As filed with the Securities and Exchange Commission on June 28, 1999
Securities Act File No. 33-68666
Investment Company Act File No. 811-8004
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 17 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 X
ALLEGHANY FUNDS
(Exact Name of Registrant as Specified in Charter)
171 North Clark Street,
Chicago, Illinois 60610
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (312) 223-2139
Name and Address of Agent for Service: Copies to:
Kenneth C. Anderson, President Arthur Simon, Esq.
Alleghany Funds Sonnenschein Nath & Rosenthal
171 North Clark Street 8000 Sears Tower
Chicago, Illinois 60610 Chicago, Illinois 60606-6404
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b);or
X on July 12, 1999 pursuant to paragraph (b);or
60 days after filing pursuant to paragraph (a)(1);or on ________
pursuant to paragraph (a)(1);or 75 days after filing pursuant to
paragraph (a)(2);or on ________ pursuant to paragraph (a)(2) of
Rule 485
<PAGE>
ALLEGHANY FUNDS
Montag & Caldwell Growth Fund
Alleghany/Chicago Trust Growth & Income Fund
Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Balanced Fund
Prospectus
Class I Shares
July 12, 1999
The Securities and Exchange Commission has not approved or
disapproved these or any mutual fund's shares or
determined if this prospectus is accurate or complete.
Any representation to the contrary is a crime.
<PAGE>
Table of Contents
[SIDEBAR: Thank you for your interest in Alleghany Funds. Alleghany Funds
offer investors a variety of investment opportunities. This prospectus pertains
only to Class I shares of Montag & Caldwell Growth Fund, Alleghany/Chicago Trust
Growth & Income Fund, Montag & Caldwell Balanced Fund and Alleghany/Chicago
Trust Balanced Fund, members of the Alleghany Funds Family.]
[SIDEBAR: For a list of terms with definitions that you may find helpful as
you read this prospectus, please refer to the "Investment Terms" section.]
Page
Alleghany Fund Categories 3
Fund Summaries
Investment Objectives, Principal Investment Strategies and Risks 4
Expense Information 11
Investment Terms 12
More About Alleghany Funds
Other Investment Strategies 14
Additional Risks 15
Management of the Funds 16
Shareowner Information
Opening an Account - Buying Shares 17
Exchanging Shares 18
Selling/Redeeming Shares 19
Transaction Policies 21
Account Policies and Dividends 22
Alleghany Funds Web Site 23
Portfolio Transactions and Brokerage Commissions 23
Dividends, Distributions and Taxes 24
Financial Highlights 25
General Information
Back Cover
Mutual fund shares are not bank deposits and are not guaranteed, endorsed or
insured by any financial institution, government entity or the Federal Deposit
Insurance Corporation (FDIC).
<PAGE>
Alleghany Fund Categories
Equity Funds
Equity funds invest principally in stocks and other equity securities. Equity
funds have greater growth potential than many other funds, but they also have
greater risk.
Who may want to invest in Equity Funds Equity funds may be appropriate if you :
o have a long-term investment goal (five years or more)
o can accept higher short-term risk in return for higher long-term return
potential o want to diversify your investments
Equity funds may not be appropriate if you want:
o a stable share price
o a short-term investment
o regular income
Balanced Funds
Balanced funds invest in a mix of stocks and fixed income securities and combine
the benefits of both types of securities - capital appreciation or growth from
stocks and income from fixed income securities. Like most other mutual funds,
the share price of a balanced fund moves up and down in response to changes in
the stock market and interest rates.
Who may want to invest in Balanced Funds
Balanced funds may be appropriate if you want:
o capital appreciation and current income
o balanced diversified investment
No single fund is intended to be a complete investment program, but individual
funds can be an important part of a balanced and diversified investment program.
Mutual funds have the following general risks:
o the value of fund shares will rise and fall
o you could lose money
o you cannot be certain that a fund will achieve its investment objective
<PAGE>
Montag & Caldwell Growth Fund
Investment Objective
The Fund seeks long-term capital appreciation and, secondarily, current
income, by investing primarily in common stocks and convertible securities.
Principal Investment Strategies
The Fund invests primarily in common stocks and convertible securities. The
portfolio manager uses a bottom-up approach to stock selection and seeks high
quality, well-established large-cap companies that have:
a strong history of earnings growth
are attractively priced, relative to the company's potential for above
average long-term earnings and revenue growth strong balance sheets a
sustainable competitive advantage the potential to become (or currently
are) industry leaders the potential to outperform during market downturns
Principal Risks of Investing in this Fund
Market risk: A fund's share price moves up and down over the short term in
response to stock market conditions, changes in the economy and a particular
company's stock price change. An individual stock may decline in value even when
stocks in general are rising. An investor could lose money during market
downturns.
Growth stock risk: As a group, growth stocks tend to go through periodic cycles
of outperforming and underperforming the general stock market. During periods of
growth stock underperformance, a fund's performance may suffer.
Manager risk: If a fund manager makes errors in security selection, a fund may
underperform the stock market or its peers. Also, a fund could fail to meet its
investment objective.
Liquidity risk: When there is no willing buyer and investments cannot be readily
sold at the desired time or price, a fund may have to accept a low price or may
not be able to sell the security at all. An inability to sell securities can
adversely affect a fund's value or prevent a fund from being able to take
advantage of other investment opportunities.
<PAGE>
Fund Performance
The bar chart shows how the Fund's performance has varied from year to year over
the periods shown. This information may help illustrate the risks of investing
in the Fund. As with all mutual funds, past performance does not guarantee
future performance.
Calendar Year Total Return
- --------------------- ------------------
1997 1998
- --------------------- ------------------
- --------------------- ------------------
32.17% 32.26%
- --------------------- ------------------
Best quarter: 12/98 27.08% Worst quarter: 9/98 (14.24)%
The following table indicates how the Fund's average annual returns for
different calendar periods compare to the returns of the S&P 500 and the Lipper
Growth Fund Index.
Average Annual Total Return
(For the periods ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------ ---------------------------- -----------------------------
1 year Since Inception1
- ------------------------------------------------ ---------------------------- -----------------------------
- ------------------------------------------------ ---------------------------- -----------------------------
Montag & Caldwell Growth Fund 32.3% 32.3%
- ------------------------------------------------ ---------------------------- -----------------------------
- ------------------------------------------------ ---------------------------- -----------------------------
S&P 500 28.6% 29.6%
- ------------------------------------------------ ---------------------------- -----------------------------
- ------------------------------------------------ ---------------------------- -----------------------------
Lipper Growth Fund Index 25.7% 25.4%2
- ------------------------------------------------ ---------------------------- -----------------------------
</TABLE>
1 Fund's Inception: June 28, 1996
2 As of closest available date (6/27/96)
<PAGE>
Alleghany/Chicago Trust Growth & Income Fund
Investment Objective
The Fund seeks long-term total return through a combination of capital
appreciation and current income by investing primarily in a combination of
stocks and bonds.
Principal Investment Strategies
The portfolio manager uses a bottom-up approach and invests in a combination of
securities that offer potential for growth and/or income, including primarily
large-cap dividend and non-dividend paying common stocks, preferred stocks and
convertible securities. Companies for possible selection must pass an initial
capitalization screen. The portfolio manager then identifies stocks of companies
with the following characteristics compared to S&P 500 averages:
higher sales and operating earnings growth more stable earnings
growth rates lower debt-to-capital ratio higher return on equity
market capitalization over $1 billion
The portfolio manager also considers the quality of company management and the
strength of the company's position among its competitors. In addition, the
portfolio manager assesses the long-term economic outlook and the risk/return of
securities in allocating investments among industry sectors.
Principal Risks of Investing in this Fund
Market risk: A fund's share price moves up and down over the short term in
response to stock market conditions, changes in the economy and a particular
company's stock price change. An individual stock may decline in value even when
stocks in general are rising. An investor could lose money during market
downturns.
Growth stock risk: As a group, growth stocks tend to go through periodic cycles
of outperforming and underperforming the general stock market. During periods of
growth stock underperformance, a fund's performance may suffer.
Manager risk: If a fund manager makes errors in security selection, a fund may
underperform the stock market or its peers. Also, a fund could fail to meet its
investment objective.
Liquidity risk: When there is no willing buyer and investments cannot be readily
sold at the desired time or price, a fund may have to accept a low price or may
not be able to sell the security at all. An inability to sell securities can
adversely affect a fund's value or prevent a fund from being able to take
advantage of other investment opportunities.
Fund Performance
Class I of the Fund will commence operations on or about July 1, 1999 and,
therefore, does not have any performance history. Performance information will
be included in the Fund's next annual or semi-annual report.
<PAGE>
Montag & Caldwell Balanced Fund
Investment Objective
The Fund seeks long-term total return.
Principal Investment Strategies
Generally, between 50% and 70% of the Fund's total assets will be invested in
equity securities, and at least 25% will be invested in fixed income securities
to provide a stable flow of income. The portfolio allocation will vary based
upon the portfolio manager's assessment of the return potential of each asset
class. For equity investments, the portfolio manager uses a bottom-up approach
to stock selection, focusing on high quality, well-established companies that
have:
a strong history of earnings growth
attractive prices relative to the company's potential for above average
long-term earnings and revenue growth strong balance sheets a sustainable
competitive advantage the potential to become (or currently are) industry
leaders the potential to outperform the market during downturns
When selecting fixed income securities, the portfolio manager strives to
maximize total return and minimize risk primarily by adjusting the portfolio
duration and sector weightings. The portfolio manager will seek to maintain the
Fund's weighted average duration within 20% of the duration of the Lehman
Brothers Government Corporate Index. Emphasis is also placed on diversification
and credit analysis.
The Fund will invest only in fixed income securities with an "A" or better
rating. Investments will include:
U.S. Government securities
corporate bonds
mortgage/asset-backed securities
money market securities and repurchase agreements
Principal Risks of Investing in this Fund
Market risk: A fund's share price moves up and down over the short term in
response to stock market conditions, changes in the economy and a particular
company's stock price change. An individual stock may decline in value even when
stocks in general are rising. An investor could lose money during market
downturns.
Growth stock risk: As a group, growth stocks tend to go through periodic cycles
of outperforming and underperforming the general stock market. During periods of
growth stock underperformance, a fund's performance may suffer.
Manager risk: If a fund manager makes errors in security selection, a fund may
underperform the stock or bond market or its peers. Also, a fund could fail to
meet its investment objective.
Interest rate risk: If interest rates rise, bond prices will fall. The longer
the maturity of a bond, the more sensitive a bond's price will be to changes in
interest rates. In other words, a long-term bond (30-year) will have greater
price sensitivity than a short-term bond (2-year). Short-term and long-term bond
prices and interest rates do not typically move the same amount or for the same
reasons.
Credit risk: Credit risk (also called default risk) is the risk that the issuer
of a security will not be able to make principal and interest payments on a bond
issue.
Issuer risk: The price of a bond is affected by the issuer's credit quality.
Changes in an issuer's financial condition and general economic conditions can
affect an issuer's credit quality. Lower quality bonds are generally more
sensitive to these changes than higher quality bonds.
Liquidity risk: When there is no willing buyer and investments cannot be readily
sold at the desired time or price, a fund may have to accept a low price or may
not be able to sell the security at all. An inability to sell securities can
adversely affect a fund's value or prevent a fund from being able to take
advantage of other investment opportunities.
Fund Performance
Class I of the Fund commenced operations on December 31, 1998 and does not have
a full year of performance history. Performance information will be included in
the Fund's next annual or semi-annual report.
<PAGE>
Alleghany/Chicago Trust Balanced Fund
Investment Objective
The Fund seeks growth of capital with current income.
Principal Investment Strategies
Generally, between 40% and 70% of the Fund's total assets will be invested in
equity securities, and between 30% and 60% will be invested in fixed income
securities. Although the prices of fixed income securities fluctuate, the steady
income flow they produce helps offset the potentially higher price volatility of
the equity securities in the portfolio. The portfolio manager can invest in
either dividend paying or non-dividend paying equity securities that offer
growth or income potential.
Asset allocation varies according to the portfolio manager's assessment of which
asset class offers the greatest potential for growth. The portfolio manager will
diversify the Fund's investments among a variety of industries.
The portfolio manager uses a bottom-up approach and invests in a combination of
securities that offer potential for growth and/or income, including primarily
large-cap dividend and non-dividend paying common stocks, preferred stocks and
convertible securities. Companies for possible selection must pass an initial
capitalization screen. The portfolio manager then identifies stocks of companies
with the following characteristics compared to S&P 500 averages:
higher sales and operating earnings growth more stable earnings
growth rates lower debt-to-capital ratio higher return on equity
market capitalization over $1 billion
The portfolio manager also considers the quality of company management and the
strength of its position among its competitors. In addition, the portfolio
manager assesses the long-term economic outlook and the risk/return of
securities in allocating investments among industry sectors.
The portfolio manager uses a combination of quantitative and fundamental
research, including risk/reward and credit risk analysis, in choosing investment
grade fixed income securities. The dollar-weighted average maturity of the bonds
in the Fund is normally between three and ten years. Investments may include:
U.S. Government securities
corporate bonds
debentures and convertible debentures
zero-coupon bonds
mortgage/asset-backed securities
Yankee bonds
Principal Risks of Investing in this Fund
Market risk: A fund's share price moves up and down over the short term in
response to stock market conditions, changes in the economy and a particular
company's stock price change. An individual stock may decline in value even when
stocks in general are rising. An investor could lose money during market
downturns.
Growth stock risk: As a group, growth stocks tend to go through periodic cycles
of outperforming and underperforming the general stock market. During periods of
growth stock underperformance, a fund's performance may suffer.
Manager risk: If a fund manager makes errors in security selection, a fund may
underperform the stock or bond market or its peers. Also, a fund could fail to
meet its investment objective.
Interest rate risk: If interest rates rise, bond prices will fall. The longer
the maturity of a bond, the more sensitive a bond's price will be to changes in
interest rates. In other words, a long-term bond (30-year) will have greater
price sensitivity than a short-term bond (2-year). Short-term and long-term bond
prices and interest rates do not typically move the same amount or for the same
reasons.
Credit risk: Credit risk (also called default risk) is the risk that the issuer
of a security will not be able to make principal and interest payments on a bond
issue.
Issuer risk: The price of a bond is affected by the issuer's credit quality.
Changes in an issuer's financial condition and general economic conditions can
affect an issuer's credit quality. Lower quality bonds are generally more
sensitive to these changes than higher quality bonds.
Liquidity risk: When there is no willing buyer and investments cannot be readily
sold at the desired time or price, a fund may have to accept a low price or may
not be able to sell the security at all. An inability to sell securities can
adversely affect a fund's value or prevent a fund from being able to take
advantage of other investment opportunities.
Fund Performance
Class I of the Fund will commence operations on or about July 1, 1999 and,
therefore, does not have any performance history. Performance information will
be included in the Fund's next annual or semi-annual report.
<PAGE>
Expense Information
As an investor in the Funds, you pay certain indirect fees and expenses, which
are described in the table below.
Shareowner Fees
As a benefit of investing with Alleghany Funds, you do not incur any sales
loads, redemption fees or exchange fees.
Annual Fund Operating Expenses
Operating expenses are the normal costs of operating any mutual fund. These
expenses are not charged directly to investors. They are paid from a fund's
assets and are expressed as an expense ratio, which is a percentage of average
net assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
---------------------------------------- ------------------ --------------- -------------------
Fund (1) Management Fees Other Expenses Expense
Ratio
---------------------------------------- ------------------ --------------- -------------------
---------------------------------------- ------------------ --------------- -------------------
Montag & Caldwell Growth Fund (2) 0.73% 0.12% 0.85%
---------------------------------------- ------------------ --------------- -------------------
---------------------------------------- ------------------ --------------- -------------------
Alleghany/Chicago Trust Growth &
Income Fund (2) 0.70 0.15 0.85
---------------------------------------- ------------------ --------------- -------------------
---------------------------------------- ------------------ --------------- -------------------
Montag & Caldwell Balanced Fund (2) 0.75 0.20 0.95
---------------------------------------- ------------------ --------------- -------------------
---------------------------------------- ------------------ --------------- -------------------
Alleghany/Chicago Trust Balanced
Fund (2) 0.70 0.15 0.85
---------------------------------------- ------------------ --------------- -------------------
</TABLE>
(1) For Montag & Caldwell Growth Fund, the ratios shown above reflect the
expenses incurred during the fiscal year ended October 31, 1998. For
Alleghany/Chicago Trust Growth & Income Fund, Montag & Caldwell Balanced Fund
and Alleghany/Chicago Trust/Balanced Fund, the expenses are based on estimated
amounts for the current fiscal year.
(2) Montag & Caldwell Growth Fund, Alleghany/Chicago Trust Growth & Income Fund,
Montag & Caldwell Balanced Fund and Alleghany/Chicago Trust Balanced Fund offer
two classes of shares that invest in the same portfolio of securities.
Shareowners of Class I are not subject to a 12b-1 distribution plan; therefore,
expenses and performance figures will vary between the classes. The information
set forth in the table above and the example below relate only to Class I
shares, which are offered in this prospectus.
Class N shares are offered in a separate prospectus.
Example
This hypothetical example shows the operating expenses you would incur as a
shareowner if you invested $10,000 in a Fund over the time periods shown,
assuming you reinvested all dividends and distributions and that the average
annual return was 5%. The example assumes that operating expenses remained the
same and includes only contractual fee waivers and reimbursements. The example
is for comparison purposes only and does not represent a Fund's actual or future
expenses and returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fund 1 year 3 years 5 years 10 years
------------------------------------------------------ ------------- ---------------- ------------- -------------
Montag & Caldwell Growth Fund $ 9 $27 $47 $105
------------------------------------------------------ ------------- ---------------- ------------- -------------
------------------------------------------------------ ------------- ---------------- ------------- -------------
Alleghany/Chicago Trust Growth & Income Fund $ 9 $27 n/a n/a
------------------------------------------------------ ------------- ---------------- ------------- -------------
------------------------------------------------------ ------------- ---------------- ------------- -------------
Montag & Caldwell Balanced Fund $10 $30 n/a n/a
------------------------------------------------------ ------------- ---------------- ------------- -------------
------------------------------------------------------ ------------- ---------------- ------------- -------------
Alleghany/Chicago Trust Balanced Fund $ 9 $27 n/a n/a
------------------------------------------------------ ------------- ---------------- ------------- -------------
</TABLE>
Investment Terms
The following is a list of terms with definitions that you may find helpful as
you read this prospectus.
Asset-backed securities. Securities that represent a participation in, or are
secured by and payable from, payments generated by credit cards, motor vehicle
or trade receivables and the like.
Bottom-up investing. An investing approach in which securities are researched
and chosen individually with less consideration given to economic or market
cycles.
Corporate bonds. Fixed income securities issued by corporations.
Debentures. Bonds or promissory notes that are secured by the general
credit of the issuer, but not secured by specific assets of the issuer.
Diversification. The practice of investing in a broad range of securities
to reduce risk.
Duration. A calculation of the average life of a bond (or portfolio of bonds)
that is a useful measure of a bond's price sensitivity to interest changes. The
higher the duration number, the greater the risk and reward potential of the
bond.
Equity securities. Equity securities include common stocks and preferred stocks
and other securities convertible into common stock.
Expense ratio. A fund's cost of doing business, expressed as a percentage of its
assets and disclosed in a prospectus.
Fixed income securities. Bonds and other securities that are used by issuers to
borrow money from investors. Typically, the issuer pays the investor a fixed,
variable or floating rate of interest and must repay the borrowed amount at a
specified time in the future (maturity).
Investment objective. The goal that an investor and a mutual fund seek together.
Examples include current income, long-term capital growth, etc.
Issuer. The company, municipality or government agency that issues a
security, such as a stock, bond or money market security.
Large-cap stocks. Stocks that are issued by large companies. Alleghany Funds
defines a large-cap company as one with a market capitalization of $5 billion or
more. Typically, large-cap companies are established, well-known companies; some
may be multinationals.
Management fee. The amount that a mutual fund pays to the investment adviser for
its services.
Money market securities. Short-term fixed income securities of federal and local
governments, banks and corporations.
Mortgage-backed securities. Securities backed by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These
securities represent collections (pools) of commercial and residential
mortgages.
Mutual fund. An investment company that stands ready to buy back its shares at
their current net asset value, which is the total market value of the fund's
investment portfolio divided by the number of its shares outstanding. Most
mutual funds continuously offer new shares to investors.
Net asset value. The per share value of a mutual fund, found by subtracting the
fund's liabilities from its assets and dividing the number of shares
outstanding. Mutual funds calculate their NAVs at least once a day.
No-load fund. A mutual fund whose shares are sold without a sales charge
and without a 12b-1 fee of more than 0.25% per year.
Repurchase agreements (repos). Transactions in which a security (usually a
government security) is purchased with a simultaneous commitment to sell it back
to the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date, usually the next day.
Risk/reward trade-off. The principle that an investment must offer higher
potential returns as compensation for the likelihood of increased volatility.
Total return. A measure of a fund's performance that encompasses all elements of
return: dividends, capital gains distributions and changes in net asset value.
Total return is the change in value of an investment over a given period,
assuming reinvestment of dividends and capital gains distributions, expressed as
a percentage of the initial investment.
U.S. Government securities. Fixed income obligations of the U.S. Government
and its various agencies. U.S. Government securities issued by the Treasury
(bills, notes and bonds) are backed by the full faith and credit of the federal
government. Some government securities not issued by the U.S. Treasury also
carry the government's full faith and credit backing on principal or interest
payments. Some securities are backed by the issuer's right to borrow from the
U.S. Treasury and some are backed only by the credit of the issuing
organization. All government securities are considered highly creditworthy.
Yield. A measure of net income (dividends and interest) earned by the securities
in the fund's portfolio, less the fund's expenses, during a specified period. A
fund's yield is expressed as a percentage of the maximum offering price per
share on a specified date.
<PAGE>
More About Alleghany Funds
Other Investment Strategies
In addition to the primary investment strategies described in our Fund
summaries, there may be times when the Funds use secondary investment strategies
in seeking to achieve investment objectives. These strategies may involve
additional risks and apply to each Fund unless otherwise indicated.
ADRs/EDRs
The Funds may invest in foreign securities in the form of depositary receipts.
Depositary receipts represent ownership of securities in foreign companies and
are held in banks and trust companies. They can include American Depositary
Receipts (ADRs), which are traded on U.S. exchanges and are U.S.
dollar-denominated, and European Depositary Receipts (EDRs), which are traded on
European exchanges and may not be denominated in the same currency as the
security they represent. The funds have no intention of investing in unsponsored
ADRs or EDRs.
Collateralized Mortgage Obligations (CMOs)
CMOs are fixed income securities secured by mortgage loans and other
mortgage-backed securities and are generally considered to be derivatives. CMOs
carry general fixed income securities risks and risks associated with
mortgage-backed securities.
Convertible Securities
Convertible securities are fixed income or equity securities that pay interest
or dividends and that may be exchanged on certain terms into common stock of the
same corporation.
Derivatives
Up to 20% of a Fund's assets can be invested in derivatives. Derivatives are
used to enhance investment return or limit risk in a portfolio and have a return
tied to a formula based upon an interest rate, index, price of a security, or
other measurement.
Derivatives include options, futures, forward contracts and related products.
Hedging involves using derivatives to hedge against an opposite position that a
fund holds. Any loss generated by the derivative should be offset by gains in
the hedged investment. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. Using derivatives for purposes other than hedging is
speculative.
Fixed Income Securities
Montag & Caldwell Growth Fund and Alleghany/Chicago Trust Growth & Income Fund
may invest in fixed income securities to offset the volatility of the stock
market. Fixed income securities provide a stable flow of income for a fund.
Preferred Stocks
Preferred stocks are stocks that pay dividends at a specified rate. Dividends
are paid on preferred stocks before they are paid on common stocks. In addition,
preferred stockholders have priority over common stockholders as to the proceeds
from the liquidation of a company's assets.
Rule 144A Securities
Rule 144A securities are restricted securities that can be sold to qualified
institutional buyers under the 1933 Act. Investing in Rule 144A securities may
increase the illiquidity of a Fund's investments in the event that an adequate
trading market does not exist for these securities.
<PAGE>
Additional Risks
Defensive Strategy Risk
There may be times when a fund takes temporary positions that may not achieve
its investment objective or follow its principal investment strategies for
defensive reasons. This includes investing all or a portion of its total assets
in cash or cash equivalents, such as money market securities and repurchase
agreements. Although a fund would do this in seeking to avoid losses, it could
reduce the benefit from any market upswings.
Year 2000
Like other business organizations and individuals around the world, each of the
Funds could be adversely affected if the computer systems used by its Advisers
and other service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." While Year 2000 problems could have a negative effect on the
Funds, Alleghany Funds is working to avoid such problems and to obtain assurance
from its service providers that they are taking similar steps. The Year 2000
Problem could also affect the companies in which the Funds invest.
Risk Summary
The following chart compares the risks of investing in each of the Funds.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Montag & Caldwell Alleghany/Chicago Trust Montag & Caldwell Alleghany/Chicago Trust
Growth Fund Growth & Income Fund Balanced Fund Balanced Fund
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Credit x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Growth Stock x x x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Interest Rate x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Issuer x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Liquidity x x x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Manager x x x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
Market x x x x
- ------------------ ----------------------- ----------------------------- ----------------------- -----------------------------
</TABLE>
More information about other investment strategies and additional risks
associated with investing in Alleghany Funds can also be found in the Statement
of Additional Information (SAI).
<PAGE>
Management of the Funds
The Advisers
Each Fund has an Adviser that provides management services. The Adviser is paid
an annual management fee by the Fund for its services. The accompanying charts
highlight each Fund and its lead portfolio manager(s) and investment experience.
The Chicago Trust Company
The Chicago Trust Company is the Adviser to Alleghany/Chicago Trust Growth &
Income Fund and Alleghany/Chicago Trust Balanced Fund. As of March 31, 1999,
Chicago Trust managed approximately $9.0 billion in assets, consisting primarily
of insurance, pension and profit sharing accounts, as well as accounts of high
net worth individuals and families. Chicago Trust is an indirect, wholly owned
subsidiary of Alleghany Corporation.
For providing investment advisory services, each Fund has agreed to pay Chicago
Trust a monthly fee based on the average daily net assets of each Fund at the
annual rate of 0.70%.
Investment management teams make the investment decisions for each Fund. Jerold
L. Stodden has been portfolio manager of Alleghany/Chicago Trust Growth & Income
Fund since its inception in 1993. Nancy M. Scinto has been a portfolio manager
of Alleghany/Chicago Trust Growth & Income Fund since 1997 and has been an
equity analyst since 1989. Thomas J. Marthaler has been portfolio manager of
Alleghany/Chicago Trust Balanced Fund since 1997. He has been a fixed income
portfolio manager since 1981. David J. Cox has been portfolio manager of
Alleghany/Chicago Trust Balanced Fund since 1997 and has been director of equity
research since 1993.
Montag & Caldwell, Inc. Montag & Caldwell, Inc. is the Adviser to Montag
& Caldwell Growth Fund and Montag & Caldwell Balanced Fund. The firm was founded
in 1945 and is an indirect wholly owned subsidiary of Alleghany Corporation. As
of December 31, 1998, Montag & Caldwell managed approximately $25.7 billion in
assets.
For providing investment advisory services, the Funds have agreed to pay Montag
& Caldwell a monthly fee based on the average daily net assets of each Fund. The
following table shows the breakout of the fees.
Montag & Caldwell Growth Fund
First $800 million 0.80%
Over $800 million 0.60%
Montag & Caldwell Balanced Fund
On all assets 0.75%
Investment management teams at Montag & Caldwell make the investment decisions
for each Fund. Ronald E. Canakaris has managed the investment program of each
Fund since its inception. He has been President and Chief Investment Officer of
Montag & Caldwell since 1984. He has been portfolio manager and Director of
Research at Montag & Caldwell since 1973.
<PAGE>
Shareowner Information
Opening an Account
Read this prospectus carefully. Determine how much you want to invest. The
minimum initial investments for Class I shares of the Funds are as follows:
Montag & Caldwell Growth Fund: $5 million Alleghany/Chicago Trust Growth &
Income Fund: $5 million Montag & Caldwell Balanced Fund: $1 million
Alleghany/Chicago Trust Balanced Fund: $5 million Balances can be aggregated to
meet the minimum investment requirements for the accounts of : clients of a
financial consultant immediate family members (i.e., a person's spouse, parents,
children, siblings and in-laws) a corporation or other legal entity Initial
minimum investment requirements may be waived: for Trustees and employees of
Chicago Trust and Montag & Caldwell and their affiliated companies with a
"letter of intent" - this letter would explain how the investor/financial
consultant would purchase shares over a Board-approved specified period of time
to meet the minimum investment requirement Complete the account application and
carefully follow the instructions. If you have any questions, please call
800-992-8151. Remember to complete the "Purchase, Exchange and Redemption
Authorization" section of the account application to establish your account
privileges. You can avoid the delay and inconvenience of having to request these
in writing at a later date. Make your initial investment using the following
table as a guideline.
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Buying Shares
--------------------------------------------------------------------------------------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
To open an account To add to an account (no minimum for
subsequent investments)
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
By Mail o Complete and sign the o Return the investment slip from a
application. Make your check statement with your check in the
payable to Alleghany Funds and mail envelope provided and mail to:
to: Alleghany Funds
Alleghany Funds P.O. Box 5163
P.O. Box 5164 Westborough, MA 01581
Westborough, MA 01581
o We accept checks, bank drafts and
o We accept checks, bank drafts and money orders for purchases. Checks
money orders for purchases. Checks must be drawn on U.S. banks.
must be drawn on U.S. banks to avoid
any fees or delays in processing o We do not accept third party
your check. checks, which are checks made
payable to someone other than the
o We do not accept third party Funds.
checks, which are checks made
payable to someone other than the
Funds.
-------------------------------------- -------------------------------------- --------------------------------------
<PAGE>
-------------------------------------- -------------------------------------- --------------------------------------
By Wire or ACH o Obtain a fund
number and account o Instruct
your bank (who may charge
number by calling Alleghany
Funds at a fee) to wire or ACH
the amount of 800-992-8151.
your additional investment.
o Instruct your bank (who may charge o Give the following wire
a fee) to wire the amount of your information to your bank:
investment. Boston Safe Deposit & Trust
ABA #01-10-01234
o Give the following wire or ACH For: Alleghany Funds
information to your bank: A/C 140414
Boston Safe Deposit & Trust FBO "Alleghany Fund Number"
ABA #01-10-01234 "Your Account Number"
For: Alleghany Funds
A/C 140414
FBO "Alleghany Fund Number"
"Your Account Number"
o Return your completed application
to:
Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
-------------------------------------- -------------------------------------- --------------------------------------
By Phone See "By Wire or ACH" o When you are ready to add to your
account, call Alleghany Funds and
tell the representative the fund
name, account number, the name(s) in
which the account is registered and
the amount of your investment.
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
By Internet Not applicable o Verify that your bank or credit
union is a member of the Automated
Clearing House (ACH) system.
o Complete the "Purchase, Exchange
and Redemption Authorization"
section of your account application.
o Obtain a Personal Identification
Number (PIN) from Alleghany
Funds for use on Alleghany Funds'
Web site if you have not already
done so. To obtain a PIN, please
call 800-992-8151.
o When you are ready to add to your
account, access your account through
the Alleghany Funds' Web site and
enter your purchase instructions in
the highly secure area for
shareowners only.
