As filed with the Securities and Exchange Commission
on February 8, 1999
Registration No. 811-8004
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
| X | Pre-Effective Amendment No. 1
| | Post-Effective Amendment No. ___
(Check appropriate box or boxes)
ALLEGHANY FUNDS
(Exact Name of Registrant as Specified in Charter)
171 North Clark Street
Chicago, Illinois 60601
(Address of Principal Executive Offices, including Zip Code)
Area Code and Telephone Number: (800) 992-8151
Kenneth C. Anderson, President
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
(Name and Address of Agent for Service)
With copies to:
Arthur J. Simon J.B. Kittredge
SONNENSCHEIN NATH & ROSENTHAL ROPES & GRAY
8000 Sears Tower One International Place
Chicago, Illinois 60606-6404 Boston, Massachusetts 02110
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
Title of Securities Being Registered: Class I, an indefinite number of shares,
and Class N, an indefinite number of shares, of beneficial interest in
Registrant's Alleghany/Blairlogie Emerging Markets and Alleghany/Blairlogie
International Developed Funds.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
ALLEGHANY FUND TRUST
CROSS-REFERENCE SHEET
PART A - INFORMATION REQUIRED IN PROSPECTUS
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ITEM NO. Item Caption Prospectus Caption
1 Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside Front Cover STATEMENT; CROSS-REFERENCE SHEET;
Page of Prospectus FRONT COVER PAGE OF PROXY
STATEMENT/PROSPECTUS
2 Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
3 Fee Table, Synopsis Information APPENDIX II -- FEE AND
EXPENSE SUMMARIES; and Risk Factors SUMMARY -- PROPOSED
REORGANIZATIONS;
-- PRINCIPAL RISK FACTORS
4 Information About the Transaction INFORMATION RELATING TO THE PROPOSED
REORGANIZATIONS
5 Information About the Registrant COMPARISON OF PIMCO FUNDS AND ALLEGHANY
FUNDS; ADDITIONAL INFORMATION ABOUT ALLEGHANY
6 Information About the Companies Being COMPARISON OF PIMCO FUNDS AND ALLEGHANY FUNDS; ADDITIONAL
Acquired INFORMATION ABOUT THE TRUST
7 Voting Information INFORMATION RELATING TO VOTING MATTERS
8 Interest of Certain Persons and Experts INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS --
DESCRIPTION OF THE SALE OF INTERESTS IN BLAIRLOGIE
9 Additional Information Required for NOT APPLICABLE
Reoffering by Persons Deemed to be
Underwriters
</TABLE>
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
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ITEM NO. Item Caption Statement of Additional Information Caption
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF
Registrant ADDITIONAL INFORMATION
13 Additional Information About the Company NOT APPLICABLE
Being Acquired
14 Financial Statements FINANCIAL
DATA SCHEDULES DATED 10/31/98
</TABLE>
PART C
ITEM NO.
15-17 Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
<PAGE>
11003507\V-13
11003507\V-13
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE:
PIMCO FUNDS: MULTI-MANAGER SERIES (the "TRUST")
From Post-Effective Amendment No. 36 of the Trust's Registration Statement (the
"Trust Registration Statement"), filed October 30, 1998 (SEC File Nos. 33-36528;
811-06161), Prospectus for Class A, Class B and Class C Shares and Prospectus
for Administrative Class and Institutional Class Shares of the PIMCO Emerging
Markets Fund and PIMCO International Developed Fund, each a series of PIMCO
Funds: Multi-Manager Series, each dated November 1, 1998 and as from time to
time revised or supplemented, and the related Statement of Additional
Information for the Trust dated November 1, 1998 and as from time to time
revised or supplemented.
The audited financial statements and related independent accountants' reports
for the PIMCO Emerging Markets Fund and the PIMCO International Developed Fund
contained in the Annual Reports of the Trust (relating to Class A, Class B
and Class C
shares of the Trust and to Administrative and Institutional Class shares
of the Trust ) for the fiscal year ended June 30,
1998.
<PAGE>
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92660
February 8, 1999
Dear Shareholder:
On behalf of the Board of Trustees (the "Trustees") of PIMCO Funds:
Multi-Manager Series (the "Trust"), we are pleased to invite you to a special
meeting of the shareholders of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund (each a "PIMCO Fund" and, together, the "PIMCO
Funds") to be held on February 26, 1999 at 10:00 a.m., Eastern time, at 2187
Atlantic Street, Stamford, Connecticut 06902 (the "Meeting"). At the Meeting,
shareholders of each PIMCO Fund will be asked to consider a proposed
reorganization of their PIMCO Fund into a corresponding newly formed portfolio
of Alleghany Funds ("Alleghany").
PIMCO Advisors L.P. ("PALP") agreed on October 24, 1998 to sell all of
its direct and its indirect general partnership interests in its subsidiary,
Blairlogie Capital Management ("Blairlogie"), to Alleghany Asset Management,
Inc. PALP serves as the investment adviser and Blairlogie acts as the investment
sub-adviser to the PIMCO Funds. As described more fully in the Proxy
Statement/Prospectus, the Trustees determined that it would be in the best
interests of the shareholders of the PIMCO Funds to approve reorganizations
whereby each PIMCO Fund would reorganize into a portfolio of Alleghany (each
such portfolio an "Alleghany Fund" and, collectively, the "Alleghany Funds").
After the reorganizations (each a "Reorganization" and, collectively, the
"Reorganizations"), Blairlogie would continue to manage the investment
portfolios of the Alleghany Funds as it currently does for the PIMCO Funds, but
pursuant to different investment advisory arrangements.
In that regard, at the upcoming Meeting, the Trustees are asking you to
approve a reorganization of your PIMCO Fund into the corresponding Alleghany
Fund. If all approvals are obtained, each PIMCO Fund will be reorganized into
its corresponding Alleghany Fund on or about March 31, 1999, when your PIMCO
Fund shares will be exchanged for shares of, in the aggregate, equal value of
the corresponding Alleghany Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE THE
PROPOSED REORGANIZATIONS FOR YOUR PIMCO FUND(S).
SHAREHOLDERS SHOULD FILL OUT THE ENCLOSED PROXY FOR EACH OF THOSE PIMCO
FUNDS IN WHICH THEY HOLD SHARES IN ORDER TO VOTE THOSE SHARES.
In considering these matters, you should note:
SUBSTANTIALLY IDENTICAL OBJECTIVES AND POLICIES
The PIMCO Funds are proposed to be reorganized into newly formed
Alleghany Funds with investment policies and objectives that are substantially
identical to those of the corresponding PIMCO Funds.
SAME DAY-TO-DAY PORTFOLIO MANAGEMENT
Blairlogie will enter into an investment advisory arrangement with
Alleghany for management of the Alleghany Funds. Under this arrangement,
Blairlogie will provide portfolio management services to the Alleghany Funds in
a manner consistent with the way it currently provides portfolio management
services to the PIMCO Funds.
SAME VALUE OF SHARES
The total dollar value of the Alleghany Fund shares you receive in the
Reorganizations will be the same as the total dollar value of the PIMCO Fund
shares that you hold immediately before the Reorganizations. The Trust and
Alleghany have been advised that the Reorganizations should be tax free to each
of the PIMCO Funds and its shareholders, and no front-end or contingent deferred
sales charges will be charged in connection with the exchange of each PIMCO
Fund's shares for the corresponding Alleghany Fund shares. In addition, because
the Alleghany Funds are no-load funds, there will be no sales charges imposed
upon purchases or redemptions made following the Reorganizations.
OPERATING EXPENSE RATIOS
The annual fund operating expense ratio (after reimbursements and
waivers) for the relevant class of shares in the corresponding Alleghany Fund
after each Reorganization is expected to be equal to or less than the current
annual fund operating expense ratio of your PIMCO Fund class for a period of at
least 3 years after the Reorganizations.
The proposed Reorganizations are expected to benefit the shareholders
of the PIMCO Funds by:
offering actual or potential reductions in total operating expense
ratios for Class A, Class B and Class C shareholders of the PIMCO
Funds; and
offering shareholders the opportunity to continue with funds
managed by Blairlogie.
The formal Notice of Special Meeting of Shareholders, the Proxy
Statement/Prospectus and a proxy are enclosed. If you own shares in more than
one of the PIMCO Funds named above, more than one proxy is included with these
materials. Whether or not you plan to attend the Meeting, you may vote by proxy
by marking, signing and dating the enclosed proxy and mailing it in the enclosed
postage-paid envelope.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY, EACH OF WHICH IS
BEING SOLICITED BY THE
TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. PROXIES MAY BE
REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE TRUST A
WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING
THE MEETING AND VOTING IN PERSON.
Shareholders of record as of the close of business on
January 22, 1999 will be entitled to notice of, and to vote at, the
Meeting.
The proposed Reorganizations and the reasons for the Trustees'
unanimous recommendation are discussed in detail in the enclosed materials,
which you should read carefully. If you have any questions about the
Reorganizations, please do not hesitate to call PIMCO Funds Distributors LLC
toll free at 1-800-426-0107.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
/s/Stephen J. Treadway
Stephen J. Treadway
Executive Vice President
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
PIMCO EMERGING MARKETS FUND
PIMCO INTERNATIONAL DEVELOPED FUND
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
To PIMCO Emerging Markets Fund and PIMCO International Developed Fund
Shareholders:
NOTICE IS GIVEN THAT a Special Meeting of Shareholders (the "Meeting")
of the PIMCO Emerging Markets Fund and the PIMCO International Developed Fund
(each
a "PIMCO Fund" and, together, the "PIMCO Funds"), each of which is a series of
PIMCO Funds: Multi-Manager Series (the "Trust"), will be held at 2187 Atlantic
Street, Stamford, Connecticut 06902, on February 26, 1999 at 10:00 a.m., Eastern
time, for the purposes of considering and voting on the following proposals:
Item 1. A proposal, to be voted on separately by the shareholders of
each of the PIMCO Funds, to approve an Agreement and Plan of Reorganization
providing, with respect to each such PIMCO Fund, for the transfer of the assets
and stated liabilities of such PIMCO Fund to a newly formed portfolio of
Alleghany Funds in exchange for shares of designated classes of such
corresponding Alleghany Fund (each such transaction a "Reorganization" and,
collectively, the "Reorganizations"). Item 1 is described in the attached Proxy
Statement/Prospectus. YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR
OF THE PROPOSAL.
Item 2. Such other business as may properly come before the Meeting or
any adjournment(s).
Shareholders of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund will consider Proposal 1 separately. Although the
approval of the Reorganization of one of the PIMCO Funds shall not be contingent
upon the approval of the Reorganization of the other PIMCO Fund, the failure of
a PIMCO Fund to approve its Reorganization may prevent the consummation of the
Blairlogie Transaction described in the Proxy Statement/Prospectus, in which
case it is anticipated that the Reorganizations would not occur, as more fully
described in the Proxy Statement/Prospectus.
Shareholders of record as of the close of business on January 22, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE SIGN AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE
TRUST'S BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
A PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY SUBMITTING TO THE
TRUST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
By Order of the Board of Trustees,
Newton B. Schott, Jr., Secretary
February 8, 1999
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
1-800-426-0107
PROXY STATEMENT/PROSPECTUS
DATED FEBRUARY 8, 1999
This Proxy Statement/Prospectus is furnished to shareholders of PIMCO
Emerging Markets Fund and PIMCO International Developed Fund (each a "PIMCO
Fund" and, together, the "PIMCO Funds"), each a series of PIMCO Funds:
Multi-Manager Series (the "Trust"), in connection with the solicitation of
proxies by the Board of Trustees of the Trust. The Board of Trustees of the
Trust has called a Special Meeting of Shareholders (the "Meeting") at 10:00 a.m.
(Eastern time) on February 26, 1999 at 2187 Atlantic Street, Stamford,
Connecticut 06902. At the Meeting, shareholders of each PIMCO Fund will be asked
to approve a proposed Agreement and Plan of Reorganization (the "Reorganization
Agreement") by and between the Trust, on behalf of each PIMCO Fund, and
Alleghany Funds ("Alleghany"), on behalf of each relevant portfolio of
Alleghany. A form of the Reorganization Agreement is attached as Appendix I.
The accompanying Notice of Special Meeting of Shareholders, this Proxy
Statement/Prospectus and the enclosed proxy or proxies are being mailed to
shareholders on or about February 10, 1999.
The Trust and Alleghany are both registered open-end series management
investment companies (mutual funds). Alleghany offers money market, tax-exempt,
bond and equity investment portfolios, and the Trust, together with PIMCO Funds:
Pacific Investment Management Series, offers stock, bond and balanced investment
portfolios. The Reorganization Agreement provides for the transfer of assets and
stated liabilities of each PIMCO Fund to a corresponding newly formed portfolio
of Alleghany (each an "Alleghany Fund" and, together, the "Alleghany Funds") in
exchange for shares ("Shares") of equal value of the relevant classes of the
corresponding Alleghany Fund (each such transaction a "Reorganization" and,
collectively, the "Reorganizations"). As a result of each Reorganization,
shareholders of each PIMCO Fund will become shareholders of the corresponding
Alleghany Fund. Because the Alleghany Funds are no-load funds, holders of Class
A, Class B and Class C shares of the PIMCO Funds will not receive Class A, Class
B or Class C Shares of the Alleghany Funds but will instead receive Class N
Shares of the Alleghany Funds. Holders of Administrative Class shares of a PIMCO
Fund will also receive Class N shares of the corresponding Alleghany Fund, while
holders of Institutional Class shares of a PIMCO Fund will receive Class I
Shares of the corresponding Alleghany Fund. The table entitled "Capitalization"
under "Information Relating to the Proposed Reorganization -- Capitalization,"
shows each class of each PIMCO Fund and the corresponding class of the
corresponding Alleghany Fund.
Solicitation of proxies by personal interview, mail and telephone may
be made by officers and Trustees of the Trust and officers and employees of
PIMCO Advisors L.P. ("PALP"), its affiliates and other representatives of the
Trust. The Trust has retained Shareholder Communications Corporation ("SCC"),
40 Exchange Place, New York, New York 10005, to aid in the solicitations of
proxies. The expenses incurred in connection with the solicitation will not be
borne by the shareholders of the PIMCO Funds or by the Trust but will instead be
borne by Alleghany.
Only shareholders of record as of the close of business on January 22,
1999 (the "Record Date") will be entitled to notice of and to vote at the
Meeting or any adjournment thereof. The number of shares of beneficial interest
issued and outstanding as of the close of business on the Record Date was, for
the PIMCO Emerging Markets Fund, 2,090,084.555, and for the PIMCO
International Developed Fund, 8,993,934.288. Each whole share shall
be entitled to one vote as
to any matter on which it is entitled to vote and each fractional share shall be
entitled to a proportionate fractional vote. Shares represented by a properly
executed proxy will be voted in accordance with the instructions thereon or, if
no specification is made, the persons named as proxies will vote in favor of
each proposal set forth in the Notice of Meeting. Proxies may be revoked at any
time before they are exercised by submitting to the Trust written notice of
revocation or a subsequently executed Proxy or by attending the Meeting and
voting in person. Shareholders of each PIMCO Fund will vote only on the approval
or disapproval of that PIMCO Fund's Reorganization.
This Proxy Statement/Prospectus sets forth concisely the information
that a PIMCO Fund shareholder should know before voting and before investing in
an Alleghany Fund, and should be retained for future reference.
The following documents are incorporated by reference in this
Proxy Statement/Prospectus: (i) the Annual
Report for the Alleghany Funds dated October 31, 1998 and (ii) the statement
of additional
information relating to this Proxy Statement/Prospectus dated the date hereof.
Additional information is set forth in the prospectuses dated November 1, 1998,
as from time to time revised or supplemented, for the PIMCO Funds. Each of these
documents is on file with the Securities and Exchange Commission (the "SEC"),
and is available along with related materials on the SEC's Internet World Wide
Website (www.sec.gov) and is also available without charge by calling or writing
the Trust or Alleghany at the telephone numbers or addresses stated on the cover
sheet of this Proxy Statement/Prospectus. The information contained in the
prospectuses for the PIMCO Funds is incorporated by reference into this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus is the Trust's proxy statement for the
Meeting, and Alleghany's prospectus for the Shares.
THE SECURITIES OF THE ALLEGHANY FUNDS OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, ALLEGHANY OR THEIR RESPECTIVE SPONSORS, IF
ANY, AND DISTRIBUTORS.
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF YOUR INVESTMENT.
<PAGE>
TABLE OF CONTENTS
FEE TABLES.................................................................1
SUMMARY 1
Proposed Reorganizations.........................................1
Overview of PIMCO Funds and Alleghany Funds......................1
Federal Income Tax Consequences..................................1
Board Consideration by Alleghany and the Trust...................2
Principal Risk Factors...........................................2
Voting Information...............................................2
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS......................2
The Proposed Reorganizations.....................................2
Description of the Sale of Interests in Blairlogie...............3
Description of the Reorganization Agreement......................3
Table - Capitalization...........................................5
Consideration by the Board of Trustees of the Trust..............5
Federal Income Tax Consequences..................................6
COMPARISON OF THE PIMCO FUNDS AND ALLEGHANY FUNDS.........................7
Overview of the PIMCO Funds and Alleghany Funds..................7
Investment Objectives and Policies...............................7
Expense Ratios...................................................7
Table - Total Annual Expense Information.........................8
Shareholder Transactions and Services............................8
Acquisition and Redemption of Shares................................8
Dividends and Other Distributions...................................9
Administrative Arrangements 9
Forms of Organization...............................................9
Share Structure.....................................................9
Portfolio Manager..................................................10
Risk Factors.......................................................10
Governing Documents................................................12
Proposed Investment Management and Administration Agreements;
Other Contractual Arrangements............................... ...14
Table - Other Service Providers for the PIMCO Funds
and Alleghany Funds..................................................16
INFORMATION RELATING TO VOTING MATTERS......................................17
Required Votes; Quorum; Adjournments...............................17
Solicitation of Proxies............................................18
Annual Meetings and Shareholder Meetings;
Shareholder Proposals for Future Meetings........................18
Shareholder and Board Approvals....................................18
Table - 5% Shareholders............................................19
ADDITIONAL INFORMATION ABOUT ALLEGHANY.......................................21
ADDITIONAL INFORMATION ABOUT THE TRUST.......................................22
FINANCIAL STATEMENTS.........................................................22
OTHER BUSINESS..............................................................23
INDEPENDENT PUBLIC ACCOUNTANTS..............................................23
SHAREHOLDER INQUIRIES......................................................23
APPENDICES
I........Form of Agreement and Plan of Reorganization
II.......Fee and Expense
Summaries of the PIMCO Funds and the Corresponding
Alleghany Funds
III......Investment Objectives
IV.......Shareholder Transactions and Services of
the Alleghany Funds and the PIMCO Funds
V........Form of Investment
Advisory Agreement
<PAGE>
FEE TABLES
Pro Forma Expense Information for each Reorganization is included in
Appendix II to this Proxy Statement/Prospectus.
SUMMARY
PROPOSED REORGANIZATIONS. The Reorganization Agreement provides for:
(i) the transfer of all of the assets and stated liabilities of each PIMCO Fund
to a corresponding Alleghany Fund in exchange for Shares of the corresponding
Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares to the
shareholders of the PIMCO Funds in liquidation of the PIMCO Funds. The
Reorganizations are subject to a number of conditions with respect to each PIMCO
Fund, including shareholder approval. Following the Reorganizations, the PIMCO
Funds will cease to operate as separate Funds and will be liquidated.
As a result of each proposed Reorganization, a PIMCO Fund shareholder
will become a shareholder of the corresponding Alleghany Fund and will hold,
immediately after the closing of such Reorganization (a "Closing" and,
collectively, the "Closings"), Shares of the corresponding class of shares of
the corresponding Alleghany Fund having a total dollar value equal to the total
dollar value of the shares of the PIMCO Fund that the shareholder held
immediately before the Closing(s).
OVERVIEW OF PIMCO FUNDS AND ALLEGHANY FUNDS. The investment objectives,
policies and restrictions of each PIMCO Fund are substantially identical to
those of the corresponding Alleghany Fund. Blairlogie will be the investment
adviser for the Alleghany Funds and is expected to manage their portfolios in a
manner consistent with the way the portfolios of the PIMCO Funds have been
managed.
The table entitled "Total Annual Expense Information," under
"Comparison of PIMCO Funds and Alleghany Funds -- Expense Ratios," shows the
current total operating expenses for each class of each PIMCO Fund along with
the total operating expenses (before and after waivers and reimbursements) that
are expected to be borne by shareholders of each class of each Alleghany Fund
after the Reorganizations. Blairlogie has committed to maintain, for a period of
at least three years after the Closing, the expense ratios for all Alleghany
Fund classes, absent extraordinary circumstances (the "Expense Commitment"). The
proposed Reorganizations will result in actual or potential reductions in total
operating expense ratios for Class A, Class B and Class C shareholders of the
PIMCO Funds.
Appendix II to this Proxy Statement/Prospectus provides additional
information about the fees and expenses for each class of each PIMCO Fund along
with the total operating expenses (before and after waivers and reimbursements)
for each class of each Alleghany Fund. The PIMCO Funds have a different
administrator, distributor, transfer agent and independent auditor. In addition,
the proposed investment and administration arrangements for the Alleghany Funds
differ from the current such arrangements for the PIMCO Funds and the PIMCO
Funds have different contractual arrangements and different trustees from the
Alleghany Funds. See "Comparison of PIMCO Funds and Alleghany Funds -- Proposed
Investment Management and Administration Agreement; Other Contractual
Arrangements."
The Alleghany/Blairlogie Emerging Markets Fund and the
Alleghany/Blairlogie International Developed Fund will each issue two classes of
shares in the Reorganizations, Class N Shares and Class I Shares. Pursuant to
the Reorganizations, holders of Class A, B, C and Administrative Class shares of
the PIMCO Funds shall receive Class N Shares of the corresponding Alleghany Fund
and the Institutional Class shares shall receive Class I Shares of the Alleghany
Funds. See "Comparison of PIMCO Funds and Alleghany Funds -- Share Structure."
The Alleghany Funds are sold at net asset value, with no front-end or
contingent deferred sales load, whereas the PIMCO Funds charge a front-end sales
charge, a servicing fee and a possible contingent deferred sales charge on their
Class A Shares and a contingent deferred sales charge and a distribution and
servicing fee on their Class B and C Shares. NO FRONT-END OR CONTINGENT DEFERRED
SALES CHARGE WILL BE IMPOSED ON ANY OF THE SHAREHOLDERS IN CONNECTION WITH THE
REORGANIZATIONS OR ON PURCHASES OR REDEMPTIONS OF ALLEGHANY FUND SHARES AFTER
THE REORGANIZATIONS.
The purchase, redemption, dividend and other policies and procedures of
the PIMCO Funds and the Alleghany Funds are substantially similar. See
"Comparison of PIMCO Funds and Alleghany Funds -- Shareholder Transactions and
Services" and Appendix IV to this Proxy Statement/Prospectus.
FEDERAL INCOME TAX CONSEQUENCES. Sonnenschein Nath & Rosenthal, legal
counsel to Alleghany, will issue (an) opinion(s) as of the Closings to the
effect that, based on certain assumptions and representations of the PIMCO
Funds, the Alleghany Funds and Blairlogie, the Reorganizations should not give
rise to the recognition of gain or loss for federal income tax purposes to the
PIMCO Funds, the Alleghany Funds or their respective shareholders.
BOARD CONSIDERATION BY ALLEGHANY AND THE TRUST. In considering the
Reorganizations, the Boards of Trustees of each of the Trust and Alleghany,
including the disinterested Trustees thereof, were advised by their respective
legal counsel as to their fiduciary duties under the Investment Company Act of
1940 (the "1940 Act") and the required determinations that each Board should
make under the 1940 Act in connection with the Reorganizations. After
considering the relevant factors, as discussed in greater detail below under
"Information Relating to the Proposed Reorganizations -- Consideration by the
Board of Trustees of the Trust," the Trust's Board of Trustees found, on behalf
of the PIMCO Funds, that participation in the Reorganizations, as contemplated
by the Reorganization Agreement, is in the best interests of the PIMCO Funds and
their shareholders and that the interests of the shareholders of the PIMCO Funds
would not be diluted as a result of the Reorganizations. THE TRUST'S BOARD OF
TRUSTEES UNANIMOUSLY RECOMMENDS THAT PIMCO FUND SHAREHOLDERS APPROVE THE
REORGANIZATIONS.
Similarly, after considering the relevant factors, the Alleghany Board,
on behalf of the Alleghany Funds, found that participation in the
Reorganizations, as contemplated by the Reorganization Agreement, is in the best
interests of the Alleghany Funds and that the interests of the shareholders of
the Alleghany Funds would not be diluted as a result of the Reorganizations.
PRINCIPAL RISK FACTORS. Because of the substantially identical nature
of the investment objectives, investment policies and restrictions of the PIMCO
Funds and the corresponding Alleghany Funds, an investment in an Alleghany Fund
involves risks that are similar to those of the corresponding PIMCO Fund. These
investment risks, in general, include those typically associated with investing
in a portfolio of securities of foreign issuers and, in the case of PIMCO
Emerging Markets Fund, the risks include the fact that the issuers may be based
in countries with developing economies. See "Comparison of PIMCO Funds and
Alleghany Funds -- Risk Factors."
VOTING INFORMATION. This Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by the Trust's Board of Trustees
for the Meeting. Only shareholders of record as of the close of business on
January 22, 1999 (the "Record Date") will be entitled to vote at the Meeting.
Each whole share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional share shall be entitled to a proportional
fractional vote. Shares represented by a properly executed proxy will be voted
in accordance with the instructions thereon or, if no specification is made, the
persons named as proxies will vote in favor of each proposal set forth in the
Notice of Meeting. Proxies may be revoked at any time before they are exercised
by submitting to the Trust a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person. For additional
information, see "Information Relating to Voting Matters."
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS
THE PROPOSED REORGANIZATIONS. The terms and conditions of the
Reorganizations are set forth in the Reorganization Agreement. Certain
provisions of the Reorganization Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Form of Reorganization
Agreement which is attached as Appendix I to this Proxy Statement/Prospectus.
The Reorganization Agreement provides for (i) the transfer of all of
the assets and stated liabilities of each PIMCO Fund to the corresponding
Alleghany Fund in exchange for Shares of the corresponding classes of the
corresponding Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares
to the shareholders of the PIMCO Funds in liquidation of the PIMCO Funds. The
Reorganizations are subject to a number of conditions with respect to each PIMCO
Fund, including shareholder approvals and consummation of the Blairlogie
Transaction described below under "Information Relating to the Proposed
Reorganizations -- Description of the Sale of Interests in Blairlogie."
Following the Reorganizations, the PIMCO Funds will cease to operate as separate
funds and will be liquidated.
As a result of the Reorganizations, each PIMCO Fund shareholder will
become a shareholder of the corresponding Alleghany Fund and will hold,
immediately after the Closing with respect to such Alleghany Fund, Shares of the
corresponding Alleghany Fund having an aggregate net asset value equal
to the aggregate net asset value of the shares of the PIMCO Fund that
the shareholder held immediately before the Closing(s). Because the Shares will
be issued at net asset value in exchange for the net assets of the corresponding
PIMCO Fund, the aggregate net asset value of the Alleghany Shares so
issued will equal the aggregate net asset value of the shares of the
corresponding PIMCO Fund immediately prior to the Reorganizations. Thus, the
Reorganization will not result in a dilution of any shareholder.
At a meeting held on December 10, 1998, the Board of Trustees of the
Trust, including those Trustees who are not "interested persons" of the PIMCO
Funds, as defined in the 1940 Act, considered and approved the Reorganizations.
Under the Reorganization Agreement, each Alleghany Fund would acquire the assets
and assume the stated liabilities of the corresponding PIMCO Fund, in exchange
for Shares of the corresponding classes of the corresponding Alleghany Fund.
Such Alleghany Fund Shares would then be distributed to the corresponding PIMCO
Fund's shareholders, representing full and fractional shares in such Alleghany
Fund with an aggregate net asset value equal to the aggregate net asset value of
the corresponding PIMCO Fund shares held by such shareholder immediately prior
to the Reorganization.
If, with respect to either PIMCO Fund, a Reorganization is approved by
such PIMCO Fund's shareholders and implemented, shareholders of such PIMCO Fund
would become shareholders of the corresponding Alleghany Fund which was
specifically created to acquire the assets and assume the stated liabilities of
such PIMCO Fund. The Alleghany Funds' investment objectives and policies are
substantially identical to those of the corresponding PIMCO Funds. Blairlogie
Capital Management ("Blairlogie"), the PIMCO Funds' current investment
sub-adviser, will serve as adviser to the Alleghany Funds.
There will be certain legal, operational and practical differences
between the PIMCO Funds and the corresponding Alleghany Funds, based on
differences in applicable state law and variations in shareholder services and
redemption procedures. These differences are described below. The fees and
expenses that an Alleghany Fund shareholder will pay, directly or indirectly,
will also differ from those incurred by shareholders of the corresponding PIMCO
Funds, as explained below. It is anticipated that for at least 3 years following
the Reorganizations, taking into account voluntary fee waivers and expense
reimbursements, the shareholders of each Alleghany Fund will be subject to
operating expenses, as a percentage of average daily net assets, which are equal
to or less than those currently borne by the shareholders of the corresponding
PIMCO Fund. The table entitled "Total Annual Expense Information" under
"Comparison of PIMCO Funds and Alleghany Funds" contains a summary for each of
the Class A, B and C and Institutional and Administrative Class shares in each
of the PIMCO Funds for the fiscal year ended June 30, 1998 and pro forma
projections for the corresponding classes of Shares of the Alleghany Funds which
will be received by the shareholders of the PIMCO Funds.
DESCRIPTION OF THE SALE OF INTERESTS IN BLAIRLOGIE. PALP has entered
into a Purchase and Sale Agreement (the "Purchase Agreement") dated as of
October 24, 1998 by and among PALP, certain of PALP's affiliates (together with
PALP, the "Sellers"), Blairlogie International LLC ("Blairlogie International")
and certain other parties, pursuant to which the Sellers will sell their direct
and their indirect general partnership ownership interests in Blairlogie to
Blairlogie International and its subsidiary (together, the "Buyer"). As of the
closing of the Blairlogie Transaction (as defined below), Blairlogie
International will be a wholly owned subsidiary of Alleghany Asset Management,
Inc. ("Alleghany Management").
Sellers currently own a 75% general partner interest in Blairlogie (the
"Sellers' Interest"). At the closing of the transactions contemplated by the
Purchase Agreement (the "Blairlogie Transaction"), Sellers will transfer the
Sellers' Interest to Buyer. The aggregate consideration to be paid by Buyer to
the Sellers is expected to be approximately $6.6 million, subject to certain
adjustments.
The completion of the Blairlogie Transaction is contingent upon
obtaining the consent of Blairlogie clients representing a significant portion
of the assets currently under the management of Blairlogie, including the
approval of the shareholders of each PIMCO Fund. Other conditions precedent to
the consummation of the Blairlogie Transaction include, among other things, that
all regulatory filings, applications, notifications and consents have been duly
and properly made or obtained. If the conditions to the Blairlogie Transaction
are not met or waived and the Blairlogie Transaction is therefore not
consummated, it is anticipated that the Reorganizations would not occur.
Certain current employees of Blairlogie, including Mr. Gavin Dobson and
Mr. James Smith, will be offered employment and other compensation arrangements
in connection with the Blairlogie Transaction.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. As noted, the Board of
Trustees of Alleghany has created and designated two new portfolios, the
Alleghany/Blairlogie Emerging Markets Fund and the Alleghany/Blairlogie
International Developed Fund, for the specific purpose of acquiring all of the
assets and the stated liabilities of the corresponding PIMCO Fund. The
Reorganization Agreement provides that at the Closing(s) the assets and stated
liabilities of each PIMCO Fund will be transferred to the corresponding
Alleghany Fund in exchange for full and fractional Shares of the corresponding
Alleghany Fund, as shown in the following table:
<TABLE>
<CAPTION>
<S> <C> <C>
PIMCO FUND/SHARE CLASS CORRESPONDING ALLEGHANY FUND/SHARE CLASS
PIMCO EMERGING MARKETS FUND ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
</TABLE>
The Shares issued by each Alleghany Fund in each Reorganization will
have an aggregate net asset value equal to the aggregate net asset value of the
shares of the corresponding PIMCO Fund that are outstanding immediately before
the Closing. Immediately after each Closing, each PIMCO Fund will distribute the
Shares of the corresponding Alleghany Fund received in the Reorganization to its
shareholders in liquidation of the PIMCO Fund. Each shareholder owning shares of
a particular PIMCO Fund at the Closing with respect to such PIMCO Fund will
receive Shares of the corresponding class of the corresponding Alleghany Fund,
and will receive any unpaid dividends or distributions that were declared before
the Closing on PIMCO Fund shares. Alleghany will establish an account for each
former shareholder of the PIMCO Funds reflecting the appropriate number of
Alleghany Fund Shares distributed to that shareholder. Shares of the Alleghany
Funds will be in uncertificated form.
