<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AON ASSET MANAGEMENT FUND INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
AON ASSET MANAGEMENT FUND, INC.
6610 WEST BROAD STREET
RICHMOND, VIRGINIA 23230
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 10, 1996
Notice is hereby given that a special meeting of the shareholders
(the "Meeting") of the Money Market Portfolio and the Flexible
Asset Allocation Portfolio (individually, a "Portfolio" and
collectively, the "Portfolios"), each a separate investment
portfolio of Aon Asset Management Fund, Inc., a Virginia
corporation (the "Fund"), will be held at 10:00 a.m., local time,
on July 10, 1996 at the offices of Aon Corporation, 123 North
Wacker Drive, Chicago, IL 60606, 13th Floor for the following
purposes:
FOR SHAREHOLDERS OF EACH PORTFOLIO, VOTING SEPARATELY BY PORTFOLIO:
(1) To approve or disapprove a reorganization (the
"Reorganization") in which each of the two Portfolios would
become a separate series of the Aon Funds, a business trust
organized under the laws of the State of Delaware (the
"Trust"), pursuant to an Agreement and Plan of Reorganization
whereby (i) all of the assets and liabilities of each
Portfolio will be transferred to a corresponding series of the
Trust; (ii) shareholders of each Portfolio will receive an
equal number of shares in the corresponding series of the
Trust in exchange for their shares of such Portfolio; and
(iii) the Fund subsequently will take all actions necessary to
effect its dissolution and to have its corporate existence
terminated.
FOR SHAREHOLDERS OF BOTH PORTFOLIOS, VOTING TOGETHER:
(2) To elect a Board of Directors consisting of five Directors and
to authorize the Fund, prior to the effective time of the
Reorganization, to vote its beneficial interest in the Trust
for the election of the same five individuals to serve as
Trustees of the Trust.
FOR SHAREHOLDERS OF EACH PORTFOLIO, VOTING SEPARATELY BY PORTFOLIO:
(3) To approve or disapprove new investment advisory agreements
between the Fund on behalf of each of the Portfolios and Aon
Advisors, Inc. ("AAI"), the current investment adviser of each
of the Portfolios.
<PAGE> 3
FOR SHAREHOLDERS OF BOTH PORTFOLIOS:
(4) To transact such other business as may properly come before
the Meeting and any adjournment thereof.
Each proposal is discussed more fully in the accompanying Proxy
Statement.
All shareholders are invited to attend the Meeting. Shareholders
of record at the close of business on May 31, 1996, the record date
fixed by the Board of Directors, are entitled to notice of and to
vote at the Meeting.
By Order of the
Board of Directors
of the Fund
June 10, 1996 /s/ Karl W. Krause ,
---------------------
Karl W. Krause
Secretary
<PAGE> 4
____________________
YOUR VOTE IS IMPORTANT
PLEASE RETURN YOUR PROXY CARD(S)
____________________
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN
AND DATE EACH ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. A SHAREHOLDER WHO COMPLETES AND RETURNS A PROXY AND
SUBSEQUENTLY ATTENDS THE MEETING MAY ELECT TO VOTE IN PERSON, SINCE
A PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 5
AON ASSET MANAGEMENT FUND, INC.
6610 West Broad Street
Richmond, Virginia 23230
June 10, 1996
PROXY STATEMENT
General Information
The enclosed proxy is solicited by the Board of Directors of Aon
Asset Management Fund, Inc., a Virginia corporation (the "Fund"),
for use at the special meeting of shareholders (the "Meeting") of
the Money Market Portfolio and the Flexible Asset Allocation
Portfolio (individually, a "Portfolio" and collectively, the
"Portfolios"), each a separate investment portfolio of the Fund, to
be held at the offices of Aon Corporation, 123 North Wacker Drive,
Chicago, IL 60606, 13th Floor at 10:00 a.m., local time, on July
10, 1996, and at any adjournment thereof. The Fund expects to mail
this Proxy Statement and each proxy to shareholders on or about
June 13, 1996.
The Fund's investment adviser is Aon Advisors, Inc. ("AAI"), with
offices at 123 North Wacker Drive, Chicago, Illinois 60606. AAI,
which is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, is a wholly-owned subsidiary of
Aon Corporation, 123 North Wacker Drive, Chicago, Illinois 60606,
a publicly held insurance holding company whose common stock is
listed on the New York Stock Exchange and which, through
subsidiaries, is a major provider of insurance, insurance brokerage
and related services. AAI serves as investment adviser of the two
Portfolios, under the general oversight of the Board of Directors
of the Fund and pursuant to respective investment advisory
agreements dated January 27, 1994 and April 26, 1995 between AAI
and the Fund (collectively, the "Current Advisory Agreements").
The Fund's shares are distributed by Aon Securities Corporation
("ASC"), 123 North Wacker Drive, Chicago, Illinois 60606, a wholly-owned
subsidiary of Aon Corporation. Effective July 1, 1996, ASC will also provide
administrative services to the Fund pursuant to an Administration Agreement
among the Fund, AAI and ASC (the "Current Administration Agreement").
The solicitation of proxies will be primarily by mail but also may
include telephone or oral communications by officers of the Fund or
by regular employees of AAI, the Fund's investment adviser, which
persons will not receive any compensation therefor from the Fund.
The cost of preparing and mailing the notice of meeting, the proxy
card, this Proxy Statement and any additional proxy material has
been or is to be borne by AAI, the investment adviser of the Fund.
<PAGE> 6
Voting Information
Shareholders of record at the close of business on May 31, 1996
will be entitled to vote in person or by proxy at the Meeting. As
of such date, with respect to each Portfolio, the number of shares
of capital stock outstanding and entitled to vote is as set forth
opposite such Portfolio's name below:
<TABLE>
<S> <C>
Money Market Portfolio (Class A) 292,151,094.350
Flexible Asset Allocation Portfolio 7,225,020.574
(Class B)
</TABLE>
The table below summarizes the proposals on which shareholders are
being asked to vote (individually, a "Proposal" and collectively,
the "Proposals") and indicates which shareholders are entitled to
vote on each. Proposal 1 relates to each of the Portfolios
separately; shareholders of each Portfolio will vote separately on
this Proposal. If Proposal 1 is approved by shareholders of one
Portfolio and disapproved by shareholders of the other Portfolio,
the Proposal will not be implemented. Proposal 2 relates generally
to both Portfolios; shareholders of both Portfolios will vote
together on this Proposal. Proposal 3 relates to each of the
Portfolios separately; shareholders of each Portfolio will vote
separately on this Proposal. If Proposal 3 is approved by
shareholders of one Portfolio and disapproved by shareholders of
the other Portfolio, the Proposal will implemented for the
Portfolio whose shareholders approve the Proposal and will not be
implemented for the Portfolio whose shareholders do not approve the
Proposal.
<TABLE>
<CAPTION>
Brief Description Shareholders Who Will
Proposal of the Proposal Vote On the Proposal
- -------- ----------------- ---------------------
<S> <C> <C>
Proposal 1 To approve an Agreement Shareholders of each
and Plan of Reorganization Portfolio, voting
pursuant to which the Fund separately
would reorganize from a
Virginia corporation into
a Delaware business trust
under the name Aon Funds.
Proposal 2 To elect Directors of Shareholders of both
the Fund. Portfolios, voting
together
Proposal 3 To approve new investment Shareholders of each
advisory agreements between Portfolio, voting
AAI and the Fund on behalf separately
of the respective
Portfolios.
</TABLE>
- 2 -
<PAGE> 7
Shares may be voted in person or by proxy. Each whole share is
entitled to one vote and each fractional share is entitled to a
proportionate fractional vote. All properly executed proxies
received prior to the Meeting will be voted at the Meeting, and any
adjournment thereof, in accordance with the instructions marked
thereon or as otherwise provided thereon.
The persons designated on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy
card is received properly executed. Unless instructions to the
contrary are marked, properly executed proxies will be voted FOR
the approval of the Proposals described herein. A shareholder may
revoke his or her proxy at any time prior to exercise thereof by
giving written notice to the Secretary of the Fund or by signing
and mailing another proxy of a later date. To be effective, such
revocation must be received by the Fund prior to the Meeting. In
addition, if you attend the Meeting in person you may, if you wish,
vote by ballot at the Meeting thereby canceling any proxy
previously given.
Abstentions and broker non-votes will be counted as shares present
for purposes of determining whether a quorum is present but will
not be voted for or against any adjournment or Proposal.
Accordingly, abstentions and broker non-votes will have no effect
on Proposal 2, for which the required vote is a plurality of the
votes cast, but effectively will be a vote against adjournment and
against Proposals 1 and 3, for which the required vote is a
percentage of the shares present or outstanding. Broker non-votes
are shares held in the name of a broker or nominee as to which
instructions have not been received from the beneficial owners or
other persons entitled to vote and the broker or nominee does not
have discretionary voting authority.
Under the Amended and Restated Articles of Incorporation (the
"Articles of Incorporation") and By-Laws of the Fund, the holders
of not less than one-third of the Fund's shares issued and
outstanding and entitled to vote, represented in person or by
proxy, constitutes a quorum at all shareholder meetings. However,
with respect to certain Proposals, the Investment Company Act of
1940 (the "1940 Act") may require the holders of a greater
proportion of shares of the Fund or a Portfolio issued and
outstanding and entitled to vote be represented in person or by
proxy for action to be validly taken. If less than a quorum is
present at the Meeting or if a quorum is present but sufficient
votes to approve any of the Proposals are not received, the persons
named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any adjournment
will require the affirmative vote of a majority of shares
represented in person or by proxy at the Meeting. The persons
named as proxies will vote all proxies that they are entitled to
vote FOR approval of any Proposal in favor of adjournment and will
vote all proxies required to be voted AGAINST the Proposal against
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<PAGE> 8
adjournment. A shareholder vote may be taken on one or more of the
Proposals in this Proxy Statement prior to any such adjournment if
sufficient votes have been received and it is otherwise
appropriate. No business shall be transacted at an adjourned
meeting except as might have been lawfully transacted had the
Meeting not been adjourned.
Approval of Proposal 1 requires the affirmative vote of not less
than two-thirds of the shares of each Portfolio outstanding and
entitled to vote at the Meeting. If Proposal 1 is not approved,
the Fund will continue to operate as a Virginia corporation.
Election of Directors pursuant to Proposal 2 requires a plurality
vote of the shares of the Fund voting in person or by proxy at the
Meeting, provided a quorum is present. This means that the five
nominees receiving the largest number of votes will be elected.
Accordingly, a plurality of all votes cast by shareholders of the
Money Market Portfolio and the Flexible Asset Allocation Portfolio,
regardless of class, shall be required to elect each Director.
Approval of Proposal 3 by each Portfolio voting on the Proposal
requires the affirmative vote of "a majority of the outstanding
voting securities" of that Portfolio as defined in the 1940 Act.
Under the 1940 Act, this means the affirmative vote of the lesser
of (i) 67% or more of the Portfolio's shares present at the meeting
in person or by proxy, if the holders of more than 50% of the
outstanding shares of such Portfolio are present at the meeting or
represented by proxy or (ii) more than 50% of the Portfolio's
outstanding shares. If Proposal 3 is not approved by a Portfolio
voting on that Proposal, that Portfolio will continue to operate
under its Current Advisory Agreement.
