust of
expenses incurred or paid by a director, officer or controlling person of the
Trust in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Trust 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 1933 Act and will be governed by the
final adjudication of such issue.
4
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Trust has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on June 7, 1996.
AON ASSET MANAGEMENT, INC.
By /s/ MICHAEL A. CONWAY
------------------------------------
Michael A. Conway
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 indicated on June 7, 1996.
<TABLE>
<C> <S>
/s/ MICHAEL A. CONWAY In his own capacity as President and Trustee,
- --------------------------------------------- and as Attorney-in-Fact for each of the
Michael A. Conway Directors and Officers of the Trust
asterisked below
/s/ PAUL RABIN Principal Accounting Officer, Principal
- --------------------------------------------- Financial Officer and Treasurer
Paul Rabin
* Director
- ---------------------------------------------
Michael A. Cavataio
* Director
- ---------------------------------------------
Donald W. Phillips
* Director
- ---------------------------------------------
Carleton D. Pearl
* Director
- ---------------------------------------------
Richard J. Peters
</TABLE>
5
<PAGE> 142
EXHIBIT INDEX
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<S> <C> <C>
(a) Financial Statements (included in Part B):
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. (a) Agreement and Declaration of Trust of the Trust.
(b) Resolutions Authorizing Six Series of Shares (and Classes Within Series)
2. By-Laws of the Trust.
3. None.
4. None.
5. (a) Form of Investment Advisory Agreement between AAI and the Trust, covering the
Money Market Fund.
(b) Form of Investment Advisory Agreement between AAI and the Trust, covering the
Government Securities Fund.
(c) Form of Investment Advisory Agreement between AAI and the Trust covering the
Asset Allocation Fund.
(d) Form of Investment Advisory Agreement between AAI and the Trust, covering the
S&P 500 Index Fund.
(e) Form of Investment Advisory Agreement between AAI and the Trust, covering the
REIT Index Fund.
(f) Form of Investment Advisory Agreement between AAI and the Trust, covering the
International Equity Fund.
(g) Form of Investment Sub-Advisory Agreement between AAI and Perpetual Portfolio
Management, Limited, covering the International Equity Fund.
6. Form of Distribution Agreement between the Trust and Aon Securities Corporation.
7. None.
8. (a) Form of domestic Custodian Agreement between the Trust and Firstar Trust Company
("Firstar").
(b) Form of Global Custody Agreement between Firstar and Chase Manhattan Bank
("Chase"), covering the overseas assets of the International Equity Fund.
(c) Form of Sub-Custodian Agreement between Chase and foreign sub-custodians.
9. (a) Form of Administration Agreement between the Trust and Aon Securities
Corporation ("ASC").
(b) Form of Administration Agreement among the Registrant, AAI and ASC, effective
July 1, 1996.
(c) Form of Administration Agreement among the Registrant, AAI and Forth Financial
Securities Corporation, effective April 2, 1996.
(d) Form of Transfer Agency Agreement between the Trust and Firstar.
(e) Form of Accounting Servicing Agreement between the Trust and Firstar.
(f) S&P 500 Index License Agreement.
(g) Morgan Stanley REIT Index License Agreement.
</TABLE>
<PAGE> 143
<TABLE>
<S> <C> <C>
(h) Agreement and Plan of Reorganization.
(i) Limited Powers of Attorney.
10. Opinion and Consent of Prickett, Jones, Elliott, Kristol & Schnee concerning the
legality of the securities to be issued*
11. Consent of Ernst & Young LLP
12. None.
13. (a) Form of Investment Commitment Letter for Initial Capital of Money Market and
Asset Allocation Funds.**
(b) Form of Subscription Agreement between Registrant and Combined Insurance Company
of America ("Combined") relating to Class C of the Money Market and Asset Allocation
Funds.
(c) Form of Subscription Agreement between Registrant and Combined relating to the
Government Securities, S&P 500 Index, REIT Index and International Equity Funds.
14. None.
15. Form of Distribution Plan (Rule 12b-1 Plan).
16. Schedule for Computation of Performance Calculations.
17. Financial Data Schedule.***
18. Form of Registrant's Plan pursuant to Rule 18f-3(d).
25. Aon Corporation List of Subsidiaries.
</TABLE>
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* To be filed by amendment.
** 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.
*** Incorporated by reference to post-effective amendment No. 7 to the
Registrant's registration statement on form N-1A, file No. 33-43133, filed
with the Securities and Exchange Commission on February 28, 1996.
<PAGE> 1
EXHIBIT 99.B.1(a)
AGREEMENT AND DECLARATION OF TRUST
of
AON FUNDS
a Delaware Business Trust
Principal Place of Business:
123 North Wacker Drive
Chicago, Illinois 60606
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I.
NAME AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
PURPOSE AND NATURE OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1. Purpose of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III.
SHARES AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Division of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Assets and Liabilities Associated with
Series and Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Issuance of and Investments in Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Nonassessability of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. No Personal Liability; Indemnification
for Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Equality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9. Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 11. Actions by Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 12. Exchange Privileges and Conversion
Features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 13. No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 14. Other Attributes of Shares and Share
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 15. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 16. Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 17. Ownership and Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 18. Combination of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 19. Rights of Shareholders to Inspect
Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 20. Purchase of Shares by Trustees, Officers,
Employees and Agents of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV.
DETERMINATION OF NET ASSET VALUE, DIVIDENDSAND DISTRIBUTIONS, AND REDEMPTIONS . . . . . . . . . . . . . . . . . . 16
Section 1. Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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Section 3. Redemptions at the Option of the
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Redemptions at the Option of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Dividends, Distributions and Redemptions
In-Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V.
SHAREHOLDERS' VOTING POWERS AND MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1. Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3. Quorum and Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4. Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5. Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6. Additional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI.
THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 1. Number and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2. Initial Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3. Election of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4. Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5. Vacancies and Appointments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6. Effect of Death, Resignation, etc. of a
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7. Action by the Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8. Chairman of the Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9. Principal Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11. Payment of Expenses by the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12. Ownership of Assets of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 13. Service Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII.
COMPENSATION, LIMITATION OF LIABILITY ANDINDEMNIFICATION OF TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . 35
Section 1. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII.
AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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ARTICLE IX.
DISSOLUTION OF TRUST OR TERMINATION OF SERIES OR CLASSES;
REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 1. Dissolution of Trust or Termination of
Series or Classe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 2. Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 1. Filing of Copies; References; Headings;
Singular and Plural; Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 2. Applicable Law; Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3. Record Dates for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4. Provisions in Conflict with Law or
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5. Use of the Name "Aon" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND DECLARATION OF TRUST
OF
AON FUNDS
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and
entered into as of the date set forth below by the Initial Trustees for the
purpose of creating a Delaware business trust in accordance with the Act and
the provisions hereinafter set forth,
NOW, THEREFORE, the Initial Trustees hereby direct that a
Certificate of Trust be filed with the Office of the Secretary of State of the
State of Delaware and declare that this Trust shall hold IN TRUST all
securities and other property which it now possesses or may hereafter acquire
from time to time in any manner and that the Trustees shall manage and dispose
of the same for the benefit of the holders of Shares in this Trust upon the
following terms and conditions.
ARTICLE I.
NAME AND DEFINITIONS
Section 1. Name.
The name of the trust created hereby (this "Trust") shall be
"Aon Funds", and the Trustees shall conduct, operate and carry on the business
and affairs of this Trust under that name or any other name or names as they
from time to time may deem appropriate.
Section 2. Definitions.
Whenever used herein, the following terms shall have the
following meanings, unless otherwise required by the context or otherwise
expressly provided herein:
(a) "Act" means Title 12, Chapter 38, Sections 3801 et.
seq. of the Delaware Code, entitled "Treatment of Delaware Business Trusts,"
and also referred to as the "Delaware Business Trust Act," as amended from time
to time.
(b) "By-Laws" means the by-laws of the Trust as adopted
by the Trustees under and in accordance with ARTICLE VI, SECTION 10(B) hereof
and as amended or restated from time to time, which are incorporated herein by
reference.
<PAGE> 6
(c) "Class" means each class of Shares within a Series,
which Class (i) has been authorized by the Trustees under and in accordance
with the provisions of ARTICLE III hereof and (ii) is a class subject to Rule
18f-3 under the 1940 Act.
(d) "Covered Person" has the meaning given it in ARTICLE
VII, SECTION 3 hereof.
(e) "Commission" has the meaning given it in Section
2(a)(7) of the 1940 Act.
(f) "Declaration of Trust" means this Agreement and
Declaration of Trust, as amended or restated from time to time. References in
this Declaration of Trust to "hereby," "herein," "hereof," "hereto" and
"hereunder" shall be deemed to refer to this Declaration of Trust rather than
the article or section of this Declaration of Trust in which such words appear.
(g) "Disinterested Trustee" has the meaning given it in
ARTICLE VII, SECTION 3 hereof.
(h) "Distribution Record Date" has the meaning given it
in ARTICLE IV, SECTION 2 hereof.
(i) "Initial Trustees" has the meaning given it in
ARTICLE VI, SECTION 2 hereof.
(j) "Interested Person" has the meaning given it in
Section 2(a)(19) of the 1940 Act.
(k) "Investment Manager" or "Manager" means a party
furnishing services to the Trust or any Series or to another Investment Manager
or Manager pursuant to any contract described in ARTICLE VI, SECTION 13 hereof.
(l) "Meeting Record Date" has the meaning given it in
ARTICLE V, SECTION 5 hereof.
(m) "Net Asset Value," when used with respect to a Share
of a particular Series or Class, means the amount determined by dividing the
Net Asset Value of that Series or Class by the number of Shares of that Series
or Class outstanding as of the time of determination of such Net Asset Value
per Share; and "Net Asset Value," when used with respect to a particular Series
or Class, means the net asset value of that Series or Class determined under
and in accordance with ARTICLE IV, SECTION 1 hereof.
(n) "1940 Act" means the Investment Company Act of 1940,
as amended from time to time, and the rules and regulations thereunder, as
adopted or amended from time to time.
- 2 -
<PAGE> 7
(o) "Person" means and includes (i) natural persons; (ii)
corporations, general partnerships, limited partnerships, joint ventures,
limited liability companies, joint stock associations or companies, trusts,
funds, other entities or any organized group of Persons, whether incorporated
or not; and (iii) governments and agencies and political subdivisions thereof,
whether domestic or foreign.
(p) "Principal Underwriter" has the meaning given it in
Section 2(a)(29) of the 1940 Act.
(q) "Resolution," as of any time, means a written consent
or consents signed, or a resolution approved at a duly constituted meeting of
the Trustees, by a majority of the Trustees in office at such time.
(r) "Series" means each series of Shares that is (i)
authorized by the Trustees under and in accordance with the provisions of
ARTICLE III hereof and (ii) a series, as described in Section 18(f)(2) of the
1940 Act, subject to Rule 18f-2 thereunder.
(s) "Service Provider" means any Person who, as agent,
independent contractor or consultant, provides services of any nature,
including, without limitation, services of the type customarily provided to
investment companies registered as such under the 1940 Act by investment
managers or advisers, administrators, custodians, depositories, transfer or
similar agents, dividend disbursement agents, shareholder servicing agents,
accountants and accounting agents, counsel, Principal Underwriters and
distributors.
(t) "Shareholder," as of any time, means a holder of
record as of such time of outstanding Shares. References herein to a
Shareholder or to Shareholders shall refer to such Shareholder or Shareholders
solely in his or her or their capacity or capacities as such hereunder.
(u) "Shares" mean the shares of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time
under and in accordance with the terms hereof, and includes fractional Shares
as well as whole Shares; and "outstanding Shares" or "Shares then outstanding,"
as of any time, mean those Shares shown as of such time on the books of the
Trust (or of the applicable transfer or similar agent for such Shares) as then
issued and outstanding.
(v) "State" means any state, territory or possession of
the United States and includes the District of Columbia and Puerto Rico.
- 3 -
<PAGE> 8
(w) "Trust" means this Delaware business trust created by
this Declaration of Trust, as amended from time to time.
(x) "Trustees" mean the Initial Trustees, so long as they
shall continue in office in accordance with the terms hereof, and all other
natural persons who at the time in question have been duly elected or appointed
to serve as Trustees in accordance with the terms hereof, who have signed this
Declaration of Trust and who are then in office in accordance with the terms
hereof, and references herein to a Trustee or to the Trustees shall refer to
such person or persons solely in his or her or their capacity or capacities as
Trustee or Trustees hereunder.
(y) "Trust Property," as of any time, means any and all
property, real or personal, tangible or intangible, which as of such time is
owned or held by or for the account of any one or more of the Trust and the
Series, including, without limitation, the limited rights referenced in ARTICLE
X, SECTION 5 hereof.
(z) "vote of a majority of the outstanding Shares of a
Series" means the vote, at a meeting of the holders of Shares of such Series
duly called, (i) of sixty-seven percent (67%) or more of the Shares of such
Series present at such meeting, if holders of more than fifty percent (50%) of
the outstanding Shares of such Series are present or represented by proxy or
(ii) of more than fifty percent (50%) of the outstanding Shares of such Series,
whichever is less.
ARTICLE II.
PURPOSE AND NATURE OF TRUST
Section 1. Purpose of Trust.
The purpose of the Trust is to conduct, operate and carry on
the business and affairs of an open-end management investment company
registered under the 1940 Act, through one or more investment portfolios, each
investing in securities and other property and represented by a Series.
Section 2. Nature of Trust.
It is the intention of the Trustees to create, and this Trust
is and shall continue to be, a business trust within the meaning of SECTION
3801(A) of the Act. Accordingly, it is the intention of the Trustees to create
only the relationship of trustee and beneficial owners within the meaning of
the Act between the Trustees and Shareholders. It is not the intention of the
Trustees to create, and the Trust shall not be deemed to be or be treated as, a
corporation, general partnership, limited
- 4 -
<PAGE> 9
partnership, joint venture, joint stock association or company, bailment, or
any form of legal organization other than a business trust within the meaning
of SECTION 3801(A) of the Act. Accordingly, nothing in this Declaration of
Trust shall be construed to make the Trustees or Shareholders, or any
combination of them, shareholders of a corporation, partners, joint venturers
or members of a joint stock association or company, for any purpose, nor shall
the Trustees or Shareholders, or any combination of them, for any purpose be
deemed to be, or be treated in any way whatsoever as though they were, liable
or responsible hereunder as partners or joint venturers.
ARTICLE III.
SHARES AND SHAREHOLDERS
Section 1. Division of Beneficial Interest.
The beneficial interest in the Trust shall at all times be
divided into an unlimited number of Shares having no par value; provided,
however, that subject to the requirements of the 1940 Act, the remainder of
this ARTICLE III and ARTICLES IV AND V hereof, the Trustees, at any time and
from time to time, by Resolution, may authorize the division of Shares into two
or more Series and the division of any existing or new Series into two or more
Classes (with each such Series and Class being constituted of an unlimited
number of Shares or such number of Shares as the Trustees may deem appropriate
in connection with such authorization). Any such authorization shall (a)
establish and designate, and fix and determine the relative rights, powers,
privileges, preferences and duties of, the Series or Class so authorized; (b)
set forth, either expressly or by reference to another document or documents,
the investment objectives, policies, restrictions and limitations of the Series
so authorized; (c) be effective as of the date specified therein; and (d) be
incorporated herein by reference.
The Trustees shall cause the Trust to maintain separate and
distinct records for each Series authorized by the Trustees under this SECTION
1.
Section 2. Assets and Liabilities Associated with Series
and Classes.
Shares of each particular Series and Class that has been
authorized under and in accordance with ARTICLE III, SECTION 1 hereof, unless
otherwise expressly provided in such authorization, shall have the following
relative rights, powers, privileges, preferences and duties:
- 5 -
<PAGE> 10
(a) Assets Associated with a Particular Series.
All consideration received by the Trust for the issuance or
sale of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, and all income, earnings, profits and
proceeds thereof, from whatever source derived, including, without limitation,
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, shall be held in trust for the benefit of the
holders of Shares of such Series, and not for the benefit of holders of Shares
of any other Series, for all purposes, subject only to the liabilities
associated with such Series (or the applicable Class thereof) (as hereinafter
defined), and shall be accounted for and recorded upon the books of the Trust
separately from the assets associated with any other Series. Such
consideration, and such assets, income, earnings, profits and proceeds thereof,
from whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets associated with" that Series.
In the event that there are any assets, income, earnings, profits and proceeds
thereof, and any funds or payments, which are not readily associated with a
particular Series (collectively, "General Assets"), the Trustees shall allocate
such General Assets to, between or among any one or more of the Series, in such
manner and on such basis as the Trustees, in their sole discretion, deem fair
and equitable, and any General Asset so allocated to a particular Series shall
thereupon be deemed to be an asset associated with that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
Notwithstanding the foregoing, where a Series is divided into
two or more Classes under and in accordance with ARTICLE III, SECTION 1 hereof,
all income and realized and unrealized capital gains that are required under
Rule 18f-3 under the 1940 Act to be allocated to, between or among one or more
of such Classes in a particular manner shall be so allocated, and where the
Trustees have discretion under that Rule to allocate income and realized and
unrealized capital gains to, between or among one or more of such Classes, the
Trustees shall exercise such discretion (either in the authorization creating
such Classes or on an ongoing basis) in such manner and on such basis as they
in their sole discretion deem fair and equitable.
(b) Liabilities Associated with a Particular Series or
Class.
All liabilities, expenses, costs, charges and reserves of the
Trust which are readily associated with a particular
- 6 -
<PAGE> 11
Series shall be charged against the assets associated with that Series, and any
liabilities, expenses, costs, charges and reserves of the Trust which are not
readily associated with a particular Series shall be allocated and charged by
the Trustees to, between or among any one or more of the Series, in such manner
and on such basis as the Trustees, in their sole discretion, deem fair and
equitable; provided, however, that where a Series is divided into two or more
Classes under and in accordance with ARTICLE III, SECTION 1 hereof, all
expenses and realized and unrealized capital losses that are required under
Rule 18f-3 under the 1940 Act to be allocated and charged to, between or among
one or more of such Classes in a particular manner shall be so allocated and
charged, and where the Trustees have discretion under that Rule to allocate and
charge expenses and realized and unrealized capital losses to, between or among
one or more of such Classes, the Trustees shall exercise such discretion
(either in the authorization creating such Classes or on an ongoing basis) in
such manner and on such basis as they in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges and reserves so allocated
and charged to a Series or Class are herein referred to as "liabilities
associated with" that Series or Class. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Series and Classes for all purposes.
Without limiting the generality of the foregoing, but subject
to the authority of the Trustees to allocate liabilities, expenses, costs,
charges and reserves which are not readily associated with a particular Series
as provided in the first sentence of this SECTION 2(B), the debts, liabilities,
obligations and expenses incurred by, contracted for or otherwise existing with
respect to a particular Series shall be enforceable against the assets
associated with that Series only, and not against the assets associated with
any other Series (or against the assets of the Trust generally). The Trustees
may cause notice of this limitation on interseries liabilities to be set forth
in the Certificate of Trust of the Trust (whether originally or by amendment)
to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Act, and upon the giving of such notice in the Certificate of
Trust, the statutory provisions of SECTION 3804 (or any successor section) of
the Act relating to limitations on interseries liabilities (and the statutory
effect under SECTION 3804 (or any successor section) of setting forth such
notice in the Certificate of Trust) shall become applicable to the Trust and
each Series. All Persons who extend credit to (or with respect to) a
particular Series, or who contract with (or with respect to) or have a claim
against a particular Series, may look only to the assets associated with that
Series for repayment of such credit or to enforce or satisfy any such contract
or claim; and no Shareholder or Trustee or officer, employee or Service
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<PAGE> 12
Provider of the Trust, whether past, present or future, shall be personally
liable therefor solely by reason of his or her capacity as such.
(c) Dividends, Distributions, Redemptions, and
Repurchases.
Notwithstanding any other provision of this Declaration of
Trust, including, without limitation, any provision of ARTICLE IV hereof or of
ARTICLE IX, SECTION 1 hereof, no dividend or distribution on or with respect to
Shares of a particular Series, including, without limitation, any distribution
paid in connection with the dissolution of the Trust or the termination of that
Series, nor any redemption or repurchase of Shares of that Series, shall be
effected by the Trust other than from the assets associated with that Series,
nor shall any Shareholder or former Shareholder of a particular Series
otherwise have any right or claim against the assets associated with any other
Series (except to the extent that such Shareholder or former Shareholder has
such a right or claim hereunder as a Shareholder or former Shareholder of such
other Series or in a capacity other than as a Shareholder or former
Shareholder).
Section 3. Issuance of and Investments in Shares.
The Trustees, at any time and from time to time, may cause the
Trust to issue whole and fractional Shares of any Series or Class that has been
authorized under and in accordance with ARTICLE III, SECTION 1 hereof (in
addition to the then outstanding Shares of such Series or Class and Shares held
as treasury shares in accordance with ARTICLE III, SECTION 16 hereof), to such
Person or Persons, on such terms (including, without limitation, terms
establishing minimum required purchases), and for such type and amount of
consideration as is permitted by SECTION 3802(A) of the Act (including cash and
securities or other property), or for no consideration, as the Trustees may
deem appropriate.
Each investment in Shares by the purchaser thereof shall be
credited to such purchaser's individual Shareholder account in the form of
whole and fractional Shares of the Trust, of such Series and Class thereof as
may be available to such purchaser and as such purchaser may select, at the Net
Asset Value per Share next determined (under and in accordance with ARTICLE IV,
SECTION 1 hereof) for such Series and Class after receipt and/or acceptance of
the investment by or on behalf of the Trust on the terms determined by the
Trustees; provided, however, that subject to the requirements of the 1940 Act,
the Trustees may cause the Trust to impose a sales charge upon investments in
the Trust in such manner and amount or amounts and at such time or times as the
Trustees may deem appropriate.
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<PAGE> 13
The Trustees shall not be required to cause the Trust to issue
Shares of a Series or Class that has been authorized under and in accordance
with ARTICLE III, SECTION 1 hereof, and may terminate the sale of Shares of any
Series or Class at any time or suspend such sales from time to time for such
periods as they may deem appropriate.
Section 4. Nonassessability of Shares.
All Shares (including, without limitation, Shares issued in
connection with a dividend paid in Shares or in connection with a split or
reverse split of Shares), when issued on the terms determined by the Trustees,
shall be fully paid and nonassessable, and neither the Trust nor any Trustee,
nor any officer, employee or agent of the Trust, shall have the power or
authority to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription for Shares or otherwise;
provided, however, that the foregoing shall not be deemed to prohibit the
Trustees from taking any of the actions described in the second paragraph of
ARTICLE IV, SECTION 1 hereof.
Section 5. No Personal Liability; Indemnification for
Personal Liability.
Neither the Trust nor any Trustee, nor any officer, employee
or agent of the Trust, shall have the power or authority to bind any
Shareholder personally, and no Shareholder or former Shareholder shall be
personally liable for the debts, liabilities, obligations or expenses incurred
by, contracted for or otherwise existing with respect to the Trust, any Series
or any Class, but shall be entitled to the same limitation of personal
liability as is extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware. The
Trustees may cause any note, bond, contract, instrument, certificate, Share or
other undertaking issued, executed or made by or on behalf of the Trust or any
Series to include a recitation limiting the obligation represented thereby to
the Trust or to such Series and the assets associated therewith, but the
omission of such a recitation shall not operate to bind any Shareholder
personally.
If any Shareholder or former Shareholder of any Series shall
be held to be personally liable solely by reason of being or having been a
Shareholder and not because of his or her acts or omissions, the Shareholder or
former Shareholder (or his or her heirs, executors, administrators or other
legal representatives or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled, out of the assets
associated with that Series, to be held harmless from and indemnified against
all losses and expenses arising from
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<PAGE> 14
such liability; provided, however, that there shall be no obligation of the
Trust or of any Series arising under this SECTION 5 to reimburse any
Shareholder or former Shareholder for taxes paid by reason of such
Shareholder's or former Shareholder's holding of any Share.
Section 6. Equality.
Each Share of a particular Series or Class thereof shall
represent an equal undivided beneficial interest in the assets associated with
that Series (subject to the liabilities associated with that Series or Class,
as the case may be), and, subject to the relative rights, powers, privileges,
preferences and duties as among Classes within a Series (with each Share within
a particular Class being equal in every respect to each other Share within that
Class), each Share of a particular Series shall be equal in every respect to
each other Share of that Series. Accordingly, (a) subject to the relative
rights, powers, privileges, preferences and duties as among Classes within a
Series, (i) no Share of a particular Series shall have any priority or
preference over any other Share of that Series with respect to dividends or
distributions including, without limitation, distributions paid in connection
with the dissolution of the Trust or the termination of such Series, and (ii)
all dividends and other distributions shall be made ratably among all
Shareholders of a particular Series from the assets associated with that Series
according to the number of Shares of that Series held of record by such
Shareholders as of the applicable Distribution Record Dates for the payment of
such dividends and distributions; and (b)(i) no Share of a particular Class
shall have any priority or preference over any other Share of that Class with
respect to dividends or distributions including, without limitation,
distributions paid in connection with the dissolution of the Trust or the
termination of such Class, and (ii) all dividends and other distributions shall
be made ratably among all Shareholders of a particular Class from the assets
associated with the Series of which such Class is a part according to the
number of Shares of that Class held of record by such Shareholders as of the
applicable Distribution Record Dates for the payment of such dividends and
distributions.
The foregoing shall not be deemed to prohibit the Trust from
distributing different types of Trust Property to different Shareholders of a
particular Series or Class (or to a particular Shareholder in respect of the
various Shares of a particular Series or Class held by him or her) in the case
of a dividend, distribution or redemption in-kind, so long as the Trust shall
have complied with the principles set forth in the preceding paragraph and in
ARTICLE IV, SECTION 5 hereof.
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Section 7. Dividends and Other Distributions.
Holders of Shares of a particular Series (and Class thereof)
shall be entitled to receive dividends and other distributions, if, when and as
declared by the Trustees on or with respect thereto, to the extent provided in
ARTICLE IV hereof.
Section 8. Voting Rights.
Shareholders shall have no voting rights except to the extent
provided in ARTICLE V hereof.
In any case herein where it is provided that the Trustees
shall or may take a particular action, do a particular thing or make a
particular determination, and the 1940 Act or such case does not expressly
provide for Shareholder authorization or approval of such action, thing or
determination, the Trustees shall have full power and authority to take such
action, to do such thing or to make such determination without obtaining any
prior or subsequent authorization or approval of the Shareholders of any Series
or Class (and the Trustees may take such action, do such thing or make such
determination in their sole discretion on such terms and in such manner as they
may deem appropriate, unless the context requires otherwise).
Without limiting the generality of the foregoing, the Trustees
may authorize Series and Classes of Shares under and in accordance with ARTICLE
III, SECTION 1 hereof without obtaining authorization or approval of the
Shareholders of any Series or Class.
Section 9. Transferability.
Unless otherwise expressly provided by the Trustees in the
authorization establishing and designating a Series or Class of Shares, Shares
of that Series or Class shall be transferable without restriction (subject to
the provisions of ARTICLE III, SECTION 17 hereof, ARTICLE IV, SECTION 2 hereof,
ARTICLE V, SECTION 5 hereof, ARTICLE X, SECTION 3 hereof and the By-Laws).
Section 10. No Preemptive Rights.
Unless otherwise expressly provided by the Trustees in the
authorization establishing and designating a Series or Class of Shares or as
otherwise expressly provided by the Trustees by Resolution, no holder of Shares
of that Series or Class, as such, shall have any preemptive or other right to
acquire, purchase or subscribe for any Shares or other securities of the Trust
which the Trust may hereafter issue or sell, whether of the same or of any
other Series or Class or otherwise.
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<PAGE> 16
Section 11. Actions by Shareholders.
Except to the extent inconsistent with the requirements of the
1940 Act:
(a) No action may be brought by a Shareholder on behalf
of the Trust, or on behalf of any Series or Class, unless holders of not less
than ten percent (10%) of the Shares then outstanding (in the case of an action
brought on behalf of the Trust), or of not less than ten percent (10%) of the
outstanding Shares of such Series or Class (in the case of an action brought on
behalf of such Series or Class), join in the bringing of such action.
(b) A holder of Shares of a particular Series or Class,
in his or her capacity as such, shall not be entitled to participate in a
derivative action or class action lawsuit on behalf of any other Series or
Class or on behalf of the holders of Shares of any other Series or Class.
Section 12. Exchange Privileges and Conversion Features.
Subject to the requirements of the 1940 Act, the Trustees, at
any time and from time to time, by Resolution, may provide that (a) the holders
of Shares of any Series (or Class) shall have the right to exchange said Shares
for Shares of one or more other Series (or Classes) or (b) Shares of any Series
(or Class) may or shall be converted into Shares of one or more other Series
(or Classes), in each case in accordance with such requirements and procedures
as the Trustees may deem appropriate. In the absence of such provision by the
Trustees with respect to a Series (or Class), Shareholders of that Series (or
Class) shall have no exchange privileges, and Shares of that Series (or Class)
shall not be subject to any conversion features.
Section 13. No Appraisal Rights.
Shareholders shall have no appraisal rights with respect to
their Shares.
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<PAGE> 17
Section 14. Other Attributes of Shares and Share
Ownership.
Shares shall be deemed to be personal property giving only the
rights, powers, privileges and preferences provided herein, notwithstanding the
nature of the property held by the Trust or any Series thereof. Every Person
who purchases a Share on the terms determined by the Trustees under and in
accordance with ARTICLE III, SECTION 3 hereof and who is recorded on the books
of the Trust or of a transfer or similar agent of the Trust shall be deemed to
have complied with the conditions for becoming a beneficial owner in an
interest in the Trust and, by virtue of the foregoing, shall be held to have
expressly assented to, and to have agreed to be bound by, the terms hereof and
to have become a party hereto; provided, however, that no Shareholder shall be
required to execute this Declaration of Trust unless the Trustees determine
otherwise. Each holder of Shares shall upon demand by the Trustees disclose to
the Trustees in writing such information with respect to such holder's direct
and indirect ownership of Shares as the Trustees may deem necessary to comply
with the requirements of any law or taxing authority. As Shares of a Series
represent only an undivided beneficial interest in the assets associated with
that Series, a holder or beneficial owner of Shares shall have no right, title
or interest in or to any specific Trust Property, nor shall such holder or
beneficial owner have any right to call for a partition or division, or
possession, of the same or for an accounting. The death of a Shareholder
during the existence of this Trust shall not operate to annul or dissolve this
Trust or to terminate any Series or Class, nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but any such representative shall
be entitled only to the same rights to which said deceased Shareholder would
have been entitled under this Declaration of Trust but for such Shareholder's
death.
Section 15. Fractional Shares.
Any outstanding fractional Share of a Series (or Class) shall
carry proportionately all the rights, powers, privileges, preferences and
duties of a whole Share of that Series (or Class), including rights with
respect to voting and receipt of dividends and other distributions, as well as
rights accorded to Shares of such Series (or Class) in connection with (a) the
redemption or purchase of such Shares by the Trust or (b) the dissolution of
the Trust or the termination of such Series (or Class).
Section 16. Treasury Shares.
Any Shares redeemed, purchased or otherwise acquired by the
Trust shall be deemed to be treasury shares and shall not be
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<PAGE> 18
canceled (unless the Trustees provide otherwise at or subsequent to the time of
such redemption, purchase or acquisition).
The Trustees may cause the Trust from time to time to reissue
treasury shares in accordance with ARTICLE III, SECTION 3 hereof.
The Trustees may classify or reclassify any unissued Shares or
any Shares redeemed, purchased or otherwise acquired by the Trust, regardless
of Series or Class, into one or more Series or Classes that have been or may be
authorized from time to time under and in accordance with ARTICLE III, SECTION
1 hereof.
Shares held by the Trust as treasury shares shall not be
considered outstanding for any purpose of this Declaration of Trust and, in
that connection, shall not confer any voting rights on the Trust or the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared or paid on or with respect to Shares.
Section 17. Ownership and Transfer of Shares.
The ownership and transfer of Shares shall be recorded on the
books of the Trust or of a transfer or similar agent for the Trust, which books
shall be maintained separately and distinctly for the Shares of each Series
(and Class). No certificates certifying the ownership of Shares shall be
issued except as the Trustees otherwise may determine from time to time. The
Trustees may make such rules as they deem appropriate for the issuance of share
certificates, the transfer of Shares of each Series (and Class) and similar
matters. The record books of the Trust as kept by the Trust or by any transfer
or similar agent, as the case may be, shall be conclusive as to who are the
holders of Shares of each Series (and Class) and as to the number of Shares of
each Series (and Class) held from time to time by each.
Section 18. Combination of Shares.
The Trustees, at any time and from time to time, may divide or
combine the Shares of any particular Series into a greater or lesser number of
Shares of that Series (with corresponding adjustments being made to the number
of Shares of each Class within such Series). No such division or combination
shall be deemed, for purposes of ARTICLE VIII, SECTION 1 hereof or for any
other purpose, to adversely affect to a material degree the rights, powers,
privileges, preferences or duties of the Shares of that Series (or Class) or of
the Shares of any other Series (or Class).
Section 19. Rights of Shareholders to Inspect Records.
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<PAGE> 19
(a) In addition to the rights provided for in the first
sentence of ARTICLE X, SECTION 1 hereof, each holder of Shares has the right,
subject to such reasonable standards (including standards governing what
information and documents are to be furnished at what time and location and at
whose expense) as may be established from time to time by the Trustees, to
obtain from the Trust from time to time upon reasonable demand for any purpose
reasonably related to the holder's interest as a holder of Shares:
(1) any written powers of attorney pursuant to
which this Declaration of Trust and any amendments hereto and
any certificates filed by or on behalf of this Trust with the
Office of the Secretary of State of the State of Delaware
pursuant to the Act have been executed;
(2) a current list of the name and last known
business, residence or mailing address of each record holder
of Shares;
(3) information regarding the business and
financial condition of the Trust; and
(4) other information regarding the affairs of
the Trust as is reasonable.
(b) Notwithstanding the foregoing, the Trustees shall
have the right to keep confidential from the holders of Shares, for such period
of time as the Trustees deem reasonable, any information that the Trustees
reasonably believe to be in the nature of trade secrets or other information
the disclosure of which the Trustees in good faith believe is not in the best
interest of the Trust or could damage the Trust or its business or which the
Trust is required by law or by agreement with a third party to keep
confidential.
(c) Any demand by a holder of Shares under this SECTION
19 shall be in writing under oath and shall state the purpose of such demand.
Section 20. Purchase of Shares by Trustees, Officers,
Employees and Agents of Trust.
Any Trustee, officer, employee or agent of the Trust, and any
organization in which any of the foregoing has an interest, may acquire, own,
hold, redeem and dispose of Shares of any Series or Class to the same extent as
if such person were not a Trustee, officer, employee or agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase or
redeem or cause to be purchased or redeemed Shares of any Series or Class to or
from any such person or organization
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<PAGE> 20
subject only to the provisions of the 1940 Act and to the general limitations,
restrictions or other provisions applicable to the issuance, sale purchase or
redemption of Shares of such Series or Class generally.
ARTICLE IV.
DETERMINATION OF NET ASSET VALUE, DIVIDENDS
AND DISTRIBUTIONS, AND REDEMPTIONS
Section 1. Determination of Net Asset Value.
The Trustees shall prescribe and set forth in the By-laws or
other written instrument such bases and times for determining the value of
Trust Property, the net asset value of each Series and Class and net income
attributable to the Shares of each Series and Class as they may deem
appropriate consistent with the requirements of the 1940 Act and generally
accepted accounting principles. To the extent not inconsistent with the
requirements of the 1940 Act and generally accepted accounting principles, the
Trustees may determine which items shall be treated as income and which items
as capital; and each such determination shall be conclusive and binding upon
the Shareholders of all Series and Classes for all purposes.
The Trustees may determine to maintain the Net Asset Value per
Share of any Series at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the requirements of the
1940 Act for the continuing declarations of income attributable to that Series
as dividends payable in additional Shares of that Series at the designated
constant dollar amount and for the handling of any losses attributable to that
Series. To the extent not inconsistent with the requirements of the 1940 Act,
each Shareholder of the Trust, by his or her investment in any Series with
respect to which the Trustees shall have adopted any such procedures, shall be
held to have agreed to be bound by the following provisions of this paragraph
in the event of any such loss. If, for any reason, the net income of any
Series, determined at any time, is a negative amount, the Trustees may, with
respect to that Series, (a) offset each Shareholder's pro rata share of such
negative amount against the accrued dividend account of such Shareholder; (b)
reduce the number of outstanding Shares of such Series by reducing the number
of Shares in the account of each Shareholder of such Series by a pro rata
portion of that number of whole and fractional Shares which represents such
negative amount; (c) cause to be recorded on the books of such Series an asset
account in the amount of such negative amount (provided that the same shall
thereupon become an asset associated with such Series but shall not be paid to
any Shareholder), which account may be reduced by the amount of
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<PAGE> 21
dividends declared thereafter upon the outstanding Shares of such Series from
and including the day such negative amount is experienced until such asset
account is reduced to zero; (d) combine the methods described in clauses (a),
(b) and (c) of this sentence; or (e) take any other action they may deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per outstanding
Share immediately after each such determination. The Trustees also may
determine not to declare a dividend out of net income for the purpose of
causing the Net Asset Value per Share to be increased. The Trustees shall not
be required to, but at any time may, adopt, discontinue or amend the practice
of maintaining the Net Asset Value per Share of a Series at a designated
constant dollar amount. In the event that any Series is divided into Classes,
the provisions of this paragraph, to the extent applicable as determined by the
Trustees consistent with the requirements of the 1940 Act, may be applied
equally to each such Class.
The Trustees may delegate any of their powers, authority,
functions and duties under this SECTION 1 with respect to determining the value
of Trust Property and the net asset value of each Series (and Class) or with
respect to a suspension of the determination of net asset value to an officer
or officers or agent or agents of the Trust designated from time to time by the
Trustees.
Section 2. Dividends and Other Distributions.
The Trustees from time to time may declare and cause the Trust
to pay dividends (including, without limitation, dividends paid in Shares) or
other distributions on or with respect to the Shares of any Series or Class, in
such amounts and with such frequency as the Trustees in their sole discretion
may deem appropriate (subject, however, to the provisions of ARTICLE III hereof
and applicable law). Without limiting the generality of the foregoing, such
dividends or other distributions may be declared and paid daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may deem appropriate.
For the purpose of determining the Shareholders who are
entitled to receive payment of any dividend or other distribution, the Trustees
may from time to time fix a date and time, by standing resolution or otherwise
(any such date and time being herein referred to as a "Distribution Record
Date"), for determining the Shareholders who are entitled to receive such
payment, and in such case only Shareholders of record as of the Distribution
Record Date shall have that right, notwithstanding any transfer of Shares on
the record books of the Trust after the Distribution Record Date. Without
fixing a Distribution Record Date, the Trustees may close the register or
transfer books for
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<PAGE> 22
one or more Series (or Classes) for all or any part of the period (not
exceeding ten (10) days) preceding the date for the payment of a dividend or
other distribution. Nothing in this Declaration of Trust shall be construed as
precluding the Trustees from setting different Distribution Record Dates for
different Series (or Classes).
Subject to the requirements of the 1940 Act and ARTICLE IV,
SECTION 5 hereof, any dividend or other distribution on or with respect to the
Shares of a Series or Class may be made in cash, Shares of such Series or Class
or in-kind (that is, in securities or other property associated with the Series
on or with respect to which such dividend or distribution is being paid), or in
any combination thereof, as the Trustees may deem appropriate.
Section 3. Redemptions at the Option of the Shareholder.
Each holder of record of Shares of a particular Series shall
have the right at such times as may be permitted by this Declaration of Trust
and as otherwise required by the 1940 Act to require the applicable Series of
the Trust to redeem all or any number of his or her Shares of that Series at a
redemption price equal to the Net Asset Value per Share of that Series (or
applicable Class thereof) next determined (under and in accordance with
ARTICLE IV, SECTION 1 hereof) after the Shares are properly tendered for
redemption; provided, however, that subject to the requirements of the 1940
Act, the Trustees may cause the Trust to impose a redemption charge upon
redemptions of Shares in such manner and amount or amounts and at such time or
times as the Trustees may deem appropriate. A Shareholder will not be deemed
properly to have tendered Shares for redemption unless and until he or she
shall have complied with such procedures for redemption as the Trustees may
from time to time deem appropriate, including, without limitation, procedures
requiring the redeeming Shareholder to deposit at the office of the applicable
transfer or similar agent a written request or such other form of request as
the Trustees may from time to time deem appropriate (together with such
accompanying documentation as the Trustees may from time to time deem
appropriate) requesting that the applicable Series of the Trust redeem such
Shares in accordance with this SECTION 3. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash inadvisable or undesirable, the Trust, subject to the
requirements of the 1940 Act and ARTICLE IV, SECTION 5 hereof, may make payment
wholly or partly in-kind (that is, in securities or other property associated
with the Series of which the Shares being redeemed are part).
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<PAGE> 23
Notwithstanding the foregoing, the Trustees may cause the
Trust to postpone payment of the redemption price or to suspend the right of
the holders of the Shares of any Series to require the Trust to redeem Shares
of that Series during any period or at any time when and to the extent
permissible under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall determine but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption,
a Shareholder either may withdraw his or her request for redemption or receive
payment based on the Net Asset Value per Share next determined after the
termination of the suspension, in accordance with such procedures as the
Trustees from time to time may deem appropriate. In the event that any Series
is divided into Classes, the provisions of this paragraph, to the extent
applicable as determined by the Trustees consistent with the requirements of
the 1940 Act, may be applied equally to each such Class.
Section 4. Redemptions at the Option of the Trust.
The Trustees, at any time and from time to time, may cause the
Trust to redeem Shares of a particular Series or Class held by any holder
thereof at the Net Asset Value per Share thereof (determined under and in
accordance with ARTICLE IV, SECTION 1 hereof): (a) if at such time the Shares
of such Series or Class held by such holder have an aggregate net asset value
of less than an amount determined from time to time by the Trustees and set
forth in the Trust's prospectus or statement of additional information relating
to such Series or Class prior to the time such Shares were purchased, as the
minimum aggregate net asset value that must be maintained by a holder with
respect to such Shares in order for such Shares not to be subject to redemption
at the option of the Trust; (b) if at such time such holder holds Shares of the
Trust or of any Series or Class in excess of a percentage determined from time
to time by the Trustees and set forth in the Trust's prospectus or statement of
additional information relating to such Series or Class prior to the time such
Shares were purchased, as the maximum percentage of Shares of the Trust or of
such Series or Class that may be held by a holder in order for Shares held by a
holder not to be subject to redemption at the option of the Trust; or (c) if
the Trustees shall determine that direct or indirect ownership of Shares of any
Series has or may become concentrated in any Person to an extent which would
disqualify such Series as a regulated investment company under the Internal
Revenue Code of 1986, as amended (in which case the Trustees may (i) call for
redemption by any such Person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such
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<PAGE> 24
qualification and (ii) refuse to transfer or issue Shares to any Person whose
acquisition of Shares in question would result in such disqualification).
No redemption shall be effected pursuant to subsections (a) or
(b) of this SECTION 4 unless the Trust has given the holder at least thirty
(30) days notice of the Trust's intention to redeem and such holder is given an
opportunity, within such thirty-day period, to adjust his or her holdings so as
to avoid the application of this SECTION 4.
Redemptions effected pursuant to this SECTION 4 shall
otherwise be effected in the manner provided in ARTICLE IV, SECTION 3 hereof.
Section 5. Dividends, Distributions and Redemptions
In-Kind.
In the event the Trustees determine that dividends or other
distributions on or with respect to Shares of a particular Series or Class
(including, for purposes of this SECTION 5, without limitation, distributions
upon redemption of Shares of such Series or Class or in connection with the
dissolution of the Trust or the termination of such Series or Class) shall be
paid wholly or partly in-kind, the Trustees first must determine that such
payments shall not be prejudicial to the interest of the remaining Shareholders
of such Series. The selection and quantity of securities or other property to
be paid in-kind shall be determined by or under the authority of the Trustees;
provided, however, that the value of the securities or other property paid
in-kind shall be the value of such securities or other property used in
determining the Net Asset Value of the Series with which such securities or
other property are associated. In no case shall the Trust or Trustees be
liable for any delay of any Person in transferring securities or other property
selected for delivery as all or part of any payment in-kind.
ARTICLE V.
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers.
Shareholders shall have power to vote only (a) for the
election and removal of Trustees to the extent provided in ARTICLE VI, SECTIONS
3 AND 4 hereof, respectively; (b) to the extent provided in ARTICLES VIII and
IX hereof; (c) with respect to such additional matters relating to this Trust
or any Series or Class as may be required by the 1940 Act or any registration
of this Trust or any Series or Class with the Commission (or any
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<PAGE> 25
successor agency) or any State; and (d) with respect to such additional matters
as the Trustees may deem appropriate; provided, however, that in no event shall
holders of Shares of a Series or Class be entitled to vote such Shares with
respect to any matter that does not affect any interest of such Series or
Class, as the case may be, unless otherwise required by the 1940 Act.
Each whole Share shall carry one vote as to any matter on
which it is entitled to be voted, and each fractional Share shall carry a
proportionate fractional vote.
In the case of (a) the election or removal of Trustees and (b)
an amendment to the provisions of ARTICLE VIII hereof, and where required by
the 1940 Act or by any registration of this Trust with the Commission (or any
successor agency) or any State, all Shares entitled to be voted shall be voted
in the aggregate without differentiation among the separate Series or Classes.
In all other cases, (a) where Rule 18f-3 under the 1940 Act does not apply in
connection with the matter to be voted on and such matter does not involve an
amendment to this Declaration of Trust that would adversely affect to a
material degree the rights, powers, privileges, preferences or duties of Shares
of a particular Class in a manner different from the Shares of any other Class
within the same Series, all Shares entitled to be voted with respect to the
matter shall be voted separately by individual Series and (b) where Rule 18f-3
under the 1940 Act applies in connection with the matter to be voted on, or
where such matter involves an amendment to this Declaration of Trust that would
adversely affect to a material degree the rights, powers, privileges,
preferences or duties of Shares of a particular Class in a manner different
from the Shares of any other Class within the same Series, all Shares entitled
to be voted with respect to the matter shall be voted separately by individual
Class; provided, however, that the Trustees in their sole discretion may
determine that, in situations where the Shares of more than one Series (or
Class) are entitled to be voted with respect to a matter, such Shares shall be
voted as a single class with respect to such matter if and to the extent
permitted under the 1940 Act.
There shall be no cumulative voting in the election of
Trustees or for any other purpose.