The Reorganizations are subject to a number of conditions, including
the following: approval of the Reorganization Agreement and the related matters
described in this Proxy Statement/Prospectus by shareholders of the PIMCO Funds
at the Meeting; the receipt of certain legal opinions described in the
Reorganization Agreement (which include opinions of counsel to Alleghany that
(a) the Alleghany Fund Shares issued in the Reorganizations will be validly
issued, fully paid and non-assessable and (b) even though there is no
controlling legal authority on point, the Reorganizations should not give rise
to recognition of gain or loss for federal income tax purposes to the PIMCO
Funds, the Alleghany Funds or their respective shareholders); the receipt of
certain certificates from the parties concerning the continuing accuracy of the
representations and warranties in the Reorganization Agreement; the receipt of
"comfort letters" from the independent public accountants of the Trust and
Alleghany regarding various financial matters; the receipt of any necessary
exemptive relief or no-action assurances requested from the Securities and
Exchange Commission or its Staff (the "SEC") with respect to Sections 17(a) and
17(d) of the 1940 Act and Rule 17d-1 thereunder; and the parties' performance in
all material respects of their respective covenants and undertakings in the
Reorganization Agreement.
The Reorganization Agreement may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Meeting that
would have a material adverse effect on any PIMCO Fund's shareholder's
interests. Assuming satisfaction of the conditions in the Reorganization
Agreement, it is anticipated that the Closing(s) will be effective as of the
close of business on or about March 31, 1999, or, in accordance with the
Reorganization Agreement, such other date as agreed to in writing by the
officers of the parties to the Reorganization Agreement.
The Reorganization Agreement and the Purchase Agreement require that
Alleghany bear both its own and the Trust's expenses incurred in connection with
entering into and carrying out the provisions of the Reorganization Agreement,
provided that the Trust will be responsible for all accounting fees incurred by
it or its affiliates in connection with entering into or carrying out the
Reorganization Agreement. See Appendix I to this Proxy Statement/Prospectus.
Each PIMCO Fund will be reorganized into a corresponding Alleghany
Fund. The following table sets forth, as of the Record Date, (a) the
capitalization of each PIMCO Fund, separated, for each class of shares of such
fund, into the net asset value of the fund allocable to such class, and (b) the
pro forma capitalization, assuming the consummation of the Reorganizations, of
each Alleghany Fund, separated, for each class of shares of such fund, into the
net asset value of the fund allocable to such class. The Alleghany Funds were
created in anticipation of the Reorganizations. Consequently, neither Alleghany
Fund will have any assets outstanding prior to the Reorganizations and the
capitalization of each PIMCO Fund immediately prior to its Reorganization, and
the capitalization of its corresponding Alleghany Fund immediately following
such Reorganization will be identical. They will, however, be different than as
set forth below as a result of daily share purchase and redemption activity in
the PIMCO Funds as well as the PIMCO Funds' other ongoing operations.
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION as of January 22, 1999
<S> <C> <C> <C> <C>
TOTAL NET ASSETS
ALLOCABLE TO SHARES OUTSTANDING NET ASSET VALUE
CLASS OF SHARES PER SHARE
PIMCO EMERGING MARKETS FUND
Class A $ 390,783.15 48,944.543 7.98
Class B 212,815.14 26,883.820 7.92
Class C 664,830.32 83,997.702 7.91
Administrative Class 1,935.57 240.436 8.05
Institutional Class 15,549,712.72 1,930,018.054 8.06
<PAGE>
PRO FORMA ALLEGHANY/BLAIRLOGIE
EMERGING MARKETS FUND
Class N $ 1,270,364.18 157,809.215 8.05
Class I 15,549,712.72 1,930,018.054 8.06
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND
Class A $ 1,448,738.56 104,255.975 13.90
Class B 2,558,150.02 186,455.043 13.72
Class C 6,061,949.13 441,504.399 13.73
Administrative Class 26,203.25 1,879.890 13.94
Institutional Class 115,058,890.42 8,259,838.981 13.93
PRO FORMA ALLEGHANY
INTERNATIONAL DEVELOPED FUND
Class N $ 10,095,040.96 724,177.974 13.94
Class I 115,058,890.42 8,259,838.981 13.93
</TABLE>
The Alleghany/Blairlogie Emerging Markets Fund and the
Alleghany/Blairlogie International Developed Fund will each issue two classes of
shares in the Reorganizations: Class N shares and Class I shares. Pursuant to
the Reorganizations, holders of Class A, B and C and Administrative Class shares
of the PIMCO Funds shall receive Class N shares of the corresponding Alleghany
Fund, and holders of Institutional Class shares shall receive Class I shares of
the corresponding Alleghany Fund.
CONSIDERATION BY THE BOARD OF TRUSTEES OF THE TRUST. On December 10,
1998, the Trust's Board of Trustees, including a majority of its Independent
Directors, determined that the Reorganizations are in the best interest of the
PIMCO Funds and that the interests of the shareholders of the PIMCO Funds will
not be diluted as a result of the Reorganizations. The Trustees also approved
the terms of the draft Reorganization Agreement.
Similarly, after considering the relevant factors, the Board of
Trustees of Alleghany found that participation in the Reorganizations, as
contemplated by the Reorganization Agreement, is in the best interests of each
of the Alleghany Funds.
In considering whether to approve the proposed Reorganizations, the
Board of Trustees of the Trust was provided with a variety of information about
the Reorganizations, the PIMCO Funds, the Alleghany Funds and Alleghany. These
materials summarized the principal features of the Reorganizations, including
the condition to each Reorganization of the receipt by the Trust and each PIMCO
Fund of an opinion that each Reorganization should be tax free for the PIMCO
Funds and Alleghany Funds and their shareholders. In addition, the Trustees of
the Trust received comparative information for the PIMCO Funds and the
corresponding Alleghany Funds with respect to the following matters: (a)
investment objectives and policies; (b) advisory, distribution and other
servicing arrangements; and (c) expenses (with and without giving effect to
anticipated expense limitations), including PRO FORMA expenses assuming
consummation of the Reorganizations and expenses relative to peer groups. The
Trustees of the Trust were also provided with information about Alleghany and
its investment advisory organization.
The Reorganization Agreement provides that Alleghany, on behalf of each
Alleghany Fund, will use its best efforts to meet the conditions of the
requirements of the "safe harbor" of Section 15(f) of the 1940 Act. The Purchase
Agreement has a similar requirement with respect to Alleghany Management.
Section 15(f) of the 1940 Act provides that, when a change in control of an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection therewith as long as,
among other things, no "unfair burden" is imposed on the investment company as a
result of the transaction relating to the change of control, or any express or
implied terms, conditions or understandings applicable thereto. The term "unfair
burden" as defined by the 1940 Act includes any arrangement during the two-year
period after the transaction whereby the investment adviser (or predecessor or
successor adviser), or any "interested person" of any such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). The "safe harbor" provisions of Section 15(f) also require that, for
the three-year period immediately following the Reorganizations, at least 75% of
the Trustees of Alleghany will not be (a) "interested persons" (as defined in
the 1940 Act) of Blairlogie or (b) interested persons of PALP. The Trustees of
the Trust were informed that the Board of Trustees of Alleghany will satisfy
this requirement prior to the Reorganizations.
At the Board of Trustees' meeting on September 17, 1998, Alleghany
represented to the Trustees of the Trust that Blairlogie would commit to the
Expense Commitment described below under "Comparison of PIMCO Funds and
Alleghany Funds -- Overview of PIMCO Funds and Alleghany Funds" and in Appendix
II. Based upon this commitment and the current expense ratio information
provided for both the PIMCO Funds and the Alleghany Funds and the expense
limitations committed to by Blairlogie, the Trustees of the Trust concluded
that, for the first three years after the Closings, the Reorganizations would
likely result in expenses to PIMCO Fund shareholders which are equal to or less
than those currently experienced by such PIMCO Fund shareholders.
After consideration of the foregoing and other factors, and with the
advice and assistance of counsel, the Trustees of the Trust unanimously
determined that the Reorganizations are in the best interest of the shareholders
of each PIMCO Fund, and that the interests of the shareholders of each PIMCO
Fund will not be diluted as a result of such Reorganizations.
Information about the similarities and differences between the
Alleghany Funds and the PIMCO Funds regarding the identity and compensation of
the investment adviser, the voting rights of shareholders, any restrictions or
material obligations associated with ownership of shares, share structure, the
identity of the distributor, sales charges, any minimum initial or subsequent
investment, Rule 12b-1 plans (including associated fees and expenses), and
shareholder redemption, repurchase and exchange rights, is included in other
appropriately titled sections within this Proxy Statement/Prospectus and the
Appendices hereto.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of each Reorganization is
subject to the condition that the Trust and Alleghany receive an opinion, based
upon certain representations and assumptions, from Sonnenschein Nath & Rosenthal
to the effect that for federal income tax purposes (A) (i) each of the Alleghany
Funds and each of the PIMCO Funds will be treated as corporations separate from
the other series of Alleghany and the Trust, respectively; (ii) although there
is no controlling authority on point, the transfer by each of the PIMCO Funds of
all or substantially all of its assets in exchange for the corresponding
Alleghany Fund Shares and the assumption by each Alleghany Fund of all of the
corresponding PIMCO Fund's stated liabilities and the subsequent liquidation of
each PIMCO Fund pursuant to the Reorganizations should constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
(the "Code"), and each Alleghany Fund and PIMCO Fund should be "a party to a
reorganization" within the meaning of Section 368(b) of the Code; and (B)
assuming that the conclusion set forth in (A) (ii) above is correct; (i) neither
of the PIMCO Funds will recognize any gain or loss as a result of the
Reorganizations; (ii) neither of the Alleghany Funds will recognize any gain or
loss on the receipt of the assets of the corresponding PIMCO Fund in exchange
for Shares of the corresponding Alleghany Fund in the Reorganizations; (iii) the
adjusted tax basis and holding period in the assets of each of the Alleghany
Funds received from the corresponding PIMCO Funds in the Reorganizations will be
the same as the adjusted tax basis and will include the holding period,
respectively, of such assets in the hands of the corresponding PIMCO Fund
immediately prior to the Reorganizations; (iv) the shareholders of each of the
PIMCO Funds who exchange shares of each of the PIMCO Funds solely for Shares of
the corresponding Alleghany Fund in the Reorganizations will not recognize any
gain or loss; (v) the aggregate tax basis of Alleghany Fund Shares received by
each shareholder of the PIMCO Funds in the Reorganizations will be the same as
the aggregate tax basis of the PIMCO Fund shares exchanged therefor; (vii) each
former PIMCO Fund shareholder's holding period of Alleghany Fund Shares received
in the Reorganizations will be determined by including the period for which
PIMCO Fund shares were held by such shareholder at the time of the
Reorganizations provided that such shareholder held the PIMCO Fund shares as a
capital asset; and (viii) each of the Alleghany Funds will succeed to and take
into account the tax attributes of the corresponding PIMCO Fund described in
Section 381(c) of the Code, subject to the conditions and limitations contained
in Section 381(c) of the Code.
If a Reorganization with respect to a PIMCO Fund is subsequently
determined not to constitute a "reorganization" within the meaning of Section
368(a) of the Code, the PIMCO Fund could recognize taxable income on the
transfer of assets to the corresponding Alleghany Fund and incur a tax
liability, and the PIMCO Fund shareholders could recognize capital gain on the
receipt of Alleghany Fund Shares in liquidation of the PIMCO Fund. It is also
possible that the PIMCO Fund may not qualify as a regulated investment company
under Subchapter M of the Code and that the PIMCO Fund, or possibly the PIMCO
Fund shareholders, could be liable for taxes upon the PIMCO Fund's income
recognized during the taxable year.
In the event that the Trust and Alleghany do not receive the foregoing
opinion of Sonnenschein Nath & Rosenthal in a form satisfactory to each of them,
the Reorganizations will not take place and the Trust's Board of Trustees will
consider other alternatives.
COMPARISON OF THE PIMCO FUNDS AND ALLEGHANY FUNDS
OVERVIEW OF THE PIMCO FUNDS AND ALLEGHANY FUNDS. The investment
objectives,
policies and restrictions of each PIMCO Fund are substantially identical to
those of the corresponding Alleghany Fund. Blairlogie will be the investment
adviser for the Alleghany Funds and is expected to manage their investment
portfolios in a manner consistent with the way the PIMCO Funds have been
managed.
The PIMCO Funds have a different administrator, distributor, transfer
agent, independent auditor and different trustees from the Alleghany Funds.
The Alleghany Funds are sold at net asset value, with no front-end or
contingent deferred sales load, whereas the PIMCO Funds charge a front-end sales
charge, a servicing fee and a possible contingent deferred sales charge on their
Class A Shares, and a contingent deferred sales charge and a distribution and
servicing fee on their Class B and C Shares. NO FRONT-END OR CONTINGENT DEFERRED
SALES CHARGE WILL BE IMPOSED ON ANY OF THE SHAREHOLDERS IN CONNECTION WITH THE
REORGANIZATIONS OR ON PURCHASES OR REDEMPTIONS AFTER THE REORGANIZATIONS.
The purchase, redemption, dividend and other policies and procedures of
the PIMCO Funds and the Alleghany Funds are generally similar. See Appendix II
for a more detailed comparison of the PIMCO Funds' and Alleghany Funds' policies
and procedures.
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies
and restrictions of the Alleghany Funds are substantially identical to those of
the PIMCO Funds. The PIMCO Emerging Markets Fund seeks to provide long-term
growth of capital by investing primarily in common stocks of companies located
in foreign countries identified as "emerging markets" countries. The Morgan
Stanley Capital International Emerging Markets Free Index and the International
Finance Corporation Emerging Markets Index are used as the bases for choosing
the countries in which the PIMCO Emerging Markets Fund invests. However, the
PIMCO Emerging Markets Fund is not limited to the countries and weightings of
these indices. The PIMCO International Developed Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities. The Morgan Stanley Capital International EAFE (Europe, Asia,
Far East) Index (the "EAFE Index") is used as a basis for choosing countries in
which the PIMCO International Developed Fund invests. However, the PIMCO
International Developed Fund is not limited to the countries and weightings of
the EAFE Index.
EXPENSE RATIOS. The following table entitled "Total Annual Expense
Information" shows the current total operating expenses for each class of shares
of each PIMCO Fund along with the total operating expenses (before and after
waivers or reimbursements) that are expected to be borne by shareholders of each
class of Alleghany Fund shares after the Reorganizations. Blairlogie has
committed to maintain for a period of at least three years after the Closing the
expense ratios set forth below under the heading "Pro Forma Combined Total Fund
Operating Expenses" (the "Expense Commitment"). Such expense ratios, as
indicated in the table, are in all cases either equal to or less than those
currently experienced by the PIMCO Funds' shareholders.
<PAGE>
<TABLE>
<CAPTION>
TOTAL ANNUAL EXPENSE INFORMATION
<S> <C> <C>
TOTAL ANNUAL FUND OPERATING EXPENSES (AS A PRO FORMA COMBINED TOTAL
PERCENTAGE OF AVERAGE NET ASSETS)* FUND OPERATING EXPENSES
NAME OF FUND (AFTER WAIVERS AND REIMBURSEMENTS)
Emerging Markets
Class A Shares 1.75% 1.60% **
Class B Shares 2.50% 1.60% **
Class C Shares 2.50% 1.60% **
Administrative Class 1.60% 1.60% **
Institutional Class 1.35% 1.35% ***
International Developed
Class A Shares 1.50% 1.35%
Class B Shares 2.25% 1.35%
Class C Shares 2.25% 1.35%
Administrative Class 1.35% 1.35%
Institutional 1.10% 1.10%
* The administrative fee for each PIMCO Fund, which constitutes a portion of the
total fee listed, is subject to reduction to the extent that the average net
assets attributable in the aggregate to that PIMCO Fund's Class A, Class B and
Class C shares exceeds $2.5 billion.
** After waivers and reimbursements. Before
waivers and reimbursements the Total Fund Operating Expenses for this Class of
Shares would be 1.93%.
*** After waivers and reimbursements. Before waivers and
reimbursements the Total Fund Operating Expenses for this Class of Shares would
be 1.68%.
</TABLE>
SHAREHOLDER TRANSACTIONS AND SERVICES. The PIMCO Funds and the
corresponding Alleghany Funds offer generally similar shareholder services and
transactions. There are, however, some differences. For example, while the PIMCO
Funds charge a front-end sales charge, a servicing fee and a possible contingent
deferred sales charge on their Class A Shares, and a contingent deferred sales
charge and a distribution and servicing fee on their Class B and C Shares, the
corresponding classes of the Alleghany Funds do not charge any front-end,
contingent deferred or level sales charge on any of the Shares they offer. In
addition, except as noted below, the minimum initial investment requirements of
the Alleghany Funds are substantially similar to those of the corresponding
classes of shares of the PIMCO Funds. Generally, the minimum initial investment
requirement with respect to Institutional and Administrative Class shares of the
PIMCO Funds is $5,000,000. However, Administrative Class shares of the PIMCO
Funds will be exchanged for Class N shares of Alleghany Funds, which have a
$2,500 minimum investment requirement. Detailed expense information for each
proposed Reorganization is included in Appendix II to this Proxy
Statement/Prospectus.
Alleghany may, upon 60 days' notice, close a shareholder's account and
send the shareholder the proceeds thereof if the account balance of such
shareholder falls below $50. Similarly, the Trust has the ability to
involuntarily redeem shares, upon 60 days' written notice, from shareholders
whose accounts decrease below the amount required for a minimum initial
investment (except in the case of employer-sponsored retirement accounts). In
addition, with certain exceptions, the Trust charges a fee of $16 per annum for
accounts with balances below $2,500.
ACQUISITION AND REDEMPTION OF SHARES. After the
Reorganizations, investors wishing to acquire shares of beneficial interest in
the Alleghany Funds will be able to purchase them from First Data Distributors,
Inc., the Alleghany Funds' distributor, at their then current net asset value.
Shareholders desiring to sell their shares would be able to do so by exercising
their right to have such shares redeemed, on any day that the New York Stock
Exchange ("NYSE") is open for business, by the relevant Alleghany Fund at their
net asset value next determined as of the close of regular trading on the NYSE
for that day, after receipt of a proper redemption request. Detailed information
relating to redemptions and other shareholder transactions for each of the
Alleghany Funds and the PIMCO Funds is included in Appendix IV to this Proxy
Statement/Prospectus.
Payment for any redemption will generally be made within two business
days after receipt by Alleghany of a proper request for redemption, but in no
event later than within seven days, subject to the suspension of such right
under limited circumstances as described under "Comparison of PIMCO Funds and
Alleghany Funds -- Governing Documents." Alleghany has no current intention to
file with the SEC a notification of election pursuant to Rule 18f-1 under the
1940 Act to permit payment of redemptions in assets other than in cash.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Alleghany Funds' dividend and
other distribution policies will be substantially similar to those of the PIMCO
Funds. Alleghany intends to distribute at least annually to the Alleghany Funds'
shareholders substantially all of the Alleghany Funds' net investment income and
realized net capital gain. Alleghany also intends to provide the opportunity for
shareholders to elect to receive dividends and capital gain distributions in
cash or in additional shares of the Alleghany Funds at net asset value.
ADMINISTRATION ARRANGEMENTS. The PIMCO Funds' "unified" fee structure
differs from the fee and expense structure of the Alleghany Funds. Each
Alleghany Fund directly bears the expenses associated with various third-party
services, such as audit, custodial, portfolio accounting, legal, transfer agency
and printing costs. By contrast, each PIMCO Fund pays a single administrative
fee, computed as a percentage of average daily net assets, to the Trust's
administrator, PIMCO Advisors L.P. (the "PIMCO Administrator"), which bears the
costs of such third-party services to the Fund as well as itself providing
administrative services to the Fund, in exchange for the administrative fee. The
result of the PIMCO Funds' "unified" fee structure is an expense level that,
with limited exceptions, is precise and predictable under ordinary
circumstances. Furthermore, during the term of its administration agreement,
such Fund is, under ordinary circumstances, insulated from price increases in
third-party services and from increases in expense ratios arising from a decline
in net assets because the PIMCO Administrator, rather than the Fund, bears these
risks. See "Proposed Investment Management and Administration Agreements; Other
Contractual Arrangements -- Administration Plans" for a more detailed discussion
of the PIMCO Funds' and Alleghany Funds' administration arrangements.
FORMS OF ORGANIZATION. The Trust and Alleghany are open-end series
management investment companies registered with the SEC under the 1940 Act. Both
the Trust and Alleghany continuously offer shares to the public. The Trust is
organized as a Massachusetts business trust, and Alleghany is organized as a
Delaware business trust. Each Trust is governed by a Declaration of Trust or
Trust Instrument, as the case may be, By-laws and a Board of Trustees. Each
Trust is also governed by applicable Massachusetts or Delaware and federal law.
Under Massachusetts' law, shareholders could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Trust's Second Amended and Restated Agreement and Declaration of Trust (the
"Declaration of Trust") disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees of the Trust. The Declaration of Trust also provides for
indemnification out of a fund's property for all loss and expense of any
shareholder of that fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which such disclaimer is
inoperative or the fund of which he or she is or was a shareholder is unable to
meet its obligations, and thus should be considered remote.
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Alleghany, a series thereof or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law
and may thereby subject Alleghany shareholders to liability. To guard against
this risk, the Trust Instrument of Alleghany (a) provides that any written
obligation of Alleghany may contain a statement that such obligation may be
enforced only against the assets of Alleghany or the particular series in
question and the obligation is not binding upon the shareholders of Alleghany;
however, the omission of such a disclaimer will not operate to create personal
liability for any shareholders, and (b) provides for indemnification out of
trust property of any shareholder held personally liable for the obligations of
Alleghany. Accordingly, the risk of a shareholder of Alleghany incurring
financial loss beyond that shareholder's investment because of shareholder
liability is limited to circumstances in which (i) the court refuses to apply
Delaware law (ii) no contractual limitation of liability was in effect and (iii)
Alleghany itself would be unable to meet its obligations. In light of Delaware
law, the nature of Alleghany's business and the nature of its assets, the risk
of personal liability to a shareholder of Alleghany is considered remote.
SHARE STRUCTURE. Currently, the Trust consists of twenty-eight
diversified investment series. Immediately after the Reorganizations, Alleghany
Funds will consist of twelve funds. See "Additional Information about Alleghany"
for a more detailed discussion of Alleghany.
Shares of both the PIMCO Funds and the Alleghany Funds are shares of
beneficial interest. Shares of both the PIMCO Funds and Alleghany Funds are
entitled to one vote for each full share held and fractional votes for
fractional shares held. With respect to both the Trust and Alleghany, matters
submitted to shareholder vote must be approved by each fund separately except
(a) when required by the 1940 Act, shares shall be voted together, and (b) when
the Trustees of the Trust determine that the matter does not affect all funds,
then only shareholders of the affected funds(s) shall be entitled to vote
separately on the matter. Each fund votes separately with respect to any
proposal to approve its investment advisory agreement, to change its fundamental
investment objectives or policies or to adopt a plan of reorganization. Each
class of shares of each PIMCO Fund and each Alleghany Fund has identical voting
rights, except that each class of shares has exclusive voting rights on any
matter submitted to shareholders that relates solely to that class, and has
separate voting rights on any matter submitted to shareholders in which the
interest of one class differs from the interests of any other class. Similarly,
a class of a fund votes separately with respect to any proposal to approve a
plan of distribution for that class or as otherwise required by the 1940 Act.
Shares of the PIMCO Funds and Alleghany Funds have no pre-emptive
rights and have only such conversion and exchange rights as the Trustees of the
Trust or the Board of Trustees of Alleghany, respectively, may grant in their
discretion. Class B shares of the PIMCO Funds automatically convert into Class A
shares after they have been held for seven years. When issued for payment as
described in their respective prospectuses, Alleghany Fund shares and PIMCO Fund
shares are fully paid and non-assessable by either Alleghany or the Trust.
Each share of a class of an Alleghany Fund represents an equal
proportionate interest in a particular portfolio with other shares of the same
class and is entitled to cash dividends and distributions earned on such shares
as are declared in the discretion of the Alleghany Trustees.
Additional information concerning the attributes of the shares issued
by the Trust is included in the Trust's prospectuses, which are incorporated
herein by reference and, in the case of Alleghany, in the statement of
additional information filed with this Proxy Statement/Prospectus.
PORTFOLIO MANAGER. The persons at Blairlogie presently responsible for
the management of the PIMCO Funds' portfolios will continue to manage the
portfolios of the Alleghany Funds following the Reorganizations. James Smith is,
and after the Reorganizations will continue to be, primarily responsible for the
day-to-day management of the PIMCO Funds. Mr. Smith is a Managing Director and
the Chief Investment Officer of Blairlogie and is responsible for managing an
investment team of six professionals who, in turn, specialize in selection of
stocks within Europe, Asia and the Americas, and in currency and derivatives. He
previously served as a Senior Portfolio Manager at Murray Johnstone in Glasgow,
Scotland, responsible for international investment management for North American
clients, and at Schroder Investment Management in London. Mr. Smith received his
bachelor's degree in Economics from London University and his MBA from Edinburgh
University. He is an Associate of the Institute of Investment Management and
Research.
RISK FACTORS.
Foreign Markets. The risks attending an investment in the Alleghany
Funds are similar to the risks involved with an investment in the PIMCO Funds,
and relate largely to risks of investing in companies in foreign markets and,
for the PIMCO Emerging Markets Fund and the Alleghany/Blairlogie Emerging
Markets Fund, in developing or "emerging markets" countries.
Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in U.S.
companies. These risks include: differences in accounting, auditing and
financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resources, self-sufficiency
and balance of payments position. The securities markets, values of securities,
yields and risks associated with securities markets may change independently of
each other. Additionally, foreign securities and dividends and interest payable
on those securities may be subject to foreign taxes, including taxes withheld
from payments on those securities. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit great
price volatility. Additional costs associated with an investment in foreign
securities may include higher custodial fees than apply to domestic custodial
arrangements and transaction costs of foreign currency conversions. Changes in
foreign exchange rates also will affect the value of securities denominated or
quoted in currencies other than the U.S. dollar.
A Fund's investments in foreign currency-denominated debt obligations
and hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's income
distributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
Each of the PIMCO Emerging Markets Fund and Alleghany/Blairlogie
Emerging Markets Fund may invest in the securities of issuers based in countries
with developing economies. Investing in developing (or "emerging market")
countries involves certain risks not typically associated with investing in U.S.
securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. A number of emerging market countries
restrict, to varying degrees, foreign investment in securities. Repatriation of
investment income, capital, and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some emerging market
countries. A number of the currencies of emerging market countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these currencies by the PIMCO
Emerging Markets Fund or the Alleghany/Blairlogie Emerging Markets Fund.
Inflation and rapid fluctuations in inflation rates have had, and may continue
to have, negative effects on the economies and securities markets of certain
emerging market countries. Many of the emerging securities markets are
relatively small, have low trading volumes, suffer periods of relative
illiquidity and are characterized by significant price volatility. There is a
risk in emerging market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization or creation of government
monopolies, any of which may have a detrimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgement in a court outside the
United States; and significantly smaller market capitalization of securities
markets. Also, any change in the leadership or policies of emerging market
countries, or the countries that exercise a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.
In addition, emerging securities markets may have different clearance
and settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment or delay
in disposing of a portfolio security. Such a delay could result in possible
liability to a purchaser of the security.
Special Risks of Investing in Russian and Other Eastern European
Securities. Both the Alleghany/Blairlogie Emerging Markets Fund and the PIMCO
Emerging Markets Fund may invest a portion of their assets in securities of
issuers located in Russia and in other Eastern European countries. While
investments in securities of such issuers are subject generally to the same
risks associated with investments in other emerging market countries described
above, the political, legal and operational risks of investing in Russian and
other Eastern European issuers, and of having assets custodied within these
countries, may be particularly acute. A risk of particular note with respect to
direct investment in Russian securities is the way in which ownership of shares
of companies is normally recorded. When a Fund invests in a Russian issuer, it
will normally receive a "share extract," but that extract is not legally
determinative of ownership. The company's share registrar maintains the official
record of ownership of a company's share. Such share registrars are completely
under the control of the issuer, and investors are provided with few legal
rights against such registrars.
Foreign Currency Transactions. Foreign currency exchange rates may
fluctuate significantly over a short period of time. They generally are
determined by the forces of supply and demand in the foreign exchange markets
and the relative merits of investments in different countries, actual or
perceived changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention (or the failure to intervene) by U.S. or foreign
governments or central banks, or by currency controls or political developments
in the U.S. or abroad. For example, significant uncertainty surrounds the
proposed introduction of the euro (a common currency unit for the European
Union) in January 1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which the assets of an
Alleghany Fund or PIMCO Fund are denominated may be devalued against the U.S.
dollar, resulting in a loss to such Fund.
Each of the PIMCO Funds and the Alleghany Funds may enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. In addition, each of the PIMCO Funds and the Alleghany
Funds may buy and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures and may enter into forward foreign
currency exchange contracts to reduce the risk of adverse changes in foreign
exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. By entering into a forward
foreign currency exchange contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes in
the value of the currency it will deliver and increases its exposure to changes
in the value of the currency it will exchange into. The effect on the value of a
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another currency. Contracts to sell foreign currency
would limit any potential gain, which might be realized by a Fund if the value
of the hedged currency increases. A Fund may enter into these contracts for the
purpose of hedging against foreign exchange risk arising from the Fund's
investment or anticipated investment in securities denominated in foreign
currencies. Suitable hedging transactions may not be available in all
circumstances and there can be no assurance that a Fund will engage in such
transactions at any given time or from time to time. Also, such hedging
transactions may not be successful and may eliminate any chance for a Fund to
benefit from favorable fluctuations in relevant foreign currencies. Each of the
PIMCO Funds and the Alleghany Funds may enter into forward contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one currency to another. To the extent that
they do, both the PIMCO Funds and the Alleghany Funds will be subject to the
additional risk that the relative value of currencies will be different than
anticipated by the particular Fund's portfolio manager. Each of the PIMCO Funds
and the Alleghany Funds may use one currency (or a basket of currencies) to
hedge against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. Each of the PIMCO Funds and the Alleghany Funds will segregate
assets determined to be liquid by the Adviser or portfolio manager in accordance
with procedures established by the applicable Board of Trustees to cover their
respective obligations under forward foreign currency exchange contracts entered
into for nonhedging purposes.
Additional Risks. In addition to the risks of foreign securities and
currencies, each Fund is subject to a variety of other risks, including the risk
of general market declines and other factors. Please see the Prospectuses and
the Statement of Additional Information for the PIMCO Funds, which are
incorporated herein by reference, for a description of these risks.
GOVERNING DOCUMENTS.
Trustees. Each of the Trust and Alleghany is governed by its respective
trust documents, in the case of the Trust its Declaration of Trust and, in the
case of Alleghany, its Trust Instrument, and By-laws (each a "Governing
Document" and, collectively, the "Governing Documents"). Each of the Governing
Documents requires that the affairs of the Trust or Alleghany, as appropriate,
be administered by a Board of Trustees (each a "Board"). The Trust's Governing
Documents require its Board to consist of at least three Trustees, whereas
Alleghany's Board may consist of one Trustee. Alleghany's Board is elected by
the shareholders of Alleghany; except that the Trustees of the Alleghany Board
are entitled to fill any vacancy occurring on the Board as a result of (a) the
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of death, disease or otherwise of a Trustee, (b)
other inability of a Trustee to serve or (c) an increase in the number of
Trustees. Pursuant to the Trust's Governing Documents, either its Board or the
shareholders of the Trust may elect Trustees. In either case, Trustees serve
until they resign or are removed. The Governing Documents contain provisions
protecting third parties relying on the authority of Trustees apparently acting
in their capacities as Trustees. Consequently, each of the Trust and Alleghany
is liable for the actions of its Trustees. Pursuant to the Trust's Governing
Documents, a Trustee is entitled to receive compensation for his services to the
Trust, which compensation is set by its Board. Similarly, the Alleghany Board
has the authority, pursuant to the Alleghany Governing Documents, to set the
compensation, if any, of officers and Trustees. Trustees of the Trust may be
removed at any time by a majority of the other Trustees, whereas two-thirds of
the Trustees or shareholders of Alleghany are required to remove a Trustee of
Alleghany.
Personal Liability; Indemnification. Trustees and officers of Alleghany
are relieved from personal liability for any actions taken in their capacities
as Trustees or officers so long as those actions do not constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties
as Trustees or officers. The Trust's Declaration of Trust provides in general
that a Trustee, officer or other person acting under their direction is entitled
to indemnification by the Trust except with respect to any matter as to which
such person shall have been finally adjudicated in any action, suit or other
proceeding (a) not to have acted in good faith in the reasonable belief that
such person's action was in or not opposed to the best interest of the Trust or
(b) to be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office. The indemnity provided by the
Governing Documents requires the Trust or Alleghany, as the case may be, to pay
expenses for the defense of and reimburse the indemnified party for any
liability arising out of any lawsuit or other action brought against a Trustee
or officer for actions taken in his or her capacity as an officer or Trustee,
subject to the limitations set forth above. In addition, Alleghany is permitted
and the Trust is required to advance the expenses of an indemnified party's
defense prior to a final disposition of the action, provided that the party
receiving the advance provides an undertaking to reimburse such payment in the
event that it is found that the liability arose out of actions taken for which
indemnification is prohibited by the relevant Governing Document. The Trust is
subject, pursuant to its Governing Documents, to an additional requirement that
indemnity be provided to officers and Trustees, even in the absence of a final
disposition of the matter, if a majority of the disinterested Trustees acting on
such matter approves such indemnification or the Trust receives an opinion of
legal counsel to the effect that a court would find the Trustee or officer not
to have been guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties.