If you are a shareholder of more than one Portfolio, you will
receive this Proxy Statement and a separate proxy for each
Portfolio of which you are a shareholder. PLEASE VOTE, SIGN AND
RETURN EACH PROXY YOU RECEIVE TO ENSURE THAT ALL YOUR VOTES ARE
COUNTED.
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:
- 4 -
<PAGE> 9
<TABLE>
<CAPTION>
_________________________________________________________________________________________________
(1) (2) (3) (4)
Amount and Percent
Name and Address Nature of of
Title of Class of Beneficial Owner Beneficial Ownership Class
(%)
_________________________________________________________________________________________________
<S> <C> <C> <C>
Class A Aon Risk Services 113,256,000.00 38.77
(Money Market Controller, 7th Floor directly owned shares
Portfolio) 123 N. Wacker Dr.
Chicago, IL 60606
Class A Rollins Hudig Hall Co. 104,352,000.00 35.72
(Money Market Controller, 22nd Floor directly owned shares
Portfolio) 123 N. Wacker Dr.
Chicago, IL 60606
Class A Virginia Surety Company, Inc. 20,344,987.44 6.96
(Money Market 123 N. Wacker Dr. directly owned shares
Portfolio) Chicago, IL 60606
Class A Rollins Hudig Hall-NY 16,355,000.00 5.60
(Money Market Suite 22 directly owned shares
Portfolio) 123 N. Wacker Dr.
Chicago, IL 60606
Class B Combined Insurance Company 5,443,722.20 75.35
(Flexible Asset of America directly owned shares
Allocation Portfolio) Investment Accounting Mgr.
27th Floor
123 N. Wacker Dr.
Chicago, IL 60606
Class B Virginia Surety Company Inc. 1,692,190.82 23.42
(Flexible Asset 123 N. Wacker Dr. directly owned shares
Allocation Portfolio) Chicago, IL 60606
</TABLE>
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT
ANNUAL REPORT AND SEMI-ANNUAL REPORT SUCCEEDING SUCH ANNUAL REPORT,
IF ANY, TO SHAREHOLDERS UPON REQUEST. A SHAREHOLDER WHO WISHES TO
RECEIVE A COPY OF THE FUND'S ANNUAL REPORT OR SEMI-ANNUAL REPORT
MAY WRITE THE FUND'S ADMINISTRATOR AT 123 NORTH WACKER DRIVE,
CHICAGO, ILLINOIS 60606, OR CALL (800) 266-3637.
- 5 -
<PAGE> 10
____________________
Proposal 1
APPROVAL OF REORGANIZATION
____________________
SHAREHOLDERS OF EACH PORTFOLIO, VOTING SEPARATELY, ARE ENTITLED TO
VOTE ON THIS PROPOSAL.
INTRODUCTION
At meetings held on April 26, 1996 and May 22, 1996, the Board of
Directors of the Fund considered, and at the meeting held on May
22, 1996 unanimously approved, an Agreement and Plan of
Reorganization (the "Plan of Reorganization"). A copy of the Plan
of Reorganization is attached hereto as Exhibit A. The Plan of
Reorganization provides that each Portfolio will transfer all of
its assets and liabilities to a corresponding series of the Aon
Funds, a Delaware business trust (the "Trust"), in exchange for all
of the beneficial interests in that corresponding series of the
Trust. The beneficial interests in each series of the Trust will
then be distributed pro rata to the current shareholders of the
corresponding Portfolio, and thereafter the Fund will take all
actions necessary to effect its dissolution and to have its
corporate existence terminated. The business of the Fund -- of
being an open-end management investment company -- will thereafter
be carried on by the Trust (the entire transaction shall
hereinafter be referred to as the "Reorganization").
Each shareholder of a Portfolio will have the same investment in
the corresponding series of the Trust as such shareholder had in
the Portfolio prior to the Reorganization. For a further
discussion of the steps to be taken to consummate the
Reorganization, see "Summary of the Plan of Reorganization" in this
Proposal 1.
Each initial series of the Trust will have investment objectives,
policies and restrictions identical to those of its corresponding
Portfolio.
AAI, the investment adviser of each Portfolio, will continue to be
responsible for the investment management of each series of the
Trust, subject to the general oversight of the Trustees of the
Trust, under respective new investment advisory agreements
(collectively, the "New Advisory Agreements") with the Trust. The
New Advisory Agreements will be the same in every material respect
as the respective Current Advisory Agreements except that, if
Proposal 3 is approved by the shareholders of the respective
Portfolios, the Current Advisory Agreements will be amended to
remove from their scope the Administrative Services (as defined in
Proposal 3) which, effective as of July 1, 1996, AAI will delegate
- 6 -
<PAGE> 11
to ASC (the "Administrator") pursuant to the Current Administration
Agreement. (Prior to July 1, 1995, FFSC (as herein after defined)
will serve as Administrator pursuant to an administration agreement
which is substantially identical to the Current Administration
Agreement.) Such Administrative Services are expected to continue
to be provided by ASC pursuant to a new administration agreement
(the "New Administration Agreement") to be entered into directly by
the Fund and ASC. The fees for such Administrative Services are
expected to remain substantially the same but will be paid directly
by the Fund (rather than by AAI) to ASC, and the fees to be paid to
AAI pursuant to the New Advisory Agreements will be reduced by the
approximate amount that AAI is currently paying to ASC as
Administrator pursuant to the Current Administration Agreement.
Accordingly, the aggregate fees paid by the Fund for investment
advisory and Administrative Services pursuant to the New Advisory
Agreements and the New Administration Agreement, respectively, are
expected to remain exactly the same.
Immediately upon completion of the Reorganization, ASC will
continue to act as distributor (the "Distributor") for each series
of the Trust pursuant to a distribution agreement (the "New
Distribution Agreement") with the Trust that will be the same in
every material respect as the distribution agreement currently in
effect between ASC and the Fund with respect to the Portfolios (the
"Current Distribution Agreement"), except that, if this Proposal 1
is approved and the Fund implements a multiple class distribution
system, ASC may receive distribution fees relating to Class C
shares as described below. ASC also will continue to act as
Administrator for each series of the Trust pursuant to the New
Administration Agreement with the Trust which will be the same in
every material respect as the Current Administration Agreement,
except that, as noted above, if Proposal 3 is approved by the
respective Portfolios, ASC will provide Administrative Services
directly to, and will receive payment for Administrative Services
directly from, the Trust.
Firstar Trust Company ("Firstar") currently acts as transfer agent
(the "Transfer Agent"), fund accounting services agent and
custodian (the "Custodian"), respectively, for the Fund and upon
completion of the Reorganization is expected to continue to act in
like capacities with respect to the Trust pursuant to transfer
agency, fund accounting services and custody agreements with the
Trust that will be the same in every material respect as the
transfer agency agreement and custodian agreement currently in
effect between Firstar and the Fund.
REASONS FOR PROPOSED REORGANIZATION
On April 1, 1996, Aon Corporation completed the sale of all of the
outstanding capital stock of its subsidiaries, The Life Insurance
Company of Virginia ("Life of Virginia") and Forth Financial
- 7 -
<PAGE> 12
Resources, Ltd. ("FFRL"), to General Electric Capital Corporation
("GECC"). Prior to this transaction, the Board of Directors of the
Fund was comprised primarily of persons who were either affiliated
persons of Life of Virginia or FFRL or were also serving as
directors of Life of Virginia Series Fund, Inc. ("LOVSF"), another
registered investment company of which Life of Virginia is the
sponsor. However, a substantial majority of the shares of each of
the Portfolios is currently owned in the aggregate by Aon
Corporation or its subsidiaries or their respective employees, and
Aon Corporation and such subsidiaries determined that as a result
of the sale of Life of Virginia and FFRL to GECC, they desired
certain changes in the operation of the Fund. To this end, Aon
Corporation and certain of its subsidiaries, which as of March 13,
1996 collectively beneficially owned approximately 99% of the
outstanding shares of capital stock of the Fund, requested the Fund
to call a special meeting of shareholders of the Fund. Such
meeting was held on April 24, 1996, and at such meeting five
nominees proposed by Aon Corporation and such subsidiaries were
elected as new Directors of the Fund (hereinafter sometimes
referred to as the "New Board").
In connection with the sale of Life of Virginia and FFRL to GECC,
Forth Financial Securities Corporation ("FFSC"), which is a
subsidiary of FFRL and which had served as the Fund's Distributor
and Administrator, has been or is in the process of being replaced
in such capacities by ASC, a wholly-owned subsidiary of Aon
Corporation. Also as a result of the sale of Life of Virginia and
FFRL, AAI no longer maintains an office in Virginia. As a result
of these changes, it is expected that within a relatively short
time the Fund will no longer have any nexus to Virginia and its
operations will be transferred elsewhere, most likely to Chicago,
Illinois, the site of Aon Corporation's headquarters.
At the same time, and in part because of the termination of Aon
Corporation's affiliation with LOVSF which resulted from the sale
of Life of Virginia and FFRL, the Fund is currently considering the
addition of up to six new portfolios, including certain portfolios
similar in certain respects to certain of the four portfolios which
are currently offered by LOVSF but not by the Fund. These LOVSF
portfolios are its Common Stock Index, Government Securities, Real
Estate Securities and International Equity portfolios. The Fund is
also considering adding an Equity Active and a Diversified Bond
portfolio in the near future.
As a result of these recent and impending changes in the Fund's
operations, the New Board considered whether to continue operating
the Fund as a Virginia corporation or whether another form of
organization would be preferable, and the New Board concluded that
operating the Fund as a Delaware business trust is preferable to
operating the Fund as a Virginia corporation. In general, Delaware
business trust law will provide greater flexibility to the Fund
than Virginia corporation law in structuring the Fund's operations
- 8 -
<PAGE> 13
and will eliminate both the need to obtain shareholder approval for
certain routine or non-material actions and the expense and delays
involved in doing so. For example, under Virginia corporation law,
routine or non-material changes to the charter of the Fund, such as
those in response to regulatory developments, generally require
shareholder approval; Delaware law permits such changes to the
Declaration of Trust of a Delaware business trust to be made
without first obtaining shareholder approval. In addition, unlike
Virginia corporation law, which restricts the delegation of a board
of directors' functions, Delaware law permits the board of trustees
of a Delaware business trust to delegate certain of its
responsibilities, such as those pertaining to the declaration of
dividends, to duly empowered committees of the board of trustees or
to appropriate officers. Finally, Delaware law permits the
trustees of a Delaware business trust to adapt the trust to future
contingencies; for example, without a shareholder vote the trustees
may merge or consolidate the trust with another entity. Any
exercise of this authority by the Trustees of the Trust may,
however, be subject to applicable provisions of the 1940 Act.
Further, the Reorganization will (i) permit the Fund to offer
unlimited series, classes of shares within series and an unlimited
number of shares of beneficial interest in series and classes, (ii)
effect a change in the Fund's name to Aon Funds, and (iii) permit
the Fund to consider transferring its operations to Chicago,
Illinois, the site of Aon Corporation's headquarters, without
incurring significant franchise taxes and license fees which would
apply if the Fund were to remain a Virginia corporation upon such
transfer.
