SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted
[ ] Definitive information statement by Rule 14c-6(d)(2))
AON FUNDS
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-6(g)
and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
<PAGE>
AON FUNDS
29th FLOOR, 123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
NOTICE OF MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 26, 2000
Notice is hereby given that a meeting of the shareholders of the Money
Market Fund, the Government Securities Fund, the Asset Allocation Fund and the
REIT Index Fund (each, a "Fund" and collectively, the "Funds"), each a separate
series of shares representing a separate portfolio of securities with its own
investment objective and policies, of Aon Funds, a Delaware business trust (the
"Trust"), will be held at 8:30 a.m., central daylight time, on July 26, 2000 at
the offices of Aon Corporation, 13th Floor, 123 North Wacker Drive, Chicago, IL
60606 for the following purposes:
For Shareholders of All Funds, Voting Together:
(1) To elect six trustees of the Trust.
For Shareholders of Each Fund, Voting Separately by Fund:
(2) To approve or disapprove new investment advisory agreements between
the Trust, on behalf of each of the Funds, and Aon Advisors, Inc., the
investment adviser of each of the Funds, (i) providing for a reduction in stated
contractual management fee rate for each Fund (each Fund's proposed management
fee rate to be equal to its current management fee rate after giving effect to
the fee waiver currently in place for each Fund) and (ii) eliminating references
to Class C shares, none of which is currently issued or outstanding.
For Shareholders of All Funds, Voting Together:
(3) To consider ratification of the selection of Ernst & Young LLP as
independent public accountants for the Trust for the 2000 fiscal year.
Each proposal is discussed more fully in the accompanying information
statement.
All shareholders are invited to attend this meeting. Shareholders of
record at the close of business on June 2, 2000, the record date fixed by the
board of trustees, are entitled to notice of and to vote at this meeting.
By Order of the Board of Trustees of the Trust
June [___], 2000 Catherine Lyczko
Secretary
--------------------------------------------------------------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
--------------------------------------------------------------------------------
<PAGE>
AON FUNDS
29th FLOOR, 123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
June [___], 2000
INFORMATION STATEMENT
--------------------------------------------------------------------------------
THIS IS NOT A PROXY STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
--------------------------------------------------------------------------------
General Information
This information statement is being furnished on behalf of Aon Funds
(the "Trust") and relates to a meeting of shareholders of the Trust to be held
on Wednesday, July 26, 2000 at 8:30 a.m., central daylight time, at the offices
of Aon Corporation, 13th Floor, 123 North Wacker Drive, Chicago, Illinois 60606
and at any adjournment thereof, for the purposes set forth in the accompanying
Notice of Meeting of Shareholders. The approximate mailing date of this
information statement is June [___], 2000.
The Trust is an open-end management investment company formed as a
Delaware business trust on May 16, 1996 and registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trust is the successor to
Aon Asset Management Fund, Inc., a Virginia corporation, which dissolved shortly
after transferring all of its assets to successor funds of the Trust in 1996.
The Trust currently issues four separate series of shares (each, a
"Fund" and collectively, the "Funds"), each representing a separate portfolio of
securities with its own investment objective and policies (commonly known as a
mutual fund). The Funds that are currently offered are the Money Market Fund,
the Government Securities Fund, the Asset Allocation Fund and the REIT Index
Fund. The Trust issues a separate series of shares for each Fund representing
undivided beneficial interests in that Fund. An investor, by investing in a
Fund, becomes entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains on the investments of that Fund.
Likewise, an investor shares pro rata in any losses of that Fund.
Each Fund is a separate series of the Trust and is treated as a separate
entity for certain purposes under the 1940 Act and for certain other purposes. A
shareholder of one Fund has an interest in the assets only of that Fund and is
not deemed to be a shareholder of any other Fund. As described below, for
certain matters shareholders of the Trust vote together as a group; as to other
matters they vote separately by Fund. Each Fund bears its own expenses and other
liabilities and also a share of the Trust's general liabilities and expenses.
All four of the Funds are diversified investment companies within the meaning of
the 1940 Act.
The investment adviser for each of the Funds is Aon Advisors, Inc.
("AAI"), with offices at 123 North Wacker Drive, Chicago, Illinois 60606. AAI,
which is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), is a wholly owned subsidiary of Aon
Corporation, 123 North Wacker Drive, Chicago, Illinois 60606.
<PAGE>
Aon Corporation is a holding company whose common stock is listed on the New
York, Chicago and London stock exchanges. Aon Corporation's subsidiaries carry
on business in three distinct segments: (i) insurance brokerage and other
services, (ii) consulting, and (iii) insurance underwriting. Trust shares are
distributed through Aon Securities Corporation ("ASC"), which is a wholly owned
subsidiary of Aon Corporation. ASC also provides administrative services to the
Trust. ASC's offices are located at 123 North Wacker Drive, Chicago, Illinois
60606. Aon Corporation and its subsidiary companies and affiliates, by virtue of
their shareholder interests in any Fund at any particular date, may be
considered to be controlling persons of the Trust and such Fund and may be able
to cast a deciding vote on all matters submitted to a vote of the Trust's or
such Fund's shareholders. Due to the holdings of Aon Corporation and its
subsidiaries and affiliates on the record date set for this meeting by the board
of trustees, Aon Corporation and is subsidiaries and affiliates are controlling
persons of the Trust and each Fund and can cast the deciding vote on all matters
submitted to a vote of the shareholders of the Trust and each Fund at this
meeting.
Shareholder Meetings and Voting
The Trust does not hold annual shareholder meetings. Under the Agreement
and Declaration of Trust of Aon Funds (the "Declaration"), the trustees, the
chairman of the board of trustees or the president of the Trust may call
meetings of the shareholders from time to time. Shareholders under certain
circumstances have the right to call a meeting of shareholders for the purpose
of voting to remove members of the board of trustees. In addition, shareholders
of the respective Funds will have the power to vote at meetings with respect to,
among other things, changes in fundamental investment policies and restrictions
of such Funds, approval of changes to investment advisory agreements and such
additional matters relating to the Trust or such Funds as required by the 1940
Act.
This meeting has been called by the board of trustees pursuant to
Article V, Section 2 of the Declaration. The table below summarizes the
proposals on which shareholders are being asked to vote and indicates which
shareholders are entitled to vote on each proposal. Proposal 1 relates generally
to all of the Funds; shareholders of all Funds will vote together on this
proposal. Proposal 2 relates to each of the Funds separately; shareholders of
each Fund will vote separately on this proposal. Proposal 2 will be implemented
for each Fund that approves it while each Fund that does not approve Proposal 2
will continue to be governed by its respective advisory agreement, each dated
September 3, 1996, between AAI and the Trust on behalf of such Fund
(collectively, the "Current Advisory Agreements") under which such Fund is
currently governed. Proposal 3 relates generally to all of the Funds;
shareholders of all Funds will vote together on this proposal.
<TABLE>
<CAPTION>
Shareholders Who Will
Proposal Brief Description of the Proposal Vote on the Proposal
-------- --------------------------------- ----------------------
<S> <C> <C>
Proposal 1 To elect six trustees of the Trust Shareholders of all
Funds voting together
2
<PAGE>
Proposal Brief Description of the Proposal Vote on the Proposal
-------- --------------------------------- ----------------------
Proposal 2 To approve or disapprove new investment advisory Shareholders of each
agreements between the Trust, on behalf of each of the Fund voting separately
Funds, and Aon Advisors, Inc., the investment adviser
of each of the Funds, (i) providing for a reduction in
stated contractual management fee rate for each Fund
(each Fund's proposed management fee rate to be equal
to its current management fee rate after giving effect
to the fee waiver currently in place for each Fund)
and (ii) eliminating references to Class C shares,
none of which are currently issued or outstanding
Proposal 3 To consider ratification of the selection of Ernst & Shareholders of all
Young LLP as independent public accountants for the Funds voting together
Trust for the 2000 fiscal year
</TABLE>
As to any matter on which shareholders of the Trust are entitled to
vote, they shall be entitled to one non-cumulative vote for each full share and
to a proportionate fractional vote for each fractional share standing in the
shareholder's name on the books of the Trust. Shares do not have preemptive or
subscription rights. In no event shall holders of shares of a series or class be
entitled to vote such shares with respect to any matter that does not affect any
interest of such series or class, as the case may be, unless otherwise required
by the 1940 Act. All shares then issued and outstanding and entitled to be voted
shall be voted on a series by series basis, except that:
o shares shall be voted in the aggregate without differentiation among
the separate series and classes in the case of the election or removal
of trustees and where otherwise required by the 1940 Act or the
Declaration;
o shares shall be voted by class where required by the 1940 Act; and
o the trustees in their sole discretion may determine that, in
situations where the shares of more than one series or class are
entitled to be voted with respect to a matter, such shares shall be
voted as a single class with respect to such matter if and to the
extent permitted under the 1940 Act.
The Declaration provides that in cases where all shares of the Trust are
to be voted in the aggregate without differentiation among the separate series,
the holders of at least one-third of the shares entitled to be voted in person
or by proxy at a meeting of the holders of such shares shall constitute a quorum
for the transaction of business. However, with respect to certain other
proposals, the 1940 Act may require the holders of a greater proportion of
shares of the Trust or a Fund issued and outstanding and entitled to vote be
represented in person or by proxy for action to be validly taken.
If less than a quorum is present at this meeting, or if a quorum is
present but sufficient votes to approve any of the proposals are not received,
one or more adjournments of this meeting may be proposed. Any adjournment will
require the affirmative vote of a majority of shares represented in person or by
proxy at this meeting. A shareholder vote may be taken on one or
3
<PAGE>
more of the proposals in this information statement prior to any such
adjournment if sufficient votes are present in person or by proxy and it is
otherwise appropriate. No business shall be transacted at an adjourned meeting
except as might have been lawfully transacted had this meeting not been
adjourned.
Election of trustees pursuant to Proposal 1 requires a plurality vote of
the shares of the Trust voting in person or by proxy at this meeting, provided a
quorum is present. Shares of each of the Funds will be voted in the aggregate
without differentiation among the separate Funds. This means that the six
nominees receiving the largest number of votes will be elected, provided that
the holders of at least one-third of the shares of all of the Funds, regardless
of series, are present in person or by proxy at this meeting. Accordingly, a
plurality of all votes cast by shareholders of all of the Funds together,
regardless of series, shall be required to elect each trustee.
Approval of Proposal 2 by each Fund voting on such proposal requires the
affirmative vote of "a majority of the outstanding voting securities" of that
Fund as defined in the 1940 Act. Under the 1940 Act, this means the affirmative
vote of the lesser of (i) 67% or more of the Fund's shares present at this
meeting in person or by proxy, if the holders of more than 50% of the
outstanding shares of such Fund are present at this meeting or represented by
proxy or (ii) more than 50% of the Fund's outstanding shares. If Proposal 2 is
not approved by a Fund voting on that proposal, that Fund will continue to
operate under its Current Advisory Agreement.
Approval of Proposal 3 requires a majority vote of the shares of the
Trust voting in person or by proxy at this meeting, provided a quorum is
present. Shares of each of the Funds will be voted in the aggregate without
differentiation among the separate Funds. This means that a majority of all
votes cast by shareholders of all of the Funds together, regardless of series,
shall be required to approve Proposal 3, provided that the holders of at least
one-third of the shares of all of the Funds, regardless of series, are present
in person or by proxy at this meeting.