Redemption of Shares. The Governing Documents allow shareholders to
make requests for redemptions at any time, except that the Alleghany Governing
Documents allow the Trustees to suspend the right to redemptions at any time for
an indefinite period of time. The Alleghany Trustees may also elect to make
redemptions to the extent ownership of shares has or may become concentrated and
such redemptions are deemed necessary by the Trustees to maintain Alleghany's
qualifications as a regulated investment company under the Internal Revenue
Code. The Governing Documents for the Trust also allow the Trust to make certain
optional redemptions of shares if (a) the holder of such shares holds fewer than
a minimum amount determined by the Trustees, (b) the shareholder whose shares
are to be redeemed owns the number of shares of a particular series equal or
greater than a percentage of the outstanding shares of that series determined by
the Trustees or (c) the shareholder whose shares are to be redeemed owns the
number of shares of the Trust representing a greater than acceptable percentage
of the total outstanding shares, as determined by the Trustees.
Assets of Trust. The Governing Documents of both Alleghany and the
Trust provide that each series of shares represents a beneficial interest in
only the assets of that series, for which separate accounts are kept. In
addition, the Alleghany Governing Documents specify that creditors of a
particular series are entitled to look to the assets of only that series to
satisfy indebtedness of that series. The Governing Documents of Alleghany allow
the Trustees in their sole discretion to allocate assets and liabilities among
the various series, if such assets and liabilities are not readily identifiable
as allocable to a particular series.
Determination of Net Asset Value. The net asset value for any series of
Alleghany is determined by subtracting the liabilities of that particular series
from the assets thereof (such assets to be valued at market value, if a market
is readily identifiable, or fair value as determined in good faith by the Board
of Trustees of Alleghany if no market can be identified). The Trustees of
Alleghany may, however, adopt an alternative method of valuation. If the net
asset value of any Alleghany series is negative, Alleghany's Trustees are
permitted, pursuant to the Governing Documents, to (a) offset the negative sum
pro rata against the accrued dividends of the shareholders of such series, (b)
reduce the outstanding shares of such series and/or (c) reduce the payment of
declared dividends until such net number reaches zero. The Trust values
portfolio securities and other assets for which market quotations are readily
available at market value. Fixed income securities are normally valued on the
basis of quotations obtained from brokers and dealers or pricing services, which
take into account appropriate factors such as institutional-sized trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Trust's Board of Trustees,
with reference to fixed income securities whose prices are more readily
obtainable and whose durations are comparable to the securities being valued.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, when the Trust's Board of Trustees determines that amortized
cost is their fair value. Exchange-traded options, futures and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. Other securities and assets are valued at their fair value
as determined in good faith by the Trustees of the Trust or by persons acting at
the direction of the Trustees.
Quotations of foreign securities in foreign currency are converted to
U.S. dollar equivalents using foreign exchange quotations received from
independent dealers. The calculation of the net asset value of the PIMCO Funds
may not take place contemporaneously with the determination of the prices of
certain portfolio securities of foreign issuers used in such calculation.
Further, under the Trust's procedures, the prices of foreign securities are
determined using information derived from pricing services and other sources.
Information that becomes known to the Trust or its agents after the time that
net asset value is calculated on any business day may be assessed in determining
net asset value per share after the time of receipt of the information, but will
not be used to retroactively adjust the price of the security so determined
earlier or on a prior day. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of regular
trading on the Exchange (normally 4:00 p.m., Eastern time) may not be reflected
in the calculation of net asset value. If events materially affecting the value
of such securities occur during such period, then these securities may be valued
at fair value as determined by PALP or Blairlogie and approved in good faith by
the Board of Trustees of the Trust.
Each PIMCO Fund's liabilities are allocated among its classes. The
total of such liabilities allocated to a class, plus that class's distribution
and/or servicing fees and any other expenses specially allocated to that class,
are then deducted from the class's proportionate interest in the Fund's assets,
and the resulting amount for each class is divided by the number of shares of
that class outstanding to produce the class's net asset value per share.
Custodian. Alleghany is at all times required by its Governing
Documents to employ a Custodian for the accounts of Alleghany. The Trust is not
subject to a similar requirement under its Governing Documents, but is so
required under the 1940 Act.
PROPOSED INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS; OTHER CONTRACTUAL
ARRANGEMENTS.
Advisory Arrangements. PALP serves as investment adviser and Blairlogie
serves as the sub-adviser for each of the PIMCO Funds. PALP's address is 800
Newport Center Drive, Newport Beach, California 92660. Blairlogie's address is
125 Princes Street, 4th Floor, Edinburgh EH2 4AD, Scotland. After the
Reorganizations, Blairlogie will serve as the sole investment adviser to the
Alleghany Funds. The PIMCO Funds currently receive investment advisory services
from Blairlogie pursuant to an Amended and Restated Investment Advisory
agreement (the "PALP Advisory Agreement") between each PIMCO Fund and PALP and
an Amended and Restated Portfolio Management Agreement between PALP and
Blairlogie (collectively, the "Current Agreements"). The Alleghany Funds will
receive investment advisory services directly from Blairlogie as investment
adviser pursuant to an Investment Advisory Agreement between Blairlogie and each
Alleghany Fund (the "New Agreement"). Subject to the general supervision of
Alleghany's Trustees, and in accordance with the investment policies of each
Alleghany Fund, Blairlogie will formulate guidelines and lists of approved
investments and make decisions with respect to and place orders for the
Alleghany Funds' purchases and sales of portfolio securities and maintain
records relating to such purchases and sales. First Data Investor Services
Group, Inc., as sole shareholder of each Alleghany Fund prior to the
Reorganizations, will approve the New Agreement.
The material differences between the New Agreement and the Current
Agreements are discussed below. A form of the New Agreement is attached to this
Proxy Statement/Prospectus as Appendix V. The following discussion is qualified
in its entirety by reference to the text of the New Agreement. The New Agreement
will take effect with respect to either Alleghany Fund, upon consummation of the
related Reorganization.
Advisory Services. Pursuant to both the Current Agreements and the New
Agreement (collectively, the "Advisory Agreements"), PALP and Blairlogie (in the
case of the Current Agreements) and Blairlogie (in the case of the New
Agreement) (each of which may sometimes be referred to hereafter as an
"Adviser"), have the responsibility (in the case of the Current Agreements, on a
nonexclusive basis, with Blairlogie acting as sub-adviser to PALP, and in the
case of the New Agreement, on an exclusive basis) for the management of the
investment portfolio of, and the making and execution of investment decisions
for, each Fund to which such agreement relates, subject to the investment
objectives and investment policies and restrictions of such Fund and the
supervision of the appropriate Board of Trustees. Under each Advisory Agreement,
the Adviser is required to pay its own expenses in connection with servicing the
investments of the Fund, except that the Current Agreements also set forth those
expenses which the Adviser is not expected to pay, primarily relating to matters
not directly related to the Adviser's activities under the Current Agreements.
These expenses include, without limitation, brokerage fees and commissions, and
expenses of (a) audits by the Trust's accountants, (b) the Trust's transfer
agent, registrar, dividend dispersing agents and shareholder recordkeeping
services, (c) the Trust's custodial services, (d) obtaining quotations for
calculating the value of a Fund's assets, (e) obtaining portfolio activity
reports, and (f) maintaining tax records.
Compensation. Under the PALP Advisory Agreement, as compensation for
PALP's services, each PIMCO Fund is obligated to pay to PALP a monthly
investment advisory fee based on the average daily net assets of such PIMCO
Fund. This fee, at an annualized rate, is .85% with respect to the PIMCO
Emerging Markets Fund and .60% with respect to the PIMCO International Developed
Fund. PALP, in turn, pays Blairlogie a fee at an annual rate of .75% and .50% of
the average daily net assets of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund, respectively, for Blairlogie's portfolio
management services under the Amended and Restated Portfolio Management
Agreement. The New Agreement provides that the Adviser will be paid an annual
fee of 0.85% of the average daily net assets of the Alleghany Funds, payable
monthly based on the actual number of days in the month for which payment is
being made.
Fee and Expense Limitations. Neither the New Agreement nor the Current
Agreements include any contractual expense limitation provisions. However,
pursuant to the Expense Commitment, Blairlogie has committed, for a period of at
least three years from the date of the Closings, to waive fees and/or pay
Alleghany Fund expenses to the extent necessary to comply with the Expense
Commitment. From time to time, Blairlogie may waive or reimburse (either
voluntarily or pursuant to applicable limitations) advisory fees or expenses
payable by an Alleghany Fund.
Ability to Retain a Sub-Adviser. The PALP Advisory agreement authorizes
PALP, at PALP's expense, to retain a sub-adviser or sub-advisers to perform some
or all of the services for which PALP is responsible under the PALP Advisory
agreement, subject to approval by the Trustees. PALP retains Blairlogie to
manage the PIMCO Funds' investment portfolios pursuant to that authority. The
New Agreement does not address whether the duties of the Adviser may be
delegated to a sub-adviser, and any such delegation would require shareholder
approval under the 1940 Act.
Administration Plans. The PIMCO Funds have entered into an
Administration Agreement with PALP (the "PIMCO Administrator"). Administrative
services are provided to the Alleghany Funds by The Chicago Trust Company (the
"Alleghany Administrator") and First Data as sub-administrator. The address for
the Alleghany Administrator is The Chicago Trust Company, 171 N. Clark Street,
Chicago, Illinois 60601.
The PIMCO Administrator provides or procures administrative services
for the PIMCO Funds, which include clerical help and accounting, bookkeeping,
internal audit services and certain other services required by the PIMCO Funds,
and preparation of reports to the PIMCO Funds' shareholders and regulatory
filings. The PIMCO Administrator has retained Pacific Investment Management
Company to provide such services as sub-administrator (the "Sub-Administrator").
The PIMCO Administrator and/or the Sub-Administrator may also retain other
affiliates to provide certain of these services. In addition, the PIMCO
Administrator, at its own expense, arranges for the provision of legal, audit,
custody, transfer agency (including sub-transfer agency and other administrative
services) and other services necessary for the ordinary operation of the PIMCO
Funds, and is responsible for the costs of registration of the PIMCO Funds'
shares and the printing of prospectuses and shareholder reports for current
shareholders.
For providing or procuring administrative services to the PIMCO Funds
as described above, the PIMCO Administrator receives monthly fees from each Fund
as follows: with respect to Class A, Class B and Class C shares of such Fund, an
amount based on the average daily net assets attributable in the aggregate to
that Fund's Class A, Class B and Class C shares at an annual rate of 0.40% of
the first $2.5 billion of average daily net assets and 0.35% of amounts in
excess of $2.5 billion, and, with respect to Administrative and Institutional
Class shares of such Funds, an amount based on the average daily net assets
attributable in the aggregate to that Fund's Administrative and Institutional
Class shares at an annual rate of 0.50%.
The Trust (and not the PIMCO Administrator) is responsible for the
following expenses: (i) salaries and other compensation of any of the Trust's
executive officers and employees who are not officers, directors, stockholders
or employees of PALP, Pacific Investment Management Company, or their
subsidiaries or affiliates; (ii) taxes and governmental fees; (iii) brokerage
fees and commissions and other portfolio transaction expenses; (iv) the costs of
borrowing money, including interest expenses; (v) fees and expenses of the
Trustees who are not "interested persons" of the PIMCO Administrator, any
portfolio manager of a series of the Trust or PALP, and any counsel retained
exclusively for their benefit; (vi) extraordinary expenses, including costs of
litigation and indemnification expenses; (vii) expenses which are capitalized in
accordance with generally accepted accounting principles; and (viii) any
expenses allocated or allocable to a specific class of shares, which include
distribution and/or service fees payable with respect to Class A, Class B and
Class C and Administrative Class shares, and may include certain other expenses
as permitted by the Trust's Multiple Class Plan adopted pursuant to Rule 18f-3
under the 1940 Act, subject to review and approval by the Trustees.
Under the Administration Agreement with the Alleghany Funds, the
Alleghany Administrator is responsible for: (1) coordinating with the Custodian
and Transfer Agent for Alleghany and monitoring the services they provide to the
Alleghany Funds; (2) coordinating with and monitoring any other third parties
furnishing services to the Alleghany Funds; (3) providing the Alleghany Funds
with necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervising the maintenance by third parties of such books and records of the
Alleghany Funds as may be required by applicable federal or state law; (5)
preparing or supervising the preparation by third parties of all federal, state
and local tax returns and reports of the Funds required by applicable law; (6)
preparing and, after approval by the Alleghany Funds, filing and arranging for
the distribution of proxy materials and periodic reports to shareholders of the
Alleghany Funds as required by applicable law; (7) preparing and, after approval
by the Alleghany Funds, arranging for the filing of such registration statements
and other documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (8) reviewing and submitting
to the officers of the Alleghany Funds for their approval invoices or other
requests for payment of the Alleghany Funds' expenses and instructing the
Custodian to issue checks in payment thereof; and (9) taking such other action
with respect to Alleghany or the Alleghany Funds as may be necessary in the
opinion of the Alleghany Administrator to perform its duties under the
Administration Agreement.
The accrued expenses of the Alleghany Funds, as well as certain
expenses attributable to each class of shares, are deducted from accrued income
before dividends are declared. The Alleghany Funds' expenses include, but are
not limited to: fees paid to Blairlogie and First Data; interest; Trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by Blairlogie or the Alleghany
Administrator under their respective agreements with Alleghany; and any
extraordinary expenses. Each class of Shares may bear certain class specific
costs associated with retail transfer agency, shareholder servicing, sales
support and distribution. Any general expenses of Alleghany that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bear to
the assets of Alleghany or in such other manner as Alleghany's Board of Trustees
deems appropriate.
As compensation for services performed under the Administration
Agreement, the Alleghany Administrator receives a fee payable monthly at an
annual rate of: 0.060% of the first $2 billion of Alleghany's average daily net
aggregate assets; 0.050% of Alleghany's average daily net assets between $2
billion and $7 billion; and 0.045% of Alleghany's average daily net assets in
excess of $7 billion. The Alleghany Administrator also receives a custody
liaison fee equal to an annual fee per Alleghany Fund of $10,000 for average
daily net assets up to $100 million, $15,000 for average daily net assets
between $100 million and $500 million, and $20,000 for average daily net
assets in excess of $500 million.
Investors Fiduciary Trust Company ("IFTC") is custodian for each of
the PIMCO Funds. Pursuant to separate sub-custody agreements between IFTC and
The Chase Manhattan Bank, N.A. ("Chase"), and IFTC and State Street Bank and
Trust Company ("State Street"), Chase and State Street serve as sub-custodians
of the Trust for the custody of the foreign securities acquired by the PIMCO
Funds. Under the sub-custody agreements, Chase and State Street may hold foreign
securities at their principal offices and their branches, and subject to
approval by the Trust's Board of Trustees, at a foreign branch of a qualified
U.S. bank, with an eligible foreign sub-custodian, or with an eligible foreign
securities depository.
Pursuant to rules or other exemptions under the 1940 Act, the Trust may
maintain foreign securities and cash in the custody of certain eligible foreign
banks and securities depositories. Selection of these foreign custodial
institutions is currently made by the Board of Trustees of the Trust following a
consideration of a number of factors, including (but not limited to) the
reliability and financial stability of the institution, the ability of the
institution to perform capably custodial services for the Trust, the reputation
of the institution in its national market, the political and economic stability
of the country in which the institution is located, and further risks of
potential nationalization or expropriation of the Trust's assets, although the
Trust's Board of Trustees reserves the right to delegate their selection
responsibilities in light of recent amendments to Rule 17f-5 under the 1940 Act,
in which case the factors for consideration would differ from those referenced
above. Currently, the Trust's Board of Trustees reviews annually the continuance
of foreign custodial arrangements for the Trust, but reserves the right to
discontinue this practice as permitted by the recent amendments to Rule 17f-5.
IFTC serves as Custodian of Alleghany's assets pursuant to a Custodian
Agreement. Under such Agreement, IFTC (a) maintains a separate account or
accounts in the name of each Fund, (b) holds and transfers portfolio securities
on account of each Fund; (c) accepts receipts and makes disbursements of money
on behalf of each Fund; (d) collects and receives all income and other payments
and distributions on account of each Fund's securities; and (e) makes periodic
reports to Alleghany's Board of Trustees concerning each Fund's operations.
Other Service Providers. The other service providers for the PIMCO Funds and the
Alleghany Funds are set forth in the table below.
OTHER SERVICE PROVIDERS
FOR THE PIMCO FUNDS AND ALLEGHANY FUNDS
<TABLE>
<CAPTION>
<S> <C> <C>
PIMCO Funds Alleghany Funds
Distributor PIMCO Funds Distributors LLC First Data Distributors, Inc.
Administrator PIMCO Advisors L.P. The Chicago Trust Company
Sub-Administrator Pacific Investment Management Company First Data Investor Services Group, Inc.
Transfer Agent First Data Investor Services Group, Inc. First Data Investor Services Group, Inc.
and Investors Fiduciary Trust Company and Investors Fiduciary Trust Company
Custodian Investors Fiduciary Trust Company Investors Fiduciary Trust Company
Independent Accountants PricewaterhouseCoopers LLP KPMG Peat Marwick LLP
</TABLE>
Distribution Plan. Shares of the PIMCO Funds are distributed by PIMCO
Funds Distributor LLC ("PFD"), a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and a wholly-owned
subsidiary of PALP. PFD's address is 2187 Atlantic Street, Stamford, Connecticut
06902. Pursuant to separate Distribution and Servicing Plans for Class A, Class
B and Class C shares of the PIMCO Funds (the "Retail Plans"), PFD receives from
the Trust: (a) in connection with the distribution of Class B and Class C shares
of the PIMCO Funds, distribution fees up to the annual rate of .75% of each
PIMCO Fund's average daily net assets attributable to Class B and C Shares,
respectively, and (b) in connection with personal services rendered to Class A,
B and C shareholders of the Trust and the maintenance of shareholder accounts,
certain servicing fees up to the annual rate of .25% of each PIMCO Fund's
average daily net assets attributable to Class A, Class B and C shares,
respectively. The Retail Plans were adopted pursuant to Rule 12b-1 under the
1940 Act, and are of the type known as "compensation plans." This means that,
although the Trustees of the Trust are expected to take into account the
expenses of PFD and its predecessors in their periodic review of the Retail
Plans, the fees are payable to compensate PFD for services rendered even if the
amounts paid exceed PFD's expenses. From time to time, expenses of PFD incurred
in connection with the distribution of Class B and C shares of the PIMCO Funds,
and in connection with the servicing of Class A, B and C shareholders of the
Funds and the maintenance of Class A, B and C shareholder accounts, may exceed
the distribution and/or servicing fees collected by PFD.
The Trust has adopted an Administrative Services Plan with respect to
Administrative Class shares of each of the PIMCO Funds, and a Distribution Plan
with respect to the Administrative Class shares of the PIMCO International
Developed Fund (together, the "Institutional Plans"). Under the terms of the
Institutional Plans, the Trust is permitted to reimburse, out of the
Administrative Class assets of each of the PIMCO Funds, in an amount up to .25%
on an annual basis of the average daily net assets attributable to that class,
financial intermediaries that provide services in connection with the
distribution and marketing of shares and/or the provision of certain shareholder
services (in the case of the Distribution Plan) or the administration of plans
or programs that use PIMCO Fund shares as their funding medium (in the case of
the Administrative Services Plan), and to reimburse certain other related
expenses. Total reimbursements under the Institutional Plans may be paid in an
amount up to .25% on an annual basis of the average daily net assets
attributable to the Administrative Class shares of each PIMCO Fund. The same
entity may not receive both distribution and administrative services fees with
respect to the same assets but may with respect to separate assets receive fees
under each Institutional Plan. Each Institutional Plan has been adopted in
accordance with the requirements of Rule 12b-1 and is administered in accordance
with the provisions of that rule, except that shareholders will not have the
voting rights set forth in Rule 12b-1 with respect to the Administrative
Services Plan that they will have with respect to the Distribution Plan.
Shares of the Alleghany Funds are distributed by First Data
Distributors, Inc. ("First Data"), a broker-dealer registered with the SEC under
the 1934 Act, pursuant to a distribution agreement (the "Distribution
Agreement"). The Alleghany Funds adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for its Class N Shares. There is no distribution plan
for the Class I Shares. Pursuant to the Distribution Agreement, First Data will
receive certain payments for services rendered for the purpose of selling shares
issued by an Alleghany Fund. Distribution expenses which are attributable to a
particular Fund will be charged against that Alleghany Fund's assets. Under
Alleghany's Plan of Distribution, each Alleghany Fund may reimburse the
Distributor for actual expenses not exceeding, on an annual basis, 0.25% of its
average daily net assets.
INFORMATION RELATING TO VOTING MATTERS
REQUIRED VOTES; QUORUM; ADJOURNMENTS. The affirmative vote of a
plurality of the quorum required for the transaction of business of each PIMCO
Fund is necessary for the approval of the Reorganization Agreement with respect
to that PIMCO Fund. The holders of 30% of the shares of each PIMCO Fund
outstanding as of the Record Date, present in person or represented by proxy,
constitute a quorum for the transaction of business by the shareholders of such
PIMCO Fund at the Meeting. Votes cast by proxy or in person at the Meeting will
be counted by persons appointed by the Trust as tellers for the Meeting. The
tellers will count the total number of votes cast "for" approval of Proposal 1
for purposes of determining whether sufficient affirmative votes have been cast.
The tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (a) instructions have not been received from the beneficial owners or
the persons entitled to vote and (b) the broker or nominee does not have
discretionary voting power on a particular matter) as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
Assuming the presence of a quorum, abstentions have the effect of a negative
vote on Proposal 1.
In the event that a quorum is not present for purposes of acting on
Proposal 1, or if sufficient votes in favor of Proposal 1 are not received by
the time of the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a plurality of the shares
present in person or represented by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of any Proposal that has
not then been adopted. They will vote against any such adjournment those proxies
required to be voted against each Proposal that has not then been adopted and
will not vote any proxies that direct them to abstain from voting on such
Proposals.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present or
knows that others will present is Proposal 1, mentioned in the Notice of Special
Meeting. However, shareholders are being asked on the enclosed proxy to
authorize the persons named therein to vote in accordance with their judgment
with respect to any additional matters which properly come before the Meeting,
and on all matters incidental to the conduct of the Meeting. Proxies may be
revoked at any time before they are exercised by submitting to the Trust a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person.
SOLICITATION OF PROXIES. Solicitation of proxies by personal interview,
mail and telephone may be made by officers and Trustees of the Trust and
officers and employees of PALP, its affiliates and other representatives of the
Trust. The Trust has retained SCC to aid in the solicitation of proxies. The
expenses incurred in connection with the solicitation will not be borne by the
shareholders of the PIMCO Funds but will instead be borne by Alleghany.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS; SHAREHOLDER PROPOSALS FOR
FUTURE MEETINGS. Neither Alleghany nor the Trust presently intends to hold
annual meetings of shareholders for the election of trustees or other business
unless otherwise required by the 1940 Act. Shareholder proposals to be presented
at any future meeting of shareholders of the Trust must be received by the Trust
at a reasonable time before that meeting in order for such proposals to be
considered for inclusion in the proxy materials relating to that meeting. Under
certain circumstances, shareholders may request that the Trustees of Alleghany
call a shareholder meeting; the Secretary of Alleghany shall call a meeting upon
the written request of shareholders owning at least 10% of the outstanding
shares entitled to vote and upon payment by such shareholders of the estimated
cost of preparing and mailing a notice of the meeting. All shareholder proposals
for inclusion in a Proxy Statement/Prospectus for any subsequent meeting of
shareholders of an Alleghany Fund must be received by the relevant fund a
reasonable period of time prior to any such meeting.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement and
related matters are being submitted for approval by each PIMCO Fund's
shareholders at the Meeting pursuant to the provisions of the Trust's
Declaration of Trust. With respect to each PIMCO Fund, the affirmative vote of a
plurality of the quorum required for the transaction of business is necessary
for the approval of the Reorganization Agreement. The Reorganization Agreement
provides that, in the event the Reorganization Agreement is approved by the
shareholders of only one of the PIMCO Funds, the failure of a PIMCO Fund to
consummate the transactions contemplated by the Reorganization Agreement shall
not affect the consummation or validity of the other PIMCO Fund's
Reorganization. The consummation of the Blairlogie Transaction is, however,
subject to several conditions, including the approval thereof by a certain
number of Blairlogie clients, including each of the PIMCO Funds.
Only shareholders of record at the close of business on the Record Date
will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. Each whole share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional share shall be entitled to a
proportionate fractional vote. Shares represented by a properly executed proxy
will be voted in accordance with the instructions thereon or, if no
specification is made, the persons named as proxies will vote in favor of each
proposal set forth in the Notice of Meeting. Shareholders of each PIMCO Fund
will vote only on the approval or disapproval of that PIMCO Fund's
Reorganization Agreement. On the Record Date, the following shares of each PIMCO
Fund were outstanding and entitled to be voted:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PIMCO
FUND AND CLASS SHARES ENTITLED TO VOTE
PIMCO EMERGING MARKETS FUND
Class A Shares 48,944.543
Class B Shares 26,883.820
Class C Shares 83,997.702
Administrative Class Shares 240.436
Institutional Class Shares 1,930,018.054
PIMCO INTERNATIONAL DEVELOPED FUND
Class A Shares 104,255.975
Class B Shares 186,455.043
Class C Shares 441,504.399
Administrative Class Shares 1,879.890
Institutional Class Shares 8,259,838.981
</TABLE>
If the accompanying proxy is executed and returned in time for the
Meeting, the shares represented thereby will be voted as discussed above under
"Required Votes; Quorum; Adjournments."
The approval of the Reorganization Agreement by the Trustees of the
Trust is discussed above under "Information Relating to the Proposed
Reorganization -- Consideration by the Board of Trustees of the Trust." The
Reorganization Agreement was approved by the Trustees of Alleghany at a meeting
held on December 17, 1998.
As of the Record Date, the officers and Trustees of the Trust as a
group owned less than 1% of any of the PIMCO Funds. As of December 31, 1998 the
officers and Trustees of Alleghany as a group owned less than 1% of any of the
Alleghany Funds. The table below entitled "5% Shareholders" shows the name,
address and share ownership of each person known to the Trust to have beneficial
or record ownership with respect to 5% or more of a class of a PIMCO Fund as of
the Record Date. There are no persons known to Alleghany to have beneficial or
record ownership with respect to 5% or more of a class of Alleghany Fund as of
the Record Date.
<TABLE>
<CAPTION>
5% SHAREHOLDERS
<S> <C> <C> <C> <C> <C> <C>
Class; Amount of Projected
Shares Owned; Percentage Percentage Percentage of
PIMCO FUND NAME AND ADDRESS Type of of Class of Fund Fund
Ownership Post-Closing
PIMCO Emerging Markets Fund
Institutional Pacific Mutual Life Insurance 810,208.334 41.98% 38.76%* 38.76%*
-------------
Company
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, CA 92660
Charles Schwab & Co., Inc.- 576,633.793 29.88% 27.59%* 27.59%*
Reinvest**
The Schwab Building
101 Montgomery Street
San Francisco, CA 94104-4122
Donaldson Lufkin & Jenrette** 119,382.310 6.19% 5.71% 5.71%
Pershing Division
P.O. Box 2052
Jersey City, NJ 07303-2052
Pacific Life Foundation 109,182.792 5.66% 5.22% 5.22%
700 Newport Center Drive
Newport Beach, CA 92660
California Race Track 117,324.616 6.08% 5.61% 5.61%
Association
P.O. Box 67
Laverne, CA 91750
Administrative FTC & Co. 228.618 95.08% 0.01% 0.01%
--------------
ATTN Datalynx #165
P.O. Box 173736
Denver, CO 80217-3736
Class A Paine Webber FBO 14,459.406 29.54% 0.69% 0.69%
-------
Donald A. Gill as Trustee for
Joseph A. Gill Irrev. Trust
U/A DTD 11-08-94
9992 Mackey Circle
Overland Park, KS 66212-3458
Paine Webber FBO 6,444.018 13.17% 0.31% 0.31%
Donald A. Gill as CDN for
Timothy P. Gill UTMA-KS
9992 Mackey Circle
Overland Park, KS 66212-3458
Class B PAF Sales Inc.
Profit Sharing Plan 2,347.418 8.73% 0.11% 0.11%
P.O. Box 307
Scarborough, NY 10510-0807
PaineWebber FBO 1,740.644 6.47% 0.08% 0.08%
PaineWebber CDM FBO
Ray G. Gross
P.O. Box 3321
Weehawken, NJ 07087-8154
Merrill Lynch Pierce Fenner 1,592.000 5.92% 0.08% 0.08%
& Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, FL 32246-6484
Raymond James 1,557.632 5.79% 0.07% 0.07%
& Associates, Inc., CSDN
Ralph R. Castaldo IRA
311 Canvasback Road
Middletown, DE 19709-9148
Class C Merrill Lynch Pierce 5,021.000 5.98% 0.24% 0.24%
-------
Fenner & Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, FL 32246-6484
PIMCO International
Developed Fund
Institutional Pacific Mutual Life Insurance 1,959,229.583 23.72% 21.78% 21.78%
-------------
Company
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, CA 92660
Charles Schwab & Co., Inc.- 1,381,973.944 16.73% 15.37% 15.37%
Reinvest**
Attn: Mutual Fund Operations
The Schwab Building
101 Montgomery Street
San Francisco, CA 94104-4122
Citibank, N.A., Trustee for the 1,049,235.535 12.70% 11.67% 11.67%
benefit of
Nissan Motor Mfg. Corp. U.S.A.
983 Nissan Drive
Smyrna, TN 37167-4400
Wachovia Bank NA as Trustee for 1,045,759.472 12.66% 11.63% 11.63%
the
Atlanta Gas Light Company
Retirement Plan
301 N. Main Street - MC NC 31057
Winston-Salem, NC 27150
Pacific Asset Management LLC 528,681.602 6.40% 5.88% 5.88%
700 Newport Center Drive
Newport Beach, CA 92660-6307
Administrative Northern Trust Company Custodian 961.012 51.12% 0.01% 0.01%
--------------
For Arthur Henzell TTEE For
Sandra Hogue Trust
P.O. Box 92956
Chicago, IL 60675-2956
National Financial Services Corp. 901.075 47.93% 0.01% 0.01%
For the Exclusive Benefit of its
Customers
1 World Financial Center
200 Liberty Street
New York, NY 10281-1003
Class A Boston Safe Deposit Trust CUST 9,456.885 9.07% 0.11% 0.11%
-------
IRA
FBO William J. Murray
Duke University Medical Center
P.O. Box 3094
Durham, NC 27715-3094
National Financial Services 6,030.043 5.79% 0.07% 0.07%
Corporation
FEBO #AEX-769231
Marianne H. Tinnin
300 16th Street, S.W.
Albuquerque, NM 87104-1107
Pension Financial Services, Inc. 6,029.722 5.78% 0.07% 0.07%
FBO 140008891
Suite 1400
1700 Pacific Avenue
Dallas, TX 75201-7322
Class B Merrill Lynch Pierce 17,075.259 9.16% 0.19% 0.19%
-------
Fenner & Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, FL 32246-6484
National Financial Services 10,445.340 5.60% 0.12% 0.12%
Corporation**
FEBO #CL5-357065
Michael Schell
50 Park Avenue, #18E
New York, NY 10016
Class C Merrill Lynch Pierce 24,610.353 5.57% 0.27% 0.27%
-------
Fenner & Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, FL 32246-6484
* Entity owned 25% or more of the outstanding shares of beneficial
interest of the noted Fund, and therefore may be presumed to "control" the Fund,
as that term is defined in the 1940 Act.
** Shares are believed to be held only as nominee.
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class of shares, or is identified as the holder of
record of more than 25% of a class of shares and has voting and/or investment
power, such shareholder may be presumed to control such class.
ADDITIONAL INFORMATION ABOUT ALLEGHANY
Alleghany is a no-load, open-end management investment company which
currently (prior to the Reorganizations) offers ten series of shares of
beneficial interest representing separate portfolios of investments as follows:
Montag & Caldwell Growth Fund, Chicago Trust Growth & Income Fund, Chicago Trust
Talon Fund, Chicago Trust Balanced Fund, Montag & Caldwell Balanced Fund,
Chicago Trust Bond Fund, Chicago Trust Municipal Bond Fund, Chicago Trust Money
Market Fund, Alleghany/Chicago Trust SmallCap Value Fund and Alleghany/Veredus
Aggressive Growth Fund.
Additional information about the Alleghany Funds is included in their
prospectuses and statements of additional information, as supplemented through
the date hereof, copies of which, to the extent not included herewith, may be
obtained without charge by writing or calling Alleghany at the address and
telephone number set forth on the first page of this Proxy Statement/Prospectus.
Alleghany is subject to the informational requirements of the 1934 Act and in
accordance therewith it files reports, proxy materials and other information
with the SEC. Reports and other information filed by Alleghany can be inspected
and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the offices of Alleghany listed
above. In addition, these materials can be inspected and copied at the SEC's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
The SEC maintains an Internet World Wide Web site (at www.sec.gov) which
contains the statement of additional information, materials that are
incorporated by reference into this Proxy Statement/Prospectus and other
information about the Alleghany Funds.