The Fund also believes that the ability to offer classes of shares
within series will facilitate the Fund taking advantage of
alternative methods of selling shares through a multiple-class
distribution program. At present, each Portfolio is a "no-load"
fund and its shares are sold to investors at a public offering
price equal to its net asset value per share without the imposition
of any sales charges, whether front-end sales charges or deferred
("back-end") sales charges (also frequently referred to as
"contingent deferred sales charges" or "CDSCs"). In addition,
neither Portfolio currently uses its assets to pay for expenses and
costs related to distribution of its shares (also frequently
referred to as "Rule 12b-1 fees"). All costs of distribution are
currently paid by AAI or the Distributor.
Subject to approval of this Proposal 1, it is the current intention
of the Fund to have the existing shares of the Portfolios
designated as Class Y (no-load) shares of the Trust and to have the
Trust establish at least one additional class of shares for each
Portfolio (as well as each of the New Series, as described below)
in order to implement a multiple-class distribution program. The
creation of one or more separate classes of shares will permit the
Trust to allocate costs associated with the distribution of shares
- 9 -
<PAGE> 14
of a class and distribution-related servicing of shareholders of
the class to the investors who elect to purchase that particular
class of shares. The Directors have determined that although
distribution-related and shareholder servicing-related charges may
be imposed on any new class, the outstanding shares of each
Portfolio as of the business day immediately prior to the
commencement of distribution under the multiple-class program (the
proposed Class Y (no-load) shares) will not bear any portion of
such costs, and will not be subject to sales charges or Rule 12b-1
fees, whether for distribution or shareholder servicing. In
addition, the holders of such shares will not bear any of the costs
and expenses (such as legal and accountants' fees) of establishing
the multiple-class distribution program and will not be subject to
any costs or expenses in connection with the reclassification of
outstanding shares to Class Y shares.
In connection with the implementation of the multiple-class
distribution program, the Fund currently intends that the Trust
will limit the general availability of Class Y shares of the
Portfolios to (i) the shareholders of record of outstanding shares
of the 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 Corporation or
AAI. Holders of outstanding Class Y shares of each Portfolio will
be entitled to purchase, and to exchange their shares for, Class Y
shares of the other Portfolios without payment of any sales,
distribution-related or shareholder servicing-related charges. No
Rule 12b-1 distribution-related or shareholder servicing-related
costs or expenses will be imposed on Class Y shares owned or
purchased, through dividend reinvestment, exchange or otherwise, by
those holders.
As mentioned above, it is currently contemplated that each
Portfolio will create at least one new class of shares in addition
to the Class Y shares. This class would be designated Class C
shares, and is currently proposed to be offered with the following
characteristics:
Class C shares will be offered for all of the Portfolios, and
will be sold without a front-end sales charge, but will be
subject to a continuing Rule 12b-1 fee at an annual rate of up
to .25% of the average daily net asset value of the Class C
shares (.10% in the case of Class C shares of the Money Market
Portfolio), which may be used for payments in respect of
distribution services rendered ("distribution fees") or
shareholder servicing related to distribution of shares of the
class ("service fees").
In general, shares of each class will be eligible to be exchanged
for shares of the same class of any other Portfolio offering that
class, without payment of any sales or distribution-related charges
- 10 -
<PAGE> 15
in connection with the exchange. While the final characteristics of the
classes, including the distribution-related and shareholder servicing-related
charges for the Class C shares, may change prior to implementation, regardless
of the final characteristics of each class, no class will bear the
distribution-related or shareholder servicing-related costs and expenses of any
other class, and no series will bear the distribution-related or shareholder
servicing-related costs and expenses of any other series.
Other than with respect to distribution-related and shareholder
servicing-related matters, all classes of shares of a series would generally
participate in all respects on a proportionate basis with all other classes of
shares of that series, including with respect to investment income, realized
and unrealized gains and losses on series investments and all other operating
expenses of the series (except for certain expenses relating specifically to a
particular class, including but not limited to any incremental shareholder
servicing fees and the printing of proxy statements for meetings of
shareholders of a particular class). All shares then issued and outstanding
and entitled to be voted shall be voted on a series by series basis, except
that (i) 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, (ii) shares shall be voted by class where required by
the 1940 Act, and (iii) 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.
In connection with approving the submission of this Proposal 1 to
shareholders of the Fund and approving in principle the multiple-class
distribution program, the Directors considered that the implementation of such
program would provide investors with additional methods of purchasing the
Fund's shares, which could lead to increased sales of shares and a larger asset
base. This in turn could enable the Fund to achieve savings where certain
costs (such as legal and audit expenses and Directors' fees) generally
unrelated to the size of a series are spread over a larger asset base.
Increasing the size of the series could also improve their ability to deal in
larger blocks of securities and obtain more favorable pricing on portfolio
transactions. (However, larger blocks may in some circumstances be more
difficult to sell at favorable prices.) In addition, the Directors considered
the fact that the multiple-class distribution program is likely to result in a
more constant cash flow to the series, which could (i) minimize or prevent any
adverse effects of redemptions requiring inopportune liquidation of portfolio
securities and the foregoing of favorable investment opportunities and (ii) in
periods of market decline enhance the ability of the series to acquire
undervalued securities
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<PAGE> 16
and securities at a better average cost. Finally, the Directors
considered that no distribution-related or shareholder servicing-related
costs or expenses will be imposed on existing holders of shares in
connection with implementation of the multiple-class distribution
program.
In conclusion, the New Board believes that reorganizing the Fund
into the Trust will better serve and protect the investment needs
and goals of the shareholders. The Reorganization will have no
material impact on the economic interests of the shareholders of
the Fund: the economic interest of a shareholder in each series of
the Trust will be virtually identical to that shareholder's
interest in the corresponding Portfolio of the Fund (subject to
Proposal 3 set forth in this Proxy Statement which is not directly
related to the Reorganization and subject to the proposed
implementation of the multiple-class distribution program, which
will not affect existing shareholders). The investment objectives
and policies of the Portfolios that are fundamental will remain
fundamental upon the reorganization of such Portfolios into the
corresponding series of the Trust and will not be subject to change
except by shareholder vote. In the event the Reorganization is
approved by shareholders, the adoption of the New Advisory
Agreements with respect to each Portfolio by that Portfolio's
shareholders under Proposal 3 will apply to the corresponding
series of the Trust. See Proposal 3.
SHAREHOLDER APPROVAL
The New Board recommends that the shareholders of the Fund vote FOR
the approval of the Reorganization provided for in the Plan of
Reorganization, as described below. A vote of approval encompasses
approval of (i) the reorganization of the Fund from a Virginia
corporation with two separate, active Portfolios to a Delaware
business trust under the name Aon Funds with two separate, active
series (excluding the New Series referred to below) pursuant to the
Plan of Reorganization, (ii) the temporary waiver of certain
investment restrictions of the Portfolios to permit the
Reorganization (see "Temporary Waiver of Investment Restrictions"),
and (iii) certain other actions, including authorization of the
Fund, as the initial shareholder of the Trust, to elect as Trustees
of the Trust the persons who at such time serve as Directors of the
Fund; to ratify the appointment of Ernst & Young LLP, currently the
independent accountants of the Fund for the fiscal year ending
October 31, 1996, to continue their current engagement with respect
to the Trust; to approve the New Advisory Agreements between AAI
and the Trust with respect to the corresponding series of the
Trust, subject to shareholder approval of Proposal 3 (or, in the
absence of such shareholder approval, to approve the Current
Advisory Agreements between AAI and the Trust with respect to the
corresponding series of the Trust); and to approve the
Reorganization.
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<PAGE> 17
SUMMARY OF THE PLAN OF REORGANIZATION
The following discussion summarizes the important terms of the Plan
of Reorganization. This summary is qualified in its entirety by
reference to the Plan of Reorganization itself, which is attached
as Exhibit A to this Proxy Statement.
In order to accomplish the Reorganization, the Trust has been
formed as a Delaware business trust under the name Aon Funds
pursuant to an Agreement and Declaration of Trust dated May 16,
1996 (the "Declaration of Trust"). Shares of the Trust will be
divided into separate series, two of which will correspond to each
of the Portfolios. On the closing date of the Reorganization (the
"Closing Date"), each of the Portfolios will transfer all of its
assets and liabilities to the corresponding series of the Trust in
exchange for the assumption by such series of the Trust of all the
liabilities of such Portfolio and the issuance of full and
fractional shares of beneficial interest of that corresponding
series of the Trust ("Trust Shares") to such Portfolio. The Trust
Shares issued to such Portfolio will have an aggregate net asset
value (as determined by using the procedures set forth in such
Portfolio's Prospectus) equal to the aggregate net asset value of
such Portfolio's capital stock as of the time as of which such
Trust Shares are issued.
Immediately thereafter, each Portfolio will distribute the Trust
Shares received by it to its shareholders pro rata, in proportion
to each shareholder's respective interest in such Portfolio (as
represented by shares of capital stock of such Portfolio) in
liquidation of that interest. Following distribution of Trust
Shares to the shareholders of the Portfolios, and as soon as
practicable thereafter, the Fund will take all actions necessary to
effect its dissolution and to have its corporate existence
terminated. Upon completion of the Reorganization, each
shareholder will be the owner of full and fractional Trust Shares
equal in number, denomination and aggregate net asset value to the
shareholder's Portfolio shares immediately prior to the
Reorganization. Certificates representing shares of capital stock
of a Portfolio outstanding at the Closing Date will not represent
Trust Shares distributed to the record holder thereof as a result
of the liquidation of the Portfolio. All certificates representing
shares of capital stock shall automatically be cancelled upon the
Reorganization. Trust Shares shall be issued in uncertificated
form except as the Trustees may otherwise determine from time to
time. Any certificate representing Trust Shares to be issued in
replacement of a certificate representing shares of a Portfolio
will be issued only upon the surrender of the latter certificate.
The Plan of Reorganization authorizes the Fund, as the then initial
shareholder of the Trust: (i) to elect as Trustees of the Trust
the persons who at that time serve as Directors of the Fund (see
"Certain Comparative Information About the Fund and the Trust --
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<PAGE> 18
Trustees and Officers of the Delaware Trust" below), (ii) to ratify
the appointment of Ernst & Young LLP, currently the independent
accountants of the Fund for the fiscal year ending October 31,
1996, to continue their current engagement with respect to the
Trust, (iii) to approve the New Advisory Agreements between the
Trust and AAI with respect to each series of the Trust, subject to
shareholder approval of Proposal 3, and (iv) to approve the
Reorganization. The Plan of Reorganization also authorizes the
transfer of substantially all of the assets of each Portfolio to
the corresponding series of the Trust and the subsequent
dissolution and termination of the corporate existence of the Fund
after the Reorganization has been completed.
The obligations of the Fund and the Trust under the Plan of
Reorganization are subject to various conditions as stated therein.
In order to protect against unforeseen events, the Plan of
Reorganization may be terminated or amended at any time prior to
the Reorganization by action of the New Board notwithstanding the
approval of the Plan of Reorganization by the shareholders of the
Fund. The Fund and the Trust may at any time waive compliance with
any of the covenants and conditions contained in, or may amend, the
Plan of Reorganization, provided that such waiver or amendment does
not materially adversely affect the interests of Fund shareholders.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Reorganization will become effective as of
the last daily determination of each Portfolio's net asset value
sometime in August, 1996. However, the Reorganization will become
effective on a later time if circumstances warrant.
