AON ASSET MANAGEMENT FUND INC, 485BPOS, 1996-02-28

AON ASSET MANAGEMENT FUND INC
485BPOS, 1996-02-28

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1996

FILE NO. 33-43133
FILE NO. 811-6422
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

PRE-EFFECTIVE AMENDMENT NO. [ ]

POST-EFFECTIVE AMENDMENT NO. 7 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 8 [X]

AON ASSET MANAGEMENT FUND, INC.
(EXACT NAME OF REGISTRANT)

123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER: 1-800-866-3555

JOHN J. PALMER
PRESIDENT
AON ASSET MANAGEMENT FUND, INC.
6610 WEST BROAD STREET
RICHMOND, VIRGINIA 23230
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)

COPY TO:

STEPHEN E. ROTH, ESQUIRE
SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404
------------------------

IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:

immediately upon filing pursuant to paragraph (b) of Rule 485

X on March 1, 1996 pursuant to paragraph (b) of Rule 485

60 days after filing pursuant to paragraph (a) of Rule 485
on Date pursuant to paragraph (a) of Rule 485
75 days after filing pursuant to paragraph (a)(ii) of Rule 485
on Date pursuant to paragraph (a)(ii) of Rule 485

PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT
HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE REGISTRANT FILED A RULE
24f-2 NOTICE FOR ITS FISCAL YEAR ENDING OCTOBER 31, 1995 ON DECEMBER 29, 1995.

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<PAGE> 2

AON ASSET MANAGEMENT FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)

<TABLE>
<CAPTION>
N-1A
ITEM NO. CAPTION
- -------- -------------------------------------
PART A
INFORMATION REQUIRED IN A PROSPECTUS
PROSPECTUS FOR MONEY MARKET PORTFOLIO
<C> <S> <C>
1. Cover Page................................... Cover Page
2. Synopsis..................................... Expenses
3. Condensed Financial Information.............. Condensed Financial Information
4. General Description of Registrant............ Organization and Classification;
Investment Objective and Policies;
5. Management of the Fund....................... Management of the Fund
5A Management's Discussion of Performance....... Not Applicable
6. Capital Stock and Other Securities........... Additional Information
7. Purchase of Securities Being Offered......... Purchase of Shares
8. Redemption or Repurchase..................... Redemption of Shares
9. Pending Legal Proceedings.................... Additional Information
</TABLE>
<PAGE> 3

AON ASSET MANAGEMENT FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)

<TABLE>
<CAPTION>
N-1A
ITEM NO. CAPTION
- -------- -------------------------------------
<C> <S> <C>
PART A
INFORMATION REQUIRED IN A PROSPECTUS

PROSPECTUS FOR FLEXIBLE ASSET ALLOCATION PORTFOLIO

1. Cover Page................................... Cover Page
2. Synopsis..................................... Expenses
3. Condensed Financial Information.............. Condensed Financial Information
4. General Description of Registrant............ Organization and Classification;
Investment Objective and Policies
5. Management of the Fund....................... Management of the Fund
5A Management's Discussion of Performance....... Not Applicable
6. Capital Stock and Other Securities .......... Additional Information
7. Purchase of Securities Being Offered......... Purchase of Shares; Distribution of
Shares
8. Redemption or Repurchase..................... Redemption of Shares
9. Pending Legal Proceedings.................... Legal Matters

PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

10. Cover Page................................... Cover Page
11. Table of Contents............................ Table of Contents
12. General Information and History.............. General Information; Additional
Information
13. Investment Objectives and Policies........... Money Market Portfolio Investments,
etc.; Flexible Asset Allocation
Portfolio Investments, etc.;
Portfolio Turnover; Risks of
Investing in Lower Quality Debt;
14. Management of the Registrant................. Management of the Fund;
15. Control Persons and Principal Holders of
Securities................................. Additional Information
16. Investment Advisory and Other Services....... Management of the Fund;
17. Brokerage Allocation and Other Practices..... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities........... Additional Information
19. Purchase, Redemption and Pricing of
Securities Being Offered................... Determination of Net Asset Value
20. Tax Status................................... Dividends, Distributions and Taxes
(in the prospectuses)
21. Underwriters................................. Distribution of Shares (in the
prospectuses); Distribution Plan for
Flexible Asset Allocation Portfolio
22. Calculation of Performance Data.............. Yields (in the Money Market Portfolio
Prospectus)
23. Financial Statements......................... Financial Statements
</TABLE>

PART C
OTHER INFORMATION

Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE> 4

PROSPECTUS

AON ASSET MANAGEMENT FUND, INC.

123 NORTH WACKER DRIVE

CHICAGO, ILLINOIS 60606

MONEY MARKET PORTFOLIO

DISTRIBUTOR -- FORTH FINANCIAL SECURITIES CORPORATION
(804) 281-6049

Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios, each of
which is, in effect, a separate fund (commonly known as a mutual fund) with its
own investment objective and policies. The Fund issues a separate series of
capital stock for each investment portfolio. THIS PROSPECTUS DESCRIBES THE MONEY
MARKET PORTFOLIO (THE "PORTFOLIO") OF THE FUND.

The investment objective of the Portfolio is to maximize current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity. To achieve this objective, the Portfolio invests in a portfolio of
high-quality, short-term money market instruments. There can be no assurance the
Portfolio's objective will be achieved.

Shares in the Portfolio are distributed, without sales charge, through
Forth Financial Securities Corporation, a wholly-owned subsidiary of Forth
Financial Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of Aon
Corporation, a New York Stock Exchange-listed company. Aon Advisors, Inc., also
a wholly-owned subsidiary of Aon Corporation, serves as investment advisor to
the Portfolio. Aon Corporation and its subsidiary companies may, by virtue of
their shareholder interests in the Portfolio at any particular date, be
considered to be controlling persons of the Portfolio or the Fund and may be
able to cast a deciding vote on all matters submitted to a vote of the
Portfolio's or the Fund's shareholders.

This Prospectus sets forth concisely information about the Portfolio and
the Fund that investors should know before investing. The Prospectus should be
read by investors and retained for future reference. More detailed information
about the Portfolio and the Fund is contained in a Statement of Additional
Information, dated March 1, 1996 that has been filed by the Fund with the
Securities and Exchange Commission and incorporated by reference into this
Prospectus. Copies of the Statement of Additional Information may be obtained
without charge by calling or writing the Fund at the telephone number or address
set forth above.

AN INVESTMENT IN THE PORTFOLIO IS NOT GUARANTEED OR INSURED BY THE U.S.
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

MARCH 1, 1996

<PAGE> 5

AON ASSET MANAGEMENT FUND, INC.

NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE INVESTMENT ADVISOR, OR THE
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses.............................................................................. 3
Condensed Financial Information....................................................... 4
Organization and Classification....................................................... 4
Yield Information..................................................................... 4
Investment Objective and Policies..................................................... 5
Standards Applicable to All Investments............................................... 6
Risks................................................................................. 6
Investment Restrictions............................................................... 7
Management of the Fund................................................................ 8
Board of Directors............................................................... 8
Investment Advisor............................................................... 8
Distribution of Shares................................................................ 10
Net Asset Value....................................................................... 10
Purchase of Shares.................................................................... 11
Redemption of Shares.................................................................. 12
Regular Redemption............................................................... 12
Telephone Redemption............................................................. 12
Check Redemption................................................................. 13
Other Redemption Information..................................................... 14
Additional Services to Investors...................................................... 14
Automatic Investment Program..................................................... 14
Exchange Privilege............................................................... 14
Systematic Withdrawal Plan....................................................... 15
Dividends, Distributions, and Taxes................................................... 15
Additional Information................................................................ 16
Capital Stock and Voting......................................................... 16
</TABLE>

2
<PAGE> 6

EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee.................................................... $5.00
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fees........................................ 0.35%
Other Expenses.................................................. 0.04%
Total Operating Expenses........................................ 0.39%
</TABLE>

EXAMPLE -- The table below shows the amount of expenses a shareholder would
pay on a $1,000 investment, assuming a 5% annual return and the expense levels
shown in the table above. The 5% annual return is a standardized rate prescribed
for the purpose of the example, and does not represent past or future return of
the Portfolio.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------
<S> <C> <C> <C> <C>
Expenses........................... $1.40 $4.62 $8.49 $21.59
</TABLE>

The purpose of the preceding table is to assist investors in understanding
the various costs and expenses an investor in the Portfolio will bear. All
expenses are borne directly or indirectly by shareholders. (For more information
about Fund expenses, see "Investment Advisor", p. 9.)

Since the Portfolio began operations, Aon Advisors, Inc. ("AAI") has waived
collection of 0.25% of the 0.35% investment advisory fee, resulting in an
investment advisory fee of 0.10% of the Portfolio's average daily net assets
during this period. AAI has agreed to continue waiving this portion of the
investment advisory fee for the indefinite future. In addition, if in any fiscal
year the aggregate expenses of the Portfolio, including the investment advisory
fee (but excluding interest, taxes, brokerage commissions, and extraordinary
expenses), exceed 1.0% of the value of the Portfolio's average daily net assets,
AAI has agreed to reimburse the Portfolio for such excess.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

3
<PAGE> 7

CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS

The information below has been derived from audited financial statements
and should be read in conjunction with the financial statements of the Fund
found in its annual report.

Years ended October 31, 1995, October 31, 1994 and October 31, 1993, and
for the period from January 23, 1992 (commencement of operations) to October 31,
1992.

<TABLE>
<CAPTION>
1995 1994 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value at beginning of
period............................. $1.00 $1.00 $1.00 $1.00
Investment income............... .06 .04 .03 .03
Expenses........................ * * * *
----- ----- ----- -----
Net investment income........... .06 .04 .03 .03
Net realized gains (losses) on
investments................... * * * *
Dividends paid to shareholders
from:......................... (.06) (.04) (.03) (.03)
Net investment income...... * * * *
----- ----- ----- -----
Net realized gains
(losses)................. (.06) (.04) (.03) (.03)
Net asset value at end of period..... $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
----- ----- ----- -----
Total Return......................... 5.79% 3.73% 3.10% ***3.57%
Ratios:
Ratio of expenses to average net
assets**...................... 0.14% 0.15% 0.17% ***0.25%
Ratio of net investment income
to average net assets**....... 5.79% 3.73% 3.10% ***3.57%
Net assets at end of period.......... $420,093,633 $410,912,278 $412,067,947 $399,075,531
</TABLE>

- ---------------
* Less than $.01 per share.

** The AAI has agreed for the first four years of the Portfolio's operations to
waive a portion of its advisory fees. Absent this agreement, the ratio of
expenses to average net assets and the ratio of net investment income to
average net assets would have been .39% and 5.54% for 1995, .40% and 3.48%
for 1994, .42% and 2.85% for 1993 and .50% and 3.32% for 1992, respectively.

*** Determined on an annualized basis.

ORGANIZATION AND CLASSIFICATION

The Fund was incorporated under the laws of the Commonwealth of Virginia on
August 21, 1991, and is registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940 (the "1940 Act") as an
open-end management investment company. The Fund is organized as a series type
company with two classes or series of capital stock, each representing an
interest in one of the two investment portfolios. Stock issued with respect to
either portfolio (including stock of the Portfolio) represents a pro-rata
interest in the assets of that portfolio and has no interest in the assets of
any other portfolio. Each investment portfolio (including the Portfolio) bears
its own expenses and other liabilities and also its proportionate share of the
Fund's general liabilities. In other respects, the Fund is treated as a single
entity. The Portfolio is diversified as that term is defined in the 1940 Act.

YIELD INFORMATION

The Fund may advertise from time to time the "yield" and "effective yield"
of the Portfolio. Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the Portfolio refers
to the income generated by an investment in the Portfolio over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized". That is, the amount of income

4
<PAGE> 8

t). This income is then "annualized". That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment.

For information as to current yield, please call (800) 338-1579 or, in the
Milwaukee area, (414) 765-4124.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Portfolio is to maximize current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity. There is no assurance that the Portfolio's investment objective will
be achieved. The Portfolio's investment objective is fundamental and may not be
changed without the affirmative vote of the holders of a majority of the
Portfolio's outstanding voting securities.

The Portfolio will seek to achieve its objective by investing in a
portfolio consisting of the following types of money market instruments:

(1) United States Government Securities -- obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities. These obligations may include instruments that are
supported by the full faith and credit of the United States (such as
Treasury bills, notes, and bonds, and obligations issued by the Government
National Mortgage Association); instruments that are supported by the right
of the issuer to borrow from the Treasury (such as securities of the
Federal Home Loan Banks); instruments that are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage
Association); and instruments that are supported only by the credit of the
instrumentality (such as securities issued by the Federal Farm Credit
Banks, the Student Loan Marketing Association, and the Federal Home Loan
Mortgage Corporation).

(2) Certificates of deposit and time deposits issued by U.S. banks
which are members of the Federal Deposit Insurance Corporation and have
assets of at least $1 billion. Certificates of deposit ("CDs") are
certificates evidencing the obligation of a bank to repay funds deposited
with it for a specified period of time at a stated interest rate. (If AAI
determines that a CD is not readily marketable, or is otherwise illiquid,
the CD will be included in the 10% limit on illiquid investments described
in "Investment Restrictions" (item (j), p. 8.)

(3) Repurchase agreements with (i) banks or (ii) government securities
dealers recognized as primary dealers by the Federal Reserve System,
provided that:

A) at the time the repurchase agreement is entered into, and
throughout the duration of the repurchase agreement, the collateral has
a market value at least equal to the value of the repurchase agreement;

B) the collateral consists of government securities or instruments
rated in the highest rating category by at least two nationally
recognized statistical rating organizations; and

C) the maturity of the repurchase agreement does not exceed 30
days.

(4) Commercial paper, which consists of unsecured promissory notes
issued by corporations to finance short-term credit needs.

Securities in which the Portfolio invests may not earn as high a level of
current income as long-term or lower quality securities which generally have
less liquidity, greater market risk, and more fluctuation in market value.

5
<PAGE> 9

STANDARDS APPLICABLE TO ALL INVESTMENTS

The Portfolio will only invest in instruments denominated in U.S. dollars
that AAI, under the supervision of the Board of Directors of the Fund,
determines present minimal credit risks and are, at the time of acquisition,
either:

1. rated in the highest rating category by at least two nationally
recognized statistical rating organizations as defined under Rule 2a-7, as
amended, under the 1940 Act (an "NRSRO"), or by only one NRSRO if only one
NRSRO has issued a rating with respect to the instrument; or

2. in the case of an unrated instrument, determined by AAI under the
supervision of the Board of Directors to be of comparable quality to the
above; or

3. issued by an issuer that has received a rating of the type
described in 1 above on other securities that are comparable in priority
and security to the instrument.

All of the Portfolio's money market instruments will mature in 13 months or
less. The average maturity of the Portfolio's portfolio securities based on
their dollar value will not exceed 90 days at the time of each investment. If
the disposition of a portfolio security results in a dollar-weighted average
portfolio maturity in excess of 90 days, the Portfolio will invest its available
cash in such a manner as to reduce its dollar-weighted average portfolio
maturity to 90 days or less as soon as reasonably practicable. By restricting
the maturity of its investments, the Portfolio seeks to limit changes in the
value of its assets resulting from market factors and thereby maintain a
constant net asset value of $1.00 per share. See "Net Asset Value."

RISKS

The Portfolio only invests in instruments that are deemed to present
minimal credit risks (see "Standards Applicable to All Investments," p. 6);
however, instruments in which the Portfolio invests will vary in terms of
relative credit risk. (For example, commercial paper presents relatively greater
credit risk than obligations issued or guaranteed by the U.S. Government). A
money market instrument held by the Portfolio is subject to the ability of the
issuer of the instrument to make payment at maturity. An investment in the
Portfolio is not guaranteed or insured by the U.S. Government.

Money market instruments are securities with relatively short maturities
and consequently their value remains relatively stable. However, money market
instruments are sensitive to short-term interest rates such as those charged by
Federal Reserve Banks to member banks and the interest rates for U.S. Treasury
obligations. As a result of the interest rate sensitivity of these instruments,
the value of the portfolio securities will generally increase when interest
rates decline, and decrease when they rise. Thus, if interest rates increase
after a security is purchased, that security, if sold, might be sold at less
than cost.

If, because of a decline in interest rates, money market securities should
become relatively less attractive in relation to other investments, the
Portfolio could experience a large number of redemptions. Substantial
redemptions of Portfolio shares could require the sale of portfolio investments
at a time when a sale might not be desirable. Although the Portfolio does not
expect that such redemptions alone would result in decreases in net asset value
per share, there can be no assurance that the net asset value of the shares
redeemed will be equal to or greater than the purchase price of the shares.

Repurchase agreements are arrangements involving the purchase by the
Portfolio of money market instruments that the Portfolio is qualified to
purchase and the simultaneous agreement to resell the same instruments back to
the seller at an agreed upon price on demand or at a specified future date.
Repurchase agreements entered into by the Portfolio will be with Banks or
primary government securities dealers. The yield to the Portfolio on a
repurchase agreement is determined by the difference between the Portfolio's
purchase price of the underlying obligation, and the price at which the
obligation is "repurchased" by the bank or dealer.

The risks associated with repurchase agreements include: (i) if the seller
defaults on its obligation to repurchase the instrument, the Portfolio may incur
a loss if the value of the collateral securing the repurchase

6
<PAGE> 10

agreement declines or the Portfolio may incur disposition costs in connection
with liquidating the collateral; and (ii) if bankruptcy proceedings are
commenced with respect to the seller of the instrument, liquidation of the
collateral by the Portfolio may be delayed or limited. Accordingly, the
Portfolio will only enter into repurchase agreements that present minimal credit
risks and otherwise meet the "Standards Applicable to All Investments" (see p.
6), and that are with sellers not perceived to present a serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement. Repurchase agreements with maturities of greater
than seven days are generally not negotiable, and therefore are not regarded as
liquid investments. Such repurchase agreements may also be subject to greater
risks than repurchase agreements of shorter maturities in that (i) the seller
may experience a decrease in credit quality during the term of the repurchase
agreement, and (ii) the value of the collateral may decline due to somewhat
higher interest rates.

The Portfolio may invest in U.S. dollar-denominated foreign securities,
provided that such instruments meet the "Standards Applicable to All
Investments" (see p. 6). Foreign money market instruments are subject to risks
similar to those affecting domestic money market instruments. Foreign money
market instruments are subject to additional risks, such as international
economic and political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding or
other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuer, expropriation or nationalization of foreign
issuers, the extent and quality of government regulation of financial markets
and institutions, and the possible impact of interruptions in the flow of
international currency transactions. These factors, along with the liquidity of
proposed foreign investments (including the availability of an active domestic
market) is carefully considered by AAI in selecting any foreign investments for
the Portfolio. For more information, see "Foreign Securities" in the Statement
of Additional Information.

Aon Corporation, along with its wholly-owned subsidiaries, is expected to
own a substantial percentage of the outstanding shares of the Portfolio. Aon
Corporation and its subsidiaries may withdraw all or any portion of their
investment in the Portfolio at any time. A redemption of a significant
percentage of the Portfolio's shares could have an adverse impact on the
Portfolio by requiring AAI to sell assets of the Portfolio prematurely, or to
hold assets in cash or cash items in anticipation of a redemption request.
However, management of the Portfolio believes that the Portfolio and its
shareholders will benefit from the substantial investments of Aon Corporation
and its subsidiaries in shares of the Portfolio as a result of the economies of
scale available to a larger company.

INVESTMENT RESTRICTIONS

The Portfolio has adopted a number of fundamental policies restricting the
investment of its assets, which may not be changed without the affirmative vote
of the holders of a majority of the Portfolio's outstanding voting securities.
The "affirmative vote of the holders of a majority of the Portfolio's
outstanding securities" means the vote of: (a) 67% or more of the capital stock
of the Portfolio present or represented by proxy at a meeting of such
shareholders, if more than 50% of the Portfolio's shareholders are present in
person or by proxy at such meeting, or (b) more than 50% of the outstanding
capital stock of the Portfolio, whichever is less. Pursuant to the Portfolio's
fundamental investment restrictions, the Portfolio may not:

(a) issue senior securities (except to the extent that borrowings
under paragraph (h) below exceeding 5% of the value of the Portfolio's
total assets might be deemed to constitute senior securities under the 1940
Act);

(b) purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other interest
in real estate). A security issued by a real estate or mortgage investment
trust is not treated as an interest in real estate;

(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
portfolio securities), or make short sales of securities or maintain a
short position;

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<PAGE> 11

(d) underwrite securities of other issuers (except insofar as the Fund
might be deemed to be an underwriter under the Securities Act of 1933 in
certain resales of portfolio securities held by the Portfolio);

(e) invest more than 25% of the value of its total assets in
securities of issuers having their principal activity in any particular
industry, other than United States Government Securities, as defined in
Section 2(a)(16) of the 1940 Act;

(f) invest more than 5% of the value of the Portfolio's total assets
in, or invest in more than 10% of the outstanding voting securities of, any
one issuer, except that this restriction does not apply to investments in
United States Government Securities;

(g) make loans, except that the Portfolio may enter into repurchase
agreements as described under "Investment Objective and Policies," p. 5,
and the Portfolio may lend its portfolio securities, but not in amounts in
excess of 5% of the value of its net assets;

(h) borrow money, except from banks for temporary or emergency
purposes, including the meeting of redemption requests which might
otherwise require the untimely disposition of securities. Borrowing in the
aggregate may not exceed 10% of the value of the Portfolio's total assets
at the time the borrowing is made, and the Portfolio will not make
additional investments during any period that borrowings exceed 5% of the
value of the Portfolio's total assets;

(i) pledge, hypothecate, mortgage or transfer as security for
indebtedness any securities held by the Portfolio, except in an amount of
not more than 10% of the value of its total net assets, and then only to
secure borrowings permitted by (c) and (h);

(j) enter into repurchase agreements maturing in more than seven days
if, as a result thereof, more than 10% of the value of the Portfolio's
total assets would be invested in such repurchase agreements and any other
assets which are either illiquid or are not readily marketable;

(k) invest in time deposits maturing in more than seven days; in
addition, time deposits maturing in two business days to seven calendar
days may not exceed 10% of the value of the Portfolio's total assets; and

(l) purchase or sell interests in oil, gas, or other mineral
explorations or development programs, commodities, or commodity contracts,
except that the Portfolio may purchase securities of issuers which invest
or deal in any of the above, provided such securities are money market
instruments in which the Portfolio is otherwise permitted to invest.

See the Statement of Additional Information for further discussion of the
Portfolios investment restrictions. If a percentage restriction is adhered to at
the time of an investment, a later increase or decrease in the investment's
percentage of the value of the Portfolio's total assets resulting from a change
in portfolio values or assets will not constitute a violation of the percentage
restriction.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund has a Board of Directors elected by the shareholders. A majority
of the Directors are not affiliated with AAI, FFSC, FFRL or Aon Corporation or
their affiliates. The Board of Directors is responsible for the overall
management of the Fund, including reviewing the results of the investment
portfolios, monitoring investment activities and practices, and receiving and
acting upon future plans for the Fund.

INVESTMENT ADVISOR

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<PAGE> 12

January 27, 1994. AAI, which is registered as an investment advisor under the
Investment Advisers Act of 1940, is a wholly-owned subsidiary of Aon
Corporation, a holding company whose common stock is listed for trading on the
New York Stock Exchange.

As of October 31, 1995, Mr. Patrick G. Ryan, President and Chief Executive
Officer of Aon Corporation, owned directly and beneficially 13,500,000 shares
(12.5%) of the outstanding common stock of Aon Corporation.

In addition to the Fund, AAI provides investment advice and management to
Aon Corporation and its subsidiaries and affiliates. It also provides investment
advice and management to Life of Virginia Series Fund, Inc., a registered
investment company, and the Flexible Asset Allocation Portfolio of the Fund. The
total staff of AAI as of October 31, 1995, consisted of 29 individuals,
including five executive directors and fourteen portfolio managers. Assets under
management include equity securities, fixed income securities and real estate.
As of October 31, 1995, the aggregate assets under AAI's management were $12
billion.

Pursuant to the Advisory Agreement, AAI manages the investment and
reinvestment of the assets of the Portfolio, in accordance with the Portfolio's
investment objective and management policies described above. The Portfolio pays
AAI monthly compensation in the form of an investment advisory fee. This fee is
accrued daily and is equal to an annual rate of .35% of the average daily net
assets of the Portfolio. Since the Portfolio began operations, AAI has waived
collection of .25% of the .35% investment advisory fee, resulting in an
investment advisory fee of .10% of the Portfolio's average daily net assets. AAI
has agreed to continue waiving this portion of the investment advisory fee for
the indefinite future.