ADDITIONAL INFORMATION ABOUT THE TRUST
TRUSTEES AND OFFICERS. The Trustees and Officers of the Trust are listed below.
Each trustee who is an "interested person" of the Trust, as defined in the 1940
Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C>
Name Position with the Trust
- ---- -----------------------
E. Philip Cannon Trustee
Donald P. Carter Trustee
Gary A. Childress Trustee
William D. Cvengros* Trustee, Chairman of the Board
Richard L. Nelson Trustee
Lyman W. Porter Trustee
Alan Richards Trustee
Joel Segall Trustee
W. Bryant Stooks Trustee
Gerald M. Thorne Trustee
Stephen J. Treadway* Trustee, President and Chief Executive Officer
R. Wesley Burns Executive Vice President
Newton B. Schott, Jr. Vice President and Secretary
Jeffrey M. Sargent Vice President
Richard M. Weil Vice President
John P. Hardaway Treasurer
Joseph D. Hattesohl Assistant Treasurer
Garlin G. Flynn Assistant Secretary
</TABLE>
Additional information about the PIMCO Funds is included in their
prospectuses and statements of additional information, dated November 1, 1998,
as from time to time revised or supplemented, which have been filed with the
SEC. Copies of these prospectuses and the related statements of additional
information may be obtained without charge by writing or calling the Trust at
the address and telephone number set forth on the first page of this Proxy
Statement/Prospectus. Reports and other information filed by the Trust can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of the Trust
listed above. In addition, these materials can be inspected and copied at the
SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
The SEC maintains an Internet World Wide Web site (www.sec.gov) which contains
the statement of additional information, materials that are incorporated by
reference into this Proxy Statement/Prospectus and other information about the
PIMCO Funds.
FINANCIAL STATEMENTS
The audited financial statements and condensed financial information
for shares of the PIMCO Funds for the annual period ended June 30, 1998 are
included or incorporated by reference in their prospectuses or statements of
additional information or in the statement of additional information related to
this Proxy Statement/Prospectus, or are included herein.
The financial statements and financial highlights of the Trust as of
and for the year ended June 30, 1998, have been incorporated by reference herein
and in the Trust Registration Statement. These financial statements have been
audited by PricewaterhouseCoopers LLP, independent certified public accountants,
as stated in their reports, which have also been incorporated by reference
herein, and have been so included upon the report of such firm given upon their
authority as experts in accounting and auditing.
The Alleghany Funds have no operations and will not begin operations
until after the Reorganizations. Accordingly, no financial statements for
Alleghany Funds have been included herein.
OTHER BUSINESS
The only business that management intends to present or knows will be
presented is Proposal 1, mentioned in the Notice of Special Meeting. However,
shareholders are being asked on the enclosed proxy to authorize the persons
named therein to vote in accordance with their judgment with respect to any
additional matters which properly come before the Meeting, and on all matters
incidental to the conduct of the Meeting.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, Missouri 64105
presently serves as independent accountants for the Trust. If requested
by any PIMCO Fund shareholder in writing addressed to and received by the
Secretary of the Trust at least five days prior to the Meeting, a representative
of the Trust's independent accountants will attend the Meeting with the
opportunity to make a statement if desired and to respond to appropriate
questions.
SHAREHOLDERS MAY REQUEST, WITHOUT CHARGE, COPIES OF THE ANNUAL
REPORTS OF THE TRUST BY WRITING TO THE TRUST AT 840 NEWPORT CENTER DRIVE,
SUITE 300,
NEWPORT BEACH, CALIFORNIA 92660 OR BY CALLING 1-800-426-0107.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the
addresses, or by phone by calling the phone numbers, on the cover page of this
Proxy Statement/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
11003507\V-13 I-17
11003507\V-13
APPENDIX I
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ___ day of _______, 1999, by and between Alleghany Funds ("Alleghany"),
a Delaware business trust, for itself and on behalf of Alleghany Emerging
Markets Fund and Alleghany International Developed Fund (each an "Acquiring
Fund," and collectively, the "Acquiring Funds"), and PIMCO Funds: Multi-Manager
Series (the "MMS Trust"), a Massachusetts business trust, for itself and on
behalf of PIMCO Emerging Markets Fund and PIMCO International Developed Fund
(each an "Acquired Fund," and collectively, the "Acquired Funds").
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of each Acquired Fund be
transferred to each Acquiring Fund corresponding thereto, as set forth in the
table attached hereto as Schedule A, in exchange for shares of specified classes
of the corresponding Acquiring Fund ("Acquiring Fund Shares") and the assumption
by each Acquiring Fund of the Stated Liabilities (as defined in paragraph 1.3)
of each corresponding Acquired Fund, and that such Acquiring Fund Shares be
distributed immediately after the Closing(s), as defined in this Agreement, by
each Acquired Fund to its shareholders in liquidation of each Acquired Fund. It
is expected that the reorganization described in this Agreement will be a
reorganization for each Acquired Fund within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each Acquired Fund
shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2 (the "Fund Assets") as of the applicable Valuation Time (as
defined below) to its corresponding Acquiring Fund identified in Schedule A, and
such corresponding Acquiring Fund shall, as consideration therefor, on the
Closing Date (as defined in paragraph 3.1), (i) deliver to such Acquired Fund
(a) a number of full and fractional Class N shares of beneficial interest of the
Acquiring Fund having an aggregate net asset value equal to the value of the
assets of the Acquired Fund attributable to Class A, Class B, Class C and
Administrative Class shares of the Acquired Fund transferred to the Acquiring
Fund on such date less the value of the liabilities of the Acquired Fund
attributable to Class A, Class B, Class C shares and Administrative Class of the
Acquired Fund assumed by the Acquiring Fund on that date, and (b) a number of
full and fractional Class I shares of beneficial interest of the Acquiring Fund
having an aggregate net asset value equal to the value of the assets of the
Acquired Fund attributable to Institutional Class shares of the Acquired Fund
transferred to the Acquiring Fund on such date less the value of the liabilities
of the Acquired Fund attributable to Administrative Class shares of the Acquired
Fund assumed by the Acquiring Fund on that date, and (ii) assume the Acquired
Fund's Stated Liabilities as of the applicable Valuation Time (as defined
below). Such transfer, delivery and assumption shall take place at the
closing(s) provided for in paragraph 3.1 (hereinafter sometimes referred to as
the "Closing(s)"). Promptly after the Closing(s), each Acquired Fund shall
distribute the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided in paragraph 1.4 hereof. Such
transaction(s) are hereinafter sometimes collectively referred to as the
"Reorganization(s)."
1.2. With respect to each Acquired Fund, the Fund Assets shall consist
of all property (including, without limitation, the books and records) and
assets of any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and interest
receivables) owned by each Acquired Fund, and any prepaid expenses shown as an
asset on each Acquired Fund's books as of the Applicable Valuation Time on the
Closing Date.
1.3. Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. Each Acquiring Fund will
assume all liabilities and obligations disclosed on an unaudited statement of
assets and liabilities of the corresponding Acquired Fund prepared by or on
behalf of the MMS Trust as of the Applicable Valuation Time (as defined in
paragraph 2.1), in accordance with generally accepted accounting principles
consistently applied from the prior audited period ("Stated Liabilities"). The
Acquiring Fund shall assume only the Stated Liabilities of its corresponding
Acquired Fund, and no other liabilities or obligations, whether absolute or
contingent, known or unknown, accrued or unaccrued.
1.4. Promptly after the Closing with respect to each Acquired Fund, the
Acquired Fund will distribute (i) the Class N shares received by the Acquired
Fund pursuant to paragraph 1.1 PRO RATA (in accordance with the relation that
the number of Class A, Class B, Class C and Administrative Class shares held by
each shareholder bears to the total number of Class A, Class B, Class C and
Administrative Class shares then outstanding) to holders of Class A, Class B,
Class C and Administrative Class shares and (ii) the Class I shares PRO RATA (in
accordance with the relation that the number of Institutional Class shares held
by each shareholder bears to the total number of Institutional Class shares then
outstanding) to the holders of Institutional Class shares, the holders entitled
to such distributions being the shareholders of record determined as of the
close of business on the Closing Date ("Acquired Fund Investors") in complete
liquidation of the Acquired Fund. Such distribution will be accomplished by an
instruction, signed by an appropriate officer of the MMS Trust, to transfer the
Acquiring Fund Shares then credited to the Acquired Fund's account on the books
of the Acquiring Fund to open accounts on the books of the Acquiring Fund
established and maintained by the Acquiring Fund's transfer agent in the names
of record of the Acquired Fund Investors and representing the respective PRO
RATA number of shares of the Acquiring Fund due such Acquired Fund Investor. In
exchange for Acquiring Fund Shares distributed, all issued and outstanding
shares of beneficial interest of the Acquired Fund will be redeemed and canceled
simultaneously therewith on the Acquired Fund's books; any outstanding share
certificates representing interests in the Acquired Fund thereafter will
represent the right to receive such number of Acquiring Fund Shares after the
Closing(s) as determined in accordance with Section 1.1.
1.5. If a request shall be made for a change of the registration of
shares of each Acquiring Fund to another person from the account of the
shareholder in which name the shares are registered in the records of the
Acquired Fund it shall be a condition of such registration of shares that there
be furnished the Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in proper form for
transfer and, if any of such shares are outstanding in certificate form, the
certificates representing such shares, and that the person requesting such
registration shall pay to such Acquiring Fund any transfer or other taxes
required by reason of such registration or establish to the reasonable
satisfaction of the Acquiring Fund that such tax has been paid or is not
applicable.
1.6. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund, the assumption of the Acquired Fund's Stated
Liabilities by the Acquiring Fund, and the distribution by the Acquired Fund of
the Acquiring Fund Shares received by it pursuant to paragraph 1.4, the MMS
Trust, to the extent required by law, shall terminate the qualification,
classification and registration of such Acquired Fund at all appropriate federal
and state agencies. All reporting and other obligations of the MMS Trust with
respect to the Acquired Funds shall remain the exclusive responsibility of the
MMS Trust up to and including the date on which the particular Acquired Fund is
terminated and/or deregistered (as necessary), subject to any reporting or other
obligations described in paragraph 4.10.
1.7. The failure of one Acquired Fund to consummate the transactions
contemplated hereby shall not affect the consummation or validity of a
Reorganization with respect to the other Acquired Fund, and the provisions of
this Agreement shall be construed to effect this intent, including, without
limitation, as the context requires, construing the terms "Acquiring Fund" and
"Acquired Fund" as meaning only that series of Alleghany and the MMS Trust,
respectively, which are involved in a Reorganization as of a Closing Date.
2. VALUATION
2.1. With respect to each Acquired Fund, the value of the Fund Assets
shall be the value of such assets computed as of the time at which its net asset
value is calculated pursuant to the valuation procedures set forth in each
Acquired Fund's then current prospectus and statement of additional information
on the Closing Date (such time and date being herein called the "Applicable
Valuation Time").
2.2. The net asset value of a class of shares of an Acquiring Fund
shall be the net asset value per share of such class computed on the Applicable
Valuation Time, using the valuation procedures set forth in the Acquiring Fund's
then current prospectus and statement of additional information.
3. CLOSING(S) AND CLOSING DATE
3.1. The Closing(s) for the Reorganization(s) shall occur on , 1999,
and/or on such other date(s) as may be mutually agreed upon in writing by the
officers of the parties hereto (each a "Closing Date"). The Closing(s) shall be
held at __________________
__________________________________________________________ or at such other
location as is mutually agreeable to the parties. All acts taking place at the
Closing(s) shall be deemed to take place simultaneously as of _____ _____.m.
__________ time on the Closing Date unless otherwise provided.
3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a
certificate of an authorized officer stating that: (a) each Acquired Fund's
portfolio securities, cash and any other assets have been delivered in proper
form to the corresponding Acquiring Fund on the Closing Date and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment shall have been made,
by such Acquired Fund in conjunction with the delivery of portfolio securities.
Proper delivery of cash shall be by wire to ___________________________,
pursuant to instruction to be delivered prior to the Closing(s).
3.3. Notwithstanding anything herein to the contrary, in the event that
at the Applicable Valuation Time (a) the New York Stock Exchange shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of both Alleghany and the MMS Trust, accurate appraisal of the
value of the net assets of an Acquiring Fund or an Acquired Fund is
impracticable, the Applicable Valuation Time and Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall have been
restored.
3.4. With respect to each Acquired Fund, the MMS Trust shall provide
Alleghany and its transfer agents with immediate access from and after the
Closing Date to (a) the computer, electronic or such other forms of records
containing the names, addresses and taxpayer identification numbers of all of
the Acquired Fund investors ("Acquired Fund Investor") and the number and
percentage ownership of outstanding Acquired Fund shares owned by such Acquired
Fund Investor, all as of the Applicable Valuation Time, and (b) all original
documentation (including all applicable Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Acquired Fund
Investors' taxpayer identification numbers and their liability for or exemption
from back-up withholding. Each corresponding Acquiring Fund shall issue and
deliver to the Secretary or Assistant Secretary of the MMS Trust, acting on
behalf of the Acquired Fund, a confirmation evidencing the Acquiring Fund Shares
credited on the Closing Date or shall provide evidence satisfactory to each
Acquired Fund that such Acquiring Fund Shares have been credited to each
Acquired Fund's account on the books of each Acquiring Fund. At the Closing(s),
each party shall deliver to the other such bills of sale, checks, assignments,
share certificates, if any, receipts or other documents of transfer, assignment
or conveyance as such other party or its counsel may reasonably request.
3.5. Within thirty (30) days after the Closing Date, each Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the corresponding
Acquiring Fund a statement of the Fund Assets and Stated Liabilities, together
with a list of such Acquired Fund's portfolio securities and other assets
showing the respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by an appropriate officer of the MMS
Trust.
3.6 Each Acquiring Fund will cause a confirmation statement to be
mailed or delivered to each corresponding Acquired Fund Investor setting forth
the number of Acquiring Fund Shares registered in such Acquired Fund Investor's
name.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. The MMS Trust, with respect to each class of shares of each of the
Acquired Funds, has called or will call a meeting of Acquired Funds shareholders
to consider and act upon this Agreement, and to take all other actions
reasonably necessary to obtain the approval of the transactions contemplated
herein, including approval for each Acquired Fund's liquidating distribution of
the Acquiring Fund Shares contemplated hereby, and for the MMS Trust, to the
extent required by law, to terminate each Acquired Fund's qualification,
classification and registration if requisite approvals are obtained with respect
to each Acquired Fund. Alleghany and the MMS Trust will jointly prepare the
notice of meeting, form of proxy and Proxy Statement/Prospectus (collectively,
"Proxy Materials") to be used in connection with such meeting; provided that
Alleghany has furnished or will furnish the MMS Trust with a current, effective
prospectus, including any supplements, relating to the class of shares of each
Acquiring Fund to be issued to the shareholders of each Acquired Fund then
outstanding for incorporation within and/or distribution with the Proxy
Materials, and with such other information relating to the Acquiring Funds as is
reasonably necessary for the preparation of the Proxy Materials.
4.2. Alleghany, on behalf of each Acquiring Fund, will use its best
efforts to meet the requirements for the statutory "safe harbor" exemption
provided by Section 15(f) of the Investment Company Act of 1940 (the "1940
Act").
4.3. The MMS Trust, on behalf of each Acquired Fund, covenants that the
corresponding Acquiring Fund Shares to be issued hereunder are not being
acquired for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
4.4. The MMS Trust, on behalf of each Acquired Fund, will provide the
Acquiring Fund with all such information as the Acquiring Fund reasonably
requests concerning the record and beneficial ownership of shares of each class
of each Acquired Fund.
4.5. Subject to the provisions hereof, Alleghany, on its own behalf and
on behalf of each Acquiring Fund; and the MMS Trust, on its own behalf and on
behalf of each Acquired Fund, will take, or cause to be taken, all actions, and
do, or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated herein.
4.6. The MMS Trust, on behalf of each Acquired Fund, shall furnish to
its corresponding Acquiring Fund on the Closing Date, a final statement of the
total amount of each Acquired Fund's assets and liabilities as of the Applicable
Valuation Time on the Closing Date, which statement shall be certified by an
appropriate officer of the MMS Trust as being determined in accordance with
generally accepted accounting principles consistently applied and as being
valued in accordance with paragraph 2.1 hereof. As promptly as practicable, but
in any case within sixty (60) days after the relevant Closing Date, the MMS
Trust, on behalf of each Acquired Fund, shall furnish its corresponding
Acquiring Fund, in such form as is reasonably satisfactory to Alleghany, on
behalf of each Acquiring Fund, a statement certified by an officer of the MMS
Trust of such Acquired Fund's federal income tax attributes that will be carried
over to the corresponding Acquiring Fund in the Reorganization pursuant to
Section 381 of the Code.
4.7. Alleghany, on behalf of each Acquiring Fund, has prepared and
filed, or will prepare and file with the SEC a registration statement on Form
N-14 under the Securities Act of 1933, as amended (the "1933 Act"), relating to
the Acquiring Fund Shares, which, without limitation, shall include a proxy
statement of the PIMCO Funds and the prospectuses of the Acquiring Funds of
Alleghany relating to the transactions contemplated by this Agreement (the
"Registration Statement"). PIMCO Funds, on behalf of each Acquired Fund, has
provided or will provide each corresponding Acquiring Fund with the materials
and information necessary to prepare the Proxy Materials for inclusion in the
Registration Statement, prepared in accordance with paragraph 4.1, and with such
other information and documents relating to each Acquired Fund as are requested
by the corresponding Acquiring Fund and as are reasonably necessary for the
preparation of the Registration Statement.
4.8. After the Closing Date within the time period required by law, the
MMS Trust, on behalf of each Acquired Fund: (a) shall prepare and file all
federal and other tax returns and reports of each Acquired Fund required by law
to be filed with respect to all periods ending on or before the Closing Date but
not theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were unpaid as of the Closing
Date.
4.9. With respect to each Acquiring Fund, Alleghany agrees to operate
in accordance with its then current prospectus and statement of additional
information prepared in accordance with Form N-1A, including qualifying as a
regulated investment company under Subchapter M of the Code.
4.10. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares and the
assumption of the Stated Liabilities of the Acquired Fund as contemplated
herein, the MMS Trust will file any final regulatory reports, including but not
limited to any Form N-SAR and Rule 24f-2 filings with respect to such Acquired
Fund(s), after the Closing Date within the time period required by law and also
will take, to the extent required by law, all other steps as are necessary and
proper to effect the termination or declassification of such Acquired Funds of
the MMS Trust in accordance with the laws of the Commonwealth of Massachusetts
and other applicable requirements.
4.11. Each Acquired Fund will pay or cause to be paid to the
corresponding Acquiring Fund any interest, cash or such dividends, rights and
other payments received by it on or after the Closing Date with respect to the
investments and other properties and assets of the Acquired Fund, whether
accrued or contingent, received by it on or after the Closing Date. Any such
distribution shall be deemed included in the assets transferred to the Acquiring
Fund at the Closing Date and shall not be separately valued unless the
securities in respect of which such distribution is made shall have gone "ex"
such distribution prior to the Applicable Valuation Time, in which case any such
distribution which remains unpaid at the Closing Date shall be included in the
determination of the value of the assets of the relevant Acquired Fund acquired
by the corresponding Acquiring Fund.
5. REPRESENTATIONS AND WARRANTIES
5.1 Alleghany, on behalf of itself and each Acquiring Fund, represents and
warrants to the MMS Trust as follows:
5.1.a. Alleghany was duly created pursuant to its Trust Instrument by
the Trustees for the purpose of acting as a management
investment company under the 1940 Act and is validly existing
under the laws of the State of Delaware, and the Trust
Instrument directs the Trustees to manage the affairs of
Alleghany and grants them all powers necessary or desirable to
carry out such responsibility, including administering
Alleghany business as conducted by Alleghany and as described
in the Proxy Materials and current prospectuses of Alleghany;
Alleghany is registered as an investment company classified as
an open-end management company under the 1940 Act and its
registration with the SEC as an investment company is in full
force and effect;
5.1.b The Registration Statement, including the current prospectuses
and statement of additional information of each Acquiring
Fund, conform or will conform, at all times up to and
including the Closing Date, in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and
the regulations thereunder and do not include or will not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the execution,
delivery and performance of this Agreement by Alleghany for
itself and on behalf of each Acquiring Fund will not (i)
violate Alleghany's Trust Instrument or By-laws or (ii) result
in a breach or violation of, or constitute a default under any
material agreement or material instrument, to which Alleghany
is a party or by which its properties or assets are bound;
5.1.d. Except as previously disclosed in writing to the MMS Trust, no litigation
or administrative proceeding or investigation of or before any court or
governmental body is presently pending or, to Alleghany's knowledge, threatened
against Alleghany or its business, the Acquiring Funds or any of their
properties or assets, which, if adversely determined, would materially and
adversely affect Alleghany or an Acquiring Fund's financial condition or the
conduct of their business, and Alleghany knows of no facts that might form the
basis for the institution of any such proceeding or investigation, and no
Acquiring Fund is a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects, or is reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions contemplated herein;
5.1.e. All shares to be issued in connection with the Reorganization
of the classes of each Acquiring Fund will, as of the Closing
Date, be duly authorized and validly issued and outstanding,
fully paid and non-assessable by Alleghany and neither
Acquiring Fund has outstanding any options, warrants or other
rights to subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this Agreement on
behalf of each Acquiring Fund will have been duly authorized
prior to the Closing Date by all necessary action on the part
of Alleghany and the Alleghany Board of Trustees, and this
Agreement constitutes a valid and binding obligation of
Alleghany and each Acquiring Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles;
5.1.g. The Acquiring Fund Shares to be issued and delivered to the
corresponding Acquired Fund for the account of the Acquired
Fund Investors, pursuant to the terms hereof, will have been
duly authorized as of the Closing Date and, when so issued and
delivered, will be duly and validly issued, fully paid and
non-assessable;
5.1.h. On the effective date of the Registration Statement, at the
time of the meeting of the Acquired Fund shareholders and on
the Closing Date, any written information furnished by
Alleghany with respect to an Acquiring Fund for use in the
Proxy Materials, the Registration Statement or any other
materials provided in connection with the Reorganization does
not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
information provided not misleading;
5.1.i. No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act or Delaware law for the execution of this Agreement by
Alleghany, for itself and on behalf of each Acquiring Fund, or the performance
of the Agreement by Alleghany, for itself and on behalf of each Acquiring Fund,
except for the effectiveness of the Registration Statement, any necessary
exemptive relief or no-action assurances requested from the SEC or its Staff
with respect to Sections 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder, and such other consents, approvals, authorizations and filings as
have been made or received, and except for such consents, approvals,
authorizations and filings as may be required subsequent to the Closing Date;
5.1.j. All federal and other tax returns and reports of Alleghany and
each Acquiring Fund required by law to be filed on or before
the Closing Date have been or will be filed, and all federal
and other taxes owed by Alleghany on behalf of the Acquiring
Funds have been or will be paid so far as due, and to the best
of Alleghany's knowledge, after due inquiry, no such return is
currently under audit and no assessment has been asserted with
respect to any such return;
5.1.k. At the Closing Date, the Acquiring Funds will have good and
marketable title to their assets and full right, power and
authority to assign, deliver and otherwise transfer such
assets; and
5.1.l. The Acquiring Funds were established by the Board of Trustees
of Alleghany in order to effect the transactions described in
this Agreement. The Acquiring Funds have not yet filed their
first federal income tax returns and, thus, have not yet
elected to be treated as "regulated investment companies" for
federal income tax purposes. However, upon filing their first
income tax return at the completion of their first taxable
year, the Acquiring Funds will elect to be "regulated
investment companies" and until such time will take all steps
necessary to ensure that they qualify for taxation as
"regulated investment companies" under Sections 851 and 852 of
the Code.
5.2. The MMS Trust, on behalf of itself and each Acquired Fund,
represents and warrants to Alleghany as follows:
5.2.a. The MMS Trust was duly created pursuant to its Agreement and Declaration
of Trust by the MMS Trust Board of Trustees for the purpose of acting as a
management investment company under the 1940 Act and is validly existing under
the laws of the Commonwealth of Massachusetts, and the Agreement and Declaration
of Trust directs the Trustees to manage the affairs of the MMS Trust and grants
them all powers necessary or desirable to carry out such responsibility,
including administering MMS Trust business as currently conducted by the MMS
Trust and as described in the current prospectuses of the MMS Trust; the MMS
Trust is registered as an investment company, classified as an open-end
management company under the 1940 Act and its registration with the SEC as an
investment company is in full force and effect;
5.2.b. All of the issued and outstanding shares representing units of
beneficial interest of each Acquired Fund have been offered
and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state
securities laws;
5.2.c. The Acquired Funds are not in violation of, and the execution
and the performance of the Agreement by the MMS Trust for
itself and on behalf of each Acquired Fund does not and will
not (i) violate the MMS Trust's Agreement and Declaration of
Trust or By-Laws, or (ii) result in a breach or violation of,
or constitute a default under, any term of any material
agreement or material instrument to which the MMS Trust is a
party or by which its properties or assets are bound, except
as otherwise disclosed in writing to the Acquiring Funds;
5.2.d. No litigation or administrative proceeding or investigation of or before
any court or governmental body is presently pending or, to the MMS Trust's
knowledge, threatened against any Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect
such Acquired Fund's financial condition or the conduct of its business, and the
MMS Trust knows of no facts that might form the basis for the institution of any
such proceeding or investigation, and no Acquired Fund is a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to consummate the
transactions contemplated herein;
5.2.e. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of each
Acquired Fund as of and for the year ended June 30, 1998,
audited by PricewaterhouseCoopers LLP (copies of which have
been or will be furnished to the Acquiring Funds) fairly
present, in all material respects, the financial condition of
each Acquired Fund as of such date and its results of
operations for such period in accordance with generally
accepted accounting principles consistently applied, and as of
such date there were no liabilities of either Acquired Fund
(contingent or otherwise) known to the MMS Trust that were not
disclosed therein but that would be required to be disclosed
therein in accordance with generally accepted accounting
principles;
5.2.f. Since June 30, 1998, there has not been any material adverse
change in any Acquired Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by an Acquired
Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed
in writing to and accepted by the corresponding Acquiring
Fund, prior to the Closing Date (for the purposes of this
subparagraph (f), neither a decline in an Acquired Fund's net
asset value per share nor a decrease in an Acquired Fund's
size due to redemptions shall be deemed to constitute a
material adverse change);
5.2.g. All federal and other tax returns and reports of the MMS Trust
and each Acquired Fund required by law have been or will be
filed, and all federal and other taxes owed by the MMS Trust
and each Acquired Fund shall, with respect to all periods
ending on or before the Closing Date, have been or will be
paid so far as due, and to the best of the MMS Trust's
knowledge, after due inquiry, no such return is currently
under audit and no assessment has been asserted with respect
to any such return;
5.2.h. For the full and partial taxable year from its inception
through the Closing Date, each Acquired Fund has qualified, or
will qualify, as a separate regulated investment company under
Subchapter M of the Code and will take all necessary and
required actions to maintain such status;
5.2.i. All issued and outstanding shares of each Acquired Fund are,
and on the Closing Date will be, duly authorized and validly
issued and outstanding, and fully paid and non-assessable by
the MMS Trust or any Acquired Fund, and all such shares will,
at the time of the Closing(s), be held by the persons and in
the amounts set forth in the list of Acquired Fund Investors
provided to each corresponding Acquiring Fund pursuant to
paragraph 3.4, and no Acquired Fund has outstanding any
options, warrants or other rights to subscribe for or purchase
any of its shares, nor is there outstanding any security
convertible into any of its shares;
5.2.j At the Closing Date, each Acquired Fund will have good and
marketable title to its Fund Assets and full right, power and
authority to assign, deliver and otherwise transfer such Fund
Assets hereunder, and upon delivery and payment for such Fund
Assets as contemplated herein, the corresponding Acquiring
Fund will acquire good and marketable title thereto, subject
to no restrictions on the ownership or transfer thereof other
than such restrictions as might arise under the 1933 Act;
5.2.k. The execution, delivery and performance of this Agreement on
behalf of the Acquired Funds will have been duly authorized
prior to the Closing Date by all necessary action on the part
of the MMS Trust and the Board of Trustees thereof, and this
Agreement constitutes a valid and binding obligation of the
MMS Trust and each Acquired Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles;
5.2.l. From the effective date of the Registration Statement, through the time
of the meeting of the Acquired Fund Investors and on the Closing Date, the
Registration Statement and the Proxy Materials insofar as they relate to
materials provided by the MMS Trust or the Acquired Funds, used in connection
with the Registration Statement: (i) will comply in all material respects with
the applicable provisions of the 1934 Act and the 1940 Act and the regulations
thereunder and (ii) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and as of such dates and times, any
written information furnished by the MMS Trust, on behalf of the Acquired Funds,
for use in the Proxy Materials or in any other manner that may be necessary in
connection with the transactions contemplated hereby will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the information provided not misleading;
5.2.m. No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the
MMS Trust, for itself and on behalf of each Acquired Fund, or
the performance of the Agreement by the MMS Trust for itself
and on behalf of each Acquired Fund, except for any necessary
exemptive relief or no-action assurances requested from the
SEC or its Staff with respect to Section 17(a) and 17(d) of
the 1940 Act and Rule 17d-1 thereunder, and except for such
other consents, approvals, authorizations and filings as have
been made or received, and except for such consents,
approvals, authorizations and filings as may be required
subsequent to the Closing Date; and
5.2.n. There are no material contracts outstanding to which the
Acquired Fund is a party, other than as disclosed in the Proxy
Materials or the registration statement of the MMS Trust.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS
The obligations of the MMS Trust to consummate the Reorganization with
respect to each Acquired Fund shall be subject to the performance by Alleghany,
for itself and on behalf of each Acquiring Fund, of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions with respect to each corresponding Acquiring
Fund:
6.1. All representations and warranties of Alleghany with respect to
each Acquiring Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated herein, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2. Alleghany, on behalf of each Acquiring Fund, shall have delivered
to the MMS Trust at the Closing(s) a certificate executed on behalf of each
corresponding Acquiring Fund by Alleghany's President, Secretary, Assistant
Secretary, or other authorized officer, in a form reasonably satisfactory to the
MMS Trust and dated as of the Closing Date, to the effect that the
representations and warranties of Alleghany with respect to each Acquiring Fund
made herein are true and correct at and as of the Closing Date, except as they
may be affected by the transactions contemplated herein, and as to such other
matters as such Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received at the Closing(s) a
favorable opinion of Sonnenschein Nath & Rosenthal, counsel to Alleghany (based
upon or subject to such representations, assumptions, limitations or opinions of
local counsel as such counsel may deem appropriate or necessary), dated as of
the Closing Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or to which it
is subject) reasonably satisfactory to each Acquired Fund and its counsel,
substantially to the effect that:
6.3.a. Alleghany is a duly registered, open-end, management
investment company, and its registration with the SEC as an
investment company under the 1940 Act is in full force and
effect;
6.3.b. each Acquiring Fund is a portfolio of Alleghany, which is a
business trust duly created pursuant to its Trust Instrument,
is validly existing and in good standing under the laws of the
State of Delaware and has the power to own all of its
properties and to carry on its business as presently conducted
and as it intends to be conducted, and the Trust Instrument
directs the Board of Trustees thereof to manage the affairs of
Alleghany and grants them all powers necessary or desirable to
carry out such responsibility, including administering
Alleghany's business as described in the current prospectuses
of Alleghany;
6.3.c. this Agreement has been duly authorized, executed and
delivered on behalf of Alleghany and each Acquiring Fund and,
assuming due authorization, execution and delivery of this
Agreement on behalf of the Acquiring Funds, is a valid and
binding obligation of Alleghany enforceable against Alleghany
in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds
Investors pursuant to this Agreement are duly registered under
the 1933 Act on the appropriate form, and are duly authorized
and upon such issuance will be validly issued and outstanding
and fully paid and non-assessable, and no shareholder of an
Acquiring Fund has any preemptive rights to subscription or
purchase in respect thereof;
6.3.e. the Registration Statement has become effective with the SEC
and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or threatened;
6.3.f. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation by Alleghany of the
Reorganization with respect to each Acquiring Fund;
6.3.g. the execution and delivery of the Agreement and the
performance of its terms by Alleghany, and each Acquiring
Fund, do not violate or result in a violation of the Alleghany
Trust Instrument or By-laws or any judgment, order or decree
known to such counsel, of any court or arbiter, to which
Alleghany is a party, and will not constitute a material
breach of the terms, conditions or provisions of, or
constitute a default under, any contract, undertaking,
indenture or other agreement by which Alleghany is now bound
or to which it is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials, involving Alleghany or the Acquiring Funds,
are required to be described in the Proxy Materials which are
not described as required and (b) there are no contracts or
documents relating to Alleghany or the Acquiring Funds, known
to such counsel, of a character required to be described in
the Proxy Materials that are not described as required or to
be filed as exhibits to the Registration Statement that are
not filed as required;
6.3.i. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Alleghany or an Acquiring Fund or any of their properties or
assets and neither Alleghany nor any Acquiring Fund is a party
to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business; and
6.3.j. in addition, such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Funds at
which the contents of the Proxy Materials and related matters were discussed,
and, although they are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the Proxy
Materials, on the basis of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other representatives of the Acquiring
Funds), no facts have come to their attention that lead them to believe that the
Proxy Materials as of its date, as of the date of the Acquired Fund
shareholders' meeting, or as of the Closing Date, contained an untrue statement
of a material fact regarding the Acquiring Funds or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
regarding the Acquiring Funds, in light of the circumstances under which they
were made, not misleading. Such opinion may state that such counsel does not
express any opinion or belief as to the financial statements or other financial
data, or as to the information relating to the Acquired Funds, contained in the
Proxy Materials, and that such opinion is solely for the benefit of the Acquired
Fund, its Board of Trustees and its officers.