Abstentions and broker non-votes will be counted as shares present for
purposes of determining whether a quorum is present but will not be voted for or
against any adjournment or proposal. Accordingly, abstentions and broker
non-votes will have no effect on Proposal 1, for which the required vote is a
plurality of the votes cast. Abstentions and broker non-votes effectively will
be a vote against adjournment and against Proposal 2, for which the required
vote is a percentage of the shares present or outstanding. Abstentions and
broker non-votes will have no effect on Proposal 3, for which the required vote
is a percentage of the votes cast. Broker non-votes are shares held in the name
of a broker or nominee as to which instructions have not been received from the
beneficial owners or other persons entitled to vote and the broker or nominee
does not have discretionary voting authority.
Shareholders of record at the close of business on June 2, 2000 will be
entitled to vote in person or by proxy at this meeting. As of such date, with
respect to each Fund, the number of shares of capital stock outstanding and
entitled to vote is as set forth opposite each Fund's name below:
Money Market Fund [ ] shares;
Government Securities Fund [ ] shares;
Asset Allocation Fund [ ] shares; and
REIT Index Fund [ ] shares.
4
<PAGE>
--------------------------------------------------------------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
--------------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information as to all persons known
to the Trust who, as of April 28, 2000, owned of record or beneficially 5% or
more of any Fund's outstanding shares. Each such person is a subsidiary or an
affiliate of Aon Corporation.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Fund Name and Address of Beneficial Amount and Nature of Percent of
Owner Beneficial Ownership Fund (%)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund Aon Savings Plan 232,512,889 24.18
400 Colony Sq. Suite 2200 directly owned shares
1201 Peachtree St. NE
Atlanta, GA 30361
---------------------------------------------------------------------
Aon Pension Trust 139,022,456 14.46
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Aon Re 126,049,695 13.11
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Aon Specialty Group Inc. 94,745,368 9.85
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Aon Risk Services 61,625,252 6.41
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Aon Risk Services, Inc. US 57,777,497 6.01
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Combined Insurance Company of 51,324,455 5.34
America directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606-1700
-----------------------------------------------------------------------------------------------
Government Securities Aon Pension Trust 10,387,861 71.72
Fund 123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
---------------------------------------------------------------------
Aon Savings Plan 4,076,733 28.15
400 Colony Sq., Suite 2200 directly owned shares
1201 Peachtree St. NE
Atlanta, GA 30361
-----------------------------------------------------------------------------------------------
Asset Allocation Fund Aon Savings Plan 10,241,955 88.63
400 Colony Sq.. Suite 2200 directly owned shares
1201 Peachtree St. NE
Atlanta, GA 30361
---------------------------------------------------------------------
Combined Insurance Company of 1,120,198 9.69
America directly owned shares
123 N. Wacker Dr.
Chicago, IL 60606-1700
-----------------------------------------------------------------------------------------------
REIT Index Fund Aon Savings Plan. 1,798,010 77.03
400 Colony Sq., Suite 2200 directly owned shares
1201 Peachtree St. NE
Atlanta, GA 30361
---------------------------------------------------------------------
Aon Pension Trust 512,295 21.94
123 N. Wacker Dr. directly owned shares
Chicago, IL 60606-1700
-----------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Aon Corporation and its subsidiaries and affiliates, by virtue of their
interests as shareholders of the Trust at any particular time, may be considered
controlling persons of the Trust and may be able to cast a deciding vote on all
matters submitted to a vote of the shareholders of the Trust or one or more of
the Funds. As of April 28, 2000, Aon Corporation and its subsidiaries and
affiliates owned in excess of 98% of the outstanding shares of the Trust. On
that date, the trustees and officers of the Trust owned less than 1% of the
outstanding shares of each of the Funds, excluding holdings attributable to
Michael A. Conway as co-trustee of the Aon Savings Plan and Aon Pension Trust.
Accordingly, Aon Corporation and its subsidiaries and affiliates are controlling
persons of the Trust and each Fund and can cast the deciding vote on all matters
submitted to a vote of the shareholders of the Trust and each Fund at this
meeting.
As of April 28, 2000, Mr. Patrick G. Ryan, Chairman, President and Chief
Executive Officer of Aon Corporation, owned directly and beneficially
[31,094,288 shares (12.09%)] of the outstanding common stock of Aon.
The Trust will furnish, without charge, a copy of its most recent annual
report and semi-annual report succeeding such annual report, if any, to
shareholders upon request. A shareholder who wishes to receive a copy of
the Trust's annual report or semi-annual report may write the Trust's
administrator at 123 North Wacker Drive, Chicago, Illinois 60606, or
call (800) 266-3637.
-------------------
Proposal 1
ELECTION OF TRUSTEES
Shareholders of All Funds, Voting Together,
Are Entitled to Vote on this Proposal.
-------------------
Introduction
The board of trustees of the Trust has nominated the six nominees named
in the table below as trustees of the Trust, to hold office until their
successors are elected and qualified. Under the Declaration and by-laws of the
Trust, the board of trustees, by a vote of a majority of the entire board, may
increase or decrease the number of trustees of the Trust. Prior to June [___],
2000, the number of trustees which normally constituted the entire board of
trustees was five. On that date the trustees voted to increase the size of the
board of trustees of the Trust to six. Due to the resignation of Richard J.
Peters as a trustee of the Trust on April 15, 2000, there are currently only
four serving members. James H. Harris and Diane M. Aigotti are being proposed to
fill the two vacancies expected to exist as of the date of this meeting.
Each trustee generally will serve as a trustee of the Trust during the
lifetime of the Trust, unless such trustee sooner dies, becomes physically or
mentally incapacitated, resigns, or is removed as provided in the Declaration.
All of the nominees for trustee have consented to being named in this
information statement and have agreed to serve if elected. In case any of the
nominees should become unable to serve prior to this meeting, the board of
trustees may recommend a substitute.
6
<PAGE>
Board of Trustees and Officers
The Trust has a board of trustees, the members of which are generally
elected by the shareholders. A majority of the trustees are not affiliated with
AAI or Aon Corporation or their affiliates. The board of trustees is responsible
for the overall management of the Trust, including reviewing the results of the
investment portfolios, monitoring investment activities and practices, and
receiving and acting upon future plans for the Trust.
The trustees and nominees for trustee of the Trust, their addresses,
ages as of June 1, 2000, and their principal occupations for the last five years
are set forth below.
<TABLE>
<CAPTION>
Name Position Age Business Experience
---- -------- --- -------------------
<S> <C> <C> <C>
Diane M. Aigotti* Trustee 35 Executive Vice President - Finance,
1919 West Fletcher Street AAI; Vice President, Office of
Chicago, IL 60657 Management and Budget, University of
Chicago Hospitals & Health System;
Budget Director, City of Chicago
Michael A. Cavataio Trustee 56 Real Estate Developer; Director, Ceres
361A Bienterra Trail Group Inc.; Director, Firstar Bank,
Rockford, IL 61107 Northern Illinois
Michael A. Conway* President, 53 President, AAI; Senior Vice President
123 North Wacker Drive Trustee, and and Senior Investment Officer, Aon
29th Floor Chairman Corporation
Chicago, IL 60606
James H. Harris Nominee for 49 Vice President of Finance, Penske
13400 West Outer Drive Trustee Corporation; former Senior Vice
Detroit, Michigan 48239 President and Chief Financial Officer,
Penske Motorsports, Inc.
Carleton D. Pearl Trustee 56 President and CEO System Capital
McDonald's Corporation Corporation; former Senior Vice
McDonald's Plaza President of McDonalds Corporation
Oak Brook, IL 60523-1900
Charles A. Tribbett Trustee 44 Managing Director and Co-Manager,
200 S. Wacker Drive Russell Reynolds Associates
Suite 3600
Chicago, IL 60606
</TABLE>
* The individuals designated with an asterisk are "interested persons" of
the Trust, as the term is defined in Section 2 (a)(19) of the 1940 Act.
Trustees or officers who are interested persons of the Trust do not
receive any compensation from the Trust for their services to the Trust.
Trustees who are not interested persons of the Trust receive compensation at a
rate of $15,000 annually. In addition, trustees who are not interested persons
of the Trust may be reimbursed for any out-of-pocket expenses incurred in
connection with affairs of the Trust.
Set forth below is a compensation table listing, for each trustee and
nominee for trustee entitled to receive compensation from the Trust during its
fiscal year ended October 31, 1999, the aggregate compensation received from the
Trust during such fiscal year.
7
<PAGE>
Aggregate Compensation
Name of Trustee from the Trust
--------------- ----------------------
Diane M. Aigotti $ 0
Michael A. Cavataio $16,000
James H. Harris $ 0
Carleton D. Pearl $16,000
Charles A. Tribbett $16,000
Executive Officers of the Trust
The following table includes information furnished by each of the
principal executive officers of the Trust. Each such executive officer has held
his or her current position since being appointed thereto by the board of
trustees and will hold such position until his or her successor is duly elected
or appointed or until he or she is removed by the board of trustees, whichever
occurs first. Each such executive officer is an "interested person" of the
Trust, as the term is defined in Section 2 (a)(19) of the 1940 Act.
<TABLE>
<CAPTION>
Name Position Age Business Experience
---- -------- --- -------------------
<S> <C> <C> <C>
Michael A. Conway President and 53 President, AAI; Senior Vice President
123 North Wacker Drive Trustee and Senior Investment Officer, Aon
29th Floor Corporation
Chicago, IL 60606
Arlene H. Hardy Treasurer 42 Treasurer, Aon Corporation
123 North Wacker Drive
26th Floor
Chicago, IL 60606
Catherine M. Lyczko Secretary 39 Counsel, Aon Corporate Law Department;
123 North Wacker Drive Secretary, ASC
13th Floor
Chicago, IL 60606
Brian H. Lawrence Controller 32 Controller, ASC; Treasurer, AAI
123 North Wacker Drive
27th Floor
Chicago, IL 60606
</TABLE>
Meetings and Committees
The Trust does not have standing nominating or compensation committees.
The Trust has a standing audit committee currently consisting of Messrs.
Cavataio, Pearl and Tribbett. Mr. Peters was a member of the audit committee at
the time of his resignation from the board of trustees. It is expected that, if
elected, Mr. Harris will also join the audit committee. The audit committee
meets periodically with the Fund's independent accountants and the executive
officers of the Trust. This committee reviews the accounting principles being
applied by the Trust in financial reporting, the scope and adequacy of internal
controls, the scope of the audit and non-audit assignments of the independent
accountants, and the related fees. During the year
8
<PAGE>
ended October 31, 1999, the board of trustees of the Trust met on four occasions
and the audit committee met once. Each person who then served as a trustee
attended seventy-five percent or more of the total meetings of the trustees and
the committees of the trustees on which he or she served which were held during
the year.
Recommendation and Vote Required
At this meeting, shareholders of the Trust will be asked to elect the
trustees for the Trust. It is the belief of the board of trustees that the
election of Ms. Aigotti and Messrs. Cavataio, Conway, Harris, Pearl and Tribbett
as the trustees for the Trust would be in the best interests of the Trust.
The election of any trustee requires the vote of a plurality of the
shares voted at a meeting of shareholders at which a quorum is present, in
person or by proxy. This means that the six nominees receiving the largest
number of votes will be elected. Accordingly, a plurality of all votes cast by
shareholders of the four Funds shall be required to elect each trustee.
Abstentions and broker non-votes will not be counted as a vote "FOR" or
"AGAINST" Proposal 1, but will be included in the number of shares represented
at this meeting in person or by proxy for quorum purposes. This means that
abstentions and broker non-votes will not have any effect on Proposal 1.