Under the Advisory Agreement, AAI is also required, at its own expense, to:

(a) supply internal auditing and internal legal services; (b) supply
stationery and office supplies; (c) prepare reports to shareholders and the
Board of Directors; (d) prepare tax returns; (e) prepare reports to and
filings with the SEC and State Blue Sky authorities; (f) at the Fund's
request, furnish office space, in such place as may be agreed upon from
time to time, and all necessary office facilities; (g) supply clerical,
accounting, bookkeeping, administrative and other similar services
(exclusive of those services relating to and to be performed under any
contract for custodial, transfer, dividend and accounting services entered
into by the Fund with a third party); and (h) furnish persons satisfactory
to the Fund to respond during normal business hours to in-person, written,
and telephone requests for assistance and information from shareholders of
the Portfolio, and provide such facilities and equipment as may be
necessary for such persons to carry out their duties, including, without
limitation, office space and facilities, telephones and CRT terminals and
equipment (including telephone lines) necessary for access to the Fund's
shareholder records.

In order to fulfill its obligation to provide these services, AAI has
entered into an Administration Agreement with Forth Financial Securities
Corporation ("FFSC"), the Fund's distributor, and the Fund, under which FFSC
furnishes substantially all such services for an annual fee of $25,000 plus .05%
of the Fund's average daily net assets. This fee is borne by AAI, and not by the
Portfolio or the Fund.

As described below in "Distribution of Shares," Aon Corporation has agreed
to sell FFRL, the parent of FFSC. Pursuant to the 1940 Act and the terms of the
Administration Agreement, a change in control of FFSC also will result in a
technical assignment and the termination of the Administration Agreement. It is
anticipated that, after the sale, either AAI will perform these administrative
tasks for the Fund directly or that the Fund's Board of Directors will approve
arrangements with another party to perform such administrative services. In the
latter event, such other party may or may not be an affiliate of AAI or Aon
Corporation. It is also possible that, in connection with new arrangements for
administrative services, the Fund's Board of Directors might approve a new or
revised investment management agreement for the Fund with AAI. If a new or
revised investment management agreement is approved by the directors, approval
of such agreement will also be sought from the Fund's shareholders.

9
<PAGE> 13

The Portfolio is responsible for all other expenses, including:

(a) taxes and fees payable by the Fund or the Portfolio to federal,
state, or other government agencies; (b) brokerage fees and commissions,
and issue and transfer taxes; (c) interest; (d) Board of Directors meeting
attendance fees and expenses of directors of the Fund who are not
directors, officers or employees of AAI, FFSC, or of any affiliated person
(other than a registered investment company) of AAI or FFSC; (e)
registration, qualification, filing and other fees in connection with
securities registration requirements of federal and state regulatory
authorities; (f) the charges and expenses for custodial, paying agent,
transfer agent, dividend agent and accounting agent services; (g) outside
legal fees and expenses in connection with the affairs of the Portfolio or
the Fund including, but not limited to, registering and qualifying its
shares with federal and state regulatory authorities; (h) charges and
expenses of independent auditors; (i) costs of meetings of shareholders and
directors of the Fund; (j) costs of maintenance of corporate existence; (k)
insurance premiums; (l) investment advisory fees; (m) costs and fees
associated with printing and delivering registration statements,
stockholders' reports and proxy statements; (n) costs and fees associated
with delivering reports to and filings with the SEC and State Blue Sky
authorities; (o) costs relating to administration of the Fund's general
operations; (p) costs relating to the Fund's own employees, if any; and (q)
costs of preparing, printing, and delivering the Portfolio's prospectus to
existing shareholders.

If in any fiscal year the aggregate expenses of the Portfolio (including
the investment advisory fee, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses), exceed 1.0% of the Portfolio's average
daily net assets, AAI has agreed to reimburse the Portfolio for such excess.

DISTRIBUTION OF SHARES

The Fund has entered into a Distribution Agreement with Forth Financial
Securities Corporation ("FFSC"), 6610 West Broad Street, Richmond, Virginia
23230, a wholly-owned subsidiary of Forth Financial Resources, Ltd. ("FFRL"),
which is in turn a wholly-owned subsidiary of Aon Corporation, under which FFSC
will act as principal underwriter of the shares of the Portfolio. Mr. John J.
Palmer, president of the Fund, and Mr. Scott R. Reeks, treasurer of the Fund,
are both affiliated with FFSC. FFSC has agreed to use its best efforts,
consistent with its other business, to sell shares of the Portfolio and to pay
all expenses relating to selling and distributing the Portfolio's shares,
including preparing, printing, and mailing sales material. The Fund and the
Portfolio pays no compensation to FFSC for services performed by FFSC under the
Distribution Agreement. AAI may, in its discretion, reimburse FFSC for certain
expenses it may incur in connection with the distribution of the Portfolio's
shares. Such reimbursement shall be made out of AAI's own resources (including,
but not limited to, AAI's profit under the Advisory Agreement). The Portfolio's
shares are continuously offered.

On December 26, 1995, Aon Corporation announced that it had agreed to sell
all of the stock of FFRL to General Electric Capital Corporation. The sale is
expected to close in the first half of 1996. Pursuant to the terms of the
Distribution Agreement, a change in control of FFSC will result in a technical
assignment and the termination of the Distribution Agreement. Prior to the sale
of FFSC, the Fund's Board of Directors will either renew the Distribution
Agreement with FFSC or make new arrangements for the distribution of the Fund's
shares. It is currently anticipated that such arrangements would entail entering
into a new distribution agreement with a new principal underwriter and not FFSC.
The new principal underwriter may be an affiliate of AAI or Aon Corporation.

NET ASSET VALUE

The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading as well as on Good Friday, except that shares of
the Portfolio may not be purchased or redeemed, and shares of the Portfolio will
not be priced, on the following days: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day. The net asset value of the
Portfolio's shares for purposes of pricing orders for

10
<PAGE> 14

purchase and redemption of shares is determined as of 1:30 p.m. (Central Time)
on each day that the Fund is open for business. Net asset value per share is
calculated for purchases and redemptions by dividing the value of all securities
and other assets of the Portfolio, less the liabilities of the Portfolio, by the
number of the Portfolio's outstanding shares.

The Fund intends to use its best efforts to maintain the net asset value of
the Portfolio at $1.00 per share although it cannot assure that it will be able
to do so on a continuous basis. The Portfolio's net asset value is computed
using the amortized cost method to value its portfolio securities. A more
detailed description of net asset value computation and amortized cost method,
is contained in the Statement of Additional Information.

PURCHASE OF SHARES

Shares of the Portfolio are offered and sold on a continuous basis without
a sales charge at the net asset value per share next calculated after a purchase
order is received and accepted. Initial investments may only be made by
submitting a completed Account Application as described below. Subsequent
purchase orders may be placed by submitting orders to the transfer agent
(Firstar Trust Company). The minimum initial investment for shares of the
Portfolio is $1,000, and subsequent investments must be at least $100. The
minimum purchase requirements do not apply to reinvested dividends. The minimum
initial investment and subsequent investment amounts may be less than the
foregoing for full time staff employees of Aon Corporation and its subsidiaries.

Investors desiring to purchase shares of the Portfolio may obtain an
Account Application from FFSC. The Application should be completed and mailed,
together with a check or money order (payable to Aon Asset Management Fund,
Inc.), to the Fund, at 6610 West Broad Street, Richmond, Virginia 23230. All
checks must be drawn on a bank located within the United States and must be
payable in U.S. dollars. Subsequent investments in an existing account in the
Portfolio may be made at any time by sending to Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53261-0701, a check or money order payable to the Fund
as shown above, along with either (a) the detachable form that regularly
accompanies the confirmation of a prior transaction, or (b) a letter stating the
amount of the investment, the name of the Portfolio and the account number in
which the investment is to be made. A $15 fee will be imposed by the transfer
agent if any check deposited on behalf of the Fund does not clear, and the
investor involved will be responsible for any loss incurred by the Fund or the
Portfolio.

An investor may also purchase shares by directing his bank to transmit
immediately available funds by wire in the amount of the purchase price to:

Firstar Bank, Milwaukee, N.A.
Account of Firstar Trust Company
ABA #0750-00022
For credit to Account #112-952-137
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
For further credit to Account # 60-245-0000
Aon Asset Management Fund, Inc. -- Money Market Portfolio
[the investor's account number and the title of the account]

When making an initial wire purchase, please call FFSC at (804) 281-6049
with the appropriate account information prior to sending the wire. Investors
making initial investments by wire must promptly complete an Account Application
and forward it to FFSC. Amounts redeemed pursuant to redemption requests
received before the completed Application has been received and accepted by the
transfer agent will not be paid until the completed Application has been
received and accepted by FFSC.

Subsequent purchase orders are accepted by the transfer agent at its
Milwaukee office. The transfer agent will not accept an order from securities
dealers or financial institutions unless the dealer or institution undertakes to
pay for the order in immediately available funds wired to the transfer agent by
the close of business the same day. The transfer agent will not accept an order
from other investors unless they, at the time

11
<PAGE> 15

they place an order, have a creditworthy financial institution guarantee payment
in immediately available funds wired to the transfer agent by the close of
business the same day.

Purchase orders that are received and accepted before 1:30 p.m. (Central
Time) on a business day will be executed at the price per Fund share calculated
as of 1:30 p.m. (Central Time). Orders received and accepted after 1:30 p.m.
(Central Time), will be executed at the price per Portfolio share calculated as
of 1:30 p.m. on the next business day. Purchase orders received and accepted
after the regular close of trading on the Exchange, or on non-business days,
will be executed on the next business day, following receipt and acceptance of
the purchase order by the transfer agent.

The Fund will not accept payment in cash for the purchase of shares.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. Applications without
a Taxpayer Identification Number or an indication that a Number has been applied
for will not be accepted. If a Number has been applied for, the Number must be
provided and certified within 60 days of the date of the Application. See the
Account Application for further information about this requirement.

If the transfer agent receives and accepts a purchase order by 1:30 p.m.
(Central Time) on a business day, the investor will receive the Portfolio
dividend declared that day. If an order is received and accepted by the transfer
agent after 1:30 p.m. (Central Time), an investor's shares will begin to accrue
dividends on the following business day.

The Fund reserves the right to reject any purchase order for any reason.

REDEMPTION OF SHARES

REGULAR REDEMPTION

An investor may redeem shares in any amount by sending a written request to
Aon Asset Management Fund, Inc. P.O. Box 701, Milwaukee, WI 53201-0701.

The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services, or receipt at the transfer agent's post office box, of purchase
applications or redemption requests does not constitute receipt by the transfer
agent or the Fund. Do not send letters by overnight courier to the post office
box address. Except as described below under "Telephone Redemption," redemption
requests and correspondence sent to the Fund by overnight courier must be
delivered to the offices of the transfer agent at 615 E. Michigan Street, Third
Floor, Milwaukee, WI 53202.

Redemption requests must be signed by each owner of the shares to be
redeemed, including each joint owner on redemption requests for joint accounts,
in the exact manner as the share account is registered, and must state the
amount of redemption and identify the shareholder account number and tax
identification number. If the amount of the redemption request exceeds $5,000,
or if the proceeds are to be sent elsewhere than the address of record, each
signature must be guaranteed by either a commercial bank that is a member of the
FDIC, a trust company, or a member firm of a national securities exchange. The
transfer agent will not accept guarantees from notaries public, savings and loan
associations, or savings banks. Guarantees must be signed by an authorized
signatory of the bank, trust company or member firm and "Signature Guaranteed"
must appear with the signature. The Fund may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians. A redemption request will not be deemed to be properly
received until the transfer agent receives all required documents in proper
form.

TELEPHONE REDEMPTION

Currently, shareholders may redeem shares of the Portfolio by telephone. To
redeem shares by telephone, an investor must check the appropriate box on the
Account Application. Once this feature has been requested, shares may be
redeemed by calling Investor Services at 1-800-338-1579, or in the Milwaukee
area,

12
<PAGE> 16

(414) 765-4124, and providing the account name, account number and amount of
redemption. Proceeds of shares redeemed by telephone will be mailed or wired
only to an investor's address or bank of record as shown on the records of the
transfer agent.

If an investor redeems shares by telephone and requests wire payment,
payment of the redemption proceeds will normally be made in federal funds on the
same business day provided the redemption order is received by the transfer
agent before 1:30 p.m. (Central Time). If a redemption order is received by the
transfer agent after 1:30 p.m. (Central Time), or on a non-business day, payment
for the redeemed shares will, at the investor's request, normally be wired in
federal funds on the next business day. As stated, the transfer agent will wire
redemption proceeds only to the bank and account designated on the Account
Application or in written instructions subsequently received by the transfer
agent, and only if the investor's bank is a commercial bank located within the
United States. The transfer agent currently charges a $7.50 fee for each payment
of redemption proceeds made by wire. The Fund's current policy is to pay this
wire transfer fee to the transfer agent as an expense of the Portfolio, in order
to facilitate shareholder redemptions. The Fund reserves the right, should its
experience warrant it, to change this policy and to impose the wire transfer fee
directly upon redeeming shareholders requesting wire transfers. In such event,
the Fund will provide shareholders at least thirty days written notice of the
policy change.

In order to arrange for telephone redemptions after an account has been
opened or to change the bank account or address designated to receive redemption
proceeds, a written request must be sent to "Aon Asset Management Fund, Inc." at
P.O. Box 701, Milwaukee, WI 53201-0701. The request must be signed by each
shareholder of the account with the signatures guaranteed as described above.
Further documentation may be requested from corporations, executors,
administrators, trustees and guardians.

The Fund reserves the right to refuse a telephone redemption if it believes
it is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Fund at any time. In addition, neither the Fund
nor its transfer agent will be responsible for the authenticity of redemption
instructions received by telephone. Nevertheless, the transfer agent has
established certain reasonable procedures to confirm that instructions
communicated by telephone are genuine (in the absence of such procedures the
Fund or the transfer agent may be liable for any unauthorized or fraudulent
instructions). Such procedures may include, among others, requiring forms of
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such instructions or transactions and/or tape
recording telephone instructions. Thus, a shareholder would bear any losses
resulting from unauthorized telephone redemption instructions with respect to
the shareholder's account.

During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If an investor is unable to contact
the transfer agent by telephone, shares may also be redeemed by delivering the
redemption request to the transfer agent in person or by mail as described above
under "Regular Redemption."

CHECK REDEMPTION

An investor may request on the Account Application or by later written
request that the Fund provide to the investor Redemption Checks ("Checks") which
may be drawn on the Portfolio. Checks will be sent only to the registered
owner(s) of Portfolio shares and only to the address of record. Checks may be
made payable to the order of any person in the amount of $500 or more. Dividends
are earned on amounts drawn until the Check clears the transfer agent. When a
Check is presented to the transfer agent for payment, the transfer agent, as the
investor's agent, will cause the Portfolio to redeem a sufficient number of the
investor's shares to cover the amount of the Check. Checks will not be returned
to shareholders after clearance. There is no charge to the investor for the use
of the Checks; however, the transfer agent will impose a $15 charge for stopping
payment of a Check upon the request of the investor, or if the transfer agent
cannot honor a Check due to insufficient funds or other valid reason. Because
dividends on the Portfolio accrue daily, Checks may not be used to close an
account, as a small balance is likely to result.

13
<PAGE> 17

OTHER REDEMPTION INFORMATION

Share redemption requests are effected at the net asset value next
determined after receipt of a request in proper form by the transfer agent.
Shares for which redemption requests are received by the Fund's transfer agent
in proper form before 1:30 p.m. (Central Time) on a business day will not
receive the Portfolio dividend declared that day. If the request is received in
proper form after 1:30 p.m. (Central Time), the shares to be redeemed will be
credited with that day's dividend.

The Fund ordinarily will make payment for redeemed shares within seven days
after receipt by the transfer agent of a request in proper form, except as may
be permitted by the SEC. Payment may be delayed (i) for any period during which
the NYSE is closed (other than customary weekend or holiday closings) or trading
on the NYSE is restricted; (ii) for any period during which an emergency exists,
as determined by the SEC, and it is not reasonably practicable for the Fund to
dispose of its securities, or to determine the value of its net assets; or (iii)
for other periods as permitted by the SEC for the protection of the Portfolio's
shareholders.

Shares purchased by check will not be redeemed until the check has cleared,
which may take up to fifteen days. During the period prior to the time the
shares are redeemed, dividends on such shares will accrue and be payable, and an
investor will be entitled to exercise all other rights of beneficial ownership.
An investor purchasing shares by wire must file an Account Application before
payment is made on any redemption requests for shares purchased by wire.

The Fund reserves the right to redeem involuntarily, upon not less than 30
days' notice, any shareholder account which is reduced as a result of a
withdrawal by an investor to a value of less than $500.

ADDITIONAL SERVICES TO INVESTORS

AUTOMATIC INVESTMENT PROGRAM

When opening an account, a shareholder may authorize deductions to be made
from his or her personal checking account with a bank for investment each month
or quarter in shares of the Portfolio in a minimum amount of $100. (This minimum
may be less for full-time staff employees of Aon Corporation and its
subsidiaries). There is no obligation to continue automatic investment program
purchases, and the program may be terminated at any time by the shareholder, the
Fund, or Firstar Trust Company. To initiate this program, please complete the
Supplemental Application, which is attached to the Application. For information
on obtaining an application, see "Purchase of Shares."

EXCHANGE PRIVILEGE

Shares of the Portfolio which have been registered in the shareholder's
name for at least 15 days may be exchanged for shares of any other Aon Asset
Management Fund, Inc. portfolio provided that the shares acquired in the
exchange are qualified for sale in the jurisdiction of residence of the
shareholder at the time of the exchange. Before initiating an exchange, the
shareholder should obtain and carefully read the prospectus relating to the
portfolio the shares of which are being acquired.

Under the exchange privilege, each Aon Asset Management Fund, Inc.
portfolio offers to exchange its shares for shares of another Aon Asset
Management Fund, Inc. portfolio on the basis of relative net asset value per
share. In order to exercise an exchange without further approval of the Fund,
the shares being exchanged must have a net asset value of at least $1,000 but
not more than $500,000.

To elect the exchange privilege, the shareholder must check the appropriate
box on the Account Application. To exercise the exchange privilege, the
shareholder must contact the Transfer Agent in writing, or telephone the
Transfer Agent (1-800-338-1579, or in the Milwaukee area, (414) 765-4124) and
request the exchange. The shareholder will be charged $5.00 for each exchange
resulting in a redemption out of the Portfolio. This charge will be deducted
from the amount being exchanged.

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<PAGE> 18

An exchange of shares is treated as a sale for federal income tax purposes
and, depending upon the circumstances, a short or long-term capital gain or loss
may be realized. If you have questions as to the tax consequences of an
exchange, you should consult your tax advisor.

The exchange privilege may be modified or terminated at any time upon 60
days prior written notice. Although an investor may make up to four exchanges in
any one calendar year, the Fund reserves the right to limit the number of
exchanges in excess of four per year.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder who owns shares having a value of $7,500 or more may receive
regular monthly, quarterly, or annual payments by arranging to redeem shares of
the Portfolio on a regular basis under a Systematic Withdrawal Plan. Under such
a Plan, a shareholder can elect fixed dollar monthly, quarterly, or annual
payments of at least $100 each.

Under this Withdrawal Plan, Portfolio dividends must be reinvested. All
payments are made by redeeming shares, and when all the shares under a
Systematic Withdrawal Plan have been redeemed, no more payments are made. A
Systematic Withdrawal Plan may be terminated at any time by the shareholder or
the Fund. To initiate this Plan, please complete the Supplemental Application,
which is attached to the Application. For information on obtaining an
Application, see "Purchase of Shares."

DIVIDENDS, DISTRIBUTIONS, AND TAXES

The Portfolio's net income is determined on each day that the Portfolio's
net asset value is determined. Net income includes: (i) accrued interest and
amortized discount on the portfolio investments of the Portfolio, plus or minus
(ii) realized gains and losses, and minus (iii) amortized premium and all
accrued expenses of the Portfolio.

The Portfolio's net income is determined immediately before the Portfolio's
computation of net asset value at 1:30 p.m. (Central Time), and is declared as a
dividend to shareholders of record at that time. Each month dividends are paid
and are reinvested in additional shares of the Portfolio based on their net
asset value on the payment date or, if a shareholder elects, paid in cash. A
cash election may be made by notifying the transfer agent in writing of the
election 10 days prior to the last business day of any month in which the
election is to be effective, and will remain in effect until revoked by similar
notice to the transfer agent. Shareholders who withdraw their entire account at
any time during the month are paid all dividends accrued through the date of
withdrawal, together with the proceeds of the withdrawal.

The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code") in order to be relieved
of payment of Federal income taxes on amounts distributed to shareholders. To do
so, it must pay out substantially all of its net income, including any short-
term capital gains.

Income dividends (and distributions, if any, paid from short-term capital
gains) will be taxable to shareholders at ordinary income rates under the Code.
(Shareholders not subject to tax on their income will not be required to pay tax
on amounts distributed to them.) The tax treatment of dividends and
distributions is the same whether they are received in cash or reinvested in
additional shares.

Dividends and distributions may also be subject to state and local taxes.
Interest on direct obligations of the U.S. and paid to individuals is not
subject to tax in most states, and dividends and distributions of the Portfolio
attributable to such interest may also be exempt from state taxes. Statements as
to the percentage of dividends and distributions that is attributable to
interest income from direct obligations of the U.S. will be mailed to each
shareholder.

Shareholders are urged to consult their tax advisors regarding taxation of
investments in the Portfolio.

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<PAGE> 19

ADDITIONAL INFORMATION

CAPITAL STOCK AND VOTING

Each share of each class of stock has the same rights as the other shares
of that class to dividends, to vote and to receive assets upon liquidation of
the investment portfolio related to that class. Each fractional share has the
same rights, in proportion, as a full share. When issued and paid for, shares of
all classes are fully paid and nonassessable. Shareholders have no preemptive or
conversion rights. Each shareholder is entitled to require the Fund to redeem,
to the extent that it may lawfully effect such redemption under the laws of the
State of Virginia, all or any part of his or her shares at the net asset value
per share computed as described herein. Payment of the aggregate price may be
made in cash or, at the option of the Fund, wholly or partly in such portfolio
securities of the Portfolio as the Fund shall select.

The Fund's bylaws provide that, unless otherwise required by the 1940 Act,
it shall not be required to hold an annual meeting of its stockholders. The Fund
intends to hold shareholder meetings only when required by law and at such times
as may be deemed appropriate by its Board of Directors. In addition, if
requested to do so by the holders of at least 10% of it's outstanding shares,
the Fund will call a meeting of shareholders for the purpose of voting upon any
question of removal of a director or directors, and it will assist in
facilitating shareholder communications as required by Section 16(c) of the 1940
Act.

Matters that affect all of the investment portfolios in an identical manner
(such as the election of directors or ratification of the selection of
independent accountants) will be voted on by all of the shareholders of the
Fund. Matters that do not affect all of the investment portfolios or that affect
different portfolios in different ways will be voted on separately by the
shareholders of the class of stock relating to that investment portfolio.
Matters requiring such separate shareholder voting on an investment portfolio by
investment portfolio basis, shall have been effectively acted upon with respect
to a portfolio (including the Portfolio) if a majority of the outstanding shares
of the class related to that portfolio vote for approval or disapproval of that
matter, notwithstanding that: (1) that matter has not been approved or
disapproved by a majority of the outstanding shares of any other class of stock,
or (2) the matter has not been approved or disapproved by a majority of the
outstanding shares of all classes of the Fund's stock.

Aon Corporation, along with its wholly-owned subsidiaries, owns, or is
expected to own, a substantial percentage of the outstanding shares of the
Portfolio. These shareholders will be affiliated persons of the Fund. Aon
Corporation and its subsidiaries may be able to cast a deciding vote on matters
submitted to a vote of shareholders, which may include proposed changes in the
Portfolio's investment objective and fundamental investment restrictions and in
terms of its Advisory Agreement.

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<PAGE> 20

Aon Asset Management Fund, Inc.
MONEY MARKET PORTFOLIO
March 1, 1996

INVESTMENT ADVISOR
Aon Advisors, Inc.
123 North Wacker Drive
Chicago, Illinois 60606

ADMINISTRATOR AND DISTRIBUTOR
Forth Financial Securities Corporation
6610 West Broad Street
Richmond, Virginia 23230

CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING AGENT
Firstar Trust Company
615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53202

INDEPENDENT AUDITORS
Ernst & Young LLP
One James Center
901 East Cary Street
Suite 1000
Richmond, VA 23219

LEGAL COUNSEL
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
<PAGE> 21

PROSPECTUS

AON ASSET MANAGEMENT FUND, INC.

123 NORTH WACKER DRIVE

CHICAGO, ILLINOIS 60606

FLEXIBLE ASSET ALLOCATION PORTFOLIO

DISTRIBUTOR -- FORTH FINANCIAL SECURITIES CORPORATION
(804) 281-6049

Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios, each of
which is in effect, a separate fund (commonly known as a "mutual fund") with its
own investment objective and policies. The Fund issues a separate series of
capital stock for each investment portfolio. THIS PROSPECTUS DESCRIBES THE
FLEXIBLE ASSET ALLOCATION PORTFOLIO (THE "PORTFOLIO").

The investment objective of the Aon Flexible Asset Allocation Portfolio is
maximum total return on invested capital, to be derived from capital
appreciation, dividends, and interest. It will pursue this objective by
following a flexible asset allocation strategy that shifts among a wide range of
investments and markets. Assets are invested in common stocks and bonds and
money market instruments, the proportion of each being continuously determined
by the investment adviser.