Shares may be voted in person or by written proxy or in any
manner provided for in the By-Laws; provided, however, that in the event a
proposal by anyone other than the Trustees or the officers of the Trust is
submitted to a vote of the Shareholders of one or more Series or Classes or of
the Trust, or in the event of any proxy contest or proxy solicitation or
proposal in opposition to any proposal by the Trustees or the officers of the
Trust, Shares may be voted only in person or by written proxy. A
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proxy with respect to Shares held in the name of two or more Persons shall be
valid if executed by any one of them unless at or prior to exercise of the
proxy the Trust receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights
hereunder that pertain to Shares and may take any action required or permitted
by law, this Declaration of Trust or any of the By-Laws of the Trust to be
taken by Shareholders (including, without limitation, the right to amend this
Declaration of Trust and the By-Laws).
Section 2. Meetings.
No annual or regular meetings of Shareholders are required.
The Trustees, their Chairman or the President of the Trust may from time to
time call and give notice of meetings of the Shareholders in general, or of the
Shareholders of any one or more Series or Classes in particular, for the
purpose of taking action upon any matter requiring Shareholder authorization or
approval as herein provided or upon any other matter as the Trustees may deem
appropriate. The Trustees, their Chairman or the President of the Trust shall
promptly call and give notice of a meeting of Shareholders for the purpose of
voting upon the question of removal of any Trustee or Trustees when requested
to do so in writing by Shareholders holding of record at least ten percent
(10%) of the Shares then outstanding. In that connection, the provisions of
the third, fourth and fifth paragraphs of Section 16(c) of the 1940 Act shall
apply to this Trust as though this Trust were subject to those provisions. The
Trustees, their Chairman or the President of the Trust shall call and give
notice of a meeting within thirty (30) days after written application by
Shareholders holding of record at least ten percent (10%) of the Shares then
outstanding entitled to be voted on the matter requesting a meeting be called
for the purpose of taking action upon a matter requiring authorization or
approval of the holders of such Shares under the provisions of ARTICLE V,
SECTIONS 1(B) OR (C) hereof.
A meeting of Shareholders may be held at any place designated
by the Trustees, within or without the State of Delaware.
Section 3. Quorum and Required Vote.
In cases where all Shares of the Trust are to be voted in the
aggregate without differentiation among the separate Series and Classes
pursuant to the terms of this Declaration of
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Trust, the holders of at least 33 2/3% of the Shares entitled to be voted in
person or by proxy at a meeting of the holders of such Shares shall constitute
a quorum for the transaction of business at a meeting of such holders. In
cases where Shares of a Series (or Class) are to be voted separately by Series
(or Class) pursuant to the terms of this Declaration of Trust, the holders of
more than 50% of the Shares of such Series (or Class) entitled to be voted in
person or by proxy at a meeting of the holders of such Shares shall constitute
a quorum for the transaction of business at a meeting of such holders. In
cases where Shares of more than one but fewer than all Series (or Classes) are
to be voted as a single class pursuant to the terms of this Declaration of
Trust, the holders of more than 50% of such Shares entitled to be voted in
person or by proxy at a meeting of the holders of such Shares shall constitute
a quorum for the transaction of business at a meeting of such holders.
Any meeting of Shareholders may be adjourned from time to time
to another date and time by a majority of the votes properly cast in person or
by proxy upon the question of adjournment, whether or not a quorum is present,
and the meeting so adjourned may be held within a reasonable time after the
date set for the original meeting, without the necessity for giving further
notice.
Subject to the provisions of the preceding paragraph, when a
quorum of holders of Shares entitled to be voted on the matter is present at
any meeting, a majority of the votes properly cast in person or by proxy shall
decide any questions and a plurality shall elect a Trustee, except where a
larger percentage is required by the 1940 Act, by any express provision of this
Declaration of Trust or by any registration of this Trust with the Commission
(or any successor agency) or any State.
Section 4. Action by Written Consent.
Any action requiring authorization or approval of Shareholders
may be taken without a meeting of such Shareholders and without prior notice
if holders of at least 66 2/3% of the Shares entitled to be voted on the matter
consent to the action in writing and such written consent or consents are filed
with the records of the meetings of Shareholders (except where a larger
percentage is required by the 1940 Act or by any express provision of this
Declaration of Trust). Such consent shall be treated for all purposes as a
vote taken at a meeting of such Shareholders.
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Section 5. Record Dates.
For the purpose of determining the Shareholders who are
entitled to notice of and to vote or act at any meeting or any adjournment
thereof, the Trustees may fix a date and time, which shall be not more than
ninety (90) days prior to the date of such meeting, as the date and time of
record (a "Meeting Record Date") for determining the Shareholders who are
entitled to receive notice of and to vote or act at such meeting and any
adjournment thereof, and in such case only Shareholders of record as of the
Meeting Record Date shall have that right, notwithstanding any transfer of
Shares on the record books of the Trust after the Meeting Record Date. Without
fixing a Meeting Record Date, the Trustees may close the register or transfer
books for one or more Series (or Classes) for all or any part of the period
(not exceeding ten (10) days) preceding the date of a meeting of Shareholders.
Nothing in this Declaration of Trust shall be construed as precluding the
Trustees from setting different Meeting Record Dates for different Series (or
Classes).
Section 6. Additional Provisions.
The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters not inconsistent with the provisions
hereof.
ARTICLE VI.
THE TRUSTEES
Section 1. Number and Qualifications.
The initial number of authorized Trustees shall be fixed at
five (5), but the Trustees from time to time hereafter may fix a different
number of authorized Trustees by Resolution; provided, however, that the number
of authorized Trustees shall in no event be less than one (1) nor more than
fifteen (15). A Trustee must be a natural person at least 21 years of age who
is not under a legal disability. A Trustee need not be a Shareholder, a
citizen of the United States or a resident of the State of Delaware. No
decrease in the authorized number of Trustees shall have the effect of removing
any Trustee from office prior to the expiration of his or her term, but the
authorized number of Trustees may be decreased in conjunction with a vacancy
created by the death, physical or mental incapacity, resignation or removal of
a Trustee.
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Section 2. Initial Trustees.
The initial Trustees shall be the persons whose signatures
appear below on the signature page dated May 15, 1996 (the "Initial Trustees").
Section 3. Election of Trustees.
Except for the Initial Trustees and Trustees appointed to fill
vacancies pursuant to ARTICLE VI, SECTION 5 hereof, Trustees shall be elected
by Shareholders at such meetings of Shareholders as the Trustees may from time
to time determine to call in their sole discretion; provided, however, that the
Trustees shall call meetings of Shareholders for the purpose of electing
Trustees at such time or times and in such manner as may be required by the
1940 Act.
Section 4. Term of Office.
Each Trustee shall serve and hold office until the next
meeting of Shareholders held for the purpose of considering the reelection of
such Trustee or the election of a successor to such Trustee and until his or
her successor is elected and qualified (or until the earlier death or physical
or mental incapacity of such Trustee), and any Trustee who is appointed by the
Trustees to fill a vacancy as provided in ARTICLE VI, SECTION 5 hereof shall
have the same remaining term of his or her predecessor, if any, or such term as
the Trustees, by Resolution, may determine; provided, however, that without the
need for a prior or subsequent accounting, (a) any Trustee may resign at any
time by a written instrument signed by him or her and delivered to any officer
of the Trust or to a meeting of the Trustees, such resignation to be effective
upon such delivery unless such written instrument specifies a later effective
date; (b) any Trustee may be removed at any time with or without cause by a
written instrument signed by at least two-thirds of the number of Trustees then
in office (including, solely for the purpose of determining two-thirds of the
number of the Trustees then in office, the Trustee sought to be removed), such
removal to be effective upon the date specified in such written instrument; and
(c) any Trustee may be removed at any time with or without cause (i) at any
meeting of the Shareholders called for that purpose by a vote of Shareholders
holding of record at least 66 2/3% of the outstanding Shares, properly cast in
person or by proxy at such meeting or (ii) by way of a written instrument
signed by Shareholders holding of record at least 66 2/3% of the outstanding
Shares, and delivered to an officer of the Trust. A meeting of Shareholders
for the purpose of removing one or more Trustees may be called (a) by the
Trustees or (b) at the request of Shareholders in accordance with the
provisions of ARTICLE V, SECTION 2 hereof.
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Notwithstanding the foregoing, if, after giving effect to the
resignation or removal of a Trustee, the Trust would not have any Trustee then
in office, such resignation or removal shall not become effective unless and
until there shall be at least one Trustee then in office.
Section 5. Vacancies and Appointments.
In case of the death, physical or mental incapacity,
resignation or removal of a Trustee, or an increase in the authorized number of
Trustees, a vacancy shall occur. As conclusive evidence of such vacancy, a
written instrument certifying the existence of such vacancy may be executed by
an officer of the Trust or by the Trustees. Subject to (a) the provisions of
the last sentence of ARTICLE VI, SECTION 1 hereof and (b) the right of the
Trustees, in their sole discretion, to call a meeting of Shareholders for the
purpose of electing a Trustee or Trustees, as provided in ARTICLE VI, SECTION 3
hereof, and subject in all cases to the proviso to ARTICLE VI, SECTION 3
hereof, in the case of a vacancy, the remaining Trustees, by Resolution, shall
appoint a person to fill such vacancy in a manner consistent with the
requirements of the 1940 Act and the By-Laws (including, without limitation,
provisions of the 1940 Act relating to the number of Interested Persons who may
serve as Trustees). Such appointment shall be recorded in the minutes of a
meeting of the Trustees, whereupon such appointment shall become effective if
accepted by the person so appointed by becoming a signatory to this Declaration
of Trust as a Trustee.
An appointment of a Trustee may be made by the Trustees, by
Resolution, in anticipation of a vacancy to occur by reason of the resignation
of a Trustee or Trustees or an increase in the authorized number of Trustees,
provided that said appointment shall become effective only at or after the
effective date of said resignation or increase.
Section 6. Effect of Death, Resignation, etc. of a
Trustee.
The death, physical or mental incapacity, resignation or
removal of one or more Trustees, or all of them, during the existence of this
Trust shall not operate to annul or dissolve this Trust, to terminate any
Series or Class or to revoke any existing agency created pursuant to the terms
of this Declaration of Trust. Whenever a vacancy in the authorized number of
Trustees shall occur, until such vacancy is filled as provided in ARTICLE VI,
SECTION 5 hereof, the Trustees then in office, regardless of their number, but
subject to the requirements of the 1940 Act, shall have all the powers and
authority granted to the Trustees hereunder and shall discharge all the duties
imposed upon the Trustees by this Declaration of Trust. Except to the extent
expressly provided in a written agreement with the Trust,
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no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
Section 7. Action by the Trustees.
Except as otherwise required by the 1940 Act or by the
provisions of ARTICLE VI, SECTION 4(B) hereof, and except where this
Declaration of Trust expressly provides that an action to be taken by Trustees
shall be taken by Resolution, any action to be taken by the Trustees on behalf
of this Trust or any Series or Class may be taken by (a) a majority of the
Trustees present at a duly constituted meeting of the Trustees (a quorum,
consisting of at least a majority of the Trustees then in office, being
present), including any meeting held by means of a conference telephone or
other communications equipment through which all persons participating in the
meeting can hear each other at the same time or (b) written consents signed by
a majority of the Trustees then in office; provided, however, that whether or
not a quorum is present, a majority of the Trustees present at a duly
constituted meeting of the Trustees may adjourn the meeting to another place
and time.
Section 8. Chairman of the Trustees.
The Trustees may appoint one of their number to be Chairman of
the Trustees. The Chairman shall preside at all meetings of the Trustees to
the extent reasonably feasible and, to the extent provided by the Trustees,
shall be responsible for the execution of policies established by the Trustees
and the administration of the Trust. The Chairman may be (but is not required
to be) the chief executive, financial and/or accounting officer of the Trust.
Section 9. Principal Transactions.
Except to the extent prohibited by the 1940 Act, the Trustees
may, on behalf of the Trust, buy any securities from or sell any securities to,
or lend any Trust Property to, any Trustee or any officer or employee of the
Trust or any organization in which any such person has a direct or indirect
interest, acting as principal.
Section 10. Powers.
Subject only to such restrictions as are set forth in this
Declaration of Trust, the 1940 Act and other applicable law, the Trustees shall
have exclusive control over the Trust Property and over the management of the
business and affairs of the Trust to the same extent as if the Trustees were
the sole owners and holders of the Trust Property and business and affairs in
their
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own right, and shall possess and may exercise all the powers and authority
which may be possessed and exercised by trustees of a business trust
established under the Act; provided, however, that the foregoing shall not be
construed to prohibit the Trustees from delegating their powers and authority
in the manner described herein.
Without limiting the generality of the foregoing, in addition
to the powers and authority granted to the Trustees elsewhere herein, the
Trustees shall have full power and authority, for and on behalf of any one or
more of the Trust and the Series and Classes, to do or cause the Trust or other
Persons to do any one or more of the following, subject only to such
restrictions as may be set forth in this Declaration of Trust, the 1940 Act and
other applicable law:
(a) To conduct, operate and carry on the business and
affairs of an open-end management investment company organized as a series
company and registered under the 1940 Act and do any and all acts or things
(including, without limitation, the making and execution of such agreements,
contracts and instruments) as the Trustees may deem necessary, convenient,
appropriate, incidental or customary in connection therewith or in the interest
of any one or more of the Trust and the Series and Classes (it being understood
that, for purposes of this SECTION 10(A), any good faith determination by the
Trustees as to what is in the interest of any one or more of the Trust and the
Series and Classes shall be conclusive);
(b) To adopt by-laws, not inconsistent with this
Declaration of Trust, containing additional provisions relating to the conduct
of the business and affairs of the Trust, and amend and repeal them to the
extent that such by-laws do not expressly and exclusively reserve that right to
the Shareholders;
(c) To conduct, operate and carry on the business and
affairs of the Trust, and maintain offices of the Trust, both within and
without the State of Delaware, in any and all other States and in any and all
foreign jurisdictions;
(d) To elect and remove such officers and hire and
terminate such employees, and provide for the compensation of any or all of the
foregoing (any one or more of any of whom may be a Trustee), as the Trustees
may deem appropriate;
(e) To establish, by appointing from the Trustees' own
number or from among other Persons, and terminate, any one or more committees
consisting of two or more Trustees or other Persons, and adopt committee
charters providing for such responsibilities, membership and other
characteristics of such committees as the Trustees may deem appropriate;
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(f) To delegate such powers, authority, functions and
duties (including, without limitation, those set forth in ARTICLE IV, SECTION 1
hereof) as the Trustees may deem appropriate to (i) any officer, employee or
Service Provider (and authorize any of the foregoing to employ subagents and to
delegate, to any other Person, any of the powers, authority, functions or
duties so delegated to them); (ii) any committee consisting of Trustees or
other Persons (including, without limitation, (A) an executive committee
consisting of less than the whole number of Trustees then in office, which may,
when the Trustees are not in session, exercise some or all of the powers and
authority of the Trustees and act for and bind the Trustees and the Trust, as
if the acts of such committee were the acts of all the Trustees then in office,
and (B) a special committee which may exercise some or all of the powers and
authority of the Trustees, and act for and bind the Trustees and the Trust, as
if the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any claim, action, suit or proceeding (civil, criminal,
administrative or other, including appeals) which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body); and (iii) other Trustees, to the extent and in the manner
provided in the By-Laws;
(g) To provide for the distribution of Shares either
through one or more Principal Underwriters or distributors, as described more
fully in ARTICLE VI, SECTION 13(B) hereof, or by the Trust itself, or both, or
otherwise pursuant to a plan of distribution of any kind;
(h) To interpret the investment objectives, policies
restrictions and limitations applicable to a particular Series;
(i) To invest and reinvest cash and other property, hold
cash and other property uninvested, and subscribe for, invest in, reinvest in,
purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer,
trade, exchange, distribute, write options on, lend, and deal in or dispose of
contracts for the future acquisition or delivery of, securities and instruments
of every nature and kind, including, without limitation, all types of bonds,
debentures, common stocks, preferred stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, bankers' acceptances,
futures contracts, options on futures contracts, swaps, caps, collars, floors
and other securities and instruments of any nature and kind, issued, created,
guaranteed or sponsored by any and all Persons, including, without limitation,
the United States government, States, foreign governments, any political
subdivision, agency or instrumentality of any of the foregoing or of any
combination of the foregoing, any supranational
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organization, any bank or savings institution, or any corporation or other
entity organized under the laws of the United States, any State, or any foreign
jurisdiction, or in "when issued" contracts for any such securities;
(j) To sell, exchange, lend, pledge, mortgage,
hypothecate or lease, or write options with respect to or otherwise deal in any
property rights relating to, any or all of the Trust Property or the assets
associated with any Series;
(k) To vote or give assent or otherwise act, or exercise
any and all rights, powers and privileges of ownership or interest, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees may
deem appropriate, granting to such Person or Persons such power and discretion
with relation to the Trust Property as the Trustees may deem appropriate
(including, without limitation, the power and authority to act in the name of
the Trust or the Trustees, to sign documents and to act as attorney-in-fact for
the Trust or the Trustees);
(l) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or other
property; and to pay calls or subscriptions with respect to any security held
by or for the account of the Trust;
(m) To hold any security or other property in a form not
indicating that it is trust property, whether in bearer, book entry,
unregistered or other negotiable form; to deposit, or authorize any custodian
or subcustodian of Trust Property to deposit, all or any part of the Trust
Property in one or more systems for the central handling of securities or other
instruments or with a Federal Reserve Bank (each of the foregoing, a
"Securities Depository"), and authorize any Securities Depository to utilize
the services of one or more other Securities Depositories or agents; and to
hold all or any part of the Trust Property in the name(s) of one or more
custodians, subcustodians, Securities Depositories, nominees or otherwise;
(n) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is or was held by or for the account of the Trust; and to
consent to any contract, lease, mortgage, purchase or sale of property by such
corporation or issuer;
(o) To join with other security holders in acting through
a committee, depositary, voting trustee or otherwise, and in that connection
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and
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delegate to them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees may deem
appropriate; and to agree to pay, and pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees may deem
appropriate;
(p) To compromise, arbitrate or otherwise adjust claims
in favor of or against this Trust or any Series or any matter in controversy,
including, without limitation, claims for taxes;
(q) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(r) To borrow money or other property in the name of the
Trust or of any Series exclusively for the purposes of the Trust or of such
Series, and in that connection issue notes or other evidences of indebtedness;
(s) To endorse or guarantee the payment of any notes or
other obligations or undertake the performance of any obligation or engagement
of any Person; and to make contracts of guaranty or suretyship, or otherwise
assume liability for payment thereof;
(t) To purchase and pay for entirely out of Trust
Property such insurance as the Trustees may deem appropriate for the conduct of
the business and affairs of the Trust, including, without limitation, insurance
policies insuring the assets of the Trust or payment of distributions or
principal on the Trust's portfolio investments, and insurance policies insuring
the Shareholders and Trustees and officers, employees and Service Providers of
the Trust or any thereof (or any Person connected therewith), individually
against all claims and liabilities of every nature arising by reason of holding
or having held Shares or holding or having held any such office or position, or
by reason of any action alleged to have been taken or omitted by any such
Person in any such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such Person against liability;
(u) To adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, including the purchasing of life
insurance and annuity contracts as a means of providing retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust;
(v) To adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans and related plans as the
Trustees may deem appropriate;
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(w) To redeem Shares in accordance with the provisions of
ARTICLE IV hereof and purchase or otherwise acquire Shares; and
(x) To do everything that the Trustees may deem
necessary, convenient, appropriate, incidental or customary for the
accomplishment of any valid purpose or the attainment of any valid object or
for the furtherance of any power hereinbefore set forth, either alone or in
association with others, the foregoing clauses to be construed as objects as
well as powers.
In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of (a) a grant of power and authority to the
Trustees and (b) the power and authority of the Trustees to delegate any of
their powers and authority, and the enumeration of any specific powers shall
not be construed as limiting or restricting in any manner the general powers of
the Trustees. The Trust and the Trustees shall not be limited to investing in
securities or instruments maturing before the possible dissolution of the Trust
or the termination of one or more Series. The Trust and the Trustees shall not
in any way be bound or limited by any present or future law or custom in regard
to investments by trustees or other fiduciaries, but shall have full power and
authority to make any and all investments which they may deem appropriate to
accomplish the purpose of the Trust or of any Series. No Person dealing with
the Trustees shall be bound to make any inquiry concerning the authority of the
Trustees or the validity of any transaction made or to be made by the Trustees
or to see to the application of any payments made or property transferred to
the Trust or the Trustees or upon its or their order. The Trust and the
Trustees shall not be required to resort to any court or other authority or to
obtain an order of any court or other authority to deal with any Trust Property
or the assets associated with any Series or take any other action hereunder.
Section 11. Payment of Expenses by the Trust.
The Trust, and not the Trustees, shall be responsible for all
liabilities, expenses, costs and charges incurred or arising in connection with
the Trust or any Series (or Class), or in connection with the management
thereof, and, subject to the other provisions of this Declaration of Trust, the
Trustees are authorized to pay or cause to be paid (which authorization carries
with it the authorization to reimburse themselves for), out of the principal or
income of the Trust or any Series (or Class), or partly out of such principal
and partly out of such income, all such liabilities, expenses, costs and
charges, including, without limitation: interest charges; taxes; brokerage fees
and commissions; expenses related to the issuance, redemption and purchase of
Shares; insurance premiums; fees, and expenses of third parties, including
Service Providers; fees of
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pricing, interest, dividend, credit and other reporting services; costs of
membership in trade associations; telecommunications expenses; funds
transmission expenses; auditing, legal and compliance expenses; costs of
creating the Trust and maintaining its existence; costs of preparing and
printing the Trust's prospectuses, statements of additional information and
shareholder reports and delivering them to existing and prospective
shareholders; expenses of meetings of shareholders and proxy solicitations
therefor; costs of maintaining books and accounts; costs of reproduction,
stationery and supplies; fees and expenses of the Trustees; compensation of the
Trust's officers and employees and costs of other personnel performing services
for the Trust; costs of Trustee meetings; Commission registration fees and
related expenses; State or foreign securities laws registration fees and
related expenses; and such non-recurring items as may arise, including
litigation to which the Trust or the Trustees or any of them is a party, and,
subject to the provisions of ARTICLE VII, SECTION 3 hereof, for all losses and
expenses incurred by them in administering the Trust, and for the payment of
such losses and expenses the Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of a loss or an expense allocable to
more than one Series, on the assets of each such Series, prior to any rights or
interests of the Shareholders thereto. This section shall not preclude the
Trust from directly paying any of the aforementioned liabilities, expenses,
costs or charges.
Section 12. Ownership of Assets of the Trust.
The Trust Property (including Trust Property associated with
the various Series) shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal right, title and interest in and to all Trust
Property (including all Trust Property associated with the various Series) and
the right to conduct the business and affairs of the Trust shall at all times
be considered as vested in the Trust as a separate legal entity under the Act,
except that the Trustees may cause or authorize legal right, title or interest
in or to any Trust Property to be held by or in the name of the Trustees or any
of them or as provided in ARTICLE VI, SECTION 10(M) hereof. To the extent that
legal right, title or interest in or to any Trust Property is vested in the
Trustees, upon the death, physical or mental incapacity, resignation or removal
of a Trustee, he or she automatically shall cease to have any such right, title
or interest, and such right, title or interest shall vest automatically in the
remaining Trustees and in each person who may thereafter become a Trustee. To
the maximum extent permitted by law, such cessation and vesting of right, title
and interest shall be effective whether or not conveyancing documents have been
executed and delivered and whether or not any other action has been taken.
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Section 13. Service Contracts.
Subject to such requirements and restrictions as may be set
forth in the By-Laws:
(a) the Trustees, at any time and from time to time, may
cause the Trust (or any Series or Class thereof) to contract for exclusive or
nonexclusive management, advisory and/or administrative services with one or
more Investment Managers or other Persons, on such terms as the Trustees may
deem appropriate, including, without limitation, terms authorizing any
Investment Manager to determine (or to employ another Investment Manager to
determine) from time to time without prior consultation with the Trustees what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested.
(b) The Trustees, at any time and from time to time, may
cause the Trust (or any Series or Class thereof) to contract with one or more
Persons, appointing any such Person exclusive or nonexclusive Principal
Underwriter or distributor for the Shares of one or more of the Series (or
Classes) or other securities to be issued by the Trust, on such terms as the
Trustees may deem appropriate.
(c) The Trustees, at any time and from time to time, may
cause the Trust (or any Series or Class thereof) to contract with one or more
Persons, appointing any such Person the custodian, transfer or similar agent,
shareholder servicing agent and/or dividend disbursement agent for the Trust or
for one or more of its Series (or Classes), on such terms as the Trustees may
deem appropriate (including, without limitation, terms authorizing any such
Person to employ subagents).
(d) The Trustees, at any time and from time to time, may
cause the Trust (or any Series or Class thereof) to contract with any other
Service Provider to provide such other services as the Trustees may deem
appropriate, on such terms as the Trustees may deem appropriate.
(e) The fact that:
(i) any of the Trustees or Shareholders or officers of
the Trust has a management, advisory or administration contract, or
Principal Underwriter's or distributor's contract, or transfer or
similar agent, shareholder servicing agent, dividend disbursement
agent or other type of service contract with the Trust, or that
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(ii) any of the Trustees or Shareholders or officers of
the Trust is or may become a shareholder, trustee, director, officer,
partner, member, employee, investment manager or adviser, Principal
Underwriter, distributor, or affiliate or agent of or for any Person,
or of or for any parent or affiliate of any Person, with which a
management, advisory or administration contract, or principal
underwriter's or distributor's contract, or transfer or similar agent,
shareholder servicing agent, dividend disbursement agent or other type
of service contract may have been or may hereafter be made by the
Trust, or that any such Person, or any parent or affiliate thereof, is
a Shareholder or has an interest in the Trust, or that
(iii) any Person with which a management, advisory or
administration contract, or Principal Underwriter's or distributor's
contract, or transfer or similar agent, shareholder servicing agent,
dividend disbursement agent or other type of service contract may have
been or may hereafter be made by the Trust (a "Trust Contract") also
has a management, advisory or administration contract, or Principal
Underwriter's or distributor's contract, or transfer or similar agent,
shareholder servicing agent, dividend disbursement agent or other
service contract with one or more other Persons, or has other business
or interests,
shall not affect the validity of any such Trust Contract or disqualify any
Trustee or Shareholder or officer of the Trust from voting upon or executing
the same, or create any liability or accountability to the Trust or its
Shareholders; provided, however, that approval of each such Trust Contract is
obtained pursuant to the applicable requirements of the 1940 Act.
Subject to the foregoing proviso, nothing in this Declaration
of Trust shall be deemed to preclude (a) any one Person from entering into more
than one Trust Contract with the Trust or (b) any one Person from being
financially interested in or otherwise affiliated with more than one Person
with whom the Trust has entered into a Trust Contract.
ARTICLE VII.
COMPENSATION, LIMITATION OF LIABILITY AND
INDEMNIFICATION OF TRUSTEES AND OFFICERS
Section 1. Compensation.
The Trustees shall be entitled to compensation from the Trust
for their services as such, and the Trustees may from time
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to time fix such compensation in such reasonable amount as they may deem
appropriate.
Section 2. Limitation of Liability.
Every note, bond, contract, instrument, certificate, Share
or other undertaking and every other act or thing whatsoever issued, executed,
made or done by the Trustees or officers or employees or (to the extent
permitted by the Trustees) Service Providers of the Trust or any of them on
behalf of the Trust or any Series or Class thereof shall conclusively be deemed
to have been issued, executed, made or done only in or with respect to such
capacities or capacity, and not in their or his or her individual capacities or
capacity. In addition, neither a Trustee nor an officer of the Trust shall be
liable for any act or omission or any conduct whatsoever in his or her capacity
as Trustee or officer (including, without limitation, errors of judgment or
mistakes of fact or law), provided that nothing contained herein shall protect
any Trustee or officer against any liability to the Trust or the Shareholders
to which he or she otherwise would be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee or officer. Accordingly, a Trustee or officer
of the Trust, when acting in such capacity (a) shall not personally be liable
to any Person (except as set forth in clause (b) immediately following) for any
act, omission, debt or obligation of the Trust or of such Trustee or officer
and (b) shall be liable to the Trust and the Shareholders only to the extent
provided in the preceding sentence. Without limiting the generality of the
foregoing, but subject in each case to clause (b) immediately above, (i) the
exercise by the Trustees or officers of the Trust of their powers and authority
in good faith shall be binding on the Trust, the Shareholders and every other
interested person; (ii) a Trustee shall not be responsible or liable for any
act, omission, debt or obligation of any officer, employee or Service Provider
of the Trust, or of any other Trustee; (iii) an officer shall not be
responsible or liable for any act, omission, debt or obligation of any Trustee,
employee or Service Provider of the Trust, or of any other officer; (iv) the
Trustees and officers may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and their duties as
Trustees or officers hereunder, and shall not be liable for any act or omission
in accordance with such advice or for failing to follow such advice; and (v) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer, employee or Service Provider
appointed by them, any independent public accountant and (with respect to the
subject matter of the contract involved) any officer, partner, member or
responsible employee or agent of any other party to any contract entered into
by the Trust or by the
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Trustees on behalf of the Trust. The Trustees and officers shall not be
required to give any bond as such, nor any surety if a bond is required or
obtained. The provisions of this Declaration of Trust, to the extent they
restrict the duties and liabilities of the Trustees and officers otherwise
existing at law or in equity, are agreed by the Shareholders and all other
Persons to replace such other duties and liabilities of the Trustees and
officers.
Every note, bond, contract, instrument, certificate, Share or
other undertaking issued, executed or made by the Trustees or any of them or by
the officers, employees or (to the extent permitted by the Trustees) Service
Providers of the Trust or any of them may recite that the same was issued,
executed or made by or on behalf of the Trust by them solely in such capacities
or capacity and not personally and that the obligations of such instrument are
not binding upon any of them personally but are binding only upon the assets
and property of the Trust or a particular Series thereof, and may contain such
further recitals as they or he or she may deem appropriate, but the omission
thereof shall not operate to bind any Trustee or any officer, employee or
Service Provider of the Trust personally.
Section 3. Indemnification.
Subject to the exceptions and limitations contained in this
SECTION 3, every person who is, or has been, a Trustee or officer of the Trust,
or who serves at the request of the Trust or at the request of a Trustee on
behalf of the Trust as a trustee, director, member, officer, employee or agent
of another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability, and against all expenses reasonably incurred or paid by him or her,
in connection with any claim, action, suit or proceeding in which he or she
becomes involved as a party or otherwise by virtue of his or her being or
having been such a Trustee, trustee, director, member, officer, employee or
agent and against amounts paid or incurred by him or her in settlement thereof.
No indemnification shall be provided hereunder to a Covered
Person:
(a) for any liability to this Trust or the Shareholders
arising out of a final adjudication by the court or other body before which the
proceeding was brought that he or she engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office;
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(b) with respect to any matter as to which he or she
shall have been finally adjudicated by the court or other body before which the
proceeding was brought not to have acted in good faith in the reasonable belief
that his or her action was in the best interest of the Trust; or
(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a) or (b) immediately
above) and resulting in a payment by a Covered Person, unless there has been
either a determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office by the court or other body
approving the settlement or other disposition or a reasonable determination,
based on a review of the readily available facts (as opposed to a full
trial-type inquiry), that he or she did not engage in such conduct, such
determination being made by:
(i) a vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(ii) a written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
exclude or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall be considered enforceable contract rights of
Covered Persons, shall continue as to a Person who has ceased to be a Covered
Person (but only with respect to the acts or omissions of such person occurring
prior to the time such person ceased to be a Covered Person) and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law. The Trustees from time to time may provide for such
indemnification as they deem appropriate (but in no event more extensive than
that provided in this SECTION 3), for employees, agents and Service Providers
of this Trust. For purposes of this SECTION 3, this Trust shall include any
successor in interest to this Trust.
Expenses in connection with preparation and presentation of a
defense to any claim, action, suit or proceeding subject to a claim for
indemnification under this SECTION 3 may be advanced by the Trust or applicable
Series from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount to the Trust
or applicable Series if it is ultimately determined that he or she is not
entitled to indemnification under this SECTION 3, provided that either:
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(a) such undertaking is secured by a surety bond or some
other appropriate security supplied by the recipient (unless the Trustees shall
waive the requirement that such surety bond or security be supplied by the
recipient) or the Trust shall be insured against losses arising out of any such
advances; or
(b) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then in
office act on the matter) or independent legal counsel in a written opinion
shall determine, based on a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found to be entitled to indemnification under this
SECTION 3.
For purposes of this SECTION 3, a "Disinterested Trustee" is a
Trustee (i) who is not an Interested Person of the Trust (including anyone who
has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (ii) against whom none of such claims, actions,
suits or other proceedings or another claim, action, suit or proceeding on the
same or similar grounds is then or has been pending.
For purposes of this SECTION 3 AND SECTION 4 immediately
below, the words "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened and while in office or
thereafter; and the words "liability," "losses" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 4. Insurance.
The Trustees may to the fullest extent permitted by law
purchase with Trust assets insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Covered Person in
connection with any claim, action, suit or proceeding in which he or she
becomes involved as a party or otherwise by virtue of his or her being or
having been a Person who falls within the definition of Covered Person, whether
or not the Trust would have the power to indemnify him or her against such
liability under the provisions of this Article.
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ARTICLE VIII.
AMENDMENT
Notwithstanding any other provision of this Declaration of
Trust, the Trustees, at any time and from time to time, by Resolution, without
any need for Shareholder authorization or approval, may amend this Declaration
of Trust so as to add to, delete, replace or otherwise modify any provision
hereof (including, without limitation, any provision (a) relating to the Shares
(or any Series or Class thereof) or (b) contained in any document incorporated
herein by reference ("Incorporated Document") or in any document incorporated
by reference into an Incorporated Document); provided, however, that (i) the
Trustees must obtain Shareholder authorization or approval of any such
amendment to the extent they are required to do so by the 1940 Act; (ii) the
Trustees must obtain the authorization or approval of holders of not less than
seventy-five percent (75%) of the outstanding Shares, voting together without
differentiation among the separate Series or Classes, to adopt any amendment to
this ARTICLE VIII; (iii) the Trustees must obtain the authorization or approval
of Shareholders of a particular Series (or Class) to adopt any amendment which
would adversely affect to a material degree the rights, powers, privileges,
preferences or duties of the Shares of such Series (or Class), in the manner
provided in ARTICLE V, SECTION 1 hereof; (iv) to the extent voting rights are
accorded to Shareholders under the provisions of this Declaration of Trust to
authorize or approve a particular matter, the Trustees may not adopt any
amendment to any such voting right, or any amendment which would have the
effect of altering or nullifying such voting right, unless they first obtain
the same authorization or approval of such Shareholders as would be required to
be obtained from them if such Shareholders were voting on such matter; and (v)
no amendment to ARTICLE VII hereof shall limit the rights to indemnification or
insurance provided herein which arise prior to such amendment.
An amendment required to be authorized or approved by holders
of particular Shares in a particular manner shall not be effective with respect
to such Shares if not so approved by such holders in such manner.
Any amendment hereto shall be effective at the time specified
by the Trustees by Resolution (or upon the time specified in any requisite
authorization or approval of the Shareholders).
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The Certificate of Trust of the Trust also may be amended in
accordance with the foregoing principles, and any such amendment shall be
effective immediately upon the filing of a certificate of amendment with the
Office of the Secretary of State of the State of Delaware or upon such future
date as may be stated therein. Any such certificate of amendment may be signed
by any one Trustee pursuant to authorization of the Trustees.
ARTICLE IX.
DISSOLUTION OF TRUST OR TERMINATION OF SERIES OR
CLASSES; REORGANIZATION
Section 1. Dissolution of Trust or Termination of
Series or Classes.
Unless dissolved as provided herein, the Trust shall continue
without limitation of time. The Trust may be dissolved (a) at any time by
approval of the Trustees and the holders of at least 66 2/3% of the outstanding
Shares of each Series, voting separately by Series; (b) at any time by the
Trustees, by Resolution and written notice to the Shareholders; or (c) in
accordance with the provisions of ARTICLE IX, SECTION 2 hereof. Any Series or
Class may be terminated (a) at any time by approval of the Trustees and the
vote of the holders of at least 66 2/3% of the outstanding Shares of that
Series or Class; (b) at any time by the Trustees, by Resolution and written
notice to the Shareholders of that Series or Class; or (c) in accordance with
the provisions of ARTICLE IX, SECTION 2 hereof. At any time there are no
Shares of a previously authorized Series or Class outstanding, the Trustees, by
Resolution, may abolish that Series or Class and rescind the authorization
thereof, such Resolution to be effective as of the date specified therein, and
to be incorporated by reference herein upon adoption.
Upon the dissolution of the Trust (or the termination of any
Series, as the case may be), the Trustees shall proceed to cause the Trust (or
Series) to wind up its business and affairs. After paying or otherwise
providing, severally, for all liabilities, expenses, costs, charges and
reserves with respect to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated, as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
may deem appropriate, reduce the remaining assets held, severally, with respect
to each Series (or the applicable Series, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds associated with each Series (or the applicable Series,
as the case may be), to the Shareholders of that Series, as a Series, ratably
according to the number of Shares of that Series held of record by such
Shareholders on the
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Distribution Record Date established by the Trustees in connection with the
dissolution or termination (giving due effect to the differences among the
various Classes within each such Series).
Upon completion of the distribution of all of the Trust
Property, or upon completion of the distribution to holders of Shares of a
Series of all of the assets associated with that Series, whether pursuant to
this SECTION 1 or ARTICLE IX, SECTION 2 hereof, the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to the Trust or such Series, as the case may be, and the right, title and
interest of all parties with respect to the Trust or such Series, as the case
may be, shall be canceled and discharged.
In the event of a dissolution of the Trust, following
completion of winding up of the Trust's business and affairs, the Trustees
shall cause a certificate of cancellation of the Trust's Certificate of Trust
to be filed in accordance with the Act, which certificate of cancellation may
be signed by any one Trustee pursuant to authorization of the Trustees.
Section 2. Reorganization.
The Trustees, by Resolution, may cause the Trust to sell,
convey and transfer all or substantially all of the assets of the Trust, or all
or substantially all of the assets associated with any one or more Series, to
another trust, partnership, limited liability company, association or
corporation organized under the laws of any State, or to one or more separate
series thereof, or to the Trust to be held as assets associated with one or
more other Series of the Trust, in exchange for cash, shares or other
securities (including, without limitation, in the case of a transfer to another
Series of the Trust, Shares of such other Series) with such transfer either (a)
being made subject to, or with the assumption by the transferee of, the
liabilities associated with each Series the assets of which are so transferred,
or (b) not being made subject to, or not with the assumption of, such
liabilities; provided, however, that, if required by the 1940 Act, no assets
associated with any particular Series shall be so sold, conveyed or transferred
unless the terms of such transaction shall first have been approved at a
meeting called for that purpose by the affirmative vote of a majority of the
outstanding Shares of that Series. Following such sale, conveyance and
transfer, the Trustees shall distribute such cash, shares or other securities
(giving due effect to the assets and liabilities associated with and any other
differences among the various Series the assets associated with which have so
been sold, conveyed and transferred) ratably among the Shareholders of the
Series the assets associated with which have been so sold, conveyed and
transferred (giving due effect to the differences among the various
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Classes within each such Series); and if all of the assets of the Trust have
been so sold, conveyed and transferred, the Trust shall be dissolved.
The Trustees may cause the Trust, or any one or more Series,
either as the successor, survivor, or non-survivor, (a) to consolidate with one
or more other trusts, partnerships, limited liability companies, associations
or corporations organized under the laws of any State, or with one or more
separate series thereof, or with one or more other Series, thereby forming a
new consolidated trust, partnership, limited liability company, association,
corporation, series or Series under the laws of which any one of the
constituent entities is organized, or (b) to merge into one or more other
trusts, partnerships, limited liability companies, associations or corporations
organized under the laws of any State, or into one or more separate series
thereof, or into one or more other Series, or to have one or more of such
trusts, partnerships, limited liability companies, associations, corporations,
series or Series merged into it, any such consolidation or merger to be upon
such terms and conditions as are specified in an agreement and plan of
reorganization entered into by the Trust, or any one or more Series, as the
case may be, in connection therewith. The terms "merge" or "merger" as used
herein also shall include the purchase or acquisition, other than in the
ordinary course of business, of any assets or business of any other trust,
partnership, limited liability company, association or corporation which is an
investment company organized under the laws of any State, or of any series
thereof, or of any Series. Any such consolidation or merger shall require a
Resolution of the Trustees and, if required by the 1940 Act, the affirmative
vote of a majority of the outstanding Shares of each Series affected thereby,
at a meeting duly called for that purpose.
In accordance with SECTION 3815(F) of the Act, an agreement of
merger or consolidation approved in accordance with this SECTION 2 may effect
any amendment to this Declaration of Trust or the By-Laws or effect the
adoption of a new declaration of trust or by-laws of this Trust if this Trust
is the surviving or resulting business trust. A certificate of merger or
consolidation of this Trust shall be signed by a majority of the Trustees.
ARTICLE X.
MISCELLANEOUS
Section 1. Filing of Copies; References; Headings;
Singular and Plural; Counterparts.
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The original or a copy of this Declaration of Trust, each
amendment or restatement hereof, each document incorporated herein by reference
and each certificate filed by or on behalf of this Trust with the Office of the
Secretary of State of the State of Delaware pursuant to the Act shall be kept
at the principal executive office of this Trust where it may be inspected by
any Shareholder at any reasonable time during usual office hours. The
inspection shall include the right to make copies and extracts, at the sole
cost and expense of the Shareholder making the inspection. Anyone dealing with
this Trust may rely on a certificate by a Trustee or officer of this Trust as
to whether or not any such amendments or restatements have been made and as to
any matter in connection with this Trust hereunder; and, with the same effect
as if it were the original, may rely on a copy certified by a Trustee or
officer of this Trust to be a copy of this Declaration of Trust or of any such
amendment or restatement.
In this Declaration of Trust and in any such amendment or
restatement hereof, references to this Declaration of Trust, and all
expressions like "hereby," "herein," "hereof," "hereto" and "hereunder," shall
be deemed to refer to this Declaration of Trust as amended or restated or
affected by any such amendment or restatement.
Headings are placed herein for convenience of reference only
and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Declaration of Trust.
Whenever the singular number is used herein, the same shall
include the plural and the neuter, masculine and feminine genders shall include
each other, as applicable.
This Declaration of Trust may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 2. Applicable Law; Construction.
This Declaration of Trust is executed and delivered by all of
the Trustees with reference to the Act and the laws of the State of Delaware,
and this Trust and all provisions of this Declaration of Trust (which shall be
the governing instrument of this Trust), and the rights, duties and obligations
of the Trustees and Shareholders hereunder, are to be governed by and construed
and administered in accordance with the Act and the internal substantive laws
of said State without regard to principles of conflict of laws (unless and to
the extent preempted by the 1940 Act or other applicable Federal securities
laws); provided, however, that there shall not be applicable to this Trust, the
Trustees or this Declaration of Trust (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State
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of Delaware (other than the Act) pertaining to trusts which are inconsistent
with the powers and authority and limitations of liability of the Trustees set
forth or referenced herein or which relate to or regulate (i) the filing with
any court or governmental body or agency of trustee accounts or schedules of
trustee fees and charges, (ii) affirmative requirements to post bonds for
trustees, officers, agents or employees of a trust, (iii) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (iv) fees or other sums
payable to trustees, officers, agents or employees of a trust, (v) the
allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees. This Trust shall be of the type commonly called a "business trust,"
and without limiting the provisions hereof, this Trust specifically reserves
the right to exercise any of the powers or privileges afforded to trusts and to
take actions that may be taken by trusts under the Act, and the absence of a
specific reference herein to any such power, privilege or action shall not
imply that this Trust may not exercise such powers or privileges or take such
actions.
In construing the meaning or application of the Securities Act
of 1933, as amended, or any rule or regulation of the Commission thereunder
(the "1933 Act"), the Securities Exchange Act of 1934, as amended, or any rule
or regulation of the Commission thereunder (the "1934 Act") or the 1940 Act,
the Trustees may consider the effect of any applicable order or interpretive
release issued by the Commission, or any applicable "no action" or interpretive
position issued by the staff of the Commission, that modifies or interprets any
of the foregoing.
If any provision of this Declaration of Trust appears to the
Trustees to be ambiguous or inconsistent with any other provision hereof, the
Trustees may construe such provision in such manner as they reasonably may
determine in good faith, and such construction shall be conclusive and binding
as to the meaning to be given to such provision.
Section 3. Record Dates for Other Purposes.
The Trustees may establish such procedures for determining
record dates for purposes other than those set forth in ARTICLE IV, SECTION 2
hereof and ARTICLE V, SECTION 5 hereof as they may deem appropriate. In lieu
of establishing record dates in connection with such other purposes, the
Trustees may close the register or transfer books for one or more Series (or
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Classes), for such periods as they may deem appropriate, preceding a date that
serves the same purpose as a record date.
Section 4. Provisions in Conflict with Law or
Regulations.
(a) The provisions of this Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel,
that any such provision is in conflict with (i) the 1933 Act, the 1934 Act or
the 1940 Act, or any rule, regulation or order of the Commission under any of
the foregoing, (ii) the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or (iii) the Act or other applicable laws,
rules, regulations or orders, whether generally or in a particular application,
the conflicting provision or such particular application thereof, as the case
may be, shall not be deemed to constitute a part of this Declaration of Trust
for so long as such conflict exists; provided, however, that such determination
shall not affect any of the remaining provisions of this Declaration of Trust
or any lawful application of any provision, or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision or the application of any provision
of this Declaration of Trust shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or application in such jurisdiction and shall not in any manner
affect such provision or application in any other jurisdiction or any other
provision of this Declaration of Trust in any jurisdiction.
Section 5. Use of the Name "Aon".
The name "Aon" and all rights to the use of the name "Aon"
belong to Aon Advisors, Inc. ("Aon"), the sponsor of this Trust. Aon has
consented to the use by this Trust of the identifying word "Aon" and has
granted to this Trust a non-exclusive license to use the name "Aon" as part of
the name of this Trust and the name of any Series (or Class). Aon, in its sole
discretion, may revoke the Trust's non- exclusive license to use the name "Aon"
at any time and for any reason or for no reason. In the event of such
revocation, the Trust shall cease using the name "Aon" as part of its name or
the name of any Series or Class, unless otherwise consented to by Aon or any
successor to its interest in such name.
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IN WITNESS WHEREOF, the Trustees named below do hereby make
and enter into this Declaration of Trust as of the 15th day of May, 1996.