The board of trustees of the Trust recommends that shareholders vote
"FOR" the election of Ms. Aigotti and Messrs. Cavataio, Conway, Harris,
Pearl and Tribbett as members of the board of trustees of the Trust.
-------------------
Proposal 2
APPROVAL OF NEW INVESTMENT ADVISORY
AGREEMENTS BETWEEN THE TRUST AND AAI
Shareholders of Each Fund, Voting Separately,
Are Entitled to Vote on this Proposal.
-------------------
Introduction
AAI serves as the investment adviser for each of the four Funds. AAI
also provides investment advice and management to Aon Corporation and its
subsidiaries and affiliates. AAI, which is registered as an investment adviser
under the Advisers Act, is a wholly owned subsidiary of Aon Corporation. AAI
serves as investment adviser under the general oversight of the board of
trustees of the Trust and pursuant to the Current Advisory Agreements.
It is proposed that the Trust enter into new investment advisory
agreements, on behalf of each Fund, with AAI (collectively, the "New Advisory
Agreements"). If approved, the New Advisory Agreements would result in a
reduction in the management fee rate for each Fund such
9
<PAGE>
that the fee, as specified in each New Advisory Agreement, would be equal to the
effective management fee under each Current Advisory Agreement after giving
effect to fee waivers which have been in place for several years and which were
permanently adopted by AAI on February 29, 2000 for each Fund. The board of
trustees has approved, and recommends that the shareholders of each Fund
approve, the New Advisory Agreement for each Fund.
While the New Advisory Agreements are described below, the discussion is
qualified by the provisions of the complete agreements, copies of which are
attached as Exhibits A, B, C and D for the Money Market Fund, the Asset
Allocation Fund, the Government Securities Fund and the REIT Index Fund,
respectively. If the shareholders of any Fund do not approve this Proposal 2,
then AAI will continue to act as the investment adviser to such Fund pursuant to
such Fund's Current Advisory Agreement.
Pursuant to the Current Advisory Agreements, AAI manages the investment
and reinvestment of the assets of the respective Funds in accordance with their
respective investment objectives and management policies. Each Fund pays AAI
monthly compensation in the form of an investment advisory fee as discussed
below under "Description of Current Advisory Agreements" and "Fees and Fee
Waivers" in this Proposal 2. This fee is accrued daily.
The Trust has entered into a separate administration agreement with ASC,
a subsidiary of Aon Corporation, pursuant to which the Trust pays ASC an annual
fee of 0.05% of each Fund's average daily net assets for administrative
services.
Information About AAI
AAI was organized as a Virginia corporation on September 2, 1987 and is
registered as an investment adviser under the Advisers Act. It is a wholly owned
subsidiary of Aon Corporation. The total staff of AAI as of April 28, 2000
consisted of approximately 22 individuals, including 2 executive directors and 5
portfolio managers. In addition, as of July 1, 2000, Ms. Diane M. Aigotti, who
has been nominated for a seat on the board of trustees of the Trust, will join
the staff of AAI as the Executive Vice President - Finance. Assets under
management include equity securities, fixed income securities and real estate.
As of April 28, 2000, the aggregate assets under AAI's management exceeded $7
billion.
The following table sets forth the name, business address, title and
principal occupation of the officers and directors of AAI:
<TABLE>
<CAPTION>
Name and Position with AAI Business, Profession, Vocation or Employment
-------------------------- --------------------------------------------
<S> <C>
Michael A. Conway Director and President, AAI, since 1990; Director and
Director and President Senior Vice President - Investments, Combined Insurance
Company of America, since 1990; Senior Vice President
and Senior Investment Officer, Aon Corporation, since 1990.
Mark B. Burka Senior Executive Director, AAI, since 1998; Executive
Senior Executive Director Director, AAI, since 1990; Vice President - Investments,
Combined Insurance Company of America, since 1984.
10
<PAGE>
Name and Position with AAI Business, Profession, Vocation or Employment
-------------------------- --------------------------------------------
John Lagedrost Executive Director, AAI, since 1997; Senior Portfolio
Executive Director Manager, AAI, since 1996; Vice President, AAI, since 1995.
Diane M. Aigotti Executive Vice President - Finance, AAI, since 2000
Executive Vice President - Finance
Brian Lawrence Treasurer, AAI, since 1999; Controller, ASC, since
Treasurer 1996; Controller, the Trust, since 1996
</TABLE>
Description of Current Advisory Agreements
Under the Current Advisory Agreements, AAI provides investment advice
and management services to the respective Funds. AAI has agreed to continuously
furnish an investment program for the respective Funds, to be responsible for
the actual managing of the investments of the Funds and to be responsible for
making decisions governing whether to buy, sell or hold any particular security.
AAI considers analyses from various sources, makes necessary investment
decisions and effects transactions accordingly.
In performing services under the Current Advisory Agreements, AAI is
subject to the general oversight and review of the board of trustees of the
Trust and is obligated to perform in a manner consistent with the investment
objective, policies and restrictions of the applicable Fund, the Declaration and
the provisions of the 1940 Act. The Current Advisory Agreements provide that AAI
shall not be liable to the Trust or to any shareholder for any error of judgment
or mistake of law or for any loss suffered by the Trust or by any shareholder in
connection with matters to which the Current Advisory Agreements relate, except
for a breach of fiduciary duty or a loss resulting from willful misfeasance, bad
faith, gross negligence, or reckless disregard on the part of AAI in the
performance of its duties thereunder. AAI bears all expenses in connection with
the performance of its services under the Current Advisory Agreements.
In addition to the fees to be paid to AAI under the Current Advisory
Agreements, the Funds also pay fees to certain service providers, including ASC
and Firstar Trust Company. The Funds pay ASC annual fees of 0.05% of the average
daily net assets for administrative services. These services include: (1)
provision of internal auditing and internal legal services; (2) provision of
stationery and office supplies; (3) preparation of reports to shareholders and
the board of trustees; (4) preparation of tax returns; (5) preparation of
reports to and filings with the Securities and Exchange Commission and state
blue sky authorities; (6) at the Trust's request, furnishing of office space, in
such place as may be agreed upon from time to time, and all necessary office
facilities; (7) provision of clerical, accounting, bookkeeping, administrative
and other similar services (exclusive of those services relating to and to be
performed under any contract for custodial, transfer, dividend and accounting
services entered into by the Trust with a third party); and (8) furnishing of
persons satisfactory to the Trust to respond during normal business hours to
in-person, written and telephone requests for assistance and information from
shareholders of the Trust, and provision of such facilities and equipment as may
be necessary for such persons to carry out their duties, including, without
limitation, office space and facilities, telephones and CRT terminals and
equipment (including telephone lines) necessary for access to the Trust's
shareholder records.
11
<PAGE>
Each Fund is also responsible for all other expenses incurred in its
operation, including: (1) taxes and fees payable by the Fund or the Trust to
federal, state or other government agencies; (2) brokerage fees and commissions,
and issue and transfer taxes; (3) interest; (4) trustees' annual retainer and
meeting attendance fees and expenses of trustees who are not directors, officers
or employees of AAI or of any affiliated person, other than a registered
investment company, of AAI; (5) registration, qualification, filing and other
fees in connection with securities registration requirements of federal and
state regulatory authorities; (6) the charges and expenses for custodial, paying
agent, transfer agent, administration, dividend agent and accounting agent
services; (7) outside legal fees and expenses in connection with the affairs of
the Trust, including, but not limited to, registering and qualifying its shares
with federal and state regulatory authorities; (8) charges and expenses of
outside auditors; (9) costs of meetings of shareholders and trustees of the
Trust; (10) costs of maintenance of the Trust's existence as a Delaware business
trust; (1) insurance premiums; (12) investment advisory fees; (13) costs and
fees associated with printing and delivering registration statements,
shareholders' reports and proxy statements; (14) costs and fees associated with
delivering reports to and making filings with the Securities and Exchange
Commission and state blue sky authorities; (15) costs relating to administration
of the Trust's general operations; (16) costs relating to the Trust's own
employees, if any; and (17) costs of preparing, printing and delivering the
Trust's prospectuses and statements of additional information to existing
shareholders of the Funds. Any expenses that are common to more than one of the
Funds are allocated based on each Fund's respective net assets.
AAI has undertaken that if, in any fiscal year, certain expenses of a
Fund, including the investment advisory, administration and accounting fees (but
excluding interest, taxes, brokerage commissions and extraordinary expenses),
exceed the maximum total annual operating expenses, AAI shall reimburse the Fund
to the extent of such excess. The maximum total annual operating expense maximum
is 1.00% for the Money Market Fund; 1.50% for the first $30 million plus 1.25%
thereafter for the Government Securities Fund; 1.25% for the Asset Allocation
Fund; and 1.50% for the first $30 million plus 1.25% thereafter for the REIT
Index Fund. During the fiscal year ended October 31, 1999, AAI was not required
to reimburse the Trust for expenses incurred in excess of maximum total
operating expenses.
Each of the Current Advisory Agreements was approved by the trustees of
the Trust (including a majority of trustees who are not parties to each of the
Current Advisory Agreements or interested persons, as defined by the 1940 Act,
of any such party) at a meeting held on May 22, 1996, and the continuation of
the Current Advisory Agreements was last approved by such trustees at a meeting
held July 21, 1999. The Current Advisory Agreement for each of the Money Market
Fund and the Asset Allocation Fund was approved by the respective shareholders
of each of such Fund on July 10, 1996. The Current Advisory Agreement for each
of the Government Securities Fund and the REIT Index Fund was approved by the
respective shareholders of each such Fund on or about September 3, 1996.
Each Current Advisory Agreement is not assignable and may be terminated
without penalty upon 60 days' written notice at the option of either the Trust
or AAI or by a vote of shareholders of each respective Fund. Each Current
Advisory Agreement provides that it can be continued from year to year so long
as such continuance is specifically approved annually (i) by the board of
trustees of the Trust or by the vote of a majority of the outstanding voting
securities of the relevant Fund and (ii) by a majority vote of the trustees who
are not parties to such Advisory Agreement or interested persons of any such
party cast in person at a meeting.
12
<PAGE>
Fees and Fee Waivers
Under the Current Advisory Agreements, each Fund currently pays AAI, as
compensation for AAI's services, a fee determined and accrued daily and paid
monthly, based on a stated percentage of the average daily net assets of such
Fund at an annual rate as set forth below:
Current Advisory
Fund Agreement Management Fee
---- ------------------------
Money Market Fund 0.30%
Government Securities Fund 0.45% of the first $100 million;
0.40% of the next $100 million; 0.35% of the
next $100 million; 0.30% of the next $100
million; and 0.25% of amounts in excess of
$400 million.
Asset Allocation Fund 0.65% of the first $250 million;
0.55% of the next $250 million; and
0.45% of amounts in excess of $500 million.
REIT Index Fund 0.60% of the first $100 million;
0.55% of the next $100 million; and
0.50% of amounts in excess of $200 million.
The following table shows the amounts that each of the Funds would have
paid during its last fiscal year ended October 31, 1999 to AAI for advisory fees
(without giving effect to fee waivers) and to ASC for administration fees, as
well as the amounts each Fund would have paid if the proposed New Advisory
Agreement had been in effect throughout the entire last fiscal year.