Shares of the Portfolio are distributed, without a sales charge, through
Forth Financial Securities Corporation, a wholly owned subsidiary of Forth
Financial Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of Aon
Corporation, a New York Stock Exchange-listed company. Aon Advisors, Inc., also
a wholly-owned subsidiary of Aon Corporation, serves as investment advisor to
the Portfolio. Aon Corporation and its subsidiary companies may, by virtue of
their shareholder interests in the Portfolio at any particular date, be
considered to be controlling persons of the Portfolio and may be able to cast a
deciding vote on all matters submitted to a vote of the Portfolio's
shareholders.

This prospectus concisely sets forth the information prospective investors
should know about the Portfolio and the Fund before investing. Investors should
retain this Prospectus for future reference. More detailed information about the
portfolios is contained in a Statement of Additional Information, dated March 1,
1996 that has been filed by the Fund with the Securities and Exchange Commission
and incorporated by reference into this Prospectus. The Statement of Additional
Information is available free of charge from the Fund at the telephone number or
address set forth above.

MARCH 1, 1996

<PAGE> 22

AON ASSET MANAGEMENT FUND, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses.............................................................................. 3
Condensed Financial Information....................................................... 4
Organization and Classification....................................................... 4
Investment Objective and Policies..................................................... 4
Investment Practices.................................................................. 6
Loans of Portfolio Securities.................................................... 6
Covered Call Options............................................................. 6
American Depository Receipts..................................................... 6
Repurchase Agreements............................................................ 7
Fixed-Income Obligations......................................................... 8
Short-Term Money Market Securities............................................... 9
Net Asset Value....................................................................... 9
Distribution of Shares................................................................ 9
Purchase of Shares.................................................................... 10
Redemption of Shares.................................................................. 11
Regular Redemption.......................................................... 11
Telephone Redemption........................................................ 11
Other Redemption Information................................................ 12
Additional Services to Investors...................................................... 13
Automatic Investment Program................................................ 13
Exchange Privilege.......................................................... 13
Systematic Withdrawal Plan.................................................. 13
Dividends, Distributions, and Taxes................................................... 13
Management of the Fund................................................................ 14
Board of Directors............................................................... 14
Investment Advisor............................................................... 14
Additional Information................................................................ 16
Capital Stock and Voting Rights.................................................. 16
</TABLE>

2
<PAGE> 23

EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee.................................................... $5.00
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee......................................... 0.70%
Other Expenses.................................................. 0.26%
Total Operating Expenses........................................ 0.96%
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Expenses........................... $10 $ 31 $ 57 $ 143
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

3
<PAGE> 24

CONDENSED FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The information below has been derived from audited financial statements
and should be read in conjunction with the financial statements of the Fund
found in its annual report.

For the year ended October 31, 1995 and the period from March 31, 1994 to
October 31, 1994.

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Net Asset Value at beginning of period........................... $ 9.97 $10.00
Investment income........................................... .32 .25
Expenses.................................................... (.08) (.08)
------ ------
Net investment income....................................... .24 .17
Net realized gains (losses) on investments.................. .66 (.05)
Net unrealized appreciation (depreciation) on investments... 1.75 .06
------ ------
Income from operations...................................... 2.65 .18
Dividends paid to shareholders from:
Net investment income.................................. (.24) (.16)
Net realized loss...................................... (.34) (.05)
------ ------
(.58) (.21)
------ ------
(Decrease) in net asset value............................... 2.07 (.03)
Net asset value at end of period............................ $12.04 $ 9.97
------ ------
------ ------
Total Return..................................................... 26.92% 1.84%*
Ratios:
Ratio of operating expenses to average net assets........... 0.96% 1.25%**
Ratio of net investment income to average net assets........ 2.73% 2.63%*
Portfolio turnover.......................................... 95.17% 64.36%
Net assets at end of period...................................... $73,775,235 $10,189,125
</TABLE>

- ---------------
* Determined on an annualized basis.
** Determined on an annualized basis. The ratio of operating expenses to average
net assets is after reimbursement of certain fees and expenses by Aon
Advisors, Inc. (see note 4 to the Fund's financial statements). Had the
reimbursements not been made, the ratio would have been 1.39%.

ORGANIZATION AND CLASSIFICATION

Stock issued with respect to either portfolio (including the Portfolio)
represents a pro-rata interest in the assets of that portfolio and has no
interest in the assets of any other portfolio. Each investment portfolio
(including the Portfolio) bears its own expenses and other liabilities and also
its proportionate share of general liabilities of the Fund. In other respects,
the Fund is treated as one corporate entity.

INVESTMENT OBJECTIVE AND POLICIES

The Flexible Asset Allocation Portfolio has the investment objective of
maximum total return on invested capital, to be derived from capital
appreciation, dividends, and interest. There can be no assurance that this
objective will be met. The investment objective of the Portfolio is fundamental
and may not be changed

4
<PAGE> 25

without the approval of a majority of the Portfolio's outstanding voting shares.
A majority means the lesser of (1) 67% of the Portfolio's outstanding shares
present at a meeting of the Portfolio's shareholders if more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Portfolio's outstanding shares. Any change in the investment objective may
result in the Portfolio having an investment objective which is different from
that which an investor deemed appropriate to his or her objectives at the time
of investment.

This Portfolio will pursue this objective by following a flexible asset
allocation strategy that shifts among a wide range of investments and markets.
The Portfolio will invest in common stocks, bonds, and money market instruments,
the proportion of each being continuously determined by AAI (under the
supervision of the Board of Directors). Total return consists of current income,
including dividends, interest and discount accruals and realized and unrealized
capital appreciation and/or realized and unrealized capital depreciation. This
portfolio will invest in equity securities of domestic and foreign issuers,
including common stocks, preferred stocks, convertible securities, and warrants;
debt securities of domestic and foreign issuers, including bonds, debentures,
and notes; and short-term money market securities. The portfolio may also write
covered call options in an effort to increase current income and for hedging
purposes.

Depending upon prevailing economic and market conditions, the Portfolio may
at any given time be primarily comprised of equity securities (including debt
securities convertible into equity securities), short-term money market
securities, corporate bonds and other debt securities, or any combination
thereof. For example, during periods when AAI believes that the overall return
on equity securities will exceed the return on debt securities, the Portfolio
may be fully or substantially invested in equity securities. In contrast, the
Portfolio normally would be invested primarily in debt securities during periods
when AAI believes that the total return from investing in debt securities will
exceed the return on equity securities. Also, the Portfolio may be primarily
invested in short-term money market securities. These may include, to a limited
extent, repurchase agreements and money market instruments purchased on a
"when-issued" or delayed-delivery basis.

At least 60% of the value of any bonds held by the Portfolio will be rated
within the four highest grades by a nationally recognized rating service such as
Moody's Investor Services, Inc. or Standard & Poor's Corporation. The balance of
the value of the bonds held in the Portfolio may be rated below those four
highest grades, and if these lower-rated bonds were held in the Portfolio in
significant amounts they would increase financial risk and income fluctuation.
At the current time, the Fund has adopted a non-fundamental investment
restriction limiting the Portfolio's investment in these lower-rated
fixed-income debt securities (i.e., rated less than Baa or BBB) to no more than
30% of the Portfolio's total assets measured at the time of purchase. The lowest
rating for debt securities in which the Portfolio may invest is B. Such a rating
indicates that a security generally lacks the characteristics of a desirable
investment and is predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal. See the Statement of Additional
Information for a complete description of ratings.

The Portfolio will be subject to varying levels of market and financial
risk and fluctuation of current income. The market value of non-convertible
fixed-income securities usually reflects yields generally available on
securities of similar quality and type. When such yields decline, the market
value of a portfolio already invested at higher yields can be expected to rise,
if such securities are protected against early call. Similarly, when such yields
increase, the market value of a portfolio already invested at lower yields can
be expected to decline. It is likely that the portfolio turnover rate for the
Portfolio will be higher than for other mutual funds due to the frequent
transactions aimed at maximizing total return. This higher portfolio turnover
rate generates higher brokerage expenses; however, it is expected that the gain
in total return will more than offset the added brokerage expense. It is
estimated that the Portfolio will have an annual turnover rate that will not
exceed 100%.

A shareholder of the Portfolio confers substantially more investment
discretion on AAI than would be the case for a shareholder investing in a mutual
fund with a more narrowly defined investment objective, thereby enabling AAI to
invest in a wide variety of investment securities.

5
<PAGE> 26

INVESTMENT PRACTICES

In pursuing the investment objective, the Portfolio may engage in the
following investment practices.

LOANS OF PORTFOLIO SECURITIES

The Portfolio may from time to time lend securities it holds to brokers,
dealers, and financial institutions. The Portfolio may lend up to a maximum of
20% of the total value of it's assets. Such loans will be secured by collateral
in the form of cash or United States Treasury securities, which will be
maintained in an amount at least equal to the current market value of the loaned
securities. The Portfolio also will receive a fee from the borrower or interest
earned from the securities in which cash collateral is invested during the term
of the loan. Where voting or consent rights with respect to loaned securities
pass to the borrower, management will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such voting or
consent rights if the issues involved have a material effect on the Portfolio's
investment in the securities loaned.

The primary risk involved in lending securities is that the borrower will
fail financially and not return the loaned securities at a time when the
collateral is insufficient to replace the full amount of the loaned securities.
In order to minimize this risk, the Portfolio will make loans of securities only
to firms determined by AAI (under the supervision of the Board of Directors) to
be creditworthy. A more detailed description of this practice, and the
associated risks are contained in the Statement of Additional Information.

COVERED CALL OPTIONS

For the purpose of minimizing or hedging against anticipated declines in
the value of its portfolio securities, the Portfolio may write covered call
options which are tradeable on a national securities exchange with respect to
securities it owns in an amount not in excess of 10% of the value of the
Portfolio's net assets at the time such options are written. So long as the
Portfolio remains obligated as a writer of a call, it forgoes the opportunity to
profit from increases in the market prices of the underlying security above the
call price.

Through the writing of a covered call option, the Portfolio receives
premium income but obligates itself to sell to the purchaser of such an option
the particular security underlying the option at a specified price at any time
prior to the expiration of the option period, regardless of the market value of
the security during this period.

The Portfolio may also enter into "closing purchase transactions" in order
to terminate its obligation as a writer of a call option prior to the expiration
of the option. Although writing only those call options which are traded on a
national securities exchange increases the likelihood of being able to make
closing purchase transactions, there is no assurance that the Portfolio will be
able to effect such a transaction at any particular time or at any acceptable
price. The writing of call options could result in a profit or a loss to the
Portfolio and could result in higher brokerage costs.

Covered call options entail certain risks that are different in some
respects from investment risks associated with similar funds which do not write
such options. These risks include the inability to effect closing transactions
at favorable prices and the inability to participate in the appreciation of the
underlying securities above the exercise price plus the premium. Because of
these risks, the writing of options requires special skills in addition to those
needed to select portfolio securities. A more detailed description of this
practice and the associated risks is contained in the Fund's Statement of
Additional Information.

AMERICAN DEPOSITORY RECEIPTS

The Portfolio may purchase foreign securities including American Depository
Receipts ("ADRs"). ADRs are certificates issued by a U.S. bank or trust company
and represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a domestic bank and traded on a U.S. exchange
or on the U.S. over-the-counter market. Generally, ADRs are in registered form.
ADRs do not eliminate all of the risk inherent in investing in foreign issuers.
To the extent that the Portfolio acquires ADRs through banks that do not have a
contractual relationship with the foreign issuer of the security underlying the

6
<PAGE> 27

ADR to issue and service the ADRs (i.e., unsponsored ADRs), there may be an
increased possibility that the Fund would not become aware of and be able to
respond to corporate actions such as stock splits and rights offerings involving
the foreign issuer in a timely manner. In addition, the lack of this information
may result in inefficiencies in the valuation of such ADRs. Investment in ADRs
has certain advantages over direct investment in the underlying foreign
securities because: (1) they are U.S. dollar denominated investments that are
generally easily transferable and for which market quotations are readily
available, (2) issuers whose securities are represented by ADRs are subject to
the same auditing, accounting and financial reporting standards as are domestic
issuers, and (3) currency risks are avoided during the settlement period for
either purchases or sales.

Investment in foreign securities involves considerations which are not
ordinarily associated with investing in domestic issuers. These include changes
in currency rates or currency exchange control regulations that affect the
dollar-value of the underlying security, the possibility of expropriation of the
foreign issuer's assets or confiscatory taxation of the issuer, the
unavailability of financial or economic information about the country or its
markets, less liquidity and more volatility in foreign markets, the impact of
political, social or diplomatic developments, the extent and quality of
government regulation of financial markets and institutions, greater difficulty
pursuing legal claims against foreign issuers, and the fact that individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.

The Flexible Asset Allocation Portfolio will limit its investment in ADRs
to 10% of its total assets, taken at market value at the time of acquisition.
The above factors will be considered before investments in foreign securities
are made. No investment in ADRs will be made unless such investments meet the
standards and objectives of the Portfolios.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements involving the purchase by the
Portfolio of money market instruments that the Portfolio is qualified to
purchase and the simultaneous agreement to resell the same instruments back to
the seller at an agreed upon price on demand or at a specified future date.
Repurchase agreements entered into by the Portfolio will be with Banks or
primary government securities dealers. The yield to the Portfolio on a
repurchase agreement is determined by the difference between the purchase price
of the underlying obligation, and the price at which the obligation is
"repurchased" by the bank or dealer.

The risks associated with repurchase agreements include: (i) if the seller
defaults on the obligation to repurchase the instrument, the Portfolio may incur
a loss if the value of the collateral securing the repurchase agreement declines
or the Portfolio may incur disposition costs in connection with liquidating the
collateral; and (ii) if bankruptcy proceedings are commenced with respect to the
seller of the instrument, liquidation of the collateral by the Portfolio may be
delayed or limited. Accordingly, the Portfolio will only enter into repurchase
agreements that present minimal credit risks and that are with sellers not
perceived to present a serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement.

Repurchase agreements with maturities of greater than seven days are
generally not negotiable, and therefore are not regarded as liquid investments.
Such repurchase agreements may also be subject to greater risks than repurchase
agreements of shorter maturities that (i) the seller may experience a decrease
in credit quality during the term of the repurchase agreement, and (ii) the
value of the collateral may decline due to somewhat higher interest rates.

The Portfolio will only enter into repurchase agreements with banks or
government securities dealers recognized as primary dealers by the Federal
Reserve System, and then only if:

(1) at the time the repurchase agreement is entered into, and
throughout the duration of the repurchase agreement, the collateral has a
market value at least equal to the value of the repurchase agreement;

7
<PAGE> 28

(2) the collateral consists of U.S. Government securities or
instruments rated in the highest rating category by at least two nationally
recognized statistical rating organizations; and

(3) the maturity of the repurchase agreement does not exceed 30 days.

FIXED-INCOME OBLIGATIONS

The value of Fixed-income securities owned by the Portfolio will fluctuate
in response to various market forces and will vary inversely with changes in
prevailing interest rate levels.

U.S. GOVERNMENT SECURITIES. The Portfolio may invest in intermediate
(maturities of 1 to 10 years) and long-term (maturities in excess of 10 years)
debt instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Such U.S. Government securities include: (1) U.S. Treasury
notes, and bonds; and (2) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities which are supported by any one of the following:
(a) the full faith and credit of the U.S. Government (e.g., Government National
Mortgage Association ("GNMA") Certificates); (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S. Treasury
(e.g., debt of each of the Federal Home Loan Banks); (c) the discretionary
authority of the U.S. Government or GNMA to purchase certain financial
obligations of the agency or instrumentality (e.g., Federal National Mortgage
Association); or (d) the credit of the issuing agency or instrumentality (e.g.,
Federal Land Banks, Farmers Home Administration or Student Loan Marketing
Association). No assurance can be given that the U.S. Government will provide
support to such U.S. Government sponsored agencies or instrumentalities in the
future, since it is not required to do so by law.

MORTGAGE PASS-THROUGH SECURITIES. GNMA securities are (along with certain
Federal National Mortgage Association and Federal Home Loan Corporation
securities in which the Portfolio may invest) securities whose scheduled monthly
interest and principle payments relating to mortgages in the pool are "passed
through" to investors. GNMA and other similar pass-through securities differ
from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, when
investments are made in such securities, the Portfolio may receive unscheduled
principal payments representing prepayments on the underlying mortgages. All
payments and unscheduled prepayments of principal will be reinvested in the
Portfolio in instruments consistent with the Portfolio's stated investment
objective and policies. GNMA and other similar securities may not be an
effective means of "locking in" long term interest rates due to the need for the
Portfolio to reinvest scheduled and unscheduled principal payments. At the time
principal payments or prepayments are received by the Portfolio, prevailing
interest rates may be higher or lower than the current yield of GNMA and other
similar pass-through securities held by the Portfolio.

INVESTMENT GRADE DEBT. The Portfolio may also invest in fixed-income
obligations such as marketable straight corporate or government debt securities
rated at the time of purchase within the four highest ratings (BBB or better)
assigned by Moody's Investor Service, Inc., ("Moody's") or (Baa or better)
assigned by Standard & Poor's Corporation ("Standard & Poor's") or which,
although not rated by one of the foregoing organizations, are determined by AAI
as being of investment quality equivalent to securities rated BBB or Baa or
better. See the Statement of Additional Information for a description of such
ratings. Also, the Portfolio may invest in securities issued by the Canadian
Government or its Provinces, or their respective agencies or instrumentalities.

LOWERED-RATED DEBT. In addition the Portfolio may invest in debt
securities with lower ratings which generally carry greater risk of default and
are generally subject to greater market fluctuations. If held by the Portfolio
in significant amounts they would increase financial risk and income
fluctuation. Lower-rated debt securities have speculative characteristics and
changes in economic conditions and other circumstances are more likely to weaken
the capacity of issuers of such securities to make principal and interest
payments than would be the case as to issuers of higher rated debt securities.
See the Statement of Additional Information for a description of lower-rated
debt securities, including further discussion of the risks of investing in such
instruments.

8
<PAGE> 29

SHORT-TERM MONEY MARKET SECURITIES

The Portfolio may invest in the following high quality short-term money
market securities:

U.S. GOVERNMENT SECURITIES. These are obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. These
obligations may include instruments that are supported by the full faith
and credit of the United States (such as Treasury bills, notes, and bonds,
and obligations issued by the Government National Mortgage Association);
instruments that are supported by the right of the issuer to borrow from
the Treasury (such as securities of the Federal Home Loan Banks);
instruments that are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations (such as securities of the
Federal National Mortgage Association); and instruments that are supported
only by the credit of the instrumentality (such as securities issued by the
Federal Farm Credit Banks, the Student Loan Marketing Association, and the
Federal Home Loan Mortgage Corporation).

BANK OBLIGATIONS. The Portfolio may invest in certificates of deposit
and time deposits issued by the U.S. banks which are members of the Federal
Deposit Insurance Corporation and have assets of at least $1 billion.
Certificates of deposits ("CDs") are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified
period of time at a stated interest rate. Time deposits are interest
bearing bank obligations payable at a stated maturity date. Certain CDs and
time deposits may not be readily marketable or otherwise illiquid. Such
instruments will be treated as illiquid investments for purposes of the
Portfolio's investment restrictions.

REPURCHASE AGREEMENTS. Repurchase agreements are described above.

COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations to finance short-term credit needs. See the
Statement of Additional Information for a complete description of
commercial paper ratings.

NET ASSET VALUE

The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading, except that shares of the Portfolio may not be
purchased or redeemed, and such shares will not be priced, on the following
days: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day.

The net asset value of the Portfolio's shares for the purposes of pricing
orders for purchase and redemption of shares is determined as of the close of
regular trading (currently, 3:00 p.m. Central Time) on the NYSE, on each day
that the Fund is open for business.

Net asset value per share is calculated for purchases and redemptions by
dividending the value of all securities and other assets of the Portfolio, less
the liabilities of the Portfolio, by the number of the Portfolio's outstanding
shares.

DISTRIBUTION OF SHARES

The Fund has entered into a Distribution Agreement with Forth Financial
Securities Corporation ("FFSC"), 6610 West Broad Street, Richmond, Virginia
23230, a wholly-owned subsidiary of Forth Financial Resources, Ltd. ("FFRL"),
which is in turn a wholly-owned subsidiary of Aon Corporation, under which FFSC
will act as principal underwriter of the Portfolio's shares. Mr. John J. Palmer,
president of the Fund, and Mr. Scott R. Reeks, treasurer of the Fund, are both
affiliated with FFSC. FFSC has agreed to use its best efforts, consistent with
its other business, to sell Portfolio's shares and to pay all expenses relating
to selling and distributing such shares, including preparing, printing, and
mailing sales material. The Fund pays no compensation to FFSC for services
performed by FFSC under the Distribution Agreement. AAI may, in its discretion,
reimburse FFSC for certain expenses it may incur in connection with the
distribution of the shares.

9
<PAGE> 30

Such reimbursement shall be made out of AAI's own resources (including, but not
limited to, AAI's profit under the Advisory Agreements). Shares are continuously
offered.

PURCHASE OF SHARES

Shares of the Portfolio are offered and sold on continuous basis at the net
asset value per share next calculated after a purchase order is received and
accepted. Initial investments may only be made by submitting a completed Account
Application as described below. Subsequent purchase orders may be placed by
submitting orders to the transfer agent (Firstar Trust Company). The minimum
initial investment for shares is $1,000.00 and subsequent investments must be at
least $100.00. The minimum purchase requirements do not apply to reinvested
dividends. The minimum initial investment and subsequent investment amounts may
be less than the foregoing for full time staff employees of Aon Corporation and
its affiliates.

Investors desiring to purchase shares of the Portfolio may obtain an
Account Application from Forth Financial Securities Corporation ("FFSC"), the
Fund's distributor. The application should be completed and mailed, together
with a check or money order (payable to "Aon Asset Management Fund, Inc."), to
the Fund, at 6610 West Broad Street, Richmond, Virginia 23230. All checks must
be drawn on a bank located within the United States and must be payable in U.S.
dollars. Subsequent investments in an existing account in the Portfolio may be
made at any time by sending to Firstar Trust Company, P.O. Box 701 Milwaukee,
Wisconsin 53201-0701 a check or money order payable to the Fund as shown above,
along with their (a) the detachable form that regularly accompanies the
confirmation of a prior transaction, or (b) a letter stating the amount of the
investment, the name of the Portfolio and the account number in which the
investment is to be made. A $15 fee will be imposed by the transfer agent if any
check from an investor does not clear, and the investor involved will be
responsible for any loss incurred by the Fund or Portfolio.

An investor may also purchase shares by directing his or her bank to
transmit immediately available funds by wire in the amount of the purchase price
to:

Firstar Bank, Milwaukee, N.A.
Account of Firstar Trust Company
ABA #0750-00022
For credit to Account # 112-950-027
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
For further credit to Account # ____________
Aon Asset Management Fund Inc. -- Flexible Asset Allocation Portfolio
[the investor's account number and the title of the account]

When making an initial wire purchase, please call FFSC at (804) 281-6049
with the appropriate account information prior to sending the wire. Investors
making initial investments by wire must promptly complete an Account Application
and forward it to the transfer agent. Amounts redeemed pursuant to redemption
requests received before the completed Application has been received and
accepted by the transfer agent will not be paid until the completed Application
has been received and accepted by FFSC.

Subsequent Purchase orders are accepted by the transfer agent at its
Milwaukee office. The transfer agent will not accept an order from securities
dealers or financial institutions, unless the dealer or institution

10
<PAGE> 31

undertakes to pay for the order in immediately available funds wired to the
transfer agent by the close of business the same day. The transfer agent will
not accept an order from other investors unless they, at the time they place the
order, have a creditworthy financial institution guarantee payment in
immediately available funds wired to the transfer agent by the close of business
the same day.

Purchase orders received and accepted before the close of regular trading
on the NYSE, currently 3:00 p.m. (Central Time), will be executed at the price
per share calculated as of the close of regular trading on the NYSE. Purchase
orders received and accepted after the close of regular trading on the NYSE, or
on non-business days, will be executed on the next business day following
receipt and acceptance of the purchase order by the transfer agent.

The Fund will not accept payment in cash for the purchase of shares.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. Applications without
a Taxpayer Identification Number or an indication that a Number has been applied
for will not be accepted. If a Number has been applied for, the Number must be
approved and certified within 60 days of the date of Application. See the
Account Application for further information about this requirement. The Fund
reserves the right to reject any purchase order for any reason.

REDEMPTION OF SHARES

REGULAR REDEMPTION

An investor may redeem shares in any amount by sending a written request to
Aon Asset Management Fund, Inc. P.O. Box 701, Milwaukee, WI 53201-0701.

The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services, or receipt at the transfer agent's post office box, of purchase
applications or redemption requests does not constitute receipt by the Transfer
Agent. Do not send letters by overnight courier to the post office box address.
Except as described below under "Telephone Redemption", redemption requests and
correspondence sent to the Fund by overnight courier must be delivered to the
offices of the Transfer Agent, Firstar Trust Company, at 615 E. Michigan Street,
Third Floor, Milwaukee, WI 53202.