______________________________ ______________________________
Michael A. Cavataio Donald Phillips
______________________________ ______________________________
Carleton D. Pearl Michael A. Conway
______________________________
Richard J. Peters
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS:
_________________________________________________________________
<PAGE> 1
Exhibit 99.B1(b)
Authorization of Six Series of Shares
(and Classes within such Series) of the Trust
WHEREAS, Article III, Section 1 of the Agreement and
Declaration of Trust of Aon Funds (the "Declaration of Trust") grants full
power and authority to the trustees (the "Trustees") of the trust created
thereby (the "Trust") to authorize the division of Shares (as defined in the
Declaration of Trust) into two or more Series (as defined in the Declaration of
Trust) and the division of any Series into two or more Classes (as defined in
the Declaration of Trust); and
WHEREAS, the Trustees deem it to be in the best interests of
the Trust to authorize the issuance of six Series of the Trust, with each
Series initially consisting of two Classes, as described more fully below;
NOW, THEREFORE, be it
RESOLVED, that the Trustees hereby authorize, and establish
and designate, the following six Series of the Trust:
Asset Allocation Series
S&P 500 Index Series
REIT Index Series
International Equity Series
Government Securities Series; and
Money Market Series
FURTHER RESOLVED, that the investment objectives, policies,
restrictions and limitations of the Series so authorized shall be as set forth
in the Prospectus and Statement of Additional Information contained in
Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A of
Aon Asset Management Fund, Inc., which is expected to be adopted as the
Registration Statement of the Trust (the "Registration Statement"); and
FURTHER RESOLVED, that to the extent the Registration
Statement provides that the investment objectives, policies, restrictions or
limitations set forth with respect to a particular series are "fundamental"
policies of that series, such "fundamental" policies with respect to such
series are hereby approved and adopted as the "fundamental" policies of the
corresponding Series of the Trust authorized hereby; and
<PAGE> 2
FURTHER RESOLVED, that each Series so authorized shall consist
of two Classes of Shares, to be known as "Class C Shares" and "Class Y Shares,"
or by such other or additional names as the Trustees may from time to time deem
appropriate; and
FURTHER RESOLVED, that the foregoing division of the Series so
authorized into Classes shall not be deemed to preclude the Trustees from
authorizing additional Classes within such Series from time to time in
accordance with the provisions of the Declaration of Trust; and
FURTHER RESOLVED, that the number of authorized Shares of each
Series and Class so authorized shall be unlimited; and
FURTHER RESOLVED, that, subject to the following resolutions,
the relative rights, powers, privileges, preferences and duties of each Series
so authorized be and they hereby are fixed and determined to be identical to
the relative rights, powers, privileges, preferences and duties pertaining to a
Series as set forth in the Declaration of Trust and the By-Laws (as defined in
the Declaration of Trust); and
FURTHER RESOLVED, that the relative rights, powers,
privileges, preferences and duties of each Class so authorized be and they
hereby are fixed and determined to be identical to the relative rights, powers,
privileges, preferences and duties pertaining to a Class as set forth in the
Declaration of Trust and the By-Laws, subject to the provisions of the Trust's
"Plan Pursuant to Rule 18f-3(d) Under the Investment Company Act of 1940," a
copy of which is attached as Exhibit A hereto and incorporated by reference
herein (the "Plan"); and
FURTHER RESOLVED, that no holder of Shares of any Series or
Class so authorized, as such, shall have any preemptive or other right to
acquire, purchase or subscribe for any Shares or other securities of the Trust
which the Trust may hereafter issue or sell, whether of the same or of any
other Series or Class or otherwise, unless the Trustees shall so provide by
Resolution (as defined in the Declaration of Trust); and
FURTHER RESOLVED, that holders of Shares of each Series and
Class shall have no exchange privileges, and the Shares shall not be subject to
any conversion features, except (1) those provided for in the Plan
and (2) those that the Trustees may provide by Resolution; and
FURTHER RESOLVED, that Shares of each Series and Class so
authorized shall be subject to redemption at the option of the holder thereof
in accordance with the provisions of Article IV, Section 3 of the Declaration
of Trust, and at the option of the Trust in accordance with the provisions of
Article IV, Section 4 of the Declaration of Trust; and
<PAGE> 3
FURTHER RESOLVED, that the foregoing resolutions shall be
effective as of the date of execution and delivery by the Trust and Aon Asset
Management Fund, Inc. ("Company") of the Agreement and Plan of Reorganization
by and between the Trust and the Company which Agreement and Plan of
Reorganization has been approved by the Trustees of the Trust;
and
FURTHER RESOLVED, that the foregoing resolutions be and they
hereby are incorporated by reference into the Declaration of Trust; and
FURTHER RESOLVED, that the officers of the Trust are
authorized and directed to prepare and file with the Securities and Exchange
Commission a post-effective amendment or amendments to the Trust's registration
statement under the Securities Act of 1933 and the Investment Company Act of
1940 for the purposes of registering shares of the Series and Classes so
authorized under said Acts; and
FURTHER RESOLVED, that the Trustees, at any time and from time
to time, may cause the Trust to issue whole and fractional Shares of the Series
and Classes so authorized, to such Person (as defined in the Declaration of
Trust) or Persons, for such type and amount of consideration as is permitted by
Section 3802(a) of the Delaware Business Trust Act (including cash and
securities or other property), or for no consideration, and on such other terms
as are not inconsistent with the foregoing resolutions, as the Trustees may
deem appropriate; and
FURTHER RESOLVED, that the ownership and transfer of Shares of
the Series and Classes so authorized shall be recorded on the books of the
Trust or of a transfer or similar agent for the Trust, that no certificates
evidencing or certifying the ownership of such Shares shall be issued except as
the Trustees may otherwise determine from time to time in their sole discretion
and that such record books shall be conclusive as to who are the holders of
such Shares and as to the number of Shares of each such Series and Class held
from time to time by each.
<PAGE> 1
Exhibit 99.B2
BY-LAWS
OF
AON FUNDS
A DELAWARE BUSINESS TRUST
(AS OF MAY __, 1996)
<PAGE> 2
TABLE OF CONTENTS
BY-LAWS
AON FUNDS
<TABLE>
<S> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. REGISTERED DELAWARE OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. CERTIFICATES OF AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. CALL OF MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. NOTICE OF SHAREHOLDERS' MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6. VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE,
VOTING AND GIVING CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 10. PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. INSPECTORS OF ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. NUMBER OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8. WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 9. ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 10. NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 11. ACTION WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 12. FEES AND COMPENSATION OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1. COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. MEETINGS AND ACTIONS OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 4. REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. CHAIRMAN OF THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8. VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9. SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. MAINTENANCE AND INSPECTION OF SHARE
REGISTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2. MAINTENANCE AND INSPECTION OF BOOKS AND
RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. INSPECTION BY TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. CERTIFICATE FOR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. REPRESENTATION OF SHARES OF OTHER ENTITIES
HELD BY TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. INCORPORATION BY REFERENCE INTO DECLARATION
OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 4
AON FUNDS
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The trustees (the "Trustees")
of Aon Funds, a Delaware business trust (the "Trust"), shall establish, and
from time to time may change the location of, the principal executive office of
the Trust at any place within or without the State of Delaware.
Section 2. REGISTERED DELAWARE OFFICE. The Trustees shall
establish, and from time to time may change the location of, a registered
office of the Trust in the State of Delaware and shall appoint from time to
time, as the Trust's registered agent for service of process in the State of
Delaware, an individual who is a resident of the State of Delaware or a
Delaware corporation or a corporation authorized to transact business in the
State of Delaware; in each case the business office of such registered agent
for service of process shall be identical to the registered office of the Trust
in the State of Delaware.
Section 3. OTHER OFFICES. The Trustees may at any time and
from time to time establish one or more branch or subordinate offices at any
place or places, in accordance with the terms of the Agreement and Declaration
of Trust of the Trust (the "Declaration of Trust").
Section 4. CERTIFICATES OF AMENDMENT. The Trustees shall
cause to be filed such certificate or certificates as may be required under the
Delaware Business Trust Act (the "Act") to effectuate the foregoing.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders may
be held at any place designated by the Trustees, within or without the State of
Delaware. In the absence of any such designation, meetings of shareholders
shall be held at the principal executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the
shareholders may be called at any time by the Trustees, the Chairman of the
Trustees (if a person is so appointed in accordance with Article VI,
Section 8 of the Declaration of Trust) (the "Chairman") or the President of
the Trust.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of
meetings of shareholders shall be given or caused to be given in accordance
with Section 4 of this Article II not less
<PAGE> 5
than fifteen (15) nor more than ninety (90) days prior to the date of the
meeting. The notice shall specify (i) the place, date and hour of the meeting
and (ii) the general nature of the business to be transacted at the meeting.
If action is proposed to be taken at any meeting for authorization or approval
of any matter requiring shareholder authorization or approval under (i) the
1940 Act, (ii) Article VIII of the Declaration of Trust or (iii) Article IX of
the Declaration of Trust, the notice of such meeting also shall state the
general nature of the proposal. If a meeting is to be held for the purpose of
electing or removing one or more Trustees, the notice of such meeting also
shall state the name or names of the person or persons proposed to be elected
or removed.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of shareholders shall be given (a) personally (whether
orally or in writing), or (b) in writing by way of first-class mail or any
other reputable delivery service (including, without limitation, any reputable
telegraphic or courier service), charges prepaid, addressed to the shareholder
at the address of that shareholder appearing on the books of the Trust or of a
transfer or similar agent of the Trust or designated by the shareholder to the
Trust for the purpose of giving notice to such shareholder in connection with
the calling of meetings of the shareholders of the Trust. If no such address
appears on such books and is not so designated, notice shall be deemed to have
been given if (a) sent to that shareholder in writing by way of first-class
mail or other reputable delivery service, charges prepaid, addressed to the
Trust's principal executive office or (b) published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when given personally or
deposited in the mail or delivered to the delivery service.
If any notice addressed to a shareholder at the address of
that shareholder appearing on the books of the Trust or of a transfer or
similar agent of the Trust or designated by the shareholder to the Trust for
the purpose of giving notice to such shareholder in connection with the calling
of meetings of the shareholders of the Trust, is returned to the Trust by the
United States Postal Service or the delivery service to whom it was delivered
by the Trust, marked to indicate that such service is unable to deliver the
notice to the shareholder at that address, all future notices shall be deemed
to have been duly given without further action on the part of the Trust if such
notices shall be available for inspection by the shareholder on written demand
of the shareholder at the principal executive office of the Trust for a period
of one year from the date of the giving of the notice.
- 2 -
<PAGE> 6
An affidavit of the mailing or other means of giving any
notice of any shareholder's meeting shall be executed by the Secretary,
Assistant Secretary or any transfer or similar agent of the Trust giving the
notice and shall be filed with the Secretary of the Trust and be maintained in
the Trust's records.
Section 5. ADJOURNED MEETING; NOTICE. Any meeting of
shareholders may be adjourned from time to time to another date and time by a
majority of the votes properly cast in person or by proxy upon the question of
adjournment, whether or not a quorum is present, without the necessity for
giving further notice, unless a new record date of the adjourned meeting is
fixed or unless the adjournment is for more than sixty (60) days after the date
set for the original meeting (in which case the Trustees shall fix a new record
date). Any notice required to be given shall be given to each shareholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 3 and 4 of this Article II. At any adjourned meeting,
the Trust may transact any business which might have been transacted at the
original meeting.
Section 6. VOTING. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the provisions
of the Declaration of Trust. The shareholders' vote may be by voice or by
ballot; provided, however, that any vote for the election or removal of one or
more Trustees must be by ballot if demanded by any shareholder before the
voting has begun. On any matter other than elections or removals of Trustees,
any holder of shares may vote part of his or her shares in favor of the
proposal and refrain from voting the remaining shares or vote them against the
proposal, but if the holder fails to specify the number of shares which the
holder is voting affirmatively, it conclusively will be presumed that such
holder's affirmative vote is with respect to the total number of shares that
such holder is entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT
SHAREHOLDERS. The transactions at a meeting of shareholders, however called
and noticed and wherever held, shall be as valid as though had at a meeting
duly held after regular call and notice if a quorum be present either in person
or proxy and if either before or after the meeting, each person entitled to
vote who was not present in person or by proxy signs a written waiver of notice
of the meeting, a consent to the holding of the meeting or an approval of the
minutes of the meeting. The waiver of notice or consent with respect to a
meeting need not specify either the business that was, or is to be, transacted
at, or the purpose of, such meeting. All such waivers, consents and approvals
may be executed in one or more counterparts and shall be filed with the records
of the Trust or the minutes of the meeting.
- 3 -
<PAGE> 7
Attendance by a person at a meeting also shall constitute a
waiver of notice of that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
was not duly called and noticed and except that attendance at a meeting is not
a waiver of any right to object to the consideration of matters not included
but required to be included in the notice of the meeting if that objection is
expressly made at the beginning of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action requiring authorization or approval of shareholders may be
taken without a meeting of such shareholders and without prior notice if
holders of at least 66 2/3% of the shares entitled to be voted on the matter
consent to the action in writing and such written consent or consents are filed
with the minutes of the meetings of shareholders (except where a larger
percentage is required by the Investment Company Act of 1940, as amended (the
"1940 Act"), or by any express provision of the Declaration of Trust). Such
consents may be executed in one or more counterparts. Any shareholder giving a
written consent (or such shareholder's proxy) may revoke the consent by a
writing received by the Secretary of the Trust before written consents by or on
behalf of holders holding the number of shares required to authorize or approve
the proposed action have been filed with the Secretary of the Trust.
If the consents of all shareholders entitled to vote have not
been solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary of the Trust shall
give prompt notice of the action authorized or approved by the shareholders
without a meeting, such notice to be given at least ten (10) days before the
consummation of the action so authorized or approved.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND
GIVING CONSENTS. If the Trustees do not fix a record date or close the
register or transfer books of the Trust in accordance with the provisions of
Article V, Section 5 of the Declaration of Trust:
(a) The record date for determining shareholders entitled
to notice of and to vote at a meeting of shareholders
shall be at the close of business on the business day
next preceding the day on which notice is given or if
notice is waived, at the close of business on the
business day next preceding the day on which the
meeting is held.
- 4 -
<PAGE> 8
(b) The record date for determining shareholders entitled
to give consent to an action in writing without a
meeting, (i) when the Trustees are not required to
approve such action, shall be the first day on which
the Trust receives a written consent to such action,
or (ii) when the Trustees are required to approve
such action, shall be the close of business on the
day on which the Trustees approve such action, or the
close of business on such subsequent day as the
Trustees may fix in connection with taking such
action.
Section 10. PROXIES. Every person entitled to vote on any
matter shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Trust. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it before the vote pursuant to that proxy by a writing delivered to
the Trust stating that the proxy is revoked or by a subsequent proxy executed
by or attendance at the meeting and voting in person by the person executing
that proxy; or (ii) written notice of the death or incapacity of the maker of
that proxy is received by the Trust before the vote pursuant to that proxy;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy unless otherwise provided in the proxy.
Section 11. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Trustees may appoint any persons other than nominees for
office to act as inspectors of election at the meeting or its adjournment. If
no inspectors of election are so appointed, the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or their proxies, the holders of a majority
of shares or their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the chairman of the
meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint a person to fill the vacancy.
The inspectors shall:
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(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at the
meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) Count and tabulate all votes, ballots or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject only to such restrictions as may
be set forth in the Declaration of Trust, the 1940 Act and other applicable
law, the Trustees shall have exclusive control over the property of the Trust
and over the management of the business and affairs of the Trust.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees
within the limits specified in the Declaration of Trust shall be fixed from
time to time by written consents signed, or a resolution approved at a duly
constituted meeting of the Trustees, by a majority of the Trustees then in
office; provided, however, that the initial number of Trustees shall be five
(5).
Section 3. VACANCIES. Article VI, Section 5 of the
Declaration of Trust shall govern the filling of vacancies.
Notwithstanding the above, whenever and for so long as the
Trust or any series or class thereof is a participant in or otherwise has in
effect a plan under which the Trust or such series or class may be deemed to
bear expenses of distributing its shares as that practice is described in Rule
12b-1 under the 1940 Act, then the selection and nomination of the Trustees who
are not interested persons of the Trust (as that term is defined in the 1940
Act) shall be, and is, committed to the discretion of the persons who are not
interested persons of the Trust.
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Section 4. PLACE OF MEETINGS. Meetings of the Trustees may
be held at any place designated by the Trustees or by the Chairman (if there be
a person holding such office), within or without the State of Delaware. In the
absence of any such designation, meetings of the Trustees shall be held at the
principal executive office of the Trust.
Section 5. REGULAR MEETINGS. Regular meetings of the
Trustees shall be held without call or notice on such dates and at such times
as shall from time to time be fixed by the Trustees or by the Chairman (if
there be a person holding such office).
Section 6. SPECIAL MEETINGS. Special meetings of the
Trustees for any purpose or purposes may be called at any time by any two (2)
Trustees, the Chairman (if there be a person holding such office) or the
President.
Notice of the place, date and hour of any special meeting
shall be caused to be delivered to each Trustee by the party or parties calling
the same, either (a) personally (whether orally or in writing); (b) by
telephone or facsimile to such telephone or facsimile number as is shown for
that Trustee on the records of the Trust; or (c) in writing by way of
first-class mail or other reputable delivery service (including, without
limitation, reputable telegraphic or courier service), charges prepaid,
addressed to that Trustee at his or her address as it is shown on the records
of the Trust. In case the notice is given by way of mail, it shall be
deposited in the United States mail at least seven (7) calendar days before the
time of the holding of the meeting. In case the notice is given personally or
by telephone or facsimile, it shall be given at least forty-eight (48) hours
before the time of the holding of the meeting. In case the notice is given by
way of a delivery service, it shall be delivered to such service at such time
as reasonably will enable such service to make delivery to the Trustee at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
Trustee or to a person who the person giving the notice reasonably believes
will promptly communicate it to the Trustee. The notice need not specify the
purpose or place of the meeting if the meeting is to be held at the principal
executive office of the Trust.
Section 7. QUORUM. A majority of the Trustees then in office
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 9 of this Article III.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not
be given to any Trustee who either before or after the meeting signs a written
waiver of notice of the meeting, a consent to the holding of the meeting or an
approval of the minutes of the meeting. The waiver of notice or consent with
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respect to a meeting need not specify either the business that was, or is to
be, transacted at, or the purpose of, such meeting. All such waivers, consents
and approvals may be executed in one or more counterparts and shall be filed
with the records of the Trust or the minutes of the meeting. Attendance by a
Trustee at a meeting also shall constitute a waiver of notice of that meeting,
except when the Trustee objects at the beginning of the meeting to the
transaction of any business because the meeting was not duly called and noticed
(if such call and notice is required by these By-Laws) and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included but required to be included in the notice
of the meeting (if such notice is required to be given) if that objection is
expressly made at the beginning of the meeting.
Section 9. ADJOURNMENT. A majority of the Trustees present,
whether or not constituting a quorum, may adjourn any meeting to another place
and time.
Section 10. NOTICE OF ADJOURNMENT. Notice of the place and
time of holding an adjourned meeting need not be given unless the meeting is
adjourned for more than forty-eight (48) hours, in which case notice of the
place and time shall be given before the time of the adjourned meeting in the
manner specified in Section 6 of this Article III to the Trustees who were
present at the time of the adjournment.
Section 11. ACTION WITHOUT A MEETING. Except as otherwise
required by the 1940 Act or the Declaration of Trust, any action required or
permitted to be taken by the Trustees may be taken without a meeting if a
majority of the Trustees then in office shall consent in writing to that
action. Such written consent or consents may be executed in one or more
counterparts and shall be filed with the minutes of the meetings of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and
members of committees may receive such compensation, if any, for their services
and such reimbursement of expenses as may be fixed or determined by the
Trustees. This Section 12 shall not be construed to preclude any Trustee from
serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. To the
extent not inconsistent with the requirements of the 1940 Act, any Trustee, by
power of attorney, may delegate his or her power for a period not exceeding six
(6) months at any one time to any other Trustee or Trustees; provided, however,
that in no case shall fewer than two (2) Trustees personally exercise the
powers granted to the Trustees except as otherwise expressly provided herein or
by Resolution (as defined in the Declaration
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of Trust). Except where applicable law may require a Trustee to be present in
person, a Trustee represented by another Trustee pursuant to such power of
attorney shall be deemed to be present for purposes of establishing a quorum
and satisfying the required vote of Trustees.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES. The Trustees may designate one or
more committees, each consisting of two (2) or more Trustees or other persons,
to serve at the pleasure of the Trustees. The Trustees may designate one or
more Trustees or other persons as alternate members of any committee who may
replace any absent member at any meeting of the committee. Any committee, to
the extent provided by the Trustees, shall have the powers and authority of the
Trustees, except with respect to:
(a) the approval of any action which under the 1940 Act or the
Declaration of Trust requires shareholder authorization or
approval; or requires approval by Resolution (as defined in
the Declaration of Trust);
(b) the filling of vacancies in the number of Trustees or in any
committee;
(c) the fixing of compensation of the Trustees or other persons
for serving as Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or the
By-Laws;
(e) the amendment or repeal of any action by the Trustees, unless
such action provides by its express terms that it is so
amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Trustees;
(g) the appointment of any other committee of the Trustees or the
members of those committees; or
(h) the removal of one or more Trustees.
Section 2. MEETINGS AND ACTIONS OF COMMITTEES. Meetings and
actions of committees shall be governed by and held and taken in accordance
with the provisions of Article III of these By-Laws, with such changes in the
context thereof as are necessary to substitute the committee and its members
for the Trustees, except that the place and time of regular meetings of
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committees may be determined either by the Trustees or by resolution of the
committee. Special meetings of committees may be called by the Trustees.
Alternate members shall be given notice of all meetings of committees of which
they are alternate members and shall have the right to attend all such
meetings. The Trustees may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a
President, a Secretary, a Treasurer and a Controller. The Trust also may have,
at the discretion of the Trustees, a Chairman, one or more Vice Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, one or more
Assistant Controllers and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may
be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust,
except such officers as may appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the Trustees, and
each shall serve at the pleasure of the Trustees, subject to the rights, if
any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Trustees may appoint
and may empower the Chairman (if there be a person holding such office) or the
President to appoint such other officers as the business of the Trust may
require, each of whom shall hold office for such period, have such powers and
authority and perform such duties as the Trustees may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to
the rights, if any, of an officer under any contract of employment, any officer
may be removed, either with or without cause, by the Trustees at any regular or
special meeting of the Trustees, by the Chairman (if there be a person holding
such office), by the President or by such other officer upon whom such power of
removal may be conferred by the Trustees.
Any officer may resign at any time by giving written notice to
the Trust. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a
party.
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Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, physical or mental incapacity, resignation, removal or other
cause shall be filled in the manner prescribed in these By-Laws for regular
appointment to that office. The Chairman (if there be a person holding such
office) or the President may make temporary appointments to a vacant office
pending action by the Trustees.
Section 6. CHAIRMAN OF THE TRUSTEES. The Chairman (if there
be a person holding such office) shall if reasonably feasible preside at
meetings of the Trustees.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Trustees to the Chairman (if there be a person
holding such office), the President shall be the chief operating officer of the
Trust and shall, subject to the control of the Trustees and the Chairman (if
there be a person holding such office), have general supervision, direction and
control of the business and affairs and the officers of the Trust. He shall
preside at all meetings of the shareholders and, in the absence of the Chairman
(if there be a person holding such office), at all meetings of the Trustees.
He shall have the general powers and duties of management usually vested in the
office of president of a corporation and shall have such other powers and
authority and perform such other duties as may be prescribed by these By-Laws
or as the Trustees or the Chairman (if there be a person holding such office)
may from time to time determine.
Section 8. VICE PRESIDENTS. In the absence or disability of
the President, in order of their rank as fixed by the Trustees, or if not
ranked, the Executive Vice President (who shall be considered first ranked) and
such other Vice Presidents as shall be designated by the Trustees, shall
perform all the duties of the President and when so acting shall have all
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall have such other powers and authority and perform such other
duties as may be prescribed by these By-Laws or as the Trustees, the Chairman
(if there be a person holding such office) or the President may from time to
time determine.
Section 9. SECRETARY. The Secretary shall keep or cause to
be kept at the principal executive office of the Trust or such other place as
the Trustees may direct a book of minutes of all meetings and actions of
Trustees, committees of Trustees and shareholders with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
given, the names of those present at Trustees' meetings or committee meetings,
the number of shares present or represented at shareholders' meetings, and the
proceedings.
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<PAGE> 15
The Secretary shall give or cause to be given notice of all
meetings of the shareholders and of the Trustees required to be given by the
Declaration of Trust or these By-Laws or by applicable law and shall have such
other powers and authority and perform such other duties as may be prescribed
by these By-Laws or as the Trustees, the Chairman (if there be a person holding
such office) or the President may from time to time determine.
Section 10. TREASURER. The Treasurer shall be the chief
financial officer officer of the Trust. The Treasurer shall deposit all monies
and other valuables in the name and to the credit of the Trust with such
depositaries as may be designated by the Trustees. He or she shall disburse
the funds of the Trust as may be ordered by the Trustees, shall render to the
Chairman (if there be a person holding such office), the President and
Trustees, whenever they request it, an account of all of his or her
transactions as chief financial officer and shall have such other powers and
authority and perform such other duties as may be prescribed by these By-Laws
or as the Trustees, the Chairman (if there be a person holding such office) or
the President may from time to time determine.
Section 11. CONTROLLER. The Controller shall be the chief
accounting officer of the Trust and shall keep and maintain or cause to be kept
and maintained adequate and correct books and records of accounts of the
properties and business transactions of the Trust, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The Controller shall render to the Chairman (if there be
a person holding such office), the President and Trustees, whenever they
request it, an account of the financial condition of the Trust and shall have
such other powers and authority and perform such other duties as may be
prescribed by these By-Laws or as the Trustees, the Chairman (if there be a
person holding such office) or the President may from time to time determine.
ARTICLE VI
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. A
register or registers shall be kept at the principal executive office of the
Trust or at the offices of one or more transfer or similar agents of the Trust
which, together, shall contain the names and addresses of the shareholders of
each series, the number of shares of that series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As
to shares for which no certificate has been issued, the shareholders listed on
any such register shall be entitled to receive dividends or other distributions
or
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<PAGE> 16
otherwise to exercise or enjoy the rights of shareholders. No shareholder
shall be entitled to receive payment of any dividend or other distribution, nor
to have notice given to him or her as herein provided, until he or she has
given his or her address to the relevant transfer or similar agent or such
officer or other agent of the Trust as shall keep the relevant register, for
entry thereon.
Section 2. MAINTENANCE AND INSPECTION OF BOOKS AND RECORDS.
The accounting books and records and minutes of proceedings of shareholders and
the Trustees and any committee or committees of the Trustees shall be kept at
such place or places designated by the Trustees or in the absence of such
designation, at the principal executive office of the Trust. The minutes shall
be kept in written form and the accounting books and records shall be kept
either in written form or in any other form capable of being converted into
written form. Subject to the provisions of the Declaration of Trust
(including, without limitation, the provisions of Article III, Section 19(b)
thereof), the minutes and accounting books and records shall be open to
inspection upon the written demand under oath of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business hours for
any purpose reasonably related to the holder's interest as a shareholder or as
the holder of a voting trust certificate. The inspection shall include the
right to copy and make extracts, at the sole cost and expense of the party
making the demand.
Section 3. INSPECTION BY TRUSTEES. Every Trustee shall have
the absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts, at the
sole cost and expense of the Trust.
Section 4. FINANCIAL STATEMENTS. Subject to the provisions
of the Declaration of Trust (including, without limitation, the provisions of
Article III, Section 19(b) thereof), a copy of any financial statements and any
income statement of the Trust for each quarterly period of each fiscal year and
accompanying balance sheet of the Trust as of the end of each such period that
has been prepared by the Trust shall be kept on file at the principal executive
office of the Trust for at least twelve (12) months and each such statement
shall be exhibited at all reasonable times during usual business hours to any
shareholder demanding an examination of any such statement, or a copy shall be
mailed to any such shareholder at the sole cost and expense of the Trust.
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The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
ARTICLE VII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts or other orders for payment of money, and all notes or other
evidences of indebtedness, issued in the name of or payable to the Trust shall
be signed or endorsed in such manner and by such person or persons as shall be
designated from time to time by the Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
Trustees, except as otherwise provided in these By- Laws, may authorize one or
more officers, agents or employees of the Trust to enter into any contract or
execute any instrument in the name of and on behalf of the Trust and this
authority may be general or confined to specific instances; and unless so
authorized or ratified by the Trustees or within the agency power of an
officer, no officer, agent or employee of the Trust shall have any power or
authority to bind the Trust by any contract or engagement or to pledge the
Trust's credit or to render the Trust liable for any purpose or for any amount.
Section 3. CERTIFICATE FOR SHARES. If the Trustees so
determine, a certificate or certificates for shares of beneficial interest in
any series and class of the Trust may be issued to a shareholder upon his or
her request when such shares are fully paid. All certificates shall be signed
in the name of the Trust by the Chairman (if there be a person holding such
office) or the President or any Vice President and by the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the
number of shares and the series and class of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer or similar agent or registrar who has signed or whose
facsimile signature has been placed on a certificate shall have ceased to be
that officer, transfer or similar agent or registrar before that certificate is
issued, it may be issued by the Trust with the same effect as if that person
were an officer, transfer or similar agent or registrar at the date of issue.
Notwithstanding the foregoing, the Trust may adopt and use a system of
issuance, recordation and transfer of its shares by electronic or other means.
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Section 4. LOST CERTIFICATES. Except as provided in this
Section 4, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the Trust and canceled at the
same time. The Trustees may in case any share certificate or certificate for
any other security is lost, stolen or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Trustees may
determine, including a provision for indemnification of the Trust secured by a
bond or other adequate security sufficient to protect the Trust against any
claim that may be made against it, including any expense or liability on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
Section 5. TRANSFER OF SHARES. Except as otherwise provided
by the Trustees, shares shall be transferable on the records of the Trust only
by the record holder thereof or by his or her agent thereunto duly authorized
in writing upon delivery to the Trustees or the Trust's transfer or similar
agent of a duly executed instrument of transfer and such evidence of the
genuineness of such execution and authorization and of such other matters as
may be required by the Trustees. Upon such delivery the transfer shall be
recorded on the books of the Trust. Until such record is made, the shareholder
of record shall be deemed to be the holder of such shares for all purposes and
neither the Trustee nor the Trust, nor any transfer or similar agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Section 6. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY
TRUST. The Chairman (if there be a person holding such office), the President
or any Vice President or any other person authorized by the Trustees or by any
of the foregoing designated officers, is authorized to vote or represent on
behalf of the Trust any and all shares of any corporation, partnership, trust,
or other entity, foreign or domestic, standing in the name of the Trust. The
authority granted may be exercised in person or by a proxy duly executed by
such designated person.
Section 7. FISCAL YEAR. The fiscal year of the Trust and of
each series thereof shall be fixed and refixed or changed from time to time by
the Trustees.
ARTICLE VIII
AMENDMENTS
Section 1. AMENDMENT. Except as otherwise provided by the
1940 Act or by the Declaration of Trust, these By-Laws may be adopted, amended
or repealed by the Trustees by Resolution (as defined in the Declaration of
Trust).
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Section 2. INCORPORATION BY REFERENCE INTO DECLARATION OF
TRUST. These By-Laws and any amendments hereto shall be incorporated by
reference into the Declaration of Trust.
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<PAGE> 1
Exhibit 99.B5(a)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______ day of
__________, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as filed with the Securities and Exchange
Commission ("SEC"), which includes all statements of
the investment objective, policies and restrictions
of the Portfolio of the Fund referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's Money Market Series (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 the documents referred to in Sections l(a), (b) and (c).
<PAGE> 2
2.3 The Advisor agrees, for the term of this Agreement, to assume
the obligations set forth in this Agreement for the compensation provided and
on the other terms and conditions set forth in this Agreement.
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at an annual rate of 0.30% (30/100ths of 1%).
For the first full twelve (12) calendar months after the effective date of this
Agreement, and for such additional periods as the Advisor may, in its sole
discretion, from time to time determine, the Advisor will waive collection of
0.10% (10/100ths of 1%) of the 0.30% (30/100ths of 1%) investment advisory fee,
resulting in an advisory fee of 0.20% (20/100ths of 1%) on an annual basis.
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<PAGE> 3
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio as last determined will be deemed to be
the net asset value for such day.
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees
and expenses of Trustees 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, administration, 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 Trustees of the
Fund;
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<PAGE> 4
(j) costs of maintenance of the Fund's existence as a
Delaware business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and
delivering registration statements, shareholders'
reports and proxy statements;
(n) costs and fees associated with delivering reports to
and making 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
Fund's prospectuses and statements of additional
information to existing shareholders of the
Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds 1% or 1.10%, respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 The Portfolio's transactions in portfolio securities shall
usually be effected with the issuer or with a dealer in money market
instruments acting as principal on a net basis. The Portfolio also may
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.
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<PAGE> 5
6.2 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.
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may 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
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; 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.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor deems to be fair.
7.2 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 recognize that there may be an adverse
effect on price.
-5-
<PAGE> 6
8. RULE 2A-7 COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 The Advisor agrees to manage the investment and reinvestment
of the Portfolio's assets in compliance with Rule 2a-7, as it may from time to
time be amended, under the 1940 Act, and to maintain all records required by
Rule 2a-7. The Advisor also agrees to maintain and preserve, in accordance
with the 1940 Act and rules thereunder, and for the periods prescribed by Rule
3la-2 under the 1940 Act, books and records with respect to the Portfolio's
securities transactions required to be maintained by Rule 3la-1 under the 1940
Act.
8.2 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 Trustees, or as may be required by
any government agency having jurisdiction over the Fund, promptly upon written
request. The provisions of this Section 8 shall survive any termination of
this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Portfolio.
-6-
<PAGE> 7
10.2 If approved as provided above, this Agreement shall continue
in effect for two years and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually either:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting securities
of the Portfolio. In either event such continuance also must
be approved by the vote of a majority of the Trustees 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.
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the Portfolio's outstanding voting
securities of the Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2(a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent required by Rule 18f-3 under the
1940 Act, of the class(es) of the Portfolio affected thereby), and (ii) the
vote of a majority of the Trustees, including a majority of the Trustees 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 amendment.
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or 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 (each of the foregoing, an "Advisory Affiliate"), neither the
Advisor nor any Advisory Affiliate 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
-7-
<PAGE> 8
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.
12. USE OF NAME "AON" MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
13.3 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.
13.4 It is intended by the parties that this Agreement be governed
by the law of the State of Illinois; 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.
13.5 The Advisor agrees to report to the Fund and its Trustees any
conflicts or potential conflicts of interest between classes of shares of the
Portfolio of which the Advisor may become aware.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
__________________________ ______________________________
Secretary President
Attest: Aon Advisors, Inc.
__________________________ ______________________________
Secretary President
-9-
<PAGE> 1
Exhibit 99.B5(b)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______
day of _______, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Portfolio of the Fund
referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES.
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's Government Securities Series
(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 the documents referred to in Sections l(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 and
on the other terms and conditions set forth in this Agreement.
<PAGE> 2
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at the following annual rates: 0.45% of the first
$100 million, .40% of the next $100 million, .35% of the next $100 million,
.30% of the next $100 million, and .25% of the amount in excess of $400
million.
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio as last determined will be deemed to be
the net asset value for such day.
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<PAGE> 3
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees 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, administration, 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 Trustees of the Fund;
(j) costs of maintenance of the Fund's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
-3-
<PAGE> 4
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making 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 Fund's
prospectuses and statements of additional information to
existing shareholders of the Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds (i) in the case of Class Y shares, 1.50% of the
first $30 million of the average daily net assets of the Portfolio and 1.25% of
the amount by which the average daily net assets of the Portfolio exceeds $30
million; and (ii) in the case of Class C shares, 1.75% of the first $30 million
of the average daily net assets of the Portfolio and 1.50% of the amount by
which the average daily net assets of the Portfolio exceeds $30 million,
respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 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 a dealer in such
instruments acting as principal on a net basis. The Portfolio also may
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.
-4-
<PAGE> 5
6.2 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.
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may 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
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; 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.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor deems to be fair.
7.2 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 recognize that there may be an adverse
effect on price.
-5-
<PAGE> 6
8. COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 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 also agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 3la-2 under the 1940 Act, books and records with respect to
the Portfolio's securities transactions required to be maintained by Rule 3la-1
under the 1940 Act.
8.2 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 Trustees, or as may be required
by any government agency having jurisdiction over the Fund, promptly upon
written request. The provisions of this Section 8 shall survive any
termination of this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Portfolio.
-6-
<PAGE> 7
11.2 If approved by the vote of a majority of the outstanding
voting securities of the Portfolio, this Agreement shall continue in effect for
two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance also must be approved by the vote of a
majority of the Trustees 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.
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2 (a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent
required by Rule 18f-3 under the 1940 Act, of the
class(es) of the Portfolio affected thereby), and
(ii) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and 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 amendment.
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or any other person
-7-
<PAGE> 8
or entity affiliated with the Advisor or retained by it to perform or assist in
the performance of its obligations under this Agreement (each of the foregoing,
an "Advisory Affiliate"), neither the Advisor nor any Advisory Affiliate 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.
12. USE OF NAME "AON"; MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
13.3 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.
-8-
<PAGE> 9
13.4 Governing Law. It is intended by the parties that this
Agreement be governed by the law of the State of Illinois; 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.
13.5 Plan Pursuant to Rule 18f-3. The Advisor agrees to report to
the Fund and its Trustees any conflicts or potential conflicts of interest
between classes of shares of the Portfolio of which the Advisor may become
aware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
____________________________ _______________________________
Secretary President
Attest: Aon Advisors, Inc.
____________________________ ______________________________
Secretary President
-9-
<PAGE> 1
Exhibit 99.B5(c)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______
day of _______, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Portfolio of the Fund
referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES.
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's Asset Allocation Series (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 the documents referred to in Sections l(a), (b) and (c) hereof.
<PAGE> 2
2.3 The Advisor agrees, for the term of this Agreement, to assume
the obligations set forth in this Agreement for the compensation provided and
on the other terms and conditions set forth in this Agreement.
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at the following annual rates: 0.65% of the first
$250 million, .55% of the next $250 million and .45% of the amount in excess of
$500 million.
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio as last determined will be deemed to be
the net asset value for such day.
-2-
<PAGE> 3
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees 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, administration, 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 Trustees of the Fund;
(j) costs of maintenance of the Fund's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
-3-
<PAGE> 4
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making 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 Fund's
prospectuses and statements of additional information to
existing shareholders of the Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds 1.25% or 1.50%, respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 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 a dealer in such
instruments acting as principal on a net basis. The Portfolio also may
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.
6.2 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.
-4-
<PAGE> 5
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may 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
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; 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.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor deems to be fair.
7.2 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 recognize that there may be an adverse
effect on price.
-5-
<PAGE> 6
8. COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 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 also agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 3la-2 under the 1940 Act, books and records with respect to
the Portfolio's securities transactions required to be maintained by Rule 3la-1
under the 1940 Act.
8.2 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 Trustees, or as may be required
by any government agency having jurisdiction over the Fund, promptly upon
written request. The provisions of this Section 8 shall survive any
termination of this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Portfolio.
10.2 If approved as provided above, this Agreement shall continue
in effect for two years and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually either:
-6-
<PAGE> 7
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance also must be approved by the vote of a
majority of the Trustees 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.
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2 (a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent
required by Rule 18f-3 under the 1940 Act, of the
class(es) of the Portfolio affected thereby), and
(ii) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and 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 amendment.
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or 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 (each of the foregoing, an "Advisory Affiliate"), neither the
Advisor nor any Advisory Affiliate 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
-7-
<PAGE> 8
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.
12. USE OF NAME "AON"; MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
13.3 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.
13.4 Governing Law. It is intended by the parties that this
Agreement be governed by the law of the State of Illinois; 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.
-8-
<PAGE> 9
13.5 Plan Pursuant to Rule 18f-3. The Advisor agrees to report to
the Fund and its Trustees any conflicts or potential conflicts of interest
between classes of shares of the Portfolio of which the Advisor may become
aware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
____________________________ _______________________________
Secretary President
Attest: Aon Advisors, Inc.
____________________________ ______________________________
Secretary President
-9-
<PAGE> 1
Exhibit 99.B5(d)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______
day of _______, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Portfolio of the Fund
referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES.
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's S&P 500 Index Series (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 the documents referred to in Sections l(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 and
on the other terms and conditions set forth in this Agreement.
<PAGE> 2
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at an annual rate of 0.30%.
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio as last determined will be deemed to be
the net asset value for such day.
<PAGE> 3
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees 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, administration, 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 Trustees of the Fund;
(j) costs of maintenance of the Fund's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
<PAGE> 4
(n) costs and fees associated with delivering reports to and
making 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 Fund's
prospectuses and statements of additional information to
existing shareholders of the Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds .75% or 1.00%, respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 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 a dealer in such
instruments acting as principal on a net basis. The Portfolio also may
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.
6.2 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.
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may 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
the Advisor. The Advisor is authorized to execute orders with dealers or
brokers that provide research and security and
<PAGE> 5
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; 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.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor deems to be fair.
7.2 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 recognize that there may be an adverse
effect on price.
8. COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 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 also agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 3la-2 under the 1940 Act, books and records with respect to
the Portfolio's securities transactions required to be maintained by Rule 3la-1
under the 1940 Act.
<PAGE> 6
8.2 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 Trustees, or as may be required
by any government agency having jurisdiction over the Fund, promptly upon
written request. The provisions of this Section 8 shall survive any
termination of this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such proposal and by a vote of the majority of the
outstanding voting securities 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 for
two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance also must be approved by the vote of a
majority of the Trustees 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.
<PAGE> 7
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2 (a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent
required by Rule 18f-3 under the 1940 Act, of the
class(es) of the Portfolio affected thereby), and
(ii) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and 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 amendment.
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or 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 (each of the foregoing, an "Advisory Affiliate"), neither the
Advisor nor any Advisory Affiliate 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.
<PAGE> 8
12. USE OF NAME "AON"; MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
13.3 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.
13.4 Governing Law. It is intended by the parties that this
Agreement be governed by the law of the State of Illinois; 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.
13.5 Plan Pursuant to Rule 18f-3. The Advisor agrees to report to
the Fund and its Trustees any conflicts or potential conflicts of interest
between classes of shares of the Portfolio of which the Advisor may become
aware.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
___________________________ ______________________________
Secretary President
Attest: Aon Advisors, Inc.
____________________________ ______________________________
Secretary President
<PAGE> 1
Exhibit 99.B5(e)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______
day of _______, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Portfolio of the Fund
referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES.
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's REIT Index Series (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 the documents referred to in Sections l(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 and
on the other terms and conditions set forth in this Agreement.
<PAGE> 2
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at the following annual rates: 0.60% of the first
$100 million, .55% of the next $100 million, and .50% of the amount in excess
of $200 million.
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio as last determined will be deemed to be
the net asset value for such day.
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<PAGE> 3
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees 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, administration, 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 Trustees of the Fund;
(j) costs of maintenance of the Fund's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
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<PAGE> 4
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making 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 Fund's
prospectuses and statements of additional information to
existing shareholders of the Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds (i) in the case of Class Y shares, 1.50% of the
first $30 million of the average daily net assets of the Portfolio and 1.25% of
the amount by which the average daily net assets of the Portfolio exceeds $30
million; and (ii) in the case of Class C shares, 1.75% of the first $30 million
of the average daily net assets of the Portfolio and 1.50% of the amount by
which the average daily net assets of the Portfolio exceeds $30 million,
respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 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 a dealer in such
instruments acting as principal on a net basis. The Portfolio also may
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.
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<PAGE> 5
6.2 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.
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may 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
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; 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.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 Trustees, available
securities may be allocated to each account and may be averaged as to price in
whatever manner the Advisor deems to be fair.
7.2 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 recognize that there may be an adverse
effect on price.
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<PAGE> 6
8. COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 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 also agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 3la-2 under the 1940 Act, books and records with respect to
the Portfolio's securities transactions required to be maintained by Rule 3la-1
under the 1940 Act.
8.2 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 Trustees, or as may be required
by any government agency having jurisdiction over the Fund, promptly upon
written request. The provisions of this Section 8 shall survive any
termination of this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Portfolio.
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<PAGE> 7
10.2 If approved by the vote of a majority of the outstanding
voting securities of the Portfolio, this Agreement shall continue in effect for
two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance also must be approved by the vote of a
majority of the Trustees 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.
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2 (a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent
required by Rule 18f-3 under the 1940 Act, of the
class(es) of the Portfolio affected thereby), and
(ii) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and 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 amendment.
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or any other person
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<PAGE> 8
or entity affiliated with the Advisor or retained by it to perform or assist in
the performance of its obligations under this Agreement (each of the foregoing,
an "Advisory Affiliate"), neither the Advisor nor any Advisory Affiliate 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.
12. USE OF NAME "AON"; MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
13.3 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.
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<PAGE> 9
13.4 Governing Law. It is intended by the parties that this
Agreement be governed by the law of the State of Illinois; 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.
13.5 Plan Pursuant to Rule 18f-3. The Advisor agrees to report to
the Fund and its Trustees any conflicts or potential conflicts of interest
between classes of shares of the Portfolio of which the Advisor may become
aware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
____________________________ _______________________________
Secretary President
Attest: Aon Advisors, Inc.
____________________________ ______________________________
Secretary President
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<PAGE> 1
Exhibit 99.B5(f)
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ______
day of _______, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (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) Agreement and Declaration of Trust 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-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Portfolio of the Fund
referred to below.
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 documents so
furnished by the Fund.
2. INVESTMENT ADVISORY SERVICES.
2.1 Subject to the supervision and approval of the Fund's trustees
(the "Trustees"), the Fund hereby employs the Advisor to act as the investment
advisor to, and manager of, the Fund's International Equity Series (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 the documents referred to in Sections l(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 and
on the other terms and conditions set forth in this Agreement.
<PAGE> 2
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 and other instruments 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 Trustees, or any
committees or officers acting pursuant to authority
of the Trustees, at such times and in such manner as
the Trustees may deem appropriate, with respect to
the implementation of the investment objective,
policies and restrictions of the Portfolio; and
(d) at the Fund's request, provide persons to serve as
trustees and officers of the Fund.
2.5 Subject to the approval of the Trustees and to other
applicable legal requirements, the Advisor may enter into any advisory or
sub-advisory agreement or contract with another affiliated or unaffiliated
entity pursuant to which such entity will carry out some or all of the
Advisor's responsibilities listed above.
3. INVESTMENT ADVISORY FEE.
3.1 In consideration of all services rendered pursuant to Section
2 of this Agreement, the Portfolio shall pay to the Advisor, after the end of
each calendar month, a fee, accrued daily and based upon the average daily net
asset value of the Portfolio for the month (or portion thereof during which
this Agreement is in effect), at the following annual rates: 0.95% of the first
$100 million, .90% of the next $100 million and .85% of the amount in excess of
$200 million.