<TABLE>
<CAPTION>
Amount that would Difference between
have been paid if the proposed
Amount payable the and actual fees
(without New Advisory (without giving
Name of Fund giving effect to Agreement had been effect to
and type of Fee fee waivers) in effect fee waivers)
--------------- ---------------- ------------------ ------------------
<S> <C> <C> <C>
Money Market Fund
Advisory Fee $2,361,451 $787,150 -66.67%
Administration Fee 393,575 393,575 0.00%
Government Securities Fund
Advisory Fee 697,767 161,942 -76.79%
Administration Fee 80,971 80,971 0.00%
Asset Allocation Fund
Advisory Fee 1,247,994 479,998 -61.54%
Administration Fee 96,000 96,000 0.00%
13
<PAGE>
Amount that would Difference between
have been paid if the proposed
Amount payable the and actual fees
(without New Advisory (without giving
Name of Fund giving effect to Agreement had been effect to
and type of Fee fee waivers) in effect fee waivers)
--------------- ---------------- ------------------ ------------------
REIT Index Fund
Advisory Fee 315,196 52,533 -83.33%
Administration Fee 26,266 26,266 0.00%
</TABLE>
Pursuant to AAI's agreements to waive or reimburse fees, AAI has waived
advisory fees for the last several years such that the net annual advisory fee
paid by each Fund as a stated percentage of the average daily net assets of each
Fund was 0.10% of the average daily net assets of the Money Market Fund, the
Government Securities Fund and the REIT Index Fund and 0.25% of the average
daily net assets of the Asset Allocation Fund. For most of the term of the
Current Advisory Agreements, these fee waivers were at the discretion of AAI and
AAI had no legal obligation to renew such fee waivers. On or about February 29,
2000, AAI entered into an agreement with the Trust to make permanent and
irrevocable these fee waivers. The following table shows the amounts that each
of the Funds paid during its last fiscal year ended October 31, 1999 to AAI for
advisory fees after giving effect to fee waivers and to ASC for administration
fees, as well as the amounts each Fund would have paid if the proposed New
Advisory Agreement had been in effect throughout the entire last fiscal year.
<TABLE>
<CAPTION>
Amount that would
have been paid if Difference between
Amount paid after the the proposed and
giving effect to New Advisory actual after
Name of Fund fee waivers Agreement giving effect to
and type of fee then in place had been in effect fee waivers
--------------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
Money Market Fund
Advisory Fee $ 787,150 $ 787,150 0.00%
Administration Fee 393,575 393,575 0.00%
Government Securities Fund
Advisory Fee 161,942 161,942 0.00%
Administration Fee 80,971 80,971 0.00%
Asset Allocation Fund
Advisory Fee 479,998 479,998 0.00%
Administration Fee 96,000 96,000 0.00%
REIT Index Fund
Advisory Fee 52,533 52,533 0.00%
Administration Fee 26,266 26,266 0.00%
</TABLE>
14
<PAGE>
Elimination of References to Class C Shares
Between September 3, 1996 and February 28, 1997, each of the Funds of
the Trust issued two classes of shares, Class C and Class Y shares. The
principal difference between the share classes was that Class C shares were
subject to distribution expenses of up to 0.25% per annum under a Rule 12b-1
Plan applicable to such shares. The Class C shares of each of the Funds were
eliminated effective February 28, 1997 by converting such shares into Class Y
shares of the respective Funds. The conversion was effected on the basis of the
relative net asset values of the Class C shares and the Class Y shares of the
respective Funds as determined as of the date and time of conversion.
Thereafter, Class Y shares became available to any investor who theretofore
would have qualified to purchase either Class C or Class Y shares, and Class Y
shares became known simply as "shares." The Current Advisory Agreements have
provisions which refer to these two classes of shares which are no longer
applicable to the Funds.
New Advisory Agreements
It is proposed that AAI, the investment adviser of each Fund, continue
to be responsible for the investment management of each Fund, subject to the
general oversight of the trustees of the Trust, under the New Advisory
Agreements with the Trust. The New Advisory Agreements will be substantially the
same in all material respects as the respective Current Advisory Agreements
except that:
o the New Advisory Agreements provide for management fees which are
equal to the effective management fees under the Current Advisory
Agreements after giving effect to the permanent fee waivers described
above; and
o the New Advisory Agreements remove references to Class C shares and
Class Y shares and instead only refer to the shares of the Funds.
The following table shows the respective management fee rates.
<TABLE>
<CAPTION>
Current Advisory
Agreement Management New Advisory
Current Advisory Agreement Fee After Giving Agreement
Fund Management Fee Effect to Fee Waivers Management Fee
---- -------------------------- --------------------- ---------------
<S> <C> <C> <C>
Money Market 0.30% 0.10% 0.10%
Fund
Government 0.45% of the first $100 million; 0.10% 0.10%
Securities Fund 0.40% of the next $100 million;
0.35% of the next $100 million;
0.30% of the next $100 million; and
0.25% of amounts in excess of $400 million.
Asset 0.65% of the first $250 million; 0.25% 0.25%
Allocation Fund 0.55% of the next $250 million; and
0.45% of amounts in excess of $500 million.
REIT Index Fund 0.60% of the first $100 million; 0.10% 0.10%
0.55% of the next $100 million; and
0.50% of amounts in excess of $200 million.
</TABLE>
15
<PAGE>
If approved by the shareholders of each of the Funds, the New Advisory
Agreements will continue in effect for two years and may thereafter be continued
from year to year so long as such continuation is specifically approved annually
(a) by the trustees of the Trust or by a majority of the outstanding shares of
the Fund and (b) by a majority vote of the trustees who are not parties to such
New Advisory Agreements, or interested persons of any such party, cast in person
at a meeting called for such purpose.
Board Consideration
In considering whether to recommend that the New Advisory Agreements be
approved by shareholders of the respective Funds, the board of trustees of the
Trust requested and evaluated such information from AAI which the board deemed
relevant, including, but not limited to, information indicating that the Funds
would continue to be managed by their current portfolio managers for the
foreseeable future, thereby ensuring continuity in management; the financial
stability and profitability of AAI; fees paid by other mutual funds relative to
the proposed fees under the New Advisory Agreements; and that the rate at which
advisory fees will be paid to AAI would be the same as the rate at which fees
are now paid to AAI for such services after giving effect to the permanent and
irrevocable fee waivers agreed to by AAI. Although each Fund's management fee is
the same under its New Advisory Agreement as under the Current Advisory
Agreements after giving effect to the fee waivers, by approving the New Advisory
Agreement, the accounting, reporting and disclosure obligations with respect to
the management fees will be simplified. The board of trustees of the Trust,
including a majority of the trustees who are not interested persons of the Fund
or AAI, unanimously approved the New Advisory Agreements at a meeting held on
May 5, 2000.
Recommendation and Vote Required
At this meeting, shareholders of each Fund of the Trust, voting
separately, will be asked to approve a New Investment Advisory Agreement
pertaining to that Fund. Approval of Proposal 2 by each Fund voting on the
proposal requires the affirmative vote of "a majority of the outstanding voting
securities" of that Fund as defined in the 1940 Act. Under the 1940 Act, this
means the affirmative vote of the lesser of (i) 67% or more of the Fund's shares
present at this meeting in person or by proxy, if the holders of more than 50%
of the outstanding shares of such Fund are present at this meeting or
represented by proxy or (ii) more than 50% of the Fund's outstanding shares. If
Proposal 2 is not approved by a Fund voting on this proposal, that Fund will
continue to operate under its Current Advisory Agreement. Abstentions and broker
non-votes will not formally be counted as "FOR" or "AGAINST" Proposal 2, but
will be included in the number of shares represented at this meeting in person
or by proxy for quorum purposes. Since Proposal 2 requires a percentage of the
votes outstanding or present, this means that abstentions and broker non-votes
will effectively be a vote against Proposal 2.
The board of trustees of the Trust recommends that shareholders of each
Fund vote "FOR" the approval of the New Advisory Agreement relating to
such Fund.
16
<PAGE>
-------------------
Proposal 3
RATIFICATION OF
INDEPENDENT ACCOUNTANTS
Shareholders of All Funds, Voting Together,
Are Entitled to Vote on this Proposal.
-------------------
The board of trustees of the Trust, including a majority of the trustees
who are not "interested persons" of the Trust, has selected Ernst & Young LLP,
an independent accounting firm, to serve as independent certified public
accountants for the Trust for the fiscal year ending October 31, 2000. Ernst &
Young LLP was selected as independent accountants to Aon Corporation and its
subsidiaries in 1986, has served as independent accountants to the Trust or its
predecessor since September 26, 1991 and reports directly to the Trust's audit
committee. Audit services performed by Ernst & Young LLP during the most recent
fiscal year included examinations of the financial statements of the Trust,
services related to filings with the Securities and Exchange Commission and
consultations on matters relating to accounting and financial reporting. Ernst &
Young LLP has been given the opportunity to make a statement if it so desires at
this meeting. Ernst & Young LLP is not expected to be present at this meeting
but will be available should any matter arise requiring its presence.
Recommendation and Vote Required
At this meeting, shareholders of the Trust will be asked to consider
ratification of the selection of Ernst & Young LLP as independent accountants
for the Trust. It is the belief of the board of trustees that the employment of
Ernst & Young LLP for the 2000 fiscal year would be in the best interests of the
Trust.
The ratification of the selection of the independent accountants
requires the vote of a majority of the shares voted at a meeting of shareholders
at which a quorum is present, in person or by proxy. Abstentions and broker
non-votes will not formally be counted as "FOR" or "AGAINST" Proposal 3, but
will be included in the number of shares represented at this meeting in person
or by proxy for quorum purposes. Since Proposal 3 requires a percentage of the
votes cast, this means that abstentions and broker non-votes, since they are not
votes cast, will not have any effect on Proposal 3.
The board of trustees of the Trust recommends that shareholders vote
"FOR" ratification of the selection of Ernst & Young LLP as independent
accountants for the Trust.
Additional Information
The Trust is not required to hold annual meetings of shareholders and
the Trust currently does not intend to hold such meetings unless shareholder
action is required in accordance with the 1940 Act or the Declaration. By
observing this policy, the Trust seeks to avoid the expenses
17
<PAGE>
customarily incurred in the preparation of proxy or informational material and
the holding of shareholder meetings, as well as the related expenditure of
corporate staff time.
A shareholder proposal intended to be presented at any meeting of
shareholders of the Trust hereafter called must be received by the Trust a
reasonable time before the information statement is to be transmitted to
security holders for information regarding such proposal to be included in such
information statement. Likewise, a shareholder proposal intended to be presented
at any meeting of shareholders of the Trust hereafter called must be received by
the Trust a reasonable time before the board of trustees' solicitation relating
thereto is made in order to be included in the Trust's proxy statement and form
of proxy relating to that meeting. In either case, the mere submission of a
proposal by a shareholder does not guarantee that such proposal will be included
in the information statement or proxy statement because certain rules under the
federal securities laws must be complied with before inclusion of the proposal
is required. A shareholder desiring to submit a proposal for presentation at a
meeting of shareholders should send the proposal to the offices of the Trust's
administrator at 123 North Wacker Drive, Chicago, Illinois 60606.
The Trust knows of no other matters that may come before this meeting.
By Order of the Board of Trustees of the Trust
---------------------------
Catherine Lyczko, Secretary
18
<PAGE>
Exhibit A
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ____ day of
___________, 2000 by and between Aon Funds, a Delaware business trust
(hereinafter the "Trust"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and Aon
Advisors, Inc., a Virginia corporation (hereinafter the "Advisor"), an
investment advisor registered under the Investment Advisers Act of 1940.