FUND AGREEMENTS
Each of the New Advisory Agreements (subject to approval of
Proposal 3) and the New Administration Agreement will continue in
force for two years from its date and thereafter from year to year
so long as its continuance is approved at least annually by (i) the
vote of a majority of the outstanding voting securities of the
Trust or the appropriate series thereof or by the Trust's Board of
Trustees and (ii) the vote of a majority of the Trustees who are
not parties to such agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting
on such agreement. With respect to the New Distribution Agreement,
it will continue in force for two years from its date and
thereafter from year to year with respect to any series so long as
its continuance is approved at least annually by (i) the vote of a
majority of the outstanding voting securities of the appropriate
class of such series or by the vote of the Trust's Board of
Trustees and (ii) the vote of a majority of the Trustees who are
not parties to such agreement or interested persons of any such
party and have no direct or indirect financial interest in such
agreement, cast in person at a meeting called for the purpose of
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<PAGE> 19
voting on such agreement. Each of the New Advisory Agreements, the
New Administration Agreement, and the New Distribution Agreement
will be terminable without penalty on sixty days' written notice by
either party to such agreement or by the vote of a majority of the
outstanding voting securities of the relevant series or class, and
each such agreement will terminate automatically in the event of
its assignment.
SHAREHOLDER ACCOUNTS AND PLANS
In connection with the Reorganization, the Transfer Agent will
establish an account for each shareholder reflecting the
appropriate number and denominations of Trust Shares to be received
by that shareholder under the Plan of Reorganization. These
accounts will be the same in all material respects as the accounts
currently maintained by the Transfer Agent with respect to the
Portfolios.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of the Portfolios might
be construed as restricting the ability of the Portfolios to carry
out the Reorganization. By approving Proposal 1, shareholders will
be deemed to waive, for the limited purpose of the Reorganization,
any fundamental investment restriction that might be construed to
prohibit either Portfolio from completing the Reorganization,
including but not limited to restrictions prohibiting either
Portfolio from (i) acquiring more than a stated percentage of
ownership of another company, (ii) investing for the purpose of
exercising control over or management of any company, (iii)
investing in issuers having a record of less than three years of
continuous operations, (iv) investing in issuers of a single
industry, (v) investing in equity securities, (vi) investing in
illiquid securities, or (vii) investing in other investment
companies.
TAX CONSEQUENCES OF THE REORGANIZATION; EXPENSES
The Fund and the Trust will receive an opinion from their counsel,
Sidley & Austin, based on certain facts, assumptions and
representations made by the Fund and AAI, to the effect that, on
the basis of existing provisions of the Internal Revenue Code of
1986, as amended, current administrative rules and court decisions,
for Federal income tax purposes:
(i) each transfer by a current Portfolio of all of its
assets to the corresponding series of the Trust solely in
exchange for the assumption by the corresponding series of the
Trust of all of the liabilities of such current Portfolio and
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<PAGE> 20
the issuance to such current Portfolio of Trust Shares of the
corresponding series of the Trust, followed by the
distribution on the Closing Date of such Trust Shares to the
shareholders of the Portfolio in liquidation and redemption of
such shareholders' current Portfolio shares, and the
dissolution of the Fund will constitute a "reorganization"
within the meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the Fund (or
either current Portfolio) or the Trust (or either of the
corresponding series of the Trust) as a result thereof;
(iii) no gain or loss will be recognized by shareholders
of either Portfolio upon the exchange of their shares of the
Portfolio in exchange for Trust Shares in connection
therewith;
(iv) the aggregate tax basis of the Trust Shares received
by a current shareholder of either Portfolio in such exchange
will be the same as the aggregate tax basis of the current
shares of the Portfolio given up in such exchange; and
(v) the holding period for Trust Shares received by a
current shareholder of either Portfolio in such exchange will
include the shareholder's holding period for current Portfolio
shares given up in such exchange, provided such current
Portfolio shares were held as capital assets by such
shareholder at the time of the exchange.
CERTAIN COMPARATIVE INFORMATION ABOUT THE FUND AND THE TRUST
As a Delaware business trust, the Trust's operations will be
governed by its Declaration of Trust and By-Laws and applicable
Delaware law rather than by the Fund's Articles of Incorporation
and By-Laws and the Virginia Stock Corporation Act (the
"Corporation Act"), which currently govern the Fund's operations
The operations of the Trust, like those of the Fund, will be
subject to the provisions of the 1940 Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC")
thereunder and applicable state securities laws.
Trustees and Officers of the Delaware Trust. Subject only to such
restrictions as may be set forth in the Declaration of Trust, the
1940 Act and other applicable law, the Trustees will have exclusive
control over the assets of the Trust and over the management of the
business and affairs of the Trust, but will have extensive
authority to delegate their powers, authority, functions and duties
to other parties. The powers, authority, functions and duties
(including fiduciary duties) of the Trustees of the Trust are
substantially similar to those of the Directors of the Fund.
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<PAGE> 21
The Trustees will be the current Directors of the Fund. For
further information about these individuals, including biographical
and compensation information, see Proposal 2. The Trustees will
serve indefinite terms, but may be removed (i) 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
purposes of determining two-thirds of the number of Trustees then
in office, such Trustee sought to be removed) and (ii) at any time
with or without cause at any meeting of the shareholders of the
Trust called for that purpose by a vote of shareholders holding of
record at least 66-2/3% of the outstanding shares of the Trust. In
addition, a Trustee may resign at any time, and the death or
physical or mental incapacity of a Trustee will effect his or her
resignation.
In the case of a vacancy in the authorized number of Trustees
resulting from the death, physical or mental incapacity,
resignation or removal of a Trustee, or an increase in the
authorized number of Trustees, a majority of the Trustees then in
office may fill such vacancy in a manner consistent with the
requirements of the 1940 Act including, without limitation,
requirements (i) relating to the number of interested persons who
may serve as Trustees; (ii) that, immediately after filling any
such vacancy, at least two-thirds of the Trustees then holding
office shall have been elected to such office by the holders of the
outstanding voting securities of the Trust; and (iii) that, in the
event that at any time less than a majority of the Trustees of the
Trust holding office at that time were so elected by the holders of
the outstanding voting securities of the Trust, the Trustees or a
proper officer of the Trust shall forthwith cause to be held as
promptly as possible and in any event within sixty days a meeting
of such holders for the purpose of electing Trustees to fill any
existing vacancies in the authorized number of Trustees (unless the
SEC shall by order extend such period).
In light of the foregoing, it is not expected that there will be
regular or periodic meetings of shareholders for the purpose of
electing Trustees.
It is anticipated that the Trustees of the Trust will continue the
appointment of the present officers of the Fund to serve as
officers of the Trust and that those persons will continue to
perform the same functions on behalf of the Trust that they now
perform on behalf of the Fund. Officers and Trustees who are
interested persons of the Trust will receive no salary, fees or
compensation from the Trust.
Capital Shares. The Declaration of Trust will permit the Trustees
to establish and designate one or more additional series or
portfolios of the Trust and to divide the shares of a series into
two or more separate and distinct classes and, with respect to each
series or class, to issue an unlimited number of full or fractional
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<PAGE> 22
shares of that series or class. Under Virginia law, the Articles of
Incorporation of the Fund must specify the number of shares authorized to be
issued. The Articles of Incorporation currently authorize eight classes of
shares. The Fund is currently authorized to issue the following number of
shares: Money Market Portfolio - 750,000,000; Flexible Asset Allocation
Portfolio - 450,000,000; Capital Stock, Class C - 400,000,000; Capital Stock,
Class D - 400,000,000; Capital Stock, Class E - 250,000,000; Capital Stock,
Class F - 250,000,000; Capital Stock, Class G - 250,000,000; and Capital Stock,
Class H - 250,000,000. The Board of Directors of the Fund may, without
shareholder approval, amend the Articles of Incorporation of the Fund to
designate investment portfolios for the Class C, D, E, F, G and H Capital
Stock. The Trust initially will have six series -- two series corresponding to
the two current Portfolios of the Fund, plus four additional series
(collectively, the "New Series") as described below, none of which has yet
commenced operations or has any shareholders. Additional series may be
established and designated by the Trustees at any time. Each share of a
particular series (or class thereof) of the Trust will represent an equal
undivided beneficial interest in the assets associated with that series
(subject to the liabilities associated with that series and, in the case of a
class within that series, subject also to the liabilities associated with that
class), and, subject to the relative rights, powers, privileges and preferences
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 of the Trust, like each share of a particular Portfolio,
will be equal in every respect to each other share of that series.
Accordingly, subject to the relative rights, powers, privileges, preferences
and duties as among classes within a series, no share of a particular series
will have any priority or preference over any other share of that series with
respect to dividends or other distributions, and all dividends and
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 at the record date
for such dividend or distribution.
Shareholder Liability. Under Delaware law, the Trust's shareholders
will not be personally liable for the obligations of the Trust. The Delaware
Business Trust Act provides that a shareholder of a Delaware business trust is
entitled to the same limitation of personal liability as is extended to
stockholders of private, for-profit Delaware corporations. Stockholders of a
for-profit Delaware corporation -- like those of a Virginia corporation, such
as the Fund, under the Corporation Act -- may not be held personally liable
under Delaware law for the obligations of the corporation. It is possible that
in some states, courts may decline to apply Delaware law on this point. As a
result, to the extent that the Trust or a shareholder will be subject to the
jurisdiction of courts in those states, there is a risk that such
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<PAGE> 23
courts might not apply Delaware law, and could thereby subject
Trust shareholders to personal liability. To guard against this
risk, the Declaration of Trust (i) contains an express disclaimer
of shareholder liability for the debts, liabilities and obligations
of the Trust, (ii) provides for indemnification, out of the assets
associated with the relevant series, of any shareholder held
personally liable for the debts, liabilities or obligations of the
Trust and (iii) permits the Trust to include a disclaimer of
shareholder liability in its contractual commitments. Thus, the
risk of a Trust shareholder incurring financial loss beyond his or
her investment because of shareholder liability would be limited to
circumstances in which (i) a court refused to apply Delaware law or
otherwise failed to give full effect to Declaration of Trust or
contractual provisions limiting shareholder liability, (ii) no
contractual limitation of liability was in effect, and (iii) the
Trust itself was unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business, and the nature of
its assets, the New Board believes that the risk of personal
liability to a Trust shareholder is remote.
Shareholders of a Virginia corporation such as the Fund may not be
held personally liable under Virginia law for the obligations of
the corporation, except in limited circumstances generally not
applicable to investment companies.
Shareholder Voting Rights. The Fund does not and the Trust will
not hold annual meetings. The Declaration of Trust provides that
the Trustees shall promptly call and give notice of a meeting of
the shareholders of the Trust 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 10% of the
shares outstanding. The Declaration of Trust also provides, in
substance, that whenever ten or more shareholders of record who
have been such for at least six months, and who hold in the
aggregate either shares having a net asset value of at least
$25,000 or at least 1% of the outstanding shares, whichever is
less, apply to the Trustees in writing, stating that they wish to
communicate with other shareholders with a view to calling a
meeting of shareholders for the purpose of removing one or more
Trustees, the Trustees shall cooperate with those shareholders to
the extent and in the manner provided in Section 16(c) of the 1940
Act (as though Section 16(c) applied to the Trust). The
Declaration of Trust also provides that the Trustees shall call and
give notice of a meeting within thirty (30) days after written
application by shareholders holding of record at least 10% of the
shares outstanding entitled to be voted on the matter requesting a
meeting be called for the purpose of taking action upon certain
amendments to the Declaration of Trust and such matters relating to
the Trust or any series as may be required by the 1940 Act.