3.2 If on any day 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 or for any other reason, then for the purpose of this Section
3, the net asset value of the Portfolio
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<PAGE> 3
as last determined will be deemed to be the net asset value for such day.
4. EXPENSES.
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 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
incurred by or allocated to the Portfolio, including:
(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) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees 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, administration, 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 Trustees of the Fund;
(j) costs of maintenance of the Fund's existence as a Delaware
business trust;
(k) insurance premiums;
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<PAGE> 4
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making 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 Fund's
prospectuses and statements of additional information to
existing shareholders of the Portfolio.
5. REIMBURSEMENT.
5.1 If in any fiscal year, the aggregate expense of the Class Y
shares or the Class C shares of the Portfolio, including fees pursuant to this
Agreement, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceeds, (i) in the case of Class Y shares, 1.75% of
the first $30 million of the average daily net assets of the Portfolio and
1.50% of the amount by which the average daily net assets of the Portfolio
exceeds $30 million; and (ii) in the case of Class C shares, 2.00% of the first
$30 million of the average daily net assets of the Portfolio and 1.75% of the
amount by which the average daily net assets of the Portfolio exceeds $30
million, respectively, 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.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
6.1 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 a dealer in such
instruments acting as principal on a net basis. The Portfolio also may
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,
-4-
<PAGE> 5
are to be made by the Advisor or if applicable the appropriate sub-advisor.
6.2 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.
6.3 The primary consideration in allocating transactions to
dealers and brokers shall be prompt and effective execution of orders at the
most favorable security prices obtainable ("best execution"). Consideration
also may be given to additional factors, such as furnishing of supplemental
research and other services deemed to be of value to the Fund, the Portfolio,
to the Advisor or if applicable to the appropriate sub-advisor. The Advisor or
sub-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 or sub-advisor, as the case may be, 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 or sub- 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; 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 or
sub-advisor in serving other portfolios of the Fund, the Portfolio and other
accounts managed by the Advisor or sub-advisor.
7. SIMILAR ACTIVITIES FOR OTHERS.
7.1 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 or sub-advisor.
If, however, accounts managed by the Advisor or sub-advisor are simultaneously
engaged in purchases of the same securities, then, pursuant to the
authorization of the Trustees, available securities may be allocated to each
account and may be averaged as to price in whatever manner the Advisor or
sub-advisor deems to be fair.
7.2 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
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<PAGE> 6
extent that transactions on behalf of more than one client of the Advisor or
sub-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
recognize that there may be an adverse effect on price.
8. COMPLIANCE AND MAINTENANCE OF RECORDS.
8.1 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 also agrees to maintain and preserve, in
accordance with the 1940 Act and rules thereunder, and for the periods
prescribed by Rule 3la-2 under the 1940 Act, books and records with respect to
the Portfolio's securities transactions required to be maintained by Rule 3la-1
under the 1940 Act.
8.2 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 Trustees, or as may be required
by any government agency having jurisdiction over the Fund, promptly upon
written request. The provisions of this Section 8 shall survive any
termination of this Agreement.
9. DUAL INTERESTS.
9.1 It is understood by both parties that any of the shareholders,
trustees, 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 or
any affiliated person of 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.
9.2 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 by specific provisions of applicable
law, including the 1940 Act.
10. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
10.1 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 Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the
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<PAGE> 7
purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Portfolio.
10.2 If approved by the vote of a majority of the outstanding
voting securities of the Portfolio, this Agreement shall continue in effect for
two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
In either event such continuance also must be approved by the vote of a
majority of the Trustees 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.
10.3 This Agreement may, on sixty days' written notice, be
terminated at any time, without the payment of any penalty, by the Board of
Trustees, by a vote of a majority of the outstanding voting securities of the
Portfolio or by the Advisor.
10.4 This Agreement shall automatically terminate in the event of
its assignment.
10.5 In interpreting the provisions of this Section 10, the
definitions contained in Section 2 (a) of the 1940 Act, particularly the
definitions of "interested person" and "assignment" and a "majority of the
outstanding voting securities", shall be applied.
10.6 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 (or, to the extent
required by Rule 18f-3 under the 1940 Act, of the
class(es) of the Portfolio affected thereby), and
(ii) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and 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 amendment.
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<PAGE> 8
11. LIABILITY OF THE ADVISOR.
11.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on the part of the
Advisor, or of its officers, directors, agents, employees, controlling persons,
shareholders, or 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 (each of the foregoing, an "Advisory Affiliate"), neither the
Advisor nor any Advisory Affiliate 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.
12. USE OF NAME "AON"; MARKS OR SYMBOLS.
12.1 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 and/or the Portfolio to a
name not including the word "Aon".
13. MISCELLANEOUS.
13.1 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.
13.2 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.
-8-
<PAGE> 9
13.3 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.
13.4 Governing Law. It is intended by the parties that this
Agreement be governed by the law of the State of Illinois; 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.
13.5 Plan Pursuant to Rule 18f-3. The Advisor agrees to report to
the Fund and its Trustees any conflicts or potential conflicts of interest
between classes of shares of the Portfolio of which the Advisor may become
aware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
____________________________ _______________________________
Secretary President
Attest: Aon Advisors, Inc.
____________________________ ______________________________
Secretary President
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<PAGE> 1
Exhibit 99.B5(g)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT ("Agreement") made this
_____ day of __________, 1996 by and between Aon Advisors, Inc., a Virginia
corporation, (the "Advisor") and Perpetual Portfolio Management Limited, a
corporation organized under the laws of England (the "Sub-Advisor").
Advisor and Sub-Advisor agree as follows:
1. Advisor hereby engages the services of Sub-Advisor in
connection with Advisor's management of the International Equity Series (the
"Portfolio") of Aon Funds, a Delaware business trust (the "Fund"). Pursuant to
this Agreement and subject to the oversight and supervision by Advisor and the
officers and the Board of Trustees of the Fund, Sub-Advisor shall manage the
investment and reinvestment of the assets of the Portfolio.
2. Sub-Advisor hereby accepts employment by Advisor in
the foregoing capacity and agrees, at its own expense, to render the services
set forth herein and to provide the office space, furnishings, equipment and
personnel required by it to perform such services on the terms and for the
compensation provided in this Agreement.
3. In particular, Sub-Advisor shall furnish continuously
an investment program for the Portfolio and shall determine from time to time
in its discretion the securities and other investments to be purchased or sold
or exchanged and what portions of the Portfolio shall be held in various
securities, cash or other investments. In this connection, Sub-Advisor shall
provide Advisor and the officers and Trustees of the Fund with such reports and
documentation as the latter shall reasonably request regarding Sub-Advisor's
management of the Portfolio's assets.
4. Sub-Advisor shall carry out its responsibilities
under this Agreement in compliance with: (a) the Portfolio's investment
objective, policies and restrictions as set forth in the Fund's current
registration statement, (b) such policies or directives as the Fund's Trustees
may from time to time establish or issue, and (c) applicable law and related
regulations. In particular, Sub-Advisor shall make every effort to ensure that
the Portfolio continuously qualifies as a regulated investment company under
sub-chapter M of the Internal Revenue Code of 1986 (the "Code"). Advisor shall
promptly notify Sub-Advisor of changes to (a) or (b) above and shall notify
Sub-Advisor of changes to (c) above promptly after it becomes aware of such
changes.
<PAGE> 2
5. Sub-Advisor shall take all actions which it considers
necessary to implement the investment policies of the Portfolio, and in
particular, to place all orders for the purchase or sale of securities or other
investments for the Portfolio with brokers or dealers selected by it, and to
that end, Sub-Advisor is authorized as the agent of the Fund to give
instructions to the Fund's custodian as to deliveries of securities or other
investments and payment of cash for the account of the Portfolio. In
connection with the selection of brokers or dealers and the placing of purchase
and sale orders with respect to investments of the Portfolio, Sub-Advisor is
director at all times to seek to obtain best execution and price within the
policy guidelines determined by the Fund's Trustees and set forth in the Fund's
current registration statement.
In addition to seeking the best price and execution,
Sub-Advisor may also take into consideration research and statistical
information and wire and other quotation services provided by brokers and
dealers to Sub-Advisor. Sub-Advisor is also authorized to effect individual
securities transactions at commission rates in excess of the minimum commission
rates available, if it determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or Sub-Advisor's overall responsibilities with respect to the
Portfolio. The policies with respect to brokerage allocation, determined from
time to time by the Fund's Trustees, are those disclosed in the Fund's
currently effective registration statement. Sub-Advisor will periodically
evaluate the statistical data, research and other investment services provided
to it by brokers and dealers. Such services may be used by Sub-Advisor in
connection with the performance of its obligations under this Agreement or in
connection with other advisory or investment operations, including using such
information in managing its own accounts.
6. Sub-Advisor's services under this Agreement are not
exclusive. Sub-Advisor may provide the same or similar services to other
clients provided that the Advisor is not treated less favorably than other
clients of Sub-Advisor. Sub-Advisor shall for all purposes herein be deemed to
be an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Advisor, the Fund or
the Portfolio or otherwise be deemed agents of the Advisor, the Fund or the
Portfolio.
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<PAGE> 3
7. Sub-Advisor is registered with the U.S. Securities
and Exchange Commission under the Investment Advisors Act of 1940, as amended
(the "Act"), and is a member of the Investment Regulatory Organization Limited
("IMRO") of the United Kingdom and is thereby regulated by IMRO in the conduct
of its investment business. The Sub-Advisor shall remain so registered
throughout the term of this Agreement and shall notify Advisor immediately if
Sub-Advisor ceases to be so registered as an investment advisor. IMRO may
require certain disclosures and representations to be made from time to time to
clients that are not included in this Agreement. Any such additional
information will be provided in a separate writing to this Agreement.
8. Subject to: (a) the requirement that Sub-Advisor
seek to obtain best execution and price within the policy guidelines determined
by the Fund's Trustees and set forth in the Fund's current registration
statement, (b) the provisions of the Act, (c) the provisions of the Securities
Exchange Act of 1934, as amended, and (d) other applicable provisions of law,
including, without limitation, the Investment Company Act of 1940, as amended,
Sub-Advisor or an affiliated person of Sub-Advisor may act as broker for the
Portfolio in connection with the purchase or sale of securities or other
investments for the Portfolio. Such brokerage services are not within the
scope of the duties of Sub-Advisor under this Agreement. Subject to the
requirements of applicable law and any procedures adopted by Fund's Trustees,
Sub-Advisor or its affiliated persons may receive brokerage commissions, fees
or other remuneration from the Portfolio or the Fund for such services in
addition to Sub-Advisor's fees for services under this Agreement.
9. For the service rendered, the facilities furnished
and the expenses assumed by Sub-Advisor, Advisor shall pay Sub-Advisor at the
end of each calendar month a fee based on the average daily net asset value of
the Portfolio at the following annual rates:
.50% of the first $100,000,000; .475% of the next $100,000,000 and
.45% of assets in excess of $200,000,000.
Sub-Advisor's fee shall be accrued daily at 1/365th of the applicable annual
rate set forth above. For the purpose of accruing compensation, the net assets
of the Portfolio shall be determined in the manner and on the dates set forth
in the current prospectus of the Fund, and, on days on which the net assets are
not so determined, the net asset value computation to be used shall be as
determined on the next preceding business day on which the
- 3 -
<PAGE> 4
net assets shall have been determined. In the event of termination of this
Agreement, all compensation due through the date of termination will be
calculated on a pro-rated basis through the date of termination and paid within
thirty business days of the date of termination.
During any period when the determination of net asset value is
suspended, the net asset value of the Portfolio as of the last business day
prior to such suspension shall for this purpose be deemed to be the net asset
value at the close of each succeeding business day until it is again
determined.
10. Sub-Advisor hereby undertakes and agrees to maintain,
in the form and for the period required by Rule 31a-2 under the Investment
Company Act of 1940, all records relating to the Portfolio's investments that
are required to be maintained by the Fund pursuant to the requirements of Rule
31a-1 of that Act.
Sub-Advisor agrees that all books and records which it
maintains for the Portfolio or the Fund are the property of the Fund and
further agrees to surrender promptly to the Advisor or the Fund any such books,
records or information upon the Advisor's or the Fund's request. All such
books and records shall be made available, within five business days of a
written request, to the Fund's accountants or auditors during regular business
hours at Sub-Advisor's offices. Advisor and the Fund or either of their
authorized representatives shall have the right to copy any records in the
possession of Sub-Advisor which pertain to the Portfolio or the Fund. Such
books, records, information or reports shall be made available to properly
authorized government representatives consistent with state and federal law
and/or regulations. In the event of the termination of this Agreement, all
such books, records or other information shall be returned to Advisor or the
Fund free from any claim or assertion of rights by Sub-Advisor.
11. Sub-Advisor agrees that it will not disclose or use
any records or information obtained pursuant to this Agreement in any manner
whatsoever except as authorized in this Agreement and that it will keep
confidential any information obtained pursuant to this Agreement and disclose
such information only if Advisor or the Fund has authorized such disclosure, or
if such disclosure is required by federal or state regulatory authorities.
12. In the absence of willful misfeasance, bad faith or
gross negligence on the part of Sub-Advisor or its officers, directors or
employees, or reckless disregard by Sub-Advisor of its duties under this
Agreement, Sub-Advisor shall not be liable to Advisor, the Portfolio, the Fund
or to any shareholder of the
- 4 -
<PAGE> 5
Portfolio for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, except to the extent specified in
Section 36(b) of the Investment Company Act of 1940 concerning loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
services.
13. This Agreement shall not become effective unless and
until it is approved by the Board of Trustees of the Fund, including a majority
of Trustees who are not parties to this Agreement or interested persons of any
such party to this Agreement. This Agreement shall come into full force and
effect on the date which it is so approved. This Agreement shall continue in
effect for two years and shall thereafter continue in effect from year to year
so long as such continuance is specifically approved at least annually by (i)
the Board of Trustees of the Fund, or by the vote of a majority of the
outstanding shares of the series of the Fund representing an interest in the
Portfolio; and (ii) a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
14. This Agreement may be terminated at any time without
the payment of any penalty, by the Fund's Board of Trustees, or by vote of a
majority of the outstanding shares of the series of the Fund representing an
interest in the Portfolio on sixty days' written notice to the Advisor and
Sub-Advisor, or by the Advisor or by the Sub-Advisor, on sixty days written
notice to the other. This Agreement shall automatically terminate in the event
of its assignment or in the event of the termination of the investment advisory
agreement between the Advisor and the Fund regarding the Advisor's management
of the Portfolio.
15. This Agreement may be amended by either party only if
such amendment is specifically approved by (i) the vote of a majority of
outstanding shares of the series of the Fund representing an interest in the
Portfolio, and (ii) a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
16. The terms "assignment," "affiliated persons" and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act of 1940. The term "majority
of the outstanding shares of the series" means the lesser of (a) 67% or more of
the shares of such series present at a meeting if more than 50% of such shares
are present or
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<PAGE> 6
represented by proxy or (b) more than 50% of the shares of such series.
17. This Agreement shall be construed in accordance with
the laws of the State of Illinois, and applicable provisions of the Act and the
Investment Company Act of 1940.
18. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
19. The Sub-Advisor agrees to report to the Fund and its
Trustees any conflicts or potential conflicts of interest between classes of
shares of the Portfolio of which the Sub-Advisor may become aware.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
AON ADVISORS, INC.
ATTEST:
By:
Its:
PERPETUAL PORTFOLIO MANAGEMENT,
LIMITED
ATTEST:
By:
Its:
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<PAGE> 1
Exhibit 99.B6
DISTRIBUTION AGREEMENT
AGREEMENT (the "Agreement") made this ____ day of ___________,
1996, by and between AON FUNDS, a Delaware business trust (the "Fund"), and AON
SECURITIES CORPORATION, a New York 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) Agreement and Declaration of Trust of the Fund (as
amended or supplemented pursuant to Section 1.2
hereof, the "Declaration of Trust");
(b) By-laws of the Fund as in effect on the date hereof;
(c) The most recent post-effective amendment to the
Fund's registration statement on Form N-1A, as filed
with the Securities and Exchange Commission ("SEC")
(as amended or supplemented pursuant to Section 1.2
hereof, the "Registration Statement"); and
(d) The most recent Prospectus and Statement of
Additional Information of the Fund (as amended or
supplemented pursuant to Section 1.2 hereof, the
"Prospectus" and "Statement of Additional
Information").
1.2 The Fund will furnish the Distributor from time to time with
copies of all amendments of or supplements to the items
referred to in Section 1.1 hereof, and any other information
for use in connection with the Distributor's duties hereunder
that the Distributor reasonably requests regarding the Fund or
shares of beneficial interest in any series of the Fund
("Shares"), including the Prospectus and Statement of
Additional Information. The Fund shall not, however, pay the
cost of reproducing the Prospectus and Statement of Additional
Information for use by the Distributor as sales material. The
Distributor shall pay the costs of any other Fund documents
(such as semi-annual reports) used as sales material.
1.3 The Fund represents to the Distributor that the Prospectus and
Statement of Additional Information contained in the
Registration Statement, or any amendments thereto, as of their
respective effective
<PAGE> 2
dates, contain (or, in the case of any amendment, will
contain) all statements and information which are required to
be stated therein by the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940 (the "1940 Act")
and in all respects conform (or, in the case of any amendment,
will conform) to the requirements thereof, and neither the
Prospectus nor the Statement of Additional Information
includes or will include any untrue statement of a material
fact or omits or will omit to state any material fact required
to be stated therein, or necessary to make the statements
therein not misleading; provided, however, that the foregoing
representations shall not apply to information contained in or
omitted from the Prospectus and/or Statement of Information in
reliance upon, and in conformity with, written information
furnished by the Distributor specifically for use in the
preparation thereof.
1.4 The Fund shall advise the Distributor promptly of (a) any
action of the SEC or any authorities of any State or
Territory, of which it may be advised, affecting registration
or qualification of the Fund or the Shares, or the right to
offer the Shares for sale, and (b) the happening of any event
which makes untrue any statement in the Registration Statement
or Prospectus or Statement of Additional Information or which
requires the making of any change in the Registration
Statement or Prospectus or Statement of Additional Information
in order to make the statements therein not misleading.
1.5 The Distributor shall furnish to the Fund reports as to the
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 the Distributor hereby agree that the Distributor
will act as the principal underwriter of the Shares in
accordance with the Registration Statement and Prospectus. In
connection therewith, it is specifically agreed that:
(a) Subject to the provisions of Section 9.1 of this
Agreement, the Distributor will use its best efforts
to solicit orders and accompanying funds for the
purchase of Class C Shares of each Series (as
hereinafter defined) of the Fund ("Class C Shares"),
and will promptly remit orders or funds
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<PAGE> 3
for the purchase of any Shares to or on behalf of the
Fund. However, the Distributor shall not be
obligated to solicit any minimum number of orders in
connection with its duties hereunder;
(b) the Distributor will have authority to receive orders
for the purchase of Shares and to receive funds on
the Fund's behalf; however, no order for the purchase
of Shares will be binding upon the Fund until
accepted by or on behalf of the Fund;
(c) the Distributor may undertake such advertising and
promotion as it deems reasonable in connection with
its duties hereunder;
(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 Prospectus or Statement
of Additional Information, as in effect from time to
time) other than such sales literature, information
or representations as the Fund may authorize in
writing;
(e) the Fund reserves the right to decline to accept any
orders for, or to 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 shall
be suspended under any of the provisions of the 1933
Act, or if and so long as a current prospectus, as
required by Section 5(b) of such Act, is not on file
with the SEC, or redemption rights of shareholders
have been suspended under any of the circumstances
specified in Section 22(e) of the 1940 Act, provided
nothing in this Section 2(f) will affect the Fund's
obligation to redeem its Shares from any shareholder
in accordance with the provisions of the Declaration
of Trust, By-Laws or Prospectus or Statement of
Additional Information, and provided further 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.
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<PAGE> 4
3. DISTRIBUTION FEES.
3.1 (a) The Fund shall pay to the Distributor, after the end
of each calendar month, a fee for advertising,
marketing and distributing Class C Shares of each
series of the Fund set forth on Exhibit A hereto, as
such Exhibit may be revised from time to time (each,
a "Series"), accrued daily and based upon the average
daily net asset value of Class C Shares of each such
Series for the month (or portion thereof during which
this Agreement is in effect), at the annual rate set
forth opposite such Series' name on Exhibit A hereto.
The Distributor may pay one or more financial
institutions, securities dealers and other industry
professionals, such as investment advisers,
accountants and estate planning firms, a fee in
respect of these services, but in doing so the
Distributor will act only on its own behalf as
principal. The Distributor shall determine the
amounts to be paid to third parties and the basis on
which such payments will be made.
(b) For the purpose of determining the fees payable under
this Agreement, the value of the net assets of Class
C Shares of a Series shall be computed in the manner
specified in the Prospectus and Statement of
Additional Information for the computation of net
asset value.
(c) The Distributor shall provide the Board of Trustees
of the Fund, at least quarterly, with a written
report of all amounts expended with respect to each
Series pursuant to this Agreement. The report shall
state the purpose for which the amounts were
expended.
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") and, to
the extent necessary to distribute the Shares, shall be duly
registered or otherwise qualified under the securities laws of
any state or other jurisdiction. The Distributor shall be
responsible for the fulfillment of its obligations under this
Agreement, by itself and by its agents, in continued
compliance with the NASD's Rules of Fair Practice, and all
rules and
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<PAGE> 5
regulations made or adopted pursuant to the 1933 Act or the
1940 Act by the SEC.
In addition, 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 shall
be maintained, preserved, and submitted to the SEC (and any
other required supervisory authority, including the NASD) in
accordance with the 1934 Act, and rules and regulations
thereunder, including (but not limited to) Rules 17a-3, 17a-4
and 17a- 5. In addition, 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 shall be the property of
the Distributor, and shall 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. The Distributor
agrees to send to purchasers of Shares all required
confirmations of 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 shall from time to time be
reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Shares for
sale under the Blue Sky Laws of any state, if such
qualification is required, 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 therewith and for qualifying itself under
applicable Blue Sky Laws and any costs of printing and mailing
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 and all of its expenses relating to the sale and
distribution of the Shares.
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. Likewise, the Fund may
accept orders for purchases of its
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<PAGE> 6
Shares that it receives directly from prospective purchasers.
7. LIABILITIES.
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 of its officers, directors,
agents, employees, controlling persons, shareholders, or 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 (each of the foregoing, a
"Distributor Affiliate")), neither the Distributor nor any
Distributor Affiliate shall be subject to liability to the
Fund or any Series thereof or to any shareholder of the Fund
or any Series thereof 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 Series thereof or any
shareholder of the Fund or any Series thereof 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.
8. DUAL INTERESTS.
8.1 It is understood by the parties to this Agreement that any of
the shareholders, trustees, 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, or any organization in which the
Distributor or any affiliated person of the Distributor may
have an interest; and that the Distributor, and any such
affiliated person or any such organization may have an
interest in the Fund or any Series; and that the existence of
any such dual interest shall not affect the validity hereof,
or of any transactions hereunder, except as otherwise provided
by specific provisions of applicable law including the 1940
Act.
9. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
9.1 This Agreement shall not become effective with respect to
Shares of any Series (and the Distributor shall not serve or
act as the principal underwriter with respect to
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<PAGE> 7
Shares within any Series) unless and until this Agreement is
approved by the Fund's Board of Trustees, including a majority
of Trustees 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 or in the operation of the Plan of Distribution of
the Fund (the "Distribution Plan") or any related agreement
and who are defined as Rule 12b-1 Trustees in the Distribution
Plan (hereinafter "the Rule 12b-1 Trustees"). To approve this
Agreement, votes by Trustees must be cast in person at a
meeting called for the purpose of voting on such approval, and
this Agreement will remain in force with respect to Shares
within a Series for a period of one year from the date of the
approval of the Agreement with respect to such Shares by the
Board of Trustees and the Rule 12b-1 Trustees and shall
continue in effect from year to year thereafter only so long
as such continuance shall be specifically approved at least
annually by the Board of Trustees and the Rule 12b-1 Trustees.
Votes to continue this Agreement must be cast in person at a
meeting called for the purpose of voting on such continuance.
This Agreement may, on sixty days' written notice, be
terminated at any time with respect to Shares of any Series,
without the payment of any penalty, by the Board of Trustees
of the Fund, by the Rule 12b-1 Trustees, by a vote of at least
a majority of the outstanding Shares of such Series (or, with
respect to Class C Shares of any Series, by a vote of at least
a majority of the outstanding Class C Shares of such Series),
or by the Distributor. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 9, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"interested person" and "assignment", and "majority of
outstanding voting securities") shall be applied.
This Agreement shall not be amended with respect to Class C
Shares of any Series without specific approval of such
amendment by (i) the vote of a majority of the outstanding
voting securities constituting Class C Shares of such Series
or (ii) the vote of a majority of the Fund's Trustees,
including a majority of Rule 12b-1 Trustees, cast in person at
a meeting called for the purpose of voting on such approval.
10. MISCELLANEOUS.
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<PAGE> 8
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 the sole
responsibility of 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 State of Illinois; 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 The Distributor hereby agrees (a) to furnish the Fund, upon
its request, such information as reasonably may be necessary
for the Fund to evaluate the services provided by the
Distributor in relation to the Fund's Plan under Rule 18f-3
under the 1940 Act (the "Plan"); (b) to maintain compliance
standards as to when each Class of Shares may appropriately be
sold to particular investors; (c) to require all persons who
are under its control and supervision and who are engaged in
selling Shares to conform to such standards; and (d) to report
to the Fund and the Trustees any conflicts or potential
conflicts of interest between Classes of Shares of any Series
of which the Distributor may become aware.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunder duly
authorized.
ATTEST: AON FUNDS
_________________________ ______________________________
Secretary President
ATTEST: AON SECURITIES CORPORATION
_________________________ ______________________________
Secretary President
- 9 -
<PAGE> 10
EXHIBIT A
<TABLE>
<CAPTION>
Name of Series1 Fee
-------------- ---
<S> <C>
Asset Allocation Series .25%
S&P 500 Index Series .25%
Government Securities Series .25%
REIT Index Series .25%
International Equity Series .25%
Money Market Series .10%
</TABLE>
____________________
1 Class C shares only.
<PAGE> 1
EXHIBIT 99.B8(a)
CUSTODIAN AGREEMENT
THIS AGREEMENT (the "Agreement") made on ________________, 1996
between Aon Funds, a Delaware business trust (hereinafter called the "Trust"),
and FIRSTAR TRUST COMPANY, a corporation organized under the laws of the State
of Wisconsin (hereinafter called the "Custodian").
W I T N E S S E T H :
WHEREAS, the Trust is organized as an open-end management investment
company currently consisting of two separate investment portfolios (the
"Portfolios" or each a "Portfolio"), the Money Market Portfolio and the Asset
Allocation Portfolio;
WHEREAS, the Trust desires that the securities and cash of the
Portfolios be hereafter held and administered by the Custodian pursuant to the
terms of this Agreement; and
WHEREAS, the Custodian is a bank qualified to act as a Custodian under
the Investment Company Act of 1940 (the "1940 Act");
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian agree as follows:
The Trust agrees to and does appoint the Custodian as custodian for
the Portfolio, subject to the provisions of this Agreement, and further agrees
to deliver to the Custodian a copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian to act in the capacities covered by this
Agreement and authorizing the signing of this Agreement. The Trust agrees to
deliver to the Custodian all securities and cash of the Portfolios owned by it,
and all payments of the income, payments of principal or capital distributions
of the Portfolios received by it, with respect to all securities of the
Portfolios owned by the Trust from time to time, and the cash consideration for
those classes of shares of the Trust as may be issued from time to time in
connection with the Portfolios. The Custodian shall not be responsible for any
property of the Trust held or received by the Trust and not delivered to the
Custodian.
The Custodian hereby accepts appointment as the custodian of the
Portfolios and agrees to perform the duties thereof as hereinafter set forth.
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets, and any other
instrument authorized for investment by the Portfolios.
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<PAGE> 2
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Trust by any two of the
President, a Vice President, the Secretary, and the Treasurer of the Trust, or
any other persons duly authorized to sign by the Board of Trustees.
The word "Board" shall mean Board of Trustees of AON Funds.
2. NAMES, TITLES, AND SIGNATURES OF THE TRUST'S OFFICERS
An officer of the Trust will certify to the Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Trustees, together with any changes which may occur from time to time.
3. RECEIPT AND SAFEKEEPING OF SECURITIES
Except as provided below, the Custodian shall keep safely the
securities of the Portfolios, and, on behalf of the Trust, shall from time to
time receive delivery of securities for safekeeping. The Custodian shall keep
all securities of each Portfolio physically segregated at all times from those
of any other person. The Custodian shall maintain records of all receipts,
deliveries and locations of such securities, together with a current inventory
thereof. With respect to securities held by any Subcustodian appointed
pursuant to Section 11 hereof, the Custodian may rely upon certificates from
such Subcustodian as to the holdings of such Subcustodian, it being understood
that such reliance no way relieves the Custodian of its responsibilities under
this Agreement.
Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of
its duties hereunder to deposit and/or maintain securities owned by the Trust
in a clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the Book-Entry System authorized by the U.S.
Department of the Treasury and certain federal agencies (collectively,
"Securities Systems"), provided that (I) the Custodian and such Securities
System meet all applicable federal and state laws and regulations, including
rules of the Federal Reserve Board, and the 1940 Act and rules thereunder, and
(ii) the Board of Trustees of the Trust approves by resolution the use of such
Securities System.
Upon receipt of proper instructions, the Custodian shall establish and maintain
a segregated account(s) for and on behalf of each Portfolio into which
account(s) may be transferred cash and/or securities.
4. RECEIPT AND DISBURSEMENT OF MONEY
A. The Custodian shall open and maintain a separate account or
accounts in the name of each Portfolio, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement. The Custodian shall
hold in such account or accounts, subject to the provisions hereof, all monies
received by it from or for the account of the Portfolios. Cash received by the
Custodian from or for the account of the Portfolios and maintained by the Trust
in a bank account
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<PAGE> 3
established and used in accordance with Rule 17f-3 under the 1940 Act shall not
be subject to the terms of this Agreement. The Custodian shall make payments
of cash to, or for the account of, the Portfolios from such cash only:
(a) for the purchase of securities for a Portfolio upon
delivery of such securities to the Custodian, or, in the case
of securities not customarily delivered to the purchaser, to
the agent of the Custodian, registered in the name of the
Portfolio or of the nominee of the Custodian referred to in
Section 7 or in proper form for transfer, or in the case of
repurchase agreements entered into between the Trust on behalf
of a Portfolio and any bank or other party, upon delivery of
the receipt evidencing purchase by the Portfolio of securities
owned by such bank or other party, along with written evidence
of the agreement by such bank or other party to repurchase such
securities from the Trust;
(b) for the purchase or redemption of shares of the capital
stock of the Portfolio upon delivery thereof to the Custodian,
or upon proper instructions from the Trust;
(c) for the payment of interest, dividends, taxes, investment
advisor's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and
custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Portfolio
held by or to be delivered to the Custodian;
(e) the payment to any bank of interest on, or any portion of the
principal of, any loan made by such bank to the Portfolio;
(f) the payment to any person, firm, corporation, or trust which
has borrowed the Portfolio's securities of the amount deposited
with the Custodian as collateral for the borrowing upon
delivery of such securities to the Custodian, registered (if
registerable) in the name of the Portfolio or the name of the
nominee of the Custodian, or in proper form for transfer; or
(g) for other proper corporate purposes certified by
resolution of the Board of Trustees of the Trust.
Before making any such payment, the Custodian shall receive (and may
rely upon) and officers' certificate requesting such payment and stating that
it is for a purpose permitted under the terms of items (a), (b), (c), (d), (e),
(f), and (g) of this Subsection A. Such officers' certificate shall include
information regarding the name of the issuer and description of the security;
the number of units of delivery; net purchase price, or the principal amount
purchased and any accrued interest due; the trade date; the settlement date;
the purchase price per unit, and the brokerage commission, taxes and other
expenses payable in connection with the purchase, as applicable; the total
amount payable upon such purchase; and the name of the person from whom, or the
broker or dealer through whom,
3
<PAGE> 4
the purchase was made.
With respect to (a) above, in the case of repurchase agreements entered
into with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to receipt of the
safekeeping receipt and repurchase agreement, provided that such documents are
received prior to the close of business on the same day. With respect to (f)
above, the Custodian shall make payment to the borrower of securities loaned by
the Portfolio of part of the collateral deposited with the Custodian only upon;
(I) receiving appropriate oral or facsimile instructions stating that the
market value of the securities loaned has declined and specifying the amount to
be paid by the Custodian without receipt or return of any of the securities
loaned by the Portfolio, (ii) and an appropriate officers' certificate is
received by the Custodian within two business days thereafter.
Also, in respect of item (g), the officers' certificate shall specify
the amount of such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be made. Notwithstanding the
foregoing, an officers' certificate need not precede the disbursement of cash
for the purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Trust issues appropriate oral or facsimile
instructions to the Custodian and an appropriate officers' certificate is
received by the Custodian within two business days thereafter.
B. The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by the
Custodian for the account of the Portfolios.
C. The Custodian shall, upon receipt of proper instructions, make
federal funds available to the Portfolios as of specified times agreed upon
from time to time by the Trust and the Custodian in the amount of checks
received in payment for shares of the Portfolios which are deposited into the
Portfolio's account.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
The Custodian shall have sole power to release or deliver any securities
of the Portfolios held by the Custodian pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver securities held by it
hereunder only:
(a) for sales of such securities for the account of a Portfolio
upon receipt by the Custodian of payment therefor;
(b) when such securities mature or are called, redeemed, retired or
otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
4
<PAGE> 5
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of effecting a loan of a Portfolio's securities
to any person, firm, corporation or trust upon receipt by the
Custodian of cash or cash equivalent collateral at least equal
to the market value of the securities loaned;
(i) to any bank for the purpose of collateralizing the obligation
of the Portfolio to repay any monies borrowed by the Trust from
the bank; provided, however, that the Custodian may, at the
option of such lending bank, keep such collateral in its
possession, subject to the rights of such bank given it by
virtue of any promissory note or agreement executed and
delivered by the Trust to such bank;
(j) for the purpose of redeeming in kind shares of capital stock of
the Trust upon delivery thereof to the Custodian; or
(k) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a), (b),
(d), (e), (f), (g), (h), and (j), securities or cash receivable in exchange
therefor shall be deliverable to the Custodian.
Before making any such transfer, exchange or delivery, the Custodian
shall receive (and may rely upon) an officer's certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), (h), (I), or (j),
of this Section 5, in each case specifying the name of the issuer and the
description of the security; the number of units or principal amount sold and
any accrued interest due; the date when the securities sold were purchased by
the Portfolio or other information identifying the securities sold and to be
delivered; the trade date; the settlement date; the sales price per unit, and
any brokerage commission, taxes or other expenses payable in connection with
such sale; the total amount to be received by the Portfolio upon such sale; and
the name of the broker or dealer through whom, or person to whom, sale was
made.
Also, with respect to item (k), upon receipt of an officer's certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officer's certificate need not
precede any
5
<PAGE> 6
such transfer, exchange or delivery of a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Trust issues appropriate oral
or facsimile instructions to the Custodian and an appropriate officers'
certificate is received by the Custodian within two business days thereafter.
With respect to (h) above, the officers' certificate shall state the
market value of the securities to be loaned and the corresponding amount of
collateral to be deposited with the Custodian; thereafter, the Custodian shall
require the borrower of securities loaned by the Portfolio to deposit
additional collateral with the Custodian only upon, (i) receiving appropriate
oral or facsimile instructions from the Trust stating that the market value of
the securities loaned has increased and specifying the amount of the increase
and, (ii) an appropriate officers' certificate is received by the Custodian
within two business days thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until the Custodian receives an officers' certificate to the
contrary, the Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the Portfolios, which call for
payment upon presentation and hold the cash received by it upon such payment
for the account of the Portfolios; (b) present for payment all securities which
may mature or be called, redeemed, retired or otherwise become payable on the
date such securities become payable; (c) collect interest and cash dividends
received, with notice to the Trust, for the account of the Portfolios; (d) hold
for the account of the Portfolios, all stock, dividends, rights, and similar
securities issued with respect to any securities held by it hereunder; and (e)
execute, as agent on behalf of the Portfolios, all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax
Regulations of the United States Treasury Department or under the laws of any
state now or hereafter in effect, inserting the Portfolio's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate, the Custodian
shall register all securities, except such as are in bearer form, in the name
of a registered nominee of the Custodian as defined in the Internal Revenue
Code, and any Regulations of the Treasury Department issued thereunder or in
any provision of any subsequent federal tax law exemption such transaction from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Custodian shall use its best
efforts to the end that the specific securities held by it hereunder shall be
at all times identifiable in its records.
The Trust shall from time to time furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any securities
which it may hold for the account of the Portfolios and which may from time to
time be registered in the name of the Portfolios.
6
<PAGE> 7
8. VOTING AND OTHER ACTION
Neither the Custodian nor any nominee of the Custodian shall vote any of
the securities held hereunder by or for the account of the Portfolios, except
in accordance with the instructions contained in an officers' certificate. The
Custodian shall deliver, or cause to be executed and delivered, to the
Portfolios all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Portfolios), but
without indicating the manner in which such proxies are to be voted.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Portfolios shall pay, or reimburse the Custodian from time to time
for any transfer taxes payable upon transfers of securities made hereunder, and
for all other necessary and proper disbursements and expenses made or incurred
by the Custodian in the performance of this Agreement.
The Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any state,
to exempt from taxation any exemptible transfers and/or deliveries of any such
securities.
10. CONCERNING CUSTODIAN
The Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
The Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of
the Board, and may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred by or assessed against it or its nominee in
connection with the performance of this Agreement, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account of the Trust
for such items upon reasonable prior notice to the Trust. In the event of any
advance of cash for any purpose made by the Custodian resulting from orders or
instructions of the Trust, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this agreement, except such
as may arise from its or its nominee's own negligent action, negligent failure
to act or willful misconduct, any property at any time held for the account of
the Trust shall be security therefor.
7
<PAGE> 8
11. SUBCUSTODIANS
The Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of a Portfolio's assets, so long
as any such bank or trust company is a bank or trust company organized under
the laws of any state of the United States, having an aggregate capital,
surplus and undivided profit, as shown by its last published report, of not
less than Two Million Dollars ($2,000,000), and satisfies the qualifications
for custodians in the 1940 Act and regulations thereunder.
If the Custodian utilizes the services of a Subcustodian, the Custodian
shall remain fully liable and responsible for any losses caused to the
Portfolios by the Subcustodian as fully as if the Custodian was directly
responsible for any such losses under the terms of the Custodian Agreement.
Notwithstanding anything contained herein, if the Portfolios require the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Trust agrees to indemnify and hold harmless the Custodian from
all claims, expenses and liabilities incurred or assessed against it in
connection with the use of such Subcustodian in regard to the Portfolio's
assets, except as may arise from its own negligent action, negligent failure to
act, or willful misconduct.
The Subcustodian may utilize the Securities Systems, in accordance with
the provisions of this agreement.
12. REPORTS BY CUSTODIAN
The Custodian shall monthly (or more frequently, upon request of the
Trust) furnish the Trust with a statement summarizing all transactions and
entries for the account of the Portfolios. The Custodian shall furnish to the
Trust, at the end of every month, a list of the Portfolio Securities showing
the adjusted average cost value of each issue. The Custodian shall furnish to
the Trust, at the close of each quarter of the Trust's fiscal year, a list
showing cost values of the securities held by it for the Portfolios, certified
by a duly authorized officer of the Custodian. The books and records of the
Custodian pertaining to its actions under this Agreement shall be open to
inspection and audit at reasonable times by officers of, and auditors employed
by, the Trust.
13. ADDITIONAL SERIES.
In the event that the Trust establishes one or more additional series of
shares or class(es) of shares within series with respect to which it desires to
have Custodian enter custody services under the terms hereof, it shall so
notify Custodian in writing, and thereafter, such series or class(es) will be
subject to the terms and conditions of this Agreement, and shall be maintained
and accounted for by Custodian on a discrete basis.
14. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Trust, or by the Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to the
Custodian at P.O. Box 2054, Milwaukee,
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<PAGE> 9
Wisconsin 53201, or to the Trust at 123 North Wacker Drive, Chicago, Illinois
60606, as the case may be. Upon any termination of this Agreement, the
Custodian shall deliver all assets of the Portfolios then held by it as
directed in an officers' certificate accompanied by a copy of a resolution of
the Board of Trustees or of the Portfolio's shareholders, signed by an officer
of the Trust and certified by its secretary, designating a successor to the
Custodian or otherwise directing the disposition of its assets in a manner
permitted by the 1940 Act; provided, however, that if the Custodian is not
reasonably satisfied, that such disposition is permitted by the 1940 Act, or
pending appointment of a successor to the Custodian or a vote of the
shareholders of the Portfolios to dissolve or to function without a custodian
of its cash, securities and other property, the Custodian shall not deliver
cash, securities or other property of the Portfolios to the Trust, but may
deliver them to a bank or trust company of its own selection, that has an
aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) and is
qualified under the 1940 Act to serve as custodian of the Portfolio's assets,
to serve as the Custodian for the Portfolios. The assets of the Trust shall be
held by such bank under terms similar to those of this Agreement. The
Custodian shall not be required to make any such delivery or payment to a
successor until full payment shall have been made by the Trust of all
liabilities constituting a charge on or against the properties then held by the
Custodian or on or against the Custodian, and until full payment shall have
been made to the Custodian of all its fees, compensation, costs, and expenses,
subject to the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by the Custodian without the consent
of the Trust, authorized or approved by a resolution of its Board of Trustees.
15. RECORDS
The Custodian will create, maintain and retain all records relating to
its activities and obligations under this Agreement in such manner as will meet
the obligations of the Trust under the 1940 Act, and particularly Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. The Custodian agrees that all
such records are the property of the Trust and further agrees to make any such
records available to the Trust upon request and to preserve such records for
the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940,
as amended. In the event of termination of this Agreement, records maintained
by the Custodian in connection with the performance of its duties under this
Agreement will be delivered to the Trust.
16. CONFIDENTIALITY
The Custodian agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the trust and its
shareholders. Such records and information shall not be disclosed to any other
party, except after prior notification to and approval in writing by the Trust,
which approval shall not be unreasonably withheld and may not be withheld where
the Custodian may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by duly
constituted authorities.
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<PAGE> 10
17. MISCELLANEOUS
A. This Agreement is executed and delivered in the State of
Wisconsin and shall be governed by the laws of the State of
Wisconsin.
B. All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
C. No provision of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized
and executed by both parties.
D. 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.
E. This Agreement shall become effective on the day, month, and
year first above shown.
F. This Agreement may be executed simultaneously or two or more
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
18. SHAREHOLDER LIABILITY
This Agreement is executed by or on behalf of the Trust and the
obligations hereunder are not binding upon any of the Trustees, offices or
shareholders of the Trust individually but are binding only upon the Trust and
the assets and property of the respective Portfolios.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly
authorized.
Attest: FIRSTAR TRUST COMPANY
_______________________________ By:_________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: AON FUNDS
_______________________________ By:_________________________________
ASSISTANT SECRETARY PRESIDENT
11
<PAGE> 1
EXHIBIT 99.B8(b)
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective _______________________, 19__, and is
between THE CHASE MANHATTAN BANK, N.A. (the "Bank") and Firstar Trust Company
(the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes, mortgages
or other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing any
other rights or interests therein and other similar property whether
certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the Bank or its
Subcustodian for the account of the Customer, which cash shall not be subject to
withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired: and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by the Bank and the Customer.
<PAGE> 2
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank to
hold Assets in the Accounts in accounts which the Bank has established with one
or more of its branches or Subcustodians. The Bank and Subcustodians are
authorized to hold any of the Securities in their account with any securities
depository in which they participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of any
amendment to Schedule A. Upon request by the Customer, the Bank will identify
the name, address and principal place of business of any Subcustodian of the
Customer's Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit of
customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be
subject only to the instructions of the Bank or its agent. Any Securities
held in a securities depository for the account of a Subcustodian will be
subject only to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for
holding its customer's assets shall provide that such assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of such Subcustodian except for safe custody or administration, and that
the beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration. The
foregoing shall not apply to the extent of any special agreement or arrangement
made by the Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the
Deposit Account upon receipt of Instructions which include all information
required by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its discretion,
may advance the Customer such excess amount which shall be deemed a loan
payable on demand, bearing interest at the rate customarily charged by the Bank
on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or
at any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary course
of business or (ii) that such amount was incorrectly credited. If the Customer
does not promptly return any amount upon such notification, the Bank shall be
entitled, upon oral or written notification to the Customer, to reverse such
credit by debiting the Deposit Account for the amount previously credited. The
Bank or its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may
act for the Customer upon Instructions after consultation with the Customer.
2
<PAGE> 3
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the
Bank or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of the Custody Account may be made
in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instruction acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on
a contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may ________ credits or debits made to the Accounts in
its discretion if the released transaction fails to _____ within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipients thereof, the Bank may reverse the credits and debits
of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed
or retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for
definitive Securities.
(d) Appoint brokers and agents for any transaction involving
Securities, including, without limitation, affiliates of the Bank or any
Subcustodians.
(e) Income statements to the Customer, at times mutually agreed
upon, identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer sends the Bank a written exception or objection to
any bank statement within sixty (60) days of receipt, the Customer shall be
deemed to have approved such statement. In such event, or where the Customer
has otherwise approved any such statement, the Bank shall, to the extent
permitted by law, be released, relieved and discharged with respect to all
matters set forth in such statement of reasonably implied therefrom as though
it had been settled by the decree of a court of competent jurisdiction in an
action where the Customer and all persons having or claiming an interest in the
Customer or the Customer's Accounts were parties.
3
<PAGE> 4
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay in
the actual receipt of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank reviews information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it deems,
in good faith, to be appropriate in which case it shall be held harmless for
any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and where
bearer Securities are involved, proxies will be delivered in accordance with
Instructions.
9. Nominees
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the
Customer cause any such Securities to cease to be registered in the name of any
such nominee and to be registered in the name of the Customer. In the event
that any Securities registered in a nominee name are called for partial
redemption by the issuer, the Bank may allot the called portion to the
respective beneficial holders of such class of security in any manner the Bank
deems to be fair and equitable. The Customer agrees to hold the Bank,
Subcustodians, and their respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record holder of Securities
in the Custody Account.
10. Authorized Persons
As used in this Agreement, the term "Authorized Person" mean employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an Authorized
Person.