1. Furnishing of Documents.
------------------------
1.1 The Trust has furnished the Advisor with copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-lA as
filed with the Securities and Exchange Commission ("SEC"), which
includes all statements of the investment objective, policies and
restrictions of the Fund of the Trust referred to below.
1.2 The Trust will furnish the Advisor, from time to time, with copies of
all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all documents so furnished by
the Trust.
2. Investment Advisory Services.
-----------------------------
2.1 Subject to the supervision and approval of the Trust's trustees (the
"Trustees"), the Trust hereby employs the Advisor to act as the investment
advisor to, and manager of, the Trust's Money Market Fund (hereinafter the
"Fund").
2.2 The Advisor hereby agrees to manage the investment and reinvestment of
the assets of the Fund, at its own expense, in accordance with the Fund's
investment objective, policies and restrictions as stated in the documents
referred to in Section l.1(a), (b) and (c) hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided and on the
other terms and conditions set forth in this Agreement.
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic, statistical and
financial data and information and undertake such additional
investment research as it shall believe necessary or advisable;
<PAGE>
(b) conduct a continuous program of investment and reinvestment with
respect to the Fund's assets and, with respect thereto, the
Advisor is hereby granted full authority by the Trust to place
orders for purchases, sales, exchanges or other dispositions of
securities and other instruments for the Fund's account and to
manage the investments and any other property of the Fund, and to
provide or obtain such services as may be necessary in managing,
acquiring or disposing of investments;
(c) consult with and report to the Trustees, or any committees or
officers acting pursuant to authority of the Trustees, at such
times and in such manner as the Trustees may deem appropriate,
with respect to the implementation of the investment objective,
policies and restrictions of the Fund; and
(d) at the Trust's request, provide persons to serve as trustees and
officers of the Trust.
3. Investment Advisory Fee.
------------------------
3.1 In consideration of all services rendered pursuant to Section 2 of this
Agreement, the Fund shall pay to the Advisor, after the end of each calendar
month, a fee, accrued daily and based upon the average daily net asset value of
the Fund for the month (or portion thereof during which this Agreement is in
effect), at an annual rate of 0.10% (10/100ths of 1%).
3.2 If on any day there is no determination of the net asset value of the
Fund as a result of a suspension of the right of redemption of Fund shares or
for any other reason, then for the purpose of this Section 3, the net asset
value of the Fund as last determined will be deemed to be the net asset value
for such day.
4. Expenses.
---------
4.1 The Advisor will bear all expenses in connection with the performance
of its services under this Agreement.
4.2 The Trust or the Fund will assume and pay, or enter into arrangements
providing for the direct payment subject to reimbursement of, all other expenses
incurred in the operation of the Fund or the Trust that are incurred by or
allocated to the Fund, including:
(a) taxes and fees payable by the Fund or the Trust to federal, state
or other government agencies;
(b) brokerage fees and commissions, and issue and transfer taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees who are not directors, officers or employees
of the Advisor or of any affiliated person, other than a
registered investment company, of the Advisor;
(e) registration, qualification, filing and other fees in connection
with securities registration requirements of federal and state
regulatory authorities;
A-2
<PAGE>
(f) the charges and expenses for custodial, paying agent, transfer
agent, administration, dividend agent and accounting agent
services,
(g) outside legal fees and expenses in connection with the affairs of
the Trust, including, but not limited to, registering and
qualifying its shares with federal and state regulatory
authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and Trustees of the Trust;
(j) costs of maintenance of the Trust's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and making
filings with the SEC and state Blue Sky authorities;
(o) costs relating to administration of the Trust's general
operations;
(p) costs relating to the Trust's own employees, if any; and
(q) costs of preparing, printing and delivering the Trust's
prospectuses and statements of additional information to existing
shareholders of the Fund.
5. Reimbursement.
--------------
5.1 If in any fiscal year, the aggregate expense of the Fund, including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceeds 1% of the value of the Fund's
average daily net assets, the Advisor will reimburse the Fund for such excess.
This expense reimbursement obligation is not limited to the amount of the fees
received hereunder and will be estimated, reconciled and paid on a monthly
basis.
6. Fund Transactions and Brokerage.
--------------------------------
6.1 The Fund's transactions in portfolio securities shall usually be
effected with the issuer or with a dealer in money market instruments acting as
principal on a net basis. The Fund also may purchase underwritten issues, which
involve an underwriting discount or commission. Decisions with respect to the
purchase and sale of portfolio securities, including allocation of portfolio
business and the negotiation of the price of the securities and commissions, if
any, are to be made by the Advisor.
6.2 Neither the Advisor nor any company affiliated with it shall act as a
broker or dealer for the purpose of executing portfolio transactions for the
Fund.
A-3
<PAGE>
6.3 The primary consideration in allocating transactions to dealers and
brokers shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration also may be given
to additional factors, such as furnishing of supplemental research and other
services deemed to be of value to the Trust, the Fund or the Advisor. The
Advisor is authorized to execute orders with dealers or brokers that provide
research and security and economic analysis that supplements the research and
analysis of the Advisor, even though the spread or commission at which an order
is executed may be higher than that which another dealer or broker might charge,
provided that the Advisor determines in good faith that the amount of the spread
or commission is reasonable in relation to the value of the services provided.
Such research and services include advice as to the value of securities, the
advisability of investment in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). The research may be useful to the Advisor in
serving other portfolios of the Trust, the Fund and other accounts managed by
the Advisor.
7. Similar Activities for Others.
------------------------------
7.1 The services of the Advisor to the Fund under this Agreement are not to
be deemed exclusive and the Advisor will be free to render similar services to
others so long as its services under this Agreement are not impaired. Investment
decisions for the Fund will be made independently from those of other accounts
that may be managed by the Advisor. If, however, accounts managed by the Advisor
are simultaneously engaged in purchases of the same securities, then, pursuant
to the authorization of the Trustees, available securities may be allocated to
each account and may be averaged as to price in whatever manner the Advisor
deems to be fair.
7.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Fund, or limit the size of the position
obtainable for the Fund. To the extent that transactions on behalf of more than
one client of the Advisor during the same period may increase the demand for
securities being purchased or the supply of securities being sold, the Trust and
the Fund recognize that there may be an adverse effect on price.
8. Rule 2a-7 Compliance and Maintenance of Records.
------------------------------------------------
8.1 The Advisor agrees to manage the investment and reinvestment of the
Fund's assets in compliance with Rule 2a-7, as it may from time to time be
amended, under the 1940 Act, and to maintain all records required by Rule 2a-7.
The Advisor also agrees to maintain and preserve, in accordance with the 1940
Act and rules thereunder, and for the periods prescribed by Rule 3la-2 under the
1940 Act, books and records with respect to the Fund's securities transactions
required to be maintained by Rule 3la-1 under the 1940 Act.
8.2 The Advisor further agrees that all records which it maintains for the
Fund are the Trust's property and that the Advisor will surrender them to the
Trust, its independent auditors, the Trustees, or as may be required by any
government agency having jurisdiction over the Trust, promptly upon written
request. The provisions of this Section 8 shall survive any termination of this
Agreement.
A-4
<PAGE>
9. Dual Interests.
---------------
9.1 It is understood by both parties that any of the shareholders,
trustees, officers, employees and agents of the Trust may be a director,
officer, employee or agent of, or be otherwise interested in, the Advisor, any
affiliated person of the Advisor, or any organization in which the Advisor or
any affiliated person of the Advisor may have an interest; and that the Advisor,
and any such affiliated person or any such organization may have an interest in
the Trust or the Fund.
9.2 It is also understood by both parties that the existence of any such
dual interest shall not affect the validity of any transactions hereunder,
except as otherwise provided by specific provisions of applicable law, including
the 1940 Act.
10. Duration, Termination and Amendment of this Agreement.
-----------------------------------------------------
10.1 This Agreement shall not become effective, and the Advisor shall not
serve or act as the Fund's investment advisor, unless and until this Agreement
is approved by the Trust's board of trustees (the "Board"), including a majority
of the Trustees who are not parties to this Agreement or interested persons of
any such party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Fund.
10.2 If approved as provided above, this Agreement shall continue in effect
for two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(a) by the Board; or
(b) by a vote of a majority of the outstanding voting securities of
the Fund.
In either event such continuance also must be approved by the vote of a majority
of the Trustees who are not parties to this Agreement or interested persons of
the Trust or of the Advisor, cast in person at a meeting called for the purpose
of voting on such approval.
10.3 This Agreement may, on sixty days' written notice, be terminated at
any time, without the payment of any penalty, by the Board, by a vote of a
majority of the Fund's outstanding voting securities of the Fund or by the
Advisor.
10.4 This Agreement shall automatically terminate in the event of its
assignment.
10.5 In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person" and "assignment" and a "majority of the outstanding voting
securities," shall be applied.
10.6 This Agreement shall not be amended without specific approval of such
amendment by:
(a) the vote of a majority of the outstanding voting securities of
the Fund; and
(b) the vote of a majority of the Trustees, including a majority of
the Trustees who are not parties to this Agreement and who are
not interested persons
A-5
<PAGE>
of the Trust or of the Advisor, cast in person at a meeting
called for the purpose of voting on such amendment.
11. Liability of the Advisor.
-------------------------
11.1 In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties on the part of the Advisor, or of
its officers, directors, agents, employees, controlling persons, shareholders,
or any other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under this Agreement
(each of the foregoing, an "Advisory Affiliate"), neither the Advisor nor any
Advisory Affiliate shall be subject to liability to the Trust or the Fund or to
any shareholder of the Fund or to any other person with a beneficial interest in
the Fund or the Trust for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund or
any shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
12. Use of Name "Aon" Marks or Symbols.
----------------------------------
12.1 If the Advisor ceases to act as the investment advisor, or, in any
event, if the Advisor so requests in writing, the Trust agrees it will take all
necessary action to change the name of the Trust and/or the Fund to a name not
including the word "Aon."
13. Miscellaneous.
--------------
13.1 The Advisor may from time to time employ or associate with any person
or persons it may believe to be particularly fitted to assist it in the
performance of this Agreement. The compensation of any such persons will be paid
by the Advisor, and no obligation will be incurred by, or on behalf of, the
Trust with respect to them. In addition, the Trust understands that the persons
employed by the Advisor to assist in the performance of its duties hereunder
will not devote their full time to those duties, and that nothing contained
herein will be deemed to limit or restrict the Advisor's right or the right of
any of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and same instrument.
13.4 It is intended by the parties that this Agreement be governed by the
law of the State of Illinois; however, this Agreement is also governed by, and
subject to, the 1940 Act, and rules thereunder, including such exemptions
therefrom as the SEC may grant.
A-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
-------------------------- ------------------------------
Secretary President
Attest: Aon Advisors, Inc.
-------------------------- ------------------------------
Secretary President
Signature page for Investment Advisory Agreement
Money Market Fund
<PAGE>
Exhibit B
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ____ day of
___________, 2000 by and between Aon Funds, a Delaware business trust
(hereinafter the "Trust"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and Aon
Advisors, Inc., a Virginia corporation (hereinafter the "Advisor"), an
investment advisor registered under the Investment Advisers Act of 1940.
1. Furnishing of Documents.
------------------------
1.1 The Trust has furnished the Advisor with copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-lA
as filed with the Securities and Exchange Commission
("SEC"), which includes all statements of the investment
objective, policies and restrictions of the Fund of the
Trust referred to below.