Redemption requests must be signed by each owner of the shares to be
redeemed, including each joint owner on redemption requests for joint accounts,
in the exact manner as the share account is registered, and must state the
amount of redemption and identify the shareholder account number and tax
identification number. If the amount of the redemption request exceeds $5,000 or
if the proceeds are to be sent elsewhere than the address of record, each
signature must be guaranteed by a commercial bank that is a member of the FDIC,
a trust company, or a member firm of a national securities exchange. The
Transfer Agent will not accept guarantees from notary public, savings and loan
associations, or savings banks. Guarantees must be signed by an authorized
signatory of the bank, trust company or member firm and "Signature Guaranteed"
must appear with the signature. The Fund may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians. A redemption request will not be deemed to be properly
received until the transfer agent receives all required documents in proper
form.

TELEPHONE REDEMPTION

Currently, shareholders may redeem shares of the Fund by telephone. To
redeem shares by telephone, an investor must check the appropriate box on the
Account Application. Once this feature has been requested, shares may be
redeemed by calling Investor Services at 1-800-338-1579, or in the Milwaukee
area, (414) 765-4124, and providing the account name, account number, and amount
of redemption. Proceeds of shares redeemed by telephone will be mailed or wired
only to an investor's address or bank of record as shown on the records of the
transfer agent.

If an investor redeems shares of the Portfolio by telephone and requests
wire payment, payment of the redemption proceeds will normally be made in
federal funds on the next business day provided that the

11
<PAGE> 32

redemption order is received by the transfer agent by the close of regular
trading on the NYSE (currently 3:00 pm, Central Time). If a redemption order is
received by the transfer agent after 3:00 pm (Central Time), or on a
non-business day, payment for the redeemed shares will, at the investor's
request, normally be wired in federal funds on the business day following the
next business day.

As stated above, the Transfer Agent will wire redemption proceeds only to
the bank and account designated on the Account Application or in written
instructions subsequently received by the transfer agent, and only if the
investor's bank is a commercial bank located within the United States. The
transfer agent currently charges a $7.50 fee for each payment of redemption
proceeds made by wire. The Fund's current policy is to pay this wire transfer
fee to the transfer agent as an expense of the Portfolio, in order to facilitate
shareholder redemptions. The Fund reserves the right, should its experience
warrant it, to change this policy and to impose the wire transfer fee directly
upon redeeming shareholders requesting wire transfers. In such event, the Fund
will provide shareholders at least thirty days written notice of the policy
change.

In order to arrange for telephone redemptions after an account has been
opened or to change the bank account or address designated to receive
redemptions proceeds, a written request must be sent to Aon Asset Management
Fund, Inc. at P.O. Box 701, Milwaukee, WI 53201-0701. The request must be signed
by each shareholder of the account with the signature guaranteed as described
above. Further documentation may be requested from corporations, executors,
administrators, trustees and guardians.

The Fund reserves the right to refuse telephone redemption if it believes
it is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Fund at any time. In addition, neither the Fund
nor its transfer agent will be responsible for the authenticity of redemption
instructions received by telephone. Nevertheless, the transfer agent has
established certain reasonable procedures to confirm that the instructions
communicated by telephone are genuine (in the absence of such procedures, the
Fund or the transfer agent may be liable for any unauthorized or fraudulent
instructions). Such procedures may include, among others, requiring forms or
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such instructions or transactions and/or tape
recording telephone instructions. Thus, a shareholder would bear any losses
resulting from unauthorized telephone redemption instructions with respect to
the shareholders account.

OTHER REDEMPTION INFORMATION

Share redemption requests are effected at the net asset value next
determined after receipt of a request in proper form by the transfer agent.
Shares for which redemption requests are received by the transfer agent in
proper form before 3:00 p.m. (Central Time) on a business day will not receive
any dividend, if any, declared that day. If the request is received in proper
form after 3:00 p.m. (Central Time), the shares to be redeemed will be credited
with that day's dividend.

The Fund ordinarily will make payment for redeemed shares within seven days
after receipt by the transfer agent of a request in proper form, except as may
be permitted by the SEC. Payment may be delayed (i) for any period during which
the NYSE is closed (other than customary weekend or holiday closing) or trading
on the NYSE is restricted; (ii) for any period during which an emergency exists,
as determined by the SEC, and it is not reasonably practicable for the Portfolio
to dispose of its securities, or to determine the value of its net assets; or
(iii) for other periods as permitted by the SEC for the protection of
shareholders.

Proceeds from the redemption of shares purchased by check will not be paid
until the check has cleared, which may take up to fifteen days. An investor
purchasing shares by wire must file an Account Application before payment is
made on any redemption requests for shares purchased by wire.

The Fund reserves the right to redeem involuntarily, upon not less than 30
day's notice, any shareholder account which is reduced as a result of a
withdrawal by an investor to a value of less than $500.00.

12
<PAGE> 33

ADDITIONAL SERVICES TO INVESTORS

AUTOMATIC INVESTMENT PROGRAM

When opening an account, a shareholder may authorize deductions to be made
from his or her personal checking account with a bank for investment each month
or quarter in shares of the Portfolio in a minimum amount of $100. (This minimum
may be less for full time staff employees of Aon Corporation and its
subsidiaries.) There is no obligation to continue automatic investment program
purchases, and the program may be terminated at any time by the shareholder, the
Fund or Firstar Trust Company. To initiate this program, please complete the
Supplemental Application, which is attached to the Application. For information
on obtaining an application, see "Purchase of Shares".

EXCHANGE PRIVILEGE

SYSTEMATIC WITHDRAWAL PLAN

A shareholder who owns shares having value of $7,500 or more may receive
regular monthly, quarterly, or annual payments by arranging to redeem shares of
the Portfolio on a regular basis under a Systematic Withdrawal Plan. Under such
a Plan, a shareholder can elect fixed dollar monthly, quarterly or annual
payments of at least $100.

Under this Withdrawal Plan, dividends on shares must be reinvested. All
payments are made by redeeming shares, and when all the shares under a
Systematic Withdrawal Plan have been redeemed, no more payments are made. A
Systematic Withdrawal Plan may be terminated at any time by the shareholder or
the Fund. To initiate this Plan, please complete the Supplemental Application,
which is attached to the Application. For information on obtaining an
Application, see "Redemption of Shares".

DIVIDENDS, DISTRIBUTIONS, AND TAXES

The Portfolio's net income is determined immediately before its computation
of net asset value at the close of the NYSE (currently 3:00 p.m., Central Time)
and is declared as a dividend at the end of each fiscal quarter. Net income
includes: (i) accrued interest and amortized discount on the portfolio
investments of the

13
<PAGE> 34

Portfolio, plus or minus (ii) realized gains and losses, and minus (iii)
amortized premium and all accrued expenses of the Portfolio. Each quarter
dividends are paid and are reinvested in additional shares of the Portfolio
based on their net asset value on the payment date or, if a shareholder elects,
paid in cash. A cash election may be made by notifying the Transfer Agent in
writing of the election 10 days prior to the last business day of any quarter in
which the election is to be effective, and will remain in effect until revoked
by similar notice to the Transfer Agent. Shareholders who withdraw their entire
account at any time during the quarter are paid all dividends accrued through
the date of withdrawal, together with the proceeds of the withdrawal.

The Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code in order to be relieved of payment of
federal income taxes on amounts distributed to shareholders. To do so, it must
pay out substantially all of its net income, including any short-term capital
gains.

Income dividends (and distributions, if any, paid from short-term capital
gains) will be taxable to shareholders at ordinary income rates under the
Internal Revenue Code. (Shareholders not subject to tax on their income will not
be required to pay tax on amounts distributed to them.) The tax treatment of
dividends and distributions is the same whether they are received in cash or
reinvested in additional shares.

Dividends and distributions may also be subject to state and local taxes.
Interest on direct obligations of the U.S. Government and paid to individuals is
not subject to tax in most states, and dividends and distributions of the
Portfolio attributable to such interest may also be exempt from state taxes.
Statements as to the percentage of dividends and distributions that is
attributable to interest income from direct obligations of the U.S. will be
mailed to each shareholder.

Shareholders are urged to consult their tax advisers regarding taxation of
investments in the Portfolio.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund has a Board of Directors elected by the shareholders. A majority
of the directors are not affiliated with AAI, FFSC, FFRL or Aon Corporation or
their affiliates. The Directors are responsible for the overall management of
the Fund and their duties include reviewing the results of the Portfolio,
monitoring investment activities and practices, and receiving and acting upon
future plans for the Portfolio.

INVESTMENT ADVISOR

Aon Advisors, Inc. ("AAI"), a Virginia corporation with offices at 123
North Wacker Drive, Chicago, Illinois 60606, serves as investment advisor of the
Portfolio under the oversight and supervision of the Board of Directors of the
Fund and pursuant to an investment advisory agreement for the Portfolio
("Advisory Agreement") dated April 26, 1995. AAI, which is registered as an
investment advisor under the Investment Advisers Act of 1940, is a wholly-owned
subsidiary of Aon Corporation, a holding company whose common stock is listed
for trading on the New York Stock Exchange.

In addition to the Portfolio, AAI provides investment advice and management
to the Money Market Portfolio of the Fund and Aon Corporation and its
subsidiaries and affiliates. It also provides investment advice and management
to Life of Virginia Series Fund, Inc., a registered investment company. The
total staff of AAI as of October 31, 1995, consisted of 29 individuals,
including five executive directors and fourteen portfolio managers. Assets under
management include equity securities, fixed-income securities and real estate.
As of October 31, 1994, the aggregate assets under AAI's management were $12
billion.

14
<PAGE> 35

The Flexible Asset Allocation Portfolio is managed by John G. Lagedrost, a
senior portfolio manager with AAI. Mr. Lagedrost has been employed in the
investment industry in varying capacities since 1987. Having received a B.S.
from Marquette University in 1984, he went on to earn a Masters of Management
degree from Northwestern University. The principle occupations held by Mr.
Lagedrost for the last five years are set forth below.

Senior Portfolio Manager, AAI since April 1995. Vice President in the Asset
Management Group of The First National Bank of Chicago ("First Chicago"), from
1991 to 1995 and Vice President in First Chicago's Mezzanine Finance Group from
1987 to 1990.

Pursuant to the Advisory Agreement, AAI manages the investment and
reinvestment of the assets of the Portfolio, in accordance with the investment
objective and management policies described above. The Portfolio pays AAI
monthly compensation in the form of an investment advisory fee. This fee is
deducted daily but is paid to the Advisor monthly. The investment advisory fee
is based upon the average daily net assets of the Portfolio, at the following
annual rates:

.70% of the first $250 million, .65% of the next $250 million, and
.50% of the assets in excess of $500 million.

Under the Advisory Agreement, AAI is also required, at its own expense, to:

In order to fulfill its obligation to provide these services, AAI has
entered into an Administration Agreement with FFSC, the Fund's distributor, and
the Fund under which FFSC furnishes substantially all such services for an
annual fee of $25,000 plus .05% of the Fund's average daily net assets. This fee
is borne by AAI, and not by the Portfolio or the Fund.

As described above in "Distribution of Shares," Aon Corporation has agreed
to sell FFRL, the parent of FFSC. Pursuant to the 1940 Act and the terms of the
Administration Agreement, a change in control of FFSC also will result in a
technical assignment and the termination of the Administration Agreement. It is
anticipated that, after the sale, either AAI will perform these administrative
tasks for the Fund directly or that the Fund's Board of Directors will approve
arrangements with another party to perform such administrative services. In the
latter event, such other party may or may not be an affiliate of AAI or Aon
Corporation. It is also possible that, in connection with new arrangements for
administrative services, the Fund's Board of Directors might approve a new or
revised investment management agreement for the Fund with AAI. If a new or
revised investment management agreement is approved by the directors, approval
of such agreement will also be sought from the Fund's shareholders.

The Portfolio is responsible for all other expenses, including:

(a) taxes and fees payable by it to federal, state, or other
governmental agencies; (b) brokerage fees and commissions, and issue and
transfer taxes; (c) interest; (d) Board of Directors meeting attendance
fees and expenses of directors of the Fund who are not directors, officers
or employees of AAI, FFSC, or of any affiliated person (other than a
registered investment company) of AAI or FFSC; (e) registration,
qualification, filing and other fees in connection with securities
registration requirements of federal and

15
<PAGE> 36

state regulatory authorities; (f) the charges and expenses for custodial,
paying agent, transfer agent, dividend agent and accounting agent services;
(g) outside legal fees and expenses in connection with the affairs of the
Fund or the Portfolio including, but not limited to, registering and
qualifying its shares with federal and state regulatory authorities; (h)
charges and expenses of independent auditors; (i) costs of meetings of
shareholders and directors of the Fund or the Portfolio (j) costs of
maintenance of corporate existence; (k) insurance premiums; (l) investment
advisory fees; (m) costs and fees associated with printing and delivering
registration statements, stockholders' reports and proxy statements; (n)
costs and fees associated with delivering reports to and filings with the
SEC and State Blue Sky authorities; (o) costs relating to administration of
the Fund's general operations; (p) costs relating to the Fund's own
employees, if any; and (q) costs of preparing, printing, and delivering the
Portfolio's prospectus to existing shareholders.

If in any fiscal year the aggregate expenses of Portfolio (including the
investment advisory fee, but excluding interest, taxes, brokerage commissions,
and extraordinary expenses), exceed 1.25% of the Portfolio's average daily net
assets, AAI has agreed to reimburse the Portfolio for such excess.

ADDITIONAL INFORMATION

CAPITAL STOCK AND VOTING RIGHTS

Each share of each class of stock has the same rights as the other shares
of the class to dividends, to vote and to receive assets upon liquidation of the
investment portfolio related to that class. Each fractional share has the same
rights, in proportion, as a full share. When issued and paid for, shares of all
classes are fully paid and nonassessable. Shareholders have no preemptive or
conversion rights. Each shareholder is entitled to require the Fund to redeem,
to the extent that it may lawfully effect such redemption under the laws of the
State of Virginia, all or any part of his or her shares at the net asset value
per share computed as described herein. Payment of the aggregate price may be
made in cash or, at the option of the Fund, wholly or partly in such portfolio
securities of the Portfolio as the Fund shall select.

The Fund's bylaws provide that, unless otherwise required by the 1940 Act,
it shall not be required to hold an annual meeting of its stockholders. The Fund
intends to hold shareholder meetings only when required by law and at such times
as may be deemed appropriate by its Board of Directors. In addition, if
requested to do so by the holders of at least 10% of the Fund's outstanding
shares, it will call a meeting of shareholders for the purpose of voting upon
any question of removal of a director or directors, and it will assist in
facilitating shareholder communications as required by Section 16(c) of the 1940
Act.

Matters that affect all of the investment portfolios in an identical manner
(such as election of directors or ratification of the selection of independent
accountants) will be voted on by all of the shareholders of the Fund. Matters
that do not affect all of the investment portfolios or that affect different
portfolios in different ways will be voted on separately by the shareholders of
the class of stock relating to that portfolio. Matters requiring such separate
shareholder voting on an investment portfolio by investment portfolio basis,
shall have been effectively acted upon with respect to a portfolio (including
the Portfolio) if a majority of the outstanding shares of the class related to
that portfolio vote for approval or disapproval of the matter, notwithstanding
that: (1) that matter has not been approved or disapproved by a majority of the
outstanding shares of any other class of stock, or (2) the matter has not been
approved or disapproved by a majority of the outstanding shares of all classes
of the Fund's stock.

Aon Corporation, along with its wholly-owned subsidiaries, is expected to
own a substantial percentage of the outstanding shares of the Portfolio. These
prospective shareholders will be affiliated persons of the Fund. Aon Corporation
and its subsidiaries may be able to cast a deciding vote on matters submitted to
a vote of shareholders, which may include proposed changes in the Portfolio's
investment objective and fundamental investment restrictions and in the terms of
its Advisory Agreement.

16
<PAGE> 37

Aon Asset Management Fund, Inc.
FLEXIBLE ASSET ALLOCATION PORTFOLIO

March 1, 1996

INVESTMENT ADVISOR
Aon Advisors, Inc.
123 North Wacker Drive
Chicago, Illinois 60606

ADMINISTRATOR AND DISTRIBUTOR
Forth Financial Securities Corporation
6610 West Broad Street
Richmond, Virginia 23230

CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING AGENT
Firstar Trust Company
615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53202

INDEPENDENT AUDITORS
Ernst & Young LLP

One James Center

901 East Cary Street

Suite 1000
Richmond, Virginia 23219

LEGAL COUNSEL
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue N.W.
Washington, D.C. 20004
<PAGE> 38

AON ASSET MANAGEMENT FUND, INC.

123 NORTH WACKER DRIVE

CHICAGO, ILLINOIS 60606

DISTRIBUTOR -- FORTH FINANCIAL SECURITIES CORPORATION

STATEMENT OF ADDITIONAL INFORMATION

MARCH 1, 1996

This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement expands upon matters discussed in the
prospectuses for the Money Market Portfolio and the Flexible Asset Allocation
Portfolio of Aon Asset Management Fund, Inc. and should, therefore, be read in
conjunction with the prospectuses. To obtain a copy of either prospectus with
the same date as this Statement of Additional Information, send a written
request to the Distributor at 6610 West Broad Street, Richmond, Virginia 23230,
or call (804) 281-6000.

<PAGE> 39

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................................... 3
Portfolio Turnover.................................................................... 3
Money Market Portfolio Investments, Investment Practices and Restrictions............. 4
General Standards................................................................ 4
U.S. Government Securities....................................................... 4
Certificates of Deposit and Time Deposits........................................ 4
Commercial Paper................................................................. 4
Repurchase Agreements............................................................ 5
Foreign Securities............................................................... 5
Lending Portfolio Securities..................................................... 6
Investment Restrictions.......................................................... 6
Flexible Asset Allocation Portfolio Investments, Investment Practices and
Restrictions........................................................................ 7
When-Issued and Delayed Delivery Securities...................................... 8
Loans of Portfolio Securities.................................................... 8
Covered Call Options............................................................. 8
GNMA Certificates................................................................ 9
Investment Restrictions.......................................................... 9
Risks of Investing in Lower Quality Debt Instruments.................................. 11
Lower Quality Debt Instruments Entail Certain Risks.............................. 11
Management of Fund.................................................................... 12
Directors and Officers........................................................... 12
Investment Advisor............................................................... 14
Portfolio Transactions and Brokerage.................................................. 15
Determination of Net Asset Value...................................................... 16
General.......................................................................... 16
Money Market Portfolio........................................................... 16
Flexible Asset Allocation Portfolio.............................................. 16
Yield Information..................................................................... 17
Taxes................................................................................. 17
Additional Information................................................................ 18
Custodian, Transfer Agent and Accounting Agent................................... 18
Independent Auditors............................................................. 19
Legal Counsel.................................................................... 19
Capital Stock.................................................................... 19
Reports.......................................................................... 19
Other Information................................................................ 19
Appendix A............................................................................ 20
</TABLE>

2
<PAGE> 40

GENERAL INFORMATION

Aon Asset Management Fund, Inc. (the "Fund") is an open-end management
investment company consisting of two separate investment portfolios (the
"Portfolios"), each of which is, for investment purposes, in effect a separate
fund (commonly known as a "mutual fund") with its own investment objective and
objective policies. The Fund is organized as a series company, with eight
classes of capital stock. Currently, only two classes of capital stock are being
issued representing interests in the Money Market Portfolio and the Flexible
Asset Allocation Portfolio.

Fund shares are distributed, without sales charge, through Forth Financial
Securities Corporation ("FFSC"), a wholly-owned subsidiary of Forth Financial
Resources, Ltd. ("FFRL"). FFRL is a wholly-owned subsidiary of Aon Corporation,
a holding company organized under the laws of the state of Delaware and listed
on the New York Stock Exchange. Aon Advisors, Inc. ("AAI"), also a wholly-owned
subsidiary of Aon Corporation, serves as investment advisor to the Fund. Aon
Corporation and its subsidiary companies, may, by virtue of their shareholder
interests in either Portfolio at any particular date, be considered to be
controlling persons of the Portfolio and may be able to cast a deciding vote on
all matters submitted to a vote of the Portfolio's shareholders.

The Money Market Portfolio has the investment objective of maximizing
current income to the extent consistent with the preservation of capital and the
maintenance of liquidity. To achieve this objective, the Portfolio invests in a
portfolio of high-quality, short-term, money market instruments.

The Flexible Asset Allocation Portfolio has the investment objective of
providing maximum total return on invested capital, to be derived primarily from
capital appreciation, dividends, and interest. To achieve this objective the
Portfolio will follow a flexible asset allocation strategy that contemplates
shifts among a wide range of investments and markets. Assets are invested in
common stocks, bonds, and money market instruments, the proportion of each being
continuously determined by AAI.

PORTFOLIO TURNOVER

The annual turnover rate for the Flexible Asset Allocation Portfolio for
the years ended October 31, 1994 and 1995 were 64.36% and 95.17% respectively
and is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal year by the monthly average of the value of such
securities (excluding from the computation all securities, including options,
with maturities at the time of acquisition of one year or less). A portfolio
turnover rate of 100% would mean that all of the Portfolio's securities (except
those excluded from the calculation) were replaced once in a period of one year.
Stocks in the Portfolio had a turnover rate of 64.05% and bonds in the Portfolio
had a turnover rate of 21.36% for the year ended October 31, 1994. Stocks in the
Portfolio had a turnover rate of 141.09% and bonds in the Portfolio had a
turnover rate of 15.60% for the year ended October 31, 1995. A high rate of
portfolio turnover generally involves correspondingly greater brokerage
commission expenses. Turnover rates may vary greatly from year to year as well
as within a particular year and may also be affected by cash requirements for
redemptions of the Portfolio's shares and by requirements, the satisfaction of
which enable the Portfolio to receive favorable tax treatment. Because the rate
of portfolio turnover is not a limiting factor, however, particular holdings may
be sold at any time, if investment judgement or portfolio operations make a sale
advisable. As a result, the annual portfolio turnover rate in future years may
exceed the percentage shown above.

Since short term instruments are excluded from the calculation of a
portfolio turnover rate, no meaningful portfolio turnover rate can be estimated
or calculated for the Money Market Portfolio. Nevertheless, the Money Market
Portfolio may, to a limited degree, engage in short-term trading to attempt to
take advantage of short-term market variations or may dispose of a portfolio
security prior to its maturity if it believes such disposition advisable. In
such cases, the Money Market Portfolio may realize a gain or loss. These
practices, as well as the relative short maturity of obligations to be purchased
by the Portfolio, may result in frequent changes in its portfolio (a high
turnover rate). However, there are usually no brokerage commissions as such paid
by the Money Market Portfolio in connection with the purchase of securities of
the type in which it invests.

3
<PAGE> 41

MONEY MARKET PORTFOLIO INVESTMENTS,
INVESTMENT PRACTICES AND RESTRICTIONS

The investment objective of the Money Market Portfolio and the policies by
which it pursues that objective are set forth in the prospectus. This section
describes in more detail certain securities in which the Portfolio may invest
and certain investment practices that it may use and augments the explanation
found in the prospectus.

GENERAL STANDARDS

The Money Market Portfolio may invest only in U.S. dollar-denominated
instruments maturing in 13 months or less which AAI, under the supervision of
the Fund's Board of Directors, determines present minimal credit risks and are,
at the time of acquisition, either:

1. rated in the highest rating category by at least two nationally
recognized statistical rating organizations (an "NRSRO") as defined under
Rule 2a-7, as amended, under the Investment Company Act of 1940, or by only
one NRSRO if only one NRSRO has issued a rating with respect to the
instrument; or

2. in the case of an unrated instrument, determined by AAI under the
supervision of the Board of Directors to be of comparable quality to the
above; or

3. issued by an issuer that has received a rating of the type
described in 1 above on other securities that are comparable in priority
and security to the instrument.

The types of securities in which the Money Market Portfolio may invest are
more fully described below:

U.S. GOVERNMENT SECURITIES

U.S. Government Securities are obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities. Some U.S. Government Securities,
such as Treasury bills, notes, and bonds (which differ only in their interest
rates, maturities, and times of issuance), are supported by the full faith and
credit of the United States. Others, such as obligations issued or guaranteed by
the U.S. Government agencies or instrumentalities, are supported either by (a)
the full faith and credit of the U.S. Government (such as securities of the
Government National Mortgage Association), (b) the right of the issuer to borrow
from the Treasury (such as securities of the Federal Home Loan Banks), (c) the
discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association),
or (d) only the credit of the issuer. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future.

CERTIFICATES OF DEPOSIT AND TIME DEPOSITS

Certificates of deposit include time deposits and negotiable certificates
of deposit. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Certificates of deposit are certificates issued
against funds deposited in a bank for a specified period of time. Bank
obligations may be purchased only if (i) the issuing bank is a U.S. bank with
total assets of at least $1 billion, and (ii) the bank is a member of the
Federal Deposit Insurance Corporation.

COMMERCIAL PAPER

Commercial paper consists of unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is issued in
bearer form with maturities generally not exceeding nine months.