-------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
Exchanging Shares
After you have opened an account with us, you can exchange your shares within
Alleghany Funds to meet your changing investment goals or other needs. This
privilege is not designed for frequent trading and may be difficult to implement
in times of drastic market changes.
You can exchange shares from one Alleghany Fund to another. All exchanges to
open new fund accounts must meet the minimum initial investment requirements.
Exchanges may be made by mail or by phone at 800-922-8151 if you chose this
option when you opened your account. For tax purposes, each exchange is treated
as a sale and a new purchase.
The Funds reserve the right to limit, impose charges upon, terminate or
otherwise modify the exchange privilege by sending written notice to
shareowners.
<PAGE>
Selling/Redeeming Shares
Once you have opened an account with us, you can sell your shares to meet your
changing investment goals or other needs. The following table shows guidelines
for selling shares.
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Selling Shares
-------------------------------------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
Designed for... To sell some or all of your shares...
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Mail o Accounts of any type o Write and sign a letter of
instruction indicating the fund
o
Sales
or
redemptions
of
any
size
name,
fund
number,
your
account
number,
the
name(s)
in
which
the
account
is
registered
and
the
dollar
value
or
number
of
shares
you
wish
to
sell.
o Include all signatures and any
additional documents that may be
required. (See "Selling Shares in
Writing.")
o Mail to:
Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
o
A
check
will
be
mailed
to
the
name(s)
and
address
in
which
the
account
is
registered.
If
you
would
like
the
check
mailed
to
a
different
address,
you
must
write
a
letter
of
instruction
and
have
it
signature
guaranteed.
Usually,
your
local
bank
can
provide
this
service
for
you.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Phone o Non-retirement accounts o For automated service 24 hours a
day using your touch-tone phone,
o Sales of up to $50,000 call 800-992-8151
o
To
place
your
request
with
a
Shareowner
Service
Representative,
call
between
9am
and
7pm
ET,
Monday
-
Friday.
o
The
Funds
reserve
the
right
to
refuse
any
telephone
sales
request
and
may
modify
the
procedures
at
any
time.
The
Funds
make
reasonable
attempts
to
verify
that
telephone
instructions
are
genuine,
but
you
are
responsible
for
any
loss
that
you
may
bear
from
telephone
requests.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Wire or ACH o Requests by letter for sales of o Complete the "Telephone
any amount (accounts of any type) Redemption" privilege section of
your account application.
o Requests by phone for sales up to
$50,000 (accounts with telephone o ACH sales proceeds will be sent on
redemption privileges) the next business day after the sale
(you should allow 3 days to be
received by your bank). There is no
fee to sell shares by ACH.
o
Wire
sales
proceeds
will
be
wired
on
the
next
business
day
after
the
sale
(see
"Transaction
Policies"
for
effective
sale
day).
A
$20
fee
will
be
deducted
from
your
account.
o
The
Funds
reserve
the
right
to
refuse
any
telephone
sales
request
and
may
modify
the
procedures
at
any
time.
The
Funds
make
reasonable
attempts
to
verify
that
telephone
instructions
are
genuine,
but
you
are
responsible
for
any
loss
that
you
may
bear
from
telephone
requests.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Internet o Non-retirement accounts o Complete the "Purchase, Exchange
and Redemption Authorization"
section of your account application.
o Obtain a Personal Identification
Number (PIN) from Alleghany Funds
for use on Alleghany Funds' Web site
if you have not already done so.
o When you are ready to redeem a
portion of your account, access your
account through the Alleghany Funds'
Web site and enter your redemption
instructions in the highly secure
area for shareowners only. A check
for the proceeds will be mailed to
you.
o If you prefer proceeds to be sent
directly to your bank account,
verify that your bank or credit
union is a member of the Automated
Clearing House (ACH) system.
o ACH sales proceeds will be sent
on the next business day (you should
allow 3 days to be received by your
bank). There is no fee to sell
shares by ACH.
-------------------------------------- ------------------------------------- --------------------------------------
</TABLE>
Selling Shares in Writing In certain circumstances, you must make your
request to sell shares in writing. You may need to include a signature guarantee
(which protects you against fraudulent orders) and additional items with your
request, as shown in the table below. We require signature guarantees if: your
address of record has change within the past 30 days you are selling more than
$50,000 worth of shares you are requesting payment other than by a check mailed
to the address of record and payable to the registered owner(s)
<PAGE>
A signature guarantee must be from a member of the Signature Guarantee
Medallion Program (generally, a bank, trust company, savings and loan
association or any broker or securities dealer) for each person whose name
is on the account. We may refuse any other source. A notary public cannot
provide a signature guarantee.
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------- ----------------------------------------------------------------
Seller Requirements for Written Requests
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners of individual, joint, sole o Letter of instruction
proprietorship, UGMA/UTMA, or general partner o On the letter, the signatures and titles of all persons
accounts authorized to sign for the account, exactly as the account is
registered
o Signature guarantee, if applicable (see above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners of corporate or association accounts o Letter of instruction
o Corporate
resolution certified
within the past 12
months o On the
letter, the
signatures and
titles of all
persons authorized
to sign for the
account, exactly as
the account is
registered o
Signature guarantee,
if applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners or trustees of trust accounts o Letter of instruction
o On the letter, the
signature of the
trustee(s) o If the
names of all
trustees are not
registered on the
account, a copy of
the trust document
certified within the
past 12 months o
Signature guarantee,
if applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Joint tenancy shareowners whose co-tenants are o Letter of instruction signed by the surviving tenant
deceased o Copy of death certificate
o Signature guarantee, if applicable (see above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Executors of shareowner
estates o Letter of
instruction signed
by executor o Copy
of order appointing
executor o Signature
guarantee, if
applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Administrators, conservators, guardians and o Call 800-992-8151 for instructions
other sellers or account types not listed above
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
IRA accounts o IRA
distribution request
form completed and
signed. Call
800-922-8151 for a
form.
-------------------------------------------------- ----------------------------------------------------------------
</TABLE>
Redemptions in Kind
The Funds have elected, under Rule 18f-1 of the 1940 Act, to pay sales proceeds
in cash up to $250,000 or 1% of each Fund's total value during any 90-day period
for any one shareowner, whichever is less. Larger redemptions may be detrimental
to existing shareowners. While we intend to pay all sales proceeds in cash, we
reserve the right to make higher payments to you in the form of certain
marketable securities of the Fund. This is called a "redemption in kind." You
may pay certain sales charges related to a redemption in kind, such as brokerage
commissions, when you sell the securities.
Transaction Policies
Calculating Share Price
When you buy, exchange or sell shares, the net asset value is used to price your
purchase or sale. The NAV for each Fund is determined each business day at the
close of regular trading on the New York Stock Exchange, Inc. (NYSE) (typically
4 p.m. Eastern Time (ET)) by dividing a class's net assets by the number of its
shares outstanding. Generally, market quotes are used to price securities. If
market quotations are not available, securities are valued at fair value as
determined by the Board of Trustees.
Execution of Requests
Each Fund is open on each business day that the NYSE is open for trading. The
NYSE is not open on weekends or national holidays. Buy and sell requests are
executed at the NAV next calculated after Alleghany Funds or an authorized
broker or designee receives your mail or telephone request in proper form. Sales
proceeds are normally sent on the next business day, but are always sent within
seven days of receipt of a request in proper form. Brokers and their authorized
designees are responsible for forwarding purchase orders and redemption requests
to the Funds.
Shares of Alleghany Funds can also be purchased through broker-dealers, banks
and trust departments that may charge you a transaction or other fee for their
services. These fees are not charged if you purchase shares directly from
Alleghany Funds. Alleghany Funds reserve the right to reject any purchase order
and to suspend the offering of fund shares. The Funds also reserve the right to
change the initial and additional investment minimums or to waive these minimums
for any investor. Alleghany Funds reserves the right to delay sending you your
sales proceeds for up to 15 days if you purchased shares by check. A minimum $20
charge will be assessed if any check used to purchase shares is returned.
Short-Term Trading
The Funds are not designed for frequent trading and certain purchase or exchange
requests may be difficult to implement in times of drastic market changes. The
Funds reserve the right to refuse any purchase or exchange order that could
adversely affect the Funds or their operations. The Funds also reserve to right
to limit, impose charges upon, terminate or otherwise modify the exchange
privilege by sending written notice to shareowners.
Account Policies and Dividends
Account Statements
In general, you will receive account statements:
after every transaction that affects your account balance (except a
dividend reinvestment) after any change of name or address of the
registered owner(s) in all other circumstances, every quarter
Dividends
The following table shows the Funds' distribution schedule.
Distribution Schedule
Fund Dividends Capital Gains Distribution
Montag & Caldwell Growth Fund
Alleghany/Chicago Trust
Growth & Income Fund o Declared and paid quarterly o Distributed at
Montag & Caldwell Balanced Fund least once a year, in
Alleghany/Chicago Trust Balanced Fund December
Dividend Reinvestments
Many investors have their dividends reinvested in additional shares of the same
fund. If you choose this option, or if you do not indicate a choice, your
dividends will be automatically reinvested on the dividend record date. You can
also choose to have a check for your dividends mailed to you by choosing this
option on your account application.
<PAGE>
Alleghany Funds Web Site
Our Web site is highly secure to prevent unauthorized access to your account
information. To access your account, you must provide verification by providing
your Social Security Number (or Tax Identification Number) and your Personal
Identification Number (PIN). To obtain a PIN, please call 800-992-8151. A
customer service representative will ask a series of questions to verify your
identity and assign a temporary PIN. The temporary PIN will allow you to log on
to the Account Access area of our site. You will be prompted to change the
temporary PIN to a new PIN, which will be known only to you.
By logging into our Web site with your Social Security number and PIN, you can
inquire about your current share balances and their current value, exchange or
transfer assets between your accounts within our fund family, and redeem shares
from your account and have your proceeds mailed to you by check.
If you would like to purchase shares electronically or have redemption proceeds
sent directly to your bank account, you must make arrangements for electronic
funds transfer using Automated Clearing House (ACH) procedures. This requires
that you have certain bank account information on file with us so that funds can
be transferred electronically between your mutual fund and bank accounts.
Portfolio Transactions and Brokerage Commissions
Alleghany Funds attempts to obtain the best possible price and most favorable
execution of transactions in its portfolio securities. Under policies
established by the Board of Trustees, there may be times when Alleghany Funds
may pay one broker-dealer a commission that is greater than the amount that
another broker-dealer may charge for the same transaction. The Adviser generally
determines in good faith if the commission paid was reasonable in relation to
the services provided by the broker-dealer. In selecting and monitoring
broker-dealers and negotiating commissions, Alleghany Funds considers a
broker-dealer's reliability, the quality of its execution services and its
financial condition.
<PAGE>
Dividends, Distributions And Taxes
Certain tax considerations may apply to your investment in Alleghany Funds. If
you have any tax-related questions relating to your own investments, please
consult your tax adviser. Further information regarding the tax consequences of
investing in the Funds is included in the SAI.
The Funds pay dividends and distribute capital gains at different
intervals. A dividend is a payment of net investment income to investors
who hold shares in a mutual fund. A distribution is the payment of income
and/or capital gain from a mutual fund's earnings. All dividends and
distributions are automatically reinvested at NAV unless you choose to
receive them in a cash payment. You can change your payment options at any
time by writing to us.
The tax treatment of dividends and distributions is the same whether you
reinvest the distributions or elect to receive them in cash. You will
receive a statement with the tax status of your dividends and distributions
for the prior year by January 31.
Distributions of any net investment income and of any net realized
short-term capital gain are taxable to you as ordinary income.
Distributions of net capital gain (net long-term capital gain less any net
short-term capital loss) are taxable as ordinary income regardless of how
long you may have held the shares of the Fund.
When you sell or exchange shares in a non-retirement account, it is
considered a current year taxable event for you. Depending on the purchase
price and the sale price of the shares you sell or exchange, you may have a
gain or a loss on the transaction.
You are responsible for any tax liabilities generated by your transactions.
Each Fund is obligated by law to withhold 31% of Fund distributions if you
do not provide complete and correct taxpayer identification information.
<PAGE>
Financial Highlights
These financial highlights tables are intended to help you understand the
Funds' financial performance. The following schedules present financial
highlights for one share of the Funds outstanding throughout the periods
indicated. Except where indicated, this information has been audited by KPMG
LLP, whose report, along with the Funds' financial statements, is included in
the SAI.
Class I of Alleghany/Chicago Trust Growth & Income Fund and Alleghany/Chicago
Trust Balanced Fund had not commenced operations at April 30, 1999.
Montag & Caldwell Growth Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended 10/31/98 Year Ended Period Ended
10/31/97 10/31/96*
--------------------- ------------------ --------------------
Net Asset Value, Beginning of Period $22.75 $17.08 $15.59
------ ------ ------
Income from Investment Operations
Net investment income (loss) 0.01 0.00 0.02
Net realized and unrealized gain on investments 4.10 5.81 1.49
---- ---- ----
Total from investment operations 4.11 5.81 1.51
---- ---- ----
Less Distributions
Distributions from and in excess of net investment 0.00 0.00 (0.02)
income
Distributions from net realized gain on investments (0.21) (0.14) 0.00
------ ------ ----
Total distributions (0.21) (0.14) (0.02)
------ ------ ------
Net increase in net asset value 3.90 5.67 1.49
---- ---- ----
Net Asset Value, End of Period $26.65 $22.75 $17.08
====== ====== ======
Total Return 18.24% 34.26% 9.67%
Ratios/Supplemental Data
Net Assets, End of Period (in 000's) $738,423 $268,861 $52,407
Ratio of expenses to average net assets:
Before reimbursement of expenses by Adviser (1) 0.85% 0.93% 0.98%
After reimbursement of expenses by Adviser (1) 0.85% 0.93% 0.98%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Adviser (1) 0.05% (0.07)% 0.17%
After reimbursement of expenses by Adviser (1) 0.05% (0.06)% 0.17%
Portfolio Turnover (1) 29.81% 18.65% 26.36%
* Montag & Caldwell Growth Fund Class I shares commenced operations on June 28,
1996.
(1) Annualized
</TABLE>
Montag & Caldwell Balanced Fund
<TABLE>
<CAPTION>
<S> <C>
Period
Ended 4/30/99*
(Unaudited)
----------------------------------------------------------
Net Asset Value, Beginning of Period $18.36
------
Income from Investment Operations
Net investment income 0.07
Net realized and unrealized gain on investments 0.65
----
Total from investment operations 0.72
----
Less Distributions
Distributions from and in excess of net investment (0.05)
income
Distributions from net realized gain on investments -----
Total distributions (0.05)
------
Net increase in net asset value 0.67
Net Asset Value, End of Period $19.03
Total Return (1) 3.94%
Ratios/Supplemental Data
Net Assets, End of Period (in 000's) $79,496 Ratio of expenses to average net
assets:
Before reimbursement of expenses by Adviser (2) 0.96%
After reimbursement of expenses by Adviser (2) 0.96%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Adviser (2) 1.49%
After reimbursement of expenses by Adviser (2) 1.49%
Portfolio Turnover (1) 16.28%
* Montag & Caldwell Balanced Fund Class I shares commenced operations on December 31, 1998 and therefore do not have a full
year of performance.
(1) Not annualized
(2) Annualized
</TABLE>
48
(Outside Back Cover)
General Information
If you wish to know more about Alleghany Funds, you will find additional
information in the following documents:
Shareowner Reports
You will receive Semi-Annual Reports dated April 30 and Annual Reports, audited
by independent accountants, dated October 31. These reports contain a discussion
of the market conditions and investment strategies that significantly affected
each Fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI, which is incorporated into this prospectus by reference and dated
July 12, 1999, is available to you without charge. It contains more detailed
information about the Funds.
How to Obtain Reports
Contacting Alleghany Funds
You can get free copies of the reports and SAI, request other
information and discuss your questions about the Funds by contacting:
Address: Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
Phone: 800-992-8151
Web site: www.alleghanyfunds.com
Obtaining Information from the SEC
You can visit the SEC's Web site at http://www.sec.gov to view the SAI
and other information. You can also view and copy information about the
Funds at the SEC's Public Reference Room in Washington, D.C. Also, you
can obtain copies of this information by sending your request and
duplication fee to the SEC's Public Reference Room, Washington D.C.
20549-6009. To find out more about the Public Reference Room, you can
call the SEC at 1-800-SEC-0330.
Investment Company Act File Number: 811-8004
<PAGE>
ALLEGHANY FUNDS
Montag & Caldwell Balanced Fund
Prospectus
Class I Shares
July 12, 1999
The Securities and Exchange Commission has not approved or
disapproved this or any mutual fund's shares or
determined if this prospectus is accurate or complete.
Any representation to the contrary is a crime.
<PAGE>
Table of Contents
[SIDEBAR: Thank you for your interest in Alleghany Funds. Alleghany Funds
offer investors a variety of investment opportunities. This prospectus pertains
only to Class I shares of Montag & Caldwell Balanced Fund, a member of the
Alleghany Funds Family.]
[SIDEBAR: For a list of terms with definitions that you may find helpful as
you read this prospectus, please refer to the "Investment Terms" section.] Page
Fund Summary
Investment Objective, Principal Investment Strategies and Risks 3
Expense Information 5
Investment Terms 6
More About the Fund
Other Investment Strategies 8
Additional Risks 9
Management of the Fund 10
Shareowner Information
Opening an Account - Buying Shares 11
Exchanging Shares 12
Selling/Redeeming Shares 13
Transaction Policies 15
Account Policies and Dividends 16
Alleghany Funds Web Site 16
Portfolio Transactions and Brokerage Commissions 17
Dividends, Distributions and Taxes 17
Financial Highlights 18
General Information Back Cover
Mutual fund shares are not bank deposits and are not guaranteed, endorsed or
insured by any financial institution, government entity or the Federal Deposit
Insurance Corporation (FDIC).
<PAGE>
Investment Objective
The Fund seeks long-term total return.
Principal Investment Strategies
Generally, between 50% and 70% of the Fund's total assets will be invested in
equity securities, and at least 25% will be invested in fixed income securities
to provide a stable flow of income. The portfolio allocation will vary based
upon the portfolio manager's assessment of the return potential of each asset
class. For equity investments, the portfolio manager uses a bottom-up approach
to stock selection, focusing on high quality, well-established companies that
have:
a strong history of earnings growth
attractive prices relative to the company's potential for above average
long-term earnings and revenue growth strong balance sheets a sustainable
competitive advantage the potential to become (or currently are) industry
leaders the potential to outperform the market during downturns
When selecting fixed income securities, the portfolio manager strives to
maximize total return and minimize risk primarily by adjusting the portfolio
duration and sector weightings. The portfolio manager will seek to maintain the
Fund's weighted average duration within 20% of the duration of the Lehman
Brothers Government Corporate Index. Emphasis is also placed on diversification
and credit analysis.
The Fund will invest only in fixed income securities with an "A" or better
rating. Investments will include:
U.S. Government securities
corporate bonds
mortgage/asset-backed securities
money market securities and repurchase agreements
Principal Risks of Investing in the Fund
Market risk: The Fund's share price moves up and down over the short term in
response to stock market conditions, changes in the economy and a particular
company's stock price change. An individual stock may decline in value even when
stocks in general are rising. An investor could lose money during market
downturns.
Growth stock risk: As a group, growth stocks tend to go through periodic cycles
of outperforming and underperforming the general stock market. During periods of
growth stock underperformance, the Fund's performance may suffer.
Manager risk: If the Fund manager makes errors in security selection, the Fund
may underperform the stock or bond market or its peers. Also, the Fund could
fail to meet its investment objective.
Interest rate risk: If interest rates rise, bond prices will fall. The longer
the maturity of a bond, the more sensitive a bond's price will be to changes in
interest rates. In other words, a long-term bond (30-year) will have greater
price sensitivity than a short-term bond (2-year). Short-term and long-term bond
prices and interest rates do not typically move the same amount or for the same
reasons.
Credit risk: Credit risk (also called default risk) is the risk that the issuer
of a security will not be able to make principal and interest payments on a bond
issue.
Issuer risk: The price of a bond is affected by the issuer's credit quality.
Changes in an issuer's financial condition and general economic conditions can
affect an issuer's credit quality. Lower quality bonds are generally more
sensitive to these changes than higher quality bonds.
Liquidity risk: When there is no willing buyer and investments cannot be readily
sold at the desired time or price, the Fund may have to accept a low price or
may not be able to sell the security at all. An inability to sell securities can
adversely affect the Fund's value or prevent a fund from being able to take
advantage of other investment opportunities.
Fund Performance
Class I of the Fund commenced operations on December 31, 1998 and does not have
a full year of performance history. Performance information for the six months
ended April 30, 1999 is included in the Financial Highlights section of this
prospectus.
<PAGE>
Expense Information
As an investor in the Fund, you pay certain indirect fees and expenses, which
are described in the table below.
Shareowner Fees
As a benefit of investing with the Fund, you do not incur any sales loads,
redemption fees or exchange fees.
Annual Fund Operating Expenses*
Operating expenses are the normal costs of operating any mutual fund. These
expenses are not charged directly to investors. They are paid from the Fund's
assets and are expressed as an expense ratio, which is a percentage of average
net assets.
Management Fees.....................................0.75
Other Expenses......................................0.20
Expense Ratio.......................................0.95
(*)The expenses above are based on estimated amounts for the
current fiscal year. The Fund offers two classes of shares
that invest in the same portfolio of securities.
Shareowners of Class I are not subject to a 12b-1
distribution plan; therefore, expenses and performance
figures will vary between the classes. The information set
forth in the table above and the example below relate only
to Class I shares, which are offered in this prospectus.
Class N shares are offered in a separate prospectus.
Example
This hypothetical example shows the operating expenses you would incur as a
shareowner if you invested $10,000 in the Fund over the time periods shown,
assuming you reinvested all dividends and distributions and that the average
annual return was 5%. The example assumes that operating expenses remained the
same and includes only contractual fee waivers and reimbursements. The example
is for comparison purposes only and does not represent the Fund's actual or
future expenses and returns.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
$10 $30 n/a n/a
</TABLE>
Investment Terms
The following is a list of terms with definitions that you may find helpful as
you read this prospectus.
Asset-backed securities. Securities that represent a participation in, or are
secured by and payable from, payments generated by credit cards, motor vehicle
or trade receivables and the like.
Bottom-up investing. An investing approach in which securities are researched
and chosen individually with less consideration given to economic or market
cycles.
Corporate bonds. Fixed income securities issued by corporations.
Diversification. The practice of investing in a broad range of securities
to reduce risk.
Duration. A calculation of the average life of a bond (or portfolio of bonds)
that is a useful measure of a bond's price sensitivity to interest changes. The
higher the duration number, the greater the risk and reward potential of the
bond.
Equity securities. Equity securities include common stocks and preferred stocks
and other securities convertible into common stock.
Expense ratio. A fund's cost of doing business, expressed as a percentage of its
assets and disclosed in a prospectus.
Fixed income securities. Bonds and other securities that are used by issuers to
borrow money from investors. Typically, the issuer pays the investor a fixed,
variable or floating rate of interest and must repay the borrowed amount at a
specified time in the future (maturity).
Investment objective. The goal that an investor and a mutual fund seek together.
Examples include current income, long-term capital growth, etc.
Issuer. The company, municipality or government agency that issues a
security, such as a stock, bond or money market security.
Management fee. The amount that a mutual fund pays to the investment adviser for
its services.
Money market securities. Short-term fixed income securities of federal and local
governments, banks and corporations.
Mortgage-backed securities. Securities backed by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These
securities represent collections (pools) of commercial and residential
mortgages.
Mutual fund. An investment company that stands ready to buy back its shares at
their current net asset value, which is the total market value of the fund's
investment portfolio divided by the number of its shares outstanding. Most
mutual funds continuously offer new shares to investors.
Net asset value. The per share value of a mutual fund, found by subtracting the
fund's liabilities from its assets and dividing the number of shares
outstanding. Mutual funds calculate their NAVs at least once a day.
No-load fund. A mutual fund whose shares are sold without a sales charge
and without a 12b-1 fee of more than 0.25% per year.
Repurchase agreements (repos). Transactions in which a security (usually a
government security) is purchased with a simultaneous commitment to sell it back
to the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date, usually the next day.
Risk/reward trade-off. The principle that an investment must offer higher
potential returns as compensation for the likelihood of increased volatility.
Total return. A measure of a fund's performance that encompasses all elements of
return: dividends, capital gains distributions and changes in net asset value.
Total return is the change in value of an investment over a given period,
assuming reinvestment of dividends and capital gains distributions, expressed as
a percentage of the initial investment.
U.S. Government securities. Fixed income obligations of the U.S. Government
and its various agencies. U.S. Government securities issued by the Treasury
(bills, notes and bonds) are backed by the full faith and credit of the federal
government. Some government securities not issued by the U.S. Treasury also
carry the government's full faith and credit backing on principal or interest
payments. Some securities are backed by the issuer's right to borrow from the
U.S. Treasury and some are backed only by the credit of the issuing
organization. All government securities are considered highly creditworthy.
Yield. A measure of net income (dividends and interest) earned by the securities
in the fund's portfolio, less the fund's expenses, during a specified period. A
fund's yield is expressed as a percentage of the maximum offering price per
share on a specified date.
<PAGE>
More About the Fund
Other Investment Strategies
In addition to the primary investment strategies described in the Fund summary,
there may be times when the Fund uses secondary investment strategies in seeking
to achieve its investment objective. These strategies may involve additional
risks.
ADRs/EDRs
The Fund may invest in foreign securities in the form of depositary receipts.
Depositary receipts represent ownership of securities in foreign companies and
are held in banks and trust companies. They can include American Depositary
Receipts (ADRs), which are traded on U.S. exchanges and are U.S.
dollar-denominated, and European Depositary Receipts (EDRs), which are traded on
European exchanges and may not be denominated in the same currency as the
security they represent. The Fund has no intention of investing in unsponsored
ADRs or EDRs.
Collateralized Mortgage Obligations (CMOs)
CMOs are fixed income securities secured by mortgage loans and other
mortgage-backed securities and are generally considered to be derivatives. CMOs
carry general fixed income securities risks and risks associated with
mortgage-backed securities.
Convertible Securities
Convertible securities are fixed income or equity securities that pay interest
or dividends and that may be exchanged on certain terms into common stock of the
same corporation.
Derivatives
Up to 20% of the Fund's assets can be invested in derivatives. Derivatives are
used to enhance investment return or limit risk in a portfolio and have a return
tied to a formula based upon an interest rate, index, price of a security, or
other measurement.
Derivatives include options, futures, forward contracts and related products.
Hedging involves using derivatives to hedge against an opposite position that
the Fund holds. Any loss generated by the derivative should be offset by gains
in the hedged investment. While hedging can reduce or eliminate losses, it can
also reduce or eliminate gains. Using derivatives for purposes other than
hedging is speculative.
Preferred Stocks
Preferred stocks are stocks that pay dividends at a specified rate. Dividends
are paid on preferred stocks before they are paid on common stocks. In addition,
preferred stockholders have priority over common stockholders as to the proceeds
from the liquidation of a company's assets.
Rule 144A Securities
Rule 144A securities are restricted securities that can be sold to qualified
institutional buyers under the 1933 Act. Investing in Rule 144A securities may
increase the illiquidity of the Fund's investments in the event that an adequate
trading market does not exist for these securities.
<PAGE>
Additional Risks
Defensive Strategy Risk
There may be times when the Fund takes temporary positions that may not achieve
its investment objective or follow its principal investment strategies for
defensive reasons. This includes investing all or a portion of its total assets
in cash or cash equivalents, such as money market securities and repurchase
agreements. Although the Fund would do this in seeking to avoid losses, it could
reduce the benefit from any market upswings.
Year 2000
Like other business organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by its Adviser and
other service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." While Year 2000 problems could have a negative effect on the
Fund, Alleghany Funds is working to avoid such problems and to obtain assurance
from its service providers that they are taking similar steps. The Year 2000
Problem could also affect the companies in which the Fund invests.
More information about other investment strategies and additional risks
associated with investing in the Fund can also be found in the Statement of
Additional Information (SAI).
Risk Summary
The following chart summarizes the risks of investing in the Fund.
- ------------------------- -----------------------------------------------------
Montag & Caldwell Balanced Fund
- ------------------------- ------------------------------------------------------
- ------------------------- -----------------------------------------------------
Credit x
- ------------------------- -----------------------------------------------------
- ------------------------- ------------------------------------------------------
Growth Stock x
- ------------------------- -----------------------------------------------------
- ------------------------- ------------------------------------------------------
Interest Rate x
- ------------------------- ----------------------------------------------------
- ------------------------- -----------------------------------------------------
Issuer x
- ------------------------- -----------------------------------------------------
- ------------------------- -----------------------------------------------------
Liquidity x
- ------------------------- -----------------------------------------------------
- ------------------------- -----------------------------------------------------
Manager x
- ------------------------- ------------------------------------------------------
- ------------------------- -----------------------------------------------------
Market x
- ------------------------- ------------------------------------------------------
More information about other investment strategies and additional risks
associated with investing in the Fund can also be found in the Statement of
Additional Information (SAI).
<PAGE>
Management of the Fund
The Adviser
The Fund has an Adviser that provides management services. The Adviser is paid
an annual management fee by the Fund for its services. The accompanying
information highlights the Fund and its lead portfolio manager and investment
experience.
Montag & Caldwell, Inc. Montag & Caldwell, Inc. is the Adviser to the Fund.
The firm was founded in 1945 and is an indirect wholly owned subsidiary of
Alleghany Corporation. As of December 31, 1998, Montag & Caldwell managed
approximately $25.7 billion in assets.
For providing investment advisory services, the Fund has agreed to pay Montag &
Caldwell a monthly fee of 0.75% based on the average daily net assets of the
Fund.
Investment management teams at Montag & Caldwell make the investment decisions
for the Fund. Ronald E. Canakaris has managed the investment program of the Fund
since its inception. He has been President and Chief Investment Officer of
Montag & Caldwell since 1984. He has been portfolio manager and Director of
Research at Montag & Caldwell since 1973.
<PAGE>
Shareowner Information
Opening an Account
Read this prospectus carefully.
Determine how much you want to invest. The minimum initial investment for
Class I shares of the Fund is $1 million:
Balances can be aggregated to meet the minimum investment requirements for
the accounts of : clients of a financial consultant immediate family members
(i.e., a person's spouse, parents, children, siblings and in-laws) a corporation
or other legal entity Initial minimum investment requirements may be waived: for
Trustees and employees of Montag & Caldwell and their affiliated companies with
a "letter of intent" - this letter would explain how the investor/financial
consultant would purchase shares over a Board-approved specified period of time
to meet the minimum investment requirement Complete the account application and
carefully follow the instructions. If you have any questions, please call
800-992-8151. Remember to complete the "Purchase, Exchange and Redemption
Authorization" section of the account application to establish your account
privileges. You can avoid the delay and inconvenience of having to request these
in writing at a later date. Make your initial investment using the following
table as a guideline.