The Trust, like the Fund, will operate as an open-end management
investment company registered with the SEC under the 1940 Act.
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<PAGE> 24
Shareholders of the respective series of the Trust will therefore
have the power to vote at special meetings with respect to, among
other things, changes in fundamental investment policies and
restrictions of such series, approval of changes to investment
advisory agreements and such additional matters relating to the
Trust as might be required by the 1940 Act. Upon approval of this
Proposal 1, the Fund will notify the SEC that the Trust will adopt
the Fund's existing registration statement under the Securities Act
of 1933 with respect to each Portfolio (the "Registration
Statement"). Pursuant to the Registration Statement, it is
expected that the Trust will also offer shares of several New
Series, which may include: the Government Securities Fund, the S&P
500 Index Fund, the International Equity Fund and the REIT Index
Fund. It is anticipated that this Registration Statement will
become effective sometime in August, 1996. If the Reorganization
is approved by the shareholders of each Portfolio and is completed,
the Trust will have, in addition to the New Series, the Aon Money
Market Fund and the Aon Asset Allocation Fund. Each of these
series will hold assets and liabilities corresponding to the
Portfolio from which they were transferred.
The Declaration of Trust provides that shareholders of the Trust
shall have the power to vote only with respect to the election of
Trustees, the removal of Trustees, the approval of investment
advisory or similar agreements, and such additional matters as may
be required by law or as the Trustees may deem appropriate. The
Declaration of Trust also permits the Trustees to amend the
Declaration of Trust provided that (i) the Trustees must obtain the
authorization or approval of holders of not less than 75% of the
outstanding shares to adopt any amendment to the provisions of the
Declaration of Trust governing amendments to the Declaration of
Trust; (ii) 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); and (iii) to the extent voting rights are
accorded to shareholders under the 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 such
shareholders if they were voting on such matter. The Fund's
Articles of Incorporation, on the other hand, generally give
shareholders, except with respect to minor amendments, exclusive
power to amend the Articles of Incorporation.
Shareholders of the Trust are entitled to one vote for each full
share and to a proportionate fractional vote for each fractional
share. In the case of (a) the election or removal of Trustees and
(b) an amendment to the provisions of the Declaration of Trust
governing the amendment of the Declaration of Trust, and where
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<PAGE> 25
required by the 1940 Act, all shares entitled to be voted are to 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 the
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 the 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.
Notwithstanding the foregoing, the Trustees 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.
Liability of Trustees. The Declaration of Trust provides that no
Trustee shall be liable for any act or omission or any conduct
whatsoever in his or her capacity as Trustee (including, without
limitation, errors of judgment or mistakes of fact or law),
provided that a Trustee shall not be protected against any
liabilities to the Trust or its 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. Furthermore, the
Declaration of Trust entitles the Trustees to indemnification
against all liability (and expenses associated therewith) in
respect of which he or she is protected, as provided in the
preceding sentence. The Trust may also advance money for these
expenses, provided that the Trustee undertakes to repay the Trust
if his or her conduct is later adjudicated to preclude
indemnification and certain other conditions are met. The
Declaration of Trust also provides that the Trust may purchase and
maintain insurance policies against such liabilities.
Under the Corporation Act, in addition to any other liability
imposed by law, a Director may be liable to the Fund: (i) for
voting for or assenting to the declaration of any dividend or other
distribution of assets to shareholders which is contrary to the
Corporation Act or the Articles of Incorporation, or (ii) for
failing to discharge his or her duties in accordance with his or
her good faith business judgment of the best interests of the
corporation. Under the Corporation Act and the Fund's Articles of
Incorporation and By-laws, the Fund shall indemnify a Director who
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<PAGE> 26
was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that such individual is or was a
Director against expenses, judgments, fines and amounts paid in
settlement, provided the Director acted in good faith and in a
manner he or she reasonably believed to be in the best interests of
the Fund. The Fund also may reimburse a Director's expenses in
advance of final disposition of any such proceeding if (i) it is
determined that the Director met the applicable standard of conduct
by the vote of a majority of a quorum of Directors who are neither
interested persons nor parties to the proceeding or by independent
legal counsel in a written opinion, and (ii) the Director provides
an undertaking to repay the advances unless it is ultimately
determined that the Director is entitled to be indemnified by the
Fund.
Record Date. The Declaration of Trust allows the Trustees to fix
a record date not more than 90 days prior to the date of any
meeting. The By-Laws of the Fund and the Corporation Act provide
that the record date may not be more than 70 days prior to the
meeting.
________________
The foregoing is only a summary of certain of the differences
between the Fund, its Articles of Incorporation and Bylaws and
Virginia law and the Trust, its Declaration of Trust and By-Laws
and Delaware law. It is not a complete list of differences.
Shareholders should refer to the provisions of the Articles of
Incorporation and Bylaws of the Fund, Virginia law, the Declaration
of Trust and By-Laws of the Trust and Delaware law directly for a
more thorough comparison. A shareholder who wishes to receive a
copy of these documents may write to the Fund's Administrator at
123 North Wacker Drive, Chicago, Illinois 60606, or call (800) 266-3637.
DISSENTERS' RIGHTS
The staff of the SEC has taken the position in Investment Company
Act Release 8752 (April 10, 1975) that adherence to appraisal
rights statutes such as that of Virginia by registered investment
companies issuing redeemable securities would constitute a
violation of Rule 22c-1 under the 1940 Act. Rule 22c-1 precludes
open-end investment companies from redeeming securities otherwise
than at a price based upon the net asset value next computed after
receipt of a tender of such security for redemption. In this
connection, the SEC staff has also taken the position in Release
No. 8752 that pursuant to Section 50 of the 1940 Act, Rule 22c-1
supersedes appraisal rights statutes. While the Fund is not aware
of any judicial decision which has dealt with this issue, the Fund
intends to adhere to the position of the staff of the SEC and will
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<PAGE> 27
not honor any shareholder's request for appraisal rights. (The
Declaration of Trust provides that shareholders of the Trust will
have no appraisal rights with respect to their shares in the
Trust.)
The Declaration of Trust provides that shareholders of the Trust
will have no appraisal rights.
RECOMMENDATION
THE BOARD OF DIRECTORS OF THE FUND RECOMMEND THAT SHAREHOLDERS VOTE
FOR PROPOSAL 1.
- 23 -
<PAGE> 28
____________________
Proposal 2
ELECTION OF DIRECTORS AND
APPROVAL OF ELECTION OF TRUSTEES
____________________
SHAREHOLDERS OF BOTH PORTFOLIOS, VOTING TOGETHER, ARE ENTITLED TO
VOTE ON THIS PROPOSAL.
INTRODUCTION
The management of the Fund has nominated the five nominees named
below (the "Nominees") as directors of the Fund ("Directors"), to
hold office until their successors are elected and qualified and,
if Proposal 1 is approved, until the Reorganization is completed.
All five Nominees currently serve as Directors of the Fund, each
having been initially elected a Director by shareholders at a
special meeting of shareholders of the Fund held on April 24, 1996.
If elected, the five Nominees will constitute all of the Directors,
to hold office until their respective successors are elected and
qualified. Under the Articles of Incorporation and By-Laws of the
Fund, the Board, by a vote of a majority of the entire Board, may
increase or decrease the number of Directors of the Fund. The
number of Directors which currently constitutes the entire Board of
Directors is five.
The Nominees are currently the initial Trustees of the Trust. If
the shareholders of the Fund approve the Reorganization, the Board
of Directors of the Fund intends to vote the Fund's beneficial
interest in the Trust to approve the Nominees as Trustees of the
Trust. Each Trustee generally will serve as a Trustee of the Trust
during the lifetime of the Trust, unless such Trustee sooner dies,
becomes physically or mentally incapacitated, resigns, or is
removed as provided in the Declaration of Trust.
All Nominees have consented to being named in this Proxy Statement
and have agreed to serve if elected. In case any of the Nominees
should become unable to serve, the proxies may vote for a
substitute to be recommended by the Board of Directors.
INFORMATION CONCERNING NOMINEES
The following table shows the Nominees who are standing for
election as Director and their principal occupations which, unless
specific dates are shown, are of more than five years' duration,
although the titles may not have been the same throughout.
- 24 -
<PAGE> 29
<TABLE>
<CAPTION>
Share
Name Position Age Business Experience Ownership (1)
- ---- -------- --- ------------------- -------------
<S> <C> <C> <C> <C>
Michael A. Cavataio Director 52 Director, Vice- 81,675.452(2)
3125 Ramsgate Road Chairman and Advisor, Flexible Asset
Rockford, IL 61114 Pioneer Financial Allocation
Services; President, Portfolio
Rockford Lillian's shares
Inc., 1984 to 1995;
Real estate developer;
Director, Today's
Bancorp and Today's
Bank East.
Michael A. Conway* Director 49 President, Aon 20,869.81(3)
123 North Wacker Dr. Advisors, Inc.; Money Market
29th Floor Senior Vice President Portfolio
Chicago, IL 60606 and Senior Investment shares
Officer, Aon Corporation.
Carleton D. Pearl Director 52 Senior Vice President - 0 -
McDonald's and Treasurer,
Corporation McDonald's Corporation.
McDonald's Plaza
Oak Brook, IL 60521
Richard J. Peters Director 48 Vice President, Treasurer - 0 -
13400 W. Outer Drive and Director, Penske
Detroit, MI 48239 Corporation; President
and Director, Penske
Motorsports, Inc.
Donald W. Phillips Director 47 Chairman, Equity - 0 -
2 N. Riverside Plaza Institutional
Chicago, IL 60606 Investors, Inc.;
Executive Vice
President, Equity
Group Investments,
Inc.; Director, Capsure,
Inc. and Sit Mutual
Funds Group.
</TABLE>
* Nominee is an "interested person" of the Fund, as defined in
the 1940 Act.
(1) Full shares of the Fund owned beneficially as of May 31, 1996,
based on information furnished by each Nominee. On that date,
the Directors and officers of the Fund, as a group,
beneficially owned less than 1% of the outstanding shares of
each of the Money Market Portfolio and the Flexible Asset
Allocation Portfolio of the Fund.
(2) Beneficial ownership by Pioneer Financial Services, of which
Mr. Cavataio is chairman of the investment committee and a
director.
- 25 -
<PAGE> 30
(3) Excludes 279,632,851.59 shares of the Money Market Portfolio,
representing 95.72% of the outstanding shares of such
Portfolio, and 7,139,124.69 shares of the Flexible Asset
Allocation Portfolio, representing 98.81% of the outstanding
shares of such Portfolio, which as of May 31, 1996 were owned
by subsidiaries of Aon Corporation for which Mr. Conway serves
as an investment officer. Accordingly, Mr. Conway may be
deemed to have sole and/or shared voting and/or investment
power with respect thereto. Mr. Conway disclaims beneficial
ownership of such shares.
Since the beginning of the Fund's fiscal year ended October 31,
1995, no transactions involving purchases or sales of securities of
AAI or Aon Corporation or any of their affiliates by any Director
or Nominee were made in an amount exceeding 1% of the outstanding
securities of any class of AAI, Aon Corporation or any of their
affiliates.