11. Instructions
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
4
<PAGE> 5
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold
the Bank harmless for the failure of Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions with
respect to the Custody Account. The Customer shall be responsible for
safeguarding any identification codes or other security devices which the
Bank shall make available to the Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in Instructions
which are consistent with the provisions of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The Bank shall
be liable to the Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be liable to
the Customer if the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or its
Subcustodian to utilize reasonable care, the Bank shall be liable to the
Customer only to the extent of the Customer's direct damages, to be determined
based on the market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or
for the solvency of any broker or agent which it or a subcustodian appoints
dealers ]and appointment was made negligent or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its obligations
under this Agreement, the Bank may rely on the genuineness of any document which
it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the advice
of counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or other governmental
actions; regulations.
<PAGE> 6
of the banking or securities industry; currency restrictions, devaluations
or fractuations; and market conditions which prevent the orderly execution
of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or raidation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than as
provided in Section 5(c) of this Agreement;
(iv) evaluation or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant to this
Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations
against Instructions issued to an statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank
may have a potential conflict of duty or interest including the fact that the
Bank or any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities, act as a
lender to the issuer of Securities, act in the same transaction as agent for
more than one customer, have a material interest in the issue of Securities, or
earn profits from any of the activities listed herein.
13. FEES AND EXPENSES
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange through
its subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign facility exchange made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then
6
<PAGE> 7
current foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply to
such transaction.
(b) Certificate of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination of
books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking to
permit the Customer's independent public accountants reasonable access to the
records of any Subcustodian which has physical possession of any Assets as may
be required in connection with the examination of the Customer's books and
records.
(d) Governing Law: Successors and Assigns. This Agreement shall
be governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement: Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
--- Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
--- Commission ("SEC") rules and regulations.
Neither of the above.
---
This Agreement consists extensively of this document together with
Schedule A, Exhibits I - _____ and the following Rider(s) [Check applicable
rider(s)]:
ERISA
---
X MUTUAL FUND
---
X SPECIAL TERMS AND CONDITIONS
---
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provision of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise, or the
exercise of any other power or right. No waiver by a party
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<PAGE> 8
of any provision of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the waiver is
to be enforced.
(h) Notices. All notices under this Agreement shall be effective
when actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the following
addresses or such other addresses as may subsequently be given to the other
party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
--------------------
Customer: Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
Attention: Joe Redwine
or telex:
--------------------
(i) Termination. This Agreement may be terminated by the Customer
or the Bank by giving ninety (90) days written notice to the other, provided
that such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within ninety (90) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owned to it under
Section 13. If within ninety (90) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver the
Assets, the Bank, at its election, may deliver the Assets to a bank or trust
company doing business in the States of New York to be held and disposed of
pursuant to the provisions of this Agreement, or to Authorized Persons, or may
continue to hold the Assets until Instructions are provided to the Bank.
CUSTOMER
By:
--------------------------------------------
Joe Redwine Title: First Vice President
THE CHASE MANHATTAN BANK, N.A.
By:
--------------------------------------------
Robert G. Train Title: Vice President
8
<PAGE> 9
STATE OF Wisconsin )
: ss.
COUNTY OF Milwaukee )
On this 21st day of April, 1995, before me personally came Joe Redwine, to
me known, who being by me duly sworn, did depose and say that he/she resides in
Mil., Wisconsin at 615 E. Michigan St. that he/she is First Vice President of
Firstar Trust Co., the entity described in and which executed the foregoing
instrument; that he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of said entity,
and that he/she signed his/her name thereto by like order.
/s/ Joe Redwine
------------------
Joe Redwine
Sworn to before me this 21
--
day of April, 1995.
----- --
/s/ Notary
- -----------------
Notary
<PAGE> 10
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 17th day of April, 1995 before me personally came Robert G.
Redwine, to me known, who being by me duly sworn, did depose and say that
he/she resides in Redbank, N.J. at 21 Delaware Avenue; that he/she
is a Vice-President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing investment; that
he/she knows the seal of said corporation, that the seal affixed to said
instruments is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that he/she signed his/her name
thereto by like order.
---------------
Sworn to before me this 17th
----
day of April 1995
----- --
/s/ Notary
- ---------------
Notary
<PAGE> 11
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Firstar Trust Company, effective________
Customer represents that its' clients have represented to it that the
Assets being placed in the Bank's custody are subject to the Investment
Company Act of 1940 (the Act), as the same may be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or under
the authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall have advised and obtained its' clients consent to
the fact that its' clients shall be solely responsible to assure that the
maintenance of Assets under this Agreement complies with such rules,
regulations, interpretations or exemptive order promulgated by or under the
authority of the Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this Agreement
shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository, which are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution or trust
company incorporated or organized under the laws of a country other than the
United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof) (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof); (iii) a
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<PAGE> 12
banking institution or trust company incorporated or organized under
the laws of a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding
company that is incorporated or organized under the laws of a country
other than the United States which has such other qualifications as
shall be specified in Instructions and approved by the Bank; or (iv)
any other entity that shall have been so qualified by exemptive order,
rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the
central system for handling securities or equivalent book-entries in
that country, or (ii) a transnational system for the central handling
of securities or equivalent book-entries.
The Customer represents that its' clients have represented to it that its'
clients Board of Directors has approved each of the Subcustodian listed in
Schedule A to this Agreement and the terms of the subcustody agreements between
the Bank and each Subcustodian, which are attached as Exhibits I through of
Schedule A, and further represents that its' clients have represented to it that
its' clients Board has determined that the use of each Subcustodian and the
terms of each subcustody agreement are consistent with the best interests of the
Fund(s) and its (their) shareholders. The Bank will supply the Customer and its'
clients with any amendment to Schedule A for approval. The Customer has
supplied or will obtain from its' clients and supply the Bank with certified
copies of its' clients Board of Directors resolution(s) with respect to the
foregoing prior to placing Assets with any Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made
pursuant to Section 5 and 6 of this Agreement may be made only for the
purposes listed below. Instructions must specify the purpose for which
any transaction is to be made and Customer shall be solely responsible
to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth
in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
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<PAGE> 13
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustments;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, is
Subcustodian or the Customer's transfer agent of such shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer;
(i) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due
other than to make proper request for such return;
13
<PAGE> 14
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 14(j).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the Customer
such reports (or portions thereof) of the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar reports as it may
reasonably request with respect to each Subcustodian and securities depository
holding the Customer's assets.
14
<PAGE> 15
GLOBAL CUSTODY AGREEMENT
WITH Firstar Trust Company
-------------------------
DATE
-------------------------
SPECIAL TERMS AND CONDITIONS RIDER
THIS AGREEMENT COVERS THE FOLLOWING CLIENTS OF FIRSTAR TRUST COMPANY:
1) AON Funds - International Equity Portfolio
<PAGE> 1
EXHIBIT 99.B8(c)
SUBCUSTODIAN AGREEMENT
The attached document is the form of agreement used by The Chase Manhattan
Bank, N.A. to appoint a bank to act as Chase's agent within our Global Custody
network. This agreement is executed both by Chase and the appointed agent bank
prior to the establishment of custodial services in any country. Each agent
bank within our network has executed an agreement in substantially the same
form as the one enclosed herein. Any differences contained within a specific
contract relate only to form and not to content.
<PAGE> 2
MODEL SUBCUSTODIAN AGREEMENT
Dear Sirs:
This will confirm to you that The Chase Manhattan Bank, N.A. ("Chase") has been
appointed to act as Trustee, Custodian or Subcustodian of securities and monies
on behalf of certain of its customers including, without limitation, investment
companies subject to the Investment Company Act of 1940, as amended and
qualified employee benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended.
Chase has been authorized to utilize the services of other banks, financial
institutions and securities depositories located in countries or jurisdictions
in which the principal trading markets for any shares, bonds, debentures or any
other securities (hereinafter collectively called "Securities") of its
customers are located or in which any Securities of its customers are to be
presented for payment or acquired, and for the purpose of holding cash and
cash equivalents. Chase wishes to utilize the services of your bank "Bank") as
Chase's agent within....for such purposes and hereby establishes with Bank a
Special Custody Account which Bank understands and agrees will be used
exclusively for Securities and other assets of Chase's customers ("Account")
and not for Chase's own interest.
The services Bank will provide to Chase and the manner in which such services
will be performed will be as set forth below in this letter, which may be
mutually amended in writing from time to time by Bank and Chase. To the extent
inconsistent with this letter, as so amended, Bank's rules and conditions
regarding accounts generally or custody accounts specifically shall not apply.
1. The account shall be used to hold, acquire, transfer or otherwise care
for, on behalf of Chase as Trustee, Custodian or Subcustodian as
aforesaid and the customers of Chase and not for Chase's own interest,
Securities and such cash and cash equivalents as are transferred to Bank
or as are received in payment of any transfer of or as payment on, or
interest on or dividend from, any such Securities (hereinafter
collectively called "Cash"), and beneficial ownership of the Securities
and Cash in the Account shall be freely transferable without payment of
money or value other than for safe custody and administration. All
transactions involving the Securities and Cash in the Account shall be
executed solely in accordance with Chase's Instructions as that term is
defined in Section 10, except solely in accordance with Chase's
Instructions as that term is defined in Section 10, except that until
Bank receives Instructions from Chase to the contrary, Bank will:
a) present for payment all Securities held in the Account which are
called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon
presentation and hold the cash received in the Account pursuant to
this Agreement:
b) in respect of Securities held in the Account, execute in the name
of Chase such ownership and other certificates as may be required
to obtain payments in respect thereof; and
c) exchange interim receipts or temporary Securities held in the
Account for definitive Securities.
<PAGE> 3
(d) where any Securities held in any securities depository are called
for a partial redemption by the issuer of such Securities, allot
in Bank's sole discretion the called portion to the respective
holders in any manner deemed to be fair and equitable in Bank's
judgment.
Whenever pursuant to this Agreement or for any purpose relating hereto
anything whatsoever may or is required to be done or given by Chase, it
shall be done or given, as the case may be, by and for Chase by such
officer or officers of Chase or other person or persons as the governing
body shall specify from time to time. Any specification by the
governing body shall specify from time to time. Any such specification
by the governing body shall by resolution of which a copy certified by
the President, or a Vice President, and the seal attested by the
Secretary or any Assistant Secretary of Chase shall be furnished to
Bank. Bank shall be conclusively entitled to rely upon the
identification of such persons as the holders of those offices so
specified in any such resolution, absent Instructions to the contrary.
Chase shall furnish to Bank specimens of the signatures of all such
officers and persons so specified in any such resolutions received by
Bank in force at the time of the receipt by Bank of such Instructions,
and shall not be charged with any responsibility respecting the
application of monies out in accordance therewith.
Bank shall not be liable for any act or omission in respect of any
Instructions so given except in the case of wilful default, negligence,
fraud, bad faith, wilful misconduct, or reckless disregard of duties on
the part of the Bank. Bank in executing all Instructions will take
relevant action in accordance with accepted industry practice.
2. The Account shall not be subject to any right, charge, security
interest, lien or claim or any kind (hereinafter collectively called
"Claims") in favor of Bank or any other institution with whom assets in
the Account may be maintained as provided in this Agreement or any
creditor of Bank or of such other institution, including a receiver or
trustee in bankruptcy, except to the extent of Bank's or such other
institution's right to compensation or reimbursement with regard to
the Account's administration in accordance with the terms of this
Agreement. Bank shall provide Chase with prompt notice of any attempt
by any party to assert any Claim against the Account and shall take all
actions to protect the Account from such Claim until Chase has had a
reasonable time to respond to such notice.
3. The ownership of the assets of the Account, whether Securities, Cash or
both, and whether any such assets are held by Bank or in a securities
depository or clearing agency as hereinafter authorized, shall be
clearly recorded on Bank's own interest, and, to the extent securities
are physically held in the Account, such Securities shall also be
physically segregated from the general assets of Bank, the assets of
Chase in its individual capacity and the assets of Bank's other
customers.
In order to facilitate the settlement of transactions, Bank may, with
the approval of Chase, which shall not be unreasonably withheld,
maintain all or any part of the Securities in the Account with a
securities depository or clearing agency which is incorporated or
organized under the law of a country other than the United States of
America and is supervised or regulated by a government agency or
regulatory authority in the foreign jurisdiction having authority over
such depositories or agencies, and which operates (i) the central
system for handling of securities or equivalent book entries, provided,
however, that while so
<PAGE> 4
maintained such Securities shall be subject only to the directions of
Bank, and that Bank's duties, obligations and responsibilities with
regard to such Securities shall be the same as if such Securities were
held by Bank.
Securities which are eligible for deposit in a depository may be
maintained with the depository in an account for Bank's customers.
Securities which are not deposited in a depository will be held in the
following forms:
a) Securities issued only in bearer form shall be held in bearer form.
b) Securities issued only in registered form shall be registered in the
name of Bank, or in the name of Bank's nominee, unless alternate
instructions are furnished by Chase.
c) Securities issued in both bearer and registered form which are
freely interchangeable without penalty, shall be registered in the
name of Bank, or in the name of Bank's nominee, if received by Bank
in registered form, or shall be held in bearer form if received by
Bank in bearer form, unless alternate instructions are furnished by
Chase.
4. Subject to the provisions of Sections 8 hereof:
a) Bank shall be responsible for complying with all provisions of the
law of ............., or any other law, applicable to Bank in
connection with its duties hereunder including (but not limited to)
the payment of all transfer or similar taxes and compliance with
any currency restrictions and securities laws;
b) All collections of funds or other property paid or distributed in
respect of Securities held in the Account shall be made at the risk
of the Account; and
c) Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by its Custody Division of any payment,
redemption or other transaction regarding Securities held in the
Account in respect of which Bank has agreed to take action as
provided in Section 1 hereof.
5. Subject to applicable law, Bank will permit independent public
accountants for Chase and customers of Chase reasonable access to its
books and records as they pertain to the Account in connection with such
accountants' examination of the books and records of Account.
6. Bank will either periodically or upon Chase's request supply Chase with
such statements regarding the Account as Chase may request and Bank is
able to supply, including an identification of, and the location of, any
person having physical possession of the Securities in the Account, and
the name and address of the governmental agency or other regulatory
authority that supervises or regulates Bank. In addition, Bank will
furnish Chase periodically with advises and/or notifications of any
transfers of such securities.
7. Bank agrees that in the event of any loss of Securities or Cash in the
Account, Bank will use its best efforts to ascertain the circumstances
relating to such loss and promptly report the same to Chase.
<PAGE> 5
8. Bank will indemnify Chase for any loss or liability to Chase's customers
and other loss or liability incurred by Chase, individually or as Trustee,
Custodian or Subcustodian as aforesaid, with respect to the Account
(including, but not limited to, Chase's legal fees and expenses and any
other legal fees and expenses for which Chase is liable, and any loss or
liability in connection with a claim settled by agreement between Chase and
a customer, which agreement is accepted by Bank) to the extent that such
loss or liability arises from negligence, fraud, bad faith, wilful
misconduct or reckless disregard of duties on the part of Bank. Chase will
indemnify Bank for any loss or liability Bank incurs from any action taken
or omitted to be taken by Bank with respect to the Account, except such
losses or liability as results from the negligence, fraud, bad faith,
wilful misconduct or reckless disregard of duties on the part of Bank.
9. Bank acknowledges that under U.S. regulatory requirements Bank must be a
regulated entity and must have a certain minimum shareholders' equity in
order to be used by Chase to provide the services contemplated in this
Agreement. Bank represents and warrants that it (i) is a banking
institution organized under the law of , (ii) is regulated as a
banking institution by , which is the agency of the Government of
responsible for the regulation of Banks and (iii) on and after the
debate hereof or such later date shall be specified in Instructions, has
shareholders' equity in excess of two hundred thirty million U.S. dollars
(U.S. $230,000,000), or such lesser amount as shall be specified in any
order of the United States Securities and Exchange Commission applicable to
Bank, or the equivalent thereof in currency determined at current
rates. For purposes of this Section, shareholders' equity of the Bank
shall mean such shareholders' equity as would be shown on any financial
statement of the Bank if such financial statement were prepared according
to United States generally accepted accounting principles. Bank will
immediately notify Chase in writing or by other authorized means of any
development or occurrence (and the circumstances related thereto) which
could render Bank unable to make the foregoing representation at any date.
Upon such notification Chase may terminate this Agreement immediately
without prior notice to Bank.
10. As used in this Agreement, the term "Instructions" means instructions of
Chase received by Bank via telephone, or in writing, including but not
limited to telex, TWX, facsimile transmission, bank wire or other
teleprocess or electronic instruction system which Bank believes in good
faith to have been given by Chase or which are transmitted with proper
testing or authentication pursuant to terms and conditions which Chase may
specify. Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until canceled or superseded. Bank shall
safeguard any testkeys, identification codes or other security devices
which Chase shall make available to it. Either party may electronically
record any Instructions given by telephone, and any other telephone
discussions, with respect to the Account. Instructions by telephone shall
be confirmed by telex or such other communication as may be mutually
acceptable.
11. Chase agrees to pay Bank such compensation, including reimbursement of
reasonable expenses (if not charged to the Account), as may be mutually
agreed upon from time to time between Bank and Chase.
<PAGE> 6
12. Either Bank or Chase may terminate this Agreement by 60 days written notice
to the other party, provided that any such notice, whether given by Chase
or by Bank shall be followed within 60 days by Instructions specifying the
names of the persons to whom Bank shall deliver the Securities in the
Account and to whom the cash in the Account shall be paid. If within 60
days following the giving of such notice of termination Bank does not
receive such Instructions, Bank shall continue to hold such Securities and
cash subject to this Agreement until such Instructions are given. The
obligations of the parties under Section 4(a), 8 and 11 of this Agreement
shall survive the termination of this Agreement.
13. Notices with respect to termination, specification of officers and other
persons and terms and conditions for Instructions shall be in writing, and
delivered by mail, postage prepaid, to the following addresses (or to such
other address as either party hereto may from time to time designate by
notice duly given in accordance with this paragraph):
To Bank at:
To Chase at:
The Manager
Global Custody Division
Chase Manhattan Bank NA
Woolgate House
Coleman Street
London EC2P 2HD
14. This Agreement shall not be assignable by either party but shall bind any
successor interest of Chase and Bank, respectively.
15. This Agreement shall be governed by and construed in accordance
with Law.
If the foregoing correctly sets forth the understanding between Bank and Chase
with respect to Bank's services in connection with the Account, kindly sign and
return to us the enclosed additional copy of this letter.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
By___________________________________
The foregoing is hereby agreed
to this ____ day of __________
By____________________________
<PAGE> 1
Exhibit 99.B9(a)
ADMINISTRATION AGREEMENT
This Agreement (hereinafter "Agreement"), made this ____ day
of __________, 1996 by and between Aon Funds, a Delaware business trust
(hereinafter the "Fund"), and Aon Securities Corporation, a New York
corporation (hereinafter "Administrator").
1. FURNISHING DOCUMENTS.
1.1 The Fund has furnished the Administrator with copies of each
of the following:
(a) Agreement and Declaration of Trust 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, as filed with the Securities and Exchange
Commission ("SEC"); and
(d) The most recent Prospectus and Statement of
Additional Information of the Fund.
1.2 The Fund will furnish the Administrator from time to time with
copies of all amendments of or supplements to the foregoing,
if any. The Administrator will be entitled to rely on all
documents so furnished by the Fund.
2. ADMINISTRATIVE SERVICES.
2.1 The Administrator hereby agrees to supervise all aspects of
the Fund's operations (except those performed by the Fund's
investment adviser, Aon Advisors, Inc.), in accordance with
the documents referred in Section 1.1, and to assume the
obligations set forth herein for the compensation hereinafter
provided.
2.2 The Administrator shall:
(a) monitor all services and personnel it supplies in
order to ensure the effective day-to-day corporate
and legal administration of the Fund;
(b) supply, or provide persons to perform, internal
auditing and internal legal services;
(c) supply stationery and office supplies;
<PAGE> 2
(d) prepare reports to shareholders and the Board of
Trustees of the Fund;
(e) prepare, or provide persons to prepare, tax returns;
(f) prepare reports to and filings with the SEC and State
Blue Sky authorities;
(g) 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 (exclusive of such
office space and facilities provided under Section
2(i) below):
(h) supply, or provide persons to perform, clerical,
accounting, bookkeeping, administrative and other
similar services (exclusive of those services
relating to and to be performed under any contract
for custodial, transfer agency, dividend and
accounting services entered into by the Fund with a
third party); and
(i) 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 Fund, and provide such
facilities and equipment as may be necessary for such
persons to carry out their duties under this Section
2(i), 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.
2.3 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.
2.4 The Administrator agrees that all records which it maintains
for the Fund are the Fund's property and that the
Administrator will surrender them to the Fund, its independent
auditors, the Board of Trustees of the Fund, or as may be
required by any governmental agency having jurisdiction over
the Fund, promptly upon written request. The provisions of
this Section 2.4 shall survive any termination of this
Agreement.
- 2 -
<PAGE> 3
3. ADMINISTRATION FEE.
3.1 The Fund shall pay to the Administrator, after the end of each
calendar month, as compensation for its services rendered
pursuant to Section 2(a) through (i) of this Agreement, an
administration fee accrued daily and based upon the net asset
values of each of the Fund's series which the Fund has
heretofore created or may hereafter determine to create from
time to time (the "Portfolios"), for the month (or portion
thereof during which this Agreement is in effect) at an annual
rate of 0.05% (5/100ths of 1%).
3.2 If on any day there is no determination of the net asset value
of any Portfolio of the Fund as a result of a suspension of
the right of redemption of Fund shares or for any other
reason, then for the purposes of this Section 3, the net asset
value of that Portfolio at last determined will be deemed to
be the net asset value of that Portfolio for such day.
4. EXPENSES.
4.1 The Administrator will bear all expenses in connection with
the performance of its services under this Agreement.
4.2 The Fund will assume and pay all other expenses incurred in
the operation of the Fund, including:
(a) taxes and fees payable by the Fund to federal, state
or other governmental agencies;
(b) brokerage fees and commissions, and issue and
transfer taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees
and expenses of Trustees who are not directors,
officers or employees of Aon Advisors, Inc. ("Aon
Advisors"), the Administrator, or of any affiliated
persons (other than a registered investment company)
of Aon Advisors or the Administrator;
(e) registration, qualification, filing and other fees in
connection with securities registration requirements
of federal and state regulatory authorities;
- 3 -
<PAGE> 4
(f) the charges and expenses for custodial, paying agent,
transfer agent, administration, 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 Trustees of the
Fund;
(j) costs of maintenance of the Fund's existence as a
Delaware business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and
delivering registration statements, shareholders'
reports and proxy statements;
(n) costs and fees associated with delivering reports to
and making 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
Fund's prospectuses and statements of additional
information to existing shareholders.
5. SIMILAR ACTIVITIES FOR OTHERS.
5.1 The services of the Administrator under this Agreement are not
to be deemed exclusive and the Administrator will be free to
render similar services to others so long as its services
under this Agreement are not impaired.
- 4 -
<PAGE> 5
6. DUAL INTERESTS.
6.1 It is understood by both parties to this Agreement that any of
the shareholders, Trustees, officers, employees and agents of
the Fund may be a director, officer, employee or agent of, or
be otherwise interested in, the Administrator, any affiliated
person of the Administrator, or any organization in which the
Administrator or any affiliated person of the Administrator
may have an interest; and that the Administrator, and any such
affiliated person or any such organization may have an
interest in the Fund or any Series thereof.
6.2 It is also understood by both parties to this Agreement that
the existence of any such dual interest shall not affect the
validity of any transactions hereunder, except as otherwise
provided by specific provisions of applicable law, including
the Investment Company Act of 1940, as amended (the "1940
Act").
7. LIABILITY OF THE ADMINISTRATOR.
7.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on
the part of the Administrator (or of its officers, directors,
agents, employees, controlling persons, shareholders, or any
other person or entity affiliated with the Administrator or
retained by it to perform or assist in the performance of its
obligations under this Agreement (each of the foregoing, an
"Administrator Affiliate")), neither the Administrator nor any
Administrator Affiliates shall 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, to the extent applicable, concerning
loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
- 5 -
<PAGE> 6
8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
8.1 This Agreement shall not become effective (and the
Administrator shall not serve or act as the Fund's
administrator) as to any Portfolio unless and until this
Agreement is approved by the Fund's Board of Trustees,
including a majority of Trustees who are not parties to this
Agreement or interested persons of any such party to this
Agreement, or by a vote of a majority of the outstanding
voting securities of such Portfolio.
8.2 If approved as provided above, this Agreement shall continue
in effect with respect to a Portfolio for two years and from
year to year thereafter, but only so long as such continuance
is specifically approved at least annually by either:
(a) the vote of a majority of the outstanding voting
securities of the Portfolio or
(b) the vote of a majority of the Fund's Board of
Trustees, including a majority of Trustees who are
not parties to this Agreement and who are not
interested persons of the Fund or of the
Administrator, cast in person at a meeting called for
the purpose of voting on such approval.
8.3 This Agreement may, on sixty days' written notice, be
terminated as to any Portfolio, at any time, without the
payment of any penalty, by the Board of Trustees of the Fund,
by a vote of a majority of the outstanding voting securities
of such Portfolio, or by the Administrator.
8.4 This Agreement shall automatically terminate as to any
Portfolio in the event of its assignment.
8.5 In interpreting the provisions of this Section 8, the
definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person" and
"assignment", and a "majority of the outstanding voting
securities") shall be applied.
8.6 This Agreement shall not be amended as to any
Portfolio without specific approval of such amendment by:
(a) the vote of a majority of the outstanding voting
securities of the Portfolio, or
(b) the vote of a majority of the Fund's Board of
Trustees, including a majority of Trustees who are
not parties to this Agreement and who are not
interested persons of the Fund or of the
- 6 -
<PAGE> 7
Administrator, cast in person at a meeting called
for the purpose of voting on such approval.
9. MISCELLANEOUS.
9.1 The Administrator may from time to time employ or associate
with any person or person 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
Administrator, and no obligation with respect to providing
compensation, or otherwise, will be incurred by, or on behalf
of, the Fund or any Portfolio with respect to such persons.
In addition, the Fund understands that the persons employed by
the Administrator 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 Administrator's right or the right of any of the
Administrator's affiliates to engage in and devote time and
attention to other businesses or to render other services of
whatever kind or nature.
9.2 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.
9.3 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.
9.4 It is intended by the parties that this Agreement be governed
by the law of the State of Illinois; 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.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, thereunto duly
authorized.
ATTEST: AON FUNDS
_________________________ ______________________________
SECRETARY PRESIDENT
ATTEST: AON SECURITIES CORPORATION
_________________________ ______________________________
SECRETARY PRESIDENT
- 8 -
<PAGE> 1
Exhibit 99.B9(b)
ADMINISTRATION AGREEMENT
This Agreement (hereinafter "Agreement"), made this 1st day of
July, 1996 by and among Aon Asset Management Fund, Inc., a Virginia corporation
(hereinafter the "Fund"), Aon Advisors, Inc., a Virginia corporation
(hereinafter "Aon Advisors"), and Aon Securities Corporation, a New York
corporation (hereinafter "Administrator"), respectively.
1. FURNISHING DOCUMENTS.
1.1 The Fund has furnished the Administrator 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, as filed with the Securities and Exchange
Commission ("SEC"); and
(d) The most recent prospectus of the Fund.
1.2 The Fund will furnish the Administrator from time to time with
copies of all amendments of or supplements to the foregoing,
if any. The Administrator will be entitled to rely on all
documents so furnished by the Fund.
2. ADMINISTRATIVE SERVICES.
2.1 The Administrative hereby agrees to supervise all aspects of
the Fund's operations (except those performed by the Fund's
investment adviser, Aon Advisors, Inc.), in accordance with
the documents referred in Section 1.1, and to assume the
obligations set forth herein for the compensation hereinafter
provided.
2.2 The Administrator shall:
(a) monitor all services and personnel it supplies in
order to ensure the effective day-to-day corporate
and legal administration of the Fund;
(b) supply, or provide persons to perform, internal
auditing and internal legal services;
(c) supply stationery and office supplies;
<PAGE> 2
(d) prepare reports to shareholders and the Board of
Directors of the Fund
(e) prepare, or provide persons to prepare, tax returns;
(f) prepare reports to and filings with the SEC and State
Blue Sky authorities;
(g) 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 (exclusive of such
office space and facilities provided under Section
2(i) below:
(h) supply, or provide persons to perform, 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
(i) 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 Fund, and to provide such
facilities and equipment as may be necessary for such
persons to carry out their duties under this Section
2(i), 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.
2.3 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.
2.4 The Administrator agrees that all records which it maintains
for the Fund are the Fund's property and that the
Administrator will surrender them to the Fund, its independent
auditors, the Board of Directors of the Fund, or as may be
required by any governmental agency having jurisdiction over
the Fund, promptly upon written request. The provisions of
this Section 2.4 shall survive any termination of this
Agreement.
- 2 -
<PAGE> 3
3. ADMINISTRATION FEE.
3.1 Aon Advisors (and not the Fund) shall pay to the
Administrator, after the end of each calendar month, as
compensation for its services rendered pursuant to Section
2(a) through (i) of this Agreement, an administration fee
accrued daily. This fee is based upon the values placed on
the net assets of the Fund's Money Market Portfolio and
Flexible Asset Allocation Portfolio, and of any other
Portfolios the Fund may determine to create from time to time,
each day the net asset value is determined throughout the
month at an annual rate of 0.05% (5/100ths of 1%).
3.2 Aon Advisors will also pay a further administrative fee in the
amount of $25,000 payable annually to the Administrator.
3.3 If there is no determination of the net asset value of any
Portfolio of the Fund as a result of a suspension of the right
of redemption of Fund shares, then for the purposes of this
Section 3, the value of the net assets of that Portfolio at
last determined will be deemed to be the value of the net
assets of that Portfolio for each day that such suspension
continues.
4. EXPENSES.
4.1 The Administrator will bear all expenses in connection with
the performance of its services under this Agreement.
4.2 The Fund will assume and pay all other expenses incurred in
the operation of the Fund, including:
(a) taxes and fees payable by the Fund to Federal, State
or other governmental agencies;
(b) brokerage fees and commissions, and issue and
transfer taxes;
(c) interest;
(d) Board of Directors retainer and meeting attendance
fees and expenses of directors of the Fund who are
not directors, officers or employees of Aon Advisors,
the Administrator, or of any affiliated persons
(other than a registered investment company) of Aon
Advisors or the Administrator;
- 3 -
<PAGE> 4
(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;
and
(q) costs of preparing, printing and delivering the
Fund's prospectuses to existing shareholders.
5. SIMILAR ACTIVITIES FOR OTHERS.
5.1 The services of the Administrator under this Agreement are not
to be deemed exclusive and the Administrator will be free to
render similar services to others so long as its services
under this Agreement are not impaired.
- 4 -
<PAGE> 5
6. DUAL INTERESTS.
6.1 It is understood by the parties to this Agreement 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 Administrator, any affiliated
person of the Administrator, any organization in which the
Administrator may have an interest, or any organization which
may have an interest in the Administrator and any such
affiliated person or organization may have an interest in the
Fund.
6.2 It is also understood by the parties to this Agreement that
the existence of any such dual interest shall not affect the
validity of any transactions, except as otherwise provided in
the Articles of Incorporation of the Fund and of the
Administrator or by specific provisions of applicable law,
including the Investment Company Act of 1940, as amended (the
"1940 Act").
7. LIABILITY OF THE ADMINISTRATOR.
7.1 In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties on
the part of the Administrator (or its officers, directors,
agents, employees, controlling persons, shareholders, and any
other person or entity affiliated with the Administrator or
retained by it to perform or assist in the performance of its
obligations under this Agreement), neither the Administrator
nor any of its officers, directors, employees or agents shall
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 in connection 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, to the
extent applicable, concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for
services.
- 5 -
<PAGE> 6
8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT.
8.1 This Agreement shall not become effective (and the
Administrator shall not serve or act as the Fund's
administrator) as to any Portfolio 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, or by a majority of the shareholders of such
Portfolio.
8.2 If approved by the vote of a majority of the Fund's directors
who are not parties to this Agreement or interested persons of
any such party to this Agreement or by a majority of the
outstanding voting securities of each Portfolio, this
Agreement shall continue in effect from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually by either:
(a) the vote of a majority of the outstanding voting
securities of the Portfolio or
(b) 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 Administrator, cast in person
at a meeting called for the purpose of voting on such
approval.
8.3 This Agreement may, on sixty days' written notice, be
terminated as to any Portfolio, 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, by Aon Advisors or by the Administrator.
8.4 This Agreement shall automatically terminate as to any
Portfolio in the event of its assignment.
8.5 In interpreting the provisions of this Section 8, the
definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person" and
"assignment", and the majority of outstanding ("voting
securities") shall be applied.
8.6 This Agreement shall not be amended as to any Portfolio
without specific approval of such amendment by:
(a) the vote of a majority of the outstanding voting
securities of the Portfolio, or
- 6 -
<PAGE> 7
(b) 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 Administrator, cast in person
at a meeting called for the purpose of voting on such
approval.
9. MISCELLANEOUS.
9.1 The Administrator may from time to time employ or associate
with any person or person 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
Administrator, and no obligation with respect to providing
compensation, or otherwise, will be incurred by, or on behalf
of, the Fund or any Portfolio with respect to such persons.
In addition, the Fund understands that the persons employed by
the Administrator 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 Administrator's right or the right of any of the
Administrator's affiliates to engage in and devote time and
attention to other businesses or to render other services of
whatever kind or nature.
9.2 The captions in this Agreement are included for convenience of
reference only and in no way define or default any of the
provisions hereof or otherwise affect their construction or
effect.
9.3 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.
9.4 It is intended by the parties that this Agreement be governed
by the law of the State of Illinois; 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.
- 7 -
<PAGE> 8
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.
_________________________ ______________________________
SECRETARY PRESIDENT
ATTEST: AON ADVISORS, INC.
_________________________ ______________________________
SECRETARY PRESIDENT
ATTEST: AON SECURITIES CORPORATION
_________________________ ______________________________
SECRETARY PRESIDENT
- 8 -
<PAGE> 1
EXHIBIT 99.B9(c)
ADMINISTRATION AGREEMENT
This Agreement (hereinafter "Agreement"), made this 2nd day of April, 1996
by and between Aon Asset Management Fund, Inc., a Virginia corporation
(hereinafter the "Fund"), Aon Advisors, Inc., a Virginia corporation
(hereinafter "Aon Advisors"), and Forth Financial Securities Corporation, a
Virginia corporation (hereinafter "Administrator"), respectively.
1. Furnishing Documents.
1.1 The Fund has furnished the Administrator 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, as
filed with the Securities and Exchange Commission ("SEC"); and
(d) The most recent prospectus of the Fund.
1.2 The Fund will furnish the Administrator from time to time with copies
of all amendments of or supplements to the foregoing, if any. The Administrator
will be entitled to rely on all such furnishings.
2. Administrative Services.
2.1 The Administrator hereby agrees to supervise all aspects of the
Fund's operations (except those performed by the Fund's investment adviser, Aon
Advisors, Inc.), in accordance with the documents referred to in Section 1.1,
and assume the obligations set forth for the compensation provided.
2.2 The Administrator shall:
(a) monitor all services and personnel it supplies in order to
ensure the effective day-to-day corporate and legal
administration of the Fund;
(b) supply, or provide persons to perform, internal auditing and
internal legal services;
<PAGE> 2
(c) supply stationery and office supplies;
(d) prepare reports to shareholders and the Board of Directors of the Fund;
(e) prepare, or provide persons to prepare, tax returns;
(f) prepare reports to and filings with the SEC and State Blue Sky
authorities;
(g) 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
(exclusive of such office space and facilities provided under Section
2(i) below);
(h) supply, or provide persons to perform, 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
(i) 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 Fund, and provide
such facilities and equipment as may be necessary for such persons to
carry out their duties under this section 2(i), 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.
2.3 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.
2.4 The Administrator agrees that all records which it maintains for the
Fund are the Fund's property and that the Administrator will surrender them to
the Fund, its independent auditors, the Board of Directors of the Fund, or as
may be required by any governmental agency having jurisdiction over the Fund,
promptly upon written request. The provisions of this paragraph shall survive
any termination of this Agreement.
3. Administration Fee.
3.1 Aon Advisors (and not the Fund) shall pay to the Administrator, after
the end of each calendar month, as compensation for its services rendered
pursuant to Section 2(a) through (i) of this Agreement, an administration fee
accrued daily. This fee is based upon the values placed on the net assets of
the Fund's Money Market Portfolio and Flexible Asset Allocation Portfolio, and
of any other Portfolios the Fund may determine to create from time to time, each
day the net asset value is determined throughout the month at an annual rate of
0.05% (5/100th of 1%).
3.2 Aon Advisors will also pay a further administrative fee in the amount
of $25,000 payable annually to the Administrator.
3.3 If there is no determination of the net asset value of any Portfolio of
the Fund as a result of a suspension of the right of redemption of Fund shares,
then for the purposes of this
<PAGE> 3
Section 3, the value of the net assets of that Portfolio as last determined
will be deemed to be the value of the net assets of that Portfolio for each day
that such suspension continues.
4. Expenses.
4.1 The Administrator will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 The Fund will assume and pay all other expenses incurred in the
operation of the Fund, including:
(a) taxes and fees payable by the Fund 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 Aon Advisors, the Administrator, or of any
affiliated person (other than a registered investment company)
of Aon Advisors or the Administrator;
(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;
3
<PAGE> 4
(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 Fund's
prospectuses to existing shareholders.
5. Similar Activities For Others.
5.1 The services of the Administrator under this Agreement are not to be
deemed exclusive and the Administrator will be free to render similar services
to others so long as its services under this Agreement are not impaired.
6. Dual Interests.
6.1 It is understood by the parties to this Agreement 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
Administrator, any affiliated person of the Administrator, any organization in
which the Administrator may have an interest, or any organization which may have
an interest in the Administrator and any such affiliated person or organization
may have an interest in the Fund.
6.2 It is also understood by the parties to this Agreement that the
existence of any such dual interest shall not affect the validity of any
transactions, except as otherwise provided in the Articles of Incorporation of
the Fund and of the Administrator or by specific provisions of applicable law,
including the Investment Company Act of 1940 (the "1940 Act").
7. Liability of the Administrator.
7.1 In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Administrator (or
its officers, directors, agents, employees, controlling person, shareholders,
and any other person or entity affiliated with the Administrator or retained by
it to perform or assist in the performance of its obligations under this
Agreement), neither the Administrator nor any of its officers, directors,
employees or agents shall 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 connection with, rendering services
hereunder, including without limitation any error or 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, to the extent applicable,
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services.
8. Duration, Termination and Amendment of this Agreement.
8.1 This Agreement shall not become effective (and the Administrator
shall not serve or act as the Fund's administrator) as to any Portfolio 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 or by a majority of the shareholders
of such Portfolio.
4
<PAGE> 5
8.2 If approved by the vote of a majority of the Fund's directors who are
not parties to this Agreement or interested persons of any such party to this
Agreement or by a majority of the outstanding voting securities of each
Portfolio, this Agreement shall continue in effect from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by either:
(a) the vote of a majority of the outstanding voting securities of the
Portfolio, or
(b) 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 Administrator, cast in person
at a meeting called for the purpose of voting on such approval.
8.3 This Agreement may, on sixty days' written notice, be terminated as to
any Portfolio, 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, by Aon Advisors or by the Administrator.
8.4 This Agreement shall automatically terminate as to any Portfolio in the
event of its assignment or if it shall not be approved by a majority of the
Fund's directors who are not parties to this Agreement or interested persons of
any such party to this Agreement or by a majority of the outstanding voting
securities of that Portfolio.
8.5 In interpreting the provisions of this Section 8, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"interested person" and "assignment", and the majority of outstanding "voting
securities") shall be applied.
8.6 This Agreement shall not be amended as to any Portfolio without
specific approval of such amendment by:
(a) the vote of a majority of the outstanding voting securities of the
Portfolio, or
(b) 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 Administrator, cast in person
at a meeting called for the purpose of voting on such approval.
9. Miscellaneous.
9.1 The Administrator 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 Administrator, and no obligation with respect to providing
compensation, or otherwise, will be incurred by, or on behalf of, the Fund or
any Portfolio with respect to such persons. In addition, the Fund understands
that the persons employed by the Administrator 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 Administrator's
right or the right of any of the
5
<PAGE> 6
Administrator's affiliates to engage in and devote time and attention to other
businesses or to render other services of whatever kind or nature.
9.2 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.
9.3 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.
9.4 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.
Marianne O'Doherty John J. Palmer
- --------------------------------- ---------------------------------
ASST. SECRETARY PRESIDENT
ATTEST: AON ADVISORS, INC.
- --------------------------------- ----------------------------------
SECRETARY PRESIDENT
ATTEST: FORTH FINANCIAL SECURITIES CORP.
Marianne O'Doherty John J. Palmer
- --------------------------------- ----------------------------------
ASST. SECRETARY PRESIDENT
6
<PAGE> 1
EXHIBIT 99.B9(d)
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on ________________, 1996 by
and between Aon Funds, a Delaware business trust (hereinafter referred to as
the "Trust") and Firstar Trust Company, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as the "Agent").
W I T N E S S E T H:
WHEREAS, the Trust is an open-ended management investment company which
is registered under the Investment Company Act of 1940; and currently consists
of two separate investment portfolios (the "Portfolios" or each a "Portfolio"),
the Money Market Portfolio and the Asset Allocation Portfolio, each of which
offers two classes of shares; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
WHEREAS, the Trust desires to appoint the Agent as its transfer agent to
perform transfer agency and dividend disbursing functions; and
WHEREAS, the Agent is willing to perform such functions upon the terms
and conditions set forth below;
NOW, THEREFORE, the Trust and the Agent do mutually promise and agree as
follows:
1. FURNISHING DOCUMENTS
The Trust has furnished or will furnish the Agent with copies of each of
the following:
(a) Agreement and Declaration of Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-1A, as
filed with the Securities and Exchange Commission ("SEC"); and
(d) The most recent prospectuses of the Trust's Portfolios.
The Trust will furnish the Agent from time to time with copies of all
amendments of or supplements to the foregoing, if any. The Agent will be
entitled to rely on all such furnishings.
1
<PAGE> 2
2. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt
delivery, where appropriate, of payment and supporting documentation
to the Trust's custodian;
B. Process purchase orders and issue the appropriate number of
shares with such shares being held in the appropriate shareholder
account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Trust's custodian;
D. Pay monies (upon receipt from the Trust's custodian) in
accordance with the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between Portfolios within the same family of
Portfolios;
G. Prepare and transmit payments for dividends and distributions
declared by each of the Portfolios;
H. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
I. Record the issuance of shares of the Portfolios and maintain,
pursuant to Section Rule 17Ad-10(e), a record of the total number of
shares of the Portfolio which are authorized, issued and outstanding;,
and (ii) subscription and redemption journals;
J. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate, and certify the tabulation of proxies;
K. Mail shareholder reports and prospectuses to current
shareholders;
L. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders. The
2
<PAGE> 3
Agent shall withhold such sums, if any, as are required to be
withheld under applicable Federal and State income tax laws, rules and
regulations;
M. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Trust, and answer correspondence from shareholders
relating to their share accounts and such other correspondence as the
Agent and the Trust may from time to time agree upon; and
N. Provide a Blue Sky System which will enable the Trust to monitor the
total number of shares of each Portfolio sold in each state. In
addition, the Trust shall identify to the Agent in writing those
transactions and assets to be treated as exempt from the Blue Sky
reporting to the Trust for each state. The responsibility of the
Agent for the Fund's Blue Sky state registration status is solely
limited to the initial compliance by the Trust and the reporting of
such transactions to the Trust.
The Agent shall perform all of the above services as provided in and in
conformity with the disclosure appearing in the Trust's current registration
statement and prospectuses, as amended or supplemented from time to time.
3. COMPENSATION
The Portfolios agree to pay the Agent for performance of the duties
listed in this Agreement; the fees and out-of-pocket expenses include, but are
not limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists, and
proxy expenses.
The Agent shall be compensated for providing the services set forth
in this Agreement in accordance with the Fee Schedule attached hereto as
Exhibit A and as mutually agreed upon and amended from time to time.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
4. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Trust that:
A. It is a trust company duly organized, existing and in good standing
under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of Wisconsin;
3
<PAGE> 4
C. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to
authorize it to enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
5. REPRESENTATIONS OF THE TRUST
The Trust represents and warrants to the Agent that:
A. The Trust registered as an open-ended, diversified management
investment company currently consisting of two separate investment
portfolios (the "Portfolios" or each a "Portfolio"), under the
Investment Company Act of 1940;
B. The Trust is a Trust organized and existing as a business trust
under the laws of Delaware;
C. The Trust is empowered under applicable laws and by its
Agreement and Declaration of Trust and bylaws to enter into and
perform this Agreement;
D. All necessary proceedings required by the Agreement and
Declaration of Trust's, Bylaws and applicable law have been taken to
authorize it to enter into and perform this Agreement;
E. The Trust will comply in all material respects with all
applicable requirements of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, the Investment
Company Act of 1940, as amended, and any applicable laws, rules and
regulations of state or federal governmental authorities having
jurisdiction; and
F. A registration statement under the Securities Act of 1933 will
become effective before shares of the Trust are offered to the public
and will remain effective, and appropriate state securities law
filings have been made and will continue to be made, with respect to
all shares of the Trust being offered for sale.
6. COVENANTS OF TRUST AND AGENT
The Trust shall furnish the Agent a certified copy of the resolution
of the Board of Trustees of the Trust authorizing the appointment of the Agent
and the execution of this Agreement. The Trust shall provide to the Agent a
copy of the Charter, Bylaws of the Trust, and all amendments.
4
<PAGE> 5
The Agent shall maintain records in connection with the issuance,
redemption and repurchase of shares, the disbursement of dividends and
distributions and the administration of reinvestments, in which it will note
the transactions effected for each shareholder, including the following: (i)
names, addresses and tax identifying numbers; (ii) number of shares held; (iii)
historical information regarding the account of each shareholder, including
dividends paid and date and price for all transactions; (iv) any stop or
restraining order placed against the account; (v) information with respect to
withholdings on dividends; (vi) correspondence relating to the current
maintenance of the account; (vii) any information required in order for the
Agent to perform its obligations contemplated or required by this Agreement;
(viii) such other records as the Trust may from time to time reasonably
request.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained and
make available in accordance with such section and rules and will be
surrendered to the Trust on and in accordance with its request.