1.2 The Trust will furnish the Advisor, from time to time, with copies
of all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all documents so furnished
by the Trust.
2. Investment Advisory Services.
-----------------------------
2.1 Subject to the supervision and approval of the Trust's trustees (the
"Trustees"), the Trust hereby employs the Advisor to act as the investment
advisor to, and manager of, the Trust's Government Securities Fund (hereinafter
the "Fund").
2.2 The Advisor hereby agrees to manage the investment and reinvestment
of the assets of the Fund, at its own expense, in accordance with the Fund's
investment objective, policies and restrictions as stated in the documents
referred to in Section l.1(a), (b) and (c) hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided and on the
other terms and conditions set forth in this Agreement.
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic, statistical and
financial data and information and undertake such additional
investment research as it shall believe necessary or advisable;
<PAGE>
(b) conduct a continuous program of investment and reinvestment with
respect to the Fund's assets and, with respect thereto, the
Advisor is hereby granted full authority by the Trust to place
orders for purchases, sales, exchanges or other dispositions of
securities and other instruments for the Fund's account and to
manage the investments and any other property of the Fund, and to
provide or obtain such services as may be necessary in managing,
acquiring or disposing of investments;
(c) consult with and report to the Trustees, or any committees or
officers acting pursuant to authority of the Trustees, at such
times and in such manner as the Trustees may deem appropriate,
with respect to the implementation of the investment objective,
policies and restrictions of the Fund; and
(d) at the Trust's request, provide persons to serve as trustees and
officers of the Trust.
3. Investment Advisory Fee.
------------------------
3.1 In consideration of all services rendered pursuant to Section 2 of
this Agreement, the Fund shall pay to the Advisor, after the end of each
calendar month, a fee, accrued daily and based upon the average daily net asset
value of the Fund for the month (or portion thereof during which this Agreement
is in effect), at an annual rate of 0.10% (10/100ths of 1%).
3.2 If on any day there is no determination of the net asset value of
the Fund as a result of a suspension of the right of redemption of Fund shares
or for any other reason, then for the purpose of this Section 3, the net asset
value of the Fund as last determined will be deemed to be the net asset value
for such day.
4. Expenses.
---------
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 The Trust or the Fund will assume and pay, or enter into
arrangements providing for the direct payment subject to reimbursement of, all
other expenses incurred in the operation of the Fund or the Trust that are
incurred by or allocated to the Fund, including:
(a) taxes and fees payable by the Fund or the Trust to federal, state
or other government agencies;
(b) brokerage fees and commissions, and issue and transfer taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees who are not directors, officers or employees
of the Advisor or of any affiliated person, other than a
registered investment company, of the Advisor;
B-2
<PAGE>
(e) registration, qualification, filing and other fees in connection
with securities registration requirements of federal and state
regulatory authorities;
(f) the charges and expenses for custodial, paying agent, transfer
agent, administration, dividend agent and accounting agent
services,
(g) outside legal fees and expenses in connection with the affairs of
the Trust, including, but not limited to, registering and
qualifying its shares with federal and state regulatory
authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and Trustees of the Trust;
(j) costs of maintenance of the Trust's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and making
filings with the SEC and state Blue Sky authorities;
(o) costs relating to administration of the Trust's general
operations;
(p) costs relating to the Trust's own employees, if any; and
(q) costs of preparing, printing and delivering the Trust's
prospectuses and statements of additional information to existing
shareholders of the Fund.
5. Reimbursement.
--------------
5.1 If in any fiscal year, the aggregate expense of the Fund, including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceeds 1.50% of the first $30 million
of the average daily net assets of the Fund and 1.25% of the amount by which the
average daily net assets of the Fund exceeds $30 million, the Advisor will
reimburse the Fund for such excess. This expense reimbursement obligation is not
limited to the amount of the fees received hereunder and will be estimated,
reconciled and paid on a monthly basis.
6. Fund Transactions and Brokerage.
--------------------------------
6.1 The Fund's transactions in equity securities will usually be
executed through brokers that will receive a commission paid by the Fund. The
Fund's transactions in fixed income and money market securities shall usually be
effected with the issuer or with a dealer in such instruments acting as
principal on a net basis. The Fund also may purchase underwritten issues, which
involve an underwriting discount or commission. Decisions with respect to the
B-3
<PAGE>
purchase and sale of portfolio securities, including allocation of portfolio
business and the negotiation of the price of the securities and commissions, if
any, are to be made by the Advisor.
6.2 Neither the Advisor nor any company affiliated with it shall act as
a broker or dealer for the purpose of executing portfolio transactions for the
Fund.
6.3 The primary consideration in allocating transactions to dealers and
brokers shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration also may be given
to additional factors, such as furnishing of supplemental research and other
services deemed to be of value to the Trust, the Fund or the Advisor. The
Advisor is authorized to execute orders with dealers or brokers that provide
research and security and economic analysis that supplements the research and
analysis of the Advisor, even though the spread or commission at which an order
is executed may be higher than that which another dealer or broker might charge,
provided that the Advisor determines in good faith that the amount of the spread
or commission is reasonable in relation to the value of the services provided.
Such research and services include advice as to the value of securities, the
advisability of investment in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). The research may be useful to the Advisor in
serving other portfolios of the Trust, the Fund and other accounts managed by
the Advisor.
7. Similar Activities for Others.
------------------------------
7.1 The services of the Advisor to the Fund under this Agreement are not
to be deemed exclusive and the Advisor will be free to render similar services
to others so long as its services under this Agreement are not impaired.
Investment decisions for the Fund will be made independently from those of other
accounts that may be managed by the Advisor. If, however, accounts managed by
the Advisor are simultaneously engaged in purchases of the same securities,
then, pursuant to the authorization of the Trustees, available securities may be
allocated to each account and may be averaged as to price in whatever manner the
Advisor deems to be fair.
7.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Fund, or limit the size of the position
obtainable for the Fund. To the extent that transactions on behalf of more than
one client of the Advisor during the same period may increase the demand for
securities being purchased or the supply of securities being sold, the Trust and
the Fund recognize that there may be an adverse effect on price.
8. Compliance and Maintenance of Records.
--------------------------------------
8.1 The Advisor agrees to manage the investment and reinvestment of the
Fund's assets in compliance with the 1940 Act and rules and regulations
thereunder. The Advisor also agrees to maintain and preserve, in accordance with
the 1940 Act and rules thereunder, and for the periods prescribed by Rule 3la-2
under the 1940 Act, books and records with respect to the Fund's securities
transactions required to be maintained by Rule 3la-1 under the 1940 Act.
8.2 The Advisor further agrees that all records which it maintains for
the Fund are the Trust's property and that the Advisor will surrender them to
the Trust, its independent auditors,
B-4
<PAGE>
the Trustees, or as may be required by any government agency having jurisdiction
over the Trust, promptly upon written request. The provisions of this Section 8
shall survive any termination of this Agreement.
9. Dual Interests.
---------------
9.1 It is understood by both parties that any of the shareholders,
trustees, officers, employees and agents of the Trust may be a director,
officer, employee or agent of, or be otherwise interested in, the Advisor, any
affiliated person of the Advisor, or any organization in which the Advisor or
any affiliated person of the Advisor may have an interest; and that the Advisor,
and any such affiliated person or any such organization may have an interest in
the Trust or the Fund.
9.2 It is also understood by both parties that the existence of any such
dual interest shall not affect the validity of any transactions hereunder,
except as otherwise provided by specific provisions of applicable law, including
the 1940 Act.
10. Duration, Termination and Amendment of this Agreement.
-----------------------------------------------------
10.1 This Agreement shall not become effective, and the Advisor shall
not serve or act as the Fund's investment advisor, unless and until this
Agreement is approved by the Trust's board of trustees (the "Board"), including
a majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Fund.
10.2 If approved as provided above, this Agreement shall continue in
effect for two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(a) by the Board; or
(b) by a vote of a majority of the outstanding voting
securities of the Fund.
In either event such continuance also must be approved by the vote of a majority
of the Trustees who are not parties to this Agreement or interested persons of
the Trust or of the Advisor, cast in person at a meeting called for the purpose
of voting on such approval.
10.3 This Agreement may, on sixty days' written notice, be terminated at
any time, without the payment of any penalty, by the Board, by a vote of a
majority of the Fund's outstanding voting securities of the Fund or by the
Advisor.
10.4 This Agreement shall automatically terminate in the event of its
assignment.
10.5 In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person" and "assignment" and a "majority of the outstanding voting
securities," shall be applied.
10.6 This Agreement shall not be amended without specific approval of
such amendment by:
B-5
<PAGE>
(a) the vote of a majority of the outstanding voting
securities of the Fund; and
(b) the vote of a majority of the Trustees, including a
majority of the Trustees who are not parties to this
Agreement and who are not interested persons of the Trust
or of the Advisor, cast in person at a meeting called for
the purpose of voting on such amendment.
11. Liability of the Advisor.
-------------------------
11.1 In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties on the part of the Advisor, or of
its officers, directors, agents, employees, controlling persons, shareholders,
or any other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under this Agreement
(each of the foregoing, an "Advisory Affiliate"), neither the Advisor nor any
Advisory Affiliate shall be subject to liability to the Trust or the Fund or to
any shareholder of the Fund or to any other person with a beneficial interest in
the Fund or the Trust for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund or
any shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
12. Use of Name "Aon" Marks or Symbols.
----------------------------------
12.1 If the Advisor ceases to act as the investment advisor, or, in any
event, if the Advisor so requests in writing, the Trust agrees it will take all
necessary action to change the name of the Trust and/or the Fund to a name not
including the word "Aon."
13. Miscellaneous.
--------------
13.1 The Advisor may from time to time employ or associate with any
person or persons it may believe to be particularly fitted to assist it in the
performance of this Agreement. The compensation of any such persons will be paid
by the Advisor, and no obligation will be incurred by, or on behalf of, the
Trust with respect to them. In addition, the Trust understands that the persons
employed by the Advisor to assist in the performance of its duties hereunder
will not devote their full time to those duties, and that nothing contained
herein will be deemed to limit or restrict the Advisor's right or the right of
any of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and same instrument.
B-6
<PAGE>
13.4 It is intended by the parties that this Agreement be governed by
the law of the State of Illinois; however, this Agreement is also governed by,
and subject to, the 1940 Act, and rules thereunder, including such exemptions
therefrom as the SEC may grant.
B-7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
-------------------------- ------------------------------
Secretary President
Attest: Aon Advisors, Inc.
-------------------------- ------------------------------
Secretary President
Signature page for Investment Advisory Agreement
Government Securities Fund
<PAGE>
Exhibit C
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ____ day of
___________, 2000 by and between Aon Funds, a Delaware business trust
(hereinafter the "Trust"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and Aon
Advisors, Inc., a Virginia corporation (hereinafter the "Advisor"), an
investment advisor registered under the Investment Advisers Act of 1940.
1. Furnishing of Documents.
------------------------
1.1 The Trust has furnished the Advisor with copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-lA
as filed with the Securities and Exchange Commission
("SEC"), which includes all statements of the investment
objective, policies and restrictions of the Fund of the
Trust referred to below.
1.2 The Trust will furnish the Advisor, from time to time, with copies
of all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all documents so furnished
by the Trust.
2. Investment Advisory Services.
-----------------------------
2.1 Subject to the supervision and approval of the Trust's trustees (the
"Trustees"), the Trust hereby employs the Advisor to act as the investment
advisor to, and manager of, the Trust's Asset Allocation Fund (hereinafter the
"Fund").