Commercial paper obligations may include variable amount master demand
notes. Variable amount master demand notes are obligations that permit the
investment of fluctuating amounts at varying interest rates pursuant to
arrangements between the issuer and a commercial bank acting as agent for the
payees of such notes. The Money Market Portfolio has the right to increase the
amount under the note at any time up to

4
<PAGE> 42

the full amount provided by the note agreement, or to decrease the amount, and
the borrower may prepay up to the full amount of the note without penalty.
Because variable amount master demand notes are direct lending arrangements
between the lender and borrower, it is not generally contemplated that such
instruments will be traded, and there is no secondary market for these notes,
although they are redeemable (and thus immediately repayable by the borrower) at
face value, plus accrued interest, at any time. In connection with the master
demand note arrangements, AAI will monitor on an ongoing basis the earning
power, cash flow, and other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand. While the master demand notes,
as such, are not typically rated by credit rating agencies, if not so rated the
Money Market Portfolio may invest in them only if at the time of an investment
the issuer meets the criteria set forth above and in the prospectus for all
other issuers of instruments that the Portfolio may purchase. Because master
demand notes are immediately repayable by the borrower on demand, they are
considered by the Money Market Portfolio to have a maturity of one business day.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements involving the purchase of money
market instruments which the Money Market Portfolio is qualified to purchase,
and the Portfolio's simultaneous agreement to sell the same instruments back to
their original seller on demand or at a specified future date at an agreed upon
price. A repurchase agreement can be viewed as a loan made by the Portfolio to
the seller of the instrument, with such instrument serving as collateral for the
seller's agreement to repay the amount borrowed with interest. In effect, the
repurchase price reflects an agreed upon interest rate unrelated to the stated
rate on the purchased instrument. Such transactions afford an opportunity for
the Portfolio to earn a return on cash which is only temporarily available.

The Money Market Portfolio will only enter into repurchase agreements when
AAI, under the supervision of the Fund's Board of Directors, determines that
such agreements present minimal credit risks. For repurchase agreements, minimal
credit risk determination relates to both the quality of the instrument serving
as collateral as well as the creditworthiness of the original seller during the
time frame contemplated by the repurchase agreement. Accordingly, as explained
in the prospectus, the Portfolio will only enter into repurchase agreements with
banks and primary government securities dealers whom AAI (under the supervision
of the Fund's Board of Directors and using the same criteria used to evaluate
the credit risk of all instruments considered for purchase by the Portfolio)
determines do not present a serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the agreement.

FOREIGN SECURITIES

The Money Market Portfolio may invest in U.S. dollar-denominated money
market instruments (including commercial paper) that are issued or guaranteed by
foreign issuers, including foreign corporations or other business organizations,
foreign governments and foreign government agencies or instrumentalities, and
foreign financial institutions. The Money Market Portfolio will only invest in
foreign securities that meet its general standards described above. Investments
by the Portfolio in foreign securities entail certain risks not shared by
domestic securities of the same type.

Securities of foreign issuers, particularly non-governmental issuers,
involve risks which are not ordinarily associated with investing in domestic
issuers. These risks include political or economic instability in the country
involved, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls. Foreign securities may also be
subject to greater fluctuations in price than similar securities of domestic
issuers. In addition, there may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers generally are not
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers. In many countries, there is
less government regulation of stock exchanges, brokers and listed companies than
in the United States.

With respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, or diplomatic developments which could
affect investment in those obligation, it may be difficult for the Portfolios to
obtain or to enforce a judgment against the issuer. Where the fund invests in
securities

5
<PAGE> 43

denominated in currencies other than United States dollars, such securities may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and costs may be incurred in connection with
conversions between various currencies.

LENDING PORTFOLIO SECURITIES

In order to further the Money Market Portfolio's investment objective of
seeking a high level of current income, it may lend its portfolio securities to
brokers, dealers, and financial institutions, although it has no present
intention of doing so.

The amount of loaned securities will not exceed 5% of the Portfolio's net
assets. Securities lending activities, if and when engaged in by the Money
Market Portfolio, will be carried out in the manner described and subject to the
conditions described in the caption "Lending Portfolio Securities" in the next
section dealing with the Flexible Asset Allocation Portfolio.

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS. The Money Market Portfolio has
adopted a number of fundamental policies restricting the investment of its
assets, which may not be changed without the affirmative vote of the holders of
a majority of the Portfolio's outstanding voting securities. The "affirmative
vote of the holders of a majority of the Portfolio's outstanding securities"
means the vote of: (a) 67% or more of the class of stock representing an
interest in the Portfolio present or represented by proxy at a meeting of the
Portfolio's shareholders, if more than 50% of the outstanding shares of that
class are present in person or by proxy at such meeting, or (b) more than 50% of
the outstanding shares of that class of stock, whichever is less. Pursuant to
the Money Market Portfolio's fundamental investment restrictions, it may not:

(a) issue senior securities (except to the extent that borrowings
under paragraph (h) below exceeding 5% of the value of the Portfolio's
total assets are deemed to constitute senior securities under the
Investment Company Act of 1940 (the "1940 Act"));

(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
Portfolio securities), or make short sales of securities or maintain a
short position;

(d) underwrite securities of other issuers (except insofar as the
Portfolio or the Fund might be deemed an underwriter under the Securities
Act of 1933 in certain resales of portfolio securities held by the
Portfolio);

(g) make loans, except that the Portfolio may enter into repurchase
agreements as described above or in the prospectus, and the Portfolio may
lend its portfolio securities, but not in amounts in excess of the 5% of
the value of its assets;

6
<PAGE> 44

made, and the Portfolio will not make additional investments during any
period that borrowings exceed 5% of the value of its total assets;

(k) invest in time deposits maturing in more than seven days. In
addition, time deposits maturing in two business days to seven calendar
days may not exceed 10% of the value of the Portfolio's total assets; and

NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, the Money Market Portfolio is subject to the
following restrictions in implementing its investment policy. These additional
restrictions are not fundamental and may be changed by the Board of Directors
without shareholder approval. The Portfolio may not:

(a) write, purchase or sell puts, calls (other than covered call
options) or combinations thereof;

(b) invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the
time of the investment, would be invested in such securities. However, up
to 25% of the total assets of the Portfolio may be invested in securities
(i) issued, assumed or guaranteed by foreign governments, or political
subdivisions or instrumentalities thereof, (ii) assumed or guaranteed by
domestic issuers, including Eurodollar securities, or (iii) issued, assumed
or guaranteed by foreign issuers having a class of securities listed for
trading on the New York Stock Exchange;

(c) participate on a joint (or a joint and several) basis in any
trading account in securities (but this does not include the "bunching" of
orders for the sale or purchase of portfolio securities with other
portfolios, with individually managed accounts, or with registered
investment companies advised or sponsored by the Portfolio's investment
advisor or any of its affiliates to reduce brokerage commissions or
otherwise to achieve best overall execution);

(d) alone, or together with any other portfolio or portfolios, make
investments for the purpose of exercising control over, or management of,
any issuer; and

(e) purchase securities of other investment companies.

COMPUTATION RULE. If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in the investment's percentage of
the value of the Portfolio's total assets will not constitute a violation of the
percentage restriction.

FLEXIBLE ASSET ALLOCATION PORTFOLIO INVESTMENTS,
INVESTMENT PRACTICES AND RESTRICTIONS

The investment objective of the Flexible Asset Allocation Portfolio and the
policies by which it pursues that objective are set forth in the prospectus.
This section describes in more detail certain securities in which the Portfolio
may invest and certain investment practices that it may use and augments the
explanation found in the prospectus.

7
<PAGE> 45

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

From time to time, in the ordinary course of business, the Flexible Asset
Allocation Portfolio may purchase securities on a when-issued basis or
delayed-delivery basis, i.e., delivery and payment can take place a month or
more after the transaction. The securities so purchased are subject to market
fluctuation, and no interest accrues to the purchaser during this period. At the
time the Portfolio makes the commitment to purchase securities on a when-issued
or delayed delivery basis, it will record the transaction and thereafter reflect
the value, each day, of such security in determining its net asset value. At the
time of delivery of the securities, the value may be more or less than the
purchase price. The Portfolio will also establish a segregated account with the
Fund's custodian bank in which it will maintain cash or cash equivalents or
other liquid portfolio securities equal in value, marked to market on a daily
basis, to commitments for such when-issued or delayed-delivery securities. As a
general matter Flexible Asset Allocation Portfolio will hold less than 5% of its
assets in commitments to purchase securities on a delayed-delivery or
when-issued basis and will not, under any circumstances, purchase securities on
a when-issued basis or delayed-delivery basis if, as a result, more than 10% of
its net assets would be so invested.

LOANS OF PORTFOLIO SECURITIES

The Portfolio may from time to time lend securities it holds to brokers,
dealers and financial institutions, up to a maximum of 20% of its total value.
Likewise, the Money Market Portfolio may lend its securities up to a maximum of
5% of the Money Market Portfolio's net assets. This percentage may not be
increased without approval of a majority of the outstanding voting securities of
the respective Portfolios. Such loans will be secured by the collateral in the
form of cash or U.S. Treasury securities, which at all times the loan is
outstanding, will be maintained in an amount at least equal to the current
market value of the loaned securities. The Portfolios will continue to receive
interest and dividends on the loaned securities during the term of the loans,
and in addition, will receive a fee from the borrower or interest earned from
investment of cash collateral in short-term securities in which cash collateral
is invested during the term of the loan.

The right to terminate a loan of securities, subject to appropriate notice,
will be given to either party. When a loan is terminated, the borrower will
return the loaned securities to the lender. A Portfolio will not have the right
to vote securities on loan, but would terminate the loan and regain the right to
vote if that were important with respect to the investment.

Each Portfolio will limit the amount of securities lending so that the
aggregate amount of interest received attributed to securities loaned, if
considered "other income" for federal tax purposes, will not cause it to lose
its tax status as a regulated investment company.

The primary risk involved in lending securities is that the borrower will
fail financially and not return the loaned securities at a time when collateral
is insufficient to replace the full amount of the loaned securities. The
borrower would be liable for the shortage, but the Portfolio would be an
unsecured creditor with respect to such shortage and might not be able to
recover all or any of it. In order to minimize this risk, Portfolios will make
loans of securities only to firms that AAI (under the supervision of the Board
of Directors) deems creditworthy.

COVERED CALL OPTIONS

The Flexible Asset Allocation Portfolio may write covered call options that
are traded on a national securities exchange with respect to securities in the
Portfolio (ensuring that at all times the Portfolio will have the securities
which it may be obligated to deliver if the option is exercised). The Portfolio
may write call options on its securities in an attempt to realize a greater
current return than would be realized on the securities alone or to provide
greater flexibility in disposing of such securities. As the writer of a call
option, the Portfolio receives a premium for undertaking the obligation to sell
the underlying security at a fixed price during the option period if the option
is exercised. So long as the Portfolio remains obligated as a writer of a call,
it forgoes the opportunity to profit from increases in the market price of the
underlying security above the call price of the option, except insofar as the
premium represents such a profit.

8
<PAGE> 46

The Flexible Asset Allocation Portfolio may also enter into "closing
purchase transactions" in order to terminate its obligation as a writer of a
call option prior to the expiration of the option. Although writing only those
call options that are traded on a national securities exchange increases the
likelihood of being able to make closing purchase transactions, there is no
assurance that the Portfolio will be able to effect such transactions at any
particular time or at any acceptable price. The writing of call options could
result in increases in the turnover rate of the Portfolio, especially during
periods when market prices of the underlying securities appreciate, which could
affect brokerage costs.

GNMA CERTIFICATES

The Flexible Asset Allocation Portfolio may invest up to 50% of its net
assets in Government National Mortgage Association ("GNMA") Certificates. GNMA
Certificates are securities representing part ownership of a pool of mortgage
loans. These loans, issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, are insured either by the Federal Housing
Administration or by the Veterans Administration. Each pool of mortgage loans is
assembled and, after being approved by GNMA, is sold to investors through
broker-dealers in a form of certificates representing participation in the pool.
GNMA guarantees the timely payment of principal and interest of each mortgage in
the pool and its guarantee is backed by the full faith and credit of the U.S.
Government. GNMA Certificates differ from bonds in that a borrower pays the
principal over the term of the loan rather than in a lump sum at maturity. GNMA
Certificates are called "pass-through" certificates because both principal and
interest payments on the mortgages (including prepayments) are passed through to
the holder of the certificate.

The average life of GNMA Certificates varies with the maturities of the
underlying mortgages. The Flexible Asset Allocation Portfolio may use principal
payments it receives to purchase additional GNMA Certificates or other
investments permitted to it. Prepayments of any mortgages in the pool will
usually result in the return of the greatest part of principal invested well
before the maturity of the mortgages in the pool. The volume of such prepayments
of principal in a given pool of mortgages will influence the actual yield of the
GNMA Certificate. Also, the Flexible Asset Allocation Portfolio may reinvest
principal repaid to it in instruments whose yield may be higher or lower than
that of the GNMA Certificate had such prepayments not been made.

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS. The Flexible Asset Allocation
Portfolio has adopted a number of fundamental policies restricting the
investment of its assets, which may not be changed without the affirmative vote
of the holders of a majority of the Portfolio's outstanding voting securities.
The "affirmative vote of the holders of a majority of the Portfolio's
outstanding securities" means the vote of: (a) 67% or more of the class of stock
representing an interest in the Portfolio present or represented by proxy at a
meeting of the Portfolio's shareholders, if more than 50% of the outstanding
shares of that class are present in person or by proxy at such meeting, or (b)
more than 50% of the outstanding shares of that class of stock, whichever is
less. Pursuant to the Flexible Asset Allocation Portfolio's fundamental
investment restrictions, it may not:

(a) issue senior securities (except to the extent that borrowings
under paragraph (h) below exceeding 5% of the value of the Portfolio's
total assets be deemed to constitute senior securities under the Investment
Company Act of 1940 (the "1940 Act")) however, this prohibition shall not
limit the Portfolio's ability to write covered call options;

(c) purchase any securities on margin (except that, subject to the
borrowing limitation in (h), the Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
Portfolio securities), or make short sales of securities or maintain a
short position. However, this prohibition shall not limit the Portfolio's
ability to write covered call options;

9
<PAGE> 47

(e) invest more than 25% of the value of its total assets in the
securities of issuers having their principal activity in any particular
industry, other than U.S. Government Securities, as defined in Section
2(a)(16) of the 1940 Act. For the purpose of defining the term "particular
industry," utilities will be divided according to their services. For
example, gas, gas transmission, electric and telephone each will be
considered a separate industry;

(f) as to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer (except that this restriction
shall not apply to U.S. Government Securities) or invest in more than 10%
of the outstanding voting securities of any one issuer;

(g) make loans, except that the Portfolio may enter into repurchase
agreements as described above or in the prospectus, and the Portfolio may
lend its portfolio securities in amounts up to 20% of the value of its
total assets;

(h) borrow money, except from banks for temporary or emergency
purposes, including the meeting or redemption requests which might
otherwise require the untimely disposition of securities. Borrowing in the
aggregate may not exceed 10% of the value of the Portfolio's total assets
at the time the borrowing is made, and the Portfolio will not make
additional investments during any period that borrowings exceed 5% of the
value of its total assets. This limitation on borrowing money shall not
limit the Portfolio's ability to write covered call options;

(j) invest in illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of
the value of the Portfolio's total assets would be invested in such
illiquid securities;

(l) purchase or sell interests in oil, gas, or other mineral
explorations or development programs, commodities, or commodity contracts,
except that the Portfolio may purchase securities of issuers which invest
or deal in any of the above, provided that such securities meet the
Portfolio's other investment criteria.

NON-FUNDAMENTAL RESTRICTIONS. In addition to the fundamental investment
restrictions set forth above, the Flexible Asset Allocation Portfolio is subject
to the following additional restrictions in implementing its investment policy.
These additional restrictions are not fundamental and may be changed by the
Board of directors without shareholder approval. The Flexible Asset Allocation
Portfolio is subject to the same non-fundamental investment restrictions as
apply to the Money Market Portfolio (described above) except as modified below.

(e) the Flexible Asset Allocation Portfolio will not purchase
securities of other investment companies if, a result thereof, the
Portfolio would own more than 3% of the total outstanding voting stock of
any one investment company, or more than 5% of the Portfolio's assets would
be invested in any one investment company, or more than 10% of the
Portfolio's total assets would be invested in securities of investment
companies.

(f) the Flexible Asset Allocation Portfolio will not invest more than
30% of its total assets, measured at the time of investment, in debt
securities (other than U.S. Government Securities) that are rated lower
than the four highest rating categories by Moody's Investor Service, Inc.
("Moody's") or Standard &

10
<PAGE> 48

Poor's Corporation ("Standard & Poor's") or are unrated. This restriction
shall apply to such unrated securities as AAI may determine, pursuant to
procedure adopted by the Board of Directors to be of comparable quality to
those securities assigned a rating in one of the four highest categories.

(g) the Flexible Asset Allocation Portfolio will not purchase or
retain the securities of any issuer if any officer or director of the Fund,
AAI or any affiliated person of the Fund or AAI beneficially own more than
0.5% of the securities of such issuer or together in the aggregate own more
than 5% of the securities of such issuer.

RISKS OF INVESTING IN LOWER QUALITY DEBT INSTRUMENTS

Up to 30% of the total assets of the Total Return Portfolio may be invested
in debt instruments that are unrated or are rated lower than the four highest
rating categories assigned by Moody's or Standard & Poor's. Furthermore, debt
instruments that are rated in the four highest categories assigned by Moody's or
Standard & Poor's (i.e. investment grade debt instruments), and especially those
which are investment grade but are not high quality (i.e. rated Baa by Moody's
or BBB by Standard & Poor's) may, after purchase by the Portfolio, have their
ratings lowered due to the deterioration of the issuer's financial position.

LOWER QUALITY DEBT INSTRUMENTS ENTAIL CERTAIN RISKS

Lower-rated fixed income securities (i.e. those rated Ba or lower by
Moody's or BB or lower by Standard & Poor's) are considered, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and will generally
involve more credit risk than securities in the higher rated categories.
Reliance on credit ratings entails greater risks with regard to lower rated
securities than it does with regard to higher-rated securities and AAI's success
is more dependent upon its own credit analysis with regard to lower-rated
securities than is the case with regard to higher-rated securities. The market
value of such securities tends to reflect individual corporate developments to a
greater extent than do higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Such lower rated securities
also tend to be more sensitive to economic conditions than are higher-rated
securities. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, regarding lower rated bonds may depress prices and
liquidity for such securities. To the extent the Flexible Asset Allocation
Portfolio invests in such securities, factors adversely affecting the market
value of lower rated securities will adversely affect the Flexible Asset
Allocation Portfolio's net asset value. In addition, the Flexible Asset
Allocation Portfolio may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings. Although some risk is inherent in all securities ownership,
holders of fixed-income securities have a claim on the assets of the issuer
prior to the holders of common stock. Therefore, an investment in fixed-income
securities generally entails less risk than an investment in common stock of the
same issuer.

Lower-rated debt securities may be issued by corporations in the growth
stage of their development. They may also be issued in connection with corporate
reorganization or as part of a corporate takeover. Companies that issue such
lower-rated securities are often highly leveraged and may not have available to
them more traditional methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is greater than is the case
with higher-rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of
lower-rated securities may experience financial stress. During such periods,
such issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments or the issuers inability
to meet specific projected business forecasts, or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high-yielding securities because
securities are generally unsecured and are often subordinated to other creditors
of the issuer.

Lower-rated debt securities have call or buy-back features that would
permit an issuer to call or repurchase the security from the Flexible Asset
Allocation Portfolio. If a call were exercised by the issuer during a period of
declining interest rates, the Flexible Asset Allocation Portfolio would likely
have to replace

11
<PAGE> 49

such called security with a lower yielding security, thus decreasing the net
investment income to the Flexible Asset Allocation Portfolio.

The Flexible Asset Allocation Portfolio may have difficulty disposing of
certain lower-rated debt securities for which there is a thin trading market.
Because not all dealers maintain markets in all lower-rated debt securities,
there is no established retail secondary market for many of these securities,
and the Portfolio anticipates that they could be sold only to a limited number
of dealers or institutional investors. To the extent there is a secondary
trading market for such securities, it is generally not as liquid as that for
higher-rated securities. The lack of a liquid secondary market for certain
securities may make it more difficult for the Portfolio to obtain accurate
market quotations for purposes of valuing the Flexible Asset Allocation
Portfolio's assets. Market quotations are generally available on many
lower-rated issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. When market
quotations are not readily available, lower-rated securities must be valued by
(or under the direction of) the Fund's Board of Directors. This valuation is
more difficult and judgment plays a greater role in such valuation when there is
less reliable objective data available.

The Flexible Asset Allocation Portfolio may acquire lower-rated securities
that are sold without registration under the federal securities laws and
therefore carry restrictions on resale. The Flexible Asset Allocation Portfolio
may incur special costs on disposing of such securities, but will generally
incur no costs when the issuer is responsible for registering the securities.

The Flexible Asset Allocation Portfolio also may acquire lower-rated
securities during an initial underwriting. Such securities involve special risks
because they are new issues. The Portfolio has no arrangement with any person
concerning the acquisition of such securities, and the investment adviser will
carefully review the credit and other characteristics pertinent to such new
issues.

From time to time, there have been proposals for legislation designed to
limit the use of certain lower-rated securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals if enacted into law could reduce the
market for such securities generally, could negatively affect the financial
condition of the issuers of lower-rated securities by removing or reducing a
source of future financing, and could negatively affect the value of specific
lower-rated issues. However, the likelihood of any such legislation or the
effect thereof is uncertain.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

The directors and officers of the Fund and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the address of
each director and officer is 6610 West Broad Street, Richmond, Virginia 23230.
Those individuals designated with an asterisk are "interested Persons" of the
Fund, as the term is defined in Section 2(a)(19) of the Investment Company Act
of 1940.

John J. Palmer, President & Director*

Director, Aon Advisors, Inc., since 1987. Director, The Life Insurance
Company of Virginia ("Life of Virginia"), since 1986. Senior Vice President,
Life of Virginia, since 1980. President, Life of Virginia Series Fund, Inc.
since 1986. President, Forth Financial Securities Corporation, since 1992.

Wallace L. Chandler, President & Director
P.O. Box 25099
Richmond, VA 23260

Director, Universal Corporation since 1986. Vice Chairman, Universal
Corporation until December 31, 1988. Director, Lawyer's Title Corporation since
1991. Director, Regency Financial Shares, Inc., since 1989 and Chairman since
1992. Director and Vice Chairman, Regency Bank, from 1987 to 1992.

12
<PAGE> 50

John E. Leard, Director
6207 Monument Ave.
Richmond, VA 23226

Retired-Vice President, Richmond Newspapers, Inc. Retired Executive Editor,
the Richmond Times-Dispatch and The Richmond News Leader.

Robert P. Martin, Jr., Director
P.O. Box 12085
Richmond, Va 23241

Self-employed investment consultant since 1985. Managing Director,
Continental Investment Advisors, Ltd., 1984 to 1985.

J. Clifford Miller, III, Director
7103 Glen Parkway
Richmond, VA 23229

Account Executive, Davenport & Co. of Virginia, Inc., Richmond, Virginia,
since 1992. Owner, Miller Farms. Consultant since 1988. Head -- Upper School,
Collegiate Schools, until 1988. Director, Miller Manufacturing Co., Inc. General
Partner, Miller Land Fund, since 1987.

Lawrence R. Miller, Vice President & Director*
123 North Wacker Drive
Chicago, IL 60606

Vice-President -- Investments, Combined Insurance Company of America, since
1986. Senior Executive Director, Aon Advisors, Inc., since 1991. Executive
Director, Aon Advisors, Inc., 1987-1990. Executive Director, Continental
Investment Advisors, Ltd., from 1986 to 1987.

J. Garnett Nelson, Director*

Director, Life of Virginia, 1989-1985. Senior Vice President, Life of
Virginia, 1988-1995. Executive Director, Aon Advisors, Inc., 1986-1985.
Director, RAC Income Fund, Inc., Director, Lawyers Title Corporation, since
1992.

Lee A. Putney, Director
4208 Sulgrave Road
Richmond, VA 23221

Director, Regency Financial Shares, Inc., since 1989. Director, Regency
Bank, since 1987. Managing Partner, KPMG Peat Marwick, from 1964 to 1985.

Jerry G. Overman, Vice President*

Treasurer and Director of Investment Services of Aon Advisors, Inc., since
1985. Treasurer, Life of Virginia, since 1988. Second Vice President and
Treasurer of Continental Investment Advisors, Ltd., from 1984 to 1986.

Linda L. Lanam, Secretary*

Corporate Secretary for Life of Virginia and for a number of Life of
Virginia affiliates since 1992. Vice President and Senior Counsel of Life of
Virginia since 1989. Vice President and Senior Counsel, Union Fidelity Life
Insurance Company from 1986 to 1989.

Scott R. Reeks, Treasurer*

Director of Marketing Administration and Equity Operations, Life of
Virginia, since 1991. Manager-Equity Operations, Life of Virginia, 1986-1991.
Treasurer, Vice President and Manager of Operations, Forth Financial Securities
Corporation, since 1985. Treasurer, Life of Virginia Series Fund, since 1985.