The Board of Directors and Board of Trustees, respectively, are
responsible for the overall management of the Fund and the Trust
and each series thereof, including general oversight and review of
their investment policies and activities. The Board of Directors
and Board of Trustees, respectively, elect the officers of the Fund
and the Trust. The officers are responsible for supervising and
administering the Fund's or the Trust's (as applicable) day-to-day
operations.
EXECUTIVE OFFICERS OF THE FUND
The following table sets forth certain information furnished by
each of the principal executive officers of the Fund. Each such
executive officer has held his or her current position since being
appointed thereto by the Board of Directors on April 26, 1996 and
will hold such position until the Reorganization or until his or
her successor is duly elected or appointed or until he or she is
removed by the Board of Directors, whichever shall occur first.
Each executive officer currently holds the identical position with
the Trust and has held such position since May 22, 1996. The
business address of each individual listed below is 123 North
Wacker Drive, Chicago, Illinois 60606.
- 26 -
<PAGE> 31
<TABLE>
<CAPTION>
Name Position Age Business Experience
- ---- -------- --- -------------------
<S> <C> <C> <C>
Michael A. Conway President 49 President, Aon Advisors,
Inc.; Senior Vice President
and Senior Investment
Officer, Aon Corporation.
Paul Rabin Treasurer 57 Treasurer, Aon Advisors,
Inc.; and Combined Insurance
of Company of America;
Assistant Treasurer,
Aon Corporation.
Karl W. Krause Secretary 45 Counsel, Aon Corporation;
Secretary, Aon Securities
Corporation.
Andrew Kubeck Controller 43 Assistant Vice
President-Finance,
Project Manager, Aon
Corporation in 1987
and 1995; Manager,
Investment Accounting
Department, Aon
Corporation since 1992.
</TABLE>
MEETINGS AND COMMITTEES
The Fund does not have an active nominating, standing or
compensation committee. The Fund has an active audit committee
currently consisting of Messrs. Cavataio, Pearl, Peters and
Phillips. It is anticipated that the Trust will have an audit
committee consisting of the same individuals. The audit committee
meets periodically with the Fund's independent accountants and the
executive officers of the Fund. This committee reviews the
accounting principles being applied by the Fund in financial
reporting, the scope and adequacy of internal controls, the scope
of the audit and non-audit assignments of the independent
accountants, and the related fees. During the year ended October
31, 1995, the Board of Directors of the Fund met five times and the
audit committee met one time. Each person who then served as a
director attended seventy-five percent or more of the total
meetings of the directors and the committees of the directors on
which he or she served which were held during the year.
COMPENSATION OF DIRECTORS AND OFFICERS
Directors or officers of the Fund who are interested persons of AAI
or any of its affiliates do not receive any compensation from the
Fund for their services to the Fund. Effective as of April 26,
1996, Directors who are not interested persons of the Fund are
compensated by the Fund at a rate of $10,000 annually, plus $500
per Board or committee meeting attended. Prior to such date,
- 27 -
<PAGE> 32
Directors who were not interested persons of the Fund received a
fee of $4,000 annually plus $250 per Board or committee meeting
attended. In addition, Directors who are compensated by the Fund
are reimbursed for any out-of-pocket expenses incurred in
connection with the affairs of the Fund.
Set forth below is a compensation table listing, for each person
who then served as a Director of the Fund entitled to receive
compensation, the aggregate compensation received from the Fund for
the fiscal year ended October 31, 1995, and the total compensation
received from the Fund and its Fund complex.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Fund and
Director from Fund 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 Fund, "Fund Complex" includes LOVSF, an
open-end investment company for which AAI serves as investment
adviser.
Directors and officers of the Fund do not receive any benefits from
the Fund upon retirement nor does the Fund accrue any expenses for
pension or retirement benefits.
RECOMMENDATION
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF MESSRS. CAVATAIO, CONWAY, PEARL, PETERS
AND PHILLIPS AS MEMBERS OF THE BOARD OF DIRECTORS OF THE FUND.
- 28 -
<PAGE> 33
____________________
Proposal 3
APPROVAL OF NEW INVESTMENT ADVISORY
AGREEMENTS BETWEEN THE FUND AND AON ADVISORS, INC.
____________________
SHAREHOLDERS OF EACH PORTFOLIO, VOTING SEPARATELY,
ARE ENTITLED TO THIS PROPOSAL
INTRODUCTION
It is proposed that the Fund enter into new investment advisory
agreements, on behalf of each Portfolio, with AAI (the "New
Advisory Agreements"). If approved, the New Advisory Agreements
would result in certain Administrative Services (as defined below),
which are now required to be provided to the Fund by AAI, and which
AAI has engaged ASC to provide on essentially a "subcontract"
basis, being provided directly to the Fund by ASC. The rate at
which fees are to be paid by the Fund for investment advisory
services and Administrative Services in the aggregate is expected
to remain the same. The Board has approved, and recommends that
the shareholders of each Portfolio approve, the New Advisory
Agreements for such Portfolios.
While the New Advisory Agreements are described below, the
discussion is qualified by the provisions of the complete
agreements, copies of which are attached as Exhibits B and C,
respectively. Certain provisions set forth in Exhibits B and C
reflect the assumption that shareholders of the Fund will approve
Proposal 1 and the Fund will be converted into a Delaware business
trust. However, since approval of this Proposal 3 is not dependent
upon the approval of Proposal 1 or the Reorganization of the Fund
to a Delaware business trust as described in Proposal 1, and since
the terms of this Proposal 3 (if approved) may be implemented prior
to the Reorganization, the Fund may enter into the New Advisory
Agreements (in which case the New Advisory Agreements will be
between the Fund and AAI and their provisions will reflect certain
information about the Fund and the Portfolios rather than the Trust
and the corresponding series). If the shareholders of either
Portfolio do not approve this Proposal 3, then AAI will continue to
act as the investment adviser to such Portfolio (or, if Proposal 1
is approved, its corresponding series of the Trust), pursuant to
such Portfolio's Current Advisory Agreement with AAI.
Under the Current Advisory Agreement between the Fund, on behalf of
the Money Market Portfolio, and AAI (the "Current Money Market
Portfolio Advisory Agreement"), AAI provides investment advice and
related services to such Portfolio. The Current Money Market
Portfolio Advisory Agreement is dated January 27, 1994 and was last
- 29 -
<PAGE> 34
approved by the Fund's Board of Directors, including approval by a
majority of Directors who are not interested persons of the Fund,
on October 24, 1995. The Current Money Market Portfolio Advisory
Agreement was last submitted to a vote of shareholders of the Fund
on December 29, 1993 in connection with the conversion of the Fund
to a series fund.
Under the Current Advisory Agreement between the Fund, on behalf of
the Flexible Asset Allocation Portfolio, and AAI (the "Current
Flexible Asset Allocation Portfolio Advisory Agreement"), AAI
provides investment advice and related services to such Portfolio.
The Current Flexible Asset Allocation Portfolio Advisory Agreement
is dated April 26, 1995 and was last approved by the Fund's Board
of Directors, including approval by a majority of Directors who are
not interested persons of the Fund, on April 26, 1996. The Current
Flexible Asset Allocation Portfolio Advisory Agreement was approved
by stockholders of the Fund pursuant to action dated April 26, 1995
in connection with the stockholders' initial approval of the
Current Flexible Asset Allocation Advisory Agreement.
Pursuant to the Current Advisory Agreements, AAI manages the
investment and reinvestment of the assets of the respective
Portfolios in accordance with their respective investment
objectives and management policies. Each Portfolio pays AAI
monthly compensation in the form of an investment advisory fee as
set forth below under "Description of Current Advisory Agreements"
in this Proposal 3. This fee is accrued daily.
Under the Current Advisory Agreements, AAI is also required, at its
own expense, to (i) supply internal auditing and internal legal
services; (ii) supply stationery and office supplies; (iii) prepare
reports to shareholders and the Board of Directors; (iv) prepare
tax returns; (v) prepare reports to and filings with the SEC and
State Blue Sky authorities; (vi) 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; (vii) supply clerical,
accounting, bookkeeping, administrative and other similar services
(exclusive of those services relating to and to be performed under
any contract for custodial, transfer, dividend and accounting
services entered into by the Fund with a third party); and (viii)
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 respective
Portfolios, and provide such facilities and equipment as may be
necessary for such persons to carry out their duties, including,
without limitation, office space and facilities, telephones and CRT
terminals and equipment (including telephone lines) necessary for
access to the shareholder records. The services described in this
paragraph are hereinafter collectively referred to as the
"Administrative Services".
- 30 -
<PAGE> 35
The Current Advisory Agreements provide that AAI 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 such
Agreements. The compensation of any such persons will be paid by
AAI. Pursuant to such authority, and in order to fulfill its
obligation to provide the Administrative Services, effective July
1, 1996 AAI will have entered into the Current Administration
Agreement with ASC and the Fund under which ASC will furnish
substantially all such services for an annual fee of $25,000 plus
.05% of the Fund's average daily net assets. This fee is borne by
AAI out of its advisory fee and not by either Portfolio or the
Fund.
The Fund proposes that the Current Advisory Agreements be amended
to remove from their scope the Administrative Services which AAI
will have delegated to ASC pursuant to the Current Administration
Agreement. Such Administrative Services are expected to continue
to be provided by ASC pursuant to the New Administration Agreement
to be entered into directly by the Fund and ASC. The fees for such
Administrative Services are expected to remain approximately the
same but to be paid directly to ASC by the Fund (rather than by
AAI), and the fees to be paid to AAI pursuant to the New Advisory
Agreements will be reduced by approximately the amount that AAI
will pay to ASC as Administrator pursuant to the Current
Administration Agreement. The aggregate fees paid by the Fund for
investment advisory services and Administrative Services pursuant
to the New Advisory Agreements and the New Administration
Agreement, respectively, are expected to remain the same.
INFORMATION ABOUT AAI
AAI was organized as a Virginia corporation on September 2, 1987
and is registered as an investment adviser under the Advisers Act.
It is a wholly-owned subsidiary of Aon Corporation. The total
staff of AAI as of May 1, 1996 consisted of approximately 40
individuals, including five executive directors and fourteen
portfolio managers. Assets under management include equity
securities, fixed income securities and real estate. As of May 1,
1996, the aggregate assets under AAI's management totaled
approximately $15 billion.
Aon Corporation, 123 North Wacker Drive, Chicago, Illinois 60606,
is 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. As of February 28, 1996, Mr. Patrick G.
Ryan, President and Chief Executive Officer of Aon Corporation,
owned directly and beneficially 13,463,051 shares (12.4%) of the
outstanding common stock of Aon Corporation. No other stockholder
owned 10% or more of Aon Corporation's outstanding stock as of such
date.
- 31 -
<PAGE> 36
The following table sets forth the name, business address, title
and principal occupation of the principal executive officer and
each director of AAI:
<TABLE>
<CAPTION>
Name and Business
Address Title Principal Occupation
- ----------------- ----- --------------------
<S> <C> <C>
Michael A. Conway Director and Director and President,
123 North Wacker Drive President AAI, since 1990; Director
Chicago, IL 60606 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 Senior Execu- Executive Director, AAI,
123 North Wacker Drive tive Director since 1987; Vice President-
Chicago, IL 60606 and Director Investments, Combined
Insurance Company of
America, since 1978.