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Buying Shares
--------------------------------------------------------------------------------------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
To open an account To add to an account (no minimum for
subsequent investments)
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
By Mail o Complete and sign the o Return the investment slip from a
application. Make your check statement with your check in the
payable to Alleghany Funds and mail envelope provided and mail to:
to: Alleghany Funds
Alleghany Funds P.O. Box 5163
P.O. Box 5164 Westborough, MA 01581
Westborough, MA 01581
o We accept checks, bank drafts and
o We accept checks, bank drafts and money orders for purchases. Checks
money orders for purchases. Checks must be drawn on U.S. banks.
must be drawn on U.S. banks to avoid
any fees or delays in processing o We do not accept third party
your check. checks, which are checks made
payable to someone other than the
o We do not accept third party Funds.
checks, which are checks made
payable to someone other than the
Funds.
-------------------------------------- -------------------------------------- --------------------------------------
<PAGE>
-------------------------------------- -------------------------------------- --------------------------------------
By Wire or ACH o Obtain the fund
number and account o Instruct
your bank (who may charge
number by calling Alleghany
Funds at a fee) to wire or ACH
the amount of 800-992-8151.
your additional investment.
o Instruct your bank (who may charge o Give the following wire
a fee) to wire the amount of your information to your bank:
investment. Boston Safe Deposit & Trust
ABA #01-10-01234
o Give the following wire or ACH For: Alleghany Funds
information to your bank: A/C 140414
Boston Safe Deposit & Trust FBO "Alleghany Fund Number"
ABA #01-10-01234 "Your Account Number"
For: Alleghany Funds
A/C 140414
FBO "Alleghany Fund Number"
"Your Account Number"
o Return your completed application
to:
Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
-------------------------------------- -------------------------------------- --------------------------------------
By Phone See "By Wire or ACH" o When you are ready to add to your
account, call Alleghany Funds and
tell the representative the fund
name, account number, the name(s) in
which the account is registered and
the amount of your investment.
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
By Internet Not applicable o Verify that your bank or credit
union is a member of the Automated
Clearing House (ACH) system.
o Complete the "Purchase, Exchange
and Redemption Authorization"
section of your account application.
o Obtain a Personal Identification
Number (PIN) from Alleghany
Funds for use on Alleghany Funds'
Web site if you have not already
done so. To obtain a PIN, please
call 800-992-8151.
o When you are ready to add to your
account, access your account through
the Alleghany Funds' Web site and
enter your purchase instructions in
the highly secure area for
shareowners only.
-------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
Exchanging Shares
After you have opened an account with us, you can exchange your shares within
Alleghany Funds to meet your changing investment goals or other needs. This
privilege is not designed for frequent trading and may be difficult to implement
in times of drastic market changes.
You can exchange shares from one Alleghany Fund to another. All exchanges to
open new fund accounts must meet the minimum initial investment requirements.
Exchanges may be made by mail or by phone at 800-922-8151 if you chose this
option when you opened your account. For tax purposes, each exchange is treated
as a sale and a new purchase.
The Fund reserves the right to limit, impose charges upon, terminate or
otherwise modify the exchange privilege by sending written notice to
shareowners.
<PAGE>
Selling/Redeeming Shares
Once you have opened an account with us, you can sell your shares to meet your
changing investment goals or other needs. The following table shows guidelines
for selling shares.
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Selling Shares
-------------------------------------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
Designed for... To sell some or all of your shares...
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Mail o Accounts of any type o Write and sign a letter of
instruction indicating the fund
o
Sales
or
redemptions
of
any
size
name,
fund
number,
your
account
number,
the
name(s)
in
which
the
account
is
registered
and
the
dollar
value
or
number
of
shares
you
wish
to
sell.
o Include all signatures and any
additional documents that may be
required. (See "Selling Shares in
Writing.")
o Mail to:
Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
o
A
check
will
be
mailed
to
the
name(s)
and
address
in
which
the
account
is
registered.
If
you
would
like
the
check
mailed
to
a
different
address,
you
must
write
a
letter
of
instruction
and
have
it
signature
guaranteed.
Usually,
your
local
bank
can
provide
this
service
for
you.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Phone o Non-retirement accounts o For automated service 24 hours a
day using your touch-tone phone,
o Sales of up to $50,000 call 800-992-8151
o
To
place
your
request
with
a
Shareowner
Service
Representative,
call
between
9am
and
7pm
ET,
Monday
-
Friday.
o
The
Fund
reserves
the
right
to
refuse
any
telephone
sales
request
and
may
modify
the
procedures
at
any
time.
The
Fund
makes
reasonable
attempts
to
verify
that
telephone
instructions
are
genuine,
but
you
are
responsible
for
any
loss
that
you
may
bear
from
telephone
requests.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Wire or ACH o Requests by letter for sales of o Complete the "Telephone
any amount (accounts of any type) Redemption" privilege section of
your account application.
o Requests by phone for sales up to
$50,000 (accounts with telephone o ACH sales proceeds will be sent on
redemption privileges) the next business day after the sale
(you should allow 3 days to be
received by your bank). There is no
fee to sell shares by ACH.
o
Wire
sales
proceeds
will
be
wired
on
the
next
business
day
after
the
sale
(see
"Transaction
Policies"
for
effective
sale
day).
A
$20
fee
will
be
deducted
from
your
account.
o
The
Fund
reserves
the
right
to
refuse
any
telephone
sales
request
and
may
modify
the
procedures
at
any
time.
The
Fund
makes
reasonable
attempts
to
verify
that
telephone
instructions
are
genuine,
but
you
are
responsible
for
any
loss
that
you
may
bear
from
telephone
requests.
-------------------------------------- ------------------------------------- --------------------------------------
-------------------------------------- ------------------------------------- --------------------------------------
By Internet o Non-retirement accounts o Complete the "Purchase, Exchange
and Redemption Authorization"
section of your account application.
o Obtain a Personal Identification
Number (PIN) from Alleghany Funds
for use on Alleghany Funds' Web site
if you have not already done so.
o When you are ready to redeem a
portion of your account, access your
account through the Alleghany Funds'
Web site and enter your redemption
instructions in the highly secure
area for shareowners only. A check
for the proceeds will be mailed to
you.
o If you prefer proceeds to be sent
directly to your bank account,
verify that your bank or credit
union is a member of the Automated
Clearing House (ACH) system.
o ACH sales proceeds will be sent
on the next business day (you should
allow 3 days to be received by your
bank). There is no fee to sell
shares by ACH.
-------------------------------------- ------------------------------------- --------------------------------------
</TABLE>
Selling Shares in Writing In certain circumstances, you must make your
request to sell shares in writing. You may need to include a signature guarantee
(which protects you against fraudulent orders) and additional items with your
request, as shown in the table below. We require signature guarantees if: your
address of record has change within the past 30 days you are selling more than
$50,000 worth of shares you are requesting payment other than by a check mailed
to the address of record and payable to the registered owner(s)
<PAGE>
A signature guarantee must be from a member of the Signature Guarantee
Medallion Program (generally, a bank, trust company, savings and loan
association or any broker or securities dealer) for each person whose name
is on the account. We may refuse any other source. A notary public cannot
provide a signature guarantee.
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------- ----------------------------------------------------------------
Seller Requirements for Written Requests
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners of individual, joint, sole o Letter of instruction
proprietorship, UGMA/UTMA, or general partner o On the letter, the signatures and titles of all persons
accounts authorized to sign for the account, exactly as the account is
registered
o Signature guarantee, if applicable (see above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners of corporate or association accounts o Letter of instruction
o Corporate
resolution certified
within the past 12
months o On the
letter, the
signatures and
titles of all
persons authorized
to sign for the
account, exactly as
the account is
registered o
Signature guarantee,
if applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Owners or trustees of trust accounts o Letter of instruction
o On the letter, the
signature of the
trustee(s) o If the
names of all
trustees are not
registered on the
account, a copy of
the trust document
certified within the
past 12 months o
Signature guarantee,
if applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Joint tenancy shareowners whose co-tenants are o Letter of instruction signed by the surviving tenant
deceased o Copy of death certificate
o Signature guarantee, if applicable (see above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Executors of shareowner
estates o Letter of
instruction signed
by executor o Copy
of order appointing
executor o Signature
guarantee, if
applicable (see
above)
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
Administrators, conservators, guardians and o Call 800-992-8151 for instructions
other sellers or account types not listed above
-------------------------------------------------- ----------------------------------------------------------------
-------------------------------------------------- ----------------------------------------------------------------
IRA accounts o IRA
distribution request
form completed and
signed. Call
800-922-8151 for a
form.
-------------------------------------------------- ----------------------------------------------------------------
</TABLE>
Redemptions in Kind
The Fund has elected, under Rule 18f-1 of the 1940 Act, to pay sales proceeds in
cash up to $250,000 or 1% of the Fund's total value during any 90-day period for
any one shareowner, whichever is less. Larger redemptions may be detrimental to
existing shareowners. While we intend to pay all sales proceeds in cash, we
reserve the right to make higher payments to you in the form of certain
marketable securities of the Fund. This is called a "redemption in kind." You
may pay certain sales charges related to a redemption in kind, such as brokerage
commissions, when you sell the securities.
Transaction Policies
Calculating Share Price
When you buy, exchange or sell shares, the net asset value is used to price your
purchase or sale. The NAV for the Fund is determined each business day at the
close of regular trading on the New York Stock Exchange, Inc. (NYSE) (typically
4 p.m. Eastern Time (ET)) by dividing a class's net assets by the number of its
shares outstanding. Generally, market quotes are used to price securities. If
market quotations are not available, securities are valued at fair value as
determined by the Board of Trustees.
Execution of Requests
The Fund is open on each business day that the NYSE is open for trading. The
NYSE is not open on weekends or national holidays. Buy and sell requests are
executed at the NAV next calculated after Alleghany Funds or an authorized
broker or designee receives your mail or telephone request in proper form. Sales
proceeds are normally sent on the next business day, but are always sent within
seven days of receipt of a request in proper form. Brokers and their authorized
designees are responsible for forwarding purchase orders and redemption requests
to the Fund.
Shares of the Fund can also be purchased through broker-dealers, banks and trust
departments that may charge you a transaction or other fee for their services.
These fees are not charged if you purchase shares directly from the Fund. The
Fund reserves the right to reject any purchase order and to suspend the offering
of fund shares. The Fund also reserves the right to change the initial and
additional investment minimums or to waive these minimums for any investor. The
Fund reserves the right to delay sending you your sales proceeds for up to 15
days if you purchased shares by check. A minimum $20 charge will be assessed if
any check used to purchase shares is returned.
Short-Term Trading
The Fund is not designed for frequent trading and certain purchase or exchange
requests may be difficult to implement in times of drastic market changes. The
Fund reserves the right to refuse any purchase or exchange order that could
adversely affect the Fund or its operations. The Fund also reserves the right to
limit, impose charges upon, terminate or otherwise modify the exchange privilege
by sending written notice to shareowners.
Account Policies and Dividends
Account Statements
In general, you will receive account statements:
after every transaction that affects your account balance (except a
dividend reinvestment) after any change of name or address of the
registered owner(s) in all other circumstances, every quarter
Dividends
Dividends for the Fund are declared and paid quarterly, while capital gains
distributions are distributed at least once a year, in December.
Dividend Reinvestments
Many investors have their dividends reinvested in additional shares of the Fund.
If you choose this option, or if you do not indicate a choice, your dividends
will be automatically reinvested on the dividend record date. You can also
choose to have a check for your dividends mailed to you by choosing this option
on your account application.
Alleghany Funds Web Site
Our Web site is highly secure to prevent unauthorized access to your account
information. To access your account, you must provide verification by providing
your Social Security Number (or Tax Identification Number) and your Personal
Identification Number (PIN). To obtain a PIN, please call 800-992-8151. A
customer service representative will ask a series of questions to verify your
identity and assign a temporary PIN. The temporary PIN will allow you to log on
to the Account Access area of our site. You will be prompted to change the
temporary PIN to a new PIN, which will be known only to you.
By logging into our Web site with your Social Security number and PIN, you can
inquire about your current share balances and their current value, exchange or
transfer assets between your accounts within our fund family, and redeem shares
from your account and have your proceeds mailed to you by check.
If you would like to purchase shares electronically or have redemption proceeds
sent directly to your bank account, you must make arrangements for electronic
funds transfer using Automated Clearing House (ACH) procedures. This requires
that you have certain bank account information on file with us so that funds can
be transferred electronically between your mutual fund and bank accounts.
Portfolio Transactions and Brokerage Commissions
The Fund attempts to obtain the best possible price and most favorable execution
of transactions in its portfolio securities. Under policies established by the
Board of Trustees, there may be times when the Fund may pay one broker-dealer a
commission that is greater than the amount that another broker-dealer may charge
for the same transaction. The Adviser generally determines in good faith if the
commission paid was reasonable in relation to the services provided by the
broker-dealer. In selecting and monitoring broker-dealers and negotiating
commissions, the Fund considers a broker-dealer's reliability, the quality of
its execution services and its financial condition.
Dividends, Distributions And Taxes
Certain tax considerations may apply to your investment in the Fund. If you have
any tax-related questions relating to your own investments, please consult your
tax adviser. Further information regarding the tax consequences of investing in
the Fund is included in the SAI.
The Fund pays dividends and distributes capital gains at different
intervals. A dividend is a payment of net investment income to investors
who hold shares in a mutual fund. A distribution is the payment of income
and/or capital gain from a mutual fund's earnings. All dividends and
distributions are automatically reinvested at NAV unless you choose to
receive them in a cash payment. You can change your payment options at any
time by writing to us.
The tax treatment of dividends and distributions is the same whether you
reinvest the distributions or elect to receive them in cash. You will
receive a statement with the tax status of your dividends and distributions
for the prior year by January 31.
Distributions of any net investment income and of any net realized
short-term capital gain are taxable to you as ordinary income.
Distributions of net capital gain (net long-term capital gain less any net
short-term capital loss) are taxable as ordinary income regardless of how
long you may have held the shares of the Fund.
When you sell or exchange shares in a non-retirement account, it is
considered a current year taxable event for you. Depending on the purchase
price and the sale price of the shares you sell or exchange, you may have a
gain or a loss on the transaction.
You are responsible for any tax liabilities generated by your transactions.
The Fund is obligated by law to withhold 31% of its distributions if you
do not provide complete and correct taxpayer identification information.
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance since it began operations on December 31, 1998 to the end
of the most recent fiscal period. The following schedule presents financial
highlights for one share of the Fund outstanding throughout the period
indicated.
<TABLE>
<CAPTION>
<S> <C>
Period
Ended 4/30/99*
(Unaudited)
----------------------------------------------------------
Net Asset Value, Beginning of Period $18.36
------
Income from Investment Operations
Net investment income 0.07
Net realized and unrealized gain on investments 0.65
----
Total from investment operations 0.72
----
Less Distributions
Distributions from and in excess of net investment (0.05)
income
Distributions from net realized gain on investments -----
Total distributions (0.05)
------
Net increase in net asset value 0.67
Net Asset Value, End of Period $19.03
Total Return (1) 3.94%
Ratios/Supplemental Data
Net Assets, End of Period (in 000's) $79,496 Ratio of expenses to average net
assets:
Before reimbursement of expenses by Adviser (2) 0.96%
After reimbursement of expenses by Adviser (2) 0.96%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Adviser (2) 1.49%
After reimbursement of expenses by Adviser (2) 1.49%
Portfolio Turnover (1) 16.28%
* The Fund's Class I shares commenced operations on December 31, 1998.
(2) Not annualized
(3) Annualized
</TABLE>
(Outside Back Cover)
General Information
If you wish to know more about the Fund, you will find additional information in
the following documents:
Shareowner Reports
You will receive Semi-Annual Reports dated April 30 and Annual Reports, audited
by independent accountants, dated October 31. These reports contain a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI, which is incorporated into this prospectus by reference and dated July
12, 1999, is available to you without charge. It contains more detailed
information about the Fund.
How to Obtain Reports
Contacting Alleghany Funds
You can get free copies of the reports and SAI, request other
information and discuss your questions about the Fund by contacting:
Address: Alleghany Funds
P.O. Box 5164
Westborough, MA 01581
Phone: 800-992-8151
Web site: www.alleghanyfunds.com
Obtaining Information from the SEC
You can visit the SEC's Web site at http://www.sec.gov to view the SAI
and other information. You can also view and copy information about the
Fund at the SEC's Public Reference Room in Washington, D.C. Also, you
can obtain copies of this information by sending your request and
duplication fee to the SEC's Public Reference Room, Washington D.C.
20549-6009. To find out more about the Public Reference Room, you can
call the SEC at 1-800-SEC-0330.
Investment Company Act File Number: 811-8004
<PAGE>
ALLEGHANY FUNDS
Alleghany/Montag & Caldwell Growth Fund
Alleghany/Chicago Trust Growth & Income Fund
Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Small Cap Value Fund
Alleghany/Veredus Aggressive Growth Fund
Alleghany/Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999, as amended
July 12, 1999
This Statement of Additional Information provides supplementary
information pertaining to shares representing interests in ten investment
portfolios of Alleghany Funds (the "Company"): Alleghany/Montag & Caldwell
Growth Fund; Alleghany/Chicago Trust Growth & Income Fund, Alleghany/Chicago
Trust Talon Fund, Alleghany/Chicago Trust Small Cap Value Fund,
Alleghany/Veredus Aggressive Growth Fund, Alleghany/Montag & Caldwell Balanced
Fund, Alleghany/Chicago Trust Balanced Fund, Alleghany/Chicago Trust Bond Fund,
Alleghany/Chicago Trust Municipal Bond Fund and Alleghany/Chicago Trust Money
Market Fund. Each Fund offers Class N shares for retail investors. Montag &
Caldwell Balanced Fund, Alleghany/Chicago Trust Growth & Income Fund, Montag &
Caldwell Growth Fund and Alleghany/Chicago Trust Balanced Fund also offer Class
I shares for institutional investors.
This Statement of Additional Information is not a Prospectus, and
should be read only in conjunction with the Prospectus for the Alleghany/Montag
& Caldwell Growth Fund, Alleghany/Chicago Trust Growth & Income Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Small Cap Value
Fund, Alleghany/Veredus Aggressive Growth Fund, Alleghany/Montag & Caldwell
Balanced Fund, Alleghany/Chicago Trust Balanced Fund, Alleghany/Chicago Trust
Bond Fund, Alleghany/Chicago Trust Municipal Bond Fund and Alleghany/Chicago
Trust Money Market Fund dated March 1, 1999, the Prospectus for Montag &
Caldwell Growth Fund, Alleghany/Chicago Trust Growth & Income Fund, Montag &
Caldwell Balanced Fund and Alleghany/Chicago Trust Balanced Fund - Class I
Shares, dated July 12, 1999 and the Prospectus for Montag & Caldwell Balanced
Fund - Class I Shares, dated July 12, 1999 (each a "Prospectus"). No investment
in shares should be made without first reading the Prospectus. Prospectus copies
may be obtained without charge from the Company at the address and telephone
number below.
Alleghany Funds: Investment Advisers:
P.O. Box 5164 CHICAGO TRUST COMPANY
Westborough, MA 01581 171 North Clark Street
(800) 992-8151 Chicago, IL 60601-3294
MONTAG & CALDWELL, INC.
3343 Peachtree Road, NE, Suite 1100
Atlanta, GA 30326-1450
VEREDUS ASSET MANAGEMENT LLC
6900 Bowling Boulevard, Suite 250
Louisville, KY 40207
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 Prospectus in connection with the offering made by the 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 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.
TABLE OF CONTENTS
Page
THE FUNDS 3
INVESTMENT POLICIES AND RISK CONSIDERATIONS 3
INVESTMENT RESTRICTIONS 20
TRUSTEES AND OFFICERS 22
PRINCIPAL HOLDERS OF SECURITIES 24
INVESTMENT ADVISORY AND OTHER SERVICES 27
Investment Advisory Agreements 27
Sub-Investment Advisory Agreement 29
The Administrator and Sub-Administrator 30
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS 32
NET ASSET VALUE 33
DIVIDENDS 33
TAXES 34
PERFORMANCE INFORMATION 35
OTHER INFORMATION 39
APPENDIX A 42
APPENDIX B 44
The Annual Report including Audited
Financial Statements dated
October 31, 1998 (Class N only
unless otherwise noted)
Alleghany/Montag & Caldwell Growth Fund - Class N
and Class I Alleghany/Chicago Trust Growth &
Income Fund Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
The Semi-Annual Report including
Unaudited Financial Statements
dated April 30, 1999 (Class N
only unless otherwise noted)
Alleghany/Montag & Caldwell Growth Fund - Class N
and Class I Alleghany/Chicago Trust Growth &
Income Fund Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Small Cap Value Fund
Alleghany/Veredus Aggressive Growth Fund
Alleghany/Montag & Caldwell Balanced Fund - Class
N and Class I Alleghany/Chicago Trust Balanced
Fund Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
<PAGE>
THE FUNDS
Alleghany Funds, 171 North Clark Street, Chicago, Illinois 60601-3294,
is a no-load, open-end management investment company which currently offers
twelve series of shares of beneficial interest representing separate portfolios
of investments, ten of which are covered by this Statement of Additional
Information: Alleghany/Montag & Caldwell Growth Fund, Alleghany/Chicago Trust
Growth & Income Fund, Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago
Trust Small Cap Value Fund, Alleghany/Veredus Aggressive Growth Fund,
Alleghany/Montag & Caldwell Balanced Fund, Alleghany/Chicago Trust Balanced
Fund, Alleghany/Chicago Trust Bond Fund, Alleghany/Chicago Trust Municipal Bond
Fund, and Alleghany/Chicago Trust Money Market Fund (collectively referred to as
"Funds" or individually as a "Fund"). The Company was established as a Delaware
business trust on September 10, 1993.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following supplements the information contained in the Prospectus
concerning the investment policies of the Funds. Except as otherwise stated
below or in the Prospectus, all Funds 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.
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
Securities Act of 1933, as amended (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 a Fund's
Investment Adviser, 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
All Funds may invest in money market instruments, including bank
obligations and commercial paper. 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. Bank obligations may include bankers'
acceptances, negotiable certificates of deposit, and non-negotiable time
deposits earning a specified return, issued for a definite period of time by a
U.S. bank that is a member of the Federal Reserve System or is insured by the
Federal Deposit Insurance Corporation, or by a savings and loan association or
savings bank that is insured by the Federal Deposit Insurance Corporation. Bank
obligations also include U.S. dollar-denominated obligations of foreign branches
of U.S. banks or of U.S. branches of foreign banks, all of the same type as
domestic bank obligations. Investments in bank obligations are limited to the
obligations of financial institutions having more than $1 billion in total
assets at the time of purchase. Investments by Alleghany/Chicago Trust Money
Market Fund in non-negotiable time deposits are limited to no more than 5% of
its total assets at the time of purchase.
Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds to
finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of
U.S. branches of foreign banks may subject a Fund to additional investment
risks, including future political and economic developments, the possible
imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and record keeping standards than those applicable to
domestic branches of U.S. banks. Investments in the obligations of U.S. branches
of foreign banks or foreign branches of U.S. banks will be made only when the
Investment Advisor believes that the credit risk with respect to the investment
is minimal.
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.
Commercial paper may include variable and floating-rate instruments,
which are unsecured instruments that permit the interest on indebtedness
thereunder to vary. Variable-rate instruments provide for periodic adjustments
in the interest rate. Floating-rate instruments provide for automatic adjustment
of the interest rate whenever some other specified interest rate changes. Some
variable and floating-rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating-rate obligations with the demand
feature, a Fund may demand payment of principal and accrued interest at a time
specified in the instrument or may resell the instrument to a third party. In
the event an issuer of a variable or floating-rate obligation defaulted on its
payment obligation, a Fund might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a
loss to the extent of the default. Substantial holdings of variable and
floating-rate instruments could reduce portfolio liquidity.
Borrowing
The Funds may not borrow money or issue senior securities, except as
described in this paragraph. Each Fund may borrow from banks or enter into
reverse repurchase agreements for temporary purposes in amounts up to 10% of the
value of its total assets. The Funds may not mortgage, pledge, or hypothecate
any assets, except that each Fund may do so in connection with borrowings for
temporary purposes 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. The Funds may also
borrow money for extraordinary purposes or to facilitate redemptions in amounts
up to 25% of the value of total assets. A Fund will not purchase securities
while its borrowings (including reverse repurchase agreements) exceed 5% of its
total assets. The Funds have no intention of increasing their net income through
borrowing. Any borrowing will be done from a bank with the required asset
coverage of at least 300%. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter (not
including Sundays or holidays) or such longer period as the Securities and
Exchange Commission ("SEC") may prescribe by rules and regulations, reduce the
amount of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%.
Illiquid Securities
All Funds may invest up to 15% (10% in the case of Alleghany/Chicago
Trust Money Market Fund) of their respective net assets in securities which are
illiquid. Illiquid securities will generally include, but are not limited to:
repurchase agreements and time deposits with notice/termination dates in excess
of seven days; unlisted over-the-counter options; interest rate, currency and
mortgage swap agreements; interest rate caps, floors and collars; and certain
securities which are subject to trading restrictions because they are not
registered under the 1933 Act.
Variable- and Floating-Rate Instruments and Related Risks
With respect to the variable- and floating-rate instruments that may be
acquired by Alleghany/Chicago Trust Balanced Fund, Alleghany/Montag & Caldwell
Balanced Fund, Alleghany/Chicago Trust Bond Fund and Alleghany/Chicago Trust
Municipal Bond Fund, the Investment Adviser will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
instruments and, if the instruments are subject to demand features, will monitor
their financial status with respect to the ability of the issuer to meet its
obligation to make payment on demand. Where necessary to ensure that a variable-
or floating-rate instrument meets a Fund's quality requirements, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Because variable and floating-rate instruments are direct lending
arrangements between the lender and the borrower, it is not contemplated that
such instruments will generally be traded, and there is generally no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand.
The same credit research must be done for master demand notes as in
accepted names for potential commercial paper issuers to reduce the chances of a
borrower getting into serious financial difficulties.
Loan Participations
All Funds may engage in Loan Participations ("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 Adviser, they cannot
be sold within seven days.
Foreign Bankers' Acceptances
All Funds may purchase foreign bankers' acceptances, although
Alleghany/Chicago Trust Money Market Fund's purchases are limited by the quality
standards of Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"). 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
All Funds may purchase foreign commercial paper, although
Alleghany/Chicago Trust Money Market Fund's purchases are limited by the quality
standards of Rule 2a-7 under the 1940 Act. 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, S&P) 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
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 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
All Funds may enter into repurchase agreements pursuant to which a Fund
purchases portfolio assets from a bank or broker-dealer concurrently with an
agreement by the seller to repurchase the same assets from the Fund at a later
date at a fixed price. Repurchase agreements are considered, under the 1940 Act,
to be collateralized loans by a Fund to the seller secured by the securities
transferred to the Fund. Repurchase agreements will be fully collateralized by
securities in which the Fund may invest directly. Such collateral will be
marked-to-market daily. If the seller of the underlying security under the
repurchase agreement should default on its obligation to repurchase the
underlying security, a Fund may experience delay or difficulty in exercising its
right to realize upon the security and, in addition, may incur a loss if the
value of the security should decline, as well as disposition costs in
liquidating the security. A Fund must treat each repurchase agreement as a
security for tax diversification purposes and not as cash, a cash equivalent or
receivable.
The repurchase price generally equals the price paid by a 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 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 Adviser or Sub-Investment Adviser. The Investment Adviser or
Sub-Investment Adviser 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. The securities
held subject to a repurchase agreement by Alleghany/Chicago Trust Money Market
Fund may have stated maturities exceeding 13 months, provided the repurchase
agreement itself matures in less than 13 months.
Reverse Repurchase Agreements
All Funds may enter into reverse repurchase agreements with banks and
broker dealers. 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. During the reverse repurchase
agreement period, the Fund continues to receive principal and interest payments
on these securities. 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 the prospectus and this Statement of
Additional Information include equity securities and debt securities that are
unencumbered and marked-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.
Rule 144A Securities
All Funds may purchase securities which are not registered under the
1933 Act but which can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act. Any such security will not be considered
illiquid so long as it is determined by the Investment Adviser or Sub-Investment
Adviser, under guidelines approved by the Company's Board of Trustees, that an
adequate trading market exists for that security. This investment practice could
have the effect of increasing the level of illiquidity in a Fund during any
period that qualified institutional buyers become uninterested in purchasing
these restricted securities.
Securities Lending
All Funds may seek additional income from time to time by lending their
respective portfolio securities on a short-term basis to banks, brokers and
dealers under agreements. Loans of portfolio securities by each Fund will be
collateralized by cash held in non-interest bearing demand accounts, letters of
credit or securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities which will be maintained at all times in an amount equal to
the current market value of the loaned securities. No Fund may make such loans
in excess of 25% of the value of its total assets. The major risk to which the
Funds would be exposed on a loan transaction is the risk that the borrower would
become bankrupt at a time when the value of the security goes up. Therefore, a
Fund will only enter into loan arrangements after a review by the Investment
Adviser, subject to overall supervision by the Board of Trustees, including a
review of the creditworthiness of the borrowing broker-dealer or other
institution and then only if the consideration to be received from such loans
would justify the risk. Creditworthiness will be monitored on an ongoing basis
by the Investment Adviser.
Securities of Other Investment Companies
All Funds may invest in securities issued by other investment companies
which invest in securities in which the particular Fund is permitted to invest
and which determine their net asset value per share based on the amortized cost
or penny-rounding method. As a shareowner of another investment company, each
Fund would bear, along with other shareowners, its pro rata portion of the such
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that a Fund bears directly in
connection with its own operations.
Each Fund intends to limit its investments in securities issued by
other investment companies prescribed by the 1940 Act 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.
Short-Term Trading
All Funds may engage in short-term trading. Securities may be sold in
anticipation of a market decline or purchased in anticipation of a market rise
and later sold. In addition, a security may be sold and another purchased at
approximately the same time to take advantage of what a Fund believes to be a
temporary disparity in the normal yield relationship between the two securities.
Such trading may be expected to increase a Fund's portfolio turnover rate and
the expenses incurred in connection with such trading.
Zero Coupon Bonds
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund and Alleghany/Chicago Trust Money Market Fund
may invest in zero coupon securities, which are debt securities issued or sold
at a discount from their face value and do not entitle the holder to any
periodic payment of interest prior to maturity, a specified redemption date or a
cash payment date. The amount of the discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and perceived credit quality of the issuer.
Zero coupon securities also may take the form of debt securities that
have been stripped of their unmatured interest coupons, the coupons themselves
and receipts or certificates representing interests in such stripped debt
obligations and coupons. The market prices of zero coupon securities are
generally more volatile than the market prices of interest-bearing securities
and respond more to changes in interest rates than interest-bearing securities
with similar maturities and credit qualities. The original issue discount on the
zero coupon bonds must be included ratably in the income of the Funds as the
income accrues even though payment has not been received. These Funds
nevertheless intend to distribute an amount of cash equal to the currently
accrued original issue discount, and this may require liquidating securities at
times they might not otherwise do so and may result in capital loss.
Lower-Grade Debt Securities and Related Risks
Alleghany/Chicago Trust Growth & Income Fund, Alleghany/Chicago
Trust Talon Fund, Alleghany/Chicago Trust Balanced Fund, Alleghany/Chicago Trust
Bond Fund, and Alleghany/Chicago Trust Municipal Bond Fund may invest in
securities with high yields and high risks. Alleghany/Chicago Trust Growth &
Income Fund may invest up to 10% of its assets in such securities.
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Balanced Fund,
Alleghany/Chicago Trust Bond Fund, and Alleghany/Chicago Trust Municipal Bond
Fund may each invest up to 20% of their respective assets in such securities.