7. INDEMNIFICATION
The Agent agrees to use reasonable care and act in good faith in
performing its duties hereunder. Notwithstanding the foregoing, the Agent
shall not be liable or responsible for delays or errors occurring by reason of
circumstances beyond its control, including acts of civil or military
authority, national or state emergencies, fire, mechanical or equipment
failure, flood or catastrophe, acts of God, insurrection or war. In the event
of a mechanical breakdown beyond its control, the Agent shall take all
reasonable steps to minimize service interruptions for any period that such
interruption continues beyond the Agent's control. The Agent will make every
reasonable effort to restore any lost or damaged data, and the correcting of
any errors resulting from such a breakdown will be at the Agent's expense. The
Agent agrees that it shall, at all times, have reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of Aon Funds shall be entitled to
inspect the Agent's premises and operating capabilities at any time during
regular business hours of the Agent, upon reasonable notice to the Agent.
The Trust will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith, willful misconduct, or negligence, and
arising out of or in connection with the Agent's duties on behalf of the Trust
hereunder.
Further, the Trust will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting
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from any claim, demand, action or suit as a result of the negligence of the
Trust or the principal underwriter (unless resulting from or contributed to by
the Agent's own negligence, willful misconduct, or bad faith); or as a result
of the Agent acting upon telephone instructions relating to the exchange or
redemption of shares received by the Agent and reasonably believed by the Agent
to have originated from the record owner of the subject shares, or as a result
of the Agent acting upon any instructions executed or orally communicated by a
duly authorized officer or employee of the Trust, according to such lists of
authorized officers and employees furnished to the Agent and as amended
from time to time in writing by a resolution of the Board of Trustees of the
Trust; or as a result of acting in reliance upon any genuine instrument or
stock certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
In order for this section to apply, it is understood that if in any
case the Trust may be asked to indemnify or hold harmless the Agent, the Trust
shall be advised of all pertinent facts concerning the situation in question,
and it is further understood that the Agent will use reasonable care to notify
the Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have
the option to defend the Agent against any claim which may be the subject of
this indemnification and, in the event that the Trust so elects, the Trust will
so notify the Agent, and thereupon the Trust shall take over complete defense
of the claim and the Agent shall sustain no further legal or other expenses in
such situation for which the Agent shall seek indemnification under this
section. The Agent will in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify the Agent, except with
the Trust's prior written consent.
Regardless of the foregoing, the Agent shall not be liable to the Trust
or to any third party for any indirect or consequential damages.
The Agent may reprocess and correct administrative errors at the
Agent's own expense.
8. ADDITIONAL SERIES
In the event that the Trust establishes one or more additional series
of shares or class(es) of shares within series with respect to which it desires
to have Agent render transfer agent services under the terms hereof, it shall
so notify Agent in writing, and thereafter such series or class(es) will be
subject to the terms and conditions of this Agreement and shall be maintained
and accounted for by Agent on a discrete basis.
9. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
shareholders and such records and other information shall not be disclosed to
any other party, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not
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<PAGE> 7
be withheld where the Agent may be exposed to civil or criminal contempt
proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities.
10. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Wisconsin.
11. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
A. This Agreement may be amended by the mutual written consent of the
parties.
B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
E. In the event that the Trust give to the Agent their written intention
to terminate and appoint a successor transfer agent for any Portfolio,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the Agent
under this Agreement.
F. Should the Trust exercise right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Trust.
12. SHAREHOLDER LIABILITY
This Agreement is executed by or on behalf of the Trust and the
obligations hereunder are not binding upon any of the Trustees, officers or
shareholders of the Trust individually but are binding only upon the Trust and
the assets and property of the respective Portfolios
7
<PAGE> 8
Aon Funds Firstar Trust Company
By: _______________________________ By: ______________________________
Attest: ____________________________ Attest: ___________________________
8
<PAGE> 1
EXHIBIT 99.B9(e)
FUND ACCOUNTING SERVICING AGREEMENT
This Fund Servicing Agreement ("Agreement") between Aon Funds, a
Delaware business trust, hereinafter called the "Trust", and Firstar Trust
Company, a Wisconsin corporation, hereinafter called "FTC", is entered into on
this _____ day of _______________, 1996.
WITNESSETH:
WHEREAS, the Trust is an open-end, diversified management investment
company registered as such under the Investment Company Act of 1940 (the "1940
Act"); currently consisting of two separate investment portfolios (the
"Portfolios" or each a "Portfolio"), the Money Market Portfolio and the Asset
Allocation Portfolio, each of which offers two classes of shares.
WHEREAS, FTC is in the business of providing, among other things,
mutual fund accounting services to investment companies;
WHEREAS, the Trust desires to appoint FTC as its accounting services
agent to maintain and keep current certain books, records, journals, or other
records of original entry relating to the Portfolios' business (the "accounts
and records"), and to perform certain daily functions in connection with such
accounts and records; and
WHEREAS, FTC is willing to perform such functions upon the terms and
conditions set forth below;
NOW, THEREFORE, the Trust and FTC do mutually promise and agree as
follows:
1. FURNISHING DOCUMENTS
The Trust has furnished or will furnish FTC with copies of each of the
following:
(a) Agreement and Declaration of Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form
N-1A, as filed with the Securities and Exchange Commission
("SEC"); and
(d) The most recent prospectuses of the Portfolios.
The Trust will furnish FTC from time to time with copies of all
amendments of or supplements to the foregoing, if any. FTC will be entitled to
rely on all such furnishings.
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<PAGE> 2
2. SERVICES
FTC agrees to provide the following mutual fund accounting services to
the Portfolios (including where, appropriate classes of shares within such
Portfolios) in conformity with the disclosure provided in the Trust's current
registration statement and each Portfolio's prospectus, as amended, or
supplemented from time to time.
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis
using security trade information communicated from
the investment manager on a timely basis.
(2) (a) As to the Money Market Portfolio, for each
valuation time, as described in the Trust's
registration statement and currently being
1:30 p.m. (Central Time), calculate the
amortized cost value for each portfolio
investment. In accordance with the Amortized
Cost Valuation Monitoring Procedures adopted
by the Trust's Board of Trustees (the
"Procedures"), calculate, at least once a
week and more often when required, the market
value of portfolio investments using the
market valuation methods described in the
registration statement and the Procedures.
When and where applicable FTC may rely on the
good faith determination of market value of
the Trust's Board or the Board's Interim
Valuation Committee.
(b) As to the Portfolios other than the Money
Market Portfolio, for each valuation time,
obtain prices from a pricing source approved
by the Board of Trustees and apply those
prices to the Portfolio's positions. For
those securities where market quotations are
not readily available, the Trust's Board of
Trustees or the Board's Interim Valuation
Committee shall approve, in good faith, the
method for determining the fair value for
such securities.
(3) Identify interest and dividend accrual balances as of
each valuation time and calculate gross earnings on
investments for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status;
account for periodic distributions of gains or losses
to shareholders and maintain undistributed gain or
loss balances as of each valuation time.
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<PAGE> 3
B. Expense Accrual and Payment Services:
(1) For each valuation time, calculate the expense
accrual amounts as directed by the Trust as to
methodology, rate or dollar amount.
(2) Record payments for Portfolio expenses upon receipt
of written authorization from the Trust.
(3) Account for Portfolio expenditures and maintain
expense accrual balances at the level of accounting
detail agreed upon by FTC and the Trust.
(4) Provide expense accrual and payment reporting.
C. Portfolio Valuation and Financial Reporting Services:
(1) Account for portfolio share purchases, sales,
exchanges, transfers, dividend reinvestments, and
other share activity as reported by the transfer
agent on a timely basis.
(2) Apply equalization accounting as directed by the
Trust.
(3) Determine net investment income (earnings) for each
Portfolio as of each valuation period defined as the
period from valuation time to the next valuation
time. For the Money Market Portfolio, account for
daily distributions of income dividends to
shareholders and maintain undistributed net
investment income balances as of each valuation time.
For Portfolios other than the Money Market Portfolio,
account for periodic distributions of earnings to
shareholders and maintain undistributed net
investment income balances as of each valuation
period.
(4) Maintain a general ledger for the Portfolios in the
form as agreed upon.
(5) (a) For each valuation period, determine the net
asset value of the Money Market Portfolio
using the amortized cost valuation method
described in the Trust's registration
statement.
(b) For Portfolios other than the Money Market
Portfolio, for each valuation period,
determine the net asset value according to
the accounting policies and procedures set
forth in the Trust's registration statement.
(6) Communicate each Portfolio's net asset value and net
asset value per share for each valuation period to
the Trust and its transfer agent as soon as is
practicable after the valuation time but in no event
later than 24 hours thereafter.
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<PAGE> 4
(7) Prepare monthly reports which document the adequacy
of accounting detail to support month-end ledger
balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for each Portfolio to
support the tax reporting required for IRS-defined
regulated investment companies.
(2) Maintain tax lot detail for each Portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax cost basis designated by each Portfolio.
(4) Provide the necessary financial information to
support the taxable components of income and capital
gains distributions to the transfer agent to support
tax reporting to the shareholders.
E. Compliance Control Services:
(1) The accounts and records shall be maintained for the
periods of time prescribed in applicable regulations
under the 1940 Act. FTC shall assist the Trust's
independent auditors, or upon approval of the Trust,
or upon demand, any regulatory body, in any requested
review of the Trust's accounts and records. Upon
receipt from the Trust of the necessary information,
FTC shall supply the necessary data for the Trust's
or the Trust's accountants to complete any tax
returns, questionnaires, periodic reports to
shareholders, and such other reports and information
requests as the Trust and FTC shall from time to time
agree upon.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations
provided thereunder. Without limiting the generality
of the foregoing, FTC shall also maintain and keep
current, in accordance with Rule 31a-1 under the 1940
Act, the following accounts and records of each
Portfolio, in such form as may be mutually agreed
upon between the Trust and FTC:
a. Dividends paid record.
b. Portfolio securities purchase and sales
journals.
c. Security ledgers.
d. Dealer ledger.
e. General ledger.
f. Daily expense accruals.
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g. Daily interest accruals.
3. CHANGES IN ACCOUNTING PROCEDURES
Any resolution passed by the Board of Trustees that affects accounting
practices and procedures under this Agreement shall be effective upon written
receipt and acceptance by FTC.
4. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC.
FTC reserves the right to make changes from time to time, as it deems
advisable, relating to its services, systems, programs, rules, operating
schedules and equipment, so long as such changes do not adversely affect the
service provided to the Portfolios under this Agreement.
5. COMPENSATION
FTC shall be compensated for providing the services set forth in this
Agreement in accordance with the Fee Schedule attached hereto as Exhibit A and
as mutually agreed upon and amended from time to time.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
6. PERFORMANCE OF SERVICE
FTC shall exercise reasonable care in the performance of its duties
under the Agreement. The Trust agrees to reimburse and make FTC whole for any
loss or damage (including reasonable fees and expenses of legal counsel)
arising out of or in connection with its actions under this Agreement so long
as FTC acts in good faith and is not negligent or guilty of any willful
misconduct.
FTC shall not be liable or responsible for delays or errors occurring
by reason of circumstances beyond its control, including acts of civil or
military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, FTC shall
take all reasonable steps to minimize service interruptions for any period that
such interruption continues. FTC will make every reasonable effort to restore
any lost or damaged data and the correcting of any errors resulting from such a
breakdown will be at the expense of FTC. FTC agrees that it shall at all times
have reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Trust shall
be entitled to inspect FTC's premises and operating capabilities at any time
during regular business hours of FTC, upon reasonable notice to FTC.
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<PAGE> 6
This indemnification includes any act, omission to act, or delay by FTC
in reliance upon, or in accordance with, any written or oral instruction it
receives from any duly authorized officer of the Trust.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
7. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower FTC or
the Trust, respectively, to act as agent for the other party to this
Agreement, or to conduct business in the name of, or for the account of, any
other party to this Agreement.
8. OWNERSHIP OF RECORDS
All records prepared or maintained by FTC on behalf of the Trust remain
the property of the Trust and will be surrendered promptly on the written
request of an authorized officer of the Trust.
9. CONFIDENTIALITY
FTC shall handle in confidence all information relating to the Trust's
business, which is received by FTC during the course of rendering any service
hereunder.
10. DATA NECESSARY TO PERFORM SERVICES
The Trust or its agent shall furnish to FTC the data necessary to
perform the services described herein at times and in such form as mutually
agreed upon.
11. NOTIFICATION OF ERROR
The Trust will notify FTC of any balancing or control error caused by
FTC within three (3) business days after receipt of any reports rendered by FTC
to the Trust, or within three (3) business days after discovery of any error or
omission not covered in the balancing or control procedure, or within three (3)
business days of receiving notice from any shareholder.
12. ADDITIONAL SERIES.
In the event that the Trust establishes one or more additional series
of shares or class(es) of shares within series with respect to which it desires
to have FTC render accounting services under the terms hereof, it shall so
notify FTC in writing, and thereafter such series or class(es) will be subject
to the terms and conditions of this Agreement, and shall be maintained and
accounted for by FTC on a discrete basis.
13. TERM OF AGREEMENT
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<PAGE> 7
This Agreement may be terminated by either party upon giving ninety
(90) days prior written notice to the other party or such shorter period as is
mutually agreed upon by the parties. However, this Agreement may be replaced
or modified by a subsequent agreement between the parties. This Agreement may
be terminated as to one or more Portfolios without being terminated as to all
Portfolios.
14. DUTIES IN THE EVENT OF TERMINATION
In the event that in connection with termination a successor to any of
FTC's duties or responsibilities hereunder is designated by the Trust by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of the Trust, transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FTC under this
Agreement in a form reasonably acceptable to the Trust (if such form differs
from the form in which FTC has maintained the same, the Trust shall pay any
expenses associated with transferring the same to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from FTC's personnel in the establishment of books,
records and other data by such successor.
15. CHOICE OF LAW
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
16. SHAREHOLDER LIABILITY
This Agreement is executed by or on behalf of the Trust and the
obligations hereunder are not binding upon any of the Trustees, officers or
shareholders of the Trust individually but are binding only upon the Trust and
the assets and property of the respective Portfolios.
IN WITNESS WHEREOF, the due execution hereof on the data first above
written.
ATTEST: Firstar Trust Company:
__________________________ By __________________________
Assistant Secretary
ATTEST: Aon Funds
By __________________________
___________________________
Assistant Secretary
7
<PAGE> 1
EXHIBIT 99.B9(f)
LICENSE AGREEMENT
LICENSE AGREEMENT, dated as of ____________ (the "Commencement Date")
by and between McGraw-Hill, Inc., through its STANDARD & POOR'S division
("S&P"), a New York corporation, having an office at 25 Broadway, New York, New
York 10004, and AON Advisors, Inc., a Virginia corporation having an office at
123 N. Wacker Drive, Chicago, Illinois 60606.
WHEREAS, S&P compiles, calculates, maintains and owns rights in and to
the S&P 500 Composite Stock Price Index and to the proprietary data therein
contained (such rights being hereinafter individually and collectively referred
to as the "S&P 500 Index"); and
WHEREAS, S&P uses in commerce and has trade name and trademark rights
to the designations "Standard & Poor's(R)", "S&P(R)", "Standard & Poor's 500",
"S&P 500(R)" and "500", in connection with the S&P 500 Index (such rights being
hereinafter individually and collectively referred to as the "S&P Marks"); and
WHEREAS, Licensee wishes to use the S&P 500 Index as a component of the
product or products described in Exhibit A attached hereto and made a
part hereof (individually and collectively referred to as the "Product"); and
<PAGE> 2
- 2 -
WHEREAS, Licensee wishes to use the S&P Marks in connection with the
marketing and/or promotion of the Product and in connection with making
disclosure about the Product under applicable law, rules and regulations in
order to indicate that S&P is the source of the S&P 500 Index; and
WHEREAS, Licensee wishes to obtain S&P's authorization to use the S&P
500 Index and the S&P Marks in connection with the Product pursuant to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of License.
(a) Subject to the terms and conditions of this Agreement, S&P
hereby grants to Licensee a non-transferable, non-exclusive license (i) to use
the S&P 500 Index as a component of the Product to be marketed and/or promoted
by Licensee and (ii) to use and refer to the S&P Marks in connection with the
distribution, marketing and promotion of the Product (including in the name of
the Product) and in connection with making such disclosure about the Product as
Licensee deems necessary or provisions of this Agreement, but, in each case,
only to the extent necessary to indicate usage and the source of the S&P 500
Index.
<PAGE> 3
-3-
It is expressly agreed and understood by Licensee that no rights to use the S&P
500 Index and the S&P Marks are granted hereunder other than those specifically
described and expressly granted herein.
(b) S&P agrees that no person or entity (other than the
Licensee) shall need to obtain a license from S&P with respect to the
Product.
2. Term.
The term of this Agreement shall commence on the Commencement
Date and shall continue in effect thereafter until it is terminated in
accordance with its terms.
3. License Fees.
(a) Licensee shall pay to S&P the license fees specified in
Exhibit B ("License Fees") and provide the data called for in Exhibit B,
attached hereto and made a part hereof.
(b) During the term of this Agreement and for a period of one
(1) year after its termination, S&P shall have the right, during normal
business hours and upon reasonable notice to Licensee, to audit on a
confidential basis the relevant books and records of Licensee to determine that
License Fees have been accurately determined. The costs of such audit shall be
borne by
<PAGE> 4
- 4 -
S&P unless it has been underpaid by five percent (5%) or more; in such case,
the actual, reasonable and verifiable costs of the audit shall be paid by
Licensee.
4. Termination
(a) At any time during the term of this Agreement, either party
may give the other party sixty (60) days prior written notice of termination if
the terminating party reasonably believes in good faith that material damage or
harm is occurring to the reputation or goodwill of that party by reason of its
continued performance hereunder, and such notice shall be effective on the date
specified therein of such termination, unless the other party shall correct the
condition causing such damage or harm within the notice period.
(b) In the case of breach of any of the material terms or
conditions of this Agreement by either party, the other party may terminate
this Agreement by giving sixty (60) days prior written notice of its intent to
terminate, and such notice shall be effective on the date specified therein for
such termination unless the breaching party shall correct such breach within
the notice period.
(c) S&P shall have the right, in its sole discretion, to cease
compilation and publication of the S&P 500 Index and, in such
<PAGE> 5
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event, to terminate this Agreement if S&P does not offer a replacement or
substitute index. In the event that S&P intends to discontinue the S&P 500
Index (which S&P has no current plans or intention to discontinue), S&P shall
give Licensee at least one (1) year's written notice prior to such
discontinuance, which notice shall specify whether a replacement or substitute
index will be made available. Licensee shall have the option hereunder within
sixty (60) days after receiving such written notice from S&P to notify S&P in
writing of its intent to use the replacement or substitute index, if any, under
the terms of this Agreement. In the event that Licensee does not exercise such
option or no substitute or replacement index is made available, this Agreement
shall be terminated as of the discontinuance date specified in the S&P notice
and the License Fees to the date of such termination shall be computed as
provided in Subsection 4(f).
(d) Licensee may terminate this Agreement upon ninety (90) days (or
upon such lesser period of time if required pursuant to a court order) prior
written notice to S&P if (i) Licensee is informed of the final adoption of any
legislation or regulation or the issuance of any interpretation that in
Licensee's reasonable judgment materially impairs Licensee's ability to market
and/or promote the Product; (ii) any litigation or regulatory proceeding (that
is material to this Agreement, the S&P Marks and/or the S&P
<PAGE> 6
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500 Index in Licensee's reasonable belief) regarding the Product, the S&P Marks
and/or the S&P 500 Index is threatened or commenced; or (iii) Licensee elects
to terminate the public offering or other distribution of the Product, as may
be applicable. In such event the License Fees to the date of such termination
shall be computed as provided in Subsection 4(f).
(e) S&P may terminate this Agreement upon ninety (90) days (or upon
such lesser period of time if required pursuant to a court order) prior written
notice to Licensee if (i) S&P is informed of the final adoption of any
legislation or regulation or the issuance of any interpretation that in S&P's
reasonable judgment materially impairs S&P's ability to license and provide the
S&P 500 Index and S&P Marks under this Agreement in connection with such
Product; or (ii) any litigation or proceeding is threatened or commenced
regarding the Product, the S&P Marks and/or the S&P 500 Index and S&P
reasonably believes that such litigation or proceeding would have a material
and adverse effect upon the ability of S&P to perform under this Agreement. In
such event the License Fees to the date of such termination shall be computed
as provided in Subsection 4(f).
(f) In the event of termination of this Agreement as provided in
Subsections 4(a), (c), (d) or (e), the License Fees to
<PAGE> 7
- 7 -
the date of such termination shall be computed by prorating the amount of the
applicable annual License Fees shown in Exhibit B on the basis of the number of
elapsed days in the current term. In the event of termination pursuant to
Subsection 4(b), the License Fees to the date of the first occurrence of the
breach of the material terms or conditions of this Agreement shall be computed
as provided in the preceding sentence. Any excess License Fees amount paid by
Licensee for the current term shall be promptly refunded by S&P.
(g) Upon termination of this Agreement, Licensee shall cease to use
the S&P 500 Index and the S&P Marks in connection with the Product; provided
that Licensee may continue to utilize any previously printed materials which
contain the S&P Marks for a period of ninety (90) days following such
termination.
5. S&P's Obligations.
(a) It is the policy of S&P to prohibit its employees who are directly
responsible for changes in the components of the S&P 500 Index from purchasing
or beneficially owning any interest in the Product and S&P believes that its
employees comply with such policy. Licensee shall have no responsibility for
ensuring that such S&P employees comply with such S&P policy and shall have no
duty to inquire whether any purchasers or sellers of the Product
<PAGE> 8
- 8 -
are such S&P employees. S&P shall have no liability to the Licensee with
respect to its employees' adherence or failure to adhere to such policy.
(b) S&P shall not and is in no way obliged to engage in any marketing
or promotional activities in connection with the Product or in making any
representation or statement to investors or prospective investors in connection
with the promotion by Licensee of the Product.
(c) S&P agrees to provide reasonable support for Licensee's
development and educational efforts with respect to the Product as follows:
(i) S&P shall provide Licensee, upon request but subject to any agreements of
confidentiality with respect thereto, copies of the results of any marketing
research conducted by or on behalf of S&P with respect to the S&P 500 Index;
and (ii) S&P shall respond in a timely fashion to any reasonable requests for
information by Licensee regarding the S&P 500 Index.
(d) S&P or its agent shall calculate and disseminate the S&P 500 Index
at least once each fifteen (15) seconds in accordance with its current
procedures, which procedures may be modified by S&P.
<PAGE> 9
- 9 -
(e) S&P shall promptly correct or instruct its agent to correct any
mathematical errors made in S&P's computations of the S&P 500 Index of which
S&P becomes aware, provided that nothing in this Section 5 shall give Licensee
the right to exercise any judgment or require any changes with respect to S&P's
method of composing, calculating or determining the S&P 500 Index; and,
provided further, that nothing herein shall be deemed to modify the provisions
of Section 9 of this Agreement.
6. Informational Materials Review.
Licensee shall not use the S&P Marks in any manner which would
reasonably demean or detract form S&P's reputation or goodwill attendant to the
S&P Marks. Licensee shall use reasonable efforts (not including litigation) to
protect the goodwill and reputation of S&P and the S&P Marks, provided S&P pays
any reasonable costs or expenses of Licensee incurred thereby. Licensee shall
promptly notify S&P if it becomes aware of any third party infringement of the
S&P Marks. Licensee shall submit to S&P for its review and approval all
informational materials created for distribution to potential investors in the
Product pertaining to and to be used in connection with the Product, including,
where applicable, all prospectuses, plans, registration statements,
advertisements, brochures and promotional and any other similar informational
materials (including documents required to be
<PAGE> 10
- 10 -
filed with governmental or regulatory agencies) that in any way refer to S&P,
the S&P 500 Index, or the S&P Marks (the "Informational Materials"). S&P's
approval shall be required with respect to the use of and description of S&P,
the S&P Marks and the S&P 500 Index in Informational Materials and shall not be
unreasonably withheld or delayed by S&P. S&P's review of such materials shall
be limited to the references in the Informational Materials to S&P, the S&P 500
Index and/or the S&P Marks. Specifically, S&P shall notify Licensee, by
facsimile transmission in accordance with Subsection 12(d) hereof, of its
approval or disapproval of any Informational Materials within forty-eight (48)
hours (excluding Saturday, Sunday and New York Stock Exchange Holidays)
following receipt thereof from Licensee. Any disapproval shall state S&P's
reasons therefor. Any failure by S&P to respond within such forty-eight (48)
hour period shall be deemed to constitute a waiver of S&P's right to review
such Informational Materials. Once Informational Materials have been approved
by S&P, subsequent Informational Materials which do not alter the use or
description of S&P, the S&P Marks or the S&P 500 Index need not be submitted
for review and approval by S&P. Licensee hereby represents that as of the date
of its execution of this Agreement it has provided S&P with copies of all
previously produced Informational Materials required to be submitted by
Licensee pursuant to this Section 6. S&P hereby acknowledges that such
<PAGE> 11
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Informational Materials meet with S&P's approval notwithstanding any failure to
comply with Subsections 6, 7(b) and/or 9(c) hereof.
7. Protection of Value of License.
(a) During the term of this Agreement, S&P shall use its best
efforts to maintain in full force and effect federal registrations for
"Standard & Poor's(R)", "S&P(R)", "S&P(R)", and "S&P 500(R)". S&P shall at S&P's
own expense and sole discretion exercise S&P's common law and statutory rights
against infringement of the S&P Marks, copyrights and other proprietary rights.
(b) Licensee shall cooperate with S&P in the maintenance of such
rights and registrations and shall take such actions and execute such
instruments as S&P may from time to time reasonably request, and shall use the
following notice when referring to the S&P 500 Index or the S&P Marks in any
Informational Material:
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's
500" and "500" are trademarks of McGraw-Hill, Inc. and have been
licensed to AON Advisors for use in Life of Virginia Series Fund,
Inc. (the "Product"). The Product is not sponsored, endorsed or
promoted by S&P.
or such similar language as may be approved in advance by S&P and Licensee, it
being understood that such notice need only appear one time in any piece of
Informational Material and need only refer to the specific S&P Marks referred
to in the Informational Material. S&P shall promptly reimburse any costs
<PAGE> 12
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and expenses incurred by Licensee in cooperating with S&P or taking actions or
executing instruments requested by S&P as provided above.
8. Proprietary Rights.
(a) Licensee acknowledges that the S&P 500 Index is selected,
coordinated, arranged and prepared by S&P through the application of methods
and standards of judgment used and developed through the expenditure of
considerable work, time and money by S&P. Licensee also acknowledges that the
S&P 500 Index and the S&P Marks are the exclusive property of S&P, that S&P has
and retains all proprietary rights therein (including, but not limited to
trademarks and copyrights) and that the S&P 500 Index and its compilation and
composition and changes therein are in the control and discretion of S&P.
(b) S&P reserves all rights with respect to the S&P 500 Index and the
S&P Marks except those expressly licensed to Licensee hereunder.
(c) Each party shall treat as confidential and shall not disclose or
transmit to any third party any documentation or other written materials
supplied by the other party to such party that are confidential and proprietary
in
<PAGE> 13
-13-
nature and that are marked as "Confidential and Proprietary" by the providing
party ("Confidential Information"). Confidential Information shall not include
(i) any information that is available to the public or to the receiving party
hereunder from sources other than the providing party (provided that such source
is not subject to a confidentiality agreement with regard to such information)
or (ii) any information that is independently developed by the receiving party
without use of or reference to information from the providing party.
Notwithstanding the foregoing, either party may reveal Confidential Information
to any regulatory agency or court of competent jurisdiction if such information
to be disclosed is (a) approved in writing by the other party for disclosure or
(b) required by law, regulatory agency or court order to be disclosed by a
party, provided, if permitted by law, that prior written notice of such required
disclosure is given to the other party and provided further that the providing
party shall cooperate with the other party to limit the extent of such
disclosure. The provisions of this Subsection 8 (c) shall survive any
termination of this Agreement for a period of five (5) years from disclosure by
either party to the other of the last item of such Confidential Information.
<PAGE> 14
- 14 -
9. Warranties; Disclaimers.
(a) S&P represents and warrants to Licensee that S&P has the right to
grant the rights granted to Licensee herein and that the license granted herein
shall not infringe any trademark, copyright or other proprietary right of any
person not a party to this Agreement.
(b) S&P further warrants and represents to Licensee that the S&P
Marks and the S&P 500 Index are the exclusive property of S&P, that S&P has and
retains all proprietary rights therein (including, but not limited to
trademarks and copyrights), that the S&P 500 Index and its compilation and
composition and changes therein are in the control and discretion of S&P, and
that the S&P 500 Index and S&P Marks do not infringe the rights of any third
party.
(c) Licensee agrees expressly to be bound itself by and furthermore
to include all of the following disclaimers and limitations in each prospectus
relating to the Product and upon request to furnish a copy thereof to S&P:
The Product is not sponsored, endorsed, sold or promoted by Standard &
Poor's ("S&P"). S&P makes no representation or warranty, express or implied,
to the owners
<PAGE> 15
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of the Product or any member of the public regarding the advisability of
investing in securities generally or in the Product particularly or the ability
of the S&P 500 Index to track general stock market performance. S&P's only
relationship to the Licensee as related to the Product is the licensing of
certain trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Licensee or
the Product. S&P has no obligation to take the needs of the Licensee or the
owners of the Product into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of
the Product or the timing of the issuance or sale of the Product or in the
determination or calculation of the equation by which the Product is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Product.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF
<PAGE> 16
- 16 -
THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
Any substantive changes in or deletions from the foregoing
disclaimers and limitations must be approved in advance in writing by an
authorized officer of S&P.
(d) Each party represents and warrants to the other that it has
the authority to enter into this Agreement according to its terms and that its
performance does not violate any laws, regulations or agreements applicable
to it.
(e) Licensee represents and warrants to S&P that the Product
shall at all times in all material respect comply with the description in
Exhibit A.
(f) Licensee represents and warrants to S&P that
<PAGE> 17
- 17 -
the Product shall not violate any applicable law, including but not limited to
banking, commodities and securities laws.
(g) Neither party shall have any liability for lost profits or
indirect, punitive, special, or consequential damages arising out of this
Agreement, even if notified of the possibility of such damages. Without
diminishing the disclaimers and limitations set forth in Subsection 9(c), in no
event shall the cumulative liability of S&P to Licensee exceed the average
annual License Fees actually paid to S&P hereunder.
(h) Use of any marks by Licensee in connection with its
Product (including in the name of such Product) which are not the S&P Marks is
at Licensee's sole risk.
(i) The provisions of this Section 9 shall survive any
termination of this Agreement.
10. Indemnification.
(a) Licensee shall indemnify and hold harmless S&P, its
affiliates and their officers, directors, employees and agents against any and
all judgments, damages, costs or losses of any kind (including reasonable
attorneys' and experts' fees) as a result of any claim, action or proceeding
that arises out
<PAGE> 18
- 18 -
of or relates to (X) a breach by Licensee of its representative or warranties
hereunder, or (Y) the Product; provided, however, that the foregoing
indemnification obligation shall not extend to any claim, action, or proceeding
(and to any judgments, damages, costs, or losses of any kind, including
reasonable attorneys' fees and experts' fees pertaining thereto) of any kind
that arises out of or relates to the bad faith, negligence or willful
misconduct of S&P as determined by a court of competent jurisdiction pursuant
to a non-appealable court order or decision and provided further, however, that
with respect to claims, actions or proceedings initiated by third parties (i)
S&P notifies Licensee promptly of any such claim, action or proceeding; (ii)
S&P grants Licensee control of its defense and/or settlement; and (iii) S&P
cooperates with Licensee in the defense thereof. Licensee shall periodically
reimburse S&P for its reasonable expenses incurred under this Subsection 10(a).
S&P shall have the right, at its own expense, to participate in the defense of
any third party claim, action or proceeding against which it is indemnified
hereunder; provided, however, it shall have no right to control the defense,
consent to judgment, or agree to settle any such claim, action or proceeding
without the written consent of Licensee (which will not be unreasonably
withheld) without waiving the indemnity hereunder. Licensee, in the
<PAGE> 19
- 19 -
defense of any such third party claim, action or proceeding except with the
written consent of S&P, shall not consent to entry of any judgment or enter
into any settlement which either (a) does not include, as an unconditional
term, the grant by the claimant to S&P of a release of all liabilities in
respect of such claims or (b) otherwise adversely affects the rights of S&P.
Licensee shall defend any such third party claim, action or proceeding using
legal counsel reasonably acceptable to S&P. This provision shall survive the
termination or expiration of this Agreement. Licensee agrees that the
exception to Licensee's indemnification obligation to S&P as set forth above
shall be deemed "Confidential Information" as provided under Subsection 8(c) of
this Agreement.
(b) S&P shall indemnify and hold harmless Licensee, its affiliates and
their officers, directors, employees and agents against any and all judgments,
damages, costs or losses of any kind (including reasonable attorneys' and
experts' fees) as a result of any claim, action, or proceeding that arises out
of or relates to any breach by S&P of any provision of this Agreement;
provided, however, that with respect to claims, actions or proceedings
initiated by third parties (i) Licensee notifies S&P promptly of any such
claim, action or proceeding; (ii) Licensee grants S&P control of its defense
and/or
<PAGE> 20
- 20 -
settlement; and (iii) Licensee cooperates with S&P in the defense thereof. S&P
shall periodically reimburse Licensee for its reasonable expenses incurred under
this Subsection 10(b). Licensee shall have the right, at its own expense, to
participate in the defense of any third party claim, action or proceeding
against which it is indemnified hereunder; provided, however, it shall have no
right to control the defense, consent to judgment, or agree to settle any such
third party claim, action or proceeding without the written consent of S&P
(which will not be unreasonably withheld) without waiving the indemnity
hereunder. S&P, in the defense of any such third party claim, action or
proceeding, except with the written consent of Licensee, shall not consent to
entry of any judgment or enter into any settlement which either (a) does not
include, as an unconditional term, the grant by the claimant to Licensee of a
release of all liabilities in respect of such claims or (b) otherwise adversely
affects the rights of Licensee. S&P in defending any such third party claim,
action or proceeding shall use legal counsel reasonably acceptable to
Licensee. This provision shall survive the termination or expiration of this
Agreement.
11. Suspension of Performance.
Neither S&P nor Licensee shall bear responsibility
<PAGE> 21
- 21 -
or liability for any losses arising out of any delay in or
interruptions of their respective performance of their obligations under this
Agreement due to any act of God, act of governmental authority, act of the
public enemy or due to war, the outbreak or escalation of hostilities, riot,
fire, flood, civil commotion, insurrection, labor difficulty (including,
without limitation, any strike, or other work stoppage or slow down), severe or
adverse weather conditions, communications line failure, or other similar cause
beyond the reasonable control of the party so affected.
12. Other Matters.
(a) This Agreement is solely and exclusively between the
parties hereto and shall not be assigned or transferred by either party,
without the prior written consent of the other party, and any attempt to so
assign or transfer this Agreement without such written consent shall be null
and void.
(b) This Agreement constitutes the entire agreement of the
parties hereto with respect to its subject matter and may be amended or
modified only by a writing signed by duly authorized officers of both parties.
This Agreement supersedes all previous agreements between the parties with
respect to the
<PAGE> 22
- 22 -
subject matter of this Agreement. There are no oral or written collateral
representations, agreements, or understandings except as provided herein.
(c) All notices and other communications under this Agreement shall be
(i) in writing, (ii) delivered by hand, by registered or certified mail, return
receipt requested, or by facsimile transmission to the address or facsimile
number set forth below or such address or facsimile number as either party
shall specify by a written notice to the other and (iii) deemed given upon
receipt.
Notice to S&P: Standard & Poor's
25 Broadway
New York, New York 10004
Attn: James G. Branscome
Senior Vice President
Equity Information
Services
Fax #: (212) 412-0294
Notice to Licensee: AON Advisors, Inc.
123 N. Wacker Drive
Chicago, Illinois 60606
Attn: Mark Burka
Fax #: (312) 701-3900
with a copy to:
<PAGE> 23
- 23 -
(d) This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of New York.
(e) Each party agrees that in connection with any legal action or
proceeding arising with respect to this Agreement, they may bring such action
or proceeding in (i) the United States District Court for the Southern District
of New York or in the Supreme Court of the State of New York in and for the
First Judicial Department or (ii) the United States District Court for the
Northern District of Illinois in the Circuit Court of the State of Illinois in
Cook County and each party agrees to submit to the jurisdiction of such court
and venue in such court and to waive any claim that such court is an
inconvenient forum.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.
AON ADVISORS, INC. McGraw-Hill, Inc., through
its STANDARD & POOR'S
division
BY: BY:
TITLE: TITLE:
DATE: DATE:
<PAGE> 1
EXHIBIT 99.B9(g)
CONFIDENTIAL
MORGAN STANLEY
REIT INDEX LICENSE AGREEMENT
AGREEMENT, dated as of __________, 1996, by and between MORGAN STANLEY
& CO. INCORPORATED ("Morgan Stanley"), a Delaware corporation, having an office
at 1585 Broadway, New York, New York 10036, and ____________. ("Licensee"), a
____________ corporation, having an office at __________________.
WHEREAS, Morgan Stanley is an international investment banking and
brokerage firm which owns rights in and to certain stock indexes and the
proprietary data contained therein, among which is the Morgan Stanley REIT Index
(such index and data contained therein are hereinafter referred to as the
"Index");
WHEREAS, Morgan Stanley uses in commerce and owns trade name, trademark
and service mark rights to the designations "Morgan Stanley" and "Morgan Stanley
REIT Index" (such rights are hereinafter individually and collectively referred
to as the "Marks");
WHEREAS, Licensee wishes to use the Index as the basis of the product
described in Exhibit A, annexed hereto and made a part hereof (the "Product"),
to be issued and traded as shares in a registered investment company;
WHEREAS, Licensee wishes to use the Index and the Marks in connection
with writing, trading, marketing and promotion of the Product as a registered
investment company and in connection with making disclosure about the Product
under applicable laws, rules and regulations in order to indicate that Morgan
Stanley is the source of the Index; and
WHEREAS, Licensee wishes to obtain Morgan Stanley's authorization to use
the Index and refer to the Index and the Marks in connection with the Product
pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of License
Subject to the terms and conditions of this Agreement, Morgan Stanley
grants to Licensee a non-transferable, non-exclusive, license (i) to use the
Index as the basis of the Product (in accord with the restrictions, if any, set
forth in Exhibit A), and (ii) to use and refer to the Index and the Marks in
connection with the writing, trading, marketing and promotion of the Product
(in accord with the restrictions, if any, set forth in Exhibit A) and in
connection with making such disclosure about the Product as Licensee deems
necessary or desirable under any applicable laws, rules or regulations in
<PAGE> 2
order to indicate the source of the Index. Licensee shall not disseminate
electronically or in any other fashion any quotations or other information
relating to the Index or the Product.
2. Term
The initial term of this Agreement shall be for one year, commencing on
____________, 1996 and automatically renewing for successive one-year renewal
terms at Morgan Stanley's then prevailing charges, unless terminated as
provided herein.
3. Licensee Fees
Upon execution of this Agreement, Licensee shall pay to Morgan Stanley a
license fee of $ with respect to unlimited use of Index for the Product.
4. Termination
(a) At any time during the term of this Agreement, either party may
give the other party thirty (30) days' prior written notice of termination if
the terminating party believes in good faith that material damage or harm is
occurring to the reputation or goodwill of the terminating party by reason of
its continued performance hereunder, and such notice shall be effective on the
date of such termination unless the other party shall correct the condition
causing such damage or harm within the notice period. In the event of
termination under this paragraph 4(a), no refund of any portion of the license
fees will be made.
(b) In the case of breach of any of the material terms and conditions
of this Agreement by either party, the other party may terminate this Agreement
by giving thirty (30) days' prior written notice of its intent to terminate,
and such notice shall be effective on the date of such termination unless the
breaching party shall correct such breach within the notice period. In the
event of termination under this paragraph 4(b) by Morgan Stanley, no refund of
any of the license fees will be made. In the event of termination under this
paragraph 4(b) by Licensee, Licensee shall be entitled to a pro rata refund of
the license fees.
(c) Morgan Stanley shall have the right, in its sole discretion, to
cease compilation and publication of the Index and, in the event that the Index
is discontinued, to terminate this Agreement if Morgan Stanley does not offer a
replacement or substitute index. In the event that Morgan Stanley intends to
discontinue the Index, Morgan Stanley shall give Licensee at least ninety (90)
days' written notice prior to such discontinuance, which notice shall specify
whether a replacement or substitute index will be available. Licensee shall
have the option hereunder within sixty (60) days after receiving such written
notice from Morgan Stanley to notify Morgan Stanley in writing of its intent to
use the replacement index under the terms of this Agreement. In the event that
the Index is discontinued and Licensee does not exercise such option or that at
least one substitute or replacement index is not made available, Licensee shall
be entitled to a pro rata refund of the license fee.
(d) Licensee may terminate this Agreement upon written notice to
Morgan Stanley if (i) Licensee is informed of the final adoption of any
legislation or regulation that materially impairs Licensee's ability to write,
market or promote the Product; or (ii) any material litigation or regulatory
proceeding regarding the Product is threatened or commences. In the event of
termination under this paragraph 4(d), no refund of any portion of the license
fees will be made.
<PAGE> 3
(e) Morgan Stanley may terminate this Agreement upon written notice to
Licensee if (i) Morgan Stanley is informed of the final adoption of any
legislation or regulation that materially impairs Morgan Stanley's ability to
license and provide the Index under this Agreement; or (ii) any material
litigation or regulatory proceeding regarding the Product is threatened or
commenced. In the event that Morgan Stanley terminates this Agreement,
Licensee shall be entitled to a pro rata refund of the license fee.
5. Rights Upon Termination
Upon termination of this Agreement, Licensee shall cease to use the
Index and ceases referring to the Index and the Marks with the Product.
6. Product Promotion
(a) Licensee shall use its best efforts to protect the goodwill and
reputation of Morgan Stanley in connections with its use of the Index and the
Marks under this Agreement. Licensee shall submit to Morgan Stanley for its
preview and approval all advertisements, brochures, and promotional and
information material ("Informational Materials") relating to or referring to
Morgan Stanley, the Index, the Marks or the Product. Morgan Stanley's approval
shall be confined solely to the use of or description of Morgan Stanley, the
Marks, and the Index and shall not be unreasonably withheld or delayed by
Morgan Stanley.
(b) Morgan Stanley is not obligated to engage in any marketing or
promotional activities in connection with the Product or in making any
representation or statement to investors or prospective investors in connection
with the promotion by Licensee of the Product.
(c) Licensee acknowledges and agrees that Morgan Stanley, in granting
the permission contained in this agreement, does not express or imply any
approval of the Product or of Licensee and Licensee further agrees not to make
any statement which expresses or implies that Morgan Stanley approves, endorses
or consents to the promotion, marketing, and arrangement by Licensee of the
Product or that Morgan Stanley makes any judgment or expresses any opinion in
respect of the Licensee.
7. Protection Of Value Of Licensee
(a) Licensee shall cooperate reasonably with Morgan Stanley in the
maintenance of all Morgan Stanley common law and statutory rights in the Index
and the Marks, including copyrights and other proprietary rights, and shall
take such acts and execute such instruments as are reasonably necessary and
appropriate to such purposes, including the use by the Licensee of the
following notice when referring to the Index or the Marks in any
advertisement, offering circular, prospectus, brochure, or promotional or
informational material relating to the Product:
The Morgan Stanley REIT Index is the exclusive property of Morgan
Stanley. Morgan Stanley REIT Index is a service mark of Morgan
Stanley Group Inc. and has been licensed for use by
____________________.
or such similar language as may be approved in advance by Morgan Stanley.
<PAGE> 4
(b) Licensee shall not refer to the names of the Index in any manner
which might cause confusion as to Morgan Stanley's responsibility for preparing
and disseminating the Index or as to the identity of Licensee and its
relationship to the Product.
8. Proprietary Rights
(a) Licensee acknowledges that the Index is selected, arranged and
prepared by Morgan Stanley through the application of methods and standards of
judgment used and developed through the expenditure of considerable work, time
and money by Morgan Stanley. Licensee also acknowledges that the Index and the
Marks are the exclusive property of Morgan Stanley.
(b) Morgan Stanley reserves all rights with respect to the Index and
the Marks except those expressly licensed to Licensee hereunder.
(c) Each party shall treat as confidential and shall not disclose or
transmit to any third party any confidential and proprietary information of the
other party, including the terms of this Agreement, provided that the
documentation or other written materials containing such information are
designated as "Confidential" or "Proprietary" by the providing party and such
information is not available generally to the public or otherwise available to
the receiving party from a source other than the providing party.
Notwithstanding the foregoing, if requested or required (by interrogatories,
requests for information or documents, subpoena, or other process) either party
may reveal such information if such information to be disclosed is (i) approved
in writing by the other party for disclosure or (ii) required by law (in the
opinion of counsel), regulatory agency or court order to be disclosed by a
party, provided prior written notice of such required disclosure is given to
the other party. Except with respect to disclosure made pursuant to (i) and
(ii) in the immediately preceding sentence, each party shall treat as
confidential the terms of this Agreement. The provisions of this paragraph
shall survive any termination of this Agreement for five (5) years from
disclosure by either party to the other party of the last such confidential and
proprietary information.
9. Warranties; Disclaimers
(a) Morgan Stanley represents and warrants that Morgan Stanley is the
owner of rights granted to Licensee herein and that use of the Index as
provided herein shall not infringe any trademark, copyright, other proprietary
right, or contractual right of any person not a party to this Agreement.
(b) Licensee agrees expressly to be bound itself by and furthermore to
include all of the following disclaimers and limitations in Informational
Materials and any contract(s) relating to the Product and upon request to
furnish a copy (copies) thereof to Morgan Stanley:
[This fund] is not sponsored, endorsed, sold or promoted by
Morgan Stanley. Morgan Stanley makes no representation or warranty,
express or implied, to the owners of [this fund] or any member of the
public regarding the advisability of investing in securities generally
or in [this fund] particularly or the ability of the Morgan Stanley REIT
Index to track general stock market performance. Morgan Stanley is the
licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley REIT Index. Morgan Stanley has no
obligation to take the needs of the issuer of [this fund] or the owners
of [this fund] into consideration in determining, composing or
<PAGE> 5
calculating the Morgan Stanley REIT Index. Morgan Stanley is not responsible for
and has not participated in the determination of the timing of, prices at, or
quantities of [this fund] to be issued or in the determination or calculation of
the equation by which [this fund] is redeemable for cash. Morgan Stanley has no
obligation or liability to owners of [this fund] in connection with the
administration, marketing or trading of [this fund].
ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR
USE IN THE CALCULATION OF THE INDEX FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDEX OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S
CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH
THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
(c) Each party represents and warrants to the other that it has the
authority to enter into this Agreement according to its terms and that its
performances does not violate any laws, regulations or agreements applicable to
it.