2.2 The Advisor hereby agrees to manage the investment and reinvestment
of the assets of the Fund, at its own expense, in accordance with the Fund's
investment objective, policies and restrictions as stated in the documents
referred to in Section l.1(a), (b) and (c) hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided and on the
other terms and conditions set forth in this Agreement.
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic, statistical
and financial data and information and undertake such
additional investment research as it shall believe necessary
or advisable;
<PAGE>
(b) conduct a continuous program of investment and reinvestment
with respect to the Fund's assets and, with respect thereto,
the Advisor is hereby granted full authority by the Trust to
place orders for purchases, sales, exchanges or other
dispositions of securities and other instruments for the
Fund's account and to manage the investments and any other
property of the Fund, and to provide or obtain such services
as may be necessary in managing, acquiring or disposing of
investments;
(c) consult with and report to the Trustees, or any committees
or officers acting pursuant to authority of the Trustees, at
such times and in such manner as the Trustees may deem
appropriate, with respect to the implementation of the
investment objective, policies and restrictions of the Fund;
and
(d) at the Trust's request, provide persons to serve as trustees
and officers of the Trust.
3. Investment Advisory Fee.
------------------------
3.1 In consideration of all services rendered pursuant to Section 2 of
this Agreement, the Fund shall pay to the Advisor, after the end of each
calendar month, a fee, accrued daily and based upon the average daily net asset
value of the Fund for the month (or portion thereof during which this Agreement
is in effect), at an annual rate of 0.25% (25/100ths of 1%).
3.2 If on any day there is no determination of the net asset value of
the Fund as a result of a suspension of the right of redemption of Fund shares
or for any other reason, then for the purpose of this Section 3, the net asset
value of the Fund as last determined will be deemed to be the net asset value
for such day.
4. Expenses.
---------
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 The Trust or the Fund will assume and pay, or enter into
arrangements providing for the direct payment subject to reimbursement of, all
other expenses incurred in the operation of the Fund or the Trust that are
incurred by or allocated to the Fund, including:
(a) taxes and fees payable by the Fund or the Trust to federal,
state or other government agencies;
(b) brokerage fees and commissions, and issue and transfer
taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees who are not directors, officers or
employees of the Advisor or of any affiliated person, other
than a registered investment company, of the Advisor;
C-2
<PAGE>
(e) registration, qualification, filing and other fees in
connection with securities registration requirements of
federal and state regulatory authorities;
(f) the charges and expenses for custodial, paying agent,
transfer agent, administration, dividend agent and
accounting agent services,
(g) outside legal fees and expenses in connection with the
affairs of the Trust, including, but not limited to,
registering and qualifying its shares with federal and state
regulatory authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and Trustees of the Trust;
(j) costs of maintenance of the Trust's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making filings with the SEC and state Blue Sky authorities;
(o) costs relating to administration of the Trust's general
operations;
(p) costs relating to the Trust's own employees, if any; and
(q) costs of preparing, printing and delivering the Trust's
prospectuses and statements of additional information to
existing shareholders of the Fund.
5. Reimbursement.
--------------
5.1 If in any fiscal year, the aggregate expense of the Fund, including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceeds 1.25% of the average daily net
assets of the Fund, the Advisor will reimburse the Fund for such excess. This
expense reimbursement obligation is not limited to the amount of the fees
received hereunder and will be estimated, reconciled and paid on a monthly
basis.
6. Fund Transactions and Brokerage.
--------------------------------
6.1 The Fund's transactions in equity securities will usually be
executed through brokers that will receive a commission paid by the Fund. The
Fund's transactions in fixed income and money market securities shall usually be
effected with the issuer or with a dealer in such instruments acting as
principal on a net basis. The Fund also may purchase underwritten issues, which
involve an underwriting discount or commission. Decisions with respect to the
purchase and sale of portfolio securities, including allocation of portfolio
business and the negotiation of the price of the securities and commissions, if
any, are to be made by the Advisor.
C-3
<PAGE>
6.2 Neither the Advisor nor any company affiliated with it shall act as
a broker or dealer for the purpose of executing portfolio transactions for the
Fund.
6.3 The primary consideration in allocating transactions to dealers and
brokers shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration also may be given
to additional factors, such as furnishing of supplemental research and other
services deemed to be of value to the Trust, the Fund or the Advisor. The
Advisor is authorized to execute orders with dealers or brokers that provide
research and security and economic analysis that supplements the research and
analysis of the Advisor, even though the spread or commission at which an order
is executed may be higher than that which another dealer or broker might charge,
provided that the Advisor determines in good faith that the amount of the spread
or commission is reasonable in relation to the value of the services provided.
Such research and services include advice as to the value of securities, the
advisability of investment in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). The research may be useful to the Advisor in
serving other portfolios of the Trust, the Fund and other accounts managed by
the Advisor.
7. Similar Activities for Others.
------------------------------
7.1 The services of the Advisor to the Fund under this Agreement are not
to be deemed exclusive and the Advisor will be free to render similar services
to others so long as its services under this Agreement are not impaired.
Investment decisions for the Fund will be made independently from those of other
accounts that may be managed by the Advisor. If, however, accounts managed by
the Advisor are simultaneously engaged in purchases of the same securities,
then, pursuant to the authorization of the Trustees, available securities may be
allocated to each account and may be averaged as to price in whatever manner the
Advisor deems to be fair.
7.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Fund, or limit the size of the position
obtainable for the Fund. To the extent that transactions on behalf of more than
one client of the Advisor during the same period may increase the demand for
securities being purchased or the supply of securities being sold, the Trust and
the Fund recognize that there may be an adverse effect on price.
8. Compliance and Maintenance of Records.
--------------------------------------
8.1 The Advisor agrees to manage the investment and reinvestment of the
Fund's assets in compliance with the 1940 Act and rules and regulations
thereunder. The Advisor also agrees to maintain and preserve, in accordance with
the 1940 Act and rules thereunder, and for the periods prescribed by Rule 3la-2
under the 1940 Act, books and records with respect to the Fund's securities
transactions required to be maintained by Rule 3la-1 under the 1940 Act.
8.2 The Advisor further agrees that all records which it maintains for
the Fund are the Trust's property and that the Advisor will surrender them to
the Trust, its independent auditors, the Trustees, or as may be required by any
government agency having jurisdiction over the Trust, promptly upon written
request. The provisions of this Section 8 shall survive any termination of this
Agreement.
C-4
<PAGE>
9. Dual Interests.
---------------
9.1 It is understood by both parties that any of the shareholders,
trustees, officers, employees and agents of the Trust may be a director,
officer, employee or agent of, or be otherwise interested in, the Advisor, any
affiliated person of the Advisor, or any organization in which the Advisor or
any affiliated person of the Advisor may have an interest; and that the Advisor,
and any such affiliated person or any such organization may have an interest in
the Trust or the Fund.
9.2 It is also understood by both parties that the existence of any such
dual interest shall not affect the validity of any transactions hereunder,
except as otherwise provided by specific provisions of applicable law, including
the 1940 Act.
10. Duration, Termination and Amendment of this Agreement.
-----------------------------------------------------
10.1 This Agreement shall not become effective, and the Advisor shall
not serve or act as the Fund's investment advisor, unless and until this
Agreement is approved by the Trust's board of trustees (the "Board"), including
a majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Fund.
10.2 If approved as provided above, this Agreement shall continue in
effect for two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(a) by the Board; or
(b) by a vote of a majority of the outstanding voting securities
of the Fund.
In either event such continuance also must be approved by the vote of a majority
of the Trustees who are not parties to this Agreement or interested persons of
the Trust or of the Advisor, cast in person at a meeting called for the purpose
of voting on such approval.
10.3 This Agreement may, on sixty days' written notice, be terminated at
any time, without the payment of any penalty, by the Board, by a vote of a
majority of the Fund's outstanding voting securities of the Fund or by the
Advisor.
10.4 This Agreement shall automatically terminate in the event of its
assignment.
10.5 In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person" and "assignment" and a "majority of the outstanding voting
securities," shall be applied.
10.6 This Agreement shall not be amended without specific approval of
such amendment by:
(a) the vote of a majority of the outstanding voting securities
of the Fund; and
(b) the vote of a majority of the Trustees, including a majority
of the Trustees who are not parties to this Agreement and
who are not interested persons
C-5
<PAGE>
of the Trust or of the Advisor, cast in person at a meeting
called for the purpose of voting on such amendment.
11. Liability of the Advisor.
-------------------------
11.1 In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties on the part of the Advisor, or of
its officers, directors, agents, employees, controlling persons, shareholders,
or any other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under this Agreement
(each of the foregoing, an "Advisory Affiliate"), neither the Advisor nor any
Advisory Affiliate shall be subject to liability to the Trust or the Fund or to
any shareholder of the Fund or to any other person with a beneficial interest in
the Fund or the Trust for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund or
any shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
12. Use of Name "Aon" Marks or Symbols.
----------------------------------
12.1 If the Advisor ceases to act as the investment advisor, or, in any
event, if the Advisor so requests in writing, the Trust agrees it will take all
necessary action to change the name of the Trust and/or the Fund to a name not
including the word "Aon."
13. Miscellaneous.
--------------
13.1 The Advisor may from time to time employ or associate with any
person or persons it may believe to be particularly fitted to assist it in the
performance of this Agreement. The compensation of any such persons will be paid
by the Advisor, and no obligation will be incurred by, or on behalf of, the
Trust with respect to them. In addition, the Trust understands that the persons
employed by the Advisor to assist in the performance of its duties hereunder
will not devote their full time to those duties, and that nothing contained
herein will be deemed to limit or restrict the Advisor's right or the right of
any of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and same instrument.
13.4 It is intended by the parties that this Agreement be governed by
the law of the State of Illinois; however, this Agreement is also governed by,
and subject to, the 1940 Act, and rules thereunder, including such exemptions
therefrom as the SEC may grant.
C-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
-------------------------- ------------------------------
Secretary President
Attest: Aon Advisors, Inc.
-------------------------- ------------------------------
Secretary President
Signature page for Investment Advisory Agreement
Asset Allocation Fund
<PAGE>
Exhibit D
INVESTMENT ADVISORY AGREEMENT
This Agreement (hereinafter the "Agreement") made this ____ day of
___________, 2000 by and between Aon Funds, a Delaware business trust
(hereinafter the "Trust"), an open-ended management company registered under the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and Aon
Advisors, Inc., a Virginia corporation (hereinafter the "Advisor"), an
investment advisor registered under the Investment Advisers Act of 1940.
1. Furnishing of Documents.
------------------------
1.1 The Trust has furnished the Advisor with copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust;
(b) Bylaws of the Trust as in effect on the date hereof;
(c) The Trust's effective registration statement on Form N-lA as
filed with the Securities and Exchange Commission ("SEC"),
which includes all statements of the investment objective,
policies and restrictions of the Fund of the Trust referred
to below.
1.2 The Trust will furnish the Advisor, from time to time, with copies
of all amendments of or supplements to the foregoing, if any.
1.3 The Advisor will be entitled to rely on all documents so furnished
by the Trust.
2. Investment Advisory Services.
-----------------------------
2.1 Subject to the supervision and approval of the Trust's trustees (the
"Trustees"), the Trust hereby employs the Advisor to act as the investment
advisor to, and manager of, the Trust's REIT Index Fund (hereinafter the
"Fund").