Fixed income securities rated lower than "Baa3" by Moody's or "BBB-" by
S&P, frequently referred to as "junk bonds," are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk. Such medium- and low-grade bonds held by a
Fund may be issued as a consequence of corporate restructurings, such as
leveraged buy-outs, mergers, acquisitions, debt recapitalizations; or similar
events. Also, high-yield bonds are often issued by smaller, less creditworthy
companies or by highly leveraged firms, which are generally less able than more
financially stable firms to make scheduled payments of interest and principal.
The risks posed by bonds issued under such circumstances are substantial.
Medium- and low-grade bonds may be issued as a consequence of corporate
restructurings, such as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. Also, these bonds are often issued by
smaller, less creditworthy companies or by highly leveraged firms which are
generally less able than more financially stable firms to make scheduled
payments of interest and principal. The risks posed by bonds issued under such
circumstances are substantial. Also, during an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their ability to service principal
and interest payment obligations, to meet projected business goals and to obtain
additional financing. Changes by recognized rating agencies in their rating of
any security and in the ability of an issuer to make payments of interest and
principal will also ordinarily have a more dramatic effect on the values of
these investments than on the values of higher-rated securities. Such changes in
value will not affect cash income derived from these securities, unless the
issuers fail to pay interest or dividends when due. Such changes will, however,
affect a Fund's net asset value per share. There can be no assurance that
diversification will protect a Fund from widespread bond defaults brought about
by a sustained economic downturn.
In the past, the high yields from low-grade bonds have more than
compensated for the higher default rates on such securities. However, there can
be no assurance that diversification will protect the Fund from widespread bond
defaults brought about by a sustained economic downturn, or that yields will
continue to offset default rates on high-yield bonds in the future. Issuers of
these securities are often highly leveraged, so that their ability to service
their debt obligations during an economic downturn or during sustained periods
of rising interest rates may be impaired. In addition, such issuers may not have
more traditional methods of financing available to them, and may be unable to
repay debt at maturity by refinancing. Further, the recent economic recession
has resulted in default levels with respect to such securities in excess of
historic averages.
The value of lower-rated debt securities will be influenced not only by
changing interest rates, but also by the bond market's perception of credit
quality and the outlook for economic growth. When economic conditions appear to
be deteriorating, low- and medium-rated bonds may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the value and liquidity of lower-rated
securities held by a Fund, especially in a thinly traded market. Illiquid or
restricted securities held by a Fund may involve valuation difficulties.
Especially at such times, trading in the secondary market for
high-yield bonds may become thin and market liquidity may be significantly
reduced. Even under normal conditions, the market for high-yield bonds may be
less liquid than the market for investment-grade corporate bonds. There are
fewer securities dealers in the high-yield market, and purchasers of high-yield
bonds are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced market liquidity, high-yield bond
prices may become more volatile.
Youth and Growth of Lower-Rated Securities Market -- The recent growth
of the lower-rated securities market has paralleled a long economic expansion,
and it has not weathered a recession in the market's present size and form. An
economic downturn or increase in interest rates is likely to have an adverse
effect on the lower-rated securities market generally (resulting in more
defaults) and on the value of lower-rated securities contained in the portfolios
of the Funds which hold these securities.
Sensitivity to Interest Rate and Economic Changes -- The economy and
interest rates can affect lower-rated securities differently from other
securities. For example, the prices of lower-rated securities are more sensitive
to adverse economic changes or individual corporate developments than are the
prices of higher-rated investments. Also, during an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the issuer of a
lower-rated security defaulted, a Fund may incur additional expenses to seek
recovery. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated
securities and a Fund's net asset values.
Liquidity and Valuation -- To the extent that an established secondary
market does not exist and a particular obligation is thinly traded, the
obligation's fair value may be difficult to determine because of the absence of
reliable, objective data. As a result, a Fund's valuation of the obligation and
the price it could obtain upon its disposition could differ.
Credit Ratings -- The credit ratings of Moody's and S&P are evaluations
of the safety of principal and interest payments, not market value risk, of
lower-rated securities. Also, credit rating agencies may fail to timely change
the credit ratings to reflect subsequent events. Therefore, in addition to using
recognized rating agencies and other sources, the Investment Adviser or
Sub-Investment Adviser also performs its own analysis of issuers in selecting
investments for the Funds. The Investment Adviser's or Sub-Investment Adviser's
analysis of issuers may include, among other things, historic and current
financial condition, current and anticipated cash flow and borrowing strength of
management, responsiveness to business conditions, credit standing, and current
and anticipated results of operations.
Yields and Ratings -- The yields on certain obligations are dependent
on a variety of factors, including general market conditions, conditions in the
particular market for the obligation, the financial condition of the issuer, the
size of the offering, the maturity of the obligation and the ratings of the
issue. The ratings of Moody's and S&P represent their respective opinions as to
the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
While any investment carries some risk, certain risks associated with
lower-rated securities are different from those for investment-grade securities.
The risk of loss through default is greater because lower-rated securities are
usually unsecured and are often subordinate to an issuer's other obligations.
Additionally, the issuers of these securities frequently have high debt levels
and are thus more sensitive to difficult economic conditions, individual
corporate developments, and rising interest rates. Consequently, the market
price of these securities may be quite volatile and may result in wider
fluctuations of a Fund's net asset value per share.
Derivative Investments
The term "derivatives" has been used to identify a range and variety of
financial instruments. In general, a derivative is commonly defined as a
financial instrument whose performance and value are derived, at least in part,
from another source, such as the performance of an underlying asset, or a
specific security, or an index of securities. As is the case with other types of
investments, a Fund's derivative instruments may entail various types and
degrees of risk, depending upon the characteristics of a derivative instrument
and the Fund's overall portfolio.
Each Fund permitted the use of derivatives may engage in such practices
for hedging purposes, or to maintain liquidity, or in anticipation of changes in
the composition of its portfolio holdings. No Fund will engage in derivative
investments purely for speculative purposes. A Fund will invest in one or more
derivatives only to the extent that the instrument under consideration is judged
by the Investment Adviser to be consistent with the Fund's overall investment
objective and policies. In making such judgment, the potential benefits and
risks will be considered in relation to the Fund's other portfolio investments.
Where not specified, investment limitations with respect to a Fund's
derivative instruments will be consistent with such Fund's existing percentage
limitations with respect to its overall investment policies and restrictions.
While not a fundamental policy, the total of all instruments deemed derivative
in nature by the Investment Adviser will generally not exceed 20% of total
assets for any Fund; however, as this policy is not fundamental, it may be
changed from time to time when deemed appropriate by the Board of Trustees.
Listed below, including risks and policies with respect thereto, are the types
of securities in which certain Funds are permitted to invest which are
considered by the Investment Adviser to be derivative in nature.
Options and Related Risks
All Funds except Alleghany/Chicago Trust Money Market Fund and
Alleghany/Chicago Trust Small Cap Value Fund may buy put and call options and
write covered call and secured put options.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up to an
agreed date. The advantage is that the purchaser may hedge against an increase
in the price of securities it ultimately wishes to buy or may take advantage of
a rise in a particular index. A Fund will only purchase call options to the
extent premiums paid on all outstanding call options do not exceed 20% of such
Fund's total assets. A Fund will only sell or write call options on a covered
basis (e.g. on securities it holds in its portfolio).
A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer at the
exercise price during the option period, and the writer of the option has the
obligation to purchase the security from the purchaser of the option. The
advantage is that the purchaser can be protected should the market value of the
security decline or should a particular index decline. A Fund will only purchase
put options to the extent that the premiums on all outstanding put options do
not exceed 20% of a Fund's total assets. A Fund will only purchase put options
on a covered basis and write put options on a secured basis. Cash or other
collateral will be held in a segregated account for such options. A Fund will
receive premium income from writing put options, although it may be required,
when the put is exercised, to purchase securities at higher prices than the
current market price. At the time of purchase, a Fund will receive premium
income from writing call options, which may offset the cost of purchasing put
options and may also contribute to a Fund's total return. A Fund may lose
potential market appreciation if the judgment of its Investment Adviser or
Sub-Investment Adviser is incorrect with respect to interest rates, security
prices or the movement of indices.
An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive cash from the seller equal to
the difference between the closing price of the index and the exercise price of
the option.
Closing transactions essentially let a Fund offset put options or call
options prior to exercise or expiration. If a Fund cannot effect a closing
transaction, it may have to hold a security it would otherwise sell or deliver a
security it might want to hold.
A Fund may use options traded on U.S. exchanges, and to the extent
permitted by law, options traded over-the-counter. It is the position of the SEC
that over-the-counter options are illiquid. Accordingly, a Fund will invest in
such options only to the extent consistent with its 15% limit on investments in
illiquid securities.
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.
These 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 of these Funds 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 of these Funds may write covered call
options from time to time on such portions of their portfolios, without limit,
as the Investment Adviser or Sub-Investment Adviser 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 of these Funds 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 of these Funds 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.
Writing Put Options -- Each of these Funds 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 Adviser or
Sub-Investment Adviser 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
All Funds, except Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Trust Small Cap Value Fund and Alleghany/Veredus Aggressive
Growth Fund, may engage in futures contracts and options on futures contracts
for hedging purposes or to maintain liquidity. However, a Fund may not purchase
or sell a futures contract unless immediately after any such transaction the sum
of the aggregate amount of margin deposits on its existing futures positions and
the amount of premiums paid for related options is 5% or less of its total
assets, after taking into account unrealized profits and unrealized losses on
any such contracts. At maturity, a futures contract obligates a Fund to take or
make delivery of certain securities or the cash value of a securities index. A
Fund may sell a futures contract in order to offset a decrease in the market
value of its portfolio securities that might otherwise result from a market
decline. A Fund may do so either to hedge the value of its portfolio of
securities as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a Fund may
purchase a futures contract in anticipation of purchases of securities. In
addition, a Fund may utilize futures contracts in anticipation of changes in the
composition of its portfolio holdings.
Any gain derived by the Fund from the use of such instruments will be
treated as a combination of short-term and long-term capital gain and, if not
offset by realized capital losses incurred by the Fund, will be distributed to
shareowners and will be taxable to shareowners as a combination of ordinary
income and long-term capital gain.
A Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When a Fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or seller
of a futures contract at a specified exercise price at any time during the
option period. When a Fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised. In
anticipation of a market advance, a Fund may purchase call options on futures
contracts as a substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which a Fund intends to purchase.
Similarly, if the market is expected to decline, a Fund might purchase put
options or sell call options on futures contracts rather than sell futures
contracts. In connection with a Fund's position in a futures contract or option
thereon, a Fund will create a segregated account of cash or liquid securities,
or will otherwise cover its position in accordance with applicable requirements
of the SEC.
The Funds may enter into contracts for the purchase or sale for future
delivery of securities, including index 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.
The Funds 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 Federal tax purposes, will 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.
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
All Funds, except Alleghany/Chicago Trust Money Market Fund and
Alleghany/Chicago Trust Small Cap Value Fund may purchase or sell securities on
a when-issued or delayed-delivery basis and make contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
Securities purchased or sold on a when-issued, delayed-delivery, or forward
commitment basis involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Although a Fund would generally
purchase securities on a when-issued, delayed-delivery, or forward commitment
basis with the intention of acquiring the securities, a Fund may dispose of such
securities prior to settlement if its Investment Adviser or Sub-Investment
Adviser deems it appropriate to do so.
The Funds 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.
Interest Rate Swaps and Related Risks
Only Alleghany/Chicago Trust Balanced Fund, Alleghany/Chicago Trust
Bond Fund, and Alleghany/Chicago Trust Municipal Bond Fund, in order to help
enhance the value of their respective portfolios, or manage exposure to
different types of investments, may enter into interest rate currency, and
mortgage swap agreements and may purchase and sell interest rate "caps,"
"floors," and "collars" for hedging purposes and not for speculation. Interest
rate swaps are generally considered to be derivative transactions. In a typical
interest rate swap agreement, one party agrees to make regular payments equal to
a floating interest rate on a specified amount in return for payments equal to a
fixed interest rate on the same amount for a specified period. Swaps involve the
exchange between a Fund and another party of their respective rights to receive
interest, e.g., an exchange of fixed-rate payments for floating-rate payments.
For example, if a Fund holds an interest-paying security whose interest rate is
reset once a year, it may swap the right to receive interest at this fixed-rate
for the right to receive interest at a rate that is reset daily. Such a swap
position would offset changes in the value of the underlying security because of
subsequent changes in interest rates. This would protect a Fund from a decline
in the value of the underlying security due to rising rates, but would also
limit its ability to benefit from falling interest rates. A Fund will enter into
interest rate swaps only on a net basis (i.e. the two payment streams will be
netted out, with the Fund receiving or paying as the case may be, only the net
amount of the two payments). The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, will
be accrued on a daily basis and an amount of cash or liquid securities having an
aggregate net asset value at least equal to the accrued excess, will be
maintained in a segregated account by the Company's custodian bank.
Interest rate swaps do not involve the delivery of securities or other
underlying assets or principal. Thus, if the other party to an interest rate
swap defaults, a Fund's risk of loss consists of the net amount of interest
payments that the Fund is contractually entitled to receive.
A Fund will typically use interest rate swaps to preserve a return on a
particular investment or portion of its portfolio or to shorten the effective
duration of its portfolio investments. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed-rate payments for floating-rate payments.
A Fund will only enter into interest rate swaps on a net basis, i.e.,
the two payment streams are netted out, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
transactions are entered into for good faith hedging purposes, the Funds and the
Investment Adviser believe that such obligations do not constitute senior
securities as defined in the 1940 Act and, accordingly, will not treat them as
being subject to the Funds' borrowing restrictions. The net amount of the
excess, if any, of a Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or liquid securities, having an aggregate net asset value at least equal to such
accrued excess will be maintained in a segregated account by the Fund's
Custodian.
In a cap or floor, one party agrees, usually in return for a fee, to
make payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on a Fund's
performance. Swap agreements involve risks depending upon the other party's
creditworthiness and ability to perform, as judged by the Investment Adviser as
well as the Fund's ability to terminate its swap agreements or reduce its
exposure through offsetting transactions.
Asset-Backed Securities and Related Risks
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Small Cap Value Fund and Alleghany/Veredus Aggressive Growth
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 might 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 a conventional debt security.
Mortgage-Backed Securities and Mortgage Pass-Through Securities and Related
Risks
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Small Cap Value Fund and Alleghany/Veredus Aggressive Growth
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. These Funds may agree to purchase or sell these securities with payment
and delivery taking place at a future date.
Other mortgage-backed securities are issued by private issuers,
generally originators of and investors in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities. These private mortgage-backed securities may be
supported by U.S. Government mortgage-backed securities or some form of
non-government credit enhancement. Mortgage-backed securities have either fixed
or adjustable interest rates. The rate of return on mortgage-backed securities
may be affected by prepayments of principal on the underlying loans, which
generally increase as interest rates decline; as a result, when interest rates
decline, holders of these securities normally do not benefit from appreciation
in market value to the same extent as holders of other non-callable debt
securities. In addition, like other debt securities, the values of
mortgage-related securities, including government and government-related
mortgage pools, generally will fluctuate in response to market interest rates.
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 of these Funds 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
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Trust Small Cap Value Fund and Alleghany/Veredus Aggressive
Growth 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.
These Funds will not invest in subordinated privately issued CMOs.
Resets -- The interest rates paid on the ARMs and CMOs in which these
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 these 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
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Trust Small Cap Value Fund and Alleghany/Veredus Aggressive
Growth Fund may purchase participations in trusts that hold U.S. Treasury and
agency securities and may also purchase zero coupon U.S. Treasury obligations,
Treasury receipts and other stripped securities that evidence ownership in
either the future interest payments or the future principal payments on U.S.
Government obligations. These participations are issued at a discount to their
face value and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. The Funds will only invest in government-backed mortgage
securities. The Investment Adviser will consider liquidity needs of a Fund when
any investment in zero coupon obligations is made. 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 Fund 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 Adviser,
subject to the supervision of the Board of Trustees. The staff of 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
All Funds except Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Chicago Trust Talon Fund, Alleghany/Chicago Trust Money Market Fund,
Alleghany/Chicago Trust Small Cap Value Fund and Alleghany/Veredus Aggressive
Growth Fund may invest in other mortgage-backed securities. The Investment
Adviser 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 Adviser will,
consistent with a 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.
Foreign Securities
All Funds except Alleghany/Chicago Trust Bond Fund, Alleghany/Chicago
Trust Municipal Bond Fund, Chicago Trust Money Market Fund, Alleghany/Chicago
Trust Small Cap Value Fund and Alleghany/Veredus Aggressive Growth Fund may
invest in foreign securities. Investment in foreign securities is subject to
special investment risks that differ in some respects from those related to
investments in securities of U.S. domestic issuers. Such risks include:
political, social or economic instability in the country of the issuer; the
difficulty of predicting international trade patterns; the possibility of the
imposition of exchange controls; expropriation; limits on removal of currency or
other assets; nationalization of assets; foreign withholding and income
taxation; and foreign trading practices (including higher trading commissions,
custodial charges and delayed settlements). Such securities may be subject to
greater fluctuations in price than securities issued by U.S. corporations or
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
The markets on which such securities trade may have less volume and liquidity,
and may be more volatile, than securities markets in the U.S. In addition, there
may be less publicly available information about a foreign company than about a
U.S. domiciled company. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to U.S. domestic companies. There is generally less government
regulation of securities exchanges, brokers and listed companies abroad than in
the U.S. Confiscatory taxation or diplomatic developments could also affect
investment in those countries.
In addition, foreign branches of U.S. banks, foreign banks and foreign
issuers may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic branches of U.S. banks and U.S. domestic issuers.
For many foreign securities, U.S. dollar-denominated ADRs, which are
traded in the United States on exchanges or over-the-counter, are issued by
domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate the risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of foreign issuers,
a Fund can avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for many ADRs. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject. The above
Funds may also invest in EDRs, which are receipts evidencing an arrangement with
a European bank similar to that for ADRs and are designed for use in the
European securities markets.
Certain ADRs and EDRs, typically those denominated as unsponsored,
require the holders thereof to bear most of the costs of such facilities while
issuers of sponsored facilities normally pay more of the costs thereof. The
depository of an unsponsored facility frequently is under no obligation to
distribute shareowner communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareowner communications and passes through the voting
rights.
Municipal Securities
Alleghany/Chicago Trust Municipal Bond Fund is expected to maintain a
dollar-weighted average maturity of between three and ten years under normal
market conditions. An assessment of a portfolio's dollar-weighted average
maturity requires the consideration a number of factors, including each bond's
yield, coupon interest payments, final maturity, call and put features, and
prepayment exposure. The Fund's computation of its dollar-weighted average
maturity is based upon estimated rather than known factors and there can be no
assurance that the anticipated average weighted maturity will be attained. In
that regard, a change in interest rates generally will affect a portfolio's
dollar-weighted average maturity.
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, PRINCIPAL INVESTMENT
STRATEGIES AND RISKS" and "OTHER INVESTMENT STRATEGIES" 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
Under Delaware law, the business and affairs of the Company are
managed under the direction of the Board of Trustees. 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 Chief Executive Officer of
171 North Clark Street (Chief Executive Officer) The Chicago Trust Company and President of
Chicago, IL 60601 Alleghany Asset Management, Inc.
Previously, Mr. Bilton was an Executive
Vice President of Chicago Title and Trust
Company. He is a Director of Alleghany
Asset Management Inc., Montag & Caldwell,
Veredus Asset Management Inc., Baldwin &
Lyons, Inc., and the Boys and Girls Clubs
of Chicago.
Leonard F. Amari 57 Trustee Mr. Amari is a Partner at the law offices
734 North Wells Street of Amari & Locallo, a practice confined
Chicago, IL 60610 exclusively to the real estate tax
assessment process.
Dorothea C. Gilliam* 45 Trustee** Ms. Gilliam is Vice President of
171 North Clark Street Investments of the Alleghany Corporation,
Chicago, IL 60601 the parent company of Alleghany Asset
Management, Inc. Previously, she was an
Assistant Vice President of Chicago Title
and Trust Company and a former Trustee of
the Company. She is a chartered Financial
Analyst and a member of AIMR. She is a
Director of Armco Inc.
Robert A. Kushner 63 Trustee** Mr. Kushner was a Vice President,
30 Vernon Drive Secretary and General Counsel at Cyclops
Pittsburgh, PA 15228 Industries, Inc. until his retirement in
April 1992. He is currently a Vice
President, Board Member and Chairman of
Investment Committee and Co-Chairman of
Strategic Planning Committee of Pittsburgh
Dance Council.
Gregory T. Mutz 53 Trustee Mr. Mutz is President and CEO of The UICI
125 South Wacker Drive Companies and Chairman of the Board of
Suite 3100 Excell Global Services. He is also
Chicago, IL 60606 Chairman of the Board of AMLI Residential
Properties
Trust (a
NYSE
Multifamily
REIT)
and
Chairman
of the
Board of
AMLI
Commercial
Properties
Trust
LP, both
successor
companies
to AMLI
Realty
Co.,
which he
co-founded
in 1980.
Robert B. Scherer 57 Trustee** Mr. Scherer is President of The Rockridge
10010 Country Club Road Group, Ltd., which provides consulting
Woodstock, IL 60098 services to the title insurance industry.
Previously,
he was a
Senior
Vice
President
-
Strategy
and
Development
at
Chicago
Title
and
Trust
Company
prior to
October
1994.
Nathan Shapiro 63 Trustee Mr. Shapiro is the President of SF
1700 Ridge Investments, Inc., a broker/dealer and
Highland Park, IL 60035 investment banking firm. He is President
of New
Horizons
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.
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
Denis Springer 53 Trustee** Mr. Springer is Senior Vice President and
1700 E. Golf Road Chief Financial Officer of Burlington
3rd Floor Northern Santa Fe Corporation.
Schaumburg, IL 60173
Kenneth C. Anderson 35 President Mr. Anderson is President of Alleghany
171 North Clark Street (Chief Operating Officer) Investment Services, Inc. and a Senior
Chicago, IL 60601 Vice President of The Chicago Trust
Company
and has
been an
officer
since
1993. He
is
responsible
for all
business
activities
regarding
mutual
funds.
Mr.
Anderson
is a
Certified
Public
Accountant.
Gerald F. Dillenburg 32 Vice President, Mr. Dillenburg is a Vice President of The
171 North Clark Street Secretary and Treasurer Chicago Trust Company and has been the
Chicago, IL 60601 (Chief Financial Officer operations manager and compliance officer
and
Compliance
Officer)
of all
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
Advisers.
Mr.
Dillenburg
is a
Certified
Public
Accountant.
Debra Comsudes 35 Vice President Ms. Comsudes is a Vice President of Montag
1100 Atlanta Financial & Caldwell, Inc. since 1996. Previously,
Center she was a Portfolio Manager and Chief
3343 Peachtree Road, NE Investment Officer at Randy Seckman &
Atlanta, GA 30326-8151 Associates, Inc., a financial advisory
firm providing asset management primarily
to individual and small businesses. She
is a Chartered Financial Analyst
</TABLE>
* These Trustees are considered "interested persons" of the Funds as
defined under the 1940 Act. ** These Trustees were first elected on June 17,
1999.
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. The Trustees receive $3,000 for each Board Meeting attended, and an
annual retainer of $3,000. No officer or employee of The Chicago Trust Company
("Chicago Trust") or its 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.
Set forth below are the total fees which were paid to each of the
Trustees who are not "interested persons" during the fiscal period ended October
31, 1998.
Trustee Aggregate Fees Paid by the Company
Leonard F. Amari $9,375
Gregory T. Mutz $9,375
Nathan Shapiro $9,375
As of June 23, 1999, the Trustees and officers of the Company as a
group owned less than 1% of the outstanding shares of any class of each Fund,
except that Stuart Bilton held 6.8% of Alleghany/Chicago Trust Municipal Bond
Fund.
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
Listed below are the names and addresses of those shareowners who, as
of __________ ____, 1999, owned of record or beneficially of 5% or more of the
shares of the Funds. The shares held in the nominee names of Marshall & Ilsley
Trust Co. are owned of record by Chicago Trust. Alleghany Corporation
("Alleghany") is the owner of Alleghany Asset Management, Inc. ("AAM"), which is
the holding company of Chicago Trust and Montag & Caldwell, Inc. ("Montag and
Caldwell") and currently holds a 40% interest in Veredus Asset Management LLC
("Veredus"), the Investment Advisers for 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.
ALLEGHANY/MONTAG & CALDWELL GROWTH FUND
Class N
<TABLE>
<CAPTION>
<S> <C>
Shareowners Percentage Owned
Charles Schwab & Co., Inc. ______%
Special Custody Account for Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
MONTAG & CALDWELL GROWTH FUND
Class I
Shareowners Percentage Owned
The Bank of Mississippi _____%
c/o Trust
P.O. Box 1605
Jackson, MS 39215
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
Mac & Co. _____%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230
<PAGE>
ALLEGHANY/CHICAGO TRUST GROWTH & INCOME FUND
Class N
Shareowners Percentage Owned
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
ALLEGHANY/CHICAGO TRUST TALON FUND
Shareowners Percentage Owned
Miter & Co. ____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
ALLEGHANY/CHICAGO TRUST BALANCED FUND
Class N
Shareowners Percentage Owned
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
ALLEGHANY/MONTAG & CALDWELL BALANCED FUND
Class N
Shareowners Percentage Owned
Miter & Co. ____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
American Express Trust Company ____%
FBO American Express Trust Retirement Services
P.O. Box 534
Minneapolis, MN 55422
BNY Western Trust Company ____%
Columbia River Logscalers Pension
Two Union Square, Ste. 520
601 Union Street
Seattle, WA 98121
<PAGE>
Shareowners Percentage Owned
Miter & Co. ____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
----%
Davis & Company
C/O Marshall & Ilsley Trust Co.
C/O M&I Trust CO/OUTSOURCING
PO Box 2977
Milwaukee, WI 53202
MONTAG & CALDWELL BALANCED FUND
Class I
Shareowners Percentage Owned
----%
ALLEGHANY/CHICAGO TRUST MUNICIPAL BOND FUND
Shareowners Percentage Owned
Davis & Company ______%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
------%
Maxine Jackson LP
A Georgia Limited Partnership
c/o Henry Jackson Sole General Part
890 Auburn Road N.E.
Dacula, GA 30019
ALLEGHANY/CHICAGO TRUST MONEY MARKET FUND
Shareowners Percentage Owned
Davis & Company _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
<PAGE>
ALLEGHANY/CHICAGO TRUST SMALL CAP VALUE FUND
Shareowners Percentage Owned
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
Charles Schwab & Co., Inc. _____%
Special Custody Account for Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
ALLEGHANY/VEREDUS AGGRESSIVE GROWTH FUND
Shareowners Percentage Owned
Miter & Co. _____%
c/o Marshall & Ilsley Trust Co.
Attn: Outsourcing
P.O. Box 2977
Milwaukee, WI 53202
Family Physician Associates PSC _____%
James R. Smith David W. Wallace
David A Jones Edward L. Samesttees
515 Hospital Drive
Shelbyville, KY 40065
Chicago Trust Custodian: ____%
FBO John W. Oneil SEP IRA
21 Riding Ridge Road
Prospect, KY 40059
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreements
The advisory services provided by the Investment Adviser of each Fund,
and the fees received by it for such services, are described in the Prospectus.
The Investment Advisers for Alleghany/Chicago Trust Talon Fund,
Alleghany/Chicago Trust Bond Fund, Alleghany/Chicago Trust Small Cap Value Fund
and Alleghany/Veredus Aggressive Growth Fund have entered into Expense
Limitation Agreements with the Company, effective January 1, 1999, whereby they
have agreed to reimburse the Funds to the extent necessary to maintain total
annual operating expenses at 1.30%, 0.80%, 1.40% and 1.40%, respectively.
The Investment Advisers for Alleghany/Montag & Caldwell Growth Fund,
Alleghany/Montag & Caldwell Balanced Fund and Alleghany/Chicago Trust Municipal
Bond Fund may from time to time voluntarily waive a portion of their advisory
fees with respect to the Funds and/or reimburse a portion of the Funds'
expenses.
The investment advisory fees earned and waived by Chicago Trust and
Montag & Caldwell, as well as expenses reimbursed, with respect to the
applicable Funds for which each acts as Investment Adviser, are set forth below:
Fiscal year ended October 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Waived Fees
Gross Advisory Fees Net Advisory Fees and Reimbursed
Fund Earned by Advisers After Fee Waivers Expenses
Alleghany/Montag & Caldwell Growth Fund $ 9,438,160 $ 9,438,160 $ 0
Alleghany/Chicago Trust Growth & Income Fund $ 2,312,832 $ 2,312,832 $ 0
Alleghany/Chicago Trust Talon Fund $ 224,933 $ 181,227 $ 43,706
Alleghany/Montag & Caldwell Balanced Fund $ 971,351 $ 971,351 $ 0
Alleghany/Chicago Trust Balanced Fund $ 1,453,465 $ 1,453,465 $ 0
Alleghany/Chicago Trust Bond Fund $ 740,845 $ 523,299 $ 217,546
Alleghany/Chicago Trust Municipal Bond Fund $ 78,556 $ 0 $ 138,689
Alleghany/Chicago Trust Money Market Fund $ 1,026,684 $ 1,002,192 $ 24,492*
</TABLE>
* As of February 27, 1998, the Investment Adviser of Alleghany/Chicago
Trust Money Market Fund no longer waived fees or reimbursed expenses.
Fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Waived Fees
Gross Advisory Fees Net Advisory Fees and Reimbursed
Fund Earned by Advisers After Fee Waivers Expenses
Alleghany/Montag & Caldwell Growth Fund $3,800,124 $3,758,696 $ 41,428
Alleghany/Chicago Trust Growth & Income Fund $1,734,260 $1,604,403 $129,857
Alleghany/Chicago Trust Talon Fund $ 182,742 $ 97,146 $ 85,596
Alleghany/Montag & Caldwell Balanced Fund $ 400,868 $ 355,895 $ 44,973
Alleghany/Chicago Trust Balanced Fund $1,228,508 $1,126,305 $102,203
Alleghany/Chicago Trust Bond Fund $ 550,514 $ 328,975 $221,539
Alleghany/Chicago Trust Municipal Bond Fund $ 69,127 $ 0 $ 85,359
Alleghany/Chicago Trust Money Market Fund $1,004,607 $ 862,275 $142,332
Fiscal year ended October 31, 1996:
Waived Fees
Gross Advisory Fees Net Advisory Fees and Reimbursed
Fund Earned by Advisers After Fee Waivers Expenses
Alleghany/Montag & Caldwell Growth Fund $ 834,718 $ 800,071 $ 34,647
Alleghany/Chicago Trust Growth & Income Fund $1,324,207 $1,038,213 $285,994
Alleghany/Chicago Trust Talon Fund $ 112,153 $ 16,856 $ 95,297
Alleghany/Montag & Caldwell Balanced Fund $ 195,796 $ 110,391 $ 85,405
Alleghany/Chicago Trust Balanced Fund $1,075,631 $ 815,487 $260,144
Alleghany/Chicago Trust Bond Fund $ 416,462 $ 190,705 $225,757
Alleghany/Chicago Trust Municipal Bond Fund $ 67,672 $ 0 $ 70,437
Alleghany/Chicago Trust Money Market Fund $ 821,513 $ 647,188 $174,325
</TABLE>
Alleghany/Chicago Trust Small Cap Value Fund and Alleghany/Veredus
Aggressive Growth Fund commenced operations after October 31, 1998.