13
<PAGE> 51

Each of the Directors, except Lawrence R. Miller, also serves as a director
of Life of Virginia Series Fund, Inc. ("LOVSF"). Directors or officers who are
interested persons of the Fund do not receive any compensation from the Fund for
their services to the Fund. The Directors who are not interested persons of the
Fund receive compensation at a rate of $4,000.00 annually, plus $250.00 per
board or committee meeting attended. In addition, Directors who are not
interested persons of the Fund also are reimbursed for any out-of-pocket
expenses incurred in connection with affairs of the Fund.

TABLE OF DIRECTORS COMPENSATION

<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM THE FUND
NAME OF DIRECTOR FROM THE FUND AND LOVSF
- ------------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Mr. Chandler........................................... $4,700 $ 7,500
Mr. Leard.............................................. $5,000 $ 8,000
Mr. Martin............................................. $5,000 $ 8,000
Mr. C. Miller.......................................... $5,000 $ 8,000
Mr. L. Miller.......................................... 0 0
Mr. G. Nelson.......................................... 0 0
Mr. J. Palmer.......................................... 0 0
Mr. L. Putney.......................................... $5,000 $ 8,000
</TABLE>

Directors and officers of the Fund do not receive any benefits from the
Fund upon retirement nor does the Fund accrue any expenses for pension or
retirement benefits.

INVESTMENT ADVISOR

Aon Advisors, Inc. ("AAI"), a Virginia corporation with offices in
Richmond, Virginia and Chicago, Illinois, serves as an investment advisor to
both Portfolios pursuant to an investment advisory agreement related to each
Portfolio ("Advisory Agreements") dated April 26, 1995 for Flexible Asset
Allocation Portfolio and January 27, 1994 for Money Market Portfolio. AAI is a
wholly-owned subsidiary of Aon Corporation, a holding company whose common stock
is listed for trading on the New York Stock Exchange. Information concerning AAI
and the basic provisions of the Advisory Agreement are described in the
Prospectus under the caption "Investment Advisor."

The duties and responsibilities of the Investment Advisor are specified in
the Advisory Agreements. The Agreements were both approved by the Board of
Directors of the Fund (including a majority of directors who are not parties to
the Agreement or interested persons, as defined by the 1940 Act, of any such
party) at meetings held on October 27, 1993 (Money Market Portfolio) and April
26, 1995 (Flexible Asset Allocation Portfolio). The agreements are not
assignable and may be terminated without penalty upon 60 days written notice at
the option of either the Fund or AAI or by a vote of shareholders of each
Portfolio. Each provides that it can be continued from year to year so long as
such continuance is specifically approved annually (a) by the Board of Directors
of the Fund or by a majority of the outstanding shares of the Portfolio and (b)
by a majority vote of the Directors who are not parties to the Agreement or
interested persons of any such party cast in person at a meeting.

AAI (under the supervision of the Board of Directors) continuously
furnishes an investment program for each Portfolio, is responsible for the
actual managing of the investments of each Portfolio and has responsibility for
making decisions governing whether to buy, sell or hold any particular security.
In carrying out its obligations to manage the investment and reinvestment of the
assets of each Portfolio, AAI performs research and obtains and evaluates
pertinent economic, statistical and financial data relevant to the investment
policies of each Portfolio.

In addition to performing management duties and providing the investment
advice described above, AAI is responsible for the administrative services in
connection with the management of the Fund and the Portfolios, including
financial reporting.

14
<PAGE> 52

The Agreements also provide that the AAI shall not be liable to the Fund or
to any shareholder for any error of judgement or mistake of law or for any loss
suffered by the Fund or by any shareholder in connection with matters to which
the Agreements relate, except for a breach of fiduciary duty or a loss resulting
from willful misfeasance, bad faith, gross negligence, or reckless disregard on
the part of AAI in the performance of its duties thereunder.

The Money Market Portfolio paid the following in investment advisory fees
(net of reimbursements) during the last three fiscal years: 1995, $487,553;
1994, $410,817; and 1993, $420,563. The Flexible Asset Allocation Portfolio paid
the following in investment advisory fees (net of reimbursements) during the
last fiscal year and previous fiscal period: 1995, $218,580 and 1994, $49,839.

PORTFOLIO TRANSACTIONS AND BROKERAGE

AAI determines which securities to buy and sell for the Portfolios, selects
brokers and dealers to effect the transactions, and negotiates commissions.
Transactions in equity securities will usually be executed through brokers who
will receive a commission paid by the Portfolios. Fixed income securities are
generally traded with dealers acting as principals for their own accounts
without a stated commission. The dealer's margin is reflected in the price of
the security. Money market instruments may be traded directly with the issuer.
Underwritten offerings of stock or fixed-income securities may be purchased at a
price that includes compensation to the underwriter.

Decisions with respect to the purchase and sale of portfolio securities,
including allocation of portfolio business and the negotiation of the price of
the securities and commissions, if any, are made by AAI. Neither AAI nor any
company affiliated with it will act as a broker or dealer for the purposes of
executing portfolio transactions for the Portfolios.

The primary consideration in allocating transactions to brokers or dealers
is prompt and effective execution of orders at the most favorable security
prices obtainable ("best execution"). When this primary consideration of best
execution has been met, consideration may be given to additional factors, such
as furnishing of supplemental research and other services deemed to be of value
to the Fund or to AAI. AAI is authorized to execute orders with dealers or
brokers that provide research and security and economic analysis that
supplements the research and analysis of AAI, even through the spread of
commission at which an order is executed may be higher than that which another
dealer or broker might charge, provided AAI determines in good faith that the
amount of the spread or commission is reasonable in relation to the value of the
services provided. Such research and services include advice as to the value of
securities, and advisability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The research may be
useful at AAI in serving both the Portfolios and other accounts managed by AAI
and, conversely, supplemental research obtained by the placement of business of
such other accounts may be useful to AAI in carrying out its obligations to the
Portfolios. The receipt of such supplemental research and other services is not
expected to reduce AAI's expenses in advising the Portfolios.

Securities held by the Portfolios may also be held by insurance company
separate accounts or other mutual funds or private investment accounts for which
the AAI acts as an advisor. Because of different investment objectives or other
factors, a particular security may be bought by the AAI or for one or more of
its clients, when one or more other clients are selling the same security. If
purchases or sales of securities for the Portfolios or other clients of AAI
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the Portfolio, and other
clients in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client of AAI during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.

Investment decisions for the Portfolios will be made independently from
those of other accounts that may be managed by AAI. If, however, accounts
managed by AAI are simultaneously engaged in purchases of the

15
<PAGE> 53

same securities, then pursuant to the authorization of the Fund's Board of
Directors, available securities may be allocated to each account and may be
averaged as to price in whatever manner AAI deems to be fair. In some cases,
this system might adversely affect the price paid by the Portfolios or limit the
size of the position obtainable for the Portfolios.

DETERMINATION OF NET ASSET VALUE

GENERAL

The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open for trading, except that shares of the Portfolios may not be
purchased or redeemed, and such shares will not be priced, on the following
days: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day, and Christmas Day. The Money Market Portfolio will also be
open for business on Good Friday.

The net asset value of the Money Market Portfolio's shares for purposes of
pricing orders for purchase and redemption of shares is determined as of 1:30
p.m. (Central Time). The net asset value of the Flexible Asset Allocation
Portfolio's shares for the purposes of pricing orders for purchase and
redemption of shares is determined as of the close of regular trading (currently
3:00 p.m. Central Time) on the NYSE, on each day that the Fund is open for
business.

For each Portfolio, net asset value per share is calculated for purchases
and redemptions by dividing the value of all securities and other assets of the
Portfolio, less the liabilities of the Portfolio, by the number of the
Portfolio's outstanding shares.

MONEY MARKET PORTFOLIO

The Fund intends to use its best efforts to maintain the Money Market
Portfolio's net asset value at $1.00 per share, although there is no assurance
that it will be able to do so on a continuous basis. Net asset value is computed
using the amortized cost method. The Board of Directors will take such action as
it deems appropriate to eliminate or reduce, to the extent reasonably
practicable, any material dilution or other unfair results that might arise from
differences between net asset value per share based on market value and net
asset value per share based on amortized cost. Such action may include
redemption in kind, selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten the average portfolio maturity,
withholding dividends, or utilizing a net asset value per share as determined by
using available market quotation, if available, or, if not available, at a fair
value as determined in good faith by the Board of Directors. The Fund may also
reduce the number of the Money Market Portfolio's outstanding shares by
redeeming proportionately from shareholders, without the payment of any monetary
consideration, such number in full and fractional shares as is necessary to
maintain the net asset value per share at $1.00. By investment in the Money
Market Portfolio, shareholders are deemed to have agreed to such redemption.

FLEXIBLE ASSET ALLOCATION PORTFOLIO

Equity securities (including common stocks, preferred stocks, convertible
securities and warrants) and call options written on all portfolio securities,
listed or traded on a national exchange are valued at their last sale price on
the exchange prior to the time when assets are valued. In the absence of any
exchange sales on that day and for unlisted equity securities, such securities
are valued at the last sale price on the NASDAQ (National Association of
Securities Dealers Automated Quotations) National Market System. In the absence
of any National Market System sales on that day, equity securities are valued at
the last reported bid price.

Debt securities traded on a national exchange are valued at their last sale
price on that exchange prior to the time when assets are valued, or, lacking any
sales, at the last reported bid price. Debt securities other than money market
instruments traded in the over-the-counter market are valued at the last
reported bid price or at yield equivalent as obtained from one or more dealers
that make markets in the securities. Debt securities

16
<PAGE> 54

traded in both the over-the-counter market and on a national exchange are valued
according to the broadest and most representative market, and it is expected
that this ordinarily will be the over-the-counter market.

Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the Board
of Directors of the Fund, including valuations provided by a pricing service
retained for this purpose.

Debt instruments held with a remaining maturity of 60 days or less are
generally valued on an amortized cost basis. Under the amortized cost basis
method of valuation, the security is initially valued at its purchase price (or
in the case of securities purchased with more than 60 days remaining to
maturity, the market value on the 61st day prior to maturity), and thereafter by
amortizing any premium or discount uniformly to maturity. If for any reason the
Fund. Directors believe the amortized cost method of valuation does not fairly
reflect the fair value of any security, fair value will be determined in good
faith by or under the direction of the Board of Directors of the Fund as in the
case of securities having a maturity of more than 60 days.

YIELD INFORMATION

The Aon Money Market Portfolio provides a current yield quotation based on
a seven-day period. This yield quotation is computed by determining the net
change (exclusive of realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical account
having a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, dividing
the net change in account value by the value of the account at the beginning of
the period to obtain the base period return, and analyzing this quotient on a
365-day basis (i.e., multiplying the base period return by 365/7). The net
change in account value reflects the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares during this period. The Money Market
Portfolio may also quote an effective yield for a seven-day period, which is
computed by 1 to the base period return (calculated as described above), raising
that sum to a power equal to 365 divided by 7, and subtracting 1 from the
result. (The current annualized effective yield is computed by expressing the
annualized return on a compounded, annualized basis).

The current yields quoted will be for a recent seven-day period. Current
yields will fluctuate from time to time and are not necessarily representative
of future results. The yield is a function of the type and quality of the
instruments in the portfolio, portfolio maturity and operating expenses.

Current yield information may not provide a basis for comparison with bank
deposits or other investments which pay a fixed yield for a stated period of
time. From time to time, advertisements for the Money Market Portfolio may
include comparison of the Portfolio's performance to that of various market
indices.

TAXES

Each Portfolio intends to qualify and to continue to qualify as a regulated
invested company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"). In order to qualify for that treatment, each Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Portfolio must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) the Portfolio must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities, or any of
the following, that were held for less than three months -- options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Portfolio's principal business of investing in
securities (or options and futures with respect thereto) ("Short-Short
Limitation");

17
<PAGE> 55

(3) at the close of each quarter of the Portfolio's taxable year, at least 50%
of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities that,
with respect to any one issuer, do no exceed 5% of the value of the Portfolio's
total assets and that do not represent more than 10% of the outstanding voting
securities of the issuer; and (4) at the close of each quarter of the
Portfolio's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer.

Each Portfolio will be subject to a nondeductible 4% excise tax on amounts
not distributed to shareholders on a timely basis. Each Portfolio intends to
make sufficient distributions to avoid this 4% excise tax.

Dividends and interest received by each Portfolio may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and foreign countries generally do not impose taxes on capital gains in
respect of investment by foreign investors.

The Portfolios may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (2) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Portfolio would
be subject to Federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain on disposition of that stock
(collectively "PFIC income"), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income would be included in the Portfolio's investment
company taxable income, and accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. If a Portfolio invests in a PFIC
and elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, that Portfolio will be required to
include income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss), even if they are not distributed
to the Portfolio; those amounts would be subject to the Distribution
Requirement. The ability of the Portfolio to make this election may be limited.

The foregoing is only a general summary of some of the import ant Federal
income tax considerations generally affecting the Portfolio and its
shareholders. No attempt is made to present a complete explanation of the
Federal tax treatment of the Portfolios' activities. Potential investors are
urged to consult their own tax advisors for more detailed information and for
information regarding any applicable state, local, or foreign taxes.

ADDITIONAL INFORMATION

CUSTODIAN, TRANSFER AGENT AND ACCOUNTING AGENT

Firstar Trust Company ("FTC") is the custodian, transfer agent, and
accounting agent for the Fund. Under the custodian agreement between the Fund
and FTC, the bank may appoint a subcustodian bank with the approval of the
Fund's directors. FTC will also calculate the net asset value per share on each
day that the New York Stock Exchange is open for trading, except that shares of
the Fund will not be priced on the following days: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Thanksgiving Day, Veteran's Day, and Christmas Day. FTC
has no part in determining the investment policies of the Fund or the securities
to be purchased or sold by the Fund.

18
<PAGE> 56

INDEPENDENT AUDITORS

Ernst & Young LLP acts as independent auditors for the Fund. Its offices
are at One James Center, 901 East Cary Street, Suite 1000, Richmond, Virginia
23219. Ernst & Young LLP performs an audit of the financial statements of the
Fund annually.

LEGAL COUNSEL

Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue, NW, Washington, DC
20004-2404, is counsel for the Fund.

CAPITAL STOCK

Aon Asset Management Fund, Inc. is a Virginia corporation, incorporated on
August 27, 1991. It has authorized capital of three billion shares of common
stock, par value one mill ($.001) per share. All of the shares of the authorized
capital stock have been divided into and may be issued in a designated class as
follows: 750 million shares have been designated as Class A shares, representing
interests in the Money Market Portfolio; 450 million shares have been designated
Class B shares, representing interests in the Flexible Asset Allocation
Portfolio and 400 million shares each have been designated classes C and D and
250 million shares each for classes E, F, G, H.

Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective class and, upon
liquidation or dissolution, in net assets allocated to such class remaining
after satisfaction of outstanding liabilities. The shares of each class, when
issued, will be fully paid and non-assessable and have no preemptive or
conversion rights.

REPORTS

The Fund will issue unaudited semi-annual reports showing each Portfolio's
investments and other information, and it will issue audited annual reports
containing financial statements audited by the Fund's independent auditors.

OTHER INFORMATION

This Statement of Additional Information and the prospectuses for the
Portfolios do not contain all the information set forth in the registration
statement and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities Act of
1933 and the 1940 Act, to which reference is hereby made.

19
<PAGE> 57

APPENDIX A

DESCRIPTION OF CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICES, INC.

Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade obligation
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba -- bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

D -- Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.

The ratings from "AA" to "B" may be modified by the addition of a plus or
minus sign to indicate relative standing within the major rating categories.

STANDARD & POOR'S CORPORATION

AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.

A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing

20
<PAGE> 58

circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than in higher rated categories.

BB-B-CCC-CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Notes: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Fund is dependent on the Adviser's
judgment, analysis and experience in the evaluation of such bonds.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"): The following rating
designations for commercial paper (defined by Moody's as promissory obligations
not having original maturity in excess of nine months), are judged by Moody's to
be investment grade, and indicate the relative repayment capacity of rated
issuers:

PRIME-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions
in well-established industries; (b) high rates of return on funds employed;
(c) conservative capitalization structures with moderate reliance on debt
and ample asset protection; (d) broad margins in earning coverage of fixed
financial charges and high internal cash generation; and (e) well
established access to a range of financial markets and assured sources of
alternate liquidity.

PRIME-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

STANDARD & POOR'S CORPORATION ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:

A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+) designation.

A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".

FITCH INVESTORS SERVICE, INC. ("FITCH"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes:

F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.

F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".

F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned
"F-1+" or "F-1" ratings.

DUFF & PHELPS, INC. ("DUFF & PHELPS"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities, when
issued, of under one year), asset-backed commercial

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<PAGE> 59

paper, and certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including bankers'
acceptance and letters of credit):

Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.

Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.

Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.

IBCA LIMITED OR ITS AFFILIATE IBCA INC. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as follows:

A1+: Obligations supported by the highest capacity for timely
repayment.

A1: Obligations supported by a very strong capacity for timely
repayment.

A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.

THOMSON BANKWATCH, INC. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other securities
having a maturity of one year or less:

TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.

TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".

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<PAGE> 60

AUDITED FINANCIAL STATEMENTS

AON ASSET MANAGEMENT FUND, INC.

YEAR ENDED OCTOBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 61

Aon Asset Management Fund, Inc.

Audited Financial Statements

Year ended October 31, 1995

TABLE OF CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2

Financial Statements

Statements of Assets and Liabilities................................................. F-3
Statements of Operations............................................................. F-4
Statements of Changes in Net Assets.................................................. F-5
Schedule of Investments.............................................................. F-6
Notes to Financial Statements........................................................ F-19
Financial Highlights................................................................. F-23
</TABLE>

F-1
<PAGE> 62

[LETTERHEAD]

Report of Independent Auditors

To the Shareholders and Board of Directors
Aon Asset Management Fund, Inc.

We have audited the statements of assets and liabilities, including the
schedules of investments, of Aon Asset Management Fund, Inc. (comprising, the
Money Market and Flexible Asset Allocation Portfolios) as of October 31, 1995,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended
(Money Market Portfolio) and for the year ended October 31, 1995 and for the
period from March 1, 1994 to October 31, 1994 (Flexible Asset Allocation
Portfolio), and the financial highlights for each of the fiscal periods since
1992. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the Aon Asset Management Fund,
Inc. at October 31, 1995, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended (Money Market Portfolio) and for the year ended October 31, 1995 and
for the period from March 1, 1994 to October 31, 1994 (Flexible Asset Allocation
Portfolio), and the financial highlights for each of the fiscal periods since
1992, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Richmond, Virginia
December 1, 1995

F-2
<PAGE> 63

Statements of Assets and Liabilities

Aon Asset Management Fund, Inc.

October 31, 1995

<TABLE>
<CAPTION>
FLEXIBLE
MONEY ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------ -------------
<S> <C> <C>
ASSETS
Investments in securities at fair value
(cost -- $68,299,794)...................................... $ -- $ 73,267,471
Investments in securities at amortized cost which approximates
fair value................................................. 426,399,125 --
Cash.......................................................... 737 70,680
Dividends receivable.......................................... -- 13,886
Interest receivable........................................... 714,883 442,838
Receivable for securities sold................................ -- 690,993
Due from affiliates........................................... -- 9,432
--------------
Total Assets.................................................... 427,114,745 74,495,300

LIABILITIES
Dividends payable............................................. 2,017,109 --
Accrued expenses payable...................................... 4,784 184,233
Payable for securities purchased.............................. 4,999,219 535,832
--------------
Total Liabilities............................................... 7,021,112 720,065
--------------
NET ASSETS...................................................... $420,093,633 $ 73,775,235
==============
OUTSTANDING SHARES.............................................. 420,093,633 6,126,826.738
==============
Net Asset Value Per Share....................................... $1.00 $12.04
===== ======
</TABLE>

See notes to financial statements.

F-3
<PAGE> 64

Statements of Operations

Aon Asset Management Fund, Inc.

Year ended October 31, 1995

<TABLE>
<CAPTION>
FLEXIBLE ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------ --------------
<S> <C> <C>
INVESTMENT INCOME
Interest......................................................... $28,920,423 $ 940,057
Dividends........................................................ -- 194,292
----------- ----------
28,920,423 1,134,349
EXPENSES
Investment advisory fee (Note 4)................................. 1,706,435 218,580
Custodian, transfer and accounting fees.......................... 146,539 40,874
Directors' fees.................................................. 12,501 12,501
Audit fees....................................................... 12,501 12,501
Registration fees................................................ 5,988 10,136
Other............................................................ 11,136 --
----------- ----------
1,895,100 294,592
Less expense waiver (Note 4)....................................... 1,218,882 --
----------- ----------
676,218 294,592
----------- ----------
NET INVESTMENT INCOME.............................................. 28,244,205 839,757
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments......................... 4,758 1,835,265
Change in net unrealized appreciation on investments............. -- 4,907,281
----------- ----------
Net realized and unrealized gain on investments.................. 4,758 6,742,546
----------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS............................. $28,248,963 $7,582,303
=========== ==========
</TABLE>

See notes to financial statements.

F-4
<PAGE> 65

Statements of Changes in Net Assets

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
FLEXIBLE
ASSET
FLEXIBLE ALLOCATION
ASSET PORTFOLIO
ALLOCATION PERIOD FROM
MONEY MARKET PORTFOLIO PORTFOLIO MARCH 1,
YEARS ENDED OCTOBER 31, YEAR ENDED 1994 TO
---------------------------------- OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income............ $ 28,244,205 $ 15,318,373 $ 839,757 $ 174,960
Net realized gain (loss) on sale
of investments................ 4,758 (605,310) 1,835,265 (46,231)
Change in unrealized appreciation
on investments................ -- -- 4,907,281 60,396
-------------- -------------- ----------- ----------
Net increase in net assets from
operations.................... 28,248,963 14,713,063 7,582,303 189,125
DIVIDENDS PAID TO SHAREHOLDERS
FROM:
Net investment income............ (28,244,205) (15,318,373) (835,923) (174,960)
Net realized gain on
investments................... (4,758) (1,940) (1,835,265) --
Distribution in excess of
realized gains................ -- -- (162,706) (36,041)
-------------- -------------- ----------- ----------
(28,248,963) (15,320,313) (2,833,894) (211,001)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares..... 4,368,158,454 4,231,505,926 56,003,807 10,000,000
Contribution of capital (Note
4)............................ -- 607,250 -- --
Net asset value of shares issued
upon reinvestment of
dividends..................... 7,851,993 3,932,861 2,833,894 211,001
Cost of redemption of shares..... (4,366,829,092) (4,236,594,456) -- --
-------------- -------------- ----------- ----------
Increase (decrease) in net assets
from capital transactions........ 9,181,355 (548,419) 58,837,701 10,211,001
-------------- -------------- ----------- ----------
Increase (decrease) in net
assets........................... 9,181,355 (1,155,669) 63,586,110 10,189,125
Net assets at beginning of
period........................... 410,912,278 412,067,947 10,189,125 --
-------------- -------------- ----------- ----------
Net assets at end of period........ $ 420,093,633 $ 410,912,278 $73,775,235 $10,189,125
============== ============== =========== ==========
Undistributed net investment
income........................... $ -- $ -- $ 3,834 $ --
============== ============== =========== ==========
</TABLE>

See notes to financial statements.

F-5
<PAGE> 66

Schedule of Investments

Aon Asset Management Fund, Inc.