6.4. As of the Closing Date with respect to the Reorganization of each
Acquired Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any material change in the investment
management fees, fee levels payable pursuant to the 12b-1 plan of distribution,
other fees payable for services provided to the Acquiring Funds, fee waiver or
expense reimbursement undertakings, of the Acquiring Funds from those fee
amounts, undertakings described in the prospectus of each Acquiring Fund
delivered to the corresponding Acquired Fund pursuant to paragraph 4.1 and in
the Proxy Materials.
6.5. With respect to each Acquiring Fund, the Board of Trustees of
Alleghany, including a majority of the "non-interested" (as defined in the 1940
Act) Trustees, has determined that the Reorganization is in the best interests
of each Acquiring Fund and that the interests of the existing shareholders of
each Acquiring Fund would not be diluted as a result of the Reorganization.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
The obligations of Alleghany to consummate the Reorganization with
respect to each Acquiring Fund shall be subject to the performance by the MMS
Trust of all the obligations to be performed by it hereunder, with respect to
each corresponding Acquired Fund, on or before the Closing Date and, in addition
thereto, the following conditions:
7.1. All representations and warranties of the MMS Trust with respect
to the Acquired Funds contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date.
7.2. The MMS Trust, on behalf of each Acquired Fund, shall have
delivered to each corresponding Acquiring Fund at the Closing(s) a certificate
executed on behalf of each Acquired Fund, by the MMS Trust's President,
Secretary or Assistant Secretary, or other authorized officer, in form and
substance satisfactory to the Acquiring Funds and dated as of the relevant
Closing Date, to the effect that the representations and warranties of the MMS
Trust with respect to each Acquired Fund made herein are true and correct at and
as of such Closing Date, except as they may be affected by the transactions
contemplated herein and as to such other matters as each Acquiring Fund shall
reasonably request.
7.3. Each Acquiring Fund shall have received at the Closing(s) a
favorable opinion from Ropes & Gray, counsel to the MMS Trust (based upon or
subject to such representations, assumptions, limitations or opinions of local
counsel as such counsel may deem appropriate or necessary), dated as of the
relevant Closing Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or to which it
is subject) reasonably satisfactory to such Acquiring Fund, substantially to the
effect that:
7.3.a. The MMS Trust is a duly registered, open-end investment
company, and its registration with the SEC as an investment
company under the 1940 Act is in full force and effect;
7.3.b. each Acquired Fund is a portfolio of the MMS Trust, the MMS
Trust is a business trust duly created pursuant to its
Agreement and Declaration of Trust, is validly existing and in
good standing under the laws of the Commonwealth of
Massachusetts, and the Agreement and Declaration of Trust
directs the Trustees to manage the affairs of the MMS Trust
and grants them all powers necessary or desirable to carry out
such responsibility, including administering the MMS Trust's
business as described in the current prospectuses of the MMS
Trust;
7.3.c. this Agreement has been duly authorized, executed and
delivered by the MMS Trust on behalf of the MMS Trust and each
Acquired Fund and, assuming that the Alleghany prospectus and
the Proxy Materials comply with the 1933 Act, the 1934 Act and
the 1940 Act and assuming due authorization, execution and
delivery of this Agreement on behalf of each Acquiring Fund,
is a valid and binding obligation of the MMS Trust,
enforceable against the MMS Trust in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
7.3.d. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation of the Reorganization
with respect to each Acquired Fund, except for such consents,
approvals, authorizations and filings as have been made or
received, and except for such consents, approvals,
authorizations and filings as may be required under state
securities or blue sky laws or required subsequent to the
Closing Date;
7.3.e. to such counsel's knowledge, the execution and delivery of the Agreement
and the performance of its terms by the MMS Trust, and each Acquired Fund, do
not violate or result in a violation of the MMS Trust's Agreement and
Declaration of Trust or By-Laws, or any judgment, order or decree known to such
counsel, of any court or arbiter, to which the MMS Trust is a party, and, to
such counsel's knowledge, will not constitute a material breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
undertaking, indenture or other agreement by which the MMS Trust is now bound or
to which it is now a party, it being understood that with respect to investment
restrictions contained in the MMS Trust Instrument and Declaration of Trust,
By-laws or then current prospectus or statements of additional information, such
counsel may rely on a certificate of an officer of the MMS Trust whose
responsibility it is to advise the MMS Trust and the Acquired Funds;
7.3.f. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials involving the MMS Trust or the Acquired Funds,
are required to be described in the Proxy Materials which are
not described as required and (b) there are no contracts or
documents relating to the MMS Trust or the Acquired Funds,
known to such counsel, of a character required to be described
in the Proxy Materials that are not described as required;
7.3.g. to such counsel's knowledge, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
the MMS Trust or an Acquired Fund or any of their properties
or assets and neither the MMS Trust nor an Acquired Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business; and
7.3.h. in addition, such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquired Funds at
which the contents of the Proxy Materials and related matters were discussed,
and, although they are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the Proxy
Materials, on the basis of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other representatives of the Acquired
Fund), no facts have come to their attention that lead them to believe that the
Proxy Materials as of its date, as of the date of the Acquired Fund
shareholders' meeting, or as of the Closing Date, contained an untrue statement
of a material fact regarding the Acquired Funds or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
regarding the Acquired Funds, in light of the circumstances under which they
were made, not misleading. Such opinion may state that such counsel does not
express any opinion or belief as to the financial statements or other financial
data, or as to the information relating to the Acquiring Fund, contained in the
Proxy Materials, and that such opinion is solely for the benefit of the
Acquiring Funds, and the Board of Trustees and officers of the Acquiring Fund.
7.4 Alleghany, on behalf of each Acquiring Fund, shall have received
from PricewaterhouseCoopers LLP, a letter addressed to Alleghany, on behalf of
each Acquiring Fund, and dated as of the Closing Date with respect to the
Acquired Funds, in form and substance satisfactory to Alleghany, to the effect
that:
7.4.a. they are independent accountants with respect to the MMS Trust
and each Acquired Fund within the meaning of the 1933 Act and
the applicable regulations thereunder;
7.4.b. in their opinion, the audited financial statements and the Per
Share Data provided in accordance with Items 9 and 22 in Form
N-1A (the "Per Share Data") of the Acquired Fund included or
incorporated by reference in the Registration Statement
previously reported on by them comply as to form in all
material aspects with the applicable accounting requirements
of the 1933 Act and the published rules and regulations
thereunder;
7.4.c. on the basis of limited procedures agreed upon by Alleghany,
on behalf of the Acquiring Funds, and the MMS Trust, on behalf
of the Acquired Funds, and described in such letter (but not
an examination in accordance with generally accepted auditing
standards), the information relating to the Acquired Funds
appearing in the Registration Statement or incorporated
therein that is expressed in dollars or percentages of dollars
(with the exception of performance comparisons) has been
obtained from the accounting records of the Acquired Funds or
from schedules prepared by officers of the MMS Trust having
responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or
computations made therefrom.
7.5. The MMS Trust shall have delivered to the Acquiring Funds,
pursuant to paragraph 5.2(e), copies of financial statements of each Acquired
Fund as of and for the period ended June 30, 1998, audited by
PricewaterhouseCoopers LLP.
7.6. With respect to each Acquired Fund, the Board of Trustees of the
MMS Trust, including a majority of "non-interested" Trustees, has determined
that the Reorganization is in the best interests of each Acquired Fund and that
the interests of the existing investors in each Acquired Fund would not be
diluted as a result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE
ACQUIRED FUNDS
The obligations of each Acquiring Fund and of each corresponding
Acquired Fund herein are subject to the satisfaction of the following further
conditions on or before the Closing Date with respect to each Acquiring Fund and
each corresponding Acquired Fund:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
beneficial interest in each Acquired Fund in accordance with the provisions of
the MMS Trust's Agreement and Declaration of Trust and the requirements of the
1940 Act, and certified copies of the resolutions evidencing such approval shall
have been delivered to each corresponding Acquiring Fund.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or any of the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC and of state securities
authorities) deemed necessary by Alleghany, on behalf of the Acquiring Funds or
by the MMS Trust, on behalf of the Acquired Funds, to permit consummation, in
all material respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or permit would
not, in the opinion of the party asserting that the condition to closing has not
been satisfied, involve a risk of a material adverse effect on the assets or
properties of any Acquiring Fund or its corresponding Acquired Fund.
8.4. The Registration Statement shall have become effective under the
1933 Act, no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated under
the 1940 Act, each Acquired Fund shall have declared a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to each Acquired Fund's shareholders all of its investment company
taxable income for all taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gain realized in each taxable year ending on or prior to the Closing
Date (after reduction for any capital loss carry forward.)
8.6. The Acquiring Funds and the Acquired Funds shall have received
from KPMG Peat Marwick LLP a letter dated as of the Closing Date, in form and
substance satisfactory to Alleghany and to the MMS Trust, to the effect that on
the basis of limited procedures agreed upon by Alleghany, on behalf of the
Acquiring Funds and the MMS Trust, on behalf of the Acquired Funds (but not an
examination in accordance with generally accepted auditing standards): (i) the
data utilized in the calculations of the projected expense ratio appearing in
the Proxy Materials agree with underlying accounting records of the Acquiring
Funds and the Acquired Funds and (ii) certain other procedures as considered
necessary by Alleghany.
8.7. Alleghany and the MMS Trust shall have received an opinion of Sonnenschein
Nath & Rosenthal addressed to both Alleghany and the MMS Trust which will be
based upon the representations and assumptions provided by Alleghany, the MMS
Trust and Blairlogie Capital Management substantially to the effect that, for
federal income tax purposes:
8.7.a. Each of the Acquiring Funds and each of the Acquired Funds
will be treated as corporations separate from the other series
of the Alleghany and the MMS Trust, respectively;
8.7.b Although there is no controlling authority on point, the
transfer by each of the Acquired Funds of all or substantially
all of their assets in exchange for the corresponding
Acquiring Funds shares and the assumption by each Acquiring
Fund of certain of corresponding Acquired Fund's liabilities
and the subsequent liquidation of each Acquired Fund pursuant
to the Reorganizations should constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code (the "Code"), and each Acquiring Fund and Acquired Fund
should be "a party to a reorganization" within the meaning of
Section 368(b) of the Code. The conclusions set forth below
assume that the conclusion set forth in this Section 8.7.b. is
correct;
8.7.c Neither of the Acquired Funds will recognize any gain or loss as
a result of the Reorganizations;
8.7.d. Neither of the Acquiring Funds will recognize any gain or loss
on the receipt of the assets of the corresponding Acquiring
Fund in exchange for shares of the corresponding Acquiring
Fund in the Reorganizations;
8.7.e. The adjusted tax basis and holding period in the assets of
each of the Acquiring Funds received from the corresponding
Acquired Funds in the Reorganizations will be the same as the
adjusted tax basis and will include the holding period,
respectively, of such assets in the hands of the corresponding
Acquiring Fund immediately prior to the Reorganizations;
8.7.f. The shareholders of each of the Acquired Funds who exchange
shares of each of the Acquired Funds solely for shares of the
corresponding Acquiring Funds in the Reorganizations will not
recognize any gain or loss;
8.7.g. The aggregate tax basis of Acquiring Fund shares received by
each shareholder of the Acquired Funds in the Reorganizations
will be the same as the aggregate tax basis of the Acquired
Fund shares exchanged therefor;
8.7.h. Each former Acquired Fund shareholder's holding period of
Acquiring Funds shares received in the Reorganizations will be
determined by including the period for which Acquired Fund
shares were held by such shareholder at the time of the
Reorganizations provided that such shareholder held the
Acquired Fund shares as a capital asset; and
8.7.i. Each of the Acquiring Funds will succeed to and take into
account the tax attributes of the corresponding Acquired Funds
described in Section 381(c) of the Code, subject to the
conditions and limitations contained in Section 381(c) of the
Code.
Notwithstanding anything herein to the contrary, neither an Acquiring
Fund nor its corresponding Acquired Fund may waive the conditions set forth in
this paragraph 8.7.
9. BROKERAGE FEES AND EXPENSES
9.1. Alleghany, for itself and on behalf of the Acquiring Funds, and
the MMS Trust, on behalf of itself and on behalf of the Acquired Funds,
represent and warrant that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
9.2. Except as otherwise provided herein, Alleghany will bear the
expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, provided that the MMS Trust shall be responsible
for all accounting fees incurred by it or its affiliates in connection with
entering into and carrying out this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the
parties and supersedes any prior or contemporaneous understanding or arrangement
with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
11.1.a. by the mutual written consent of Alleghany and the MMS Trust;
11.1.b. by either Alleghany or the MMS Trust by notice to the other,
without liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
default or breach of this Agreement by such terminating
party), if such Closing(s) shall not have occurred on or
before [March 31], 1999; or
11.1.c by either of Alleghany or the MMS Trust, in writing without
liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
material default or breach of this Agreement by such
terminating party), if (i) the other party shall fail to
perform in any material respect its agreements contained
herein required to be performed prior to the Closing Date,
(ii) the other party materially breaches or shall have
breached any of its representations, warranties or covenants
contained herein, or (iii) any other express condition
precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot
be met.
11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or
(b) shall terminate all obligations of the parties hereunder with respect to the
Acquired Fund and Acquiring Fund affected by such termination, or with respect
to Alleghany and the MMS Trust, as the case may be, and there shall be no
liability for damages on the part of Alleghany or the MMS Trust or the Trustees
or officers of Alleghany or the MMS Trust, to any other party or its Trustees or
officers on account of termination pursuant to paragraphs 11.1(a) or (b);
provided, however, that notwithstanding any termination of this Agreement
pursuant to paragraph 11.1, such termination shall not relieve either party of
its respective obligations pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of
Alleghany, acting on behalf of each Acquiring Fund and the authorized officers
of the MMS Trust, acting on behalf of the shareholders of each Acquired Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Funds, no such amendment may have the effect of changing the provisions
for determining the number of shares of the corresponding Acquiring Funds to be
issued to the Acquired Fund Investors under this Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
such Acquired Fund, without the Acquired Fund obtaining the Acquired Fund
Investors' further approval except that nothing in this paragraph 12 shall be
construed to prohibit any Acquiring Fund and the corresponding Acquired Fund
from amending this Agreement to change the Closing Date or Applicable Valuation
Time by mutual agreement.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For Alleghany, on behalf of itself and each Acquiring Fund:
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
Attention: President
with copies (which shall not constitute notice) to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Arthur J. Simon
For the MMS Trust, on behalf of itself and each Acquired Fund:
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Attention: R. Wesley Burns
with copies (which shall not constitute notice) to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: J.B. Kittredge
14. INDEMNIFICATION
14.1. The MMS Trust will indemnify and hold harmless, out of its assets
but no other assets, the Acquiring Funds and such Funds' Trustees, officers or
other agents (for purposes of this paragraph 14, the "Alleghany Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the
Alleghany Indemnified Parties in connection with, arising out of, or resulting
from any claim, action, suit or proceeding in which any one or more of the
Alleghany Indemnified Parties may be involved or with which any one or more of
the Alleghany Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact, provided or made by
the MMS Trust or the Acquired Funds, and relating to the MMS Trust or the
Acquired Fund, contained in the Proxy Materials or Registration Statement, or
any amendment or supplement thereto, or arising out of or based upon the
omission or alleged omission to state in the Registration Statement a material
fact relating to the MMS Trust or the Acquired Funds, required to be stated
therein or necessary to make the statements therein not misleading, including,
without limitation, any amounts paid by any one or more of the Alleghany
Indemnified Parties in a reasonable compromise or settlement of any such claim,
action, suit or proceeding, or threatened claim, action, suit or proceeding made
with the consent of the Acquired Funds. Each Acquired Fund, however, will not
indemnify or hold harmless the Alleghany Indemnified Parties, identified in this
paragraph 14, for any expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of the Alleghany
Indemnified Parties in connection with, arising out of, or resulting from any
claim, action, suit or proceeding in which any one or more of the Alleghany
Indemnified Parties may be involved or with which any one or more of the
Alleghany Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact relating to Alleghany
or the Acquiring Funds contained in the representations, warranties and
covenants of this Agreement or arising out of or based upon the omission or
alleged omission to state in the foregoing representations, warranties and
covenants, a material fact relating to Alleghany or the Acquiring Funds required
to be stated therein or necessary to make the statements relating to the
Alleghany or the Acquiring Funds therein not misleading. The Alleghany
Indemnified Parties will notify the Acquired Funds in writing within ten days
after the receipt by any one or more of the Alleghany Indemnified Parties of any
notice of legal process or any suit brought against or claim made against such
Alleghany Indemnified Parties as to any matters covered by this paragraph 14.
The Acquired Funds shall be entitled to participate at their own expense in the
defense of any claim, action, suit or proceeding covered by this paragraph 14,
or, if they so elect, to assume at their expense by counsel satisfactory to the
Alleghany Indemnified Parties the defense of any such claim, action, suit or
proceeding, and if the Acquired Funds elect to assume such defense, the
Alleghany Indemnified Parties shall be entitled to participate in the defense of
any such claim, action, suit or proceeding at their own expense. The Acquired
Funds' obligation under this paragraph 14 to indemnify and hold harmless the
Alleghany Indemnified Parties shall constitute a guarantee of payment so that
the MMS Trust or the Acquired Funds will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be paid by them under this
paragraph 14 without the necessity of the Alleghany Indemnified Parties first
paying the same.
14.2 Alleghany will indemnify and hold harmless, out of its assets but
no other assets, the Acquired Funds and such Funds' Trustees, officers or other
agents (for purposes of this paragraph 14, the "PIMCO Indemnified Parties")
against any and all expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of the PIMCO
Indemnified Parties in connection with, arising out of, or resulting from any
claim, action, suit or proceeding in which any one or more of the PIMCO
Indemnified Parties may be involved or with which any one or more of the PIMCO
Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact, provided or made by the Alleghany
or the Acquiring Funds, and relating to Alleghany or the Acquired Funds,
contained in the Proxy Materials or Registration Statement, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state in the foregoing Registration Statement a material fact
relating to Alleghany or the Acquiring Funds, required to be stated therein or
necessary to make the statements therein not misleading, including, without
limitation, any amounts paid by any one or more of the PIMCO Indemnified Parties
in a reasonable compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding made with the
consent of the Acquiring Funds. Each Acquired Fund, however, will not indemnify
or hold harmless the PIMCO Indemnified Parties, identified in this paragraph 14,
for any expenses, losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the PIMCO Indemnified Parties
in connection with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the PIMCO Indemnified Parties may be
involved or with which any one or more of the PIMCO Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue statement of a
material fact relating to the MMS Trust or the Acquired Funds contained in the
representations, warranties and covenants of this Agreement or arising out of or
based upon the omission or alleged omission to state in the foregoing
representations, warranties and covenants, a material fact relating to the MMS
Trust or the Acquired Funds required to be stated therein or necessary to make
the statements relating to the MMS Trust or the Acquired Funds therein not
misleading. The PIMCO Indemnified Parties will notify the Acquiring Funds in
writing within ten days after the receipt by any one or more of the PIMCO
Indemnified Parties of any notice of legal process or any suit brought against
or claim made against such PIMCO Indemnified Parties as to any matters covered
by this paragraph 14. The Acquiring Funds shall be entitled to participate at
their own expense in the defense of any claim, action, suit or proceeding
covered by this paragraph 14, or, if they so elect, to assume at its expense by
counsel satisfactory to the PIMCO Indemnified Parties the defense of any such
claim, action, suit or proceeding, and if the Acquiring Funds elect to assume
such defense, the PIMCO Indemnified Parties shall be entitled to participate in
the defense of any such claim, action, suit or proceeding at their own expense.
The Acquiring Funds' obligation under this paragraph 14 to indemnify and hold
harmless the PIMCO Indemnified Parties shall constitute a guarantee of payment
so that Alleghany or the Acquiring Funds will pay in the first instance any
expenses, losses, claims, damages and liabilities required to be paid by them
under this paragraph 14 without the necessity of the PIMCO Indemnified Parties
first paying the same.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to Articles, paragraphs,
subparagraphs or Exhibits shall be construed as referring to Articles,
paragraphs or subparagraphs hereof or Exhibits hereto, respectively. Whenever
the terms hereto, hereunder, herein or hereof are used in this Agreement, they
shall be construed as referring to this entire Agreement, rather than to any
individual Article, paragraph, subparagraph or sentence.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
15.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5. It is expressly agreed that the obligations of Alleghany
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of Alleghany personally, but shall bind only the
assets and the property of the respective Acquiring Fund of Alleghany, as
provided in its Trust Instrument. The execution and delivery by such officers
shall not be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the assets and the
property of the respective Acquiring Fund of Alleghany as provided in its Trust
Instrument.
15.6. No Acquired Fund shall have any liability for the obligations of
any other Acquired Fund hereunder and no Acquiring Fund shall have any liability
for the obligation of any other Acquiring Fund hereunder.
15.7. A copy of the Second Amended Agreement and Declaration of Trust
of the MMS Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the trustees of the MMS Trust on behalf of the Acquired Funds as
trustees and not individually and that the obligations of this instrument are
not binding upon any of the trustees, officers or shareholders of the MMS Trust
individually but are binding only upon the assets and property of the Acquired
Funds.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its authorized officer, and attested by its
Secretary.
ALLEGHANY FUNDS, for itself and on
behalf of each Acquiring Fund
ATTEST:
________________________________ By: _______________________________
Secretary Stuart Bilton
Chairman of the Board
PIMCO FUNDS: MULTI-
MANAGER SERIES, for itself and
ATTEST: on behalf of each Acquired Fund
________________________________ By: _______________________________
Secretary William D. Cvengros
Chief Executive Officer
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C>
PIMCO FUND/SHARE CLASS CORRESPONDING ALLEGHANY/SHARE CLASS
PIMCO EMERGING MARKET FUND ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
PIMCO INTERNATIONAL ALLEGHANY/BLAIRLOGIE INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
</TABLE>
<PAGE>
II-11
APPENDIX II
FEE AND EXPENSE SUMMARIES OF THE PIMCO FUNDS
AND THE CORRESPONDING ALLEGHANY FUNDS
-----------------------------------------------
The following tables (a) compare the fees and expenses for the PIMCO
Funds for the year ended June 30, 1998 and (b) show the estimated fees and
expenses for the corresponding Alleghany Funds on a pro forma basis after giving
effect to the Reorganizations. The purpose of these tables is to assist
shareholders in understanding the various costs and expenses that investors in
these funds will bear as shareholders. The tables do not reflect any charges
that may be imposed by institutions directly on their customer accounts in
connection with investments in the portfolios. Blairlogie has committed to
maintain (after waivers and reimbursements) the current expense ratios for all
Alleghany Fund share classes for a period of at least three years after the
Closing.
<PAGE>
PIMCO EMERGING MARKETS FUND - CLASS A
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 5.50% None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 1.00%* None
Redemption Fees........................................ None None
Exchange Fee .......................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%**
Distribution/12b-1 Fees....................................... 0.25% 0.25%
Other Expenses***...................................... 0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 1.75% 1.60%
* Imposed in certain circumstances where Class A shares are purchased without front-end sales charges at the time of
purchase.
** After waivers and reimbursements. Before waivers and reimbursements, this Management/Advisory Fee would be
0.85%.
*** Other expenses for each Alleghany Fund will be based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end
of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $ 72 $ 16
3 years.............................................................. 107 50
5 years.............................................................. 145 87
10 years............................................................. 250 190
- --------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO EMERGING MARKETS FUND - CLASS B
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 5.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from the fund assets
as a percentage of average net assets):
Management/Advisory Fees...............................
Distribution/12b-1 Fees................................ 0.85% 0.52%**
Other Expenses***...................................... 1.00% 0.25%
0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 2.50% 1.60%
* The maximum deferred sales load is imposed on shares redeemed within
the first year. For shares held longer than one year, the maximum
deferred sales load declines to 4% in the second year, 3% in the third
year, 2% in the fifth year and 1% in the sixth year. In the seventh
year, redemptions may be made with no deferred sales load.
** After waivers and reimbursements. Before waivers and reimbursements, this Management/Advisory Fee would be
0.85%.
*** Other expenses for each Alleghany Fund are based on estimated amounts for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $ 75 $16
3 years.............................................................. 108 50
5 years.............................................................. 153 87
10 years............................................................. 256 190
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO EMERGING MARKETS FUND - CLASS C
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%**
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses***...................................... 0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 2.50% 1.60%
* Imposed only when shares redeemed in first year.
** After waivers and reimbursements. Before waivers and reimbursements, this Management/Advisory Fee would be 0.85%.
*** Other expenses for each Alleghany Fund are based on estimated amounts for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $35 $16
3 years.............................................................. 78 50
5 years.............................................................. 133 87
10 years............................................................. 284 190
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO EMERGING MARKETS FUND - INSTITUTIONAL CLASS
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS I
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%*
Distribution/12b-1 Fees................................ None None
Other Expenses**....................................... 0.50% 0.83%
TOTAL FUND OPERATING EXPENSES 1.35% 1.35%
* After waivers and reimbursements. Before waivers and reimbursements, this Management/Advisory Fee would be 0.85%.
** Other expenses for each Alleghany Fund are based on estimated amounts for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $14 $14
3 years.............................................................. 43 43
5 years.............................................................. 74 74
10 years............................................................. 162 162
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO EMERGING MARKETS FUND - ADMINISTRATIVE CLASS
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from Shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%*
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses**....................................... 0.50% 0.83%
TOTAL FUND OPERATING EXPENSES 1.60% 1.60%
* After waivers and reimbursements. Before waivers and reimbursements,
this Management/Advisory Fee would be 0.85%.
** Other expenses for each Alleghany Fund are based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $16 $16
3 years.............................................................. 50 50
5 years.............................................................. 87 87
10 years............................................................. 190 190
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS A
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 5.50% None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 1.50% 1.35%
* Imposed in certain circumstances where Class A Shares are purchased
without front-end sales changes at the time of purchase.
** Other expenses for each Alleghany Fund are based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $69 $14
3 years.............................................................. 100 43
5 years.............................................................. 132 74
10 years............................................................. 224 162
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS B
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 5.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 2.25% 1.35%
* The maximum deferred sales load is imposed on shares redeemed within
the first year. For shares held longer than one year, the maximum
deferred sales load declines to 4% in the second year, 3% in the third
year, 2% in the fifth year and 1% in the sixth year. In the seventh
year, redemptions may be made with no deferred sales load.
** Other expenses for each Alleghany Fund are based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $73 $14
3 years.............................................................. 100 43
5 years.............................................................. 140 74
10 years............................................................. 230 162
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS C
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 2.25% 1.35%
* Only imposed when shares redeemed in first year.
** Other expenses for each Alleghany Fund are based on estimated amounts
or the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $33 $14
3 years.............................................................. 70 43
5 years.............................................................. 120 74
10 years............................................................. 258 162
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND - ADMINISTRATIVE CLASS
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses*........................................ 0.50% 0.25%
TOTAL FUND OPERATING EXPENSES 1.35% 1.35%
* Other expenses for each Alleghany Fund are based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $14 $14
3 years.............................................................. 43 43
5 years.............................................................. 74 74
10 years............................................................. 162 162
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
PIMCO INTERNATIONAL DEVELOPED FUND - INSTITUTIONAL CLASS
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS I
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... None None
Maximum Sales Load Imposed on
Reinvested Dividends........................ None None
Deferred Sales Load.................................. None None
Redemption Fees...................................... None None
Exchange Fee......................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................. 0.60% 0.85%
Distribution/12b-1 Fees.............................. None None
Other Expenses*...................................... 0.50% 0.25%
TOTAL FUND OPERATING EXPENSES 1.10% 1.10%
* Other expenses for each Alleghany Fund are based on estimated amounts
for the current fiscal year.
</TABLE>
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C>
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $11 $11
3 years.............................................................. 35 35
5 years.............................................................. 61 61
10 years............................................................. 134 134
- -------------------------------------------------------------------------
*THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS; ACTUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
</TABLE>
<PAGE>
11003507\V-13
APPENDIX III
INVESTMENT OBJECTIVES
THIS APPENDIX CONTAINS INVESTMENT OBJECTIVES AND LIMITATIONS AND CERTAIN
SIGNIFICANT INVESTMENT POLICIES OF THE ALLEGHANY FUNDS AND THE CORRESPONDING
PIMCO FUNDS. THE INVESTMENT OBJECTIVES, POLICIES AND LIMITATIONS OF EACH
ALLEGHANY FUND WILL BE IDENTICAL TO THOSE OF THE CORRESPONDING PIMCO FUND.
.
<PAGE>
11003507\V-13 IV-3
11003507\V-13
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND SERVICES OF
THE ALLEGHANY FUNDS AND THE PIMCO FUNDS
A. PURCHASE POLICIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ALLEGHANY FUNDS PIMCO FUNDS
Class N Classes A, B and C
Minimum Initial Investment $2,500, +except IRAs, and UGMAs $2,500, except IRAs and certain other
Tax-Qualified Retirement Plans, UGMAs
and PIMCO Funds Auto-Exchange and
Auto-Invest Plans
$500 for IRAs and UGMAs $1,000 for PIMCO Funds Auto-Invest
and IRAs, except employer sponsored
IRAs
$50 under Alleghany's Automatic $50 for employer-sponsored IRAs
Investment Plan
Minimum Subsequent Investment $50* $100, except employer-sponsored IRAs
and certain other Tax-Qualified
Retirement Plans
$50 for employer-sponsored IRAs and
certain other Tax-Qualified
Retirement Plans
Class I Institutional and Administrative Class
Minimum Initial $1 Million++ $5 million, except Institutional
Investment** Class shares purchased through
omnibus accounts, for which the
amount is $250,000
Minimum Subsequent Investment None None
Purchase Methods
By Exchange Yes*** Yes
By Mail** Yes Yes
By Wire Yes Yes****
By Telephone Yes*** Yes***
Through Dealer or Yes Yes*****
Broker
+There is no minimum initial investment for Institutional Class Shares
purchased through broker-dealers under the fee based program approved
by the Distributor where the fee is at least .50% of the assets in the
account.
++For purposes of this minimum, the accounts of a financial
consultant's clients may be aggregated in determining whether the $1
million minimum has been met. In addition, aggregation may be applied
to the accounts of immediate family members as well as to the related
accounts of a corporation or other legal entity. The Fund may also
waive the minimum initial investment for investors who have signed a
letter of intent.
* For accounts opened through a fund network, the network minimums will apply.
** Checks drawn only on banks located in the U.S.
*** Not available for initial investment.
**** Automatic transfers may also be arranged under PIMCO Funds Auto-Invest plan or Fund-Link plan.
***** The dealer or broker must have a dealer agreement with the Trust's distributor, PIMCO Funds
Distributors LLC.
</TABLE>
B. REDEMPTION PROCEDURES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ALLEGHANY FUNDS PIMCO FUNDS
Through an authorized selling or servicing agent Yes Yes
By mail Yes Yes
By telephone Yes Yes*
By wire Yes Yes
By automatic withdrawal plan Yes** Yes***
* Redemptions of more than $10 million must be confirmed in writing.
** Net asset value of account must be $50,000.
*** Net value of account must be at least $10,000.
</TABLE>
Alleghany may, upon 60 days' notice, close a shareholder's account and
send the shareholder the proceeds if the balance falls below $50.
The Trust similarly may, subject to certain restrictions, redeem
involuntarily, upon 60 days' written notice, shares of a shareholder whose
account decreases to a value below the amount necessary to fund the account. In
addition, PIMCO charges a fee of $16 per annum for accounts with balances below
$2,000, except UGMAs, IRAs (including Ruth IRAs) and Auto-Invest Accounts, for
which the minimum balance is $1,000.
C. ADDITIONAL SHAREHOLDER SERVICES
<TABLE>
<CAPTION>
<S> <C> <C>
PIMCO FUNDS ALLEGHANY FUNDS
Share exchange privilege for shares of same class in Automatic
investing from checking or savings account another PIMCO Fund
Free interfund transfers
PIMCO Funds Automated Telephone System for certain Automatic dividend reinvestment
transactions related to established accounts
Automatic Withdrawal Plan for accounts of $10,000 or Investor website
for checking account balances, obtaining more which allows for a
designated distribution paid fund information and making transactions
online monthly to any person designated by the investor
</TABLE>
D. DIVIDENDS AND DISTRIBUTIONS
The following table shows the Funds' policies concerning the
declaration and payment of dividends and net capital gains.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PIMCO FUNDS ALLEGHANY FUNDS
Frequency and Dividends Net investment
income from interest and Net
income from interest and
dividends, if any, and net
capital gains dividends and
net capital gain from sale of
portfolio securities paid at
from sale of portfolio least
annually securities paid
quarterly
Payment Method Dividend income and capital gain Dividend income and capital
reinvested in Fund shares unless investor gain reinvested in Fund Shares
instructs otherwise unless investor instructs
otherwise
Reinvested Dividends Sales Charge None. Dividends paid on Class B and
Class C shares may be lower as a result
of the distribution fee applicable to N/A
those shares
</TABLE>
<PAGE>
V-3
APPENDIX V
FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of _________________, 1999 by and between
Alleghany Funds, a Delaware business trust (the "Trust") on behalf of the
Alleghany/Blairlogie Emerging Markets Fund and the Alleghany/Blairlogie
International Developed Fund (individually a "Fund" and collectively, the
"Funds") and Blairlogie Capital Management (the "Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end series management investment
company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Funds, and the Adviser is willing to furnish such
services to each Fund.