Under the Investment Advisory Agreements, the Investment Adviser 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 Adviser. An Investment Adviser 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 Adviser; (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.
Chicago Title and Trust, 171 North Clark Street, Chicago, Illinois
60601, an Illinois chartered trust company, was previously a wholly-owned
subsidiary of Alleghany. On June 18, 1998, Alleghany spun-off Chicago Title and
Trust to its shareholders as of that date. Chicago Title and Trust provided
investment advisory services to certain Funds of the Company since their
respective inception dates through October 30, 1995. As described more fully
below, Chicago Trust, an Illinois corporation, assumed those responsibilities on
October 30, 1995. Such Funds include: Alleghany/Chicago Trust Growth & Income
Fund; Alleghany/Chicago Trust Balanced Fund; Alleghany/Chicago Trust Bond Fund;
Alleghany/Chicago Trust Municipal Bond Fund; Alleghany/Chicago Trust Money
Market Fund; and Alleghany/Chicago Trust Talon Fund, with Talon Asset
Management, Inc. ("Talon") serving as Sub-Investment Adviser ("Sub-Adviser") for
that Fund.
Chicago Title and Trust formed AAM, a wholly-owned subsidiary, to
act as a holding company for certain of its financial services entities. On
October 30, 1995, Chicago Title and Trust transferred substantially all of its
fiduciary business and investment operations to Chicago Trust, a wholly-owned
subsidiary of AAM. As part of such transfer, Chicago Trust assumed all of
Chicago Title and Trust's obligations and liabilities under its existing
Investment Advisory Agreements. Chicago Title and Trust had entered into a
Guaranty Agreement with the Company on behalf of each Fund for which it served
as Investment Adviser, pursuant to which it guaranteed all the obligations and
liabilities of Chicago Trust under such Agreements. Following approval of the
Investment Advisory Agreements by the shareholders of the respective Funds on
June 17, 1999, with the exception of Alleghany/Chicago Trust Talon Fund, the
Funds are no longer parties to such Guaranty Agreement, which was terminated on
June 17, 1999 with respect to all Funds except Alleghany/Chicago Trust Talon
Fund. The investment management operations with respect to the Company remain
unchanged, and those persons or groups responsible for the investment management
of the applicable Funds of the Company continue to have such responsibility for
Chicago Trust.
Chicago Trust managed approximately $9.0 billion in assets at March
31, 1999, consisting primarily of pension and profit sharing accounts, high net
worth individuals, families and insurance companies. As part of the spin-off of
Chicago Title and Trust described above, Chicago Trust, an Illinois corporation,
became a direct wholly-owned subsidiary of AAM. AAM, located at Park Avenue
Plaza, New York City, New York 10055, is engaged through its subsidiaries in the
business of title insurance, reinsurance, other financial services and
industrial minerals.
As part of the corporate reorganization described above, Montag &
Caldwell became an indirect wholly-owned subsidiary of AAM. Prior to October 30,
1995, Montag & Caldwell was a wholly-owned subsidiary of Chicago Title and
Trust. AAM also holds a 40% interest in Veredus, with certain options over the
next nine years to acquire up to a 70% interest.
Sub-Investment Advisory Agreement
Pursuant to a Sub-Investment Advisory Agreement between
Alleghany/Chicago Trust and Talon, Talon provides an investment program for
Alleghany/Chicago Trust Talon Fund, including investment research and the
determination from time to time of the securities that will be purchased and
sold by the Fund, subject to the supervision of Chicago Trust and the Board of
Trustees of the Company. Prior to December 23, 1996, as compensation for its
services, Talon received from Chicago Trust an annual fee of 0.40% of the first
$8 million, 0.50% of the next $12 million, 0.70% of the next $230 million of the
average daily net assets of this Fund, and 0.75% of such average daily net
assets in excess of $250 million. Effective December 23, 1996, for months in
which the Fund's average daily net assets exceed $18 million, the Investment
Adviser will pay the Sub-Adviser a fee equal to 68.75% of the management fee
that the Investment Adviser receives from the Fund, net of any expense
reimbursement. For the months in which the Fund's average daily net assets are
$18 million or less, the Sub-Adviser will receive no fee. During the fiscal
years ended October 31, 1996, 1997 and 1998, Talon was paid $15,109, $60,407 and
$123,095 respectively, for sub-investment advisory services rendered.
Under the Sub-Investment Advisory Agreement, Talon is not liable for
any error of judgment or mistake of law or for any loss suffered by Chicago
Trust or the Funds in connection with the performance of the Sub-Investment
Advisory 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.
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"), 101 Federal Street, Boston, Massachusetts 02110,
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 the annual rate
set forth below multiplied by the average daily net assets of the Company:
Administration Fees:
.06% of less than $2 billion of the aggregate average daily net assets
of the Funds; and
.05% of aggregate average daily net assets of the Funds of at
least $2 billion but not more than $7 billion; and
.045% of the Funds' aggregate average daily net assets over $7
billion.
Custody Liaison Fees:
$10,000 for average daily net assets of a Fund less than $100
million; and
$15,000 for average daily net assets of a Fund of at least $100
million but not more than $500 million; and
$20,000 for average daily net assets of a Fund over $500 million.
<PAGE>
The following are the administrative fees paid to the Administrator for the
three most recent fiscal years:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Administrative Administrative Administrative
Fees FYE Fees FYE Fees FYE
Fund October 31, 1996 October 31, 1997 October 31, 1998
- ---- ---------------- ---------------- ----------------
FPS First Data
Alleghany/Montag & Caldwell Growth Fund $ 58,127 $ 76,898 $ 165,326 $ 741,210
Alleghany/Chicago Trust Growth & Income Fund $104,720 $ 52,175 $ 69,751 $ 191,695
Alleghany/Chicago Trust Talon Fund $ 9,096 $ 5,005 $ 6,670 $ 18,106
Alleghany/Chicago Trust Balanced Fund $ 83,563 $ 38,136 $ 47,246 $ 80,312
Alleghany/Montag & Caldwell Balanced Fund $ 15,232 $ 9,676 $ 17,554 $ 131,063
Alleghany/Chicago Trust Bond Fund $ 41,966 $ 21,291 $ 28,043 $ 87,388
Alleghany/Chicago Trust Municipal Bond Fund $ 6,481 $ 2,679 $ 3,007 $ 12,164
Alleghany/Chicago Trust Money Market Fund $113,018 $ 56,421 $ 65,373 $ 148,930
</TABLE>
Prior to June 1, 1997, FPS Broker Services, Inc. ("FPSB"), 3200 Horizon
Drive, King of Prussia, Pennsylvania 19406, acted as an Underwriter of the
Funds' shares for the purpose of facilitating the registration of shares of the
Funds under state securities laws and assisted in sales of shares pursuant to
the Underwriting Agreement approved by the Company's Trustees. Pursuant to its
Underwriter Compensation Agreement with the Company, FPSB was paid an annual
underwriter fee of $2,500 for each Class N Shares Fund and $2,000 for each Class
I Shares Fund ($22,000 per annum total for eight Class N Shares Funds and one
Class I Shares Fund), and certain other registration and transaction fees. For
the fiscal years ended October 31, 1995 and 1996, an aggregate of $18,125 and
$20,833 was paid on behalf of the then-existing Funds.
Effective June 1, 1997, First Data Distributors, Inc. replaced FPS Broker
Services, Inc. as principal underwriter and distributor of the Funds' shares.
First Data Distributors, Inc. is located at 4400 Computer Drive, Westborough,
Massachusetts 01581.
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. Amounts spent on behalf of each Fund pursuant to
such Plan during the fiscal year ended October 31, 1998, are set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Compensation Compensation
Distribution to Broker to Sales
Fund Printing Services Dealers Personnel
Alleghany/Montag & Caldwell Growth Fund $36,309 $95,715 $1,473,381 $35,453
Alleghany/Chicago Trust Growth & Income Fund $15,739 $40,479 $ 204,442 $30,397
Alleghany/Chicago Trust Talon Fund $ 1,768 $ 5,764 $ 13,187 $ 3,436
Alleghany/Chicago Trust Balanced Fund $ 9,899 $22,299 $ 129,505 $ 1,910
Alleghany/Montag & Caldwell Balanced Fund $ 7,847 $15,035 $ 192,871 $ 5,334
Alleghany/Chicago Trust Bond Fund $ 6,663 $14,914 $ 103,761 $ 3,893
Alleghany/Chicago Trust Municipal Bond Fund $ 619 $ 1,613 $ 647 $ 93
Fund Marketing Service Providers Total
Alleghany/Montag & Caldwell Growth Fund $ 545,737 $36,471 $2,223,067
Alleghany/Chicago Trust Growth & Income Fund $ 632,211 $63,994 $ 987,262
Alleghany/Chicago Trust Talon Fund $ 33,461 $ 428 $ 58,044
Alleghany/Chicago Trust Balanced Fund $ 309,224 $46,546 $ 342,223
Alleghany/Montag & Caldwell Balanced Fund $ 110,846 $10,290 $ 519,384
Alleghany/Chicago Trust Bond Fund $ 129,141 $21,330 $ 279,703
Alleghany/Chicago Trust Municipal Bond Fund $ 7,108 $ 0 $ 10,080
</TABLE>
Class N shares of Alleghany/Chicago Trust Small Cap Value Fund and
Alleghany/Chicago Trust Veredus Aggressive Growth Fund commenced operations on
November 10, 1998 and July 2, 1998, respectively, and therefore, do not have a
full year of performance history.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Investment Adviser or Sub-Adviser 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 Adviser, 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 Company will attempt to obtain the best overall price and most
favorable execution of transactions in portfolio securities. However, subject to
policies established by the Board of Trustees of the Company, a Fund may pay a
broker-dealer a commission for effecting a portfolio transaction for a Fund in
excess of the amount of commission another broker-dealer would have charged if
Chicago Trust, Montag & Caldwell or Talon, as appropriate, determines in good
faith that the commission paid was reasonable in relation to the brokerage or
research services provided by such broker-dealer, viewed in terms of that
particular transaction or such firm's overall responsibilities with respect to
the clients, including the Fund, as to which it exercises investment discretion.
In selecting and monitoring broker-dealers and negotiating commissions,
consideration will be given to a broker-dealer's reliability, the quality of its
execution services on a continuing basis and its financial condition. Subject to
the foregoing considerations, preference may be given in executing portfolio
transactions for a Fund to brokers which have sold shares of that Fund.
The Investment Adviser or Sub-Adviser 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 Adviser or Sub-Adviser, as the case
may be, in servicing all of their respective accounts; not all such services may
be used in connection with the Funds. The Investment Adviser and Sub-Adviser
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 Adviser and Sub-Adviser, however, the results of such procedures
will, on the whole, be in the best interest of each of the clients.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Brokerage Brokerage Brokerage
Commissions Commissions Commissions
FYE FYE FYE
Fund October 31, 1996 October 31, 1997 October 31, 1998
- ---- ---------------- ---------------- ----------------
Alleghany/Montag & Caldwell Growth Fund $ 204,066 $ 537,610 $ 1,379,506
Alleghany/Chicago Trust Growth & Income Fund $ 122,722 $ 130,947 $ 243,509
Alleghany/Chicago Trust Talon Fund $ 40,019 $ 55,212* $ 69,511
Alleghany/Chicago Trust Balanced Fund $ 66,370 $ 58,087 $ 86,435
Alleghany/Montag & Caldwell Balanced Fund $ 17,700 $ 34,393 $ 102,195
Alleghany/Chicago Trust Bond Fund N/A N/A N/A
Alleghany/Chicago Trust Municipal Bond Fund N/A N/A N/A
Alleghany/Chicago Trust Money Market Fund N/A N/A N/A
</TABLE>
* Of this amount, $1,300 paid to Talon Securities, Inc. ("TSI"), an
affiliate of Talon, the Fund's Sub-Adviser. The amount paid to TSI
represents: (a) 0.20% of the aggregate brokerage commissions received
by TSI from all clients during the fiscal year ended October 31, 1997;
and (b) 2.35% of the total commissions paid by Alleghany/Chicago Trust
Talon Fund to all brokers through whom trades were placed during the
Fund's fiscal year ended October 31, 1997.
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 and by requirements which enable the Funds to receive
favorable tax treatment. In any event, portfolio turnover is generally not
expected to exceed 100% in the Funds, except for Alleghany/Chicago Trust Talon
Fund in which it is not expected to exceed 150%. 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
net capital gains are realized, distributions derived from such gains are
treated as ordinary income for Federal income tax purposes.
The portfolio turnover rates for the Funds for their most recent
fiscal periods may be found under "FINANCIAL HIGHLIGHTS" in the Prospectus
except for the Class I shares of Alleghany/Chicago Trust Growth & Income Fund
and Alleghany/Chicago Trust Balanced Fund, which had not yet commenced
operations. Alleghany/Chicago Trust Talon Fund experienced portfolio turnover
rates of 112.72% and 78.33% for the fiscal years ended October 31, 1997 and
October 31, 1998, respectively. The Fund is periodically repositioned in the
market as it seeks capital preservation, value and competitive performance.
Portfolio trades are executed in accordance with the Fund's investment
objective, in the best judgment of management.
NET ASSET VALUE
The net asset value per share of each Fund is computed as of the close
of regular trading on the NYSE on each day the NYSE is open for trading. The
NYSE is closed on New Year's Day, Martin Luther King Jr.'s Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
The net asset value per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. The portfolio securities of each Fund listed or traded on a stock
exchange are valued at the latest sale price. If no sale price is reported, the
mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices. When
market quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial
pricing service or at the mean of the most recent bid and asked prices provided
by investment dealers in accordance with procedures established by the Board of
Trustees. Options, futures and options on futures are valued at the settlement
price as determined by the appropriate clearing corporation.
The securities held in the portfolio of Alleghany/Chicago Trust
Money Market Fund, and the debt securities with maturities of sixty days or less
held by the other Funds, are valued at amortized cost. When a security is valued
at amortized cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any premium or accretion of
discount, unless de minimis, regardless of the impact of fluctuating interest
rates on the market value of the instrument.
DIVIDENDS
Income dividends and capital gain distributions are reinvested
automatically in additional shares at net asset value, unless you elect to
receive them in cash. Distribution options may be changed at any time by
requesting a change in writing. Any check in payment of dividends or other
distributions which cannot be delivered by the Post Office or which remains
uncashed for a period of more than one year may be reinvested in the
shareowner's account at the then current net asset value and the dividend option
may be changed from cash to reinvest. Dividends are reinvested on the exdividend
date (the "ex-date") at the net asset value determined at the close of business
on that date. Please note that shares purchased shortly before the record date
for a dividend or distribution may have the effect of returning capital although
such dividends and distributions are subject to taxes.
Dividends paid by Montag & Caldwell Growth Fund, Alleghany/Chicago
Trust Growth & Income Fund, Montag & Caldwell Balanced Fund and
Alleghany/Chicago Trust Balanced Fund with respect to Class I shares are
calculated in the same manner and at the same time. Both Class N and Class I
shares of the Fund will share proportionately in the investment income and
general expenses of the Fund, except that the per share dividends of Class N
shares will differ from the per share dividends of Class I shares as a result of
class-specific expenses.
TAXES
Each Fund intends to qualify or to continue to qualify each year as a
regulated investment company under the Code.
In order to so qualify, 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) derive less than 30% of its gross
income from gains from the sale or other disposition of securities or certain
futures and options thereon held for less than three months ("short-short
gains"); (iii) distribute at least 90% of its dividend, interest and certain
other taxable income each year; and (iv) 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 28% rate gains or 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. Dividends paid by a Fund may qualify in part for the 70%
dividends-received deduction for corporations, provided however, that those
shares have been held for at least 45 days.
An investment in Alleghany/Chicago Trust Municipal Bond Fund is not
intended to constitute a balanced investment program. Shares of this Fund would
not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans, and
IRAs since such plans and accounts are generally tax-exempt and, therefore, not
only would the shareowner receive less income and not gain any benefit from the
Fund's dividend being tax-exempt, but such dividends would be ultimately taxable
to the beneficiaries when distributed.
In order for Alleghany/Chicago Trust Municipal Bond Fund to pay
exempt-interest dividends for any taxable year, at the close of each taxable
quarter, at least 50% of the aggregate value of the Fund's portfolio must
consist of exempt-interest obligations. Within 60 days after the close of its
taxable year, the Fund will notify its shareowners of the portion of the
dividends paid by the Fund which constitutes exempt-interest dividends with
respect to such taxable year.
The Funds will notify shareowners each year of the amount of dividends
and distributions, including the amount of any distribution of 28% rate gains
and 20% rate gains, and the portion of its dividends which qualify for the 70%
deduction.
Dividends and distributions also may be subject to state and local
taxes. Shareowners are urged to consult their tax Advisers regarding specific
questions as to Federal, state and local taxes.
The foregoing discussion relates solely to U.S. Federal income tax law.
Non-U.S. investors should consult their tax Advisers 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).
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
Total return is defined as the change in value of an investment in
a Fund over a particular period, assuming that all distributions have been
reinvested. Thus, total return reflects not only income earned, but also
variations in share prices at the beginning and end of the period. Average
annual total return is determined by computing the annual compound return over a
stated period of time that would have produced a Fund's cumulative total return
over the same period if the Fund's performance had remained constant throughout.
The Funds that compute their average annual total returns do so by
determining the average annual compounded rates of return during specified
periods that equate 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:
1
Average Annual Total Return = (ERV) n - 1
---
P
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
T = average annual total return
The Funds that compute their aggregate total returns over a specified
period do so 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 - 1
---
P
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 o
the period
P = hypothetical initial payment of $1,000
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.
The average annual total returns for the Funds which quote such
performance were as follows for the periods shown:
<TABLE>
<CAPTION>
<S> <C> <C>
One Year Ended From Inception of Fund
Series 10/31/98 through 10/31/98
Alleghany/Montag & Caldwell Growth Fund - Class N 17.90% 28.26%
Alleghany/Montag & Caldwell Growth Fund - Class I 18.24% 26.77%
Alleghany/Chicago Trust Growth & Income Fund 25.43% 21.72%
Alleghany/Chicago Trust Talon Fund (10.54)% 15.99%
Alleghany/Chicago Trust Balanced Fund 18.50% 18.30%
Alleghany/Montag & Caldwell Balanced Fund 14.46% 20.68%
Alleghany/Chicago Trust Bond Fund 7.66% 6.79%
Alleghany/Chicago Trust Municipal Bond Fund 6.17% 4.50%
</TABLE>
Return numbers are not available for Class N shares of
Alleghany/Chicago Trust Small Cap Value Fund and
Alleghany/Veredus Aggressive Growth Fund or Class I shares
of Alleghany/Chicago Trust Growth & Income Fund, Montag &
Caldwell Balanced Fund and Alleghany/Chicago Trust
Balanced Fund.
Yield and Tax-Equivalent Yield
Yield refers to net income generated by an investment over a particular
period of time, which is annualized (assumed to have been generated for one
year) and expressed as an annual percentage rate. Effective yield is yield
assuming that all distributions are reinvested. Effective yield will be slightly
higher than the yield because of the compounding effect of the assumed
investment. Yield for Alleghany/Chicago Trust Money Market Fund over a seven-day
period is called current yield. For Alleghany/Chicago Trust Bond Fund and
Chicago Trust Municipal Bond Fund, yield is calculated by dividing the net
investment income per share earned during a 30-day period by the maximum
offering price per share on the last day of the period, and annualizing the
result.
Alleghany/Chicago Trust Municipal Bond Fund also measures its
performance by a tax-equivalent yield. This reflects the taxable yield that an
investor at the highest marginal Federal income tax rate would have to receive
to equal the primarily tax-exempt yield from this Fund. Tax-equivalent yield is
calculated by dividing the municipal yield by the difference between 100% and an
investor's marginal tax rate.
Yield of Alleghany/Chicago Trust Money Market Fund
The yield of this Fund for a seven-day period (the "base period") will
be computed by determining the net change in value (calculated as set forth
below) of a hypothetical account having a balance of one share at the beginning
of the period, dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, but will not include realized gains or
losses or unrealized appreciation or depreciation on portfolio investments.
Yield may also be calculated on a compound basis (the "effective yield") which
assumes that net income is reinvested in shares of the Fund at the same rate as
net income is earned for the base period.
The yield and effective yield of Alleghany/Chicago Trust Money
Market Fund will vary in response to fluctuations in interest rates and in the
expenses of the Fund. For comparative purposes, the current and effective yields
should be compared to current and effective yields offered by competing
financial institutions for the same base period and calculated by the methods
described above. For the seven-day period ended October 31, 1998,
Alleghany/Chicago Trust Money Market Fund had a yield of 4.89% and an effective
yield of 5.01%.
Yields of Alleghany/Chicago Trust Bond Fund and Alleghany/Chicago Trust
Municipal Bond Fund
The yield of each of these Funds is calculated by dividing the net
investment income per share (as described below) earned by the Fund during a
30-day (or one month) period by the maximum offering price per share on the last
day of the period and annualizing the result on a semi-annual basis by adding
one to the quotient, raising the sum to the power of six, subtracting one from
the result and then doubling the difference. A Fund's net investment income per
share earned during the period is based on the average daily number of shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements.
This calculation can be expressed as follows:
YIELD = 2 [(a - b + 1) 6 - 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = maximum offering price per share on the last
day of the period
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on any debt obligations held by a Fund is calculated by
computing the yield to maturity of each obligation held by that Fund based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day of the month, the purchase price
(plus actual accrued interest) and dividing the result by 360 and multiplying
the quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by that Fund. For
purposes of this calculation, it is assumed that each month contains 30 days.
The date on which the obligation reasonably may be expected to be called or, if
none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount premium. The amortization schedule will be adjusted monthly to reflect
changes in the market values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include
all recurring fees charged by a Fund to all shareowner accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Interest earned on tax-exempt obligations that are issued without
original issue discount and have a current market discount is calculated by
using the coupon rate of interest instead of the yield to maturity. In the case
of tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original discount (market discount), the yield to maturity is the
imputed rate based on the original issue discount calculation. On the other
hand, in the case of tax-exempt obligations that are issued with original issue
discount but which have discounts based on current market value that are less
than the then-remaining portion of the original discount (market premium), the
yield to maturity is based on the market value.
With respect to mortgage- or other receivables-backed obligations which
are expected to be subject to monthly payments of principal and interest
("pay-downs"): (i) gain or loss attributable to actual monthly pay-downs are
accounted for as an increase or decrease to interest income during the period;
and (ii) each Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the weighted average date is not available or
(b) not to amortize discount or premium on the remaining security.
For the 30-day period ended October 31, 1998, Alleghany/Chicago Trust
Bond Fund had a yield of 5.19%.
For the 30-day period ended October 31, 1998, Alleghany/Chicago Trust
Municipal Bond Fund had a yield of 3.95%.
Tax-Equivalent Yield
The "tax-equivalent yield" of Alleghany/Chicago Trust Municipal Bond
Fund is computed by: (a) dividing the portion of the yield (calculated as above)
that is exempt from Federal income tax by one minus a stated Federal income tax
rate; and (b) adding to that figure to that portion, if any, of the yield that
is not exempt from Federal income tax.
The tax-equivalent yield of this Fund reflects the taxable yield that
an investor at the stated marginal Federal income tax rate would have to receive
to equal the primarily tax-exempt yield from Alleghany/Chicago Trust Municipal
Bond Fund. Before investing in this Fund, you may want to determine which
investment -- tax-free or taxable -- will result in a higher after-tax yield. To
do this, divide the yield on the tax-free investment by the decimal determined
by subtracting from one the highest Federal tax rate you pay. For example, if
the tax-free yield is 5% and your maximum tax bracket is 36%, the computation
is:
5% Tax-Free Yield - (1/.36 Tax Rate) = 5%/.64% = 7.81% Tax Equivalent Yield
In this example, your after-tax return would be higher from the 5%
tax-free investment if available taxable yields are below 7.81%. Conversely, the
taxable investment would provide a higher yield when taxable yields exceed
7.81%.
For the 30-day period ended October 31, 1998, Alleghany/Chicago Trust
Municipal Bond Fund had a tax-equivalent yield of 4.11%, based on the tax-free
yield of 2.63% shown above, and assuming a shareowner is at the 36% Federal
income tax rate.
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.
Description of Shares
Each Fund is authorized to issue an unlimited number of shares of
beneficial interest without par value. Currently, there is only one class of
shares issued by the Funds of the Company, except for Montag & Caldwell Growth
Fund, Alleghany/Chicago Trust Growth & Income Fund, Montag & Caldwell Balanced
Fund and Alleghany/Chicago Trust Balanced Fund. These Funds offers two classes
of shares: Class N shares and Class I shares. Since these classes have different
expenses, i.e., Class I shares do not pay a distribution plan fee, their
performance will vary and it is anticipated that the Class N dividends will be
lower than the Class I dividends. Shares of each Fund represent equal
proportionate interests in the assets of that Fund only and have identical
voting, dividend, redemption, liquidation, and other rights except that Class I
shares of Montag & Caldwell Growth Fund, Alleghany/Chicago Trust Growth & Income
Fund, Montag & Caldwell Balanced Fund and Alleghany/Chicago Trust Balanced Fund
have no rights with respect to that Fund's distribution plan. All shares issued
are fully paid and non-assessable, and shareowners have no preemptive or other
right to subscribe to any additional shares and no conversion rights.
Information about Class I shares is available by calling the Fund at (800)
992-8151.
Class I shares of Montag & Caldwell Growth Fund, Alleghany/Chicago
Trust Growth & Income Fund, Montag & Caldwell Balanced Fund and
Alleghany/Chicago Trust Balanced Fund may be purchased directly from the Funds
at the net asset value next determined after receipt of the order in proper
form. The minimum initial investment is $5 million for Montag & Caldwell Growth
Fund, Alleghany/Chicago Trust Growth & Income Fund, Alleghany/Chicago Trust
Balanced Fund and $1 million for Montag & Caldwell Balanced Fund; there is no
minimum subsequent investment. For purposes of the investment minimum, the
balances of Fund accounts of clients of a financial consultant may be aggregated
in determining whether the minimum investment has been met. This aggregation may
also be applied to the accounts of immediate family members (i.e., a person's
spouse, parents, children, siblings and in-laws). In addition, the aggregation
may be applied to the related accounts of a corporation or other legal entity.
The Funds may waive the minimum initial investment by obtaining a letter of
intent, evidencing an investor's intention of meeting the minimum initial
investment in a specified period of time as continually reviewed and approved by
the Board. The minimum investment is waived for Trustees of the Trust and
employees of the Investment Adviser and its affiliates. There is no sales load
or charge in connection with the purchase of shares. The Company reserves the
right to reject any purchase order and to suspend the offering of shares of the
Funds. The Funds also reserve the right to change the initial and subsequent
investment minimums.
<PAGE>
Voting Rights
Each issued and outstanding full and fractional share of a Fund is
entitled to one full and fractional vote in the Fund. Shares of a Fund
participate equally in regard to dividends, distributions, and liquidations with
respect to that Fund subject to preferences (such as Rule 12b-1 distribution
fees), rights or privileges of any share class. Shareowners have equal
non-cumulative voting rights. Class N shares have exclusive voting rights with
respect to the distribution plan. On any matter submitted to a vote of
shareowners, shares of each Fund will vote separately except when a vote of
shareowners in the aggregate is required by law, or when the Trustees have
determined that the matter affects the interests of more than one Fund, in which
case the shareowners of all such Funds shall be entitled to vote thereon.
Shareowner Meetings
The Trustees of the Company do not intend to hold annual meetings of
shareowners of the Funds. The Trustees have undertaken to the SEC, however, that
they will promptly call a meeting for the purpose of voting upon the question of
removal of any Trustee when requested to do so by not less than 10% of the
outstanding shareowners of the Funds. In addition, subject to certain
conditions, shareowners of the Funds may apply to the Company to communicate
with other shareowners to request a shareowners' meeting to vote upon the
removal of a Trustee or Trustees.
Certain Provisions of Trust Instrument
Under Delaware law, the shareowners of the Funds will not be personally
liable for the obligations of any Fund; a shareowner is entitled to the same
limitation of personal liability extended to shareowners of corporations. To
guard against the risk that the Delaware law might not be applied in other
states, the Trust Instrument requires that every written obligation of the
Company or a Fund contain a statement that such obligation may only be enforced
against the assets of the Company or Fund and provides for indemnification out
of Company or Fund property of any shareowner nevertheless held personally
liable for Company or Fund obligations.
Expenses
Expenses attributable to the Company, but not to a particular Fund,
will be allocated to each Fund on the basis of relative net assets. Similarly,
expenses attributable to a particular Fund, but not to a particular class
thereof, will be allocated to each class on the basis of relative net assets.
General Company expenses may include but are not limited to: insurance premiums;
Trustee fees; expenses of maintaining the Company's legal existence; and fees of
industry organizations. General Fund expenses may include but are not limited
to: audit fees; brokerage commissions; registration of Fund shares with the SEC
and notification fees to the various state securities commissions; fees of the
Funds' Custodian, Administrator, Sub-Administrator and Transfer Agent or other
"service providers"; costs of obtaining quotations of portfolio securities; and
pricing of Fund shares.
Class-specific expenses relating to distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares and any other
costs relating to implementing or amending such plan (including obtaining
shareowner approval of such plan or any amendment thereto) will be borne solely
by shareowners of such class or classes. Other expense allocations which may
differ between classes, or which are determined by the Trustees to be class
specific, may include but are not limited to: printing and postage expenses
related to preparing and distributing required documents such as shareowner
reports, prospectuses, and proxy statements to current shareowners of a specific
class; SEC registration fees and state "blue sky" fees incurred by a specific
class; litigation or other legal expenses relating to a specific class; expenses
incurred as a result of issues relating to a specific class; and different
transfer agency fees attributable to a specific class.
Notwithstanding the foregoing, the Investment Adviser or other service
provider may waive or reimburse the expenses of a specific class or classes to
the extent permitted under Rule 18f-3 under the 1940 Act.
Custodian
Bankers Trust Company ("Bankers Trust"), 16 Wall Street, New York,
New York 10005 serves as Custodian of the Company's assets pursuant to a
Custodian Agreement. Under such Agreement, Bankers Trust: (i) maintains a
separate account or accounts in the name of each Fund; (ii) holds and transfers
portfolio securities on account of each Fund; (iii) accepts receipts and makes
disbursements of money on behalf of each Fund; (iv) collects and receives all
income and other payments and distributions on account of each Fund's
securities; and (v) makes periodic reports to the Board of Trustees concerning
each Fund's operations.
Transfer Agent
Investor Services Group, 4400 Computer Drive, Westborough,
Massachusetts 01581 serves as Transfer Agent for the Company.
Reports to Shareowners
Shareowners will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by the
Funds' independent certified public accountants. Inquiries regarding a Fund may
be directed to the Investment Adviser or the Administrator at (800) 992-8151.
KPMG LLP, 303 E. Wacker Drive, Chicago, Illinois is the Company's
independent public accountant and auditor.
<PAGE>
APPENDIX A
Debt Ratings
Moody's Investors Service, Inc. describes classifications of corporate bonds as
follows:
"Aaa" -- These bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
"AA" -- These bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
highgrade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in "Aaa" securities.