Mark Burka Director Executive Director, AAI,
123 North Wacker Drive since 1990; Vice-President-
Chicago, IL 60606 Investments of Combined
Insurance Company of America,
since 1984.
Ivan Berk Director Executive Director, AAI.
123 North Wacker Drive
Chicago, IL 60606
James White Director Executive Director, AAI,
123 North Wacker Drive Vice President and
Chicago, IL 60606 Controller, Aon Corporation,
since 1985, Director and Vice
President Finance, Combined
Insurance Company of America.
</TABLE>
DESCRIPTION OF CURRENT ADVISORY AGREEMENTS
Under the Current Advisory Agreements between the Fund on behalf of
each Portfolio and AAI, AAI provides investment advice and
management services to respective Portfolios. AAI agrees to
continuously furnish an investment program for the respective
Portfolios, to be responsible for the actual managing of the
investments of the Portfolios and to be responsible for making
decisions governing whether to buy, sell or hold any particular
security. AAI considers analyses from various sources, makes
necessary investment decisions and effects transactions
accordingly.
In addition to performing management duties and providing the
investment advice described above, AAI also is obligated to
perform, or supervise the performance of, the Administrative
- 32 -
<PAGE> 37
Services as described above. AAI also is responsible for
providing, at the Fund's request, persons to serve as officers and
directors of the Fund.
In performing services under the Current Advisory Agreements, AAI
is subject to the general oversight and review of the Board of
Directors of the Fund and is obligated to perform in a manner
consistent with the investment objective, policies and restrictions
of the applicable Portfolio, the Articles of Incorporation and
Bylaws of the Fund and the provisions of the 1940 Act.
AAI bears all expenses in connection with the performance of the
its services under the Current Advisory Agreements.
The Fund is responsible for all other expenses incurred in its
operation, including: (i) taxes and fees payable by the Fund to
federal, state, or other governmental agencies; (ii) brokerage fees
and commissions, and issue and transfer taxes; (iii) interest; (iv)
Board of Directors meeting attendance fees and expenses of
Directors of the Fund who are not directors, officers or employees
of AAI or of any affiliated person (other than a registered
investment company) of AAI; (v) registration, qualification, filing
and other fees in connection with securities registration
requirements of federal and state regulatory authorities; (vi) the
charges and expenses for custodial, paying agent, transfer agent,
dividend agent and accounting agent services; (vii) 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; (viii)
charges and expenses of independent auditors; (ix) costs of
meetings of shareholders and Directors of the Fund; (x) costs of
maintenance of corporate existence; (xi) insurance premiums; (xii)
investment advisory fees; (xiii) costs and fees associated with
printing and delivering registration statements, shareholders'
reports and proxy statements; (xiv) costs and fees associated with
delivering reports to and filings with the SEC and state Blue Sky
authorities; (xv) costs relating to administration of the Fund's
general operations; (xvi) costs relating to the Fund's own
employees, if any; and (xvii) costs of preparing, printing, and
delivering the Fund's prospectus to existing shareholders. Any
expenses that are common to both Portfolios are allocated based on
each Portfolio's respective net assets.
If in any fiscal year the aggregate expenses of the Money Market
Portfolio or the Flexible Asset Allocation Portfolio (including the
investment advisory fee, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceeds 1.00% or 1.25%,
respectively, of the Portfolio's average daily net assets, AAI has
agreed to reimburse the Portfolio for such excess.
The Current Advisory Agreements are not assignable and may be
terminated without penalty upon 60 days' written notice at the
- 33 -
<PAGE> 38
option of either the Fund or AAI or by the vote of a majority of
the outstanding voting securities of the relevant Portfolio. Each
provides that it can be continued from year to year so long as such
continuance is specifically approved annually (i) by the Board of
Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the relevant Portfolio and (ii) by
a majority vote of the Directors who are not parties to the
Agreement or interested persons of any such party cast in person at
a meeting.
The Current Advisory Agreements also provide that AAI shall not be
liable to the Fund or to any shareholder for any error of judgment
or mistake of law or for any loss suffered by the Fund or by any
shareholder in connection with matters to which the Current
Advisory Agreements relate, except for a breach of fiduciary duty
imposed by law 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.
FEES AND FEE WAIVERS
Under the Current Advisory Agreements, each Portfolio currently
pays AAI, as compensation for AAI's services, a fee determined and
accrued daily and paid monthly, based on a stated percentage of the
average daily net assets of such Portfolio at an annual rate as set
forth below:
MONEY MARKET PORTFOLIO
Net Asset Value Annual Rate
--------------- -----------
All Amounts................... 0.35%
FLEXIBLE ASSET ALLOCATION PORTFOLIO
Net Asset Value Annual Rate
--------------- -----------
First $250 Million............ 0.70%
Next $250 Million............. 0.60%
Amounts Over $500 Million..... 0.50%
Pursuant to AAI's agreements to waive or reimburse fees, AAI
waived, reimbursed and received the following amounts during the
fiscal year ended October 31, 1995, resulting in total Portfolio
expenses for advisory fees for that year as follows:
- 34 -
<PAGE> 39
<TABLE>
<CAPTION>
Fund
Fee Expenses Fee
Waived Reimbursed Paid
------ ---------- ----
<S> <C> <C> <C>
Money Market Portfolio....... $1,218,882 $ 0 $487,553
Flexible Asset
Allocation Portfolio....... $ 0 $ 0 $218,580
</TABLE>
AAI's agreement to waive fees with respect to the Money Market
Portfolio is cancelable by AAI at any time. The New Advisory
Agreements provide that AAI will continue to waive a portion of its
fees with respect to the Money Market Portfolio for at least one
year. The initial annual rate at which AAI assesses fees to such
Portfolio (after giving effect to full advisory fees less all
applicable fee waivers) will thus increase from .10% to .20% of the
average daily net assets of such Portfolio.
Other than the payments received by AAI pursuant to the Current
Advisory Agreements, the Portfolios did not make any payments to
affiliates of AAI during the fiscal year ended October 31, 1995.
In addition to the Portfolios, AAI provides investment advice and
management to Aon Corporation and its subsidiaries and affiliates
and to LOVSF, a registered investment company sponsored by Life of
Virginia. Under the terms of its investment advisory agreement
with AAI, LOVSF has agreed to pay AAI monthly compensation at the
following rates, based on the average daily net assets of the
applicable LOVSF Portfolio:
Common Stock Index Portfolio: .35%;
Government Securities Portfolio, Money Market Portfolio
and Total Return Portfolio: .50% of the first
$100,000,000; .45% of the next $100,000,000; .40% of the
next $100,000,000; .35% of the next $100,000,000 and .30%
of amounts in excess of $400,000,000;
International Equity Portfolio: 1.00% of the first
$100,000,000; 95% of the next $100,000,000; and .90% of
amounts in excess of $200,000,000; and
Real Estate Securities Portfolio: .85% of the first
$100,000,000; .80% of the next $100,000,000; and .75% of
amounts in excess of $200,000,000.
LOVSF's Money Market Portfolio and Total Return Portfolio have
investment objectives similar to those of the Fund's Money Market
Portfolio and Flexible Asset Allocation Portfolio, respectively.
LOVSF's Money Market Portfolio and Total Return Portfolio had net
assets of $111 million and $83 million, respectively, as of May 9,
1996.
- 35 -
<PAGE> 40
NEW ADVISORY AGREEMENTS
The material terms and conditions of the New Advisory Agreements
between AAI and the Trust on behalf of the two series thereof into
which the Portfolios will be reorganized are substantially the same
in all material respects as the respective Current Advisory
Agreements relating to such Portfolios, subject to the exceptions
noted below. The investment advisory fee rates provided for in the
respective New Advisory Agreements for each series are equal to the
rates currently being paid by the Portfolios less the amount of
fees payable by AAI under the Current Administration Agreement,
with the exception that such investment advisory fee rates have not
been reduced by the $25,000 annual fee payable under the Current
Administration Agreement. The amount of fees payable by AAI under
the Current Administration Agreement is at an annual rate of 0.05%
of the average daily net assets of the respective Portfolios plus
$25,000 annually.
Accordingly, under the New Advisory Agreements, each Portfolio
would pay AAI, as compensation for its services, a monthly fee
based on the stated percentage of the average daily net assets of
such Portfolio at an annual rate as set forth below:
MONEY MARKET PORTFOLIO
Net Asset Value Annual Rate
--------------- -----------
All Amounts................... 0.30%
FLEXIBLE ASSET ALLOCATION PORTFOLIO
Net Asset Value Annual Rate
--------------- -----------
First $250 Million............ 0.65%
Next $250 Million............. 0.55%
Amounts Over $500 Million..... 0.45%
In addition, the New Advisory Agreements provide that AAI is not
responsible for providing the Administrative Services to the Fund
to the extent provided by ASC or another administrator engaged by
the Fund. Thus, Administrative Services will not be provided
pursuant to the terms of the New Advisory Agreements but will be
provided pursuant to the separate New Administration Agreement
between the Fund and ASC or such other administrator. The amount
of fees payable by the Fund to ASC under such New Administration
Agreement is expected to be at an annual rate of .05% of the
average daily net assets of the respective Portfolios. The $25,000
additional annual fee would be eliminated. Accordingly, the rate
at which fees are to be paid by the Fund for investment advisory
services and Administrative Services in the aggregate is expected
- 36 -
<PAGE> 41
to remain the same. However, any future fee increases, if any,
required to be paid for the Fund to obtain Administrative Services
would be borne by the Fund, not by AAI.
If in any fiscal year the aggregate expenses of the Money Market
Portfolio or the Flexible Asset Allocation Portfolio (including the
investment advisory fee, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceeds 1.00% or 1.25%,
respectively (1.10% or 1.50%, respectively, in the case of Class C
shares) of the Portfolio's average daily net assets, AAI has agreed
to reimburse the Portfolio for such excess.
The following table shows the amounts that the Money Market
Portfolio would have paid during the its last fiscal year ended
October 31, 1995 for advisory fees and administration fees (without
giving effect to fee waivers), as well as the amounts it would have
paid (without giving effect to fee waivers) if the proposed new
arrangements had been in effect throughout the entire last fiscal
year.
- 37 -
<PAGE> 42
<TABLE>
<CAPTION>
Amount that Difference
would have been between the
paid if proposed proposed and
arrangements had actual ar-
Amount payable been in effect rangements as
(without giving without giving a percentage
Type of payment by effect to effect to of the actual
Money Market Portfolio fee waivers) fee waivers arrangements
- ---------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Advisory fee................. $1,706,435 $1,452,658 -14.3%
Administration fee........... $ 0 $ 243,777 *
Total Payments............... $1,706,435 $1,706,435 0%
* Not meaningful
Note: The above amounts for the advisory fee and administration fee represent the
amounts that the Portfolio would have paid if AAI had not waived $1,218,882
of such fees.
</TABLE>
The following table shows the amounts that the Flexible Asset
Allocation Portfolio paid during its last fiscal year ended October
31, 1995 for advisory fees and administration fees, as well as the
amounts it would have paid if the proposed new arrangements had
been in effect throughout the entire last fiscal year.