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Duties of Adviser. As investment adviser, the Adviser shall: (i)
manage the investment and reinvestment of the assets of each Fund, (ii)
continuously review, supervise and administer the investment program of each
Fund, (iii) determine in its discretion, the assets to be held uninvested, (iv)
provide the Trust with records concerning the Adviser's activities which are
required to be maintained by the Trust, and (v) render regular reports to the
Trust's officers and Board of Trustees concerning the Adviser's discharge of the
foregoing responsibilities. The Adviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in each Fund's then effective prospectus and statement of
additional information. The Adviser accepts such employment and agrees to render
such services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform such services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Adviser shall select and monitor the
selection of the brokers or dealers that will execute the purchases and sales of
securities for each Fund and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities transactions
for each Fund are obtained. Subject to policies established by the Board of
Trustees and communicated to the Adviser, it is understood that the Adviser will
not be deemed to have acted unlawfully, or to have breached a fiduciary duty to
the Trust or in respect of a Fund, or be in breach of any obligation owing to
the Trust or in respect of a Fund under this Agreement, or otherwise, solely by
reason of its having caused such Fund to pay a member of a securities exchange,
a broker or a dealer a commission for effecting a securities transaction for
such Fund in excess of the amount of commission another member of an exchange,
broker or dealer would have charged, if the Adviser determines in good faith
that the commission paid was reasonable in relation to the brokerage or research
services provided by such member, broker or dealer, viewed in terms of that
particular transaction or the Adviser's overall responsibilities with respect to
the accounts, including such Fund, as to which it exercises investment
discretion. The Adviser will promptly communicate to the officers and Trustees
of the Trust such information relating to Fund transactions as they may
reasonably request.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 2 and 3 of this Agreement, each Fund shall pay to
the Adviser within five business days after the end of each calendar month, a
monthly fee equal to the product of (a) 0.85% of such Fund's average daily net
assets for that month times (b) the quotient of (i) the actual number of days
elapsed in that month divided by (ii) 365. In the event of termination of this
Agreement, the fee provided in this Section 4 shall be paid on a pro-rata basis,
based on the number of days during which this Agreement was in effect.
5. Reports. Each Fund and the Adviser agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
6. Status of Adviser. The services of the Adviser to the Funds are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Funds are not impaired thereby.
7. Liability of Adviser. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Adviser of its obligations
and duties hereunder, the Adviser shall not be subject to any liability
whatsoever to either Fund, or to any shareholder of either Fund, for any error
of judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of a Fund.
8. Duration and Termination. The term of this Agreement, with respect
to a Fund, shall commence on the date which an amendment to the Trust's
registration statement establishing such Fund becomes effective (the "Effective
Date"), provided that first it is approved by the Board of Trustees of the
Trust, including a majority of those Trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the 1940 Act, and by the holders of a majority of the
outstanding voting securities of such Fund; and shall continue in effect for two
years thereafter. This Agreement may continue in effect after its initial term
only if such continuance is approved at least annually by, (i) the Board of
Trustees or, (ii) the vote of a majority of the outstanding voting securities of
the relevant Fund; and in either event by a vote of a majority of those Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party in the manner provided in Section 15(c) of the 1940 Act.
Notwithstanding the foregoing, this Agreement may be terminated with respect to
a Fund: (a) at any time without penalty by such Fund upon the vote of a majority
of such Trustees or by vote of the majority of such Fund's outstanding voting
securities, upon sixty (60) days' written notice to the Adviser or (b) by the
Adviser at any time without penalty, upon sixty (60) days' written notice to
such Fund. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postage prepaid, to the
other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person"
and "a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
9. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of each Fund, and (ii) a majority of the Trustees, including a
majority of the Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
ALLEGHANY FUNDS for
ATTEST ALLEGHANY/BLAIRLOGIE EMERGING
MARKETS FUND and
ALLEGHANY/BLAIRLOGIE
INTERNATIONAL DEVELOPED FUND
- -------------------------------
By:_______________________________________
, President
ATTEST BLAIRLOGIE CAPITAL MANAGEMENT
_______________________________ By:_______________________________________
<PAGE>
11003507\V-13
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 8, 1999
PIMCO FUNDS: MULTI-MANAGER SERIES
840 Newport Center Drive
Newport Beach, California 92660
1-800-426-0107
ALLEGHANY FUNDS
171 North Clark Street
Chicago, Illinois 60601
1-800-992-8151
FEBRUARY 26, 1999 SPECIAL MEETING OF SHAREHOLDERS OF THE PIMCO EMERGING MARKETS
FUND AND PIMCO INTERNATIONAL DEVELOPED FUND (THE "PIMCO FUNDS")), EACH A SERIES
OF PIMCO FUNDS: MULTI-MANAGER SERIES (THE "TRUST").
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Proxy Statement/Prospectus dated the date
hereof for the Special Meeting of Shareholders of PIMCO Funds to be held on
February 26, 1999. Copies of the Proxy Statement/Prospectus may be obtained at
no charge by writing or calling the Trust or Alleghany at the addresses or
telephone numbers set forth above. Unless otherwise indicated, capitalized terms
used herein and not otherwise defined have the same meanings as are given to
them in the Proxy Statement/Prospectus.
GENERAL INFORMATION
The proposed Reorganizations contemplate: (i) the transfer of all of
the assets and stated liabilities of each PIMCO Fund to a corresponding
Alleghany Fund in exchange for Shares of comparable classes of the corresponding
Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares to the
shareholders of the PIMCO Funds in liquidation of the PIMCO Funds. The
consummation of the Reorganizations is subject to a number of conditions with
respect to each PIMCO Fund, including shareholder approval. Following the
Reorganizations, each PIMCO Fund will distribute to its shareholders the Shares
of the corresponding Alleghany Fund received in its Reorganization and will
liquidate. As a result of the proposed Reorganization, each PIMCO Fund
shareholder will become a shareholder of the corresponding Alleghany Fund and
will hold, immediately after the Closing(s), Shares of a comparable class of the
corresponding Alleghany Fund having a total dollar value equal to the total
dollar value of the shares of the PIMCO Fund that the shareholder held
immediately before the Closing(s).
Further information relating to the PIMCO Funds is set forth in the
Statement of Additional Information of the Trust, dated November 1, 1998, which
is incorporated herein by reference.
PRO FORMA FINANCIAL INFORMATION.
The total assets and stated liabilities of each Alleghany Fund
immediately following the Reorganizations shall be identical to the total assets
and stated liabilities of the corresponding PIMCO Fund immediately prior to such
transfer. Reference is therefore made to the audited financial statements and
related independent auditors' report for PIMCO International Developed Fund and
PIMCO Emerging Markets Fund for the year ended June 30, 1998, contained in the
Trust's Annual Report, which is incorporated herein by reference.
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Proxy Statement/Prospectus in connection with the offering made by the Proxy
Statement/Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or its
distributor. The Proxy Statement/Prospectus does not constitute an offering by
the Company or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
<PAGE>
IV-2
11003507\V-11
11003507\V-13
TABLE OF CONTENTS
Page
THE FUNDS............................................................ 1
INVESTMENT POLICIES AND RISK CONSIDERATIONS.......................... 1
INVESTMENT RESTRICTIONS.............................................. 12
TRUSTEES AND OFFICERS................................................ 14
PRINCIPAL HOLDERS OF SECURITIES..................................... 16
INVESTMENT ADVISORY AND OTHER SERVICES.............................. 16
Investment Advisory Agreements................................. 16
The Administrator and Sub-Administrator........................ 16
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.................... 17
TAXES............................................................... 17
PERFORMANCE INFORMATION............................................. 21
OTHER INFORMATION................................................... 21
<PAGE>
1003507\V-13 24
11003507\V-13
THE FUNDS
Alleghany Funds, 171 North Clark Street, Chicago, Illinois 60601, is a
no-load, open-end management investment company which currently offers twelve
series of shares of beneficial interest representing separate portfolios of
investments: Montag & Caldwell Growth Fund, Chicago Trust Growth & Income Fund,
Chicago Trust Talon Fund, Chicago Trust Balanced Fund, Montag & Caldwell
Balanced Fund, Chicago Trust Bond Fund, Chicago Trust Municipal Bond Fund,
Chicago Trust Money Market Fund, Alleghany/Chicago Trust SmallCap Value Fund,
Alleghany/Veredus Aggressive Growth Fund, Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund. This Statement of
Additional Information pertains only to Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund (collectively
referred to as "Funds" or individually as a "Fund").
INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following supplements the information contained in the Proxy
Statement/Prospectus concerning the investment policies of the Funds. Except as
otherwise stated below or in the Proxy Statement/Prospectus, each Fund may
invest in the portfolio investments included in this section.
The investment practices described below, except for the discussion of
portfolio loan transactions, are not fundamental and may be changed by the Board
of Trustees without the approval of the shareowners.
As discussed in the Proxy Statement/Prospectus, certain of the
following investment instruments are generally considered "derivative" in nature
and are so noted. While not a fundamental policy, each Fund that is permitted
the use of such instruments will generally limit its aggregate holdings of such
instruments to 20% or less of its total assets.
Restricted Securities
Each Fund will limit investments in securities of issuers which the
Fund is restricted from selling to the public without registration under the
1933 Act to no more than 5% of the Fund's total assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Investment Advisor, pursuant to guidelines adopted by
the Company's Board of Trustees.
Convertible Securities
Common stock occupies the most junior position in a company's capital
structure. Convertible securities entitle the holder to exchange the securities
for a specified number of shares of common stock, usually of the same company,
at specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior to the claims
of preferred and common shareowners. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareowners.
Money Market Instruments and Related Risks
Money market instruments in which the Funds may invest include, but are
not limited to the following: short-term corporate obligations; Certificates of
Deposit ("CDs"); Eurodollar Certificates of Deposit ("Euro CDs"); Yankee
Certificates of Deposit ("Yankee CDs"); foreign bankers' acceptances; foreign
commercial paper; letter of credit-backed commercial paper; time deposits; loan
participations ("LPs"); variable- and floating-rate instruments; and master
demand notes.
Euro CDs, Yankee CDs and foreign bankers' acceptances involve risks
that are different from investments in securities of U.S. banks. The major risk,
which is sometimes referred to as "sovereign risk," pertains to possible future
unfavorable political and economic developments, possible withholding taxes,
seizures of foreign deposits, currency controls, interest limitations, or other
governmental restrictions which might affect payment of principal or interest.
Investment in foreign commercial paper also involves risks that are different
from investments in securities of commercial paper issued by U.S. companies.
Non-U.S. securities markets generally are not as developed or efficient as those
in the United States. Such securities may be less liquid and more volatile than
securities of comparable U.S. corporations. Non-U.S. issuers are not generally
subject to uniform accounting and financial reporting standards, practices and
requirements comparable to those applicable to U.S. issuers. In addition, there
may be less public information available about foreign banks, their branches and
other issuers.
Time deposits usually trade at a premium over Treasuries of the same
maturity. Investors regard such deposits as carrying some credit risk, which
Treasuries do not; also, investors regard time deposits as being sufficiently
less liquid than Treasuries; hence, investors demand some extra yield for buying
time deposits rather than Treasuries. The investor in a loan participation has a
dual credit risk to both the borrower and also the selling bank. The second risk
arises because it is the selling bank that collects interest and principal and
sends it to the investor.
Foreign Securities
Each Fund may invest in U.S. Dollar or foreign currency-denominated
corporate debt securities of foreign issuers; preferred securities of foreign
issuers; certain foreign bank obligations; and U.S. dollar- or foreign
currency-denominated obligations of foreign governments or their subdivisions,
agencies and instrumentalities, international agencies and supranational
entities. Each Fund may invest in American Depositary Receipts ("ADRs"). Each
Fund may also invest in common stock issued by foreign companies or in
securities represented by European Depositary Receipts ("EDRs"), or Global
Depositary Receipts ("GDRs"). ADRs are dollar-denominated receipts issued
generally by domestic banks and represent the deposit with the bank of a
security of a foreign issuer. EDRs are foreign currency-denominated receipts
similar to ADRs and are issued and traded in Europe, and are publicly traded on
exchanges or over-the-counter in the United States. GDRs may be offered
privately in the United States and also trade in public or private markets in
other countries. ADRs, EDRs and GDRs may be issued as sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities trade in the for of ADRs, EDRs or GDRs. In unsponsored programs, the
issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program.
Investing in the securities of foreign issuers involves special risks
and considerations not typically associated with investing in U.S. companies.
These include: differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. Investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
The risks of investing in foreign securities are particularly high when
securities of issuers based in developing (or "emerging market") countries are
involved. Investing in emerging market countries involves certain risks not
typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social economic and political
uncertainty and instability (including the risk of war); more substantial
government involvement in the economy; higher rates of inflation; less
government supervision and regulation of the securities markets and participants
in those markets; controls on foreign investment and limitations on repatriation
of invested capital and on the Fund's ability to exchange local currencies for
U.S. dollars; unavailability of currency hedging techniques in certain emerging
market countries; the fact that companies in emerging market countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.
Special Risks of Investing in Russian and Other Eastern European Securities
Alleghany/Blairlogie Emerging Markets Fund may invest a portion of its
assets in securities of issuers located in Russia and in other Eastern European
countries. The political, legal and operational risks of investing in the
securities of Russian and other Eastern European issuers, and of having assets
custodied within these countries, may be particularly acute. Investment in
Eastern European countries may involve acute risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. Also, certain
Eastern economies, are characterized by an absence of developed legal structures
governing private and foreign investments and private property in European
countries, which do not have market economies, are characterized by an absence
of developed legal structures governing private and foreign investments and
private property.
In addition, governments in certain Eastern European countries may
require that a governmental or quasi-governmental authority act as custodian of
a Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the 1940 Act
to act as foreign custodians of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required to be effected
through intermediaries. The risk of loss through governmental confiscation may
be increased in such circumstances.
Investments in securities of Russian issuers may involve a particularly
high degree of risk and special considerations not typically associated with
investing in U.S. and other more developed markets, many of which stem from
Russia's continuing political and economic instability and the slow-paced
development of its market economy. Investments in Russian securities should be
considered highly speculative. Such risks and special considerations include:
(a) delays in settling portfolio transactions and the risk of loss arising out
of Russia's system of share registration and custody (see below); (b)
pervasiveness of corruption, insider trading, and crime in the Russian economic
system; (c) difficulties associated in obtaining accurate market valuations of
many Russian securities, based partly on the limited amount of publicly
available information; (d) the general financial condition of Russian companies,
which may involve particularly large amounts of inter-company debt; and (e) the
risk that the Russian tax system will not be reformed to prevent inconsistent,
retroactive and/or exorbitant taxation or, in the alternative, the risk that a
reformed tax system may result in the inconsistent and unpredictable enforcement
of the new tax laws. Also, there is the risk that the government of Russia or
other executive or legislative bodies may decide not to continue to support the
economic reform programs implemented since the dissolution of the Soviet Union
and could follow radically different political and/or economic policies to the
detriment of investors, including non-market-oriented policies such as the
support of certain industries at the expense of other sectors or investors, a
return to the centrally planned economy that existed prior to the dissolution of
the Soviet Union, or the nationalization of privatized enterprises.
A risk of particular note with respect to direct investment in Russian
securities is the way in which ownership of shares of companies is normally
recorded. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the
register or, in certain limited circumstances, by formal share certificates.
However, there is no central registration system for shareholders and these
services are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision nor are they licensed with any governmental entity. It is
possible for a Fund to lose its registration through fraud, negligence or even
mere oversight. While a Fund will endeavor to ensure that is interest continues
to be appropriately recorded, which may involve a custodian or other agent
inspecting the share register and obtaining extracts of share registers through
regular confirmations, these extracts have no legal enforceability and it is
possible that subsequent illegal amendment or other fraudulent act may deprive
the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for a Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration.
Also, although a Russian public enterprise with more than 500
shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, this
regulation has not always been strictly enforced in practice. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. In addition, so-called "financial-industrial groups" have emerged in
recent years that seek to deter outside investors from interfering in the
management of companies they control. These practices may prevent a Fund from
investing in the securities of certain Russian companies deemed suitable by the
Fund's Investment Advisor. Further, this also could cause a delay in the sale of
Russian securities held by a Fund if a potential purchases is deemed unsuitable,
which may expose the Fund to potential loss on the investment.
Foreign Currencies
Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, each
Fund may but and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures.
Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency exchange contract, the
fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, a Fund
reduces its exposure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it will exchange
into. Contracts to sell foreign currencies would limit any potential gain which
might be realized by a Fund if the value of the hedged currency increases. A
Fund may enter into these contracts of the purpose of hedging against foreign
exchange risks arising from the Fund's investment or anticipated investment in
securities denominated in foreign currencies. Such hedging transactions may not
be successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies.
Each Fund may also enter into forward foreign currency exchange
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one currency to another. To the
extent that they do so, the Funds will be subject to the additional risk that
the relative value of currencies will be different than anticipated by the
particular Fund's Investment Advisor. A Fund may use one currency (or a basket
of currencies) to hedge against adverse changes in the value of another currency
(or a basket of currencies) when exchange rates between the two currencies are
positively correlated. A Fund will segregate assets determined to be liquid by
the Investment Advisor in accordance with procedures established by the Board of
Trustees in a segregated account to cover forward currency contracts entered
into for non-hedging purposes. The Funds may also use foreign currency futures
contracts and related options on currencies for the same reasons for which
forward foreign currency exchange contracts are used.
Loans of Portfolio Securities and Related Risks
Each Fund may lend portfolio securities to broker-dealers and financial
institutions provided: (1) the loan is secured continuously by collateral
marked-to-market daily and maintained in an amount at least equal to the current
market value of the securities loaned; (2) the Fund may call the loan at any
time and receive the securities loaned; (3) the Fund will receive any interest
or dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned by the Fund will not at any time exceed 25% of the total
assets of such Fund.
Collateral will consist of U.S. Government securities, cash
equivalents, or irrevocable letters of credit. Loans of securities involve a
risk that the borrower may fail to return the securities or may fail to maintain
the proper amount of collateral. Therefore, the Fund will only enter into
portfolio loans after a review by the Investment Advisor, under the supervision
of the Board of Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored on an ongoing basis.
Loan Participations ("LPs")
Each Fund may engage in LPs. LPs are loans sold by the lending bank to
an investor. The loan participant borrower may be a company with highly-rated
commercial paper that finds it can obtain cheaper funding through an LP than
with commercial paper and can also increase the company's name recognition in
the capital markets. LPs often generate greater yield than commercial paper.
The borrower of the underlying loan will be deemed to be the issuer
except to the extent the Fund derives its rights from the intermediary bank
which sold the LPs. Because LPs are undivided interests in a loan made by the
issuing bank, the Fund may not have the right to proceed against the LP borrower
without the consent of other holders of the LPs. In addition, LPs will be
treated as illiquid if, in the judgment of the Investment Advisor, they cannot
be sold within seven days.
Foreign Bankers' Acceptances
Each Fund may purchase foreign bankers' acceptances. Foreign bankers'
acceptances are short-term (270 days or less), non-interest-bearing notes sold
at a discount and redeemed by the accepting foreign bank at maturity for full
face value and denominated in U.S. dollars. Foreign bankers' acceptances are the
obligations of the foreign bank involved, to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and the
drawer to pay the face amount of the instrument upon maturity.
Foreign Commercial Paper
Each Fund may purchase foreign commercial paper. Foreign commercial
paper consists of short-term unsecured promissory notes denominated in U.S.
dollars, either issued directly by a foreign firm in the U.S., or issued by a
"domestic shell" subsidiary of a foreign firm established to raise dollars for
the firm's operations abroad or for its U.S. subsidiary. Like commercial paper
issued by U.S. companies, foreign commercial paper is rated by the rating
agencies (Moody's Investors Service, Inc; Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies, Inc.) as to the issuer's creditworthiness.
Foreign commercial paper can potentially provide the investor with a greater
yield than domestic commercial paper.
Eurodollar Certificates of Deposit ("Euro CDs")
A Euro CD is a receipt from a bank for funds deposited at that bank for
a specific period of time at some specific rate of return and denominated in
U.S. dollars. It is the liability of a U.S. bank branch or foreign bank located
outside the U.S. Almost all Euro CDs are issued in London.
Yankee Certificates of Deposit ("Yankee CDs")
Yankee CDs are certificates of deposit that are issued domestically by
foreign banks. It is a means by which foreign banks may gain access to U.S.
markets through their branches which are located in the United States, typically
in New York. These CDs are treated as domestic securities.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered loans by a Fund under the Investment Company Act of
1940, as amended (the "1940 Act").
The financial institutions with which a Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Investment Advisor. The Investment Advisor will continue to monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement at not less than the repurchase price.
Each Fund will only enter into a repurchase agreement where the market
value of the underlying security, including interest accrued, will be at all
times equal to or exceed the value of the repurchase agreement.
Reverse Repurchase Agreements
Reverse repurchase agreements involve the sale of securities held by a
Fund pursuant to a Fund's agreement to repurchase the securities at an agreed
upon price, date and rate of interest. Such agreements are considered to be
borrowings under the 1940 Act, and may be entered into only for temporary or
emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account cash, or liquid, securities in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. (Liquid securities as used in this Statement
of Additional Information include equity securities and debt securities that are
unencumbered and market-to-market daily.) Reverse repurchase agreements involve
the risk that the market value of the securities sold by the Fund may decline
below the price at which the Fund is obligated to repurchase such securities.
Securities of Other Investment Companies
Each Fund intends to limit its investments in securities issued by
other investment companies so that, as determined immediately after a purchase
of such securities is made: (i) not more than 5% of the value of the Fund's
total assets will be invested in the securities of any one investment company;
(ii) not more than 10% of its total assets will be invested in the aggregate in
securities of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the Fund
as a whole. Each Fund will also limit investments in securities of other
investment companies as described in the Prospectus under "INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS" and in this Statement of Additional Information under
"INVESTMENT RESTRICTIONS."
Options and Related Risks
Each Fund may buy put and call options and write covered call and
secured put options. These options are generally considered to be derivative
securities. Such options may relate to particular securities, stock indices, or
financial instruments and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.
The Funds will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if a Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities, in such amount are held in
a segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if a
Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value.
A call option is also covered if a Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written; or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in cash or liquid securities in a segregated account with
its custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds' Custodian in an
amount not less than the exercise price of the option at all times during the
option period.
A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the
Fund's execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series as the previously written
option. Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being called, to
permit the sale of the underlying security, or to permit the writing of a new
option containing different terms on such underlying security. The cost of such
a liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Fund will have incurred a
loss in the transaction.
There is no assurance that a liquid secondary market will exist for any
particular option. An option writer, unable to effect a closing purchase
transaction, will not be able to sell the underlying security (in the case of a
covered call option) or liquidate the segregated account (in the case of a
secured put option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline or appreciation in the security
during such period.
Purchasing Call Options.--Each Fund may purchase call options to the
extent that premiums paid by such Fund do not aggregate more than 20% of that
Fund's total assets. When a Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that a Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with transactions, except the cost of the option.
A Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction by selling an option of the
same series as the option previously purchased. The Fund will realize a profit
from a closing sale transaction if the price received on the transaction is more
than the premium paid to purchase the original call option; the Fund will
realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.
Although a Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Fund may expire without any value to
the Fund, in which event the Fund would realize a capital loss which will be
short-term unless the option was held for more than one year.
Covered Call Writing -- Each Fund may write covered call options from
time to time on such portions of their portfolios, without limit, as the
Investment Advisor determines is appropriate in pursuing a Fund's investment
objective. The advantage to a Fund of writing covered calls is that the Fund
receives a premium which is additional income. However, if the security rises in
value, the Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase transaction,
in which a Fund, as writer of an option, terminates its obligation by purchasing
an option of the same series as the option previously written, cannot be
effected with respect to an option once the option writer has received an
exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, a Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
A Fund will write call options only on a covered basis, which means
that a Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell or deliver a security it would want to hold. The exercise
price of a call option may be below, equal to, or above the current market value
of the underlying security at the time the option is written.
Purchasing Put Options -- Each Fund may invest up to 20% of its total
assets in the purchase of put options. A Fund will, at all times during which it
holds a put option, own the security covered by such option. With regard to the
writing of put options, each Fund will limit the aggregate value of the
obligations underlying such put options to 50% of its total assets. The purchase
of the put on substantially identical securities held will constitute a short
sale for tax purposes, the effect of which is to create short-term capital gain
on the sale of the security and to suspend running of its holding period (and
treat it as commencing on the date of the closing of the short sale) or that of
a security acquired to cover the same if at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. A Fund would purchase put
options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options allows a Fund to
protect unrealized gains in an appreciated security in their portfolios without
actually selling the security. If the security does not drop in value, a Fund
will lose the value of the premium paid. A Fund may sell a put option which it
has previously purchased prior to the sale of the securities underlying such
option. Such sale will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
Each Fund may sell a put option purchased on individual portfolio
securities. Additionally, a Fund may enter into closing sale transactions. A
closing sale transaction is one in which a Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
Foreign Currency Options. Each Fund may buy or sell put and call
options on foreign currencies either on exchanges or in the over-the-counter
market. A put option on a foreign currency gives the purchaser of the option the
right to sell a foreign currency at the exercise price until the option expires.
A call option on a foreign currency gives the purchaser of the option the right
to purchase the currency at the exercise price until the option expires.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of a Fund to reduce foreign currency risk
using such options.
Writing Put Options -- Each Fund may also write put options on a
secured basis which means that a Fund will maintain in a segregated account with
its Custodian, cash or U.S. Government securities in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash or U.S. Government securities held in the segregated account will be
adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Investment Advisor wishes
to purchase the underlying security for a Fund's portfolio at a price lower than
the current market price of the security. In such event, that Fund would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.
Following the writing of a put option, a Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
Futures Contracts and Related Risks
Each Fund may enter into contracts for the purchase or sale for future
delivery of securities, including index contracts. The Funds may use interest
rate, foreign currency or index futures contracts. Futures contracts are
generally considered to be derivative securities. While futures contracts
provide for the delivery of securities, deliveries usually do not occur.
Contracts are generally terminated by entering into offsetting transactions.
Each Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in security prices, or interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, a Fund might enter into futures contracts for the sale of
debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at approximately
the same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt securities,
the Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund could then buy debt
securities on the cash market.
A stock index futures contract obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement was made. Open
futures contracts are valued on a daily basis and a Fund may be obligated to
provide or receive cash reflecting any decline or increase in the contract's
value. No physical delivery of the underlying stocks in the index is made in the
future.
With respect to options on futures contracts, when a Fund is
temporarily not fully invested, it may purchase a call option on a futures
contract to hedge against a market advance. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested, it may purchase a call
option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the value of the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is higher than the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.
If a put or call option which a Fund has written is exercised, the Fund
may incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities and for some federal tax purposes, may
be considered a "short sale." For example, a Fund will purchase a put option on
a futures contract to hedge the Fund's portfolio against the risk of rising
interest rates.
To the extent that market prices move in an unexpected direction, a
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund would lose part or all of the benefit of the increased value
which it has because it would have offsetting losses in its futures position. In
addition, in such situations, if the Fund had insufficient cash, it may be
required to sell securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at
increased prices which reflect the rising market. A Fund may be required to sell
securities at a time when it may be disadvantageous to do so.
Options on securities, futures contracts, options on futures contracts,
and options on currencies may be traded on foreign exchanges. Such transactions
may not be regulated as effectively as similar transactions in the United
States; may not involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in, or the prices
of, foreign securities. Some foreign exchanges may be principal markets so that
no common clearing facility exists and a trader may look only to the broker for
performance of the contract. The value of such positions also could be adversely
affected by (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decision, (iii) delays in the Company's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lesser
trading volume. In addition, unless a Fund hedges against fluctuations in the
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that a Fund might realize in trading
could be eliminated by adverse changes in the exchange rate, or the Fund could
incur losses as a result of those changes.
Further, with respect to options on futures contracts, a Fund may seek
to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
Forward Commitments, When-Issued Securities, and Delayed Delivery Transactions
and Related Risks
Each Fund may dispose of or negotiate a when-issued or forward
commitment after entering into these transactions. Such transactions are
generally considered to be derivative transactions. The Funds will normally
realize a capital gain or loss in connection with these transactions. For
purposes of determining a Fund's average dollar-weighted maturity, the maturity
of when-issued or forward commitment securities will be calculated from the
commitment date.
When a Fund purchases securities on a when-issued, delayed delivery or
forward commitment basis, the Fund's Custodian will maintain in a segregated
account: cash, or liquid securities having a value (determined daily) at least
equal to the amount of the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the Custodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that the Fund will maintain
sufficient assets at all times to cover its obligations under when-issued
purchases, forward commitments and delayed delivery transactions.
Swap Agreements. Each Fund may enter into equity index swap agreements
for purposes of attempting to gain exposure to the stocks making up an index of
securities in a market without actually purchasing those stocks. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested in a "basket" of
securities representing a particular index.
Most swap agreements entered into by the Funds calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counter party will be covered by the
maintenance of a segregated account consisting of assets determined to be liquid
by the Investment Advisor in accordance with procedures established by the Board
of Trustees, to avoid any potential leveraging of the Fund's portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of a Fund's investment restriction concerning senior
securities. A Fund will not enter into a swap agreement with any single party if
the net amount owed or to be received under existing contracts with that party
would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Investment Advisor's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid. Moreover, a Fund bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain standards
of creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
The swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect a Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
Asset-Backed Securities and Related Risks
Each Fund may invest in asset-backed securities. Asset-backed
securities are securities backed by installment contracts, credit card and other
receivables, or other financial type assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
payments made by the individual borrowers on the assets underlying securities,
net of any fees paid to the issuer or guarantor of the securities. The average
life of asset-backed securities varies with the maturities of the underlying
instruments. An asset-backed security's stated maturity may be shortened, and
the security's total return may be difficult to predict precisely. The risk that
recovery on repossessed collateral may be unavailable or inadequate to support
payments on asset-backed securities is greater than in the case for
mortgage-backed securities. Falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to the conventional debt security.
Mortgage-Backed Securities and Mortgage Pass-Through Securities and Related
Risks
Each Fund may also invest in mortgage-backed securities. The timely
payment of principal and interest on mortgage-backed securities issued or
guaranteed by Ginnie Mae (formerly known as the Government National Mortgage
Association) ("GNMA") is backed by GNMA and the full faith and credit of the
U.S. Government. Also, securities issued by GNMA and other mortgage-backed
securities may be purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and would be lost if
prepayment occurs. Mortgage-backed securities issued by U.S. Government agencies
or instrumentalities other than GNMA are not "full faith and credit"
obligations. Certain obligations, such as those issued by the Federal Home Loan
Bank are supported by the issuer's right to borrow from the U.S. Treasury; while
others, such as those issued by the Federal National Mortgage Association
("FNMA"), are supported only by the credit of the issuer. Unscheduled or early
payments on the underlying mortgages may shorten the securities' effective
maturities and reduce returns. The Funds may agree to purchase or sell these
securities with payment and delivery taking place at a future date.
Mortgage-backed securities have greater market volatility then other
types of securities. In addition, because prepayments often occur at times when
interest rates are low or are declining, the Funds may be unable to reinvest
such funds in securities which offer comparable yields. The yields provided by
these mortgage securities have historically exceeded the yields on other types
of U.S. Government securities with comparable maturities in large measure due to
the risks associated with prepayment features. (See "General Risks of Mortgage
Securities" herein.)
For federal tax purposes other than diversification under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), mortgage-backed
securities are not considered to be separate securities but rather "grantor
trusts" conveying to the holder an individual interest in each of the mortgages
constituting the pool.
The mortgage securities which are issued or guaranteed by GNMA, Federal
Home Loan Mortgage Corporation ("FHLMC"), or FNMA ("certificates") are called
pass-through certificates because a pro-rata share of both regular interest and
principal payments (less GNMA's, FHLMC's, or FNMA's fees and any applicable loan
servicing fees), as well as unscheduled early prepayments on the underlying
mortgage pool, are passed through monthly to the holder of the certificate
(i.e., the portfolio).
Each Fund may also invest in pass-through certificates issued by
non-governmental issuers. Pools of conventional residential mortgage loans
created by such issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payment. Timely payment of interest and principal of
these pools is, however, generally supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance. The
insurance and guarantees are issued by government entities, private insurance
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets the Fund's quality standards. The Fund may buy
mortgage-related securities without insurance or guarantees if through an
examination of the loan experience and practices of the poolers, the investment
manager determines that the securities meet the Fund's quality standards.