2.2 The Advisor hereby agrees to manage the investment and reinvestment
of the assets of the Fund, at its own expense, in accordance with the Fund's
investment objective, policies and restrictions as stated in the documents
referred to in Section l.1(a), (b) and (c) hereof.
2.3 The Advisor agrees, for the term of this Agreement, to assume the
obligations set forth in this Agreement for the compensation provided and on the
other terms and conditions set forth in this Agreement.
2.4 The Advisor shall:
(a) provide, or obtain, and evaluate such economic, statistical
and financial data and information and undertake such
additional investment research as it shall believe necessary
or advisable;
<PAGE>
(b) conduct a continuous program of investment and reinvestment
with respect to the Fund's assets and, with respect thereto,
the Advisor is hereby granted full authority by the Trust to
place orders for purchases, sales, exchanges or other
dispositions of securities and other instruments for the
Fund's account and to manage the investments and any other
property of the Fund, and to provide or obtain such services
as may be necessary in managing, acquiring or disposing of
investments;
(c) consult with and report to the Trustees, or any committees
or officers acting pursuant to authority of the Trustees, at
such times and in such manner as the Trustees may deem
appropriate, with respect to the implementation of the
investment objective, policies and restrictions of the Fund;
and
(d) at the Trust's request, provide persons to serve as trustees
and officers of the Trust.
3. Investment Advisory Fee.
------------------------
3.1 In consideration of all services rendered pursuant to Section 2 of
this Agreement, the Fund shall pay to the Advisor, after the end of each
calendar month, a fee, accrued daily and based upon the average daily net asset
value of the Fund for the month (or portion thereof during which this Agreement
is in effect), at an annual rate of 0.10% (10/100ths of 1%).
3.2 If on any day there is no determination of the net asset value of
the Fund as a result of a suspension of the right of redemption of Fund shares
or for any other reason, then for the purpose of this Section 3, the net asset
value of the Fund as last determined will be deemed to be the net asset value
for such day.
4. Expenses.
---------
4.1 The Advisor will bear all expenses in connection with the
performance of its services under this Agreement.
4.2 The Trust or the Fund will assume and pay, or enter into
arrangements providing for the direct payment subject to reimbursement of, all
other expenses incurred in the operation of the Fund or the Trust that are
incurred by or allocated to the Fund, including:
(a) taxes and fees payable by the Fund or the Trust to federal,
state or other government agencies;
(b) brokerage fees and commissions, and issue and transfer
taxes;
(c) interest;
(d) Trustees' annual retainer and meeting attendance fees and
expenses of Trustees who are not directors, officers or
employees of the Advisor or of any affiliated person, other
than a registered investment company, of the Advisor;
D-2
<PAGE>
(e) registration, qualification, filing and other fees in
connection with securities registration requirements of
federal and state regulatory authorities;
(f) the charges and expenses for custodial, paying agent,
transfer agent, administration, dividend agent and
accounting agent services,
(g) outside legal fees and expenses in connection with the
affairs of the Trust, including, but not limited to,
registering and qualifying its shares with federal and state
regulatory authorities;
(h) charges and expenses of outside auditors;
(i) costs of meetings of shareholders and Trustees of the Trust;
(j) costs of maintenance of the Trust's existence as a Delaware
business trust;
(k) insurance premiums;
(l) investment advisory fees;
(m) costs and fees associated with printing and delivering
registration statements, shareholders' reports and proxy
statements;
(n) costs and fees associated with delivering reports to and
making filings with the SEC and state Blue Sky authorities;
(o) costs relating to administration of the Trust's general
operations;
(p) costs relating to the Trust's own employees, if any; and
(q) costs of preparing, printing and delivering the Trust's
prospectuses and statements of additional information to
existing shareholders of the Fund.
5. Reimbursement.
--------------
5.1 If in any fiscal year, the aggregate expense of the Fund, including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceeds 1.50% of the first $30 million
of the average daily net assets of the Fund and 1.25% of the amount by which the
average daily net assets of the Fund exceeds $30 million, the Advisor will
reimburse the Fund for such excess. This expense reimbursement obligation is not
limited to the amount of the fees received hereunder and will be estimated,
reconciled and paid on a monthly basis.
6. Fund Transactions and Brokerage.
--------------------------------
6.1 The Fund's transactions in equity securities will usually be
executed through brokers that will receive a commission paid by the Fund. The
Fund's transactions in fixed income and money market securities shall usually be
effected with the issuer or with a dealer in such instruments acting as
principal on a net basis. The Fund also may purchase underwritten issues, which
involve an underwriting discount or commission. Decisions with respect to the
D-3
<PAGE>
purchase and sale of portfolio securities, including allocation of portfolio
business and the negotiation of the price of the securities and commissions, if
any, are to be made by the Advisor.
6.2 Neither the Advisor nor any company affiliated with it shall act as
a broker or dealer for the purpose of executing portfolio transactions for the
Fund.
6.3 The primary consideration in allocating transactions to dealers and
brokers shall be prompt and effective execution of orders at the most favorable
security prices obtainable ("best execution"). Consideration also may be given
to additional factors, such as furnishing of supplemental research and other
services deemed to be of value to the Trust, the Fund or the Advisor. The
Advisor is authorized to execute orders with dealers or brokers that provide
research and security and economic analysis that supplements the research and
analysis of the Advisor, even though the spread or commission at which an order
is executed may be higher than that which another dealer or broker might charge,
provided that the Advisor determines in good faith that the amount of the spread
or commission is reasonable in relation to the value of the services provided.
Such research and services include advice as to the value of securities, the
advisability of investment in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). The research may be useful to the Advisor in
serving other portfolios of the Trust, the Fund and other accounts managed by
the Advisor.
7. Similar Activities for Others.
------------------------------
7.1 The services of the Advisor to the Fund under this Agreement are not
to be deemed exclusive and the Advisor will be free to render similar services
to others so long as its services under this Agreement are not impaired.
Investment decisions for the Fund will be made independently from those of other
accounts that may be managed by the Advisor. If, however, accounts managed by
the Advisor are simultaneously engaged in purchases of the same securities,
then, pursuant to the authorization of the Trustees, available securities may be
allocated to each account and may be averaged as to price in whatever manner the
Advisor deems to be fair.
7.2 The parties to this Agreement understand that this system might
adversely affect the price paid by the Fund, or limit the size of the position
obtainable for the Fund. To the extent that transactions on behalf of more than
one client of the Advisor during the same period may increase the demand for
securities being purchased or the supply of securities being sold, the Trust and
the Fund recognize that there may be an adverse effect on price.
8. Compliance and Maintenance of Records.
--------------------------------------
8.1 The Advisor agrees to manage the investment and reinvestment of the
Fund's assets in compliance with the 1940 Act and rules and regulations
thereunder. The Advisor also agrees to maintain and preserve, in accordance with
the 1940 Act and rules thereunder, and for the periods prescribed by Rule 3la-2
under the 1940 Act, books and records with respect to the Fund's securities
transactions required to be maintained by Rule 3la-1 under the 1940 Act.
8.2 The Advisor further agrees that all records which it maintains for
the Fund are the Trust's property and that the Advisor will surrender them to
the Trust, its independent auditors,
D-4
<PAGE>
the Trustees, or as may be required by any government agency having jurisdiction
over the Trust, promptly upon written request. The provisions of this Section 8
shall survive any termination of this Agreement.
9. Dual Interests.
---------------
9.1 It is understood by both parties that any of the shareholders,
trustees, officers, employees and agents of the Trust may be a director,
officer, employee or agent of, or be otherwise interested in, the Advisor, any
affiliated person of the Advisor, or any organization in which the Advisor or
any affiliated person of the Advisor may have an interest; and that the Advisor,
and any such affiliated person or any such organization may have an interest in
the Trust or the Fund.
9.2 It is also understood by both parties that the existence of any such
dual interest shall not affect the validity of any transactions hereunder,
except as otherwise provided by specific provisions of applicable law, including
the 1940 Act.
10. Duration, Termination and Amendment of this Agreement.
-----------------------------------------------------
10.1 This Agreement shall not become effective, and the Advisor shall
not serve or act as the Fund's investment advisor, unless and until this
Agreement is approved by the Trust's board of trustees (the "Board"), including
a majority of the Trustees who are not parties to this Agreement or interested
persons of any such party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of a majority of the
outstanding voting securities of the Fund.
10.2 If approved as provided above, this Agreement shall continue in
effect for two years and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually either:
(a) by the Board; or
(b) by a vote of a majority of the outstanding voting securities
of the Fund.
In either event such continuance also must be approved by the vote of a majority
of the Trustees who are not parties to this Agreement or interested persons of
the Trust or of the Advisor, cast in person at a meeting called for the purpose
of voting on such approval.
10.3 This Agreement may, on sixty days' written notice, be terminated at
any time, without the payment of any penalty, by the Board, by a vote of a
majority of the Fund's outstanding voting securities of the Fund or by the
Advisor.
10.4 This Agreement shall automatically terminate in the event of its
assignment.
10.5 In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act, particularly the definitions of
"interested person" and "assignment" and a "majority of the outstanding voting
securities," shall be applied.
10.6 This Agreement shall not be amended without specific approval of
such amendment by:
D-5
<PAGE>
(a) the vote of a majority of the outstanding voting securities
of the Fund; and
(b) the vote of a majority of the Trustees, including a majority
of the Trustees who are not parties to this Agreement and
who are not interested persons of the Trust or of the
Advisor, cast in person at a meeting called for the purpose
of voting on such amendment.
11. Liability of the Advisor.
-------------------------
11.1 In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties on the part of the Advisor, or of
its officers, directors, agents, employees, controlling persons, shareholders,
or any other person or entity affiliated with the Advisor or retained by it to
perform or assist in the performance of its obligations under this Agreement
(each of the foregoing, an "Advisory Affiliate"), neither the Advisor nor any
Advisory Affiliate shall be subject to liability to the Trust or the Fund or to
any shareholder of the Fund or to any other person with a beneficial interest in
the Fund or the Trust for any act or omission in the course of, or connected
with, rendering services hereunder, including without limitation any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund or
any shareholder or other person in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services.
12. Use of Name "Aon" Marks or Symbols.
----------------------------------
12.1 If the Advisor ceases to act as the investment advisor, or, in any
event, if the Advisor so requests in writing, the Trust agrees it will take all
necessary action to change the name of the Trust and/or the Fund to a name not
including the word "Aon."
13. Miscellaneous.
--------------
13.1 The Advisor may from time to time employ or associate with any
person or persons it may believe to be particularly fitted to assist it in the
performance of this Agreement. The compensation of any such persons will be paid
by the Advisor, and no obligation will be incurred by, or on behalf of, the
Trust with respect to them. In addition, the Trust understands that the persons
employed by the Advisor to assist in the performance of its duties hereunder
will not devote their full time to those duties, and that nothing contained
herein will be deemed to limit or restrict the Advisor's right or the right of
any of the Advisor's affiliates to engage in and devote time and attention to
other businesses or to render other services of whatever kind or nature.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and same instrument.
D-6
<PAGE>
13.4 It is intended by the parties that this Agreement be governed by
the law of the State of Illinois; however, this Agreement is also governed by,
and subject to, the 1940 Act, and rules thereunder, including such exemptions
therefrom as the SEC may grant.
D-7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized.
Attest: Aon Funds
-------------------------- ------------------------------
Secretary President
Attest: Aon Advisors, Inc.
-------------------------- ------------------------------
Secretary President
Signature page for Investment Advisory Agreement
REIT Index Fund