<TABLE>
<CAPTION>
Amount that Difference
would have been between the
paid if proposed proposed and
arrangements had actual ar-
Amount payable been in effect rangements as
(without giving without giving a percentage
Type of payment by effect to effect to of the actual
Money Market Portfolio fee waivers) fee waivers arrangements
- ---------------------- --------------- ---------------- ------------
<S> <C> <C> <C>
Advisory fee................. $218,580 $202,967 -7.1%
Administration fee........... $ 0 $ 15,613 *
Total Payments............... $218,580 $218,580 0%
* Not meaningful
</TABLE>
BOARD CONSIDERATION
In considering whether to recommend that the New Advisory
Agreements be approved by shareholders of the respective
Portfolios, the Board considered the nature and quality of services
to be provided by AAI and ASC and comparative data as to advisory
fees and expenses, and the Board requested and evaluated such other
information from AAI which the Board deemed relevant, including,
but not limited to, information indicating that the Portfolios
would continue to be managed by their current portfolio managers
for the foreseeable future, thereby ensuring continuity in
management; and that the aggregate rate at which advisory fees will
- 38 -
<PAGE> 43
be paid to AAI and administration fees will be paid to ASC in the
aggregate would be exactly the same as the aggregate rate at which
fees are now paid to AAI for such services.
The Board, including a majority of the Directors who are not
interested persons of the Fund or AAI, unanimously approved the New
Advisory Agreements at a meeting held on May 22, 1996.
RECOMMENDATION
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF
EACH PORTFOLIO VOTE FOR THE APPROVAL OF THE NEW ADVISORY AGREEMENT
RELATING TO SUCH PORTFOLIO.
ADDITIONAL INFORMATION
The Fund is not required to hold annual meetings of shareholders
and the Fund currently does not intend to hold such meetings unless
shareholder action is required in accordance with the 1940 Act or
the Fund's By-Laws. By observing this policy, the Fund seeks to
avoid the expenses customarily incurred in the preparation of proxy
material and the holding of shareholder meetings, as well as the
related expenditure of corporate staff time.
A shareholder proposal intended to be presented at any meeting of
shareholders of the Fund hereafter called must be received by the
Fund a reasonable time before the Board of Directors' solicitation
relating thereto is made in order to be included in the Fund's
proxy statement and form of proxy relating to that meeting and
presented at the meeting. The mere submission of a proposal by a
shareholder does not guarantee that such proposal will be included
in the proxy statement because certain rules under the Federal
securities laws must be complied with before inclusion of the
proposal is required. A shareholder desiring to submit a proposal
for presentation at a meeting of shareholders should send the
proposal to the offices of the Fund's Administrator at 123 North
Wacker Drive, Chicago, Illinois 60606.
The Fund knows of no other matters that may come before the
Meeting. If any other matters should properly come before the
Meeting, the proxies intend to vote shares of the Fund upon such
matters at their discretion.
Ernst & Young LLP, independent accountants of the Fund for its most
recently completed fiscal year ended October 31, 1995 and current
fiscal year ending October 31, 1996, has been given the opportunity
to make a statement if it so desires at the Meeting. Ernst & Young
LLP is not expected to be present at the Meeting but will be
available should any matter arise requiring its presence.
- 39 -
<PAGE> 44
By order of the Board of Directors
/s/ Karl W. Krause
----------------------------------
Karl W. Krause
Secretary
June 10, 1996
- 40 -
<PAGE> 45
AON ASSET MANAGEMENT FUND, INC.
PROXY FOR SHAREHOLDERS MEETING
JULY 10, 1996
PROXY ON BEHALF OF BOARD OF DIRECTORS
The undersigned shareholder of the Money Market Portfolio of
Aon Asset Management Fund, Inc. (the "Fund") hereby appoints
Michael A. Conway and Paul Rabin, and each of them, the attorneys
and proxies of the undersigned, with full power of substitution,
for and in the name, place and stead of the undersigned, to vote
and act with respect to all of the shares of Capital Stock of the
Money Market Portfolio of the Fund standing in the name of the
undersigned or with respect to which the undersigned is entitled to
vote and act, at the Shareholders Meeting to be held at the offices
of Aon Corporation, 123 North Wacker Drive, Chicago, IL 60606, 13th
Floor, 10:00 a.m. Wednesday, July 10, 1996, or at any adjournment
thereof and to vote:
(1) FOR [ ] AGAINST [ ] ABSTAIN FROM [ ]
Approval of an Agreement and Plan of Reorganization
providing for the acquisition of all of the assets of the
Money Market Portfolio of the Fund by a corresponding
series of Aon Funds, a Delaware business trust (the
"Trust") in exchange for shares of beneficial interest in
such series of the Trust, the distribution of such shares
of such series of the Trust to shareholders of the Money
Market Portfolio of the Fund, and the subsequent
dissolution of the Fund.
(2) Election of Directors
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
[ ] [ ]
INSTRUCTION: To withhold authority to vote FOR any individual
nominee, strike a line through the nominee's name in the list
below.
Michael A. Cavataio, Michael A. Conway, Carleton D. Pearl,
Richard J. Peters and Donald W. Phillips
(3) FOR [ ] AGAINST [ ] ABSTAIN FROM [ ]
Approval of the proposed amended Investment Advisory Agreement
with Aon Advisors, Inc. for the Money Market Portfolio.
<PAGE> 46
(4) In their discretion, upon such other matters as may properly
come before the meeting.
The shares represented by this proxy will be voted as
directed. UNLESS A CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR AGENDA ITEMS (1), (2) AND (3) ABOVE AND IN THE DISCRETION
OF THE PROXIES UPON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING.
Dated: ________________, 1996 Signed _______________________
_______________________
If shares are held in the name of more than one person, all holders
should sign. When signing as an agent, attorney, administrator,
executor, guardian or trustee, please add your title as such. If
executed by a corporation, the proxy should be signed by a duly
authorized officer who should indicate his or her title. Please
mail this proxy card in the enclosed envelope.
Please date this proxy
and sign your name exactly
as it appears above.
<PAGE> 47
AON ASSET MANAGEMENT FUND, INC.
PROXY FOR SHAREHOLDERS MEETING
JULY 10, 1996
PROXY ON BEHALF OF BOARD OF DIRECTORS
The undersigned shareholder of the Flexible Asset Allocation
Portfolio of Aon Asset Management Fund, Inc. (the "Fund") hereby
appoints Michael A. Conway and Paul Rabin, and each of them, the
attorneys and proxies of the undersigned, with full power of
substitution, for and in the name, place and stead of the
undersigned, to vote and act with respect to all of the shares of
Capital Stock of the Flexible Asset Allocation Portfolio of the
Fund standing in the name of the undersigned or with respect to
which the undersigned is entitled to vote and act, at the
Shareholders Meeting to be held at the offices of Aon Corporation,
123 North Wacker Drive, Chicago, IL 60606, 13th Floor, 10:00 a.m.
Wednesday, July 10, 1996, or at any adjournment thereof and to
vote:
(1) FOR [ ] AGAINST [ ] ABSTAIN FROM [ ]
Approval of an Agreement and Plan of Reorganization
providing for the acquisition of all of the assets of the
Flexible Asset Allocation Portfolio of the Fund by a
corresponding series of Aon Funds, a Delaware business
trust (the "Trust") in exchange for shares of beneficial
interest in such series of the Trust, the distribution of
such shares of such series of the Trust to shareholders
of the Flexible Asset Allocation Portfolio of the Fund,
and the subsequent dissolution of the Fund.
(2) Election of Directors
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
[ ] [ ]
INSTRUCTION: To withhold authority to vote FOR any individual
nominee, strike a line through the nominee's name in the list
below.
Michael A. Cavataio, Michael A. Conway, Carleton D. Pearl,
Richard J. Peters and Donald W. Phillips
(3) FOR [ ] AGAINST [ ] ABSTAIN FROM [ ]
Approval of the proposed amended Investment Advisory Agreement
with Aon Advisors, Inc. for the Flexible Asset Allocation
Portfolio.
<PAGE> 48
(4) In their discretion, upon such other matters as may properly
come before the meeting.
The shares represented by this proxy will be voted as
directed. UNLESS A CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR AGENDA ITEMS (1), (2) AND (3) ABOVE AND IN THE DISCRETION
OF THE PROXIES UPON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING.
Dated: ________________, 1996 Signed _______________________
_______________________
If shares are held in the name of more than one person, all holders
should sign. When signing as an agent, attorney, administrator,
executor, guardian or trustee, please add your title as such. If
executed by a corporation, the proxy should be signed by a duly
authorized officer who should indicate his or her title. Please
mail this proxy card in the enclosed envelope.
Please date this proxy
and sign your name exactly
as it appears above.
- 44 -
<PAGE> 49
EXHIBIT A
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 Flexible Asset Allocation
Portfolio (individually, a "current Fund" and together, the "current Funds") to
a corresponding portfolio of the Trust with the same or substantially similar
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> 50
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 on the Closing Date. 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 or substantially similar series as, 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") and the Registration Statement (as hereinafter defined).
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 Subject to respective approvals of the current Fund's
Shareholders at the Special Meeting, immediately upon delivery of the one share
of each successor Fund to the Company pursuant to paragraph 8.1 of this
Agreement, 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, (ii) 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 and (iii) this Agreement.
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
-2-
<PAGE> 51
Fund acquired by the corresponding current Fund pursuant to paragraph 8.1
hereof shall be redeemed by the successor Fund for $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-
<PAGE> 52
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 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-
<PAGE> 53
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 Company
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 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 to the Trust 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 conduct 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-
<PAGE> 54
5.5 Current Fund Shares. The outstanding shares of the current
Funds are duly and validly issued and outstanding, fully paid and nonassessable
under Virginia law.
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 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
-6-
<PAGE> 55
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
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 formed, 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.
-7-
<PAGE> 56
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.
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 the Trust's
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
-8-
<PAGE> 57
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 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 successor Funds
shall have been declared effective by the Commission and no stop orders under
the Securities Act pertaining
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<PAGE> 58
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 by the Trust 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 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 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 formed 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,
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<PAGE> 59
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 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 Class Y share of each successor Fund to each corresponding current
Fund in consideration of the payment of $1.00 and the Company shall have
elected 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 by the
Company shall have been obtained.
8.4 Legal Opinions. The Company 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.
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<PAGE> 60
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
mutual consent of both parties hereto, notwithstanding approval hereof 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 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 Non-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.
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 headings 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
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<PAGE> 61
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> 62
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.
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<PAGE> 63
Draft -- 5/16/96
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-1A 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 1(a), (b) and (c).
<PAGE> 64
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> 65
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> 66
(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> 67
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> 68
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
31a-2 under the 1940 Act, books and records with respect to the Portfolio's
securities transactions required to be maintained by Rule 31a-1 under the 1940
Act.
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> 69
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
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<PAGE> 70
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.
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<PAGE> 71
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> 72
Draft -- 5/16/96
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-1A 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 Flexible 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 1(a), (b) and (c) hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume
the obligations set forth in this Agreement for the compensation provided and
on the other terms and conditions set forth in this Agreement.
<PAGE> 73
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.
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<PAGE> 74
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> 75
(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.
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
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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.
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
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to maintain and preserve, in accordance with the 1940 Act and rules thereunder,
and for the periods prescribed by Rule 31a-2 under the 1940 Act, books and
records with respect to the Portfolio's securities transactions required to be
maintained by Rule 31a-1 under the 1940 Act.
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:
(i) by the Board of Trustees; or
(ii) by a vote of a majority of the outstanding voting
securities of the Portfolio.
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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 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
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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.
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.
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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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