"A" -- These bonds possess many favorable investment attributes and are to
be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa" -- These bonds are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
"Ba" -- These bonds are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
"B" -- These bonds generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
"Caa" -- These bonds are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
"Ca" -- These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings.
"C" -- These bonds are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's may modify a rating of "Aa", "A" or "Baa" by adding numerical
modifiers 1, 2, 3 to show relative standing within these categories.
Standard & Poor's Corporation describes classifications of corporate and
municipal debt as follows:
"AAA" -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest
and repay principal.
"AA" -- These bonds also qualify as high-quality debt obligations. Their
capacity to pay interest and repay principal is very strong, and
differs from the "AAA" issues only in small degree.
"A" -- These bonds have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
"BBB" -- These bonds are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in the higher rated categories.
"BB", "B", "CCC", "CC", or "C" -- These bonds are regarded as having
predominantly speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal. "BB" indicates the lowest degree of
speculation and "C" the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major exposures to adverse conditions. Debt rated "BB"
has less near-term vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments. The "BB" rating category is also used
for debt subordinated to senior debt that is assigned an actual or implied
"BBB-" rating. Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Debt rated "CCC" has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. The rating "CC" is
typically applied to debt subordinated to senior debt which is assigned an
actual or implied "CCC" rating. The rating "C" is typically applied to debt
subordinated to senior debt which is assigned an actual or implied "CCC-" debt
rating.
"CI" -- This rating is reserved for income bonds on which no interest is
being paid.
"D" -- Debt is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-) -- The ratings from "AA" through "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
APPENDIX B
FINANCIAL STATEMENTS
for
Alleghany/Montag & Caldwell Growth Fund
Alleghany/Chicago Trust Growth & Income Fund
Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
Fiscal Year Ended
October 31, 1998
ANNUAL REPORT TO SHAREOWNERS
<PAGE>
OCTOBER 31, 1998 ANNUAL REPORT
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
[LOGO] ALLEGHANY FUNDS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1 Letter from the Chairman
2 Summary Information
Management Discussion & Analysis:
4 Montag & Caldwell Growth Fund
5 Chicago Trust Growth & Income Fund
6 Chicago Trust Talon Fund
7 Chicago Trust Balanced Fund
8 Montag & Caldwell Balanced Fund
9 Chicago Trust Bond Fund
10 Chicago Trust Municipal Bond Fund
11 Chicago Trust Money Market Fund
Schedule of Investments:
12 Montag & Caldwell Growth Fund
13 Chicago Trust Growth & Income Fund
15 Chicago Trust Talon Fund
16 Chicago Trust Balanced Fund
20 Montag & Caldwell Balanced Fund
23 Chicago Trust Bond Fund
26 Chicago Trust Municipal Bond Fund
29 Chicago Trust Money Market Fund
32 Statement of Assets and Liabilities
34 Statement of Operations
36 Statement of Changes in Net Assets
40 Financial Highlights
49 Notes to Financial Statements
55 Independent Auditors' Report
</TABLE>
[LOGO] ALLEGHANY FUNDS
<PAGE>
Dear Shareowner,
We began our odyssey to build a top quality mutual fund group in November 1993.
As we approach our fifth anniversary, we are pleased with the progress we have
made and are excited with new developments in the Alleghany Fund family.
Our two flagship funds, the Chicago Trust Growth & Income Fund and the Montag &
Caldwell Growth Fund, continue to deliver outstanding investment performance.
Both rank in the top 5 percent of funds in their respective Lipper investment
categories for the three-year period ended October 31, 1998 (see table below).
Our two balanced funds, the Montag & Caldwell Balanced Fund and Chicago Trust
Balanced Fund, also rank in the top quartile among their peers. Among 278
balanced funds monitored by Lipper Analytical Services, the Montag & Caldwell
Fund ranks 9th, and the Chicago Trust Fund 22nd, for the three years ended
October 31, 1998. We have also achieved solid results with Chicago Trust Bond
Fund, Talon Fund and Money Market Fund. All rank in the top third among their
peers in their respective Lipper peer groups for the three years ended October
31, 1998.
We are pleased to announce a new fund, the Alleghany/Chicago Trust SmallCap
Value Fund. The Fund seeks long-term total return by using a risk-averse,
disciplined strategy of investing in smaller companies. It is managed by
Patricia Falkowski, a nationally known institutional specialist in small-cap
management and research. Prior to joining Chicago Trust, she managed UAM FMA's
Small Company Fund, an outstanding performer and a "Money 100" Fund. Subject to
regulatory and shareowner approval, we will soon add a small cap growth fund and
two international funds.
Thank you for your support of Alleghany Funds. We will continue to do all that
we can to meet--and exceed--your long-term expectations.
<TABLE>
<CAPTION>
TOTAL RETURN FOR 3 YEARS ENDED 10/31/98 TOTAL RETURN FOR 1 YEAR ENDED 10/31/98 AVERAGE ANNUAL TOTAL RETURN
RANK AMONG SIMILAR FUNDS (LIPPER) RANK AMONG SIMILAR FUNDS (LIPPER) SINCE INCEPTION AS OF 10/31/98
FOR SAME TIME PERIOD* FOR SAME TIME PERIOD* (INCEPTION DATE)
--------------------------------------- -------------------------------------- ------------------------------
<S> <C> <C> <C>
M&C GROWTH - N CLASS 104.96% 17.90% 28.26%
22 out of 577 227 out of 944 (11/02/94)
Growth Funds GrowthFunds
CT GROWTH & INCOME 99.35% 25.43% 21.72%
18 out of 456 8 out of 725 (12/13/93)
Growth & Income Funds Growth & Income Funds
CT TALON 51.06% -10.54% 15.99%
58 out of 180 251 out of 302 (09/19/94)
Mid-Cap Funds Mid-Cap Funds
CT BALANCED 66.82% 18.50% 18.30%
22 out of 278 9 out of 395 (09/21/95)
Balanced Funds Balanced Funds
M&C BALANCED 71.20% 14.46% 20.68%
9 out of 278 52 out of 395 (11/02/94)
Balanced Funds Balanced Funds
CT BOND 23.93% 7.66% 6.79%
43 out of 158 142 out of 218 (12/13/93)
Intermediate Investment Grade Intermediate Investment Grade
Debt Funds Debt Funds
CT MONEY MARKET 16.37% 5.25% 4.98%
48 out of 265 55 out of 310 (12/14/93)
Money Market Funds Money Market Funds
</TABLE>
Sincerely,
/s/ Stuart D. Bilton
Stuart D. Bilton
Chairman
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE PERFORMANCE.
* Lipper Analytical Services, Inc. (Lipper) is the source of the rankings,
which are based on total return fund performance for the one year ended
October 31, 1998, and the three years ended October 31, 1998, for funds of
similar investment objectives. The Lipper rankings listed include all
classes of multiple-class funds. Certain expenses for all of the ranked
Alleghany Funds were subsidized (by the Chicago Trust Company and Montag &
Caldwell, Inc.) during the ranking period for the one year ended October
31, 1998, and the three years ended October 31, 1998.
The Alleghany Funds are no-load mutual funds distributed by First Data
Distributors, Inc., Westborough, MA 01581. This is not an offer to sell or a
solicitation of an offer to buy shares of any of the Funds described. Investment
return and pricipal of value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. This information must be accompanied or preceded by a prospectus.
1
<PAGE>
ALLEGHANY FUNDS
PERFOMANCE FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL GROWTH FUND
CLASS N (RETAIL) CLASS I (INSTITUTIONAL) CHICAGO TRUST GROWTH & INCOME FUND
<S> <C> <C> <C>
Total Returns:
1 Year 17.90% 18.24% 25.43%
Three Year
Average Annual 27.02% N/A 25.86%
Average Annual
Since Inception 28.26% 26.77% 21.72%
Value of $10,000 $27,027 $17,409 $26,090
from Inception
Date 11/2/94 6/28/96 12/13/93
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS as of October 31, 1998
<S> <C> <C> <C> <C>
Company and
% of Total Net
Assets
Johnson & Johnson 4.68% Sysco Corp. 3.87%
McDonald's Corp. 4.60% General Electric Co. 3.59%
Bristol-Myers Squibb Co. 4.44% EMC Corp. 3.56%
Pfizer, Inc. 4.43% Walgreen Co. 3.51%
Gillette Co. 4.38% Federal Home Loan Mortgage Corp. 3.39%
Procter & Gamble Co. 4.33% Paychex, Inc. 3.30%
Coca-Cola Co. 3.88% Merck & Co., Inc. 2.97%
Eli Lilly & Co. 3.51% Schwab (Charles) Corp. 2.95%
Medtronic, Inc. 3.41% Cardinal Health, Inc. 2.93%
Intel Corp. 3.38% American International Group, Inc. 2.92%
</TABLE>
<TABLE>
<CAPTION>
CHICAGO TRUST TALON FUND CHICAGO TRUST BALANCED FUND
<S> <C> <C>
Total Returns:
1 Year (10.54)% 18.50%
Three Year
Average Annual 14.74% 18.60%
Average Annual
Since Inception 15.99% 18.30%
Value of $10,000 $18,413 $16,862
from Inception
Date 9/19/94 9/21/95
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS as of October 31, 1998
<S> <C> <C> <C> <C>
Company and
% of Total Net
Assets
Starbucks Corp. 6.39% Federal Home Loan Mortgage Corp. 2.36%
R.R. Donnelley & Sons Co. 6.07% Walgreen Co. 2.22%
Cerner Corp. 5.61% General Electric Co. 2.19%
Corning Inc. 5.59% Cintas Corp. 2.07%
Compaq Computer Corp. 5.57% EMC Corp. 2.05%
St. Paul Bancorp, Inc. 5.26% American International Group, Inc. 2.04%
Mylan Laboratories Inc. 5.15% Paychex, Inc. 2.04%
Teva Pharmaceutical Industries Ltd. 4.34% Pfizer, Inc. 1.96%
U. S. Treasury Bill, 4.196%, 04/15/99 4.32% Sysco Corp. 1.96%
Helmerich & Payne, Inc. 4.09% Illinois Tool Works, Inc. 1.90%
</TABLE>
2
<PAGE>
ALLEGHANY FUNDS
PERFOMANCE FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL BALANCED FUND CHICAGO TRUST BOND FUND
<S> <C> <C>
Total Returns:
1 Year 14.46% 7.66%
Three Year
Average Annual 19.63% 7.41%
Average Annual
Since Inception 20.68% 6.79%
Value of $10,000 $21,185 $13,778
from Inception
Date 11/2/94 12/13/93
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS as of October 31, 1998
<S> <C> <C> <C> <C>
Company and
% of Total Net
Assets
Johnson & Johnson 3.18% U.S. Treasury Note, 7.250%, 05/15/04 3.89%
Pfizer, Inc. 3.12% U.S. Treasury Bond, 6.250%, 08/15/23 3.84%
Procter & Gamble Co. 3.09% U.S. Treasury Note, 5.750%, 08/15/03 3.63%
McDonald's Corp. 2.96% U.S. Treasury Note, 6.375%, 08/15/02 3.33%
Gillette Co. 2.84% U.S. Treasury Note, 7.125%, 02/29/00 2.26%
Bristol Myers Squibb Co. 2.62% U.S. Treasury Note, 5.500%, 02/28/99 2.19%
Coca-Cola Co. 2.49% U.S. Treasury Note, 6.125%, 08/15/07 2.06%
U.S. Treasury Note, 6.500%, 10/15/06 2.48% U.S. Treasury Bond, 7.125%, 02/15/23 1.92%
General Electric Co. 2.32% DR Investment Corp., 7.450%, 05/15/07 1.72%
Intel Corp. 2.32% U.S. Treasury Note, 7.875%, 08/15/01 1.70%
</TABLE>
<TABLE>
<CAPTION>
CHICAGO TRUST MUNICIPAL BOND FUND
Total Returns:
<S> <C>
1 Year 6.17%
Three Year
Average Annual 4.96%
Average Annual
Since Inception 4.50%
Value of $10,000 $12,393
from Inception
Date 12/13/93
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS as of October 31, 1998
<S> <C> <C> <C> <C>
Company and
% of Total Net
Assets
King County, Washington, Series A, State of New Jersey Transportation Trust Fund
G.O., 5.800%, 01/01/04 3.92% Revenue, Series A, Escrowed to Maturity,
Salt River Project Electric System 5.200%, 12/15/00 2.75%
Revenue, AZ, Refunding, Series A Tulsa, Oklahoma Metropolitan Utility
5.500%, 01/01/05 3.70% Authority Revenue, 5.500%, 07/01/00 2.74%
Texas State Water Development Board, Tooele County, Utah Hazardous Waste
G.O., Escrowed to Maturity, Treatment Revenue, 5.700%, 11/01/26 2.64%
5.000%, 08/01/99 3.46% Intermountain Power Agency, Utah, Power
Commonwealth of Puerto Rico, Series A, Supply Revenue, 6.250%, 07/01/07 2.62%
G.O., 6.500%, 07/01/03 3.39% Clarkston Community Schools, Michigan,
Clark County, Nevada, School District, 5.000%, 05/01/06 2.41%
G.O., 6.400%, 06/15/06 3.00%
</TABLE>
3
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL GROWTH FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
After a sharp correction during the third calendar quarter of 1998, we believe
the stock market has formed a meaningful bottom and that the outlook is
favorable. From a technical standpoint, the stock market at its recent lows
became very oversold and investor sentiment turned cautious, which are among the
ingredients needed to form a bottom. Also, corporate insider activity has shown
a significant pick-up in buying and a fall-off in selling by corporate officers
and directors, suggesting that they view their companies' stocks as attractively
priced.
In the meantime, the fundamental outlook remains encouraging. The economy is
growing at a moderate rate, which should support corporate profits. The
inflation outlook is good, and interest rates are coming down. Importantly, the
Federal Reserve has already moved in a preemptive manner to support economic
growth by lowering interest rates while economic fundamentals are still strong.
Inflation, as measured by an annual increase in the CPI of 1.5%, is at a 32 year
low and the unemployment rate of 4.6% remains near a 28 year low. In fact, with
such strong fundamentals plus a federal budget surplus of nearly $70 billion,
the Federal Reserve is in an excellent position to implement monetary policies
to sustain economic growth. Last but not least, the combination of the decline
in bond yields and stock prices has made equity valuations increasingly
attractive.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
Health Care Services 9%
Retail 8%
Finance 6%
Other Common Stocks 17%
Cash and Other 3%
Restaurants 6%
Food and Beverage 4%
Technology 19%
Consumer Non-Durables 17%
Pharmaceuticals 11%
</TABLE>
In terms of stock selection, we continue to favor pharmaceutical and medical
supply stocks, selected technology holdings, certain consumer cyclical growth
issues and high quality consumer non-durable global growth stocks. Going
forward, we believe that as our economy slows, international economies will
either be stabilizing or improving, and that weak foreign currencies will
gain support against the dollar--a trend that has already begun among several
countries' currencies. With the shares of global consumer companies very
attractively priced and discounting the current global weakness, we believe
their stocks present a good opportunity to participate in the favorable
long-term growth that the markets in these faster growing areas of the world
may offer. Also, after this period of adjustment to rapidly changing economic
conditions, the defensive nature of these companies' non-durable consumer
product lines should become increasingly attractive to investors as the world
economy moves ahead at a more gradual pace.
GROWTH OF $10,000 INVESTED IN MONTAG & CALDWELL GROWTH
FUND, S&P 500 INDEX AND THE LIPPER GROWTH FUND INDEX
SINCE FUND'S INCEPTION
[GRAPHIC]
<TABLE>
<CAPTION>
Values/Yrs S&P 500 Index Lipper Growth Fund Index M&G Growth
- ---------- ------------- ------------------------ ----------
<S> <C> <C> <C>
11/94 10000 10000 10000
1/95 10032 9739 10005
4/95 11046 10699 10999
7/95 12142 12075 12630
10/95 12641 12398 13187
1/96 13907 13183 14178
4/96 14380 13789 15065
7/96 14152 13145 14874
10/96 15685 14498 17131
1/97 17568 15915 19367
4/97 17992 15733 19245
7/97 21527 18897 23571
10/97 20720 18617 22925
1/98 22295 19496 24252
4/98 25381 21995 27690
7/98 25680 22142 28200
10/98 25277 21199 27027
</TABLE>
[GRAPHIC]
<TABLE>
<CAPTION>
Values/Yrs S&P 500 Index Lipper Growth Fund Index M&G Growth
- ---------- ------------- ------------------------ ----------
<S> <C> <C> <C>
6/96 10000 10000 10000
10/96 10593 10433 10967
1/97 11865 11453 12087
4/97 12152 11322 12341
7/97 14539 13598 15125
10/97 13994 13397 14724
1/98 15058 14029 15593
4/98 17142 15828 17814
7/98 17344 15934 18147
10/98 17072 15255 17409
</TABLE>
THESE CHARTS COMPARE A $10,000 INVESTMENT MADE IN CLASS N SHARES AND CLASS I
SHARES OF THE FUND ON THEIR RESPECTIVE INCEPTION DATES TO A $10,000 INVESTMENT
MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAINS ARE
REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S PERFORMANCE, INCLUDING
EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED FINANCIAL INFORMATION
SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED AND INVESTORS CANNOT
INVEST IN THEM.
4
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST GROWTH & INCOME FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
Since the semi-annual review six months ago, the Chicago Trust Growth & Income
Fund's total return was a positive 2.2% compared to declines in both the
Standard & Poor's 500 Index (S&P 500) at negative 0.4% and the Lipper Growth &
Income Fund Index, at negative 6.4%. For the fiscal year ended October 31, 1998,
the Fund returned a strong 25.4%. This compares favorably to both the S&P 500
return of 21.9% and the Lipper Growth & Income Fund Index return of 9.5%. The
Fund ranked eighth out of 725 Lipper growth & income funds for the twelve months
ended October 31, 1998, based on total return. On a three-year basis, the Fund's
25.9% annualized rate of return matched that of the S&P 500 return of 26.0% and
was ahead of the Lipper Growth & Income Fund Index return of 19.4%. The Fund
ranked 18th out of 456 Lipper growth & income funds for this three year time
period based on total return. Please see the Dear Shareowner letter on page 1
for further details on the Lipper rankings.
The year ended October 31, 1998 marked the fourth full fiscal year of operations
for the Fund and was the fourth consecutive year the Fund returned 25% or more
to our shareholders. While the market has, somewhat surprisingly, continued to
show very strong overall returns, the volatility of these returns has been
steadily increasing. This past fiscal year the market experienced wider swings
in returns than during most of this decade. The market has recovered since its
downturn in July and August; issues plaguing the market such as international
economic and political instability, domestic political uncertainty and the
slowing down of our own economy are expected to temper further exuberance.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
Retail 5%
Finance 18%
Electrical 4%
Food and Beverage 4%
Other Common Stocks 18%
Cash and Other Net Assets 6%
Consumer Durables 7%
Consumer Non-Durables 11%
Health Care Services 11%
Technology 16%
</TABLE>
The Fund has experienced wide swings in returns as the market's volatility has
increased; yet our careful stock selection process continues to reward with
solid returns. Additionally, individual issue volatility offers opportunities to
add to current positions or initiate new positions. Our disciplined process
emphasizes consistency of earnings growth, which we believe is an important
characteristic, especially in a choppy market. We believe the markets will
continue to be volatile, and we expect to continue our emphasis on high quality
stocks with strong fundamentals.
GROWTH OF $10,000 INVESTED IN CHICAGO TRUST GROWTH &
INCOME FUND, S&P 500 INDEX AND THE LIPPER GROWTH &
INCOME FUND INDEX SINCE FUND'S INCEPTION
[GRAPHIC]
<TABLE>
<CAPTION>
Lipper Growth and
Values/Yrs S&P 500 Index Income Fund Index CT Growth and Income
- ---------- ------------- ----------------- --------------------
<S> <C> <C> <C>
12/93 10000 10000 10000
4/94 9745 9807 9797
7/94 9979 9993 9945
10/94 10360 10241 10173
1/95 10394 10115 10365
4/95 11444 11036 11231
7/95 12580 12011 12327
10/95 13096 12318 13088
1/96 14408 13448 14350
4/96 14898 14021 14983
7/96 14663 13587 14933
10/96 16250 14953 16619
1/97 18201 16463 18002
4/97 18641 16616 18258
7/97 22303 19584 21812
10/97 21466 19144 20801
1/98 23097 20048 22280
4/98 26293 22412 25536
7/98 26603 21786 26022
10/98 26185 20969 26090
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
5
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST TALON FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
For the twelve months ended October 31, 1998, the Chicago Trust Talon Fund
had a negative total return of 10.54% versus the Standard & Poor's (S&P) 400
Mid-Cap Index which returned a positive 6.68%.
With the exception of large capitalization growth stocks, stocks have been in a
bear market for over a year. The market decline during the third quarter brought
to the forefront the realization that unbridled speculation can bring the risk
of significant economic loss. Sensibility in lending standards by institutions
and the sobering of unrealistic consumer expectations is constructive. The
unwinding of excessive leverage should cause inevitable pain, yet it also brings
discipline into the marketplace and rewards those who have the liquidity to
opportunistically profit from current market conditions. As leverage unwound,
there was a risk that financial institutions that had been underpricing credit
would go to the opposite extreme. In fact, as they realized the magnitude of
their losses, banks and brokerage firms pulled back on their lending and for all
but the highest quality companies, credit became virtually unavailable. The
Federal Reserve responded admirably by providing liquidity in a measured way.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
Other Common Stocks 17%
Preferred Stocks 2%
U.S. Government and Agency Obligations 7%
Printing 6%
Restaurants 6%
Consumer Durables 6%
Cash and Other 3%
Finance 15%
Pharmaceuticals 13%
Health Care Services 9%
Technology 16%
</TABLE>
The market decline enabled us to both utilize our cash reserves by adding to
companies already in the portfolio, like Starbucks, and to reposition the
portfolio into more dominant companies with outstanding franchises at attractive
price levels. We added Corning Inc., MCI WorldCom Inc., Liberty Media Group,
Thomas & Betts Corp. and Tenet Healthcare Corp. We also added Loral Space
Communications Ltd.("Loral") whose stock price was depressed due to general
market pressures as well as the loss of satellites in a launch explosion at
Globalstar Telecommunications Ltd., which is 42% owned by Loral.
During the year, the Fund's performance was particularly hurt by a few small
company investments, notably Robotic Vision Systems, Inc., North American
Vaccine, Inc., Capital Trust, Danielson Holding Corp. and St. Paul Bancorp, Inc.
We believe that as a class, the small-cap sector is significantly undervalued
and should enhance the performance of the Fund in fiscal 1999.
GROWTH OF $10,000 INVESTED IN CHICAGO TRUST TALON FUND AND
THE S&P 400 MID-CAP INDEX SINCE FUND'S INCEPTION
[GRAPHIC]
<TABLE>
<CAPTION>
Values/Yrs S&P 400 Mid-Cap Index Chicago Trust Talon Fund
- ---------- --------------------- ------------------------
<S> <C> <C>
9/94 1000 10000
10/94 9921 10250
1/95 9660 10151
4/98 10551 10766
7/95 11829 12173
10/95 12025 12189
1/96 12701 12762
4/96 13695 14580
7/96 12747 13530
10/96 14111 15420
1/97 15482 18020
4/97 15082 16935
7/97 18531 20074
10/97 18721 20582
1/98 19359 20055
4/98 22307 21320
7/98 20605 19231
10/98 19974 18413
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
6
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
The Chicago Trust Balanced Fund had a total return of 18.5% for the fiscal year
ended October 31, 1998. This return compares very favorably with the Lipper
Balanced Fund Index return of 10.8% for the period, and ranks this Fund 9th in
the universe of 395 Lipper balanced funds based on total return. For the
three-year period ended October 31, 1998, the Fund ranks 22nd out of 278 Lipper
balanced funds with an annualized return of 18.6%, versus 15.0% for the Lipper
Balanced Fund Index. Please see the Dear Shareowner letter on page 1 for further
details on the Lipper rankings.
The strong performance of this Fund can be attributed to the long-term focus of
our security selection process, coupled with significant appreciation in both
the stock and bond markets over the last several years. For the Fund's equity
portion, our lower risk approach to investing in growth stocks with superior
earnings consistency and strong fundamental characteristics has been especially
rewarding in the more turbulent stock market environment experienced in 1998.
The fixed income segment has added stability to the portfolio, and thorough
credit analysis has added value in the corporate and mortgage areas of the
market without taking significant interest rate risks. The recent flight to
quality (or flight to liquidity) has widened the interest rate spreads between
U.S. Government bonds and other fixed income securities, offering good
opportunities to add to attractive corporate and mortgage bonds that should help
to provide superior returns in the long term.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
Government Trust Certificates 1%
Corporate Notes and Bonds 14%
Asset-Backed Securities 3%
U.S. Government and Agency Obligations 18%
Cash and Other Net Assets 4%
Yankee Bonds 3%
Common Stocks 57%
</TABLE>
This Fund is appropriate for investors who want equity participation, but with
less risk exposure. The three year results show it has produced returns similar
to the Lipper Growth & Income Fund Index while experiencing significantly less
volatility than the average equity fund. While the long term outlook for
financial assets remains bright, the Fund should continue to offer an attractive
alternative to those concerned about the current problems confronting the global
economic landscape.
GROWTH OF $10,000 INVESTED IN CHICAGO TRUST
BALANCED FUND, LEHMAN BROTHERS AGGREGATE BOND
INDEX/S&P 500 INDEX AND THE LIPPER BALANCED
FUND INDEX SINCE FUND'S INCEPTION
[GRAPHIC]
<TABLE>
<CAPTION>
Values/Yrs Lehman/S&P 500 Index Lipper Balanced Fund Index CT Balanced
- ---------- -------------------- -------------------------- -----------
<S> <C> <C> <C>
9/95 10000 10000 10000
10/95 10039 9975 10108
1/96 10752 10635 10796
4/96 10817 10751 10893
7/96 10783 10616 10926
10/96 11625 11420 11847
1/97 12493 12187 12612
4/97 12708 12213 12720
7/97 14481 13874 14438
10/97 14237 13715 14229
1/98 15319 14272 15029
4/98 17439 15399 16362
7/98 17645 15342 16725
10/98 17368 15511 16862
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
7
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
After a sharp correction during the third calendar quarter of 1998, we believe
the stock market has formed a meaningful bottom and that the outlook is
favorable. From a technical standpoint, the stock market at its recent lows
became very oversold and investor sentiment turned cautious, which are among the
ingredients needed to form a bottom. Also, corporate insider activity has shown
a significant pick-up in buying and a fall-off in selling by corporate officers
and directors, suggesting that they view their companies' stocks as attractively
priced.
In the meantime, the fundamental outlook remains encouraging. The
economy is growing at a moderate rate, which should support corporate profits.
The inflation outlook is good, and interest rates are coming down. Importantly,
the Federal Reserve has already moved in a preemptive manner to support economic
growth by lowering interest rates while economic fundamentals are still strong.
Inflation, as measured by an annual increase in the CPI of 1.5%, is at a 32 year
low and the unemployment rate of 4.6% remains near a 28 year low. In fact, with
such strong fundamentals plus a federal budget surplus of nearly $70 billion,
the Federal Reserve is in an excellent position to implement monetary policies
to sustain economic growth. Last but not least, the combination of the decline
in bond yields and stock prices has made equity valuations increasingly
attractive.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
U.S. Government and Agency Obligations 23%
Corporate Notes and Bonds 9%
Asset-Backed Securities 1%
Cash and Other Net Assets 2%
Common Stock 65%
</TABLE>
In terms of stock selection, we continue to favor pharmaceutical and medical
supply stocks, selected technology holdings, certain consumer cyclical growth
issues and high quality consumer non-durable global growth stocks. With the
shares of global consumer companies very attractively priced and discounting the
current global weakness, we believe their stocks present a good opportunity to
participate in the favorable long-term growth that markets in these faster
growing areas of the world may offer. Also, after this period of adjustment to
rapidly changing economic conditions, the defensive nature of these companies'
non-durable consumer product lines should become increasingly attractive to
investors as the world economy moves ahead at a more gradual pace.
We expect near-term volatility in interest rates and continue to maintain the
duration of the Fund's bond holdings close to its targeted benchmark. Longer
term, we believe interest rates may decline further, as the international
financial market turmoil leads to slower domestic growth and continued low
inflation.
GROWTH OF $10,000 INVESTED IN MONTAG & CALDWELL BALANCED
FUND, LEHMAN BROTHERS AGGREGATE BOND INDEX/S&P 500
INDEX AND THE LIPPER BALANCED FUND INDEX
SINCE FUND'S INCEPTION
[GRAPHIC]
<TABLE>
<CAPTION>
Values/Yrs Lehman/S&P 500 Index Lipper Balanced Fund Index M&G Balanced
- ---------- -------------------- -------------------------- ------------
<S> <C> <C> <C>
11/94 10000 10000 10000
1/95 10128 9983 10079
4/95 10891 10652 10817
7/95 11706 11424 11944
10/95 12539 11759 12375
1/96 13040 12537 13172
4/96 13141 12674 13446
7/96 13090 12515 13410
10/96 14881 13462 14895
1/97 15230 14343 16162
4/97 15498 14397 16071
7/97 17717 16355 18635
10/97 17894 16168 18509
1/98 19254 16824 19427
4/98 21919 18153 20979
7/98 22178 18086 21364
10/98 21830 17887 21185
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
8
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
The last twelve months can best be described as a time when investors were
rewarded for hoarding liquidity and avoiding credit risk. U.S. Government
securities generated the highest returns in the fixed income market (see chart).
As we move toward a global economy, U.S. investors are experiencing the close
ties between domestic and international financial market activity known as
financial contagion. Contagion occurs when problems in one country with weak
economic fundamentals spark severe effects on asset prices in other markets with
much stronger fundamentals. A recent chain of economic events originated from an
economic recession in Japan and developed into a global economic slowdown. The
contagion first spread throughout Southeast Asia and then led to the economic
collapse of Russia, finally infecting the U.S. financial markets in the third
quarter. As the flight to quality gained momentum, yields on U.S. Treasury
securities in the third quarter declined to their lowest levels in over 30
years. However, by October some fixed income investors began to recognize value
in other sectors, enticed by the largest incremental returns offered in
corporate, mortgage and asset-backed securities since 1990.
PORTFOLIO ALLOCATION BY MARKET SECTOR
<TABLE>
<S> <C>
U.S. Government and Agency Obligations 51%
Corporate Notes and Bonds 28%
Cash and Other Net Assets 8%
Yankee Bonds 7%
Asset-Backed Securities 6%
</TABLE>
LEHMAN BROTHERS INDEX RETURNS
10/31/97 - 10/31/98
[CHART]
<TABLE>
<S> <C>
U.S. Government 11.28%
Corporate 7.99%
High Yield -0.50%
Mortgage-Backed 7.30%
Asset-Backed 7.35%
Emerging Markets -11.81%
</TABLE>
For the year ended October 31, 1998, the Chicago Trust Bond Fund had a total
return of 7.66% compared to a 7.92% return on the Lipper Intermediate Investment
Grade Index. The portfolio has emphasized corporate, mortgage-backed and
asset-backed securities while under-weighting U.S. Government Obligations. Our
specialization in these sectors allows us to structure a portfolio of core
holdings that we believe represents our best and most developed ideas. Our use
of dynamic quantitative modeling helps us focus on the behavioral
characteristics of these securities that should provide the expected total
returns that we have calculated for these securities as well as meet the Fund's
investment objectives. We remain committed to our disciplined bottom up
investment approach. We believe investors who focus on a long-term investment
horizon will be rewarded with consistent and attractive investment results.