Collateralized Mortgage Obligations ("CMOs"), Real Estate Mortgage Investment
Conduits ("REMICs"), Multi-Class Pass-Throughs, and Related Risks
Each Fund may also invest in certain debt obligations which are
collateralized by mortgage loans or mortgage pass-through securities. These
obligations are generally considered to be derivative securities. CMOs and
REMICs are debt instruments issued by special-purpose entities which are secured
by pools or mortgage loans or other mortgage-backed securities. Multi-class
pass-through securities are equity interests in a trust composed of mortgage
loans or other mortgage-backed securities. Payments of principal and interest on
underlying collateral provides the funds to pay debt service on the CMO or REMIC
or make scheduled distributions on the multi-class pass-through securities.
CMOs, REMICs, and multi-class pass-through securities (collectively, CMOs unless
the context indicates otherwise) may be issued by agencies or instrumentalities
of the U.S. Government or by private organizations.
In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specified coupon rate or adjustable rate tranche (to be discussed in the next
paragraph) and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO on a monthly, quarterly, or
semi-annual basis. The principal and interest on the underlying mortgages may be
allocated among several classes of a series of a CMO in many ways. In a common
structure, payments of principal, including any principal prepayments, on the
underlying mortgages are applied to the classes of a series of a CMO in the
order of their respective stated maturities or final distribution dates, so that
no payment of principal will be made on any class of a CMO until all other
classes having an earlier stated maturity or final distribution date have been
paid in full.
One or more tranches of a CMO may have coupon rates which reset
periodically at a specified increment over an index such as the London Interbank
Offered Rate ("LIBOR"). These adjustable-rate tranches, known as "floating-rate
CMOs," will be considered as adjustable-rate mortgage securities ("ARMs") by the
Funds. Floating-rate CMOs may be backed by fixed-rate or adjustable-rate
mortgages; to date, fixed-rate mortgages have been more commonly utilized for
this purpose. Floating-rate CMOs are typically issued with lifetime "caps" on
the coupon rate thereon. These "caps," similar to the "caps" on adjustable-rate
mortgages, represent a ceiling beyond which the coupon rate on a floating-rate
CMO may not be increased regardless of increases in the interest rate index to
which the floating-rate CMO is geared.
REMICs are private entities formed for the purpose of holding a fixed
pool of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities. As with CMOs, the
mortgages which collateralize the REMICs in which the Funds may invest include
mortgages backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or issued
by private entities, which are not guaranteed by any government agency.
Yields on privately issued CMOs as described above have been
historically higher than the yields on CMOs issued or guaranteed by U.S.
Government agencies. However, the risk of loss due to default on such
instruments is higher since they are not guaranteed by the U.S. Government. The
Funds will not invest in subordinated privately issued CMOs.
Resets -- The interest rates paid on the ARMs and CMOs in which the
Funds may invest generally are readjusted at intervals of one year or less to an
increment over some predetermined interest rate index. There are three main
categories of indices: those based on U.S. Treasury securities; those derived
from a calculated measure such as a cost of funds index; or a moving average of
mortgage rates. Commonly utilized indices include: the one-year, three-year and
five-year constant maturity Treasury rates; the three-month Treasury bill rate;
the six-month Treasury bill rate; rates on longer-term Treasury securities; the
11th District Federal Home Loan Bank Cost of Funds; the National Median Cost of
Funds; the one-month, three-month, six-month or one-year LIBOR; the prime rate
of a specific bank; or commercial paper rates. Some indices, such as the
one-year constant maturity Treasury rate, closely mirror changes in market
interest rate levels. Others, such as the 11th District Federal Home Loan Bank
Cost of Funds index, tend to lag behind changes in market rate levels and tend
to be somewhat less volatile.
Caps and Floors -- The underlying mortgages which collateralize the
ARMs and CMOs in which the Funds may invest will frequently have caps and floors
which limit the maximum amount by which the loan rate to the residential
borrower may change up or down (1) per reset or adjustment interval and (2) over
the life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and interest
payments rather than limiting interest rate changes. These payment caps may
result in negative amortization.
Stripped Mortgage Securities and Related Risks
Each Fund may also invest in stripped mortgage securities. The stripped
mortgage securities in which the Funds may invest will only be issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Stripped
mortgage securities have greater market volatility than other types of mortgage
securities in which the Funds invest.
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the yield to maturity
of any such IOs held by a Fund. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment in these securities even if the securities are
rated in the highest rating categories--"Aaa" or "AAA" by Moody's or S&P,
respectively.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed; accordingly,
certain of these securities may generally be illiquid. The Funds will treat
stripped mortgage securities as illiquid securities except for those securities
which are issued by U.S. Government agencies and instrumentalities and backed by
fixed rate mortgages whose liquidity is monitored by the Investment Advisor,
subject to the supervision of the Board of Trustees. The staff of the Securities
and Exchange Commission (the "SEC") has indicated that it views such securities
as illiquid. Until further clarification of this matter is provided by the
staff, a Fund's investment in stripped mortgage securities will be treated as
illiquid and will, together with any other illiquid investments, not exceed 15%
of such Fund's net assets.
Other Mortgage-Backed Securities
Each Fund may invest in other mortgage-backed securities. The
Investment Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed-rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Investment Advisor will,
consistent with each Fund's investment objective, policies and quality
standards, consider making investments in such new types of mortgage-related
securities.
General Risks of Mortgage Securities
The mortgage securities in which a Fund invests differ from
conventional bonds in that principal is paid back over the life of the mortgage
security rather than at maturity. As a result, the holder of the mortgage
securities (i.e., the Fund) receives monthly scheduled payments of principal and
interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the holder reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest which is lower than the rate on the existing mortgage securities.
For this reason, mortgage securities may be less effective than other types of
securities as a means of "locking in" long-term interest rates.
A decline in interest rates may lead to a faster rate of repayment of
the underlying mortgages and expose a Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Fund, the prepayment right of mortgagors may decrease or limit the increase in
net asset value of the Fund because the value of the mortgage-backed securities
held by the Fund may decline more than or may not appreciate as much as the
price of non-callable debt securities. To the extent market interest rates
increase beyond the applicable cap or maximum rate on a mortgage security, the
market value of the mortgage security would likely decline to the same extent as
a conventional fixed-rate security. The volatility of the security would likely
increase, however, because the expected decline in prepayments would lead to
longer effective maturity of the underlying mortgages.
In addition, to the extent mortgage securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the holder's principal investment to the extent of the premium
paid. On the other hand, if mortgage securities are purchased at a discount,
both a scheduled payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the recognition of
income which when distributed to shareowners will be taxable as ordinary income.
With respect to pass-through mortgage pools issued by non-governmental
issuers, there can be no assurance that the private insurers associated with
such securities can meet their obligations under the policies. Although the
market for such non-governmental issued or guaranteed mortgage securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable. The purchase of such securities is subject to
each Fund's limit with respect to investment in illiquid securities.
Other Investments
The Board of Trustees may, in the future, authorize a Fund to invest in
securities other than those listed here and in the Prospectus, provided that
such investment would be consistent with that Fund's investment objective and
that it would not violate any fundamental investment policies or restrictions
applicable to that Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies
and may not be changed as to a Fund without the approval of a majority of the
outstanding voting shares (as defined in the 1940 Act) of the Fund. Unless
otherwise indicated, all percentage limitations governing the investments of
each Fund apply only at the time of transaction. Accordingly, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in the percentage which results from a relative change in values or
from a change in a Fund's total assets will not be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVES AND POLICIES" and
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS" in the Prospectus, each Fund may
not:
(1) As to 75% of the total assets of each Fund, purchase the securities
of any one issuer (other than securities issued by the U.S. Government or its
agencies or instrumentalities) if immediately after such purchase, more than 5%
of the value of the Fund's total assets would be invested in securities of such
issuer;
(2) Purchase or sell real estate (but this restriction shall not
prevent the Funds from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or acquiring securities of real
estate investment trusts or other issuers that deal in real estate), interests
in oil, gas and/or mineral exploration or development programs or leases;
(3) Purchase or sell commodities or commodity contracts, except that a
Fund may enter into futures contracts and options thereon in accordance with
such Fund's investment objectives and policies;
(4) Make investments in securities for the purpose of exercising control;
(5) Purchase the securities of any one issuer if, immediately after
such purchase, a Fund would own more than 10% of the outstanding voting
securities of such issuer;
(6) Sell securities short or purchase securities on margin, except such
short-term credits as are necessary for the clearance of transactions. For this
purpose, the deposit or payment by a Fund for initial or maintenance margin in
connection with futures contracts is not considered to be the purchase or sale
of a security on margin;
(7) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with a Fund's investment
objectives and policies, (b) the lending of portfolio securities, or (c) entry
into repurchase agreements with banks or broker-dealers;
(8) Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the total assets of the Fund
at the time of its borrowing. All borrowings will be done from a bank and asset
coverage of at least 300% is required. A Fund will not purchase securities when
borrowings exceed 5% of that Fund's total assets;
(9) Purchase the securities of issuers conducting their principal
business activities in the same industry (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if
immediately after such purchase the value of a Fund's investments in such
industry would exceed 25% of the value of the total assets of the Fund;
(10) Act as an underwriter of securities, except that, in connection
with the disposition of a security, a Fund may be deemed to be an "underwriter"
as that term is defined in the 1933 Act;
(11) Invest in puts, calls, straddles or combinations thereof except to
the extent disclosed in the Prospectus;
(12) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three year periods shall include the operation
of any predecessor company or companies.
<PAGE>
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and Executive Officers of the
Company is set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
Stuart D. Bilton* 52 Chairman, Board of Trustees Mr. Bilton is President and Chief Executive Officer of The
171 North Clark Street (Chief Executive Officer) Chicago Trust Company, where he is responsible for the
Chicago, IL 60601 Financial Services Group. Mr. Bilton previously held a
variety
of
positions
within
Chicago
Title
and
Trust
Company
including:
Executive
Vice
President;
Chief
Economist;
Senior
Vice
President--Corporate
Marketing
and
Strategic
Planning;
Vice
President--Lincoln
National
Life;
and
Manager
of
Eastern
Region
Reinsurance
Operations.
Mr.
Bilton
was
educated
at
the
London
School
of
Economics
and
at
the
University
of
Wisconsin.
He
is
a
Chartered
Financial
Analyst,
a
Director
of
Montag
&
Caldwell,
Inc.,
and
a
Director
of
Baldwin
&
Lyons,
Inc.,
an
Indianapolis-based
insurance
company,
and
of
the
Boys
and
Girls
Clubs
of
Chicago.
Dorothea C. Gilliam* 45 Trustee Ms. Gilliam is Vice President of Investments of the
171 North Clark Street Alleghany Corporation. Previously, she was an Assistant
Chicago, IL 60601 Vice President of Chicago Title and Trust Company.
<PAGE>
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
Leonard F. Amari 55 Trustee Mr. Amari is a Partner at the law offices of Amari &
734 North Wells Street Locallo, a practice confined exclusively to the real estate
Chicago, IL 60610 tax assessment process.
Gregory T. Mutz 52 Trustee Mr. Mutz is the Chairman of the Board for both the Amli
125 South Wacker Drive Realty and Amli Residential Properties Inc. As Chairman,
Suite 3100 he is responsible for the operation of the two real estate
Chicago, IL 60606 companies whose principal businesses are multi-family
apartments, land, and business, office and industrial parks.
Nathan Shapiro 61 Trustee Mr. Shapiro is the President of SF Investments, Inc., a
1700 Ridge broker/dealer and investment banking firm. Previously, he
Highland Park, IL 60035 was President of SLD Corporation, a consulting firm, and
Senior
Vice
President
of
Pekin,
Singer
and
Shapiro,
an
investment
advisory
firm.
He
is
a
Director
of
Baldwin
&
Lyons,
Inc.
Kenneth C. Anderson 33 President Mr. Anderson is a Senior Vice President of The Chicago
171 North Clark Street (Chief Operating Officer) Trust Company and has been an officer since 1993. He is
Chicago, IL 60601 responsible for the mutual fund operations and marketing.
Mr.
Anderson is a Certified Public Accountant.
Gerald F. Dillenburg 31 Vice President, Secretary, and Mr. Dillenburg is a Vice President of The Chicago
Trust
171 North Clark Street Treasurer (Chief Financial Company and has been the operations manager and compliance
Chicago, IL 60601 Officer and Compliance Officer) officer of the mutual funds since 1996. Previously, he was
an
audit
manager
with
KPMG
Peat
Marwick
LLP,
specializing
in
investment
services,
including
mutual
and
trust
funds,
broker/dealers
and
investment
advisors.
Mr.
Dillenburg
is
a
Certified
Public
Accountant.
*These Trustees are considered "interested persons" of the Funds as
defined under the 1940 Act.
</TABLE>
The Trustees of the Company who are not "interested persons" of the
Funds receive fees and expenses for each meeting of the Board of Trustees they
attend. Prior to January 1, 1997, such Trustees received $1,500 for each Board
Meeting attended, and an annual retainer of $1,500. Effective January 1, 1998,
such Trustees now receive $2,000 for each Board Meeting attended, and an annual
retainer of $2,000. No officer or employee of The Chicago Trust Company
("Chicago Trust") or their affiliates receives any compensation from the Funds
for acting as a Trustee of the Company. The Officers of the Company receive no
compensation directly from the Funds for performing the duties of their offices.
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 8, 1999, First Data Investor Services Group, Inc. will
own of record 100% of the issued and outstanding shares of each class in each of
the Funds. Shareowners who have the power to vote a large percentage of shares
of a particular Fund can control the Fund and determine the outcome of a
shareholders' meeting.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreements
The advisory services provided by the Investment Advisor of each Fund,
and the fees received by it for such services, are described in the Prospectus.
The Investment Advisor of each Fund may from time to time voluntarily waive a
portion of its advisory fees with respect to such Fund and/or reimburse a
portion of the Fund's expenses.
Under the Investment Advisory Agreements, the Investment Advisor of
each Fund is not liable for any error of judgment or mistake of law or for any
loss suffered by the Company or a Fund in connection with the performance of the
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its duties and obligations thereunder.
Each Investment Advisory Agreement is terminable with respect to a Fund
by vote of the Board of Trustees or by the holders of a majority of the
outstanding voting securities of the Fund, at any time without penalty, on 60
days' written notice to the Investment Advisor. An Investment Advisor may also
terminate its advisory relationship with respect to a Fund on 60 days' written
notice to the Company. Each Investment Advisory Agreement terminates
automatically in the event of its assignment.
Under each Investment Advisory Agreement, the Fund pays the following
expenses: (1) the fees and expenses of the Company's disinterested directors;
(2) the salaries and expenses of any of the Company's officers or employees who
are not affiliated with the Investment Advisor; (3) interest expenses; (4) taxes
and governmental fees; (5) brokerage commissions and other expenses incurred in
acquiring or disposing of portfolio securities; (6) the expenses of registering
and qualifying shares for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees
and expenses of the Company's Custodian, Administrator, Sub-Administrator and
Transfer Agent and any related services; (10) expenses of obtaining quotations
of the Funds' portfolio securities and of pricing the Funds' shares; (11)
expenses of maintaining the Company's legal existence and of shareowners'
meetings; (12) expenses of preparation and distribution to existing shareowners
of reports, proxies and prospectuses; and (13) fees and expenses of membership
in industry organizations.
The Investment Advisor for the Funds is Blairlogie Capital Management
("Blairlogie"), located at 125 Princes Street, Edinburgh EH2 4AD, Scotland.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organization in the United
Kingdom. Blairlogie Capital Management Ltd., the predecessor investment adviser
to Blairlogie, commenced operations in 1992. Blairlogie was founded in 1992 and
will become an indirect wholly-owned subsidiary of the Alleghany Corporation,
which is engaged through its subsidiaries in the business of title insurance,
reinsurance, other financial services and industrial minerals. Alleghany
Corporation is located at Park Avenue Plaza, New York, New York 10055.
Blairlogie managed approximately $900 million in assets at December 31,
1998, primarily for institutional clients.
The Administrator and Sub-Administrator
As Administrator, Chicago Trust, 171 North Clark Street, Chicago,
Illinois 60601, provides certain administrative services to the Company pursuant
to an Administration Agreement. First Data Investor Services Group, Inc.
("Investor Services Group"), 53 State Street, Boston, Massachusetts 02109,
provides certain administrative services for the Funds and Chicago Trust
pursuant to a Sub-Administration Agreement.
Under the Administration Agreement, the Administrator is responsible
for: (1) coordinating with the Custodian and Transfer Agent and monitoring the
services they provide to the Funds; (2) coordinating with and monitoring any
other third parties furnishing services to the Funds; (3) providing the Funds
with necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervising the maintenance by third parties of such books and records of the
Funds as may be required by applicable Federal or state law; (5) preparing or
supervising the preparation by third parties of all Federal, state and local tax
returns and reports of the Funds required by applicable law; (6) preparing and,
after approval by the Funds, filing and arranging for the distribution of proxy
materials and periodic reports to shareowners of the Funds as required by
applicable law; (7) preparing and, after approval by the Company, arranging for
the filing of such registration statements and other documents with the SEC and
other Federal and state regulatory authorities as may be required by applicable
law; (8) reviewing and submitting to the Officers of the Company for their
approval invoices or other requests for payment of the Funds' expenses and
instructing the Custodian to issue checks in payment thereof; and (9) taking
such other action with respect to the Company or the Funds as may be necessary
in the opinion of the Administrator to perform its duties under the Agreement.
As compensation for services performed under the Administration
Agreement, the Administrator receives a fee payable monthly at an annual rate
(as described in the Prospectus) multiplied by the average daily net assets of
the Company.
First Data Distributors, Inc. is principal underwriter and distributor of the
Funds' shares.
Distribution Plan
The Board of Trustees of the Company has adopted a Plan of Distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Class N
shares of each Fund to pay certain expenses associated with the distribution of
its shares. Under the Plan, each Fund may pay actual expenses not exceeding, on
an annual basis, 0.25% of a Fund's average daily net assets. To the Company's
knowledge, no interested person of the Company, nor any of its Trustees who are
not "interested persons," has a direct or indirect financial interest in the
operation of the Plan. The Company anticipates that each Fund will benefit from
additional shareholders and assets as a result of implementation of the Plan.
The terms of such Plan are more fully described in the Prospectus under
"DISTRIBUTION PLAN."
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Investment Advisor is responsible for decisions to buy and sell
securities for the Funds and for the placement of its portfolio business and the
negotiation of commissions, if any, paid on such transactions. The Investment
Advisor, in placing trades for a Fund, will follow the Company's policy of
seeking best execution of orders. Securities traded in the over-the-counter
market are generally traded on a net basis. These securities are generally
traded on a net basis with dealers acting as principal for their own accounts
without a stated commission. In over-the-counter transactions, orders are placed
directly with a principal market-maker unless a better price and execution can
be obtained by using a broker. Brokerage commissions are paid on transactions in
listed securities, futures contracts, and options.
The Investment Advisor effects portfolio transactions for other
investment companies and advisory accounts. Research services furnished by
broker-dealers through whom the Funds effect securities transactions may be used
by the Investment Advisor in servicing all of their respective accounts; not all
such services may be used in connection with the Funds. The Investment Advisor
will attempt to equitably allocate portfolio transactions among the Funds and
others whenever concurrent decisions are made to purchase or sell securities by
the Funds and other accounts. In making such allocations between the Funds and
others, the main factors to be considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held, and the opinions of the persons responsible for
recommending investments to the Funds and the others. In some cases, this
procedure could have an adverse effect on the Funds. In the opinion of the
Investment Advisor, however, the results of such procedures will, on the whole,
be in the best interest of each of the clients.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of purchases or sales of portfolio investments for the
reporting period by the monthly average value of the portfolio investments owned
during the reporting period. The calculation excludes all securities, including
options, whose maturities or expiration dates at the time of acquisition are one
year or less. Portfolio turnover may vary greatly from year to year as well as
within a particular year, and may be affected by cash requirements for
redemption of units. In any event, portfolio turnover is generally not expected
to exceed 100% in the Funds. A high rate of portfolio turnover (i.e., over 100%)
may result in the realization of substantial capital gains and involves
correspondingly greater transaction costs. To the extent that such capital gains
are short-term-capital gains, distributions derived from such gains generally
will be treated as ordinary income for Federal income tax purposes.
TAXES
Each Fund intends to continue to qualify each year as a regulated
investment company under the Code.
In order to so qualify and to qualify for the favorable tax treatment
accorded regulated investment companies and their shareholders, a Fund must,
among other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
of securities or foreign currencies, or other income (including but not limited
to gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; (ii) distribute
at least 90% of its dividend, interest and certain other taxable income each
year; and (iii) at the end of each fiscal quarter maintain at least 50% of the
value of its total assets in cash, U.S. Government securities, securities of
other regulated investment companies, and other securities of issuers which
represent, with respect to each issuer, no more than 5% of the value of a Fund's
total assets and 10% of the outstanding voting securities of such issuer, and
with no more than 25% of its assets invested in the securities (other than those
of the government or other regulated investment companies) of any one issuer or
of two or more issuers which the Fund controls and which are engaged in the
same, similar or related trades and businesses.
To the extent such Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income paid
to shareowners in the form of dividends or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of a Fund's "required distributions" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of a Fund's ordinary income
for the calendar year plus 98% of its capital gain net income recognized during
the one-year period ending on October 31 plus undistributed amounts from prior
years. The Funds intend to make distributions sufficient to avoid imposition of
the excise tax. For a distribution to qualify as such with respect to a calendar
year under the foregoing rules, it must be declared by a Fund during October,
November or December to shareowners of record during such month and paid by
January 31 of the following year. Such distributions will be taxable in the year
they are declared, rather than the year in which they are received.
When a Fund writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the Fund's accounts as an
asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the last sale price on the
principal exchange on which such option is traded or, in the absence of a sale,
the mean between the last bid and asked prices. If an option which a Fund has
written expires on its stipulated expiration date, the Fund recognizes a
short-term capital gain. If a Fund enters into a closing purchase transaction
with respect to an option which the Fund has written, the Fund realizes a
short-term gain (or loss if the cost of the closing transaction exceeds the
premium received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which a Fund has written is exercised, the Fund
realizes a capital gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is recorded
in the Fund's assets and liabilities as an investment and subsequently adjusted
daily to the current market value of the option. For example, if the current
market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Fund has purchased expires on
the stipulated expiration date, the Fund realizes a short-term or long-term
capital loss for federal income tax purposes in the amount of the cost of the
option. If a Fund exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale which will be decreased by the premium originally paid.
The amount of any realized gain or loss on closing out options on
certain stock indices will result in a realized gain or loss for tax purposes.
Such options held by a Fund at the end of each fiscal year on a broad-based
stock index will be required to be "marked-to-market" for federal income tax
purposes. Sixty percent of any net gain or loss recognized on such deemed sales
or on any actual sales will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss ("60/40 gain or
loss"). Certain options, futures contracts and options on futures contracts
utilized by the Funds are "Section 1256 contracts." Any gains or losses on
Section 1256 contracts held by a Fund at the end of each taxable year (and on
October 31 of each year for purposes of the 4% excise tax) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized and the resulting gain or loss is treated as a
60/40 gain or loss.
Shareowners will be subject to federal income taxes on distributions
made by the Funds whether received in cash or additional shares of the Funds.
Distributions of net investment income and net short-term capital gains, if any,
will be taxable to shareowners as ordinary income. Distributions of net capital
gains (the excess of net capital gains over net short-term capital losses), if
any, will be taxable to shareowners as 20% rate gains, without regard to how
long a shareowner has held shares of a Fund. A loss on the sale of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any long-term capital gain dividend paid to the shareowner with respect to
such shares.
The Funds will notify shareowners each year of the amount of dividends
and distributions, including the amount of any distribution of 20% rate gains,
and the portion of its dividends which qualify for the 70% deduction.
Passive Foreign Investment Companies
Each Fund may invest in the stock of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself may be subject
to tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to stockholders.
In general, under the PFIC rules, an excess distribution is treated as
having been realized ratably over the period during which the Fund held the PFIC
stock. A Fund itself will be subject to a U.S. federal income tax (including
interest) on the portion, if any, of an excess distribution that is so allocated
to prior taxable years. Certain distributions from a PFIC as well as gain from
the sale of PFIC stock are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Fund generally would be required to include its share of the
PFIC's income and net capital gain annually, regardless of whether distributions
are received from the PFIC in a given year. If this election were made, the
special rules discussed above relating to the taxation of excess distributions
would not apply. In addition, another election generally is available that would
involve marking to market a Fund's PFIC shares at the end of each taxable year
(and on certain other dates prescribed in the Code), with the result that
unrealized gains (and, to a certain extent, losses) are treated as though they
were realized. If this election were made, tax at the Fund level under the PFIC
rules would generally be eliminated, but the Fund could, in limited
circumstances, incur nondeductible interest charges.
Because the application of the PFIC rules may affect, among other
things, the character of gains and the amount of gain or loss and the timing of
the recognition of income with respect to PFIC shares, and may subject a Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders and will be taxed to shareholders as ordinary income
or long-term capital gain may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
Foreign Currency Transactions
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liability denominated in a foreign
currency and the time the Fund actually collects such receivable or pays such
liabilities generally are treated as ordinary income or loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain other instruments, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
Foreign Taxation
Income received by the Funds from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce of eliminate such
taxes. In addition, the Investment Advisor intends to manage the Funds with the
intention of minimizing foreign taxation in cases where it is deemed prudent to
do so. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, such Fund will
be eligible to elect to "pass through" to the Fund's shareholders the amount of
eligible foreign income and similar taxes paid by the Fund. If this election is
made, a shareholder generally subject to tax will be required to include in
gross income (in addition to taxable dividends actually received) his or her pro
rata share of foreign taxes in computing his or her taxable income and the
shareholder may be entitled to claim the amount of such taxes as a deduction or
to use it as a foreign tax credit against his or her U.S. federal income tax
liability, subject to certain limitations. In particular, shareholders must hold
their shares (without protection from risk of loss) on the ex-dividend date and
for at least 15 more days during the 30-day period surrounding the ex-dividend
date to be eligible to claim a foreign tax credit with respect to a gain
dividend. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Each shareholder will be notified within 60 days
after the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election is
made, the source of the electing Fund's income will flow through to shareholders
of the Company. With respect to such Funds, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign currency-denominated debt
securities, receivables and payables will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Shareholders may be unable to claim a credit for the full amount of
their proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit can be used to offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.
Dividends and distributions also may be subject to foreign, state and
local taxes. Shareowners are urged to consult their tax advisors regarding
specific questions as to federal, foreign, state and local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisors concerning the tax
consequences of ownership of shares of the Funds, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
<PAGE>
PERFORMANCE INFORMATION
In General
From time to time, the Company may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to shareowners. The Company may also include
calculations, such as hypothetical compounding examples or tax-free compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any Fund. In addition, the Company may
include charts comparing various tax-free yields versus taxable yield
equivalents at different income levels.
From time to time, the yield and total return of a Fund may be quoted
in advertisements, shareowner reports or other communications to shareowners.
Total Return Calculations
Each Fund computes its average annual total return by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Return = ([ERV/P]1/n) - 1
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of
the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms of years
The Funds compute their aggregate total returns over a specified period
by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
Aggregate Annual Total Return = (ERV/P) - 1
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of
the period
P = hypothetical initial payment of $1,000
</TABLE>
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations. Such calculations are not
necessarily indicative of future results and do not take into account Federal,
state and local taxes that shareowners must pay on a current basis.
Since performance will fluctuate, performance data for the Funds should
not be used to compare an investment in the Funds' shares with bank deposits,
savings accounts and similar investment alternatives which often provide an
agreed or guaranteed fixed yield for a stated period of time. Shareowners should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
OTHER INFORMATION
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information forms a part. Each such statement is qualified in all respects by
such reference.
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 26, 1999
The undersigned hereby appoints Stephen J. Treadway, Timothy R. Clark and Newton
B. Schott, Jr., and each of them separately, proxies with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Special Meeting of Shareholders of the PIMCO INTERNATIONAL
DEVELOPED FUND (the "Fund"), a series of PIMCO FUNDS: MULTI-MANAGER SERIES, on
February 26, 1999 at 10:00 Eastern time, and any adjournments thereof, all of
the shares of the Fund which the undersigned would be entitled to vote if
personally present.
NOTE: Please sign exactly
as your name appears on
this proxy card. All joint
owners should sign. When
signing as executor,
administrator, attorney,
trustee or guardian or as
custodian for a minor,
please give full title as
such. If a corporation,
please sign in full
corporate name and indicate
the signer's office. If a
partner, sign in the
partnership name.
- ----------------------------------------------------------------------------
Signature
- ------------------------------------------------------------------------------
Signature (if held jointly)
- ------------------------------------------------------------------------------
Date
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
EACH PROPOSAL.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposal 1.
For Against Abstain
1. To approve the merger _____ _____ _____
of the Fund, as describe
in the Proxy Statement/
Prospectus, and the Agreement
and Plan of Reorganization
with respect to the Fund
between PIMCO Funds:
Multi-Manager Series and
Alleghany Funds.
PLEASE SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 26, 1999
The undersigned hereby appoints Stephen J. Treadway, Timothy R. Clark and Newton
B. Schott, Jr., and each of them separately, proxies with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Special Meeting of Shareholders of the PIMCO EMERGING MARKETS FUND
(the "Fund"), a series of PIMCO FUNDS: MULTI-MANAGER SERIES, on February 26,
1999 at 10:00 Eastern time, and any adjournments thereof, all of the shares of
the Fund which the undersigned would be entitled to vote if personally present.
NOTE: Please sign exactly
as your name appears on
this proxy card. All joint
owners should sign. When
signing as executor,
administrator, attorney,
trustee or guardian or as
custodian for a minor,
please give full title as
such. If a corporation,
please sign in full
corporate name and indicate
the signer's office. If a
partner, sign in the
partnership name.
- ------------------------------------------------------------------------------
Signature
- ------------------------------------------------------------------------------
Signature (if held jointly)
- ------------------------------------------------------------------------------
Date
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
EACH PROPOSAL.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposal 1.
For Against Abstain
1. To approve the merger _____ _____ _____
of the Fund, as described
the Proxy Statement/Prospectus,
and the Agreement and
Plan of Reorganization
with respect to the Fund
between PIMCO Funds:
Multi-Manager Series and
Alleghany Funds.
PLEASE SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PART C - OTHER INFORMATION
0 Item 15. Indemnification:
Section 10.2 of the Registrant's Trust Instrument provides as follows:
10.2 Indemnification. The Trust shall indemnify each of its
Trustees against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his
being or having been such a Trustee except with respect to any
matter as to which he shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties, provided that as to any
matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the
Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty,
or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of
such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may
be lawfully entitled, provided that no person may satisfy any
right of indemnity or reimbursement hereunder except out of
the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this
Section 10.2, provided that the indemnified person shall have
given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to
such indemnification.
The Trust shall indemnify officers, and shall have
the power to indemnify representatives and employees of the
Trust, to the same extent that Trustees are entitled to
indemnification pursuant to this Section 10.2.
Insofar as indemnification for liability arising under the 1933 Act may
be permitted to trustees, officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in that Act and is, therefore, enforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in that Act and will
be governed by the final adjudication of such issue.
Section 10.3 of the Registrant's Trust Instrument, also provides for
the indemnification of shareholders of the Registrant. Section 10.3 states as
follows:
10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally
liable solely by reason of his being or having been a
shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other
legal representatives or, in the case of a corporation or
other entity, its corporate or other general successor) shall
be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust, on
behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Trust and satisfy
any judgment thereon from the assets of the Series.
In addition, Registrant currently has a trustees' and officers'
liability policy covering certain types of errors and omissions.
1 Item 16. Exhibits:
(1) Trust Instrument dated September 10, 1993--Incorporated herein by reference
to Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
(2) Copies of existing By-Laws--Incorporated
herein by reference to Exhibit No. (2) to
Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
(3) Copies of any voting trust agreement--Not
Applicable.
(4) Copies of the agreement of acquisition,
reorganization, merger, liquidation, and any
amendments to it included as Appendix D to Part A of
this Registration Statement.
(5) Copies of all instruments defining the rights of holders of the
securities--Not Applicable.
(6) Copies of all investment advisory contracts:
(a) Investment Advisory Agreements for CT&T Growth & Income Fund, CT&T
Intermediate Fixed Income Fund, CT&T Intermediate Municipal Bond Fund,
and CT&T Money Market Fund with Chicago Title and Trust Company, each
dated November 30, 1993--Incorporated herein by reference to Exhibit
No. (5)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Investment Advisory Agreements for CT&T Talon Fund with Chicago Title
and Trust Company, and Montag & Caldwell Growth Fund and Montag &
Caldwell Balanced Fund with Montag & Caldwell, Inc., each dated August
27, 1994--Incorporated herein by reference to Exhibit No. (5)(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Investment Advisory Agreement for CT&T Balanced Fund (formerly known as
"CT&T Asset Allocation Fund") with Chicago Title and Trust Company,
dated March 15, 1995--Incorporated herein by reference to Exhibit No.