October 31, 1995

<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO
COMMERCIAL PAPER
Agricultural Product........................ 3.59%
Weyerhauser Co.
5.73% due November 2, 1995................ 3,090,000 $ 3,089,508 $ 3,089,508
5.74% due November 6, 1995................ 12,000,000 11,990,433 11,990,433
------------ ------------
15,079,941 15,079,941
Auto & Truck................................ 0.38%
Fluor Corp.
5.78% due November 14, 1995............... 1,580,000 1,576,702 1,576,702
Ford Motor Credit Co.
5.67% due November 17, 1995............... 5,000,000 4,987,400 4,987,400
5.73% due December 8, 1995................ 5,000,000 4,970,554 4,970,554
5.70% due January 12, 1996................ 5,000,000 4,943,000 4,943,000
General Mtrs Accep Corp.
5.79% due November 17, 1995............... 5,000,000 4,987,133 4,987,133
5.72% due January 31, 1996................ 10,000,000 9,855,411 9,855,411
------------ ------------
31,320,200 31,320,200
Banking -- Foreign.......................... 7.05%
Canadian Imperial
5.67% due November 27, 1995............... 5,000,000 4,979,525 4,979,525
5.72% due December 1, 1995................ 5,000,000 4,976,167 4,976,167
5.73% due January 4, 1996................. 5,000,000 4,949,067 4,949,067
International Lease Financial Corp.
5.66% due November 15, 1995............... 5,000,000 4,988,994 4,988,994
5.68% due November 21, 1995............... 5,000,000 4,984,222 4,984,222
5.70% due January 2, 1996................. 4,797,000 4,749,909 4,749,909
------------ ------------
29,627,884 29,627,884
Conglomerate................................ 1.29%
Avco Financial Services Inc.
5.75% due January 12, 1996................ 5,500,000 5,436,750 5,436,750
Consumer Cyclical........................... 1.18%
General Electric Co.
5.70% due December 18, 1995............... 5,000,000 4,962,792 4,962,792
Finance -- Miscellaneous.................... 29.56%
American Express
5.60% due November 8, 1995................ 5,000,000 4,994,556 4,994,556
5.65% due November 22, 1995............... 5,000,000 4,983,521 4,983,521
5.70% due January 26, 1996................ 5,000,000 4,931,917 4,931,917
American General Finance
5.73% due November 28, 1995............... 5,000,000 4,978,513 4,978,513
5.70% due December 22, 1995............... 5,000,000 4,959,625 4,959,625
</TABLE>

F-6
<PAGE> 67

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
COMMERCIAL PAPER (continued)
Finance -- Miscellaneous (continued)
Associates Corp. of North America
5.70% due December 28, 1995............... 10,000,000 $ 9,909,750 $ 9,909,750
5.70% due January 22, 1996................ 5,000,000 4,935,083 4,935,083
Beneficial Corp.
5.67% due December 8, 1995................ 5,000,000 4,970,863 4,970,863
5.65% due February 7, 1996................ 10,000,000 9,846,194 9,846,194
Comerica Bank
5.75% due April 8, 1996................... 5,000,000 5,000,000 5,000,000
Du Pont E I DE Nemours & Co.
5.70% due November 14, 1995............... 5,000,000 4,989,708 4,989,708
First Natl Bank of Chicago
6.17% due August 26, 1996................. 10,000,000 10,000,000 10,000,000
Fleet Mortgage Group
5.74% due January 22, 1996................ 10,000,000 9,869,256 9,869,256
General Electric Capital
5.70% due December 8, 1995................ 5,000,000 4,970,708 4,970,708
5.68% due January 16, 1996................ 5,000,000 4,940,044 4,940,044
Household Finance Corp.
5.73% due November 16, 1995............... 15,000,000 14,964,188 14,964,188
Preferred Receivables FDG Co.
5.80% due November 8, 1995................ 5,000,000 4,994,361 4,994,361
5.70% due December 6, 1995................ 10,000,000 9,944,583 9,944,583
------------ ------------
124,182,870 124,182,870
Finance -- Service.......................... 7.11%
Merrill Lynch & Co.
5.75% due November 2, 1995................ 5,000,000 4,999,201 4,999,201
5.75% due November 3, 1995................ 10,000,000 9,996,806 9,996,806
Morgan Stanley Group
5.73% due November 10, 1995............... 7,000,000 6,989,973 6,989,973
5.73% due January 25, 1996................ 8,000,000 7,891,767 7,891,767
------------ ------------
29,877,747 29,877,747
Insurance................................... 2.97%
Prudential Funding
5.70% due November 3, 1995................ 7,500,000 7,497,625 7,497,625
5.73% due November 15, 1995............... 5,000,000 4,988,858 4,988,858
------------ ------------
12,486,483 12,486,483
Miscellaneous............................... 8.28%
Asset Securitization Corp.
5.70% due January 16, 1996................ 5,000,000 4,939,833 4,939,833
5.63% due January 17, 1996................ 10,000,000 9,879,581 9,879,581
</TABLE>

F-7
<PAGE> 68

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
COMMERCIAL PAPER (continued)
Miscellaneous (continued)
PHH Corp.
5.72% due November 15, 1995............... 15,000,000 $ 14,966,633 $ 14,966,633
Raytheon Co.
5.72% due November 3, 1995................ 5,000,000 4,998,411 4,998,411
------------ ------------
34,784,458 34,784,458
Oil & Gas................................... 3.57%
Mobil Corp.
5.75% due November 7, 1995................ 15,000,000 14,985,625 14,985,625
Retail...................................... 3.56%
Goldman Sachs Group
5.72% due November 22, 1995............... 5,000,000 4,983,317 4,983,317
5.73% due November 22, 1995............... 10,000,000 9,966,575 9,966,575
------------ ------------
14,949,892 14,949,892
Technology.................................. 3.56%
IBM Credit
5.73% due November 14, 1995............... 15,000,000 14,968,963 14,968,963
Telecommunication........................... 1.18%
Ameritech Cap. FDG. Corp.
5.60% due January 19, 1996................ 5,000,000 4,938,556 4,938,556
Utility -- Communication.................... 7.22%
AT&T Cap. Corp.
5.86% due November 1, 1995................ 5,000,000 5,000,000 5,000,000
Bell Atlantic Financial Svcs.
5.71% due November 30, 1995............... 10,369,000 10,321,305 10,321,305
Bell So. Capital Funding C/P
5.65% due November 1, 1995................ 15,000,000 15,000,000 15,000,000
------------ ------------
30,321,305 30,321,305
Utility -- Electric......................... 3.57%
Pacific Gas & Electric
5.72% due November 10, 1995............... 15,000,000 14,978,550 14,978,550
------------ ------------
TOTAL COMMERCIAL PAPER...................... 91.15% 382,902,016 382,902,016
REPURCHASE AGREEMENTS....................... 1.19%
First Bank America SE MI
5.80% due January 4, 1996................. 2,000,000 2,000,000 2,000,000
Harris Nesbit Thompson Repo
5.70% due November 1, 1995................ 2,994,000 2,994,000 2,994,000
------------ ------------
TOTAL REPURCHASE AGREEMENTS................. 1.19% 4,994,000 4,994,000
</TABLE>

F-8
<PAGE> 69

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO (CONTINUED)
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies.................... 7.14%
Federal Farm Credit Bank
6.10% due November 1, 1995................ 10,000,000 $ 10,000,000 $ 10,000,000
5.94% due December 1, 1995................ 5,000,000 5,000,000 5,000,000
5.72% due February 1, 1996................ 10,000,000 10,000,000 10,000,000
5.66% due February 1, 1996................ 5,000,000 4,999,219 4,999,219
------------ ------------
29,999,219 29,999,219
------------ ------------
TOTAL U.S. GOVERNMENT SECURITIES............ 7.14% 29,999,219 29,999,219
CORPORATE BONDS
Asset Back Security......................... 2.02%
Corporate Asset Fndg. Co.
5.72% due November 21, 1995............... 8,531,000 8,503,890 8,503,890
------------ ------------
TOTAL CORPORATE BONDS....................... 2.02% 8,503,890 8,503,890
------------ ------------
TOTAL INVESTMENTS........................... 101.50% $426,399,125 426,399,125
===========
Liabilities, less cash and other assets..... -1.50% (6,305,492)
------------
NET ASSETS.................................. 100.00% $420,093,633
===========
</TABLE>

F-9
<PAGE> 70

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO
COMMON STOCKS -- BANKING & FINANCIAL SERVICE
Bank & Bank Holding Co......................... 0.53%
NationsBank Corp. ............................. 6,000 $ 315,547 $ 394,500
Financial Service.............................. 1.22%
First Investors Financial Service Group (A).... 7,000 77,000 67,375
Green Tree Financial Corp. (A)................. 24,000 642,936 639,000
PMT Services Inc. (A).......................... 5,000 112,500 134,375
Pioneer Financial Services Inc. ............... 4,000 56,240 56,000
----------- -----------
888,676 896,750
Insurance...................................... 1.98%
American General Corp. ........................ 8,500 297,947 279,438
American International Group................... 14,000 1,059,597 1,181,250
----------- -----------
1,357,544 1,460,688
Real Estate.................................... 0.44%
Centerpoint Properties Corp. .................. 4,000 74,120 90,500
Glimcher Realty Trust.......................... 5,000 105,000 90,000
JDN Realty Corp. (A)........................... 7,000 141,750 142,625
----------- -----------
320,870 323,125
----------- -----------
TOTAL COMMON STOCKS -- BANKING & FINANCIAL
SERVICE...................................... 4.17% 2,882,637 3,075,063
COMMON STOCKS -- CAPITAL GOODS
Production..................................... 0.24%
Illinois Tool Works............................ 3,000 134,805 174,375
Electrical Equipment........................... 0.06%
California Microwave Inc. (A).................. 2,000 57,000 44,000
----------- -----------
TOTAL COMMON STOCKS -- CAPITAL GOODS........... 0.30% 191,805 218,375
COMMON STOCKS -- CONSUMER CYCLICAL
Apparel........................................ 0.38%
Gucci Group (A)................................ 500 11,000 15,000
Tommy Hilfiger Corp. (A)....................... 7,000 151,860 266,875
----------- -----------
162,860 281,875
Auto & Truck................................... 1.19%
Ford Motor Co. ................................ 2,000 58,245 57,500
Harley Davidson (A)............................ 15,000 384,275 401,250
Oxford Resources Corp. CL A (A)................ 16,000 416,416 420,000
----------- -----------
858,936 878,750
</TABLE>

F-10
<PAGE> 71

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER CYCLICAL (continued)
Auto Parts..................................... 0.60%
Magna International (A)........................ 10,200 $ 439,015 $ 441,150
Household Products............................. 0.71%
Aptargroup, Inc. (A)........................... 2,000 51,000 68,500
Dept 56, Inc. (A).............................. 10,000 406,037 453,750
----------- -----------
457,037 522,250
Retail -- Specialty............................ 1.79%
General Nutrition Co. (A)...................... 40,000 591,969 995,000
Pep Boys -- Manny, Mo, Jack.................... 4,000 122,490 87,500
Talbots Inc. (A)............................... 6,300 258,294 152,775
Walgreen Co. .................................. 3,000 67,144 85,500
----------- -----------
1,039,897 1,320,775
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER CYCLICAL....... 4.67% 2,957,745 3,444,800
COMMON STOCKS -- CONSUMER NON-DURABLE
Communications & Media......................... 3.07%
Clear Channel Communications (A)............... 4,000 230,240 328,000
Cox Communications Inc. A NEW (A).............. 35,000 707,130 656,250
Evergreen Media Corp. CL A (A)................. 5,300 151,050 144,425
Panamsat Corp. (A)............................. 22,000 356,500 332,750
SFX Broadcasting Inc. -- CL A (A).............. 15,000 392,212 405,000
Time Warner Inc. .............................. 4,000 163,677 146,000
Tribune Co. ................................... 4,000 252,184 252,500
----------- -----------
2,252,993 2,264,925
Cosmetic & Soap................................ 0.38%
Procter & Gamble............................... 3,500 245,248 283,500
Drugs.......................................... 6.51%
Abbott Labs.................................... 16,000 625,336 636,000
Becton Dickinson Co. .......................... 10,000 574,350 650,000
Johnson & Johnson Co. ......................... 16,000 1,067,710 1,304,000
Merck & Co. ................................... 8,000 341,855 460,000
Pfizer Inc. ................................... 14,000 672,167 803,250
Schering Plough Corp. ......................... 6,000 230,805 321,750
Watson Pharmaceuticals Inc. (A)................ 14,000 450,413 626,500
----------- -----------
3,962,636 4,801,500
Entertainment & Leisure........................ 0.45%
Viacom Inc. Class A (A)........................ 1,000 44,966 49,750
Viacom Inc. Class B (A)........................ 5,600 251,561 280,000
----------- -----------
296,527 329,750
</TABLE>

F-11
<PAGE> 72

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- CONSUMER NON-DURABLE (continued)
Food, Beverage & Tobacco....................... 1.14%
Archer-Daniels-Midland Company................. 13,125 $ 237,625 $ 211,641
Pepsico, Inc. ................................. 12,000 546,706 633,000
----------- -----------
784,331 844,641
Health Care.................................... 0.71%
Medisense Inc. (A)............................. 7,000 140,437 149,625
Omega Healthcare Investors..................... 2,000 48,500 50,750
Orthodontic Centers of America (A)............. 10,000 173,750 320,000
----------- -----------
362,687 520,375
Health Care Service............................ 0.92%
Medpartners Inc. (A)........................... 2,500 32,500 70,000
Occusystems Inc. (A)........................... 9,400 149,274 194,463
United Healthcare Corp. (A).................... 7,800 358,978 414,375
----------- -----------
540,752 678,838
Hospital Supply & Service...................... 0.48%
Emcare Holdings Inc. (A)....................... 3,000 33,000 69,000
Inphynet Medical Management (A)................ 16,000 272,375 288,000
----------- -----------
305,375 357,000
Office Product................................. 0.19%
BT Office Products (A)......................... 11,000 131,790 141,625
Printing & Publishing.......................... 0.23%
Mail-Well Inc. (A)............................. 15,000 210,000 172,500
Travel & Recreation............................ 1.25%
Walt Disney Co. ............................... 16,000 879,969 922,000
----------- -----------
TOTAL COMMON STOCKS -- CONSUMER NON-DURABLE.... 15.34% 9,972,308 11,316,654
COMMON STOCKS -- ENERGY
Oil & Gas -- Domestic.......................... 0.61%
Amoco Corp. ................................... 7,000 447,982 447,125
Oil & Gas -- International..................... 0.36%
Mobil Corp. ................................... 2,000 178,745 201,500
Royal Dutch Petroleum -- ADR................... 500 53,030 61,438
----------- -----------
231,775 262,938
----------- -----------
TOTAL COMMON STOCKS -- ENERGY.................. 0.96% 679,757 710,063
</TABLE>

F-12
<PAGE> 73

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- MANUFACTURING
Chemical....................................... 1.01%
Dupont De Nemours & Co. ....................... 12,000 $ 765,795 $ 748,500
Computer....................................... 0.55%
EMC Corp. Massachusetts (A).................... 19,200 332,259 297,600
MICROCOM Inc. (A).............................. 5,000 78,000 109,375
----------- -----------
410,259 406,975
Miscellaneous.................................. 1.51%
Applied Materials Inc. (A)..................... 10,000 518,026 501,250
Silicon Valley Group Inc. (A).................. 14,000 404,338 453,250
WATSCO Inc. ................................... 3,750 40,171 62,344
WATSCO Inc. Class B............................ 6,000 63,740 98,250
----------- -----------
1,026,275 1,115,094
Non Ferrous Metal.............................. 0.41%
Reynolds Metals................................ 6,000 309,949 302,250
Office Equipment............................... 0.47%
Boise Cascade Office Products (A).............. 9,500 248,920 343,185
----------- -----------
TOTAL COMMON STOCKS -- MANUFACTURING........... 3.95% 2,761,198 2,916,004
COMMON STOCKS -- SERVICE
Business....................................... 0.46%
Avid Tech Inc. (A)............................. 7,800 302,025 341,250
Distributor.................................... 0.66%
Alco Standard Corp. ........................... 5,500 392,080 486,750
Miscellaneous.................................. 0.61%
ADT, Ltd. (A).................................. 28,000 386,680 392,000
ITT Corp. ..................................... 500 41,071 61,250
----------- -----------
427,751 453,250
----------- -----------
TOTAL COMMON STOCKS -- SERVICE................. 1.74% 1,121,856 1,281,250
COMMON STOCKS -- TECHNOLOGY
Aerospace Aircraft............................. 0.13%
Simula Inc. (A)................................ 4,500 57,180 98,438
Business -- Mechanics & Software............... 3.27%
Compaq Computers Corp. (A)..................... 5,500 218,892 306,625
Network General Corp. (A)...................... 10,500 305,315 435,750
</TABLE>

F-13
<PAGE> 74

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- TECHNOLOGY (continued)
Business -- Mechanics & Software (continued)
Sun Microsystems (A)........................... 8,100 $ 485,675 $ 631,800
Xerox Corp. ................................... 8,000 952,455 1,038,000
----------- -----------
1,962,337 2,412,175
Business -- Service............................ 1.28%
First Data (A)................................. 14,273 709,415 943,809
Electronics.................................... 2.76%
Charter Power Systems Inc. (A)................. 8,000 216,000 200,000
Gemstar International Group (A)................ 11,500 138,000 240,063
Hewlett-Packard Co. ........................... 10,000 809,978 926,250
Motorola Inc. ................................. 9,000 670,165 590,625
Nimbus Co International Inc. (A)............... 10,000 70,000 80,000
----------- -----------
1,904,143 2,036,938
Miscellaneous.................................. 0.13%
Cherry Corp. Class A (A)....................... 500 6,250 6,250
Keane, Inc. (A)................................ 1,400 31,891 37,800
Three Five Systems Inc. (A).................... 3,000 79,429 54,375
----------- -----------
117,570 98,425
Software....................................... 3.32%
HCIA Inc. (A).................................. 7,900 225,150 215,275
Informix Corp. (A)............................. 15,000 372,810 436,875
Intersolv (A).................................. 8,500 178,626 133,875
Mcafee Associates Inc. (A)..................... 12,700 636,511 739,775
SPSS Inc. (A).................................. 8,000 125,504 135,000
Sterling Software, Inc. (A).................... 16,000 663,900 738,000
Transaction Systems Archit-A (A)............... 2,000 30,000 52,000
----------- -----------
2,232,501 2,450,800
Telecommunication.............................. 2.98%
Bell & Howell Holdings Co. (A)................. 39,000 809,793 975,000
Echostar Communications -- A (A)............... 8,000 139,000 116,000
U S Robotics (A)............................... 12,000 646,655 1,110,000
----------- -----------
1,595,448 2,201,000
----------- -----------
TOTAL COMMON STOCKS --
TECHNOLOGY................................... 13.88% 8,578,594 10,241,585
COMMON STOCKS -- TRANSPORTATION
Railroad....................................... 0.09%
Union Pacific Corp. ........................... 1,000 62,660 65,375
----------- -----------
TOTAL COMMON STOCKS -- TRANSPORTATION.......... 0.09% 62,660 65,375
</TABLE>

F-14
<PAGE> 75

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
COMMON STOCKS -- TRANSPORTATION (continued)
COMMON STOCKS -- UTILITY
Telephone...................................... 0.31%
AT&T Corp. .................................... 500 $ 26,217 $ 32,000
Worldcom Inc. (A).............................. 6,000 181,500 195,750
----------- -----------
TOTAL COMMON STOCKS -- UTILITY................. 0.31% 207,717 227,750
----------- -----------
COMMON STOCKS -- GRAND TOTAL................... 45.40% 29,416,277 33,496,919
DEMAND NOTES
Utility -- Electrical.......................... 0.04%
Wisconsin Electric Demand Note
5.5082% due December 31, 2031................ 32,235 32,235 32,235
----------- -----------
TOTAL DEMAND NOTES............................. 0.04% 32,235 32,235
COMMERCIAL PAPER
Asset Back Security............................ 0.68%
Asset Securitization Corp.
5.73% due November 15, 1995.................. 500,000 498,886 498,886
Auto & Truck................................... 1.83%
Associates Corp. of North Amer.
5.7445% due November 29, 1995................ 350,000 350,000 350,000
General Electric Capital Corp.
5.7639% due November 17, 1995................ 500,000 500,000 500,000
Household Finance Corp.
5.7666% due November 2, 1995................. 500,000 500,000 500,000
----------- -----------
1,350,000 1,350,000
Finance -- Miscellaneous....................... 1.26%
American Express CR. Corp. CP
5.7906% due November 15, 1995................ 530,000 530,000 530,000
Ford Motor Credit
5.7455% due November 6, 1995................. 100,000 100,000 100,000
5.7657% due December 1, 1995................. 300,000 300,000 300,000
----------- -----------
930,000 930,000
Household Product.............................. 0.72%
Illinois Tool Works
5.73% due November 7, 1995................... 535,000 534,489 534,489
----------- -----------
TOTAL COMMERCIAL PAPER......................... 4.49% 3,313,375 3,313,375
</TABLE>

F-15
<PAGE> 76

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENTS
Beneficial Corp................................ 0.68%
5.7888% due November 10, 1995................ 500,000 $ 500,000 $ 500,000
----------- -----------
TOTAL REPURCHASE AGREEMENTS.................... 0.68% 500,000 500,000
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies....................... 9.54%
FHLMC Disc Notes
5.63% due November 1, 1995................... 1,535,000 1,535,000 1,535,000
5.62% due November 6, 1995................... 2,785,000 2,782,826 2,782,826
5.64% due November 30, 1995.................. 2,735,000 2,722,574 2,722,574
----------- -----------
7,040,400 7,040,400
U.S. Treasury.................................. 35.95%
Treasury Notes
6.00% due August 31, 1997.................... 2,500,000 2,509,294 2,514,842
7.1250% due September 30, 1999............... 200,000 198,991 209,312
7.75% due January 31, 2000................... 500,000 502,092 535,938
6.875% due March 31, 2000.................... 2,500,000 2,500,543 2,603,125
6.25% due May 31, 2000....................... 500,000 506,128 508,438
6.125% due July 31, 2000..................... 2,000,000 1,997,034 2,024,374
6.25% due August 31, 2000.................... 3,000,000 3,027,648 3,051,560
6.375% due August 15, 2002................... 100,000 97,513 102,500
7.25% due August 15, 2004.................... 2,000,000 2,014,058 2,165,624
7.8750% due November 15, 2004................ 450,000 453,647 507,234
6.50% due May 15, 2005....................... 2,500,000 2,522,911 2,588,280
6.50% due August 15, 2005.................... 4,500,000 4,636,918 4,660,313
Treasury Bills
6.25% due August 15, 2023.................... 500,000 410,592 489,063
7.625% due February 15, 2025................. 3,000,000 3,367,642 3,484,685
6.875% due August 15, 2025................... 1,000,000 997,983 1,073,437
----------- -----------
25,742,994 26,518,725
----------- -----------
TOTAL U.S. GOVERNMENT SECURITIES............... 45.49% 32,783,394 33,559,125
CORPORATE BONDS
Bank & Bank Holding Co......................... 0.27%
Huntington National
6.75% due June 15, 2003...................... 100,000 93,763 100,079
NationsBank Corp.
5.375% due December 1, 1995.................. 100,000 99,940 99,940
----------- -----------
193,703 200,019
Chemical....................................... 0.14%
Rhone-Poulenc
6.75% due October 15, 1999................... 100,000 97,210 100,958
</TABLE>

F-16
<PAGE> 77

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CORPORATE BONDS (continued)
Communications & Media......................... 0.16%
Bell Atlantic
5.37% due July 13, 1998...................... 120,000 $ 114,776 $ 117,965
Electronics.................................... 0.21%
Union Pacific
7.00% due June 15, 2000...................... 150,000 148,940 153,981
Finance Company................................ 0.34%
Commercial Credit
6.00% due June 15, 2000...................... 150,000 142,531 148,334
Norwest Financial Inc.
6.25% due February 15, 1997.................. 100,000 99,542 100,215
----------- -----------
242,073 248,549
Food, Beverage & Tobacco....................... 0.13%
Canandaigua Wine
8.75% due December 15, 2003.................. 100,000 98,748 99,250
Health Care.................................... 0.13%
Gillette Company
5.75% due October 15, 2005................... 100,000 87,526 95,562
Investment Company............................. 0.14%
Dean Witter Discover
6.875% due March 1, 2003..................... 100,000 93,944 102,027
Metal & Mineral................................ 0.27%
Aluminum Co. of America
5.75% due February 1, 2001................... 100,000 93,327 97,580
Federated Dept. Stores
9.72% due February 15, 2004.................. 100,000 99,077 99,500
----------- -----------
192,404 197,080
Miscellaneous.................................. 0.65%
Ann Taylor, Inc. Sub Notes
8.75% due June 15, 2000...................... 100,000 97,349 81,000
Argosy Gaming Co.
12.00% due June 1, 2001...................... 100,000 100,000 97,750
CitiCorp Sub NTS
7.1250% due March 15, 2004................... 100,000 98,878 102,842
Merck & Co.
7.75% due May 1, 1996........................ 100,000 100,631 100,983
</TABLE>

F-17
<PAGE> 78

Schedule of Investments (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
FLEXIBLE ASSET ALLOCATION PORTFOLIO (CONTINUED)
CORPORATE BONDS (continued)
Miscellaneous (continued)
Pep Boys Notes Non-Callable
6.6250% due May 15, 2003..................... 100,000 $ 91,838 $ 99,454
----------- -----------
488,696 482,029
Paper & Forest Product......................... 0.14%
International Paper Co.
7.50% due May 15, 2004....................... 100,000 98,759 106,202
Retail Trade................................... 0.14%
Black & Decker -- Notes nonCall
6.625% due November 15, 2000................. 100,000 95,057 100,325
----------- -----------
TOTAL CORPORATE BONDS.......................... 2.72% 1,951,836 2,003,947
CONVERTIBLE SECURITIES
Liberty Property SSB Deb. conv
8.00% due July 1, 2001....................... 50,000 50,000 50,620
Morgan Stanley 7.0% "CSCO" PFO (A)............. 7,500 252,677 311,250
----------- -----------
TOTAL CONVERTIBLE SECURITIES................... 0.49% 302,677 361,870
----------- -----------
TOTAL INVESTMENTS.............................. 99.31% $68,299,794 73,267,471
==========
Cash and other assets less liabilities......... 0.69% 507,764
-----------
NET ASSETS..................................... 100.00% $73,775,235
==========
</TABLE>

- ---------------

(A) Non income producing security

F-18
<PAGE> 79

Notes to Financial Statements

Aon Asset Management Fund, Inc.