(d) Licensee represents and warrants to Morgan Stanley that the
Product shall not violate any applicable laws, including but not limited to
banking, commodities and securities laws.
(e) Neither party shall have any liability for lost profits or
consequential damages arising out of this Agreement.
(f) The provisions of this Section 9 shall survive any termination
of this Agreement.
10. Indemnification
Licensee shall indemnify and hold harmless Morgan Stanley, its parent,
subsidiaries, affiliates, and their officers, directors, employees and agents
against any and all judgments, damages, costs or losses of any kind (including
reasonable attorneys' and experts' fees) as a result of claims or actions
brought by third parties against Morgan Stanley which arise from all acts,
representations or omissions of Licensee under this Agreement or are in any
manner related to the Product; provided, however, that (a) Morgan Stanley
notifies Licensee promptly of any such claim or action, and (b) such judgements,
damages, costs or losses are not attributable to any negligent act or omission
by Morgan Stanley, its
<PAGE> 6
parent, affiliates, subsidiaries or any of their employees or agents. Licensee
shall bear all expenses in connection with the defense and/or settlement of any
such claim or action. Morgan Stanley shall have the right, at its own expense,
to participate in the defense of any claim or action against which it is
indemnified hereunder; provided, however, it shall have no right to control the
defense, consent to judgement, or agree to settle any such claim or action,
without the written consent of Licensee. Licensee, in the defense of any such
claim, except with the written consent of Morgan Stanley, shall not consent to
entry of any judgment or enter into any settlement which (a) does not include,
as an unconditional term, the grant by the claimant to Morgan Stanley of a
release of all liabilities in respect of such claims or (b) otherwise adversely
affects the rights of Morgan Stanley. This provision shall survive the
termination of this Agreement.
11. Force Majeure
Neither Morgan Stanley nor Licensee shall bear responsibility or
liability for any losses arising out of any delay in or interruptions of their
respective performance of their obligations under this Agreement due to any act
of God, act of governmental authority, act of the public enemy or due to war,
riot, fire, flood, civil commotion, insurrection, labor difficulty (including,
without limitation, any strike, or other work stoppage or slowdown), severe or
adverse weather conditions or other cause beyond the reasonable control of the
party so affected, provided that such party had exercised due diligence as the
circumstances reasonably required.
12. Other Matters
(a) This Agreement is solely and exclusively between the parties as
now constituted and, unless otherwise provided, shall not be assigned or
transferred by either party, without prior written consent of the other party,
and any attempt to so assign or transfer this Agreement without such written
consent shall be null and void. Notwithstanding the foregoing, this Agreement
may be assigned without such consent to Morgan Stanley's parent or any
subsidiary or affiliate of Morgan Stanley.
(b) This Agreement constitutes the entire agreement of the parties
hereto with respect to its subject matter and may be amended or modified only
by a writing signed by duly authorized officers of both parties. This Agreement
supersedes all previous Agreements between the parties with respect to the
subject matter of this Agreement. There are no oral or written collateral
representations, agreements, or understandings except as provided herein.
(c) No breach, default, or threatened breach of this Agreement by
either party shall relieve the other party of its obligations or liabilities
under this Agreement with respect to the protection of the property or
proprietary nature of any property which is the subject of this Agreement.
(d) All notices and other communications under this Agreement shall
be (i) in writing, (ii) delivered by hand or by registered or certified mail,
return receipt requested, to the addresses set forth below or such addresses as
either party shall specify by a written notice to the other and (iii) deemed
given upon receipt.
<PAGE> 7
Notice to Morgan Stanley: Morgan Stanley & Co. Incorporated
- ------------------------- 1585 Broadway
New York, New York 10036
Attn: Henry Fernandez, Managing Director
-----
and
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Attn: General Counsel
-----
Notice to Licensee:
-------------------
(e) This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.
MORGAN STANLEY & CO.
INCORPORATED
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Name: Name:
-------------------------------- --------------------------------
(Printed) (Printed)
Date: Date:
-------------------------------- --------------------------------
<PAGE> 8
EXHIBIT A
Description of the Product
The Morgan Stanley Real Estate Investment Trust (REIT) Index for use as the
basis for
---------------------------------
<PAGE> 1
EXHIBIT 99.B9(h)
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
___________, 1996 by and between AON ASSET MANAGEMENT FUND, INC., a corporation
formed under the laws of the Commonwealth of Virginia (the "Company"), and AON
FUNDS, a business trust formed under the laws of the State of Delaware (the
"Trust").
WHEREAS, this Agreement is intended to effect the reorganization of the
Company into a Delaware business trust by the transfer of all of the assets of
each of the Company's Money Market Portfolio and the Flexible Asset Allocation
Portfolio (individually, a "current Fund" and together, the "current Funds") to
a corresponding portfolio of the Trust with the same name (individually, a
"successor Fund" and together, the "successor Funds") solely in exchange for
assumption by each successor Fund of all of the liabilities of the
corresponding current Fund and issuance to the corresponding current Fund of
Class Y shares of beneficial interest of such successor Fund (the "Trust
Shares") followed by the distribution, on the Closing Date, as hereinafter
defined, of the Trust Shares of each successor Fund to the holders of shares of
the corresponding current Fund (the "Fund Shareholders") and by the dissolution
and termination of the Company as provided herein, all upon the terms and
conditions hereinafter set forth and in accordance with the applicable laws of
the Commonwealth of Virginia and the State of Delaware;
NOW THEREFORE, in consideration of the premises and the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. SHAREHOLDER APPROVAL.
A special meeting (the "Special Meeting") of the respective Fund
Shareholders shall be called and held for the purpose of approving this
Agreement and the transactions contemplated herein.
2. REORGANIZATION.
The transactions described in this section are hereinafter referred to as
the "Reorganization." The Reorganization shall occur with respect to each
current Fund and its corresponding successor Fund and, unless the context
otherwise requires, all transactions contemplated hereby are to be entered into
by each current Fund with its corresponding successor Fund and no other
successor Fund.
<PAGE> 2
2.1 Subject to the terms and conditions set forth herein and on the basis
of the representations and warranties contained herein, each current Fund
agrees to assign, transfer and convey all of its assets as set forth in
paragraph 2.2 to its corresponding
successor Fund. The Trust, on behalf of each successor Fund, agrees in
exchange therefor (1) that each successor Fund shall assume all of the
corresponding current Fund's liabilities, whether contingent or otherwise,
existing as of the Closing Date, and further (2) that on the Closing Date each
successor Fund shall deliver to the Company the number of full and fractional
Trust Shares equal to the value and number of full and fractional shares of the
corresponding current Fund outstanding on the Closing Date, such Trust Shares
to be denominated in the same series, and to have relative rights, powers,
privileges, preferences and duties identical to, the shares of the
corresponding current Fund, except as otherwise provided for herein or in or
under the Trust's Agreement and Declaration of Trust (the "Declaration of
Trust").
2.2 The assets of the current Funds transferred to the corresponding
successor Funds shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividend receivables), claims
or rights of action or rights to register shares under applicable securities
laws, books and records of the current Funds, all other property owned by the
current Funds and all deferred or prepaid expenses shown as assets on the books
of the current Funds on the Closing Date.
2.3 Immediately upon delivery of the one share of each successor fund to
the Company pursuant to paragraph 8.1 of this Agreement, and subject to
respective approvals of the current Fund's Shareholders at the Special Meeting,
the Company is authorized, as the then initial shareholder of the Trust and
each of the successor Funds, (1) to elect as trustees of the Trust ("Trustees")
the persons who currently serve as directors of the Company and (2) to approve
(i) the investment advisory agreements between Aon Advisors, Inc., the
investment adviser of the current Funds (the "Adviser"), and the Trust with
respect to the successor Funds (the "Advisory Agreements"), which shall be
identical in every material respect to the investment advisory agreements
between the Adviser and the Company with respect to the corresponding current
Funds then in effect or previously approved by the respective Fund
Shareholders, and (ii) to approve the continuation for the Trust's fiscal year
ended October 31, 1996 of the engagement of the independent accountants who
currently serve in that capacity for the Company.
2.4 Upon consummation of the transactions described in paragraph 2.3 of
this Agreement, and immediately prior to or contemporaneously with consummation
of the transactions described in paragraph 2.1 of this Agreement, the share of
each successor Fund acquired by the corresponding current Fund pursuant to
paragraph 8.1 hereof shall be redeemed by the successor Fund for
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<PAGE> 3
$1.00 and the Company will distribute to each Fund Shareholder of record of a
current Fund, Trust Shares of the corresponding successor Fund pro rata in
proportion to the Fund Shareholder's interest in the current Fund in
liquidation and redemption of the Fund Shareholder's current Fund shares.
Simultaneously with such crediting of Trust Shares of the corresponding
successor Fund to Fund Shareholders, their current Fund shares shall be
canceled. The Trust will not issue certificates evidencing Trust Shares in
connection with such distribution except as the Trustees of the Trust may
determine from time to time in their sole discretion.
2.5 As soon as practicable after the distribution pursuant to paragraph
2.4 of Trust Shares with respect to both of the current Funds, the Company
shall take all actions necessary to effect its dissolution and to have its
corporate existence terminated in accordance with Virginia law.
2.6 Ownership of Trust Shares by the former Fund shareholders will be
reflected on the books of the applicable transfer agent of the Trust.
2.7 Any transfer taxes payable upon issuance of Trust Shares in a name
other than the name of the registered owner of the corresponding current Fund
shares on the books of the current Fund as of the Closing Date shall be paid by
the person to whom such Trust Shares are to be distributed as a condition of
such transfer.
2.8 Any reporting responsibility of a current Fund is and shall remain its
responsibility up to and including the later of the Closing Date and any date
on which the Company may have its corporate existence terminated.
3. CLOSING AND CLOSING DATE.
3.1 The closing shall occur at the later of (i) the date of final
adjournment of the Special Meeting and (ii) such later time as the parties may
mutually agree (the "Closing Date"). The transfer of all of the current Funds'
assets in exchange for the assumption by the successor Funds of the liabilities
of the current Funds and the issuance of Trust Shares, as described above,
together with all acts necessary to consummate such acts (the "Closing") shall
occur on the Closing Date at the offices of Aon Advisors, Inc., 123 North
Wacker Drive, Chicago, Illinois 60606 or at such other place as the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the last daily determination of each current Fund's net
asset value or at such other time and place as the parties may agree.
3.2 In the event that on the Closing Date, (a) the New York Stock Exchange
is closed to trading, or trading thereon is restricted, or (b) trading or
reporting of trading on said Exchange or in any market in which portfolio
securities of a current Fund
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<PAGE> 4
are traded is disrupted so that accurate appraisal of the value of the total
net assets of a current Fund is impracticable, the Closing shall be postponed
until the first business day upon which trading shall have been fully resumed
and reporting shall have been restored.
3.3 The Company shall deliver at the Closing a certificate of an
authorized officer of the Company stating that it has notified the custodian of
the Company of the transfer of the assets of each current Fund to its
corresponding successor Fund.
3.4 The transfer agent for each of the current Funds shall deliver at the
Closing a certificate as to the transfer on its books and records of each
current Fund Shareholder's account to an account of a holder of Trust Shares of
the corresponding successor Fund. The Trust shall issue and deliver a
confirmation to the Company of the number of Trust Shares to be credited to the
Company with respect to each successor Fund on the Closing Date or provide
evidence satisfactory to the Company that such Trust Shares have been credited
to the Company's account on the books of the Trust.
3.5 At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts and other documents as
the other party may reasonably request.
4. VALUATION.
4.1 The value of each current Fund's net assets to be acquired by the
Trust on behalf of each successor Fund hereunder shall be the net asset value
computed as of the last daily determination of each current Fund's net asset
value on the last business day preceding the Closing Date, using the valuation
procedures set forth in such current Fund's then current prospectus or
statement of additional information that forms a part of the Company's
Registration Statement (the "Registration Statement") under the Securities Act
of 1933 ("Securities Act"). For purposes of this Agreement, a "business day"
shall mean each day that the New York Stock Exchange is open for trading (which
excludes the following national business holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day).
4.2 The number, value and denominations of full and fractional Trust
Shares to be issued in exchange for a current Fund's net assets shall be equal
to the number, value and denominations of full and fractional shares
outstanding as of the last daily determination of each current Fund's net asset
value on the last business day preceding the Closing Date (after giving effect
to any issuances or redemptions of shares of that current Fund prior to or as
of such time). The Company shall not issue any
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<PAGE> 5
shares after the last daily determination of each current Fund's net asset
value on the last business day preceding the Closing Date.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company represents and warrants as follows:
5.1 Organization, Existence, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has the power to carry on its business as it is
now being conducted. The Company has all necessary Federal, state and local
authorizations to own all of its properties and assets and to conduct its
business as it is now being conducted.
5.2 Registration as an Investment Company. The Company is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company; such registration has not been revoked
or rescinded and is in full force and effect.
5.3 Capitalization. The authorized capital stock of the Company consists
of three billion shares of Common Stock, with a par value of $.001 per share.
Currently all the authorized capital stock of the Company is divided into the
following eight separate classes of shares: Money Market Portfolio -
750,000,000 shares; Flexible Asset Allocation Portfolio - 450,000,000 shares;
Class C - 400,000,000 shares; Class D - 400,000,000 shares; Class E -
250,000,000 shares; Class F - 250,000,000 shares; Class G - 250,000,000 shares;
and Class H - 250,000,000 shares. No shares are held in the treasury of the
Company. Because the Company is an open-end investment company engaged in the
continuous offering and redemption of its shares, the number of outstanding
shares may change prior to the Closing Date.
5.4 Financial Statements. The audited financial statements of the Company
for the fiscal year ended October 31, 1995 (the "Company Financial Statements")
fairly present the financial position of each current Fund as of the date
thereof and the results of its operations and changes in its net assets for the
periods indicated.
5.5 Current Fund Shares. The outstanding shares of the current Funds are
duly and validly issued and outstanding, fully paid and nonassessable.
5.6 Authority Relative to this Agreement. The Company has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Company's
Board of
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<PAGE> 6
Directors and no other corporate proceedings by the Company, other than the
approval of this Agreement by the respective Fund Shareholders at the Special
Meeting, are necessary to authorize its officers to effectuate this Agreement
and the transactions contemplated hereby. The Company is not a party to or
obligated under any charter, by-law, indenture or contract provision or any
other commitment or obligation, or subject to any order or decree, which would
be violated by its executing and carrying out this Agreement.
5.7 Liabilities. There are no liabilities of the current Funds, whether
or not determined or determinable, other than liabilities disclosed or provided
for in the Company Financial Statements and liabilities incurred in the
ordinary course of business subsequent to October 31, 1995, none of which has
been materially adverse to the business, assets or results of operations of any
of the current Funds. All liabilities of the current Funds to be assumed by
the successor Funds were incurred by the current Funds in the ordinary course
of business.
5.8 Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened which would adversely
affect the current Funds or their respective assets or business or which would
prevent or hinder consummation of the transactions contemplated hereby.
Neither the Company nor any of the current Funds is under the jurisdiction of a
court in a proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
5.9 Contracts. Except for contracts and agreements described in the
current prospectus and statement of additional information of the current
Funds, under which no default exists, the Company is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise, license or
permit of any kind or nature whatsoever with respect to the current Funds.
5.10 Taxes. The Federal income tax returns of each current Fund have been
filed for all taxable years to and including the taxable year ended October 31,
1995, and all taxes payable pursuant to such returns have been paid. Each
current Fund has qualified as a regulated investment company ("RIC") under
Subchapter M of the Code, for each taxable year since it commenced operations
and will continue to meet all the requirements for such qualification for its
current taxable year.
5.11 Registration Statement. The Company has filed or will file a
post-effective amendment to the Registration Statement (the "Post-Effective
Amendment") to become effective on or about the Closing Date. The Company will
notify the Securities and Exchange Commission (the "Commission") that the Trust
will adopt the Company's existing Registration Statement with respect to the
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<PAGE> 7
shares of the current Funds. At the time the Post-Effective Amendment becomes
effective, the Registration Statement, insofar as it relates to the Company,
(i) will comply in all material respects with the provisions of the Securities
Act and the rules and regulations of the Commission thereunder (the
"Regulations") and (ii) will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at the time Post-Effective
Amendment becomes effective, at the time of the Special Meeting and at the
Closing Date, the prospectus and statement of additional information, as
amended or supplemented by any amendments or supplements filed by the Company,
insofar as it relates to the Company, will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5.12 Dissolution and Termination. The Company will take all actions
necessary to effect its dissolution and to have its corporate existence
terminated in accordance with Virginia law as soon as practicable after
completion of the Reorganization.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUST.
The Trust represents and warrants to the Company as follows:
6.1 Organization, Existence, etc. The Trust is a Delaware business trust
duly organized, validly existing and in good standing under the laws of the
State of Delaware; the Trust has filed a Certificate of Trust with the
Secretary of State of Delaware pursuant to the Delaware Business Trust Act; and
each successor Fund and its Class Y shares have been duly authorized,
established and designated as a series and a class within a series,
respectively, of the Trust in accordance with the Trust's Agreement and
Declaration of Trust.
6.2 Registration as an Investment Company. On the Closing Date and upon
the adoption of the Registration Statement, the Trust will be registered under
the 1940 Act as an open-end management investment company.
6.3 Capitalization. Except as described in Section 8.1 hereto, prior to
the Closing Date, there shall be no issued and outstanding Trust Shares. Trust
Shares issued on the Closing Date in connection with the transactions
contemplated herein will be duly and validly issued and outstanding, fully paid
and non-assessable under Delaware law.
6.4 Commencement of Operations. The Trust has not commenced operations
and will not commence operations until after the Closing.
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<PAGE> 8
6.5 Authority Relative to this Agreement. The Trust has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the trustees of
the Trust, and no other proceedings are necessary to authorize its officers to
effectuate this Agreement and the transactions contemplated hereby. The Trust
is not a party to or obligated under any charter, by-law, indenture or contract
provision or any other commitment or obligation, or subject to any order or
decree, which would be violated by its executing and carrying out this
Agreement.
6.6 Liabilities. There are no liabilities of the Trust, whether or not
determined or determinable, other than liabilities otherwise previously
disclosed to the Company, none of which has been materially adverse to the
business, assets or results of operations of the Trust.
6.7 Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Trust, threatened which would adversely
affect the Trust or its assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby.
6.8 Contracts. Except for contracts and agreements disclosed to the
Company, under which no default exists, the Trust is not a party to or subject
to any material contract, debt instrument, plan, lease, franchise, license or
permit of any kind or nature whatsoever.
6.9 Taxes. The Trust intends that each successor Fund will be a "fund" as
defined in section 851(h)(2) of the Code and will meet all the requirements to
qualify as a RIC under Subchapter M of the Code for each of the taxable years
following the Reorganization.
6.10 Registration Statement. In connection with the Reorganization, the
Trust will adopt the Registration Statement. At the time the Post-Effective
Amendment as adopted by the Trust becomes effective, the Registration Statement
insofar as it relates to the Trust (i) will comply in all material respects
with the provisions of the Securities Act and the Regulations and (ii) will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
6.11 Continuation of the Company's Business. The Trust has no plan or
intention to issue additional Trust Shares following the Reorganization except
for shares issued in the ordinary course of the Trust's business as an open-end
investment company; nor does the Trust have any plan or intention to redeem or
otherwise reacquire any Trust Shares issued to Fund Shareholders pursuant to
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<PAGE> 9
the Reorganization, other than through redemptions arising in the ordinary
course of that business. The Trust will actively conduct the Company's
business in the same manner that the Company conducted it immediately before
the Reorganization and has no plan or intention to sell or otherwise dispose of
any of the assets to be acquired by the Trust in the Reorganization, except for
dispositions made in the ordinary course of its business and dispositions
necessary to maintain the Trust's status as a RIC under Subchapter M of the
Code.
7. CONDITIONS TO OBLIGATIONS OF THE TRUST.
The obligations of the Trust hereunder with respect to the consummation of
the Reorganization as it relates to each successor Fund are subject to the
satisfaction of the following conditions:
7.1 Approval by Shareholders. This Agreement and the transactions
contemplated hereby, including, as necessary, any temporary amendment of any
investment restrictions of a current Fund that might otherwise preclude the
consummation of the Reorganization, shall have been approved by the affirmative
vote of at least two-thirds of the outstanding shares of each of the current
Funds entitled to vote on the matter.
7.2 Covenants, Warranties and Representations. The Company shall have
complied with each of its covenants contained herein, each of the
representations and warranties of the Company contained herein shall be true in
all material respects as of the Closing Date, there shall have been no material
adverse change in the financial condition, results of operations, business,
properties or assets of either of the current Funds since October 31, 1995, and
the Trust shall have received a certificate of the President of the Company
satisfactory in form and substance to the Trust so stating.
7.3 Regulatory Approval. The Post-Effective Amendment under the 1940 Act
and the Securities Act relating to the Trust and the current Funds shall have
been declared effective by the Commission and no stop orders under the
Securities Act pertaining thereto shall have been issued; all necessary orders
of exemption under the 1940 Act with respect to the transactions contemplated
hereby shall have been granted by the Commission; and all approvals,
registrations, and exemptions under Federal and state laws considered to be
necessary shall have been obtained.
7.4 Tax Opinion. The Trust shall have received an opinion of its tax
counsel, dated the Closing Date, to the effect that, on the basis of existing
provisions of the Code, current administrative rules and court decisions, for
Federal income tax purposes: (i) each transfer by a current Fund of all of its
assets to its corresponding successor Fund solely in exchange for the
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<PAGE> 10
assumption by such successor Fund of all of the liabilities of such current
Fund and the issuance to such current Fund of Trust Shares of such successor
Fund, followed by the distribution on the Closing Date of such Trust Shares to
Fund Shareholders in liquidation and redemption of the Fund Shareholders'
current Fund shares, and the dissolution of the Company will constitute a
"reorganization" within the meaning of Section 368(a) of the Code; (ii) no gain
or loss will be recognized by the Company (or either current Fund) or the Trust
(or either successor Fund) as a result thereof; (iii) no gain or loss will be
recognized by the Fund Shareholders upon the exchange of their current Fund
shares in exchange for Trust Shares in connection therewith; (iv) the aggregate
tax basis of the Trust Shares received by a current Fund shareholder in such
exchange will be the same as the aggregate tax basis of the current Fund shares
given up in such exchange, and (v) the holding period for Trust Shares received
by a current Fund shareholder in such exchange will include the shareholder's
holding period for current Fund shares given up in such exchange, provided such
current Fund shares were held as capital assets by such shareholder at the time
of the exchange. In rendering such opinion, tax counsel may rely, without
independent verification, upon the statements made in this Agreement, upon the
proxy statement which will be distributed to the Fund Shareholders in
connection with the Reorganization, and upon written representations by the
Trust, the Company and current Fund shareholders.
7.5 Opinion of Counsel. The Company and the Trust shall have received the
opinion or opinions of its counsel, dated as of the Closing Date, to the effect
that: (i) the Company is a corporation duly organized and existing under the
laws of the Commonwealth of Virginia and the Trust is a Delaware business trust
duly organized and validly existing under the laws of the State of Delaware;
(ii) each of the Company and the Trust is an open-end management investment
company registered under the Act; (iii) this Agreement and the Reorganization
provided for herein and the execution of this Agreement have been duly
authorized and approved by all requisite action of the Company and the Trust,
and this Agreement has been duly executed and delivered by the Company and the
Trust, and is a valid and binding obligation of each of the Company and the
Trust, subject to applicable bankruptcy, insolvency, fraudulent conveyance and
similar laws or court decisions regarding enforcement of creditors' rights
generally and to general equitable principles; (iv) the Post-Effective
Amendment has been declared effective under the Securities Act and to the best
of counsel's knowledge no stop order has been issued or threatened suspending
its effectiveness; (v) to the best of such counsel's knowledge, no consent,
approval, order or other authorization of any federal or state court or
administrative or regulatory agency is required for the Company or the Trust to
enter into this Agreement or to carry out its terms that has not already been
obtained, other than where the failure to obtain any such consent, approval,
order or authorization would not have a material
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<PAGE> 11
adverse effect on the operations of the Company or the Trust; and (vi) the
Trust Shares of the successor Fund to be issued in the Reorganization have been
duly authorized and upon issuance thereof in accordance with this Agreement
will be validly issued, fully paid and nonassessable.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company hereunder with respect to the consummation
of the Reorganization as it relates to each current Fund are subject to the
satisfaction of the following conditions:
8.1 Issuance of Initial Share. Prior to Closing, the trustees of the
Trust shall have authorized the issuance of, and the Trust shall have issued,
one share of each successor Fund to each corresponding current Fund in
consideration of the payment of $1.00 and the Company shall have elected the
initial trustees of the Trust and voted on the matters referred to in paragraph
2.3 of this Agreement.
8.2 Covenants, Warranties and Representations. The Trust shall have
complied with each of its covenants contained herein, and each of the
representations and warranties of the Trust contained herein shall be true in
all material respects as of the Closing Date.
8.3 Regulatory Approval. All necessary orders of exemption under the 1940
Act with respect to the transactions contemplated hereby shall have been
granted by the Commission; and all approvals, registrations, and exemptions
under Federal and state laws considered to be necessary shall have been
obtained.
8.4 Legal Opinions. The Company and the Trust shall have received, and
shall have been duly authorized to rely on, the opinions referred to in
paragraphs 7.4 and 7.5 of this Agreement.
9. AMENDMENTS; WAIVERS; TERMINATION; NON-SURVIVAL OF COVENANTS, WARRANTIES
AND REPRESENTATIONS, GOVERNING LAW.
9.1 Amendments. This Agreement may be amended at any time by action of
the directors or trustees, as the case may be, of either party hereto
notwithstanding approval thereof by the shareholders of the Company, provided
that no amendment shall have a material adverse effect on the interests of such
shareholders.
9.2 Waivers. At any time prior to the Closing Date either of the parties
may waive compliance with any of the covenants or conditions made for its
benefit contained herein.
9.3 Termination by Either Party. This Agreement may be terminated at any
time prior to the Closing Date without liability
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<PAGE> 12
on the part of either party hereto or its respective trustees, directors,
officers or shareholders by either party on notice to the other.
9.4 Survival. No representations, warranties or covenants made in or
pursuant to this Agreement (including certifications of officers) shall survive
the Reorganization, except to the extent provided in connection with the
issuance of the opinion referred to in paragraph 7.4 of this Agreement.
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Delaware, without giving effect to principles of
conflicts of laws; provided, however, that the due authorization, execution and
delivery of this Agreement, in the case of the Company, shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without giving effect to principles of conflict of laws.
10. EXPENSES LIABILITIES.
The current Funds and the successor Funds shall be responsible for all of
their respective expenses in connection with the Reorganization.
11. GENERAL.
This Agreement supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement of the
terms of the agreement between the parties and may not be changed or terminated
orally. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by the Trust and the
Company and delivered to each of the parties hereto. The heading contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person not a party to this
Agreement any rights or remedies under or by reason of this Agreement.
* * * * * * * *
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<PAGE> 13
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Attest: AON ASSET MANAGEMENT FUND, INC.
By_______________________ By________________________
Secretary President
Attest: AON FUNDS
By_______________________ By________________________
Secretary President
Copies of the Certificate of Trust , as amended, creating the Trust are on file
with the Secretary of the Trust, and notice is hereby given that this Agreement
and Plan of Reorganization is executed on behalf of the Trust by officers of
the Trust as officers and not individually and that the obligations of or
arising out of this Agreement are not binding upon any of the trustees,
officers, shareholders, employees or agents of the Trust personally but are
binding only upon the assets and property of the Trust.
-13-
<PAGE> 1
EXHIBIT 99.B9(i)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael A. Conway his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign the Registration Statement of Aon Asset Management Fund,
Inc., a Virginia corporation, on Form N-1A under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission
and such other jurisdictions in which the Fund's shares are or are sought to be
registered or qualified for sale, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
DATED: April 26, 1996
/s/ Michael A. Cavataio
------------------------------
<PAGE> 2
EXHIBIT 99.B9(i)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael A. Conway his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign the Registration Statement of Aon Asset Management Fund,
Inc., a Virginia corporation, on Form N-1A under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission
and such other jurisdictions in which the Fund's shares are or are sought to be
registered or qualified for sale, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
DATED: April 26, 1996
/s/ Donald W. Phillips
-----------------------------
<PAGE> 3
EXHIBIT 99.B9(i)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Michael A. Conway his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement of Aon Asset Management Fund, Inc., a Virginia
corporation, on Form N-1A under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and any or all amendments thereto,
and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission and such other
jurisdictions in which the Fund's shares are or are sought to be registered or
qualified for sale, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all said attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
DATED: April 26, 1996
/s/ Carleton D. Pearl
--------------------------
<PAGE> 4
EXHIBIT 99.B9(i)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Michael A. Conway his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement of Aon Asset Management Fund, Inc., a Virginia
corporation, on Form N-1A under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and any or all amendments thereto,
and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission and such other
jurisdictions in which the Fund's shares are or are sought to be registered or
qualified for sale, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all said attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
DATED: April 26, 1996
/s/ Richard J. Peters
--------------------------
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
December 1, 1995 for the Aon Asset Management Fund, Inc. (comprised of the
Money Market Portfolio and the Flexible Asset Allocation Portfolio) in the
Registration Statement (Form N-1A) and related Prospectus of the Aon Asset
Management Fund, Inc. filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 8 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-43133) and in this Amendment No. 9
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-6422).
ERNST & YOUNG LLP
Chicago, Illinois
June 7, 1996
<PAGE> 1
Exhibit 99.B13(b)
SUBSCRIPTION AGREEMENT
(Aon Funds)
AGREEMENT made as of __________, 1996 between Aon Funds, a
Delaware business trust (herein called the "Trust"), and Combined Insurance
Company of America, a __________ corporation, or another subsidiary of Aon
Corporation ("Aon") designated by Aon (herein called the "Purchaser").
WHEREAS, the Trust is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act")
and proposes to offer shares of Class C of each of the Money Market Series and
Asset Allocation Series of the Trust (the "Class C Shares").
WHEREAS, the Purchaser desires to subscribe for and acquire
Class C Shares and the Trust is willing to offer and sell such Class C Shares,
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound hereby, it is
agreed between the parties hereto as follows:
1. (a) The Purchaser hereby subscribes for 1,000 Class C
Shares of the Money Market Series of the Trust and promises to pay to
the Trust, on behalf of the Money Market Series, as the total
consideration for such Class C Shares, the sum of $1.00 per Class C
Share or an aggregate of $1,000, which sum shall be payable in cash.
(b) The Purchaser hereby subscribes for 100 Class C
Shares of the Asset Allocation Series of the Trust and promises to pay
to the Trust, on behalf of the Asset Allocation Series, as the total
consideration for such Class C Shares, the product of (i) 100 and (ii)
the net asset value per share (as determined by using the procedures
set forth in the Trust's current prospectus) of the corresponding
Class Y Shares of the Asset Allocation Series as of the time of
issuance.
<PAGE> 2
2. The Purchaser represents and warrants to the Trust that:
(a) the subscription of the Purchaser hereunder is
made, and such Class C Shares will be acquired, by the
Purchaser solely for investment purposes and with no present
intention to sell, redeem or otherwise dispose of the same or
any part thereof; and
(b) the subscription of the Purchaser hereunder is
made, and such Class C Shares will be accepted, by the
Purchaser with the understanding that such Class C Shares will
not have been registered under the Securities Act of 1933 (the
"1933 Act") or the securities laws of any state or other
jurisdiction and the Trust has no present intention to
register the same under such 1933 Act or laws.
3. The subscription and the rights, benefits and privileges
of the Purchaser hereunder may not be transferred or assigned, and the
Class C Shares acquired hereby can be disposed of only by redemption.
4. If the registration statement filed under the Securities
Act of 1933 with respect to the Class C Shares does not become
effective prior to __________, 1996, the subscription of the Purchaser
hereunder shall become null and void and the full amount paid in by
the Purchaser will be refunded to the undersigned on demand without
any deduction.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their officers designated below as of the day and
year first above written.
AON FUNDS, a Delaware business trust
Attest:___________________________ By:_________________________________
Name:
Title:
COMBINED INSURANCE COMPANY
OF AMERICA, a ________ corporation
Attest:___________________________ By:_________________________________
Name:
Title:
- 2 -
<PAGE> 1
Exhibit 99.B13(c)
SUBSCRIPTION AGREEMENT
(Aon Funds)
AGREEMENT made as of __________, 1996 between Aon Funds, a
Delaware business trust (herein called the "Trust"), and Combined Insurance
Company of America, a __________ corporation, or another subsidiary of Aon
Corporation ("Aon") designated by Aon (herein called the "Purchaser").
WHEREAS, the Trust is or will shortly be registered as an
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act") and proposes to offer shares of Class Y (the "Class Y Shares")
and Class C (the "Class C Shares") of each of the S&P 500 Index Series, REIT
Index Series, International Equity Series and Government Securities Series of
the Trust.
WHEREAS, the Purchaser desires to subscribe for and acquire
Class Y Shares and Class C Shares and the Trust is willing to offer and sell
such Class Y Shares and Class C Shares, subject to the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound hereby, it is
agreed between the parties hereto as follows:
1. (a) The Purchaser hereby subscribes for 100,000 Class Y
Shares of the S&P 500 Index Series of the Trust and promises to pay
the Trust, on behalf of the S&P 500 Index Series, as the total
consideration for such Class Y Shares, the sum of $10.00 per Class Y
Share or an aggregate of $1,000,000, which sum shall be payable in
cash.
(b) The Purchaser hereby subscribes for 100,000 Class Y
Shares of the REIT Index Series of the Trust and promises to pay the
Trust, on behalf of the REIT Index Series, as the total consideration
for such Class Y Shares, the sum of $10.00 per Class Y Share or an
aggregate of $1,000,000, which sum shall be payable in cash.
(c) The Purchaser hereby subscribes for 100,000 Class Y
Shares of the International Equity Series of the Trust and promises to
pay the Trust, on behalf of the International Equity Series, as the
total consideration for such Class Y Shares, the sum of $10.00 per
Class Y Share or an aggregate of $1,000,000, which sum shall be
payable in cash.
<PAGE> 2
(d) The Purchaser hereby subscribes for 100,000 Class Y
Shares of the Government Securities Series of the Trust and promises to
pay the Trust, on behalf of the Government Securities Series, as the
total consideration for such Class Y Shares, the sum of $10.00 per
Class Y Share or an aggregate of $1,000,000, which sum shall be payable
in cash.
2. (a) The Purchaser hereby subscribes for 100 Class C
Shares of the S&P 500 Index Series of the Trust and promises to pay
the Trust, on behalf of the S&P 500 Index Series, as the total
consideration for such Class C Shares, the sum of $10.00 per Class C
Share or an aggregate of $1,000, which sum shall be payable in cash.
(b) The Purchaser hereby subscribes for 100 Class C
Shares of the RIET Index Series of the Trust and promises to pay the
Trust, on behalf of the REIT Index Series, as the total consideration
for such Class C Shares, the sum of $10.00 per Class C Share or an
aggregate of $1,000, which sum shall be payable in cash.
(c) The Purchaser hereby subscribes for 100 Class C
Shares of the International Equity Series of the Trust and promises to
pay the Trust, on behalf of the International Equity Series, as the
total consideration for such Class C Shares, the sum of $10.00 per
Class C Share or an aggregate of $1,000, which sum shall be payable in
cash.
(d) The Purchaser hereby subscribes for 100 Class C
Shares of the Government Securities Series of the Trust and promises
to pay the Trust, on behalf of the Government Securities Series, as
the total consideration for such Class C Shares, the sum of $10.00 per
Class C Share or an aggregate of $1,000, which sum shall be payable in
cash.
3. The Purchaser represents and warrants to the Trust that:
(a) the subscription of the Purchaser hereunder is made, and
such Class Y Shares and Class C Shares will be acquired, by the
Purchaser solely for investment purposes and with no present intention
to sell, redeem or otherwise dispose of the same or any part thereof;
and
(b) the subscription of the Purchaser hereunder is made, and
such Class Y Shares and Class C Shares will be accepted, by the
Purchaser with the understanding that such Class Y Shares and Class C
Shares will not have been registered under the Securities Act of 1933
(the "1933 Act") or the securities laws of any state or other
jurisdiction and the Trust has no present intention to register the
same under such 1933 Act or laws.
4. The subscription and the rights, benefits and privileges
of the Purchaser hereunder may not be transferred or assigned, and the
Class Y Shares and Class C Shares acquired hereby can be disposed of
only by redemption.
- 2 -
<PAGE> 3
5. If the registration statement filed under the Securities
Act of 1933 with respect to the Class Y Shares and Class C Shares does
not become effective prior to __________, 1996, the subscription of
the Purchaser hereunder shall become null and void and the full amount
paid in by the Purchaser will be refunded to the undersigned on demand
without any deduction.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their officers designated below as of the day and
year first above written.
AON FUNDS, a Delaware business trust
Attest:___________________________ By:_________________________________
Name:
Title:
COMBINED INSURANCE COMPANY
OF AMERICA, a_________ corporation
Attest:___________________________ By:_________________________________
Name:
Title:
- 3 -
<PAGE> 1
Exhibit 99.B15
DISTRIBUTION PLAN
AON FUNDS
S&P 500 INDEX PORTFOLIO
ASSET ALLOCATION PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
REIT INDEX PORTFOLIO
MONEY MARKET PORTFOLIO
CLASS C SHARES
WHEREAS, Rule 12b-1 ("Rule 12b-1") under the Investment
Company Act of 1940, as amended (the "1940 Act"), provides that, except as
provided in Rule 12b-1, it shall be unlawful for any registered open-end
management investment company (other than such a company complying with the
provisions of Section 10(d) under the 1940 Act) to act as distributor of
securities of which such company is the issuer, except through an underwriter.
WHEREAS, Rule 12b-1 provides that a registered open-end
management investment company will be deemed to be acting as a distributor of
securities of which it is the issuer, other than through an underwriter, if it
engages directly or indirectly in financing any activity which is primarily
intended to result in the sale of shares issued by such company, including but
not necessarily limited to advertising, compensation of underwriters, dealers
and sales personnel, the printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of sales literature.
WHEREAS, the activities of Aon Funds, a Delaware business
trust (the "Trust"), as hereinafter described may be deemed to constitute the
financing of an activity primarily intended to result in the sale of the
Trust's shares and the Trust may be deemed a distributor of its own shares.
WHEREAS, Rule 12b-1 provides that a registered, open-end
management investment company may act as a distributor of securities of which
it is the issuer, provided that any payments made by such company in connection
with such distribution are made pursuant to a written plan describing all
material aspects of the
<PAGE> 2
proposed financing of distribution and that all agreements with any person
relating to implementation of the plan are in writing, and provided further,
that certain additional conditions are met.
WHEREAS, the Board of Trustees of the Trust (the "Board of
Trustees"), in considering whether the Trust should adopt and implement this
Distribution Plan (the "Plan"), has evaluated such information as it deemed
necessary to an informed determination of whether this Plan should be adopted
and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Class C shares
(the "Shares") of the Trust's S&P 500 Index Portfolio, Asset Allocation
Portfolio, Government Securities Portfolio, International Equity Portfolio,
Money Market Portfolio and REIT Index Portfolio (collectively, the "Portfolios")
for such purposes, and has determined that there is a reasonable likelihood that
the adoption and implementation of this Plan will benefit the Trust, such
Portfolios and the holders of the Shares representing interests in such
Portfolios;
NOW, THEREFORE, the following shall constitute the Plan
pursuant to which distribution of the Shares representing interests in the
Portfolios shall be made.
SECTION 1. The Trust may act as the distributor of
Shares of which it is the issuer, pursuant to Rule 12b-1, according to the
terms of this Plan.
SECTION 2. The Trust may expend daily amounts at an
annual rate of 0.25% of the average daily net asset value of the Shares of each
of its Portfolios (.10% in the case of the Money Market Portfolio) to finance
any activity which is primarily intended to result in the sale of Shares, or
the provision of services to holders of Shares, of such Portfolios, including,
without limitation, expenditures consisting of payments to a principal
underwriter of the Trust (the "Principal Underwriter") pursuant to a written
agreement, in order (i) to enable the Principal Underwriter to pay for any
activity primarily intended to result in the sale of Shares of such Portfolios,
including, without limitation, (a) compensation to public relations consultants
or other persons assisting in distribution of Shares of such Portfolios, (b)
advertising, (c) printing and mailing of prospectuses and reports for
distribution to persons other than current shareholders, (d) preparation and
distribution of advertising material and sales literature and (e) conducting
public relations efforts such as seminars; (ii) to enable the Principal
Underwriter to pay or to have paid to others who sell Shares of such Portfolios
a maintenance or other fee, at such intervals as the Principal Underwriter may
determine, in respect of Shares of such Portfolios previously sold by any such
others and remaining outstanding during the period in respect of which such fee
is or
-2-
<PAGE> 3
has been paid; and/or (iii) to compensate the Principal Underwriter for its
efforts in respect of sales of Shares of such Portfolios since inception of the
Plan.
SECTION 3. This Plan shall not take effect with respect
to a Portfolio until it has been approved (i) by votes of a majority of both
(a) the Board of Trustees of the Trust and (b) those Trustees of the Trust who
are not "interested persons" of the Trust (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of this Plan or
in any agreements relating to the Plan ("Rule 12b-1 Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan or such agreements
and (ii) by a vote of a "majority of the outstanding voting securities"
consisting of Class C shares of such Portfolio (as defined in the 1940 Act).
SECTION 4. Unless sooner terminated pursuant to Section
6, this Plan shall continue in effect with respect to each Portfolio for a
period of one year from the date of its adoption or implement action with
respect to such Portfolio and thereafter shall continue in effect so long as
such continuance is specifically approved at least annually in the manner
provided for approval of this Plan in clause (i) of Section 3.
SECTION 5. Any person authorized to direct the
disposition of monies paid or payable by a Portfolio pursuant to this Plan or
any related agreement shall provide to the Board of Trustees, and the Board of
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated with respect to a
Portfolio at any time by vote of a majority of the Rule 12b-1 Trustees, or by
vote of a "majority of the outstanding voting securities" consisting of Class C
shares of such Portfolio.
SECTION 7. Any agreement of the Trust related to this
Plan shall be in writing, and shall provide:
(i) That such agreement may be terminated with respect to
a Portfolio at any time, without payment of any
penalty, by vote of a majority of the Rule 12b-1
Trustees or by a vote of a "majority of the
outstanding voting securities" consisting of Class C
shares of such Portfolio on not more than sixty days'
-3-
<PAGE> 4
written notice to any other party to the agreement;
and
(ii) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 8. This Plan may be amended at any time by the
Board of Trustees, provided that it may not be amended with respect to any
Portfolio to increase materially the limitation on the annual percentage of
average daily net assets that may be expended without the approval of holders
of a "majority of the outstanding voting securities" consisting of Class C
shares of such Portfolio and may not be materially amended in any case without
a vote of a majority of both the Board of Trustees and the Rule 12b-1 Trustees.
Any amendment of this Plan to increase or modify the expense categories
initially designated in Section 2 above shall only require approval of a
majority of the Board of Trustees and the Rule 12b-1 Trustees if such amendment
does not include an increase in the expense limitation set forth in such
Section 2.
________________, 1996
-4-
<PAGE> 1
EXHIBIT 99.B16
Schedule for Computation of Performance Quotations
Asset Allocation Fund (Class Y Shares)
- --------------------------------------
One year period ended October 31, 1995:
1
$1,000 (1 + .2644) = $1,264.35
Inception (March 1, 1994) through October 31, 1995:
2.16666
$1,000 (1 + .1597) = $1,378.51
Money Market Fund (Class Y shares)
- ----------------------------------
Yield Quotation: .00098271545 365
------------ X --- = 5.12%
1.00 7
365/7
Effective Yield Quotation: [(.00098271545 + 1) ] - 1 = 5.26%
<PAGE> 1
EXHIBIT 99.B18
FORM OF AON FUNDS
PLAN PURSUANT TO RULE 18f-3(d)
UNDER THE INVESTMENT COMPANY ACT OF 1940
RECITALS
A. WHEREAS, if an open-end management investment company registered as such
under the Investment Company Act of 1940, as amended (the "1940 Act"), wishes
to offer multiple classes of shares each representing an interest in the same
portfolio of securities, the board of directors or trustees of such company
must adopt a written plan setting forth the separate arrangement and expense
allocation of each class, and any related conversion features or exchange
privileges;
B. WHEREAS, Aon Funds (the "Trust"), a Delaware business trust registered
under the 1940 Act as an open-end management investment company of the series
type, intends to offer shares in series, as identified from time to time on
Schedule A hereto (each such series being referred to herein individually as a
"Fund" and all of such series being referred to herein collectively as the
"Funds");
C. WHEREAS, the Trust wishes to establish two classes of shares of each
Fund, to be known as the "Class C Shares" and the "Class Y Shares;" and
D. WHEREAS, a majority of the trustees of the Trust (the "Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust (as defined in the 1940 Act), have found, as to each Fund, that the
provisions set forth below under "Plan" (including the provisions relating to
expense allocations between classes of such Fund) is in the best interests of
each class of shares of such Fund, considered individually, and of such Fund as
a whole;
E. NOW, THEREFORE, each Fund hereby approves the provisions set forth
below under "Plan" (such provisions being referred to herein collectively as
the "Plan"), effective as of the date set forth opposite the name of such Fund
on Schedule A hereto.
PLAN
1. Differences in Distribution Arrangements.
a. Class Y Shares of any Fund may be offered (i) in connection with the
reorganization of Aon Asset Management Fund, Inc. (the "Company") into the
Trust pursuant to the terms of an Agreement and Plan of Reorganization between
the Company and the
<PAGE> 2
Trust (the "Plan of Reorganization"), (ii) in connection with the initial
capitalization of any Fund and (iii) directly by any distributor(s) of that
Fund to (A) the holders of record of outstanding shares of the Company as of
the effective time of the reorganization of the Company into the Trust pursuant
to the Plan of Reorganization (it being understood that Class Y Shares of a
Fund may continue to be offered to such holders, as such, subsequent to such
time); (B) investment advisory clients of Aon Advisers, Inc. ("AAI") or any of
its affiliates; (C) affiliates of AAI or Aon Corporation; and (D) such other
entities and persons as may be set forth from time to time in that Fund's
Prospectus and/or Statement of Additional Information as persons eligible to
purchase Class Y Shares of that Fund.
b. Class C Shares of any Fund may be offered (i) in connection with the
initial capitalization of such Fund and (ii) directly by any distributor(s) of
that Fund to investors who are not eligible to purchase Class Y Shares of that
Fund. To compensate a Fund's distributor(s) for the distribution of Class C
Shares of that Fund to such investors, including making payments to
broker-dealers, retirement plan administrators and/or financial services
companies or similar organizations, and for incurring other expenses in
connection with such distribution and providing shareholder and administrative
services described below, the Fund will pay a distribution fee of 0.25% per
annum of the average daily net asset value of its Class C Shares (0.10% per
annum of the average daily net asset value of Class C Shares of a "money
market" Fund) to its distributor(s) in accordance with a Plan of Distribution
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act (the
"Distribution Plan").
c. Shares of each class are subject to such investment minimums as may be
set forth from time to time in the Prospectus and/or Statement of Additional
Information relating to such shares.