(5)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendments to Investment Advisory Agreements for each Series, each
dated December 21, 1995, reflecting name changes of Series and
Advisor--Incorporated herein by reference to Exhibit No. (5)(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Amendments to Investment Advisory Agreements for Montag & Caldwell Growth Fund
and Montag & Caldwell Balanced Fund, each dated December 21, 1995--Incorporated
herein by reference to Exhibit No. (5)(a) to Registration Statement No. 33-68666
filed via EDGAR on April 16, 1996.
Form of Investment Advisory Agreement for Alleghany/Chicago Trust
SmallCap Value Fund with Chicago Title and Trust Company, dated
_________________, 1998 -- Incorporated herein by reference to Exhibit
No. 5(a) to Registration Statement No. 33-68666 filed via EDGAR on
November 10, 1998.
Form of Investment Advisory Agreement for Alleghany/Veredus Aggressive Growth
Fund with Veredus Asset Management LLC, dated __________________, 1998--
Incorporated herein by reference to Exhibit No. 5(a) to Registration Statement
No. 33-68666 filed via EDGAR on November 10, 1998.
Form of Investment Advisory Agreement for Alleghany/Blairlogie Emerging
Markets Fund with Blairlogie Capital Management, dated
_________________, 1998 -- filed herewith as Appendix IV to this
Registration Statement.
Form of Investment Advisory Agreement for Alleghany/Blairlogie
International Developed Fund with Blairlogie Capital Management, dated
_________________, 1998 -- filed herewith as Appendix IV to this
Registration Statement.
(b) Amended and Restated Sub-Investment Advisory Agreement for CT&T Talon
Fund with Talon Asset Management, Inc., dated December 21,
1995--Incorporated herein by reference to Exhibit No. 5(b) to
Registration Statement No. 33-68666 filed via EDGAR on February 27,
1997.
(c) Amended and Restated Guaranty Agreement dated December 23, 1996,
between Chicago Title and Trust Company and CT&T Funds--Incorporated
herein by reference to Exhibit No. 5(c) to Registration Statement No.
33-68666 filed via EDGAR on February 27, 1998.
(d) Investment Advisory Assignment dated October 30, 1995, between and
among Chicago Title and Trust Company, The Chicago Trust Company, and
CT&T Funds--Incorporated herein by reference to Exhibit No. (5)(d) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
(e) Master Services Agreement dated October 30, 1995, between Chicago Title
and Trust Company and certain of its subsidiaries--Incorporated herein
by reference to Exhibit No. (5)(e) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(7) Copies of each underwriting or distribution
contract:
(a) Underwriting Agreement for all Funds with FPS Broker Services, Inc.,
dated November 30, 1993--Incorporated herein by reference to Exhibit
No. (6)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendment dated December 21, 1995 to Underwriting Agreement, reflecting name
changes to certain Series--Incorporated herein by reference to Exhibit No.
(6)(a) to Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Amendment dated June 13, 1996 to Underwriting Agreement, reflecting
creation of multiple class--Incorporated herein by reference to
Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
(b) Underwriter Compensation Agreement for all Funds with FPS Broker
Services, Inc., dated November 30, 1993--Incorporated herein by
reference to Exhibit No. (6)(b) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment dated December 21, 1995 to Underwriter Compensation
Agreement, reflecting name changes to certain Series--Incorporated
herein by reference to Exhibit No. (6)(a) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(c) Distribution Agreement dated June 1, 1997 between CT&T Funds and First
Data Distributors, Inc.--Incorporated herein by reference to Exhibit
No. 6(c) to Registration Statement No. 33-68666 filed via EDGAR on
February 27, 1998.
Form of Amendment to Distribution Agreement between Alleghany Funds and First
Data Distributors, Inc, dated ________________________, 1998-- Incorporated
herein by reference to Exhibit No. 6(c) to Registration Statement No. 33-68666
filed via EDGAR on November 10, 1998.
(8) Copies of all bonus, profit sharing, pension or other similar
contracts--Not Applicable.
(9) Copies of all custodian agreements:
(a) Custodian Agreement between Bankers Trust Company and CT&T Funds, dated
June 1, 1997--Incorporated herein by reference to Exhibit No. 8(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 27,
1998.
Form of Amendment to Custodian Agreement between Alleghany Funds and Bankers
Trust Company, dated
___________________________, 1998-- Incorporated herein by reference to Exhibit
No. 8(a) to Registration
Statement No. 33-68666 filed via EDGAR on November 10, 1998.
(b) Custody Administration and Agency Agreement for all CT&T Funds with FPS
Services, Inc., with respect to UMB Bank, N.A., dated December 8,
1994--Incorporated herein by reference to Exhibit (8)(b) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Amendment dated December 21, 1995 to Custody Administration and Agency
Agreement, reflecting name changes to certain Series--Incorporated herein
by reference to Exhibit No. (8)(b) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment dated June 13, 1996 to Custody Administration and Agency
Agreement, reflecting creation of multiple class--Incorporated herein
by reference to Registration Statement No. 33-68666 filed via EDGAR on
April 16, 1996.
(10) Copies of any plan or agreement entered into by Registrant
pursuant to Rule 12b-1:
(a) Distribution and Service Plan for all Funds except Chicago Trust Money
Market Fund, with FPS Broker Services, Inc.--Incorporated herein by
reference to Exhibit No. (15)(a) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment to Distribution and Service Plan dated December 21, 1995,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (15)(a) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(b) Servicing Agreement for Distribution Assistance and Shareholder
Administrative Support Services for all Funds except Money Market
Fund, with FPS Broker Services, Inc.--Incorporated herein by reference
to Exhibit No. (15)(b) to Registration Statement No. 33-68666 filed
via EDGAR on February 22, 1996. <R?
Amendment to Servicing Agreement for Distribution Assistance and
Shareholder Administrative Support Services dated December 21, 1995,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (15)(b) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
(c) Form of Amendment to Amended and Restated Distribution and Services
Plan pursuant to Rule 12b-1 between Alleghany Funds and First Data
Distributors, Inc., dated ___________________, 1998-- Incorporated
herein by reference to Exhibit No. 15(c) to Registration Statement No.
33-68666 filed via EDGAR on November 10, 1998.
(11) Consent of Counsel - Not Applicable.
(12) Tax matters opnion and consent. *
(13) Copies of all other
material contracts not
made in the ordinary
course of business
which are to be
performed:
(a) Transfer Agency and Services Agreement between CT&T Funds and First
Data Investor Services Group, Inc., dated June 1, 1997--Incorporated
herein by reference to Exhibit No. 9(a) to Registration Statement No.
33-68666 filed via EDGAR on February 27, 1998.
Form of Amendment to Transfer Agency and Services Agreement between
Alleghany Funds and First Data Investor Services Group, Inc., dated
_________________________, 1998-- Incorporated herein by reference to
Exhibit No. 9(a) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
(b) Administration Agreement between the Company and Chicago Title and
Trust Company, dated June 15, 1995--Incorporated herein by reference to
Exhibit No. (9)(b) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
*To be filed by amendment
Amendment dated December 21, 1995 to Administration Agreement,
reflecting name changes of certain Series and the
Administrator--Incorporated herein by reference to Exhibit No.
(9)(b) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendment dated June 13, 1996 to Administration Agreement, reflecting
creation of multiple class--Incorporated herein by reference to
Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
Form of Amendment to Administration Agreement between Alleghany
Funds and Chicago Title and Trust Company, dated
_____________________, 1998-- Incorporated herein by reference to
Exhibit No. 9(b) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
(c) Sub-Administration Agreement between First Data Investor
Services Group, Inc. and The Chicago Trust Company, dated June 1,
1997--Incorporated herein by reference to Exhibit No. 9(c) to
Registration Statement No. 33-68666 filed via EDGAR on February
27, 1998.
Form of Amendment to Sub-Administration Agreement with Alleghany
Funds and First Data Investor Services Group, Inc., dated
____________________, 1998-- Incorporated herein by reference to
Exhibit No. 9(c) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
(d) Accounting Services Agreement between CT&T Funds and FPS Services,
Inc., dated November 30, 1993--Incorporated herein by reference to
Exhibit No. (9)(c) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
Amendment dated December 21, 1995 to Accounting Services Agreement,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (9)(c) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment dated June 13, 1996 to Accounting Services Agreement,
reflecting creation of multiple class--Incorporated herein by Reference
to Registration Statement No. 33-68666 filed via EDGAR on April 16,
1996.
(14) Copies of any other opinions, appraisals or rulings.*
(15) All financial statements omitted from Item
14(a)(1)--Not Applicable.
(16) Additional Exhibits -- Not Applicable.
(18)The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the
Securities Act [17 CFR 230.145c], the reoffering prospectus will
contain the information called for by the applicable registration form
for
reofferings by persons who may be deemed
underwriters, in addition to the
information called for by the other
items of the applicable form.
The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Chicago,
the State of Illinois on the 29th day of January, 1999.
ALLEGHANY FUNDS
By: /s/ KENNETH C. ANDERSON
Kenneth C. Anderson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Alleghany Funds has been signed below by the following person in
his or her capacity and on the 29th day of January, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Capacity
/s/ STUART D. BILTON Chairman, Board of Trustees 1/29/99
Stuart D. Bilton
/s/ DOROTHEA C. GILLIAM Trustee 1/29/99
Dorothea C. Gilliam
/s/ NATHAN SHAPIRO Trustee 1/29/99
Nathan Shapiro
/s/ GREGORY T. MUTZ Trustee 1/29/99
Gregory T. Mutz
/s/ LEONARD F. AMARI Trustee 1/29/99
Leonard F. Amari
/s/ KENNETH C. ANDERSON President 1/29/99
Kenneth C. Anderson (Principal Executive Officer)
/s/ GERALD F. DILLENBURG Secretary, Treasurer and 1/29/99
Gerald F. Dillenburg Vice President (Principal
Accounting and Financial
Officer)
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
12 Tax Opinion
14 Opinions and Consents
17 Financial Data Schedules
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Proxy Statement/Prospectus constituting parts of the Pre-Effective
Amendment No. 1 to the registration statement on Form N-14 of our reports dated
August 17, 1998, relating to the financial statements and financial
highlights appearing in the June 30, 1998 Annual Reports to Shareholders
of the PIMCO Emerging Markets Fund and PIMCO International Developed Fund,
each a series of PIMCO Funds: Multi-Manager Series, which are also
incorporated by
reference into the registration statement. We also consent to the
references to us under the headings "Financial Statements" and
"Independent Accountants" in the Proxy Statement/Prospectus.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 8, 1999
Emerging Markets PRIVATE
[Sonnenschein Letterhead]
March 31, 1999
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
Attention: President
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Ladies & Gentlemen:
You have requested our opinion as to certain federal income
tax consequences of the transfer of the assets of the PIMCO
Emerging Markets Fund ("Target"), a series of the PIMCO Funds:
Multi-Manager Series, a Massachusetts business trust, to the
Alleghany/Blairlogie Emerging Markets Fund ("Acquiror"), a series
of the Alleghany Funds, a Delaware business trust, in exchange
for voting common shares of the Acquiror ("Acquiror Common
Stock") and the assumption by Acquiror of certain of the
liabilities of Target, and the distribution of the Acquiror
Common Stock to the holders of voting common shares of Target
("Target Common Stock") in liquidation of the Target
("Reorganization"), all pursuant to an Agreement and Plan of
Reorganization (the "Agreement"), in a form substantially the
same as the copy attached hereto.
The opinions expressed herein are based solely upon current
law, including the Internal Revenue Code of 1986, as amended
("Code"), applicable Treasury Regulations promulgated or proposed
thereunder, current positions of the Internal Revenue Service
contained in published Revenue Rulings and Revenue Procedures,
other current administrative positions of the Internal Revenue
Service and existing judicial decisions, all of which are subject
to change or modification at any time.
In connection with the rendering of this opinion, we have
reviewed the Agreement, the most recent financial statements and
related documents and other materials as we deemed relevant to
the rendering of our opinion. In addition, we have relied upon
the representations made by the Acquiror, Target and Blairlogie
Capital Management ("Advisor"), attached hereto, upon the
assumption that all documents we have reviewed are true and
accurate, accurately reflect the originals and have been or will
be properly executed, and that the Acquiror and Target's actions
in connection with the Agreement and the transactions
contemplated thereby have been, and will be, conducted in the
manner provided in such document, and upon the assumption that
representation (b) provided by Target is correct.
We are members of the bar of the State of New York and are
not admitted to practice law in any other jurisdiction.
Accordingly, we express no opinion with respect to the laws of
any other jurisdiction other than the federal laws of the United
States of America in respect of the opinions set forth herein.
Based on and subject to the foregoing and provided that all
terms of the transaction occur in accordance with the terms of
the Agreement, it is our opinion that:
(1) Pursuant to Section 851(g) of the Code, for
federal income tax purposes, the Acquiror and Target will be
treated as corporations separate from the other series of the
Alleghany Funds and PIMCO Funds, respectively;
(2) Although there is no controlling authority on
point, the transfer by the Target of all or substantially all of
its assets in exchange for Acquiror shares and the assumption by
Acquiror of certain of Target's liabilities and the subsequent
liquidation of the Target pursuant to the Reorganization should
constitute a reorganization within the meaning of Section 368(a)
of the Code, and Acquiror and Target should each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
The conclusions set forth below assume that the conclusion set
forth in this paragraph (2) is correct;
(3) Pursuant to Sections 357(a), 361(a), (b) and
(c) of the Code, the Target will not recognize any gain or loss
as a result of the Reorganization;
(4) Pursuant to Section 1032(a) of the Code, the
Acquiror will not recognize any gain or loss on the receipt of
the assets of Target in exchange for shares of Acquiror in the
Reorganization;
(5) Pursuant to Sections 362(b) and 1223(2) of the
Code, the Acquiror's adjusted tax basis and holding period in the
assets received from Target in the Reorganization will be the
same as the adjusted tax basis and will include the holding
period, respectively, of such assets in the hands of the Target
immediately prior to the Reorganization;
(6) Pursuant to Section 354(a)(1) of the Code, the
shareholders of Target who exchange shares of Target solely for
shares of Acquiror in the Reorganization will not recognize any
gain or loss;
(7) Pursuant to Section 358(a)(1) of the Code, the
aggregate tax basis of Acquiror's common stock received by each
shareholder of Target in the Reorganization will be the same as
the aggregate tax basis of Target common stock exchanged
therefor;
(8) Pursuant to Section 1223(1) of the Code, each
former Target shareholder's holding period of Acquiror common
stock received in the Reorganization will be determined by
including the period for which Target common stock was held by
such shareholder at the time of the Reorganization provided that
such shareholder held the Target common stock as a capital asset;
and
(9) Pursuant to Section 381(c) of the Code, the
Acquiror will succeed to and take into account the tax attributes
of the Target described and subject to the conditions and
limitations contained therein.
This opinion is solely for your information and is not to
be quoted in whole or in part, summarized or otherwise referred
to, nor is it to be filed with or supplied to or relied upon by
any governmental agency or other person without our written
consent. This opinion is as of the date hereof. We disclaim any
responsibility to update or supplement this opinion to reflect
any events or state of facts which may hereafter come to our
attention, or any changes in statutes or regulations or any court
decisions which may hereafter occur.
We hereby consent to the filing of this opinion in
connection with the Registration Statement on Form N-14 (File No.
333-58079).
Very truly yours,
SONNENSCHEIN NATH & ROSENTHAL
7159724.04
Although ownership interests in the Acquiror and Target constitute
shares of beneficial
interests for Massachusetts and Delaware state law purposes, respectively, such
interests are considered stock for Federal income tax purposes.
International Developed PRIVATE
[Sonnenschein Letterhead]
March 31, 1999
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
Attention: President
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Ladies & Gentlemen:
You have requested our opinion as to certain federal income
tax consequences of the transfer of the assets of the PIMCO
International Developed Fund ("Target"), a series of the PIMCO
Funds: Multi-Manager Series, a Massachusetts business trust, to
the Alleghany/Blairlogie International Developed Fund
("Acquiror"), a series of the Alleghany Funds, a Delaware
business trust, in exchange for voting common shares of the
Acquiror ("Acquiror Common Stock") and the assumption by Acquiror
of certain of the liabilities of Target, and the distribution of
the Acquiror Common Stock to the holders of voting common shares
of Target ("Target Common Stock") in liquidation of the Target
("Reorganization"), all pursuant to an Agreement and Plan of
Reorganization (the "Agreement"), in a form substantially the
same as the copy attached hereto.
The opinions expressed herein are based solely upon current
law, including the Internal Revenue Code of 1986, as amended
("Code"), applicable Treasury Regulations promulgated or proposed
thereunder, current positions of the Internal Revenue Service
contained in published Revenue Rulings and Revenue Procedures,
other current administrative positions of the Internal Revenue
Service and existing judicial decisions, all of which are subject
to change or modification at any time.
In connection with the rendering of this opinion, we have
reviewed the Agreement, the most recent financial statements and
related documents and other materials as we deemed relevant to
the rendering of our opinion. In addition, we have relied upon
the representations made by the Acquiror, Target and Blairlogie
Capital Management ("Advisor"), attached hereto, upon the
assumption that all documents we have reviewed are true and
accurate, accurately reflect the originals and have been or will
be property executed, and that the Acquiror and Target's actions
in connection with the Agreement and the transactions
contemplated thereby have been, and will be, conducted in the
manner provided in such document, and upon the assumption that
representation (b) provided by Target is correct.
We are members of the bar of the State of New York and are
not admitted to practice law in any other jurisdiction.
Accordingly, we express no opinion with respect to the laws of
any other jurisdiction other than the federal laws of the United
States of America in respect of the opinions set forth herein.
Based on and subject to the foregoing and provided that all
terms of the transaction occur in accordance with the terms of
the Agreement, it is our opinion that:
(1) Pursuant to Section 851(g) of the Code, for
federal income tax purposes, the Acquiror and Target will be
treated as corporations separate from the other series of the
Alleghany Funds and PIMCO Funds, respectively;
(2) Although there is no controlling authority on
point, the transfer by the Target of all or substantially all of
its assets in exchange for Acquiror shares and the assumption by
Acquiror of certain of Target's liabilities and the subsequent
liquidation of the Target pursuant to the Reorganization should
constitute a reorganization within the meaning of Section 368(a)
of the Code, and Acquiror and Target should each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
The conclusions set forth below assume that the conclusion set
forth in this paragraph (2) is correct;
(3) Pursuant to Sections 357(a), 361(a), (b) and
(c) of the Code, the Target will not recognize any gain or loss
as a result of the Reorganization;
(4) Pursuant to Section 1032(a) of the Code, the
Acquiror will not recognize any gain or loss on the receipt of
the assets of Target in exchange for shares of Acquiror in the
Reorganization;
(5) Pursuant to Sections 362(b) and 1223(2) of the
Code, the Acquiror's adjusted tax basis and holding period in the
assets received from Target in the Reorganization will be the
same as the adjusted tax basis and will include the holding
period, respectively, of such assets in the hands of the Target
immediately prior to the Reorganization;
(6) Pursuant to Section 354(a)(1) of the Code, the
shareholders of Target who exchange shares of Target solely for
shares of Acquiror in the Reorganization will not recognize any
gain or loss;
(7) Pursuant to Section 358(a)(1) of the Code, the
aggregate tax basis of Acquiror's common stock received by each
shareholder of Target in the Reorganization will be the same as
the aggregate tax basis of Target common stock exchanged
therefor;
(8) Pursuant to Section 1223(1) of the Code, each
former Target shareholder's holding period of Acquiror common
stock received in the Reorganization will be determined by
including the period for which Target common stock was held by
such shareholder at the time of the Reorganization provided that
such shareholder held the Target common stock as a capital asset;
and
(9) Pursuant to Section 381(c) of the Code, the
Acquiror will succeed to and take into account the tax attributes
of the Target described and subject to the conditions and
limitations contained therein.
This opinion is solely for your information and is not to
be quoted in whole or in part, summarized or otherwise referred
to, nor is it to be filed with or supplied to or relied upon by
any governmental agency or other person without our written
consent. This opinion is as of the date hereof. We disclaim any
responsibility to update or supplement this opinion to reflect
any events or state of facts which may hereafter come to our
attention, or any changes in statutes or regulations or any court
decisions which may hereafter occur.
We hereby consent to the filing of this opinion in
connection with the Registration Statement on Form N-14 (File No.
333.58079).
Very truly yours,
SONNENSCHEIN NATH & ROSENTHAL
7159760.04
Although ownership interests in the Acquiror and Target constitute
shares of beneficial
interests for Massachusetts and Delaware state law purposes, respectively, such
interests are considered stock for Federal income tax purposes.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> CHICAGO TRUST BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 167,307,152
<INVESTMENTS-AT-VALUE> 217,423,579
<RECEIVABLES> 2,415,105
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,193
<TOTAL-ASSETS> 219,841,877
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 480,335
<TOTAL-LIABILITIES> 480,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155,556,778
<SHARES-COMMON-STOCK> 18,230,280
<SHARES-COMMON-PRIOR> 16,999,608
<ACCUMULATED-NII-CURRENT> 693,191
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,995,146
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,116,427
<NET-ASSETS> 219,361,542
<DIVIDEND-INCOME> 979,385
<INTEREST-INCOME> 6,034,686
<OTHER-INCOME> 0
<EXPENSES-NET> 2,243,547
<NET-INVESTMENT-INCOME> 4,770,524
<REALIZED-GAINS-CURRENT> 13,005,184
<APPREC-INCREASE-CURRENT> 16,518,248
<NET-CHANGE-FROM-OPS> 34,293,956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,710,584
<DISTRIBUTIONS-OF-GAINS> 11,401,639
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,882,800
<NUMBER-OF-SHARES-REDEEMED> 16,106,383
<SHARES-REINVESTED> 39,802,711
<NET-CHANGE-IN-ASSETS> 31,368,205
<ACCUMULATED-NII-PRIOR> 624,636
<ACCUMULATED-GAINS-PRIOR> 11,400,216
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,453,465
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,243,547
<AVERAGE-NET-ASSETS> 207,637,833
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 1.65
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.68
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.03
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> CHICAGO TRUST BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 154,069,071
<INVESTMENTS-AT-VALUE> 157,530,364
<RECEIVABLES> 3,457,181
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 958
<TOTAL-ASSETS> 160,988,503
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 427,283
<TOTAL-LIABILITIES> 427,283
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155,978,487
<SHARES-COMMON-STOCK> 15,636,666
<SHARES-COMMON-PRIOR> 11,894,302
<ACCUMULATED-NII-CURRENT> 412,661
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 708,779
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,461,293
<NET-ASSETS> 160,561,220
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,088,167
<OTHER-INCOME> 0
<EXPENSES-NET> 1,076,689
<NET-INVESTMENT-INCOME> 8,011,478
<REALIZED-GAINS-CURRENT> 720,844
<APPREC-INCREASE-CURRENT> 629,065
<NET-CHANGE-FROM-OPS> 9,361,387
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,038,190
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75,297,016
<NUMBER-OF-SHARES-REDEEMED> 6,689,047
<SHARES-REINVESTED> 43,280,217
<NET-CHANGE-IN-ASSETS> 40,029,043
<ACCUMULATED-NII-PRIOR> 452,597
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 25,289
<GROSS-ADVISORY-FEES> 740,845
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,294,235
<AVERAGE-NET-ASSETS> 134,699,105
<PER-SHARE-NAV-BEGIN> 10.13
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> CHICAGO TRUST GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 243,389,138
<INVESTMENTS-AT-VALUE> 367,773,631
<RECEIVABLES> 314,492
<ASSETS-OTHER> 33,107
<OTHER-ITEMS-ASSETS> 36,437
<TOTAL-ASSETS> 368,157,667
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 491,225
<TOTAL-LIABILITIES> 491,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 220,003,494
<SHARES-COMMON-STOCK> 15,946,790
<SHARES-COMMON-PRIOR> 13,917,656
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,278,455
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 124,384,493
<NET-ASSETS> 367,666,442
<DIVIDEND-INCOME> 2,460,911
<INTEREST-INCOME> 757,761
<OTHER-INCOME> 0
<EXPENSES-NET> 3,566,119
<NET-INVESTMENT-INCOME> (347,447)
<REALIZED-GAINS-CURRENT> 23,413,427
<APPREC-INCREASE-CURRENT> 47,348,240
<NET-CHANGE-FROM-OPS> 70,414,220
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,963
<DISTRIBUTIONS-OF-GAINS> 19,283,609
<DISTRIBUTIONS-OTHER> 30,652
<NUMBER-OF-SHARES-SOLD> 84,420,291
<NUMBER-OF-SHARES-REDEEMED> 19,000,003
<SHARES-REINVESTED> 61,437,775
<NET-CHANGE-IN-ASSETS> 93,058,535
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19,148,637
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,312,832
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,566,119
<AVERAGE-NET-ASSETS> 330,404,631
<PER-SHARE-NAV-BEGIN> 19.73
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 4.73
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 1.37
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.06
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> CHICAGO TRUST MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 281,891,950
<INVESTMENTS-AT-VALUE> 281,891,950
<RECEIVABLES> 711,725
<ASSETS-OTHER> 1,015
<OTHER-ITEMS-ASSETS> 1,331
<TOTAL-ASSETS> 282,606,021
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,216,727
<TOTAL-LIABILITIES> 1,216,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 281,389,294
<SHARES-COMMON-STOCK> 281,389,294
<SHARES-COMMON-PRIOR> 238,551,474
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 281,389,294
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,477,508
<OTHER-INCOME> 0
<EXPENSES-NET> 1,317,083
<NET-INVESTMENT-INCOME> 13,160,425
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,160,425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,160,425
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 720,702,583
<NUMBER-OF-SHARES-REDEEMED> 816,231
<SHARES-REINVESTED> 678,680,994
<NET-CHANGE-IN-ASSETS> 42,837,820
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,026,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,341,575
<AVERAGE-NET-ASSETS> 256,670,879
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> CHICAGO TRUST MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 12,869,117
<INVESTMENTS-AT-VALUE> 13,364,268
<RECEIVABLES> 211,842
<ASSETS-OTHER> 504
<OTHER-ITEMS-ASSETS> 614
<TOTAL-ASSETS> 13,577,228
<PAYABLE-FOR-SECURITIES> 298,499
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,821
<TOTAL-LIABILITIES> 367,320
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,722,879
<SHARES-COMMON-STOCK> 1,274,844
<SHARES-COMMON-PRIOR> 1,215,334
<ACCUMULATED-NII-CURRENT> 26,603
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 34,725
<ACCUM-APPREC-OR-DEPREC> 495,151
<NET-ASSETS> 13,209,908
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 606,663
<OTHER-INCOME> 0
<EXPENSES-NET> 46,073
<NET-INVESTMENT-INCOME> 560,590
<REALIZED-GAINS-CURRENT> 56,385
<APPREC-INCREASE-CURRENT> 175,662
<NET-CHANGE-FROM-OPS> 792,637
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 561,443
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,749,139
<NUMBER-OF-SHARES-REDEEMED> 42,390
<SHARES-REINVESTED> 10,192,023
<NET-CHANGE-IN-ASSETS> 830,700
<ACCUMULATED-NII-PRIOR> 27,456
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 91,110
<GROSS-ADVISORY-FEES> 78,556
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 184,762
<AVERAGE-NET-ASSETS> 13,092,630
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.17
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> CHICAGO TRUST TALON FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 21,463,727
<INVESTMENTS-AT-VALUE> 22,731,458
<RECEIVABLES> 55,636
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,030
<TOTAL-ASSETS> 22,790,124
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,432
<TOTAL-LIABILITIES> 62,432
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,765,149
<SHARES-COMMON-STOCK> 1,726,652
<SHARES-COMMON-PRIOR> 1,617,134
<ACCUMULATED-NII-CURRENT> 3,805
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 308,993
<ACCUM-APPREC-OR-DEPREC> 1,267,731
<NET-ASSETS> 22,727,692
<DIVIDEND-INCOME> 178,745
<INTEREST-INCOME> 316,698
<OTHER-INCOME> 0
<EXPENSES-NET> 366,037
<NET-INVESTMENT-INCOME> 129,406
<REALIZED-GAINS-CURRENT> (152,152)
<APPREC-INCREASE-CURRENT> (2,860,775)
<NET-CHANGE-FROM-OPS> (2,883,521)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 163,813
<DISTRIBUTIONS-OF-GAINS> 4,653,292
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,908,329
<NUMBER-OF-SHARES-REDEEMED> 4,757,368
<SHARES-REINVESTED> 9,696,962
<NET-CHANGE-IN-ASSETS> (5,731,891)
<ACCUMULATED-NII-PRIOR> 37,253
<ACCUMULATED-GAINS-PRIOR> 4,497,410
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 224,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 409,743
<AVERAGE-NET-ASSETS> 28,116,579
<PER-SHARE-NAV-BEGIN> 17.60
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (1.59)
<PER-SHARE-DIVIDEND> 0.09
<PER-SHARE-DISTRIBUTIONS> 2.83
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.16
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> MONTAG & CALDWELL BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 139,967,661
<INVESTMENTS-AT-VALUE> 157,485,654
<RECEIVABLES> 1,249,059
<ASSETS-OTHER> 531
<OTHER-ITEMS-ASSETS> 3,597
<TOTAL-ASSETS> 158,738,841
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 340,493
<TOTAL-LIABILITIES> 340,493
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,995,888
<SHARES-COMMON-STOCK> 8,997,568
<SHARES-COMMON-PRIOR> 5,167,798
<ACCUMULATED-NII-CURRENT> 351,445
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,533,022
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,517,993
<NET-ASSETS> 158,398,348
<DIVIDEND-INCOME> 578,855
<INTEREST-INCOME> 3,119,261
<OTHER-INCOME> 0
<EXPENSES-NET> 1,530,556
<NET-INVESTMENT-INCOME> 2,167,560
<REALIZED-GAINS-CURRENT> 8,565,876
<APPREC-INCREASE-CURRENT> 5,973,930
<NET-CHANGE-FROM-OPS> 16,707,366
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,001,366
<DISTRIBUTIONS-OF-GAINS> 2,095,351
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101,273,482
<NUMBER-OF-SHARES-REDEEMED> 3,950,066
<SHARES-REINVESTED> 42,154,902
<NET-CHANGE-IN-ASSETS> 75,679,295
<ACCUMULATED-NII-PRIOR> 185,563
<ACCUMULATED-GAINS-PRIOR> 2,062,185
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 971,351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,530,556
<AVERAGE-NET-ASSETS> 129,513,450
<PER-SHARE-NAV-BEGIN> 16.01
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 1.97
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.38
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.60
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 062
<NAME> MONTAG & CALDWELL GROWTH FUND - CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-13-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 1,499,700,738
<INVESTMENTS-AT-VALUE> 1,756,048,973
<RECEIVABLES> 5,483,899
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 39,529
<TOTAL-ASSETS> 1,761,572,401
<PAYABLE-FOR-SECURITIES> 16,556,586
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,237,308
<TOTAL-LIABILITIES> 18,793,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,422,549,988
<SHARES-COMMON-STOCK> 27,711,120
<SHARES-COMMON-PRIOR> 11,816,961
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 63,880,284
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 256,348,235
<NET-ASSETS> 1,742,778,507
<DIVIDEND-INCOME> 9,082,746
<INTEREST-INCOME> 2,602,662
<OTHER-INCOME> 0
<EXPENSES-NET> 13,107,512
<NET-INVESTMENT-INCOME> (1,422,104)
<REALIZED-GAINS-CURRENT> 63,978,484
<APPREC-INCREASE-CURRENT> 109,207,399
<NET-CHANGE-FROM-OPS> 171,763,779
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 2,772,360
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 510,661,778
<NUMBER-OF-SHARES-REDEEMED> 2,260,596
<SHARES-REINVESTED> 104,226,891
<NET-CHANGE-IN-ASSETS> 994,360,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,424,226
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,438,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,107,512
<AVERAGE-NET-ASSETS> 517,408,225
<PER-SHARE-NAV-BEGIN> 22.75
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 4.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.65
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> MONTAG & CALDWELL GROWTH FUND - CLASS N
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 1,499,700,738
<INVESTMENTS-AT-VALUE> 1,756,048,973
<RECEIVABLES> 5,483,899
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 39,529
<TOTAL-ASSETS> 1,761,572,401
<PAYABLE-FOR-SECURITIES> 16,556,586
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,237,308
<TOTAL-LIABILITIES> 18,793,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,422,549,988
<SHARES-COMMON-STOCK> 37,909,987
<SHARES-COMMON-PRIOR> 21,142,111
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 63,880,284
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 256,348,235
<NET-ASSETS> 1,742,778,507
<DIVIDEND-INCOME> 9,082,746
<INTEREST-INCOME> 2,602,662
<OTHER-INCOME> 0
<EXPENSES-NET> 13,107,512
<NET-INVESTMENT-INCOME> (1,422,104)
<REALIZED-GAINS-CURRENT> 63,978,484
<APPREC-INCREASE-CURRENT> 109,207,399
<NET-CHANGE-FROM-OPS> 171,763,779
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,750,066
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 735,037,158
<NUMBER-OF-SHARES-REDEEMED> 4,476,035
<SHARES-REINVESTED> 318,089,688
<NET-CHANGE-IN-ASSETS> 994,360,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,424,226
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,438,160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,107,512
<AVERAGE-NET-ASSETS> 776,857,328
<PER-SHARE-NAV-BEGIN> 22.68
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 4.07
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.49
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