GROWTH OF $10,000 INVESTED IN CHICAGO TRUST BOND FUND, LEHMAN BROTHERS AGGREGATE
BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT INDEX SINCE FUND'S
INCEPTION
[GRAPH]
<TABLE>
<CAPTION>
Values/Yrs LBAI Lipper Intermed CT Bond
- ---------- ----- --------------- -------
<S> <C> <C> <C>
12/93 10000 10000 10000
4/94 9507 9524 9682
7/94 9674 9640 9768
10/94 9535 9537 9677
1/95 9769 9720 9894
4/95 10203 10121 10307
7/95 10651 10520 10735
10/95 11026 10885 11117
1/96 11424 11267 11507
4/96 11085 10930 11169
7/96 11241 11070 11331
10/96 11671 11465 11758
1/97 11797 11589 11926
4/97 11870 11641 11972
7/97 12451 12191 12555
10/97 12709 12388 12797
1/98 13061 12695 13144
4/98 13164 12771 13211
7/98 13430 13015 13455
10/98 13895 13378 13778
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
9
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
During the Chicago Trust Municipal Bond Fund's past fiscal year, municipal bonds
have underperformed their taxable counterparts. A great deal of the municipal
underperformance is directly attributable to the tremendous outperformance of
the U.S. Treasury market. Increasing concern over the economic weakness in
Russia and Asia, and equity market weakness in the third calendar quarter, have
prompted a flight to quality. Investors eagerly purchased U.S. Treasuries,
pushing the 30-year Treasury Bond trading yields below 5% and other yields down
to unprecedented levels.
At October 31, 1998, municipal bonds provided 78% to 96% of Treasury yields from
1- to 30-year maturities - historically high ratios. We took advantage of this
relative cheapness of municipals, especially in the 10- to 20-year maturity
range, by selling shorter maturities and purchasing longer bonds. The average
maturity of the Fund was lengthened to 8.4 years from 5.6 years during the
fiscal year. We also added more revenue bonds to the portfolio, reducing our
weightings in insured and government guaranteed escrowed bonds. Longer term, we
expect these changes to benefit the Fund's total return. Year-to-date, the
Fund's performance matched the 4.81% total return average of 148 intermediate
municipal bond funds, according to Lipper Analytical Services, Inc.
PORTFOLIO ALLOCATION BY QUALITY RATING
[CHART]
<TABLE>
<S> <C>
Aaa 50%
Aa 37%
A 5%
Baa 5%
Not Rated 3%
</TABLE>
GROWTH OF $10,000 INVESTED IN CHICAGO TRUST MUNICIPAL BOND FUND AND THE LEHMAN
BROTHERS FIVE-YEAR GOVERNMENT OBLIGATIONS INDEX SINCE FUND'S INCEPTION
[GRAPH]
<TABLE>
<CAPTION>
Lehman 5 Year
Values/Yrs Government Obligations Index CT Muni Bond
- ---------- ---------------------------- ------------
<S> <C> <C>
12/93 10000 10000
1/94 10094 10106
4/94 9782 9803
7/94 9921 9922
10/94 9838 9808
1/95 9956 9958
4/95 10288 10218
7/95 10669 10518
10/95 10855 10719
1/96 11138 10969
4/96 11025 10811
7/96 11156 10935
10/96 11368 11103
1/97 11540 11230
4/97 11548 11201
7/97 11990 11600
10/97 12107 11673
1/98 12362 11900
4/98 12339 11871
7/98 12570 12089
10/98 12897 12393
</TABLE>
THIS CHART COMPARES A $10,000 INVESTMENT MADE IN THE FUND ON ITS INCEPTION DATE
TO A $10,000 INVESTMENT MADE IN THE INDICES ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAINS ARE REINVESTED. FURTHER INFORMATION RELATING TO THE FUND'S
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IS CONTAINED IN THE CONDENSED
FINANCIAL INFORMATION SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. INDICES ARE UNMANAGED
AND INVESTORS CANNOT INVEST IN THEM.
10
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MONEY MARKET FUND
MANAGEMENT DISCUSSION & ANALYSIS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
Recently, financial market participants have been refocused on the Federal
Reserve (the"Fed"). "Fed watching" has become popular again now that the Fed has
lowered the rate three times within the span of seven weeks. Each time the Fed
reduced rates 25 basis points (0.25%), and at October 31, the rate was at 4.75%.
This is the lowest Federal Funds rate since the end of 1994. Also interesting is
the fact that two of the rate reductions were announced at the usual time (just
after the Federal Reserve Open Market Committee met), but one announcement was
made between formal committee meetings. This was generally viewed by many as a
"statement" sent by the Federal Reserve to calm the financial markets. The
markets responded favorably as stocks rallied and liquidity improved in the bond
market. Money market funds, however, were reinvesting maturities at short-term
rates considerably below where they were investing just two months ago. As a
consequence, yields on money market funds have been falling, and should likely
continue to fall over the near term.
While yields are falling, the Chicago Trust Money Market Fund continues to
outperform its peers. For the quarter ended October 31, 1998, it beat its
benchmark, the Donoghue's First Tier Index, by an average of 21 basis points
(0.21%). Coincidentally, for the previous twelve months and year-to-date, the
Fund beat its benchmark by .19% over each of these time periods. While downward
pressure on short-term interest rates may encourage some funds to stretch for
yield so that they can maintain a competitive advantage, this can only be
accomplished by increasing risk. The risk profile of the Fund will not be
compromised, and we continue to adhere to our strict credit review process. We
will attempt to continue to provide solid yields in our high quality money
market fund.
PORTFOLIO ALLOCATION BY MARKET SECTOR
[GRAPHIC]
<TABLE>
<S> <C>
Commercial Paper 95%
GIC within Funding Agreement 4%
Cash and Other Net Assets 1%
</TABLE>
11
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL GROWTH FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
- ------ -----
<S> <C>
COMMON STOCKS - 96.59%
BUSINESS SERVICES - 0.97%
700,000 Manpower, Inc........................... $ 16,887,500
----------------
CONSUMER NON-DURABLES - 16.71%
825,000 Bestfoods............................... 44,962,500
1,700,000 Gillette Co. ........................... 76,393,750
700,000 Interpublic Group of Companies, Inc. ... 40,950,000
1,489,300 Mattel, Inc. ........................... 53,428,638
850,000 Procter & Gamble Co. ................... 75,543,750
----------------
291,278,638
----------------
ELECTRICAL - 3.01%
600,400 General Electric Co. ................... 52,535,000
----------------
ENTERTAINMENT AND LEISURE - 2.94%
1,900,000 The Walt Disney Co. .................... 51,181,250
----------------
FINANCE - 6.22%
600,000 American Express Co. ................... 53,025,000
650,000 American International Group, Inc. ..... 55,412,500
----------------
108,437,500
----------------
FOOD AND BEVERAGE - 3.88%
1,000,000 Coca-Cola Co. .......................... 67,625,000
----------------
HEALTH CARE SERVICES - 9.11%
1,000,000 Johnson & Johnson ...................... 81,500,000
720,000 Pfizer, Inc. .......................... 77,265,000
----------------
158,765,000
----------------
LODGING - 2.17%
1,406,400 Marriott International, Inc., Class A... 37,797,000
----------------
MEDICAL SUPPLIES - 3.41%
914,300 Medtronic, Inc. ........................ 59,429,500
----------------
OIL AND GAS EXTRACTION - 1.83%
608,400 Schlumberger Limited ................... 31,941,000
----------------
PHARMACEUTICALS - 10.85%
700,000 Bristol-Myers Squibb Co. ............... 77,393,750
756,700 Eli Lilly & Co. ........................ 61,245,406
373,700 Merck & Co., Inc. ...................... 50,542,925
----------------
189,182,081
----------------
RESTAURANTS - 5.50%
600,000 Cracker Barrel Old Country Store, Inc... $ 15,525,000
1,200,000 McDonald's Corp. ....................... 80,250,000
----------------
95,775,000
----------------
RETAIL - 8.25%
628,700 Costco Companies., Inc. * .............. 35,678,725
850,000 Gap, Inc. .............................. 51,106,250
1,308,400 Home Depot, Inc. ....................... 56,915,400
----------------
143,700,375
----------------
TECHNOLOGY - 18.81%
950,000 Boston Scientific Corp. * .............. 51,715,625
704,000 Cisco Systems, Inc. * .................. 44,352,000
700,000 Electronic Arts, Inc. * ................ 28,787,500
950,000 Hewlett-Packard Co. .................... 57,178,125
660,000 Intel Corp. ............................ 58,863,750
360,600 Microsoft Corp. * ...................... 38,178,525
850,000 Solectron Corp. * ...................... 48,662,500
----------------
327,738,025
----------------
TELECOMMUNICATIONS - 2.93%
930,000 Tellabs, Inc. * ........................ 51,150,000
----------------
TOTAL COMMON STOCKS .................... 1,683,422,869
(Cost $1,427,074,634) ----------------
INVESTMENT COMPANIES - 4.17%
68,158,260 Bankers Trust Institutional
Cash Management Fund ................... 68,158,260
4,467,844 Bankers Trust Institutional
Treasury Money Fund..................... 4,467,844
----------------
TOTAL INVESTMENT COMPANIES.............. 72,626,104
(Cost $72,626,104) ----------------
TOTAL INVESTMENTS - 100.76%........................... 1,756,048,973
(Cost $1,499,700,738)** ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.76%).... (13,270,466)
----------------
NET ASSETS - 100.00% ................................. $1,742,778,507
----------------
----------------
</TABLE>
- ---------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $1,499,821,318.
<TABLE>
<S> <C>
Gross unrealized appreciation $ 319,915,145
Gross unrealized depreciation (63,687,490)
-----------------
Net unrealized appreciation $ 256,227,655
-----------------
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
- ------ -----
<S> <C>
COMMON STOCKS - 94.22%
BUSINESS SERVICES - 3.30%
244,000 Paychex , Inc........................... $ 12,139,000
----------------
CAPITAL GOODS - 2.75%
184,000 Pitney Bowes, Inc. ..................... 10,131,500
----------------
CHEMICALS - 1.84%
168,000 Praxair, Inc. .......................... 6,762,000
----------------
COMMERCIAL SERVICE - 2.07%
255,000 Ecolab Inc. ............................ 7,618,125
----------------
CONSUMER DURABLES - 7.13%
191,000 Harley-Davidson, Inc. .................. 7,401,250
167,000 Illinois Tool Works, Inc. .............. 10,708,875
144,000 Johnson Controls, Inc. ................. 8,100,000
----------------
26,210,125
----------------
CONSUMER NON-DURABLES - 11.09%
200,200 Cintas Corp. ........................... 10,710,700
124,250 Lancaster Colony Corp. ................. 3,727,500
265,000 Mattel, Inc. ........................... 9,506,875
170,100 Newell Co. ............................. 7,484,400
105,000 Procter & Gamble Co. ................... 9,331,875
----------------
40,761,350
----------------
ELECTRICAL - 3.59%
150,800 General Electric Co. ................... 13,195,000
----------------
FINANCE - 18.03%
200,000 AFLAC Inc. ............................. 7,625,000
125,962 American International Group, Inc. ..... 10,738,261
133,000 Associates First Capital Corp., Class A 9,376,500
216,600 Federal Home Loan Mortgage Corp. ....... 12,454,500
307,930 MBNA Corp. ............................. 7,024,653
221,200 Norwest Corp. .......................... 8,225,875
226,000 Schwab (Charles) Corp. ................. 10,833,875
----------------
66,278,664
----------------
FOOD AND BEVERAGE - 3.87%
528,000 Sysco Corp. ............................ $ 14,223,000
----------------
HEALTH CARE SERVICES - 10.83%
114,000 Cardinal Health, Inc. .................. 10,780,125
554,062 Health Management
Associates , Inc., Class A *............ 9,869,229
264,000 Omnicare, Inc. ......................... 9,124,500
93,600 Pfizer, Inc. ........................... 10,044,450
----------------
39,818,304
----------------
OIL AND GAS EXTRACTION - 1.43%
100,000 Schlumberger Limited.................... 5,250,000
----------------
PHARMACEUTICALS - 2.97%
80,700 Merck & Co., Inc. ...................... 10,914,675
----------------
RETAIL - 4.83%
102,000 Kohl's Corp. *.......................... 4,876,875
265,000 Walgreen Co. ........................... 12,902,187
----------------
17,779,062
----------------
TECHNOLOGY - 16.41%
144,400 Cisco Systems, Inc. *................... 9,097,200
205,000 Computer Associates International, Inc. 8,071,875
127,200 Computer Sciences Corp.*................ 6,709,800
203,300 EMC Corp. *............................. 13,087,438
354,000 HBO & Co. .............................. 9,292,500
64,800 Microsoft Corp. *....................... 6,860,700
124,000 Sun Microsystems, Inc. *................ 7,223,000
----------------
60,342,513
----------------
TELECOMMUNICATIONS - 2.89%
193,000 Tellabs, Inc. *......................... 10,615,000
----------------
UTILITY - 1.19%
107,000 AES Corp. *............................. 4,380,313
----------------
TOTAL COMMON STOCKS..................... 346,418,631
(Cost $222,034,138) ----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- ---------- ------
<S> <C>
REPURCHASE AGREEMENT - 5.81%
$ 21,355,000 Bank of America
5.300%, dated 10/30/98 to be repurchased
on 11/2/98 at $21,364,432
(Collateralized by U.S. Treasury Note
5.625% due 04/30/00);
Total Par $20,820,000................... $ 21,355,000
----------------
TOTAL REPURCHASE AGREEMENT.............. 21,355,000
(Cost $21,355,000) ----------------
TOTAL INVESTMENTS - 100.03%........................... 367,773,631
(Cost $243,389,138)** ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.03%).... (107,189)
----------------
NET ASSETS - 100.00%.................................. $ 367,666,442
----------------
----------------
</TABLE>
- ----------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $243,389,138.
<TABLE>
<S> <C>
Gross unrealized appreciation $ 130,730,412
Gross unrealized depreciation (6,345,919)
----------------
Net unrealized appreciation $ 124,384,493
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST TALON FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
- ------ -----
<S> <C>
COMMON STOCKS - 88.37%
COMMERCIAL SERVICES - 0.92%
50,000 Data Broadcasting Corp. *............... $ 209,375
----------------
CONSUMER DURABLE GOODS - 5.59%
35,000 Corning Inc. ........................... 1,270,937
----------------
ELECTRICAL - 2.95%
15,000 Thomas & Betts Corp. ................... 670,313
----------------
FINANCE - 15.06%
125,000 Capital Trust, Class A *................ 765,625
137,200 Danielson Holdings Corp. *.............. 540,225
58,125 St. Paul Bancorp, Inc. ................. 1,195,195
30,000 Travelers Property Casualty Corp., Class A 920,625
----------------
3,421,670
----------------
HEALTH CARE SERVICES - 9.45%
25,000 Columbia\HCA Healthcare Corp. .......... 525,000
25,000 HCR Manor Care, Inc. *.................. 812,500
29,000 Tenet Healthcare Corp. *................ 810,188
----------------
2,147,688
----------------
OIL AND GAS EXTRACTION - 4.09%
39,000 Helmerich & Payne, Inc. ................ 928,687
----------------
PHARMACEUTICALS - 13.48%
34,000 Mylan Laboratories Inc. ................ 1,170,875
60,000 North American Vaccine, Inc. * ......... 907,500
25,000 Teva Pharmaceutical Industries Ltd., ADR 985,937
----------------
3,064,312
----------------
PRINTING AND PUBLISHING - 6.07%
32,000 R.R. Donnelley & Sons Co. .............. 1,380,000
----------------
REAL ESTATE - 3.28%
31,000 Equity Office Properties Trust, REIT.... 744,000
----------------
RESTAURANTS - 6.39%
33,500 Starbucks Corp. *....................... 1,453,063
----------------
TECHNOLOGY - 15.92%
57,000 Cerner Corp. *.......................... 1,275,375
40,000 Compaq Computer Corp. .................. 1,265,000
200,000 Robotic Vision Systems, Inc. *.......... 725,000
10,000 Sterling Commerce, Inc. *............... 352,500
----------------
3,617,875
----------------
TELECOMMUNICATIONS - 5.17%
20,000 Tele-Communications, Inc.
Liberty Media Group, Series A *........ $ 761,250
7,500 MCI Worldcom, Inc. *.................... 414,375
----------------
1,175,625
----------------
TOTAL COMMON STOCKS..................... 20,083,545
(Cost $18,936,513) ----------------
PREFFERED STOCK - 2.08%
TELECOMMUNICATIONS - 2.08%
25,000 Loral Space & Communications Ltd. *..... 473,438
----------------
TOTAL PREFERRED STOCK................... 473,438
(Cost $353,375) ----------------
Par Value
- ---------
U.S. GOVERNMENT OBLIGATIONS - 6.49%
U.S. TREASURY BILLS - 6.49% (A)
$ 500,000 5.171%, 02/11/99........................ 494,120
1,000,000 4.196%, 04/15/99........................ 980,860
----------------
1,474,980
----------------
TOTAL U.S. GOVERNMENT OBLIGATIONS....... 1,474,980
(Cost $1,474,344) ----------------
Shares
- ------
INVESTMENT COMPANY - 3.08%
699,495 Bankers Trust Institutional
Cash Management Fund.................... 699,495
----------------
TOTAL INVESTMENT COMPANY................ 699,495
(Cost $699,495) ----------------
TOTAL INVESTMENTS - 100.02%........................... 22,731,458
(Cost $21,463,727)** ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.02%).... (3,766)
----------------
NET ASSETS - 100.00%.................................. $ 22,727,692
----------------
----------------
</TABLE>
- ------------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $21,460,423.
<TABLE>
<S> <C>
Gross unrealized appreciation $ 3,499,081
Gross unrealized depreciation (2,228,046)
--------------
Net unrealized appreciation $ 1,271,035
--------------
--------------
</TABLE>
(A) Annualized yield at time of purchase.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
- ------ -----
<S> <C>
COMMON STOCKS - 57.11%
BUSINESS SERVICES - 2.04%
90,000 Paychex, Inc. .......................... $ 4,477,500
----------------
CAPITAL GOODS - 1.88%
75,000 Pitney Bowes, Inc. ..................... 4,129,687
----------------
CHEMICALS - 1.01%
55,000 Praxair, Inc. .......................... 2,213,750
----------------
COMMERCIAL SERVICES - 0.95%
70,000 Ecolab Inc. ............................ 2,091,250
----------------
CONSUMER DURABLES - 4.77%
90,000 Harley-Davidson, Inc. .................. 3,487,500
65,000 Illinois Tool Works, Inc. .............. 4,168,125
50,000 Johnson Controls, Inc. ................. 2,812,500
----------------
10,468,125
----------------
CONSUMER NON-DURABLES - 6.84%
85,000 Cintas Corp. ........................... 4,547,500
60,000 Lancaster Colony Corp. ................. 1,800,000
60,000 Mattel, Inc. ........................... 2,152,500
75,000 Newell Co. ............................. 3,300,000
36,000 Procter & Gamble Co. ................... 3,199,500
----------------
14,999,500
----------------
ELECTRICAL - 2.19%
55,000 General Electric Co. ................... 4,812,500
----------------
FINANCE - 11.69%
80,000 AFLAC Inc. ............................. 3,050,000
52,500 American International Group, Inc. ..... 4,475,625
40,000 Associates First Capital Corp., Class A 2,820,000
90,000 Federal Home Loan Mortgage Corp. ....... 5,175,000
112,500 MBNA Corp. ............................. 2,566,406
100,000 Norwest Corp. .......................... 3,718,750
80,000 Schwab (Charles) Corp. ................. 3,835,000
----------------
25,640,781
----------------
FOOD AND BEVERAGE - 1.96%
160,000 Sysco Corp. ............................ 4,310,000
----------------
HEALTH CARE SERVICES - 6.75%
35,000 Cardinal Health, Inc. .................. 3,309,687
210,000 Health Management
Associates, Inc., Class A *............. 3,740,625
100,000 Omnicare, Inc. ......................... 3,456,250
40,000 Pfizer, Inc. ........................... 4,292,500
----------------
14,799,062
----------------
OIL AND GAS EXTRACTION - 0.60%
25,000 Schlumberger Limited.................... $ 1,312,500
----------------
PHARMACEUTICALS - 1.85%
30,000 Merck & Co., Inc. ...................... 4,057,500
----------------
RETAIL - 3.31%
50,000 Kohl's Corp. *.......................... 2,390,625
100,000 Walgreen Co............................. 4,868,750
----------------
7,259,375
----------------
TECHNOLOGY - 9.33%
60,000 Cisco Systems, Inc. *................... 3,780,000
35,000 Computer Associates International, Inc. 1,378,125
50,000 Computer Sciences Corp. ................ 2,637,500
70,000 EMC Corp. *............................. 4,506,250
110,000 HBO & Co. .............................. 2,887,500
25,000 Microsoft Corp. *....................... 2,646,875
45,000 Sun Microsystems, Inc. *................ 2,621,250
----------------
20,457,500
----------------
TELECOMMUNICATIONS -1.38%
55,000 Tellabs, Inc. *......................... 3,025,000
----------------
UTILITY - 0.56%
30,000 AES Corp. *............................. 1,228,125
----------------
TOTAL COMMON STOCKS..................... 125,282,155
(Cost $77,265,467) ----------------
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -17.62%
U.S. TREASURY NOTES - 5.63%
$ 500,000 5.500%, 02/28/99....................... 501,715
1,000,000 7.125%, 02/29/00....................... 1,035,680
2,000,000 7.875%, 08/15/01....................... 2,182,860
2,000,000 6.375%, 08/15/02....................... 2,136,900
2,000,000 5.750%, 08/15/03....................... 2,120,520
2,000,000 5.875%, 02/15/04....................... 2,140,520
2,000,000 6.500%, 08/15/05....................... 2,233,960
----------------
12,352,155
----------------
U.S. TREASURY BONDS - 1.61%
1,500,000 7.125%, 02/15/23....................... 1,852,320
1,500,000 6.250%, 08/15/23....................... 1,679,550
----------------
3,531,870
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- -----
<S> <C>
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.65%
$ 1,500,000 5.750%, 07/15/03........................ $ 1,559,220
4,856 5.500%, 08/15/04, CMO................... 4,845
1,000,000 5.850%, 02/21/06, Debenture............. 1,036,530
1,000,000 6.500%, 09/15/07, CMO................... 1,029,720
395,382 7.500%, 04/01/08, Debenture............. 405,882
829,327 6.500%, 06/01/09........................ 842,281
1,000,000 6.000%, 12/15/23, CMO................... 933,610
----------------
5,812,088
----------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 4.10%
2,000,000 5.625%, 03/15/01........................ 2,044,500
691,745 6.900%, 12/25/03, CMO................... 706,161
1,273,647 7.000%, 01/01/13........................ 1,299,909
906,389 7.000%, 03/01/13........................ 925,079
1,671,420 6.000%, 08/01/13........................ 1,678,724
578,608 7.000%, 07/25/17, CMO................... 33,582
322,232 9.000%, 05/01/25........................ 339,552
695,632 6.500%, 02/01/28........................ 701,281
1,248,487 6.500%, 09/01/28........................ 1,258,625
----------------
8,987,413
----------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 3.63%
377,591 7.000%, 06/15/08........................ 387,736
538,165 8.000%, 03/15/17........................ 558,513
695,655 8.000%, 06/15/17........................ 721,957
1,416,907 7.000%, 09/15/23........................ 1,451,876
917,299 7.000%, 10/15/23........................ 939,937
682,323 7.000%, 10/15/23........................ 699,163
1,319,371 6.500%, 03/15/26........................ 1,335,032
414,524 7.500%, 06/15/27........................ 427,088
915,231 6.500%, 08/15/27........................ 926,672
498,758 7.500%, 07/15/28........................ 513,876
----------------
7,961,850
----------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS.................. 38,645,376
(Cost $36,998,686) ----------------
CORPORATE NOTES AND BONDS - 13.67%
CABLE TELEVISION - 0.37%
700,000 Continental Cablevision, Debenture
9.500%, 08/01/13........................ 815,500
----------------
ENERGY - 1.48%
$ 1,700,000 Ashland, Inc., Senior Notes
6.625%, 02/15/08........................ $ 1,748,875
850,000 Thermo Electron Corp.
4.250%, 01/01/03 (A).................... 748,000
750,000 Williams Co., Inc.
5.950%, 02/15/00 (A).................... 754,688
----------------
3,251,563
----------------
FINANCE - 6.17%
1,250,000 Advanta Corp., MTN
7.000%, 05/01/01........................ 1,100,000
750,000 Chelsea GCA Realty Partnership, REIT
7.250%, 10/21/07........................ 747,188
1,000,000 Continental Corp. Notes
7.250%, 03/01/03........................ 1,021,250
1,250,000 Goldman Sachs Group LP, MTN
6.250%, 02/01/03 (A).................... 1,257,813
1,500,000 Heller Financial, Inc.
5.625%, 03/15/00........................ 1,501,875
1,600,000 HSBC America Capital II
8.380%, 05/15/27 (A).................... 1,498,000
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
8.250%, 06/15/05........................ 1,107,500
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
7.875%, 10/15/06........................ 1,040,000
1,500,000 Metropolitan Life Insurance Co.
6.300%, 11/01/03 (A).................... 1,537,500
600,000 Arcadia Financial Ltd.
11.500%, 03/15/07....................... 402,000
1,000,000 Pacific Mutual Life Insurance Co.
7.900%, 12/30/23 (A).................... 1,158,750
1,000,000 Prudential Insurance Co. of America
8.300%, 07/01/25 (A).................... 1,167,500
----------------
13,539,376
----------------
FOOD AND BEVERAGE - 0.46%
1,000,000 Nabisco, Inc.
6.700%, 06/15/02........................ 1,015,000
----------------
HEALTH CARE SERVICES - 0.99%
1,250,000 HealthSouth Corp., Senior Notes
6.875%, 06/15/05........................ 1,267,188
1,100,000 Hospital Corp. of America, Debenture
8.123%, 06/01/00 (B).................... 908,875
----------------
2,176,063
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- -----
<S> <C>
PRINTING AND PUBLISHING - 0.48%
$ 1,000,000 News America Holdings Inc.,
Senior Debenture
7.750%, 02/01/24........................ $ 1,042,500
----------------
RETAIL - 0.45%
1,000,000 Kmart Corp., Debenture
7.950%, 02/01/23........................ 991,250
----------------
TELECOMMUNICATIONS - 0.59%
1,250,000 Worldcom, Inc.
6.950%, 08/15/28........................ 1,287,500
----------------
TRANSPORTATION - 0.21%
413,123 Delta Air Lines Equipment Trust,
Series 1992-A,
8.540%, 01/02/07........................ 452,969
----------------
UTILITIES - 2.47%
1,000,000 CalEnergy Co., Inc.
7.630%, 10/15/07........................ 1,041,250
1,000,000 Gulf States Utilities, First Mortgage,
Series A
8.250%, 04/01/04........................ 1,132,500
1,000,000 Long Island Lighting Co., Debenture
9.000%, 11/01/22........................ 1,190,000
1,000,000 Niagara Mohawk Power Corp.,
First Mortgage
7.625%, 10/01/05........................ 1,033,750
1,000,000 Philadelphia Electric Co.,
First Mortgage
5.625%, 11/01/01........................ 1,018,750
----------------
5,416,250
----------------
TOTAL CORPORATE NOTES AND BONDS......... 29,987,971
(Cost $29,269,440) ----------------
YANKEE BONDS - 3.30%
1,750,000 Chilgener S.A. Yankee (Chile)
6.500%, 01/15/06........................ 1,413,125
1,500,000 DR Investment Corp.
7.450%, 05/15/07 (A).................... 1,657,500
775,000 LG-Caltex Oil Corp.
7.500%, 07/15/07 (A).................... 530,038
25,000 Petroliam Nasional Berhad
7.125%, 10/18/06 (A).................... 17,469
825,000 Petroliam Nasional Berhad
7.625%, 10/15/26 (A).................... 453,750
786,253 Province of Mendoza
Collateral Oil Royalty Note
10.000%, 07/25/02 (A)................... 785,742
YANKEEBONDS (CONTINUED)
$ 1,250,000 Skandinaviska Enskilda,
Subordinated Notes
6.625%, 03/29/49 (A).................... $ 1,257,813
1,250,000 SB Treasury Co. LLC
9.400%, 12/29/49 (A).................... 1,125,000
----------------
TOTAL YANKEE BONDS...................... 7,240,437
(Cost $7,632,540) ----------------
GOVERNMENT TRUST CERTIFICATE - 0.54%
1,127,762 Israel Collateral Trust, Class 1-C
9.250%, 11/15/01........................ 1,181,330
----------------
TOTAL GOVERNMENT TRUST CERTIFICATE...... 1,181,330
(Cost $1,202,264) ----------------
ASSET-BACKED SECURITIES - 2.04%
1,400,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.550%, 09/15/03........................ 1,417,598
1,000,000 Citibank Credit Card Master Trust I
Series 1997-3, Class A
6.839%, 02/10/04........................ 1,029,180
2,000,000 DVI Receivables Corp.
Series 1998-1, Class A2
6.035%, 04/10/06 (A).................... 2,026,875
----------------
TOTAL ASSET-BACKED SECURITIES........... 4,473,653
(Cost $4,373,536) ----------------
CMO/NON-AGENCY MORTGAGE SECURITIES - 1.44%
1,000,000 BA Mortgage Securities, CMO,
REMIC Series 1997-1, Class A4
7.350%, 07/25/26........................ 1,009,531
1,500,000 GE Capital Mortgage Services, Inc., CMO, REMIC
Series 1998-9, Class A15
6.500%, 06/25/28........................ 1,506,563
600,000 Midland Realty Acceptance Corp., CMO
Series 1996-C001, Class A2
7.475%, 08/25/28........................ 642,563
----------------
TOTAL CMO/NON-AGENCY
MORTAGAGE SECURITIES.................. 3,158,657
(Cost $3,111,219) ----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- ------ -----
<S> <C>
REPURCHASE AGREEMENT - 3.40%
$ 7,454,000 Bank of America
5.300%, dated 10/30/98 to be
repurchased on 11/2/98 at $7,457,292
(Collateralized by U.S. Treasury Note
5.625% due 04/30/00);
Total Par $7,270,000
........................................ $ 7,454,000
----------------
TOTAL REPURCHASE AGREEMENT.............. 7,454,000
(Cost $7,454,000) ----------------
TOTAL INVESTMENTS - 99.12%............................ 217,423,579
(Cost $167,307,152)** ----------------
NET OTHER ASSETS AND LIABILITIES - 0.88%.............. 1,937,963
----------------
NET ASSETS - 100.00%.................................. $ 219,361,542
----------------
----------------
</TABLE>
- ----------------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $167,334,448.
<TABLE>
<S> <C>
Gross unrealized appreciation $ 52,629,077
Gross unrealized depreciation (2,539,946)
---------------
Net unrealized appreciation $ 50,089,131
---------------
---------------
</TABLE>
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At October 31, 1998,
these securities amounted to $15,976,438 or 7.28% of net assets.