Year ended October 31, 1995

1. DESCRIPTION OF ENTITY

Aon Asset Management Fund, Inc. (the Fund) incorporated in Virginia on
August 27, 1991 is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company whose shares are sold
principally to affiliates of Aon Corporation. The Fund consists of two
portfolios: the Money Market Portfolio and the Flexible Asset Allocation
Portfolio. The Money Market Portfolio of the Fund is designated as a "Money
Market Fund", and must adhere to the guidelines governing such funds as
described in Rule 2a-7 of the Investment Company Act of 1940. Pursuant to that
rule, the Money Market Portfolio maintains a constant net asset value of $1.00
per share on a daily basis. Dividends are declared daily and paid monthly for
the Money Market Portfolio and declared and paid quarterly for the Flexible
Asset Allocation Portfolio.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies of the Fund
used in the preparation of its financial statements.

a) Security Valuation -- Securities traded on a national securities
exchange are valued at the last reported sales price on the last business
day of the period. Securities traded in the over-the-counter market are
stated at the last quoted bid price. The investments held by the Money
Market Portfolio and debt instruments held by the Flexible Asset Allocation
Portfolio that mature in 60 days or less are stated at amortized cost,
which approximates fair value. The remaining investments held by the
Flexible Asset Allocation Portfolio are stated at fair value.

b) Investment Transactions and Income -- Security transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Interest income is recorded on the accrual basis and dividend
income is reported on the ex-dividend date. Realized gains and losses on
investment are determined on the first-in, first-out basis. Discounts and
premiums on securities purchased are amortized over the life of the
respective securities.

c) Distributions to Shareholders -- Distributions of net investment
income and capital gains are determined in accordance with income tax
regulations. The Fund has no material differences in book and tax income or
cost of securities.

3. INCOME TAXES

The Fund intends to qualify as a "regulated investment company" under the
provision of Sub-chapter M of the Internal Revenue Code of 1986 as amended, and
thereby, under the provisions of the income tax laws available to regulated
investment companies, be relieved of substantially all income taxes. Therefore,
no provision has been made for Federal or state income taxes. The Flexible Asset
Allocation Portfolio's accumulated net realized loss on sales of investments for
the Federal income tax purposes at October 31, 1995 of $46,231 is available to
offset future tax gains. If unused, this loss carryover expires in 2002.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of an investment advisory contract with Aon Advisors, Inc.,
(Investment Advisor), a subsidiary of Aon Corporation, investment advisory fees
will be deducted from the Fund daily and paid monthly at a rate of 0.35% of
average daily net assets in the Money Market Portfolio and 0.75% of average
daily net assets up to $250 million, 0.65% of average daily net assets on the
next $250 million, and 0.50% of average daily net assets in excess of $500
million in the Flexible Asset Allocation Portfolio. Effective April 26, 1995,
the investment advisory contract was amended to change the investment advisory
fees in the Flexible

F-19
<PAGE> 80

Notes to Financial Statements (continued)

Aon Asset Management Fund, Inc.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
Asset Allocation Portfolio. The amended investment advisory fees are equal to
0.70% of average daily net assets up to $250 million, 0.60% of average daily net
assets on the next $250 million, and 0.50% of average daily net assets in excess
of $500 million in the Flexible Asset Allocation Portfolio. The Investment
Advisor has agreed to waive 0.25% of the advisory fee for the Money Market
Portfolio for a net rate of 0.10% on a daily basis.

The Investment Advisor provides administrative services to the Fund and
manages its business affairs, including personnel, facilities and equipment and
all legal, accounting and other costs incurred in the organization of the Fund.
Expenses of the Fund are subject to reimbursement to the extent that ordinary
business expenses of the Fund (including the advisory fees but excluding
interest, taxes, brokerage commissions, and extraordinary expenses) in any year
exceed 1.0% of the aggregate average daily net assets of the Money Market
Portfolio, and 1.25% of the aggregate net asset in the Flexible Asset Allocation
Portfolio.

To assist in the administration of the Fund, the Investment Advisor has
entered into an administrative contract with Forth Financial Securities
Corporation ("FFSC"), an affiliate of Aon Corporation, to provide certain
administrative services for the Fund. Under this agreement, the Investment
Advisor will pay FFSC an annual fee of $25,000 plus 0.05% of the average daily
net assets of the Fund's portfolios.

Certain officers and directors of the Fund were also officers and directors
of the Investment Advisor and The Life Insurance Company of Virginia an indirect
wholly-owned subsidiary of Aon and parent company of FFSC. During the year ended
October 31, 1995, the Fund made payments totaling $25,002 ($12,501 per
portfolio) to unaffiliated directors of the Money Market Portfolio and the
Flexible Asset Allocation Portfolio.

During 1994, an affiliate of the Investment Advisor purchased securities
from the Money Market Portfolio, at an amount less than their current fair value
resulting in a capital loss of $607,250. The Investment Advisor made a capital
contribution of $607,250.

5. COMPOSITION OF NET ASSETS

At October 31, 1995, net assets of the Flexible Asset Allocation Portfolio
consisted of:

<TABLE>
<S> <C>
Common shares.......................................................... $68,849,955
Accumulated net realized loss on sales of investments.................. (46,231)
Unrealized appreciation on investments................................. 4,967,677
Undistributed net investment income.................................... 3,834
-----------
Net assets............................................................. $73,775,235
===========
</TABLE>

F-20
<PAGE> 81

Notes to Financial Statements (continued)

Aon Asset Management Fund, Inc.

6. CAPITAL SHARE TRANSACTIONS

At October 31, 1995, there were 3,000,000,000 shares of no par value common
stock authorized in the Fund. The shares will be issued in the following classes
and have the following designations:

<TABLE>
<CAPTION>
CLASS SHARES
----------------------------------------------------------------------- -----------
<S> <C>
Class A (Money Market Portfolio)....................................... 750,000,000
Class B (Flexible Asset Allocation Portfolio).......................... 450,000,000
Class C................................................................ 400,000,000
Class D................................................................ 400,000,000
Class E................................................................ 250,000,000
Class F................................................................ 250,000,000
Class G................................................................ 250,000,000
Class H................................................................ 250,000,000
</TABLE>

A summary of capital stock transactions follows:

<TABLE>
<CAPTION>
FLEXIBLE
ASSET
MONEY MARKET ALLOCATION
PORTFOLIO PORTFOLIO
------------------ -------------
<S> <C> <C>
Balance at October 31, 1993........................ 412,067,946.750 --
Shares sold........................................ 4,231,505,926.180 1,000,000.000
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 3,932,861.420 21,494.102
------------------ -------------
Total issued....................................... 4,235,438,787.600 1,021,494.102
Shares redeemed.................................... (4,236,594,456.020) --
------------------ -------------
Net change in shares............................... (1,155,668.420) 1,021,494.102
------------------ -------------
Balance at October 31, 1994........................ 410,912,278.330 1,021,494.102
Shares sold........................................ 4,368,158,454.020 4,865,217.717
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 7,851,992.89 240,114.919
------------------ -------------
Total issued....................................... 4,376,010,446.91 5,105,332.636
Shares redeemed.................................... (4,366,829,092.71) --
------------------ -------------
Net change in shares............................... 9,181,354.20 5,105,332.636
------------------ -------------
Balance at October 31, 1995........................ 420,093,632.53 6,126,826.738
================== =============
</TABLE>

F-21
<PAGE> 82

Notes to Financial Statements (continued)

Aon Asset Management Fund, Inc.

7. INVESTMENTS

Purchases and sales of investment securities, excluding maturities, during
the periods were as follows:

<TABLE>
<CAPTION>
FLEXIBLE
MONEY ASSET
MARKET ALLOCATION
PORTFOLIO PORTFOLIO
-------------- ------------
<S> <C> <C>
PURCHASES
U.S. Government and Agency Obligations............... $ -- $ 34,194,530
Corporate bonds...................................... -- 199,000
Commercial paper..................................... 9,874,922,480 193,988,108
Common stock......................................... -- 47,796,532
-------------- ------------
Total purchases........................................ $9,874,922,480 $276,178,170
============== ============
SALES
U.S. Government and Agency Obligations............... $ -- $ 1,105,000
Corporate bonds...................................... -- 618,015
Commercial paper..................................... 174,419,896 16,081,762
Common stock......................................... -- 24,282,256
-------------- ------------
Total Sales............................................ $ 174,419,896 $ 42,087,033
============== ============
</TABLE>

At October 31, 1995, based on cost for federal income tax purposes, net
unrealized appreciation of portfolio securities consisted of the following:

<TABLE>
<CAPTION>
FLEXIBLE ASSET
ALLOCATION
PORTFOLIO
--------------
<S> <C>
Appreciated Securities.................................................. $5,619,765
Depreciated Securities.................................................. (652,088)
----------
Net unrealized appreciation............................................. $4,967,677
==========
</TABLE>

8. OTHER MATTERS

In September 1995, Aon Corporation announced its intention to sell The Life
Insurance Company of Virginia. The sale of The Life Insurance Company of
Virginia will probably include other Richmond based operations, including Forth
Financial Securities Corporation, the fund's principal underwriter.

F-22
<PAGE> 83

Financial Highlights

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
***
MONEY MARKET PORTFOLIO 1995 1994 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value at beginning
of period.................. $1.00 $1.00 1.00 1.00
Investment income............ .06 .04 .03 .03
Expenses..................... * * * *
----- ----- ----- -----
Net investment income........ .06 .04 .03 .03
Net realized gains (losses)
on sale of investments..... * * * *
----- ----- ----- -----
Income from operations....... .06 .04 .03 .03
Dividends paid to
shareholders from:
Net investment income...... (.06) (.04) (.03) (.03)
Net realized gain (loss)... * * * *
----- ----- ----- -----
(.06) (.04) (.03) (.03)
Contribution of capital...... -- * -- --
----- ----- ----- -----
Increase in net asset
value...................... .00 .00 .00 .00
Net asset value at end of
period..................... $1.00 $1.00 $1.00 $1.00
Total return................. 5.79% 3.73% 3.10% 3.57%
Ratios:
Ratio of operating expenses
to average net assets...... 0.14%** 0.15%** 0.17%** 0.25%**
Ratio of net investment
income to average net
assets..................... 5.79%** 3.73%** 3.10** 3.57**
Net assets at end of
period..................... $420,093,633 $410,912,278 $412,067,947 $399,075,531
</TABLE>

- ---------------

* Less than $0.01 per share

** The Investment Advisor has agreed for the first four years of the
Portfolio's operations to waive a portion of its advisory fees. Absent this
agreement, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .39% and 5.54% for
1995, .40% and 3.48% for 1994, .42% and 2.85% for 1993 and .50% and 3.32%
for 1992, respectively.

*** For the period January 23, 1992 (commencement of operations) to October 31,
1992. Amounts for 1992 have been determined on an annualized basis.

F-23
<PAGE> 84

Financial Highlights (continued)

Aon Asset Management Fund, Inc.

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1,
YEAR ENDED 1994 TO
OCTOBER 31, OCTOBER 31,
FLEXIBLE ASSET ALLOCATION PORTFOLIO 1995 1994
----------- -----------
<S> <C> <C>
Net asset value at beginning of period.......................... $ 9.97 $10.00
Investment income............................................... .32 .25
Expenses........................................................ (.08) (.08)
------ ------
Net investment income........................................... .24 .17
Net realized gains (losses) on sale of investments.............. .66 (.05)
Net unrealized appreciation (depreciation) on investments....... 1.75 .06
------ ------
Income from operations.......................................... 2.65 .18
Dividends paid to shareholders from:
Net investment income......................................... (.24) (.16)
Net realized gains (loss)..................................... (.34) (.05)
------ ------
(.58) (.21)
------ ------
Increase (decrease) in net asset value.......................... 2.07 (.03)
Net asset value at end of period................................ 12.04 9.97
Total return.................................................... 26.92% 1.84%
Ratios:
Ratio of operating expenses to average net assets............. .96% 1.25%*
Ratio of net investment income to average net assets.......... 2.73% 2.63%*
Portfolio turnover............................................ 95.17% 64.36%
Net assets at end of period..................................... $73,775,235 $10,189,125
</TABLE>

- ---------------

* Ratios have been determined on an annualized basis.

F-24
<PAGE> 85

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements

1. Report of the Independent Auditors

2. Statement of Assets and Liabilities.

3. Statement of Operations.

4. Statement of Changes in Net Assets.

5. Portfolio of Investments.

6. Notes to Financial Statements.

(b) Exhibits:

1. Amended and Restated Articles of Incorporation.*

2. Amended and Restated By-Laws of Registrant.*

3. None.

4. None.

5. (a) Investment Advisory Agreement for the Money Market Portfolio.**

(b) Investment Advisory Agreement for the Flexible Asset Allocation
Portfolio.***

6. Amended Distribution Agreement between Registrant and Forth Financial
Securities Corporation.***

7. None.

8. Amended Custody Agreement between Registrant and First Star Trust
Company.**

9. (a) Amended Administration Agreement among Registrant, Aon Advisors,
Inc., and Forth Financial Securities Corporation.**

(b) Amended Transfer Agency Agreement between Registrant and First
Star Trust Company.**

10. Opinion and Consent of George H. Parsons, Esq. concerning the
legality of the securities to be issued.****

11. (a) Consent of Ernst & Young LLP.

(b) Consent of Sutherland, Asbill & Brennan.

12. None.

13. Form of Investment Commitment Letter for Initial Capital.****
<PAGE> 86

14. None.

15. None.

16. Schedule for Computation of Performance Calculations. ****

17. Powers of Attorney.****
- ---------------
* Incorporated herein by reference to post-effective amendment No. 3 to the
Registrant's registration statement on Form N-1A, file No. 33-43133, filed
with the Commission on December 16, 1993.
** Incorporated herein by reference to post-effective amendment No. 4 to
Registrant's registration statement on Form N-1A, file No. 33-43133, filed
with the Commission on February 25, 1994.

*** Incorporated herein by reference to post-effective amendment No. 6 to
Registrant's registration statement on Form N-1A, file No. 33-43133, filed
with the Commission on June 25, 1995.

**** Incorporated herein by reference to pre-effective amendment No. 1 to the
Registrant's registration statement on Form N-1A, File No. 33-43133, filed
with the Securities and Exchange Commission on December 5, 1991.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

The Registrant is a Virginia corporation organized on August 27, 1991. Aon
Corporation, a corporation organized under the laws of the State of Delaware,
and its wholly-owned subsidiaries, have provided the initial investment in both
Portfolios of the Fund and own a substantial percentage of each class of the
outstanding shares of the Fund. The information regarding persons under common
control with the Registrant is provided in the following organization chart for
Aon Corporation.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF DECEMBER 31, 1995
------------------------------------------------------ -------------------------
<S> <C>
Capital Stock -- Class A 157
(Money Market Portfolio)............................
Capital Stock -- Class B 23
(Flexible Asset Allocation Portfolio)...............
</TABLE>

ITEM 27. INDEMNIFICATION.

See Article NINTH of the Registrant's Amended and Restated Articles of
Incorporation, filed as Exhibit 1 to this Registration Statement, which
provision is incorporated herein by reference, and Article VII of the By-Laws of
the Registrant, filed as Exhibit 2 to the Registration Statement, which
provision is incorporated herein by reference.

The Investment Advisory Agreements between the Registrant and AON Advisers,
Inc. ("Advisor") both provide that, in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties on the
part of the Advisor (or its officers, directors, agents, employees, controlling
persons, shareholders, and any other person or entity affiliated with the
Advisor or retained by it to perform or assist in the performance of its
obligations under the Investment Advisory Agreements), neither the Advisor nor
any of its officers, directors, employees or agents shall be subject to
liability to the Registrant or to any shareholder or to any other person with a
beneficial interest in the Registrant for any act or omission in the course of,
or connected with, rendering services under the Investment Advisory Agreements,
including without limitation any error of judgment or mistake of law or for any
loss suffered by the Registrant or any shareholder or other person in connection
with the matters to which these Agreements relate, except to the extent
specified in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services.
<PAGE> 87

In addition, the Registrant intends to maintain a directors and officers
"errors and omissions" liability insurance policy under which the Registrant and
its directors and officers are named insureds.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of such action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR

The Registrant's investment advisor, Aon Advisors, Inc., is a wholly-owned
subsidiary of Aon Corporation. Aon Advisors, Inc. offers its investment advisory
services to subsidiaries and affiliates of Aon Corporation.

Set forth below is a list of the principal officers of Aon Advisors, Inc.,
indicating each business, profession, vocation, or employment of a substantial
nature in which each person has been engaged at any time during the past two
fiscal years, for his or her own account or in the capacity of director,
officer, partner or trustee.

<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION,
AON ADVISORS, INC. VOCATION, OR EMPLOYMENT
- ------------------------------ -------------------------------------------------------------
<S> <C>
Michael A. Conway............. Director and President, Aon Advisors, Inc., since 1990;
Director and President Director and Senior Vice President -- Investments, Combined
Insurance Company of America, since 1990; Senior Vice
President and Senior Investment Officer, Aon Corporation,
since 1990.
Lawrence R. Miller............ Executive Director, Aon Advisors, Inc., since 1987; Vice
Senior Executive Director President -- Investments, Combined Insurance Company of
America, since 1978.
John J. Palmer................ Director, Life of Virginia, since 1986; President, Life of
Director Virginia Series Fund, Inc., since 1986; Senior Vice
President, Life of Virginia, since 1980; President, Aon Asset
Management Fund, Inc. since 1991; President, Forth Financial
Securities Corporation, since 1992.
Jerry G. Overman.............. Vice President, Life of Virginia Series Fund, Inc., since
Treasurer 1986; Director of Investment Services, Aon Advisors, Inc.,
since 1985; Treasurer, Life of Virginia, since 1988.
Mark B. Burka................. Executive Director, Aon Advisors, Inc., since 1990; Vice
Executive Director President -- Investments, Combined Insurance Company of
America, since 1984.
Pendleton M. Shiflett, III.... Vice President, Life of Virginia, since 1988; Executive
Executive Director Director, Aon Advisors, Inc., since 1990.
Jerome I. Baer................ Vice President -- Taxes of Aon Corporation since 1989. Mr.
Director -- Taxes Baer also holds executive positions with a number of Aon
Corporation subsidiaries.
</TABLE>
<PAGE> 88

<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION,
AON ADVISORS, INC. VOCATION, OR EMPLOYMENT
- ------------------------------ -------------------------------------------------------------
<S> <C>
Linda L. Lanam................ Corporate Secretary, Life of Virginia and other Aon
Secretary Corporation affiliates since 1992; Vice President and Senior
Counsel, Life of Virginia since 1989.
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Forth Financial Securities Corporation, the principal underwriter for
Registrant, also acts as the principal underwriter for Life of Virginia Separate
Account I, Life of Virginia Separate Account II, Life of Virginia Separate
Account III, and Life of Virginia Separate Account 4.

(b) Affiliations of Directors and Officers:

<TABLE>
<CAPTION>
POSITIONS WITH POSITIONS WITH
NAME PRINCIPAL UNDERWRITER REGISTRANT
- ------------------------- ------------------------ -----------------------------
<S> <C> <C>
John J. Palmer President and Director President and Director
Wallace L. Chandler No position held Director
John E. Leard No position held Director
Robert P. Martin, Jr. No position held Director
J. Clifford Miller, III No position held Director
Lawrence R. Miller No position held Vice President and Director
J. Garnett Nelson No position held Director
Lee A. Putney No position held Director
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder and
Rule 2a-7 under the 1940 Act will be maintained at the offices of the
Registrant, the Registrant's custodian, Firstar Trust Company, 615 East Michigan
Street, Third Floor, Milwaukee, Wisconsin 53202, or the Registrant's investment
advisor, Aon Advisors, Inc., 123 North Wacker Drive, Chicago, Illinois 60606.

ITEM 31. MANAGEMENT SERVICES.

Inapplicable.

ITEM 32. UNDERTAKINGS.

(a) Inapplicable.

(b) Inapplicable.

(c) The Registrant hereby undertakes to furnish, upon request and without
charge, to each person to whom a prospectus for the Flexible Asset Allocation
Portfolio is delivered a copy of the Registrant's latest annual report to
shareholders.

(d) The Registrant hereby undertakes, if requested to do so by the holders
of at least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon any question of removal of a
director or directors, and to assist in communications with other shareholders
as required by Section 16(c) of the Investment Company Act of 1940.
<PAGE> 89

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this post-effective
amendment number 6 to this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Henrico,
Commonwealth of Virginia, on the 20th day of February, 1996.

AON ASSET MANAGEMENT FUND, INC.

By /s/ JOHN J. PALMER
------------------------------

John J. Palmer
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<C> <S> <C>
/s/ JOHN J. PALMER In his own capacity as President and 2/20/96
- ------------------------------------- Director, and as Attorney-in-fact for each
John J. Palmer of the following Directors and Officers of
the Registrant*

/s/ SCOTT R. REEKS Principal Accounting Officer, Principal 2/20/96
- ------------------------------------- Financial Officer and Treasurer
Scott R. Reeks

* Director 2/20/96
- -------------------------------------
J. Garnett Nelson

* Director 2/20/96
- -------------------------------------
Wallace L. Chandler

* Director 2/20/96
- -------------------------------------
John E. Leard

* Director 2/20/96
- -------------------------------------
Robert P. Martin

* Director 2/20/96
- -------------------------------------
J. Clifford Miller, III

* Director 2/20/96
- -------------------------------------
Lawrence R. Miller

* Director 2/20/96
- -------------------------------------
Lee A. Putney
</TABLE>

<PAGE> 1
Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated December 1, 1995 with respect to
Aon Asset Management Fund, Inc. in the Registration Statement (Form N-1A) and
related Prospectuses of Aon Asset Management Fund, Inc. filed with the
Securities and Exchange Commission in this Post-Effective Amendment No. 7 to
the Registration Statement under the Securities Act of 1933 (Registration No.
33-43133) and in this Amendment No. 8 to the Registration Statement under the
Investment Company Act of 1940 (Registration No. 811-6422).

/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP

Richmond, Virginia
February 28, 1996

<PAGE> 1
February 22, 1996

Board of Directors
Aon Asset Management Fund, Inc.
6610 West Broad Street
Richmond, Virginia 23230

Directors:

We hereby consent to the reference to our name under the caption
"Legal Matters" in the prospectuses and the statement of additional information
filed as part of post-effective amendment number 7 to the Registration
Statement on Form N-1A filed by Aon Asset Management Fund, Inc. with the
Securities and Exchange Commission. In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section
7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN

By: /s/ STEPHEN E. ROTH
----------------------------------
Stephen E. Roth

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 426,399,125
<INVESTMENTS-AT-VALUE> 426,399,125
<RECEIVABLES> 714,883
<ASSETS-OTHER> 737
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 427,114,745
<PAYABLE-FOR-SECURITIES> 4,999,219
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,021,893
<TOTAL-LIABILITIES> 7,021,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 415,892,697
<SHARES-COMMON-STOCK> 420,093,633
<SHARES-COMMON-PRIOR> 410,912,278
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 420,093,633
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 28,920,423
<OTHER-INCOME> 0
<EXPENSES-NET> 676,218
<NET-INVESTMENT-INCOME> 28,244,205
<REALIZED-GAINS-CURRENT> 4,758
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,248,963
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28,244,205
<DISTRIBUTIONS-OF-GAINS> 4,758
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,368,158,454
<NUMBER-OF-SHARES-REDEEMED> 4,366,829,093
<SHARES-REINVESTED> 7,851,993
<NET-CHANGE-IN-ASSETS> 9,181,355
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,706,435
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 676,218
<AVERAGE-NET-ASSETS> 487,552,857
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> FLEXIBLE ASSET

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 68,299,794
<INVESTMENTS-AT-VALUE> 73,267,471
<RECEIVABLES> 1,157,149
<ASSETS-OTHER> 70,680
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,495,300
<PAYABLE-FOR-SECURITIES> 535,832
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184,233
<TOTAL-LIABILITIES> 720,065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,788,687
<SHARES-COMMON-STOCK> 6,126,827
<SHARES-COMMON-PRIOR> 1,021,494
<ACCUMULATED-NII-CURRENT> 3,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 46,231
<ACCUM-APPREC-OR-DEPREC> 4,967,677
<NET-ASSETS> 73,775,235
<DIVIDEND-INCOME> 194,292
<INTEREST-INCOME> 940,057
<OTHER-INCOME> 0
<EXPENSES-NET> 294,592
<NET-INVESTMENT-INCOME> 839,757
<REALIZED-GAINS-CURRENT> 1,835,265
<APPREC-INCREASE-CURRENT> 4,907,281
<NET-CHANGE-FROM-OPS> 7,582,303
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 835,925
<DISTRIBUTIONS-OF-GAINS> 1,835,265
<DISTRIBUTIONS-OTHER> 162,706
<NUMBER-OF-SHARES-SOLD> 4,865,218
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 240,115
<NET-CHANGE-IN-ASSETS> 63,586,110
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 218,580
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 294,592
<AVERAGE-NET-ASSETS> 31,225,714
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 2.41
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> .34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.04
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>