2. Differences in Shareholder Services.
Beneficial owners of Class C Shares of any Fund generally will have
smaller accounts than holders of Class Y Shares of the same Fund, will engage
in more shareholder transactions in relation to the size of their holdings, and
will require more information-, communication-, and transaction-related
services, including automatic investment programs, in relation to such
holdings. These services will be provided by broker-dealers, retirement plan
administrators and/or financial services companies or similar organizations who
hold Class C Shares of that Fund for the benefit of their customers, as well as
by that Fund's distributor(s) and transfer or similar agent.
<PAGE> 3
3. Expense Payments and Expense and Income Allocations.
All expenses incurred with respect to a class under the Distribution Plan
shall be paid solely by that class.
All other expenses that are readily associated with a class (collectively,
"Class Expenses") shall be paid by that class. Class Expenses shall include,
without limitation: (a) printing and postage expenses related to preparing and
distributing materials, such as shareholder reports, prospectuses and proxies,
to current shareholders of a specific class; (b) Securities and Exchange
Commission ("SEC"), Blue Sky and foreign registration fees relating to sales of
shares of a specific class; (c) the expense of administrative personnel and
services required to effect such registrations and related activities; (d) the
expense of administrative personnel and services required to support the
shareholders of a specific class; (e) litigation and other legal expenses
relating to a specific class; (f) transfer agent fees identified by the Fund's
transfer agent as being attributable to a specific class; (g) expenses incurred
in connection with Trustee or shareholder meetings as a result of matters
relating to a specific class; and (h) auditors' fees and accounting and
consulting expenses relating to a specific class. In addition, if a class of
shares receives services of a different kind or to a different degree than
other classes, but the fees and expenses associated with such services are not
billed to the Fund or the Trust in such a manner as to be readily associated
with one or more classes, the Trustees shall allocate such fees and expenses
among classes in such manner and on such basis as they in their sole discretion
deem fair and equitable. The allocation of expenses between classes of shares
described above may be amended to the extent, if any, necessary to prevent such
an allocation from causing a Fund to fail to satisfy any requirements necessary
to obtain and rely on a private letter ruling from the Internal Revenue Service
relating to the issuance of multiple classes of shares.
Notwithstanding the foregoing, (1) for purposes of calculating SEC
registration fees applicable to the issuance of shares of a particular class
pursuant to Rule 24f-2 under the 1940 Act, to the extent redemptions of shares
of a particular class cannot be used to reduce the registration fee applicable
to the issuance of shares of that class in respect of a given calculation
period, such redemptions shall, to the maximum extent permitted by the 1940
Act, be used to reduce the registration fees applicable to the issuance of
shares of other classes, pro rata among the classes in respect of which such
redemptions are permitted to be so used on the basis of the net dollar amount
of shares issued by each such class (being the dollar amount of shares issued
by such class less the dollar amount of shares redeemed by such class) during
the calculation period in question and (2) advisory and custodial fees and
other expenses related to the management of the assets of a Fund to which a
class belongs shall in no event be treated as Class Expenses, except to the
extent permitted by the Rule or in an order issued by the SEC.
<PAGE> 4
Income, realized and unrealized capital gains and losses, and expenses of
a Fund not allocated to a particular class pursuant to the first two paragraphs
of this Section 3 shall be allocated between the classes of such Fund pro rata
on the basis of the respective net asset values of such classes; provided,
however, that in the case of a "money market" series, in the discretion of the
Trustees, income, realized and unrealized capital gains and losses and expenses
of a Fund not allocated between the classes of such series pursuant to the
first two paragraphs of this Section 3 shall be allocated:
a. to each share without regard to class provided that the Fund has
received undertakings from its adviser, underwriter or any other provider of
services to the Fund, agreeing to waive or reimburse the Fund for payments to
such service provider by one or more classes, as allocated under the first two
paragraphs of this Section 3, to the extent necessary to assure that both
classes of the Fund maintain the same net asset value per share; or
b. on the basis of relative net assets (settled shares). For purposes of
the foregoing, "relative net assets (settled shares)" are net assets valued in
accordance with generally accepted accounting principles but excluding the
value of subscriptions receivable, in relation to the net assets of that Fund.
The foregoing paragraphs of this Section 3 are designed to be consistent
with and to implement the provisions of paragraphs (a)(i)-(ii) and (c) of the
Rule. In the event the Trustees determine that the application of any
provision in the foregoing paragraphs of this Section 3 (each, an "Allocation
Provision") would be inconsistent with any provision of such paragraphs of the
Rule (each, a "Rule Provision"), the Trustees may adjust such Allocation
Provision in such manner as they may reasonably deem appropriate to remedy such
inconsistency with the Rule Provision.
Nothing in this Plan shall be deemed to prohibit the waiver of fees or
reimbursement of expenses by a Fund's adviser, distributor or any other
provider of services to the Fund, provided that no such adviser, distributor or
provider of services shall be required to waive fees or reimburse expenses
unless it expressly shall have agreed to do so. Any waiver or reimbursement
may be applicable to one or more classes and/or may be in different amounts
with respect to one or more classes. Aon Advisers, Inc. will prepare or cause
to be prepared for the Trustees, on a quarterly basis, a report outlining any
differences in waivers or reimbursements in respect of classes of a particular
Fund.
4. Voting Rights.
Each class of shares shall have exclusive voting rights on any matter that
relates solely to its arrangement, to the extent such matter is required to be
submitted to shareholders by the 1940
<PAGE> 5
Act or the Trust's Agreement and Declaration of Trust (the "Declaration of
Trust").
Each class of shares shall have separate voting rights on any matter in
which the interests of that class differ from the interests of any other class,
to the extent such matter is required to be submitted to shareholders by the
1940 Act or the Declaration of Trust.
5. Similarities Between Classes.
Except as otherwise set forth in this Plan, each class of shares of a Fund
shall have the same rights and obligations as the other class of shares of that
Fund.
6. Conversion Features.
Any Fund may offer a conversion feature whereby shares of one class
("Purchase Class Shares") will convert into shares of another class ("Target
Class Shares") of that Fund, after being held for a requisite period or upon
the happening of a specified event ("Matured Purchase Class Shares"), pursuant
to the terms and conditions of that Fund's Prospectus and/or Statement of
Additional Information. Upon conversion of Matured Purchase Class Shares, all
Purchase Class Shares of that Fund acquired by reinvestment of dividends or
distributions with respect to such Matured Purchase Class Shares shall also be
converted at that time. Purchase Class Shares will convert into Target Class
Shares of that Fund on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other charge. The
conversion feature shall be offered for so long as (i) the expenses to which
Target Class Shares of a Fund are subject, including payments authorized under
that Fund's Target Class 12b-1 plan, are not higher than the expenses of
Purchase Class Shares of that Fund, including payments authorized under that
Fund's Purchase Class 12b-1 plan; (ii) there continues to be available a ruling
from the Internal Revenue Service, or an opinion of counsel or of an auditing
firm serving as tax adviser, to the effect that the conversion of Purchase
Class Shares into Target Class Shares does not constitute a taxable event for
the holder; and (iii) if the amount of expenses to which Target Class Shares of
a Fund are subject, including payments authorized under that Fund's Target
Class 12b-1 plan, is increased materially without approval of the shareholders
of Purchase Class Shares of that Fund, that Fund will establish a new class of
shares ("New Target Class Shares") and shall take such other action as is
necessary to provide that existing Purchase Class Shares are exchanged or
converted into New Target Class Shares, identical in all material respects to
Target Class Shares as they existed prior to implementation of the proposal to
increase expenses, no later than the date such shares previously were scheduled
to convert into Target Class Shares.
<PAGE> 6
7. Exchange Privileges.
A shareholder may exchange shares of a particular class of a Fund for
shares of the corresponding class of another Fund on the basis of the
respective net asset values of the shares exchanged, plus such charge per
exchange as may be determined by the Trust, and subject to such additional
conditions as may be set forth in the Prospectuses or Statements of Additional
Information of such Funds.
8. Additional Information.
This Plan is qualified by and subject to the terms of the current
Prospectus and Statement of Additional Information for each of the respective
classes; provided, however, that none of the terms set forth in any such
Prospectus or Statement of Additional Information shall be inconsistent with
the terms contained in this Plan.
9. Agreements by Distributors and Advisers.
The Trust shall not enter into any agreement with a distributor with
respect to shares of a Fund unless such distributor shall have agreed (a) to
furnish the Trust, upon its request, such information as reasonably may be
necessary for the Trust to evaluate the services provided by such distributor
in relation to this Plan; (b) to maintain compliance standards as to when each
class of shares may appropriately be sold to particular investors; (c) to
require all persons who are under its control and supervision and who are
engaged in selling shares to conform to such standards; and (d) to report to
the Trustees any conflicts or potential conflicts of interest between classes
of a Fund of which it may become aware.
The Trust shall not enter into any agreement with an adviser unless such
adviser shall have agreed to report to the Trustees any conflicts or potential
conflicts of interest between classes of a Fund of which it may become aware.
10. Independent Audit.
The methodology and procedures for (a) calculating the net asset value of,
and dividends and other distributions on or with respect to, shares of each
class and (b) determining the proper allocation of income and expenses between
classes of each Fund, shall be reviewed and reported on no less frequently than
annually by an independent auditing firm acceptable to the Trustees (the
"Expert"). The report of the Expert shall also address whether each Fund has
adequate facilities in place to ensure the implementation of such methodology
and procedures. Each Fund and
<PAGE> 7
its adviser shall take prompt corrective measures in the event of any
irregularities reported by the Expert.
11. Amendments to Plan.
The Trustees may amend this Plan at any time and from time to time in any
respect without authorization or approval by shareholders of any class, except
as otherwise may be required by the 1940 Act or the Declaration of Trust;
provided, however, that in no event shall the Trustees adopt any material
amendment to this Plan unless a majority of the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust (as defined in
the 1940 Act), shall first have found, as to each Fund to which the amendment
relates, that such amendment is in the best interests of each class of shares
of such Fund, considered individually, and of such Fund as a whole.
<PAGE> 1
EXHIBIT 99.B25
Page 1
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
A. J. Norcott & Company (Holdings) Limited United Kingdom
A. J. Norcott & Partners (Northern) Limited United Kingdom
A. J. Norcott & Partners (Scotland) Limited United Kingdom
A. J. Norcott & Partners Limited United Kingdom
A. J. Norcott Benefit Consultants Limited United Kingdom
A.H. Laseur B.V. Netherlands
AAA Missouri Automotive Financial Services Illinois
AMLT, Inc. Alabama
AOPA Insurance Agency, Inc. Maryland
AOPA Insurance Agency, Inc. Texas
APS International Limited United Kingdom
APS Life & Pensions Limited United Kingdom
APS Overseas Investments Limited United Kingdom
ARM COVERAGE INC. New York
ARS Acquisition Company of Florida, Inc. Florida
ARS Holdings, Inc. Illinois
ARS Holdings, Inc. Louisiana
Acedale Co. Ltd. Hong Kong
Adams & Porter Financial Services, Inc. Texas
Adams & Porter Services, Inc. Texas
Advantage Plus Insurance Services, Inc. Illinois
Adviser 151 Limited United Kingdom
Agricola Training Limited United Kingdom
Agricola Underwriting United United Kingdom
Agricultural Risk Management North America, Inc. Kansas
Agricultural Risk Management, Limited United Kingdom
Airscope Insurance Services Limited United Kingdom
Alpenbeck Limited United Kingdom
American Associates, Inc. Texas
American Attorneys' Protection Plan Co. Illinois
American Combined Life Insurance Company Illinois
American Combined Life Insurance Company Nebraska
American Insurance Brokers, Ltd. Indiana
American National General Agencies, Inc. Colorado
Anchor Reinsurance Company, Ltd. Bermuda
Anchor Underwriting Managers, Ltd. Bermuda
Anscor Insurance Brokers Inc. Philippines
Aon Advisors (U.K.) Limited United Kingdom
Aon Advisors, Inc. Virginia
Aon Asset Management Fund, Inc. Virginia
Aon Aviation, Inc. Illinois
Aon Broker Services, Inc. Illinois
Aon Capital Corporation Delaware
Aon Capital Management, Inc. Delaware
Aon Captive Management, Ltd. U.S. Virgin Islands
Aon Consultants Limited United Kingdom
Aon Consulting Limited United Kingdom
Aon Corporation Delaware
Aon Direct Group, Inc. California
Aon Direct Group, Inc. Pennsylvania
Aon Entertainment, Ltd. California
Aon Entertainment, Ltd. New York
Aon Entertainment, Ltd. (Divertissement Aon, Ltee.) Canada
Aon Financial Institutions Services, Inc. Illinois
Aon H&R, Inc. New York
Aon Holdings Limited United Kingdom
Aon Holdings bv Netherlands
Aon Insurance Management Services - Virgin U.S. Virgin Islands
Islands, Inc.
<PAGE> 2
Page 2
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Aon Insurance Management Services, Inc. Delaware
Aon Insurance Management of Texas, Inc. Texas
Aon Insurance Services California
Aon Insurance Services, Inc. Pennsylvania
Aon Intermediaries (Bermuda) Ltd. Bermuda
Aon Managed Care, Inc. California
Aon Nominees Limited United Kingdom
Aon Overseas Holdings Limited United Kingdom
Aon Partnership Limited United Kingdom
Aon Re (Bermuda) Ltd. Bermuda
Aon Re Accident & Health Limited United Kingdom
Aon Re Aviation Limited United Kingdom
Aon Re Inc. Illinois
Aon Re International Limited United Kingdom
Aon Re Latinoamericana, S.A. Mexico
Aon Re Non-Marine Limited United Kingdom
Aon Re North American Limited United Kingdom
Aon Re Panama, S.A. Panama
Aon Re Seascope Limited United Kingdom
Aon Re Services, Inc. Delaware
Aon Re Worldwide Limited United Kingdom
Aon Re Worldwide, Inc. Delaware
Aon Reengineering & Consulting Services, Inc. Delaware
Aon Risk Consultants (Bermuda) Ltd. Bermuda
Aon Risk Consultants (Europe) Limited United Kingdom
Aon Risk Consultants, Inc. Illinois
Aon Risk Resources Limited United Kingdom
Aon Risk Resources, Inc. Delaware
Aon Risk Services (Bermuda) Ltd. Bermuda
Aon Risk Services (Europe) S.A. Luxembourg
Aon Risk Services (Vermont) Inc. Vermont
Aon Risk Services Limited United Kingdom
Aon Risk Services, Inc. Delaware
Aon Risk Services, Inc. U.S.A. New York
Aon Risk Technologies, Inc. Delaware
Aon Securities Corporation New York
Aon Service Corporation Illinois
Aon Specialty Group of Tennessee, Inc. Tennessee
Aon Specialty Group, Inc. Delaware
Aon Specialty Limited United Kingdom
Aon Technical Insurance Services, Inc. Illinois
Aon UK Limited United Kingdom
Aon Warranty Group, Inc. Illinois
Aon/Albert G. Ruben Company (New York) Inc. New York
Artscope Insurance Services Limited United Kingdom
Artscope International Insurance Services Agency Germany
GmbH
Artscope International Insurance Services Limited United Kingdom
Ascom B.V. Netherlands
Asia Area Underwriters Ltd. Hong Kong
Assigned Settlement, Inc. Virginia
Assurantie Groep Langeveldt c.v. Netherlands
Atlantic Underwriters Agency, Incorporated Kentucky
Attorneys' Advantage Insurance Agency, Inc. Illinois
Auto Conduit Corporation, The Delaware
Automotive Development Centers, Inc. Illinois
B.V. Assurantiekantoor Langeveldt-Schroder Netherlands
BRIC, Inc. North Carolina
Banker's Acceptance, L.P. Illinois
<PAGE> 3
Page 3
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Bankers Insurance Service Corp. Illinois
Bauer & Associates, Inc. Michigan
BenefitsMedia, Inc. Tennessee
Berkely Agency Ltd. New York
Berkely Coverage Corporation New York
Berkely-ARM, Inc. New York
BerkelyCare, LTD. New York
Big Sky Finance, L.P. Illinois
Blanco Finance, L.P. Illinois
Blom & Van der Aa BV Netherlands
Blom & Van der Aa Holding BV Netherlands
Brennan Group, Inc., The Delaware
Bruno Sforni S.p A. Italy
Bruns Ten Brink & Co. b.v. Netherlands
Bruns Ten Brink Groep b.v. Netherlands
Bruns Ten Brink Herverzekeringen b.v. Netherlands
Bryson Associates Incorporated Pennsylvania
C.I.C. Realty, Inc. Illinois
C.V. 'T Huys Ter Merwe Netherlands
CCC Agency, Inc. of Illinois Illinois
CIC - Atlanta, Inc. Illinois
CIC - Hilldale, Inc. Illinois
CIC - Wells, Inc. Illinois
CIC - Westmont, Inc. Illinois
CICA- 123, Inc. Illinois
CICA- Court, Inc. Illinois
CICA Realty Corporation Illinois
CICA Seguros de Mexico SA de CV Mexico
CICA Superannuation Nominees Pty. Ltd. Australia
CJP, Inc. Delaware
Cabinet Servet et Baud S.a.r.l. Annecy France
California Auto Finance, L.P. Illinois
California Group Services California
Camperdown 100 Limited United Kingdom
Camperdown 101 Limited United Kingdom
Cananwill Corporation Delaware
Cananwill, Inc. California
Cananwill, Inc. Pennsylvania
Catz & Lips B.V. Netherlands
Central States Acceptance, L.P. Illinois
Cinema Completions International, Inc. Delaware
Citadel Insurance Company Texas
City and County Purchasing Group Unknown
Cole Booth Potter of New Jersey, Inc. New Jersey
Cole Booth Potter, Inc. Pennsylvania
Combined Administrative Services Corp. Illinois
Combined Insurance Company of America Illinois
Combined Insurance Company of Ireland Limited Ireland
Combined Insurance Company of New Zealand New Zealand
Limited
Combined Life Assurance Company Limited United Kingdom
Combined Life Assurance Company of Europe Ireland
Limited
Combined Life Insurance Company of Australia Australia
Limited
Combined Life Insurance Company of New York New York
CompLogic, Inc. Rhode Island
Consumer Program Administrators, Inc. Illinois
Cooreman & Saverys IBC & Co. nv Belgium
<PAGE> 4
Page 4
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Cooreman & Saverys N.V. Belgium
Coughlan General Insurances Limited Ireland
Courtiers D'Assurances Rollins Hudig Hall du Canada
Quebec, Inc.
Crotty MacRedmond Insurance Limited Ireland
Cush Finance Group, L.P. Illinois
Customer Loyalty Institute Michigan
D. Hudig & Co. b.v. Netherlands
D.W.F.S., L.P. Illinois
DPR, Dansk Pensionsradgivning A/S Denmark
Dealer Development Services, Ltd. United Kingdom
Deanborne Limited United Kingdom
Dearborn Insurance Company Illinois
Direct Co., Inc. Michigan
Dobson Park L. G. Limited Guernsey
Dominion Mutual Insurance Brokers Ltd. Canada
Don Flower Aviation Underwriters, Inc. Kansas
Dreadnaught Insurance Company Limited Bermuda
DuPage Acceptance, L.P. Illinois
E. Lillie & Co. Limited United Kingdom
ERCO Services, Inc. Ohio
Elm Lane Limited United Kingdom
Energy Insurance International, Inc. Texas
Equiscope Insurance Services Limited United Kingdom
Excess Underwriters Agency, Inc. New York
Expatriate Consultancy Limited, The United Kingdom
FFRL Re Corp. Virginia
Fabels-Versteeg b.v. Netherlands
Far East Agency Korea
Finance Associates, Inc. Texas
Forth Financial Resources of Ohio, Inc. Ohio
Forth Financial Resources of Oklahoma Agency, Inc. Oklahoma
Forth Financial Resources of Texas, Inc. Texas
France Fenwick Limited United Kingdom
Frank B. Hall & Co. Holdings (N.Z.) Limited New Zealand
Frank B. Hall (Reinsurance) France S.A. France
Frank B. Hall Iberica S.A. Spain
Frank B. Hall Ireland Ltd. Ireland
Frank B. Hall Management Services Pty. Ltd. Australia
Frank B. Hall Re (Latin America) Inc. Panama
Friis & Company, Inc. California
G.E.F. Insurance Ltd. U.S. Virgin Islands
GBV Gesellschaft Fur Betriebliche Beratung und Germany
verwaltung GmbH
Gateway Alternatives, L.L.C. Delaware
Gateway Insurance Company, Ltd. Bermuda
Go Pro Agency, Inc. of San Antonio Texas
Go Pro Life Agency, Inc. of San Antonio Texas
Go Pro Underwriting Managers of Virginia, Inc. Virginia
Go Pro Underwriting Managers, Inc. Texas
Godolphin Bloodstock Limited United Kingdom
Godwins (Overseas) Limited United Kingdom
Godwins (Trustees) Limited United Kingdom
Godwins Acquisition Co. North Carolina
Godwins Australia Pty. Limited Australia
Godwins Booke & Dickenson Insurance Services California
Godwins Booke & Dickenson Insurance Services, Inc. MassachusettS
Godwins Booke & Dickenson, Inc. Ohio
<PAGE> 5
Page 5
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Godwins Employee Benefits Services (Texas), Inc. Texas
Godwins General Agency, Inc. Texas
Godwins Group Limited United Kingdom
Godwins International, Inc. Delaware
Godwins Investment Advisors, Inc. Florida
Godwins Limited United Kingdom
Godwins Nederland pensioen-en employee benefits Netherlands
adviseurs en actuarissen c.v
Godwins Nominees Pty. Limited Australia
Godwins Securities, Inc. Washington
Godwins of New York, Inc. New York
Godwins, Inc. Pennsylvania
Gotuaco del Rosario & Associates, Inc. Philippines
Group Organization, Inc. District of Columbia
H.Z. Financial, Limited Parntership Illinois
HHL (Holdings) Ltd. Hong Kong
HHL (Taiwan) Ltd. Taiwan
HHL (Thailand) Ltd. Thailand
HHL Employee Benefits Ltd. Thailand
HHL Ltd. Hong Kong
HHL Management Ltd. Hong Kong
HHL Pte Ltd. Singapore
HHL Re Ltd. Thailand
HHL Reinsurance Brokers Inc. Philippines
HHL Reinsurance Brokers Pte. Ltd. Singapore
HHL Reinsurance Services Ltd. Hong Kong
HLS Hudig-Langeveldt GmbH Germany
HR Strategies, Inc. Michigan
Hanseatische Assekruanz Kontor GmbH Germany
Hanseatische Assekruanz Vermittlungs AG Germany
Havag Hudig-Langeveldt GmbH Germany
Heinz Hahn GmbH Germany
Heli Agency Korea
Highplain Limited United Kingdom
Hodgson McCreery & Company Limited United Kingdom
Hudig-Langeveldt Berlin GmbH Germany
Hudig-Langeveldt Borghuis B.V. Netherlands
Hudig-Langeveldt Coens N.V. Belgium
Hudig-Langeveldt Janson Eiffers B.V. Netherlands
Hudig-Langeveldt Kyoritsu Ltd. Japan
Hudig-Langeveldt Makelaardij in Assurantien bv Netherlands
Hudig-Langeveldt Merwestad bv Netherlands
Hudig-Langeveldt Nijmegen B.V. Netherlands
Hudig-Langeveldt Pensioenbureau B.V. Netherlands
Hudig-Langeveldt Reinsurance Brokers C.V. Netherlands
Hudig-Langeveldt Reinsurance B.V. Netherlands
Hudig-Langeveldt S.A. France
Hudig-Langeveldt SECA S.A. France
Hudig-Langeveldt Tilburg B.V. Netherlands
Hudig-Langeveldt Van Bruggen & De Laat B.V. Netherlands
Huntington T. Block Insurance Agency Inc. District of Columbia
Huntington T. Block Insurance Agency, Inc. Ohio
IRISC L.L.C. Delaware
IRISC Limited United Kingdom
IRISC Specialty, Inc. Delaware
IRISC, Inc. New Jersey
ISPP Purchasing Group Missouri
Impact Forecasting, L.L.C. Illinois
Independent Dealer Services, Inc. Missouri
<PAGE> 6
Page 6
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Independent Homeowner Services, Inc. Missouri
Independent Inspections, Inc. Illinois
Inmobiliaria Ramos Rosada, S.A. de C.V. Mexico
Insurance Brokers Service, Inc. Illinois
Insurance Underwriters Agency, Inc. Arizona
Insurmark Agency Corp. Ohio
Intassco Versicherungsmakler GmbH Austria
Integrated Insurance Industries, Inc. Delaware
Integrated Insurance Industries, Inc. Missouri
Intercept Corporation Illinois
Interims Limited United Kingdom
International Industrial Insurances Limited Ireland
International Shipowners Mutual Insurance Bermuda
Association Limited
Interocean (Italia) S.p.A. Italy
Interocean Reinsurance Company, S.A. Panama
J.C.J. Van Dalen Beheer B.V. Netherlands
J.H. Blades & Co. (Agency), Inc. Texas
J.H. Blades & Co., Inc. Texas
J.H. Blades Insurance Services California
J.H. Blades, Inc. Oklahoma
J.H. Lea & Company, Inc. Illinois
JFS Fenchurch Limited United Kingdom
JFS Greig Fester Limited United Kingdom
James S. Kemper & Co. International, Limited Bermuda
James S. Kemper Insurance Services, Inc. Texas
Jenner Fenton Slade (Special Risks) Limited United Kingdom
Jenner Fenton Slade Group Limited United Kingdom
Jenner Fenton Slade Limited United Kingdom
Jenner Fenton Slade Political Risks Limited United Kingdom
Jenner Fenton Slade Reinsurance Brokers Limited United Kingdom
Jenner Fenton Slade Surety and Specie Limited United Kingdom
John Scott Insurance Brokers Limited United Kingdom
K & K Insurance Group of Florida, Inc. Florida
K & K Insurance Group, Inc. Indiana
K & K Insurance Specialties, Inc. Indiana
K & K Specialties, Inc. Indiana
Karl Alt & Co. GmbH Germany
Keeling & Company California
Key-Royal Automotive Company, Inc. Alabama
Keystone Insurance Management, Inc. Unknown
Kininmonth Limited Ireland
L & G LMX Limited United Kingdom
L & G Seascope Insurance Holdings Limited United Kingdom
Langeveldt Groep B.V. Netherlands
Langeveldt de Vos b.v. Netherlands
Laverack & Haines, Inc. New York
Lescorp Limited United Kingdom
Leslie & Godwin (C.I.) Limited Guernsey
Leslie & Godwin (Reinsurance) Copenhagen A/S Denmark
Leslie & Godwin (Scotland) Limited Scotland
Leslie & Godwin (U.K.) Limited United Kingdom
Leslie & Godwin (WFG) Limited United Kingdom
Leslie & Godwin AXL Limited United Kingdom
Leslie & Godwin Aviation Holdings Limited United Kingdom
Leslie & Godwin Aviation Limited United Kingdom
Leslie & Godwin Aviation Reinsurance Services United Kingdom
Limited
Leslie & Godwin Financial Risks Limited United Kingdom
<PAGE> 7
Page 7
- --------------------------------------------------------------------------------
corp_full_name juris_name
- --------------------------------------------------------------------------------
Leslie & Godwin GmbH Germany
Leslie & Godwin Group Limited United Kingdom
Leslie & Godwin Insurance Brokers Ltd. Ontario
Leslie & Godwin Insurance Brokers, Inc. New York
Leslie & Godwin International Limited United Kingdom
Leslie & Godwin Investments Limited United Kingdom
Leslie & Godwin Limited United Kingdom
Leslie & Godwin Marine Holdings Limited United Kingdom
Leslie & Godwin Non-Marine Limited United Kingdom
Leslie & Godwin Overseas Reinsurance Holdings United Kingdom
Limited
Leslie & Godwin Reinsurance Holdings Limited United Kingdom
Leslie & Godwin Risk Management Limited United Kingdom
Leslie Godwin Technical Services Limited United Kingdom
Life Insurance Company of Virginia, The Virginia
Life of Virginia Series Fund, Inc. Virginia
Lloyd Paulista Corretores de Seguros e Reaseguros Brazil
S.A.
London General Holdings Limited United Kingdom
London General Insurance Company Limited United Kingdom
Lowndes Lambert Insurance Limited Ireland
Lumley JFS Limited United Kingdom
Lynn & Schaller Insurance Brokers, Inc. California
MTSA S.ar.l., Annecy France
MacDonagh & Boland (International) Limited Ireland
MacDonagh & Boland Group Limited Ireland
MacDonagh Boland Beech Hill Limited Ireland
MacDonagh Boland Crotty MacRedmond Limited Ireland
MacDonagh Boland Cullen Duggan Limited Ireland
MacDonagh Boland Foley Woollam Limited Ireland
Macey Clifton Walters Limited United Kingdom
Macey Williams Insurance Services Limited Ireland
Macey Williams Insurance Services Limited United Kingdom
Macey Williams Limited Ireland
Madison Intermediaries Pty. Limited Australia
Madison Reinsurance Holdings, Inc. Illinois
Mahamy Company plc (Rollins Huding Hall Iran) Iran
Maritime Underwriters, Ltd. Bermuda
Marketing and Training Resources, Inc. Illinois
Martin Boyer Company, Inc. Illinois
Mayflower National Life Insurance Company Indiana
Media/Professional Insurance Agency, Inc. Missouri
Media/Professional International Limited United Kingdom
Minahan Reinsurance Management Limited United Kingdom
Morency, Weible & Sapa, Inc. Illinois
Motorists Service Corporation Delaware
Motorplan Limited United Kingdom
Muirfield Underwriters, Ltd. Delaware
N.V. Assurantiehuis Holding (Curacao) Netherlands Antilles
NB Life Agents, Inc. New York
NSU Benefit Corporation Indiana
Nask bv Netherlands
National Benefits Corporation Pennsylvania
National Care Provider Insurance, Inc. California
National Product Care Company Illinois
National Sports Underwriters, Inc. Indiana
Nesdale Holdings Limited New Zealand
Newco Properties, Inc. Virginia
Nicholson Chamberlain Colls Australia Limited Australia
<PAGE> 8
Page 8
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Nicholson Chamberlain Colls Group Limited United Kingdom
Nicholson Chamberlain Colls Marine Limited United Kingdom
Nicholson Leslie (North America) Limited United Kingdom
Nicholson Leslie Accident & Health Limited United Kingdom
Nicholson Leslie Agencies Limited United Kingdom
Nicholson Leslie Asia Pte. Ltd. Singapore
Nicholson Leslie Australia Holdings Limited Australia
Nicholson Leslie Aviation Limited United Kingdom
Nicholson Leslie Aviation Reinsurance Brokers United Kingdom
Nicholson Leslie BankAssure Limited United Kingdom
Nicholson Leslie Bankscope Insurance Services United Kingdom
Limited
Nicholson Leslie Bankscope Marine Insurance United Kingdom
Consultants
Nicholson Leslie Energy Resources Limited United Kingdom
Nicholson Leslie Financial Institutions Limited United Kingdom
Nicholson Leslie Group Limited United Kingdom
Nicholson Leslie International (Reinsurance Brokers) United Kingdom
Limited
Nicholson Leslie International Limited United Kingdom
Nicholson Leslie International Limited United Kingdom
Nicholson Leslie Investments Limited United Kingdom
Nicholson Leslie Italia S.P.A. Italy
Nicholson Leslie Limited United Kingdom
Nicholson Leslie Management Services United Kingdom
Nicholson Leslie Marine Limited United Kingdom
Nicholson Leslie Nominees Limited United Kingdom
Nicholson Leslie Non-Marine Reinsurance Brokers United Kingdom
Limited
Nicholson Leslie North American Reinsurance United Kingdom
Brokers, Limited
Nicholson Leslie Property Limited United Kingdom
Nicholson Leslie Seascope Limited United Kingdom
Nicholson Leslie Special Risks Limited United Kingdom
Nicholson Stewart-Brown Limited United Kingdom
North Derbyshire Finance Company Limited, The United Kingdom
Nova Reinsurance Brokers, Inc. Illinois
OLD BENEFITS CORPORATION Illinois
OUM & Associates of California, A Corporation California
OUM & Associates of New York, A Corporation New York
OUM & Associates of Ohio, A Corporation Ohio
OUM & Associates, Inc., A Corporation Washington
OUM Risk Consultants, Inc. Washington
Oak Brook Holding, Inc. Delaware
Oak Brook Life Insurance Company Arizona
Oceanic Adjusters Limited New York
Ogle & Waters, Inc. Florida
Ohrinsoo Agency Korea
Olandis Insurance Agency, Inc. Illinois
Olarescu & B.I. Davis Asesores y Corredores de Peru
Seguros S.A.
Old RHH North, Inc. California
P M R Re, Inc. New York
P.I. Consultants Ltd. Hong Kong
PFS, L.P. Illinois
PLCM Group, Inc. Florida
PLCM Group, Inc. Illinois
PLCM Group, Inc. Pennsylvania
PT RNJ Ratna Nusa Jaya Indonesia
<PAGE> 9
Page 9
- -------------------------------------------------------------------------------
corp_full_name juris_name
- -------------------------------------------------------------------------------
Pandimar Consultants, Inc. New York
Paribas Assuratien B.V. Netherlands
Parker Risk Management (Barbados) Ltd. Barbados
Parker Risk Management (Bermuda) Ltd. Bermuda
Parker Risk Management (Cayman) Ltd. Cayman Islands
Parker Risk Management (Guernsey) Ltd. Guernsey
Parker Risk Management (S) Pte Ltd Singapore
Parker Risk Management, Inc. Colorado
Pat Ryan & Associates, B.V. Netherlands
Pecos River Learning Centers, Inc. Minnesota
Pernas HHL Illinois
Piercey Auto Group Finance, L.P. Malaysia
Pikes Peak Holding Company, Inc. Delaware
Powell & Company Georgia
Preferred Risk Strategies, A Corporation Washington
Premier Auto Finance, Inc. Delaware
Premier Auto Finance, L.P. Illinois
Product Care, Inc. Illinois
Production Life Insurance Company Arizona
Professional Sports Insurance Co. Ltd. Bermuda
Property Owners Database Limited United Kingdom
Provider Services, Ltd. Bermuda
Pyramid Services, Inc. Connecticut
RAMRO y Asociados, S.C. Mexico
RBH Acquisition Co. Delaware
RBH General Agencies (Canada) Inc. Quebec
RHH Captive Management Ltd. Bermuda
RHH Empreendimentos e Servicos Ltda. Brazil
RHH Europe, Inc. Delaware
RHH Financial Services Group of New York, Inc. New York
RHH Financial Services Group, Inc. California
RHH Financial Services Group, Inc. Illinois
RHH Financial Services Group, Inc. Pennsylvania
RHH Financial Services Group, Inc. Texas
RHH General Agency, Inc. Texas
RHH Hazard Limited United Kingdom
RHH Life Agency of Texas, Inc. Texas
RHH Special Risks, Inc. Illinois
RHH/Albert G. Ruben Insurance Services, Inc. California
RIP Services Limited Guernsey
Rae Liness & Duffus Limited Scotland
Regent Acceptance, L.P. New Jersey
Resource Insurance Services, Inc. Indiana
Retailer Acceptance, L.P. Illinois
Rockford Holding, Inc. Delaware
Rockford Life Insurance Company Arizona
Rollins Hudig Hall (Sweden) A.B Sweden
Rollins Financial Brokers, Inc. Oklahoma
Rollins Financial Services Co. Illinois
Rollins Heath (Japan) Ltd. Japan
Rollins Hudig Hall & Co. (N.S.W.) Pty. Ltd. Australia
Rollins Hudig Hall (Bermuda) Limited Bermuda
Rollins Hudig Hall (Finland) OY Finland
Rollins Hudig Hall (Hong Kong) Ltd. Hong Kong
Rollins Hudig Hall (Nederland) Limited United Kingdom
Rollins Hudig Hall (Norway) A/S Norway
Rollins Hudig Hall (Scandinavia) A/S Norway
Rollins Hudig Hall (Scandinavia) Holding A/S Denmark
Rollins Hudig Hall (Singapore) Pte. Ltd Singapore
<PAGE> 10
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corp_full_name juris_name
- -------------------------------------------------------------------------------
Rollins Hudig Hall Agency of Texas, Inc. Texas
Rollins Hudig Hall Antillean N.V. Netherland Antilles
Rollins Hudig Hall Aruba N.V. Netherland Antilles
Rollins Hudig Hall Associates B.V. Netherlands
Rollins Hudig Hall Ceska Republika spol.s r.o. Czech Republic
Rollins Hudig Hall Co. Delaware
Rollins Hudig Hall Consulting Italia srl Italy
Rollins Hudig Hall Denmark A/S Denmark
Rollins Hudig Hall Employee Benefits of Ohio, Inc. Ohio
Rollins Hudig Hall Entertainment Brokers Ltd. United Kingdom
Rollins Hudig Hall Espana Correduria de Seguros, Spain
SA
Rollins Hudig Hall Groep B.V. Netherlands
Rollins Hudig Hall Groep Inc. Delaware
Rollins Hudig Hall Healthcare Risk, Inc. Florida
Rollins Hudig Hall Holdings (Deutschland) GmbH Germany
Rollins Hudig Hall Holdings Limited Australia
Rollins Hudig Hall Holdings Limited United Kingdom
Rollins Hudig Hall Insurance Brokers, Inc. Ontario
Rollins Hudig Hall International b.v. Netherlands
Rollins Hudig Hall Italia S.p.A. Italy
Rollins Hudig Hall Limited United Kingdom
Rollins Hudig Hall Magyarorszag Biztositasi Alkusz Hungary
Rollins Hudig Hall Mexico Mexico
Rollins Hudig Hall Middle East United Arab Emirates
Rollins Hudig Hall Nederland Makelaars in Netherlands
Assurantien bv
Rollins Hudig Hall Netherlands b.v. Netherlands
Rollins Hudig Hall Polska Ltd. Poland
Rollins Hudig Hall Pty. Ltd. Australia
Rollins Hudig Hall Risk Management Services A/S Denmark
Rollins Hudig Hall Services Limited United Kingdom
Rollins Hudig Hall Sigorta Brokerlik ve Musavirlik AS Turkey
Rollins Hudig Hall Slovensko spol.s r.o. Slovak Republic
Rollins Hudig Hall Surety & Guarantee Limited United Kingdom
Rollins Hudig Hall Vancouver Inc. British Columbia
Rollins Hudig Hall do Brazil Corretora de Seguros Brazil
Ltda.
Rollins Hudig Hall of Alabama, Inc. Alabama
Rollins Hudig Hall of Alaska, Inc. Alaska
Rollins Hudig Hall of Arizona, Inc. Arizona
Rollins Hudig Hall of Arkansas, Inc. Arkansas
Rollins Hudig Hall of Canada Inc. Canada
Rollins Hudig Hall of Central California, Inc. California
Insurance Services
Rollins Hudig Hall of Colorado, Inc. Colorado
Rollins Hudig Hall of Connecticut, Inc. Connecticut
Rollins Hudig Hall of Florida, Inc. Florida
Rollins Hudig Hall of Georgia, Inc. Georgia
Rollins Hudig Hall of Hawaii, Inc. Hawaii
Rollins Hudig Hall of Idaho, Inc. Idaho
Rollins Hudig Hall of Illinois, Inc. Illinois
Rollins Hudig Hall of Indiana, Inc. Indiana
Rollins Hudig Hall of Kansas, Inc. Kansas
Rollins Hudig Hall of Latin America, Inc. Delaware
Rollins Hudig Hall of Louisiana, Inc. Louisiana
Rollins Hudig Hall of Massachusetts, Inc. Massachusetts
Rollins Hudig Hall of Michigan, Inc. Michigan
Rollins Hudig Hall of Minnesota, Inc. Minnesota
<PAGE> 11
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corp_full_name juris_name
- -------------------------------------------------------------------------------
Rollins Hudig Hall of Missouri, Inc. Missouri
Rollins Hudig Hall of Montana, Inc. Montana
Rollins Hudig Hall of Nebraska, Inc. Nebraska
Rollins Hudig Hall of Nevada, Inc. Nevada
Rollins Hudig Hall of New Jersey, Inc. New Jersey
Rollins Hudig Hall of New York, Inc. New York
Rollins Hudig Hall of Northern California, Inc. California
Insurance Services
Rollins Hudig Hall of Ohio, Inc. Ohio
Rollins Hudig Hall of Oklahoma, Inc. Oklahoma
Rollins Hudig Hall of Oregon, Inc. Oregon
Rollins Hudig Hall of Pennsylvania, Inc. Pennsylvania
Rollins Hudig Hall of Rhode Island, Inc. Rhode Island
Rollins Hudig Hall of Southern California, Inc. California
Rollins Hudig Hall of Tennessee, Inc. Tennessee
Rollins Hudig Hall of Utah, Inc. Utah
Rollins Hudig Hall of Virginia, Inc. Virginia
Rollins Hudig Hall of Washington, D.C., Inc. District of Columbia
Rollins Hudig Hall of Washington, Inc. Washington
Rollins Hudig Hall of Wisconsin, Inc. Wisconsin
Rollins Hudig Hall of Wyoming, Inc. Wyoming
Rollins Hudig Hall of the Americas, Inc. Illinois
Rollins Hudig Hall of the Carolina's North Carolina
Rollins Risk & Benefit Management Services, Inc. Nevada
Rollins Technical Services Co. Illinois
Rollins Technology Brokers, Inc. California
Roundwise Limited United Kingdom
Ryan Dealer Group of Alabama, Inc. Alabama
Ryan Dealer Group of Arizona Insurance Services, Arizona
Inc.
Ryan Dealer Group of Indiana, Inc. Indiana
Ryan Dealer Group of Kentucky, Inc. Kentucky
Ryan Dealer Group of Massachusetts Insurance Massachusetts
Agency, Inc.
Ryan Dealer Group of Mississippi, P.A. Mississippi
Ryan Dealer Group of New Mexico, Inc. New Mexico
Ryan Dealer Group of Ohio Agency, Inc. Ohio
Ryan Dealer Group of Washington, Inc. Washington
Ryan Dealer Group, Inc. Texas
Ryan Dealer Group, Inc. Illinois
Ryan Dealer Group, Inc. Mississippi
Ryan Dealer Insurance Services of California, Inc. California
Ryan Financial Services, Inc. Illinois
Ryan Insurance Group Espana, Correduria de Spain
Seguros, S.A.
Ryan Insurance Group France S.A.R.L. France
Ryan Insurance Group, Inc. Delaware
Ryan Warranty Services Canada, Inc. Canada
Ryan Warranty Services Quebec, Inc. Ontario
Ryan Warranty Services of Florida, Inc. Florida
Ryan Warranty Services, Inc. Delaware
Ryan/CSI, Inc. Illinois
SIS Services of New York, Inc. New York
SLE International Underwriters, Inc. Delaware
SLE Underwriters, Inc. Delaware
SLE Worldwide Australia Pty Limited Australia
SLE Worldwide Canada Brokers, Ltd. Ontario
SLE Worldwide Limited United Kingdom
SLE Worldwide Mexico, Agente de Seguros, S.A. de Mexico
C.V.
<PAGE> 12
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corp_full_name juris_name
- -------------------------------------------------------------------------------
SLE Worldwide, Inc. Delaware
SRS Management Antilles N.V. Netherland Antilles
Saat Van Marwijk Beheer B.V. Netherlands
Saat Van Marwijk Noordwijk B.V. Netherlands
Safeguard Risks Services (Bermuda) Ltd. Bermuda
Safeguard Risks Services Antilles N.V. Netherlands Antilles
Safeguard Risks Services b.v. Netherlands
Sang Woon Agency Korea
Scarborough & Company Illinois
Scarborough & Company, Inc. Delaware
Scarborough Insurance Agency of Massachussetts, Massachusetts
Inc.
Seascope Cargo Insurance Services Limited United Kingdom
Seascope Insurance Holdings Limited United Kingdom
Seascope Insurance Sevices Limited United Kingdom
Seascope Marine Insurance Services Limited United Kingdom
Seascope Marine Limited United Kingdom
Seascope Reinsurance Services Limited United Kingdom
Select Direct Limited Scotland
Self-Insurers Service, Inc. Delaware
Service Protection, Inc. Illinois
Service Saver, Incorporated Florida
ServicePlan, Inc. Illinois
Servicios Y Garantias Ryan S.L. Spain
Sherwood Insurance Services California
Shoreline Insurance Agency, Inc. Rhode Island
Singer Group, Inc., The Texas
Singer Plan, Inc. Delaware
Skyline Agency, Ltd., The Illinois
Square One, Inc. Texas
Steetley Leslie & Godwin Limited Guernsey
Sterling Life Insurance Company Arizona
Stichting Employee Fund Hudig-Langeveldt Groep B.V. Netherlands
Stichting Verum-HLG Netherlands
Stichting Werknernerscertificaten HLG Netherlands
Superannuation Fund (CICNZ) Limited New Zealand
Suras B.V. Netherlands
Surety & Guarantee Consultants Limited United Kingdom
TREV Properties Corporation Delaware
Tabma-Hall Insurance Services Pty. Limited Australia
Tarik Acceptance, L.P. Unknown
Texas Star Insurance Agency Texas
Texecur Versicherungs Vermittlungs GmbH Germany
The Auto Leasing Corporation Delaware
Trans Caribbean Insurance Services, Inc. American Samoa
U.S. Rating Bureau, Inc. Delaware
Underwriters Marine Services Limited United Kingdom
Underwriters Marine Services of Texas, Inc. Texas
Underwriters Marine Services, Inc. Lousiana
Union Fidelity Life Insurance Company Illinois
Union Fidelity Life Insurance Company Ohio
Universal Acceptance, L.P. Illinois
VOL Properties Corporation Delaware
Verum-HLG B.V. Netherlands
Virginia Surety Company, Inc. Illinois
Wacus/Hudig-Langeveldt GmbH Germany
Wacus/Hudig-Langeveldt, Kreditveraicherungsmakler Germany
und Beratungs GmbH
<PAGE> 13
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corp_full_name juris_name
- -------------------------------------------------------------------------------
Walker Persson & Partners Limited United Kingdom
Western Premier Auto Finance, L.P. Illinois
Wexford Underwriting Managers, Inc. Delaware
Wilfredo Armstrong S.A. Argentina
Worldwide Integrated Services Company Texas