(B) Annualized yield at time of purchase
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION (Moody's Ratings)
<S> <C>
Common Stocks 58%
Repurchase Agreement 3%
U.S. Government Obligations 7%
U.S. Government Agency Obligations 10%
Government Trust Certificate 1%
Corporate Notes and Bonds:
Aaa 3%
A 5%
Baa 8%
Ba 3%
B 1%
NR 1%
-----
100%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
- ------ --------
<S> <C>
COMMON STOCKS - 65.12%
BUSINESS SERVICES - 0.78%
51,500 Manpower, Inc......................... $ 1,242,437
------------
CONSUMER NON-DURABLES - 11.67%
55,000 Bestfoods............................. 2,997,500
100,000 Gillette Co. ......................... 4,493,750
43,000 Interpublic Group of Companies, Inc... 2,515,500
100,000 Mattel, Inc........................... 3,587,500
55,000 Procter & Gamble Co................... 4,888,125
------------
18,482,375
------------
ELECTRICAL - 2.32%
42,000 General Electric Co................... 3,675,000
------------
ENTERTAINMENT AND LEISURE - 1.96%
115,000 The Walt Disney Co.................... 3,097,812
------------
FINANCE - 4.38%
40,000 American Express Co................... 3,535,000
40,000 American International Group, Inc..... 3,410,000
------------
6,945,000
------------
FOOD AND BEVERAGE - 2.49%
58,300 Coca-Cola Co.......................... 3,942,537
------------
HEALTH CARE SERVICES - 6.30%
61,800 Johnson & Johnson..................... 5,036,700
46,000 Pfizer, Inc........................... 4,936,375
------------
9,973,075
------------
LODGING - 1.40%
82,500 Marriott International, Inc., Class A. 2,217,187
------------
MEDICAL SUPPLIES - 2.02%
49,400 Medtronic, Inc........................ 3,211,000
------------
OIL AND GAS EXTRACTION - 1.27%
38,300 Schlumberger Limited.................. 2,010,750
------------
PHARMACEUTICALS - 6.77%
37,600 Bristol-Myers Squibb Co............... 4,157,150
43,300 Eli Lilly & Co........................ 3,504,594
22,600 Merck & Co., Inc...................... 3,056,650
------------
10,718,394
------------
RESTAURANTS - 3.80%
51,400 Cracker Barrel Old Country Store, Inc. $ 1,329,975
70,000 McDonald's Corp....................... 4,681,250
------------
6,011,225
------------
RETAIL - 5.46%
35,900 Costco Companies, Inc.*............... 2,037,325
50,000 Gap, Inc.............................. 3,006,250
82,700 Home Depot, Inc....................... 3,597,450
------------
8,641,025
------------
TECHNOLOGY - 12.42%
52,000 Boston Scientific Corp.*.............. 2,830,750
41,000 Cisco Systems, Inc.*.................. 2,583,000
44,000 Electronic Arts, Inc.*................ 1,809,500
60,000 Hewlett-Packard Co.................... 3,611,250
41,200 Intel Corp............................ 3,674,525
21,000 Microsoft Corp.*...................... 2,223,375
51,400 Solectron Corp.*...................... 2,942,650
------------
19,675,050
------------
TELECOMMUNICATIONS - 2.08%
60,000 Tellabs, Inc. *....................... 3,300,000
------------
TOTAL COMMON STOCKS................... 103,142,867
(Cost $87,847,141) ------------
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.58%
U.S. TREASURY NOTES - 10.90%
$ 2,000,000 6.250%, 04/30/01...................... 2,091,300
2,500,000 6.625%, 04/30/02...................... 2,679,175
3,000,000 5.750%, 08/15/03...................... 3,180,780
1,750,000 7.875%, 11/15/04...................... 2,056,058
3,500,000 6.500%, 10/15/06...................... 3,928,610
3,000,000 6.250%, 02/15/07...................... 3,326,670
------------
17,262,593
------------
U.S. TREASURY BONDS - 4.67%
2,500,000 7.250%, 05/15/16...................... 3,042,450
2,000,000 8.000%, 11/15/21...................... 2,680,680
1,500,000 6.250%, 08/15/23...................... 1,679,550
------------
7,402,680
------------
FEDERAL HOME LOAN BANK - 0.98%
500,000 6.940%, 02/12/04...................... 502,705
1,000,000 5.890%, 06/30/08...................... 1,043,310
------------
1,546,015
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.81%
$ 750,000 6.400%, 12/13/06, Debenture........... $ 806,850
1,750,000 6.700%, 01/05/07, Global Bond......... 1,915,515
600,000 7.500%, 03/15/07, CMO, Class J........ 650,502
175,000 6.000%, 04/15/08, CMO, Class K........ 176,192
500,000 6.500%, 07/15/20, CMO, Class F........ 503,350
400,000 6.500%, 11/15/20, CMO, Class H........ 405,380
------------
4,457,789
------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 3.22%
2,500,000 6.250%, 03/20/00...................... 2,554,175
500,000 7.070%, 03/08/11, MTN................. 501,740
2,000,000 7.250%, 01/17/21,
CMO, REMIC............................ 2,043,520
------------
5,099,435
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 0.00% (A)
2,193 8.500%, 06/15/01...................... 2,293
2,008 9.000%, 09/15/08...................... 2,140
------------
4,433
------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS................ 35,772,945
(Cost $34,054,609) ------------
CORPORATE NOTES AND BONDS - 9.25%
CONSUMER NON-DURABLES - 2.98%
2,000,000 NIKE, Inc.
6.375%, 12/01/03...................... 2,120,000
2,500,000 Warner Lambert Co.
5.750%, 01/15/03...................... 2,590,625
------------
4,710,625
------------
FINANCE - 4.26%
$ 1,500,000 American Express Co., Senior Notes
6.750%, 06/23/04...................... $ 1,614,375
55,000 American General Finance, MTN
7.200%, 07/08/99...................... 55,802
2,500,000 Citicorp, Subordinated Notes
7.125%, 05/15/06...................... 2,575,000
1,000,000 Household Finance Corp.
7.250%, 05/15/06...................... 1,056,250
1,350,000 Household Finance Corp., MTN
7.300%, 07/30/12...................... 1,451,250
------------
6,752,677
------------
RETAIL - 1.68%
500,000 Penney (J.C.) & Co., Debenture
9.750%, 06/15/21...................... 560,000
2,000,000 Sears Roebuck Acceptance Corp.
6.700%, 11/15/06...................... 2,100,000
------------
2,660,000
------------
SECURITY AND COMMODITY BROKERS - 0.33%
500,000 Salomon, Inc.
7.300%, 05/15/02...................... 528,750
------------
TOTAL CORPORATE NOTES AND BONDS....... 14,652,052
(Cost $14,168,500) ------------
ASSET-BACKED SECURITY - 1.14%
1,750,000 First USA Credit Card Master Trust
Series 1997-6, Class A
6.420%, 03/17/05...................... 1,810,095
------------
TOTAL ASSET-BACKED SECURITY ......... 1,810,095
(Cost $1,789,716) ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
INVESTMENT COMPANIES - 1.33%
2,104,220 Bankers Trust Institutional
Cash Management Fund.................. $ 2,104,220
3,475 Bankers Trust Institutional
Treasury Money Fund................... 3,475
------------
TOTAL INVESTMENT COMPANIES............ 2,107,695
(Cost $2,107,695) ------------
TOTAL INVESTMENTS - 99.42%.......................... 157,485,654
(Cost $139,967,661)** ------------
NET OTHER ASSETS AND LIABILITIES - 0.58%............ 912,694
------------
NET ASSETS - 100.00%................................ $158,398,348
------------
------------
</TABLE>
- ----------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $140,338,149.
<TABLE>
<S> <C>
Gross unrealized appreciation.................. $ 20,706,589
Gross unrealized depreciation.................. (3,559,084)
-------------
Net unrealized appreciation.................... $ 17,147,505
-------------
-------------
</TABLE>
(A) Amount represents less than 0.1%
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION (Moody's Ratings)
- ---------------------
<S> <C>
Common Stocks .............................. 65%
U.S. Government Obligations ................ 16%
U.S. Government Agency Obligations ......... 7%
Investment Companies ....................... 1%
Corporate Notes and Bonds:
Aaa ........................................ 1%
Aa ......................................... 2%
A .......................................... 8%
-----
100%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 51.43%
U.S. TREASURY NOTES - 20.70%
$ 3,500,000 5.500%, 02/28/99 ..................... $ 3,512,005
3,500,000 7.125%, 02/29/00 ..................... 3,624,880
2,500,000 7.875%, 08/15/01 ..................... 2,728,575
2,500,000 6.250%, 10/31/01 ..................... 2,632,725
5,000,000 6.375%, 08/15/02 ..................... 5,342,250
5,500,000 5.750%, 08/15/03 ..................... 5,831,430
5,500,000 7.250%, 05/15/04 ..................... 6,248,055
3,000,000 6.125%, 08/15/07 ..................... 3,313,620
------------
33,233,540
------------
U.S. TREASURY BONDS - 7.13%
2,000,000 7.500%, 05/15/02 ..................... 2,202,260
2,500,000 7.125%, 02/15/23 ..................... 3,087,200
5,500,000 6.250%, 08/15/23 ..................... 6,158,350
------------
11,447,810
------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 8.61%
2,500,000 5.750%, 07/15/03 ..................... 2,598,700
2,500,000 5.850%, 02/21/06 ..................... 2,591,325
1,000,000 6.500%, 09/15/07, CMO ................ 1,029,720
500,000 5.750%, 01/15/08, CMO ................ 497,860
395,382 7.500%, 04/01/08 ..................... 405,883
1,500,000 6.000%, 03/15/09, CMO ................ 1,553,700
1,105,769 6.500%, 06/01/09 ..................... 1,123,042
1,414,408 6.500%, 01/01/11 ..................... 1,436,501
1,266,730 6.500%, 11/01/11 ..................... 1,286,517
1,400,000 6.000%, 12/15/23, CMO ................ 1,307,054
------------
13,830,302
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 8.95%
2,500,000 5.625%, 03/15/01 ..................... 2,555,625
922,327 6.900%, 12/25/03, CMO ................ 941,548
1,203,262 7.000%, 05/01/12 ..................... 1,228,073
2,122,745 7.000%, 01/01/13 ..................... 2,166,515
1,359,584 7.000%, 03/01/13 ..................... 1,387,619
2,556,289 6.000%, 08/01/13 ..................... 2,567,460
515,571 9.000%, 05/01/25 ..................... 543,283
958,414 6.500%, 02/01/26 ..................... 966,197
1,997,579 6.500%, 09/01/28 ..................... 2,013,799
------------
14,370,119
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 6.04%
$ 695,655 8.000%, 06/15/17 ..................... $ 721,958
1,194,065 7.000%, 10/15/23 ..................... 1,223,535
1,223,065 7.000%, 10/15/23 ..................... 1,253,250
1,319,371 6.500%, 03/15/26 ..................... 1,335,032
1,340,946 7.000%, 06/15/27 ..................... 1,374,886
1,159,208 7.000%, 08/20/27 ..................... 1,182,751
1,259,890 6.500%, 09/20/27 ..................... 1,269,339
1,296,771 7.500%, 07/15/28 ..................... 1,336,076
------------
9,696,827
------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS ............... 82,578,598
(Cost $79,937,459) ------------
CORPORATE NOTES AND BONDS - 27.66%
CABLE TELEVISION - 1.09%
1,500,000 Continental Cablevision, Debenture
9.500%, 08/01/13 ..................... 1,747,500
------------
ENERGY - 2.81%
2,000,000 Ashland, Inc.
6.625%, 02/15/08 ..................... 2,057,500
1,350,000 Thermo Electron Corp.
4.250%, 01/01/03 (A) ................. 1,188,000
1,250,000 Williams Co., Inc.
5.950%, 02/15/00 (A) ................. 1,257,813
------------
4,503,313
------------
FINANCE - 10.91%
2,000,000 Advanta Corp., MTN
7.000%, 05/01/01 ..................... 1,760,000
2,000,000 Chelsea GCA Realty Partnership, REIT
7.250%, 10/21/07 ..................... 1,992,500
1,500,000 Continental Corp. Notes
7.250%, 03/01/03 ..................... 1,531,875
500,000 Goldman Sachs Group LP
6.250%, 02/01/03 (A) ................. 503,125
2,200,000 HSBC America Capital II
8.380%, 05/15/27 (A) ................. 2,059,750
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
FINANCE - (CONTINUED)
$ 1,750,000 Heller Financial, Inc.
5.625%, 03/15/00 ..................... $ 1,752,188
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
8.250%, 06/15/05 ..................... 1,107,500
2,000,000 Metropolitan Life Insurance Co.
6.300%, 11/01/03 (A) ................. 2,050,000
1,000,000 Arcadia Financial Ltd.
11.500%, 03/15/07 .................... 670,000
1,520,000 Pacific Mutual Life Insurance Co.
7.900%, 12/30/23 (A) ................. 1,761,300
2,000,000 Prudential Insurance Co. of America
8.300%, 07/01/25 (A) ................. 2,335,000
------------
17,523,238
------------
FOOD AND BEVERAGE - 1.59%
2,500,000 Nabisco, Inc.
6.850%, 06/15/05 ..................... 2,550,000
------------
HEALTHCARE SERVICES - 1.91%
1,300,000 Columbia Healthcare
6.125%, 12/15/00 ..................... 1,285,375
1,750,000 HealthSouth Corp.
6.875%, 06/15/05 ..................... 1,774,063
------------
3,059,438
------------
PRINTING AND PUBLISHING - 0.97%
1,500,000 News America Holdings
7.750%, 01/20/24 ..................... 1,558,125
------------
RETAIL - 0.93%
1,500,000 Kmart Corp., Debenture
7.950%, 02/01/23 ..................... 1,486,875
------------
TELECOMMUNICATIONS - 1.28%
2,000,000 MCI Worldcom, Inc.
6.950%, 08/15/28 ..................... 2,060,000
------------
TRANSPORTATION - 0.42%
413,123 Delta Air Lines, Inc.
Equipment Trust Series 1992A
8.540%, 01/02/07 ..................... 452,969
196,670 Delta Air Lines, Inc.
9.375%, 09/11/07 ..................... 222,187
------------
675,156
------------
UTILITIES - 5.75%
$ 1,825,000 Calenergy Co., Inc.
7.630%, 10/15/07 ..................... $ 1,900,281
2,000,000 Gulf States Utilities, First Mortgage,
Series A
8.250%, 04/01/04 ..................... 2,265,000
1,250,000 Long Island Lighting Co., Debenture
9.000%, 11/01/22 ..................... 1,487,500
1,500,000 Niagara Mohawk Power, First Mortgage
7.625%, 10/01/05 ..................... 1,550,625
2,000,000 Philadelphia Electric Co., First Mortgage
5.625%, 11/01/01 ..................... 2,037,500
------------
9,240,906
------------
TOTAL CORPORATE NOTES AND BONDS....... 44,404,551
(Cost $42,526,570) ------------
YANKEE BONDS - 7.01%
2,250,000 Chilgener S.A. Yankee (Chile)
6.500%, 01/15/06 ..................... 1,816,875
2,500,000 DR Investment Corp.
7.450%, 05/15/07 (A) ................. 2,762,500
1,150,000 LG-Caltex Oil Corp.
7.500%, 07/15/07 (A) ................. 786,507
1,200,000 Petroliam Nasional Berhad
7.625%, 10/15/26 (A) ................. 660,000
1,416,255 Province of Mendoza
Collateral Oil Royalty Note
10.000%, 07/25/02 (A) ................ 1,415,335
2,000,000 Skandinaviska Enskilda, Subordinated Notes
6.625%, 03/29/49 (A) ................. 2,012,500
2,000,000 SB Treasury Co., LLC
9.400%, 12/29/49 (A) ................. 1,800,000
------------
TOTAL YANKEE BONDS ................... 11,253,717
(Cost $12,520,939) ------------
ASSET-BACKED SECURITIES - 3.32%
2,500,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.550%, 09/15/03 ..................... 2,531,425
750,000 Citibank Master Credit Card Trust I
Series 1997-3, Class A
6.839%, 02/10/04 ..................... 771,885
2,000,000 DVI Receivables Corp., Series 1998-1
Class A2
6.035%, 04/10/06 (A) ................. 2,026,875
------------
TOTAL ASSET-BACKED SECURITIES ........ 5,330,185
(Cost $5,193,115) ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
CMO/NON-AGENCY MORTGAGE SECURITIES - 2.62%
$ 1,750,000 BA Mortgage Securities, CMO, REMIC
Series 1997-1, Class A4
7.350%, 07/25/26 ..................... $ 1,766,680
1,500,000 GE Capital Mortgage Services, Inc., CMO,
REMIC
Series 1998-9, Class A15
6.500%, 06/25/28 ....................... 1,506,563
875,000 Midland Realty Acceptance Corp., CMO
Series 1996-C001, Class A2
7.475%, 08/25/28........................ 937,070
------------
TOTAL CMO/NON-AGENCY
MORTAGAGE SECURITIES ................. 4,210,313
(Cost $4,137,988) ------------
REPURCHASE AGREEMENT - 6.07%
9,753,000 Bank of America
5.300%, dated 10/30/98 to be repurchased
on 11/02/98 at $9,757,308
(Collateralized by U.S. Treasury Note
6.625%, due 04/30/02;
Total Par $9,000,000) .................. 9,753,000
------------
TOTAL REPURCHASE AGREEMENT ............. 9,753,000
(Cost $9,753,000) ------------
TOTAL INVESTMENTS - 98.11% ........................... 157,530,364
(Cost $154,069,071)* ------------
NET OTHER ASSETS AND LIABILITIES - 1.89% ............. 3,030,856
------------
NET ASSETS - 100.00% ................................. $160,561,220
------------
------------
</TABLE>
- ----------
* Aggregage cost for Federal tax purposes is $154,069,071.
<TABLE>
<S> <C>
Gross unrealized appreciation ......... $ 4,854,926
Gross unrealized depreciation ......... (1,393,633)
---------------
Net unrealized appreciation ........... $ 3,461,293
---------------
---------------
</TABLE>
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
regisrtation, to qualified institutional buyers. At October 31, 1998,
these securities amounted to $22,618,705 or 14.09% of net assets.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION (Moody's Ratings)
- ---------------------
<S> <C>
Repurchase Agreement ...................... 6%
U.S. Government Obligations ............... 28%
U.S. Government Agency Obligations ........ 23%
Corporate Notes and Bonds:
Aaa ....................................... 6%
A ......................................... 8%
Baa ....................................... 18%
Ba ........................................ 6%
B ......................................... 3%
NR ........................................ 2%
-----
100%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 1998
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
MUNICIPAL SECURITIES - 99.63%
ALASKA - 2.21%
$ 280,000 Anchorage, Alaska, G.O.
5.000%, 07/01/13 ..................... $ 291,987
------------
ARIZONA - 5.34%
450,000 Salt River Project Electric System
Revenue Refunding, Series A
5.500%, 01/01/05 ..................... 488,219
200,000 Tucson, Arizona Water Revenue
5.400%, 07/01/05 ..................... 216,786
------------
705,005
------------
CALIFORNIA - 2.04%
250,000 California State
5.250%, 10/01/10 ..................... 269,687
------------
FLORIDA - 4.11%
265,000 Dade County, Florida State
School District, G.O.
5.000%, 07/15/02
Insured: MBIA ........................ 277,429
250,000 Hillsborough County, Florida, G.O.
5.000%, 07/01/11
Insured: MBIA ........................ 265,060
------------
542,489
------------
GEORGIA - 3.97%
250,000 State of Georgia, Series A, G.O.
6.100%, 03/01/05 ..................... 280,823
200,000 State of Georgia, Series D, G.O.
6.700%, 08/01/09 ..................... 243,762
------------
524,585
------------
ILLINOIS - 1.92%
250,000 Cook County, Illinois, Series A, G.O.
5.000%, 11/15/15
Insured: FGIC ........................ 253,043
------------
MICHIGAN - 6.57%
300,000 Clarkston Community Schools
5.000%, 05/01/06
Insured: AMBAC ....................... 318,381
250,000 Michigan State Trunk Line, Series A
5.500%, 11/01/16 ..................... 270,777
260,000 Utica Community Schools
5.375%, 05/01/04
Insured: FGIC ........................ 278,762
------------
867,920
------------
MINNESOTA - 5.44%
$ 200,000 Shakopee Independent
School District, G.O.
4.500%, 02/01/06 ..................... $ 206,294
245,000 Minneapolis & St. Paul Housing
Finance Board Revenue
5.050%, 11/01/07 ..................... 255,106
250,000 Minneapolis & St. Paul Metropolitan
Airport Revenue, Series B
5.250%, 01/01/15
Insured: AMBAC ....................... 257,115
------------
718,515
------------
NEBRASKA - 3.75%
250,000 American Public Energy Agency
Revenue, Series C
4.300%, 03/01/11
Insured: AMBAC ....................... 242,595
250,000 Nebraska Public Power District
Revenue, Series A
5.000%, 01/01/15
Insured: MBIA ........................ 253,510
------------
496,105
------------
NEVADA - 3.00%
350,000 Clark County, Nevada School District, G.O.
6.400%, 06/15/06
Insured: FGIC ........................ 396,127
------------
NEW HAMPSHIRE - 1.91%
250,000 New Hampshire State Housing Finance
Authority Single Family Revenue, Series B
4.850%, 07/01/08 ..................... 252,310
------------
NEW JERSEY - 2.74%
350,000 State of New Jersey Transportation
Trust Fund Revenue, Series A
Escrowed to Maturity
5.200%, 12/15/00
Insured: AMBAC ....................... 362,627
------------
NEW YORK - 7.85%
250,000 Municipal Assistance Corporation
4.500%, 07/01/01 ..................... 255,763
250,000 New York City Municipal Water Finance
Authority Revenue, Series A
5.000%, 06/15/27 ..................... 245,320
250,000 New York City Transitional Finance
Authority Revenue
5.500%, 08/15/08 ..................... 273,955
250,000 New York State Dormitory Authority
Revenue, Series C
5.100%, 05/15/03 ..................... 262,320
------------
1,037,358
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
OHIO - 3.60%
$ 250,000 Ohio State Highway Capital
Improvement Series C, G.O.
5.000%, 05/01/07 ..................... $ 267,962
200,000 Ohio State Public Facilities Commission
(Higher Education), Series II-A
5.200%, 05/01/01
Insured: AMBAC ....................... 207,812
------------
475,774
------------
OKLAHOMA - 2.74%
350,000 Tulsa, Oklahoma Metropolitan Utilities
Authority Revenue
5.500%, 07/01/00 ..................... 361,785
------------
OREGON - 2.05%
250,000 Portland, Oregon Series A, G.O.
7.000%, 06/01/01 ..................... 271,387
------------
PENNSYLVANIA - 1.66%
215,000 Pennsylvania Housing Finance Agency
Single Family Mortgage, Series 47
5.000%, 10/01/09 ..................... 218,797
------------
PUERTO RICO - 3.39%
400,000 Commonwealth of Puerto Rico
Series A, G.O.
6.500%, 07/01/03
Insured: MBIA ........................ 447,508
------------
TEXAS - 14.22%
245,000 Denton Independent School District
Refunding, G.O.
5.000%, 02/15/12 ..................... 257,515
200,000 Humble Independent School District
Refunding, G.O.
5.500%, 02/15/10 ..................... 220,242
280,000 Lubbock Independent School District
Refunding, G.O.
5.000%, 02/15/09 ..................... 296,982
200,000 Round Rock Independent School District
Refunding, G.O.
4.700%, 08/01/09 ..................... 206,386
210,000 Tarrant County Health Facilities
Development Corp.
Health System Revenue, Series A
5.500%, 02/15/05
Insured: MBIA ........................ 226,325
TEXAS (CONTINUED)
$ 200,000 Texas State Public Finance Authority
Series A, G.O.
5.600%, 10/01/02 ..................... $ 214,077
450,000 Texas State Water
Development Board, G.O.
Escrowed to Maturity
5.000%, 08/01/99 ..................... 456,962
------------
1,878,489
------------
UTAH - 6.86%
300,000 Intermountain Power Agency
Power Supply Revenue
6.250%, 07/01/07
Insured: FSA ......................... 345,813
350,000 Tooele County, Utah Hazardous Waste
Treatment Revenue
5.700%, 11/01/26 ..................... 349,367
200,000 Utah State Building Ownership Authority
Lease Revenue, Series A
5.125%, 05/15/03 ..................... 210,997
------------
906,177
------------
VIRGINIA - 5.96%
250,000 Henrico County, Virginia
Industrial Redevelopment
Authority Revenue
5.300%, 12/01/11 ..................... 263,420
250,000 Virginia State Housing Development
Authority Commonwealth Mortgage
Series H
4.750%, 07/01/07 ..................... 253,892
250,000 Virginia State Public School
Authority Revenue
5.500%, 08/01/03 ..................... 270,095
------------
787,407
------------
WASHINGTON - 3.92%
475,000 King County, Washington, Series A, G.O.
5.800%, 01/01/04 ..................... 517,437
------------
WISCONSIN - 4.38%
300,000 Wisconsin Housing & Economic Development
Authority Home Ownership Revenue
Series A
5.375%, 09/01/17 ..................... 305,904
250,000 State of Wisconsin, Series A, G.O.
5.750%, 05/01/04 ..................... 272,900
------------
578,804
------------
TOTAL MUNICIPAL SECURITIES ........... 13,161,323
(Cost $12,666,172) -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Par Value Value
- --------- --------
<S> <C>
INVESTMENT COMPANIES - 1.54%
17,819 Goldman Sachs Tax Exempt Fund ........ $ 17,819
185,126 Provident Money Market ............... 185,126
------------
TOTAL INVESTMENT COMPANIES ........... 202,945
(Cost $202,945) ------------
TOTAL INVESTMENTS - 101.17% ........................ 13,364,268
(Cost $12,869,117)* -------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (1.17%) . (154,360)
-------------
NET ASSETS - 100.00% ............................... $13,209,908
-------------
-------------
</TABLE>
- ----------
* Aggregage cost for Federal tax purposes is $12,869,117.
<TABLE>
<S> <C>
Gross unrealized appreciation ...... $ 501,066
Gross unrealized depreciation ...... (5,915)
--------------
Net unrealized appreciation ........ $ 495,151
--------------
--------------
</TABLE>
AMBAC American Municipal Board Assurance Corp.
FGIC Federal Guaranty Insurance Corp.
FSA Fund Services Associates
G.O. General Obligation
MBIA Municipal Bond Insurance Association
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION (Moody's Ratings)
- ---------------------
<S> <C>
Investment Companies .................. 1%
Corporate Notes and Bonds:
Aaa ................................... 50%
Aa .................................... 37%
A ..................................... 5%
Baa ................................... 5%
NR .................................... 2%
-----
100%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Par Value Cost
- --------- ----
<S> <C>
COMMERCIAL PAPER - 95.48%
$ 5,300,000 Toyota Motor Credit Corp.
5.532%, 11/02/98 (A).......... $ 5,299,193
8,500,000 GTE Corp.
5.352%, 11/03/98 (A).......... 8,497,483
2,400,000 Baxter International, Inc.
5.591%, 11/04/98 (A).......... 2,398,890
5,000,000 Duke Capital Corp.
5.325%, 11/04/98 (A).......... 4,997,783
5,000,000 Commercial Credit Co.
5.404%, 11/05/98.............. 5,000,000
4,310,000 GTE Corp.
5.344%, 11/05/98 (A).......... 4,307,452
3,000,000 AON Corp.
5.466%, 11/06/98 (A).......... 2,997,738
7,000,000 Toys `R' Us, Inc.
5.163%, 11/06/98 (A).......... 6,994,993
4,000,000 AON Corp.
5.571%, 11/09/98 (A).......... 3,995,084
11,000,000 AVCO Financial Sevices, Inc.
5.548%, 11/10/98.............. 11,000,000
9,000,000 CIT Group Holdings
5.519%, 11/12/98.............. 9,000,000
6,500,000 Hertz Corp.
5.286%, 11/13/98 (A).......... 6,488,603
5,000,000 Baxter International, Inc.
5.315%, 11/16/98 (A).......... 4,988,958
5,100,000 Sears Roebuck Acceptance Corp.
5.316%, 11/16/98.............. 5,100,000
6,000,000 Chrysler Financial Corp.
5.398%, 11/17/98 (A).......... 5,985,733
2,500,000 Sears Roebuck Acceptance Corp.
5.194%, 11/17/98.............. 2,500,000
3,500,000 Heller Financial, Inc.
5.549%, 11/18/98.............. 3,500,000
8,000,000 Prudential Funding Corp.
5.450%, 11/18/98.............. 8,000,000
4,000,000 AON Corp.
5.272%, 11/19/98 (A).......... 3,989,500
5,000,000 General Electric Capital Corp.
5.578%, 11/19/98.............. 5,000,000
2,000,000 Sears Roebuck Acceptance Corp.
5.502%, 11/19/98.............. 2,000,000
6,000,000 Duke Capital Corp.
5.593%, 11/20/98 (A).......... 5,982,520
4,000,000 Texaco, Inc.
5.458%, 11/20/98.............. 4,000,000
5,600,000 Transamerica Finance Group
5.581%, 11/23/98 (A).......... 5,581,178
14,000,000 American Home Products Corp.
5.464%, 11/24/98 (A).......... 13,951,521
5,000,000 American General Finance
5.130%, 11/25/98.............. 5,000,000
COMMERCIAL PAPER - (CONTINUED)
$ 6,000,000 Chrysler Financial Corp.
5.583%, 11/30/98 (A).......... $ 5,973,417
4,000,000 General Electric Capital Corp.
5.266%, 12/01/98.............. 4,000,000
5,800,000 Heller Financial, Inc.
5.617%, 12/02/98.............. 5,800,000
4,000,000 Associates First Capital Corp.
5.277%, 12/03/98.............. 4,000,000
4,000,000 Toys `R' Us, Inc.
5.239%, 12/04/98 (A).......... 3,980,933
4,000,000 Norwest Financial, Inc.
5.261%, 12/07/98.............. 4,000,000
4,000,000 General Electric Capital Corp.
5.272%, 12/08/98.............. 4,000,000
4,000,000 Associates First Capital Corp.
5.282%, 12/09/98.............. 4,000,000
5,000,000 Prudential Funding Corp.
5.095%, 12/09/98.............. 5,000,000
4,000,000 International Lease Finance Corp.
5.244%, 12/10/98 (A).......... 3,977,467
5,000,000 American General Finance
5.106%, 12/11/98.............. 5,000,000
4,000,000 Household Finance Corp.
5.250%, 12/11/98.............. 4,000,000
5,000,000 Norwest Financial, Inc.
5.163%, 12/14/98.............. 5,000,000
5,000,000 American Express Credit Corp.
5.085%, 12/15/98.............. 5,000,000
7,400,000 General Motors Acceptance Corp.
5.112%, 01/04/99.............. 7,400,000
6,000,000 Baxter International, Inc.
5.313%, 01/05/99 (A).......... 5,943,125
4,300,000 Hertz Corp.
5.148%, 01/07/99 (A).......... 4,259,266
3,280,000 International Lease Finance Corp.
5.390%, 01/08/99 (A).......... 3,247,164
7,700,000 Toyota Motor Credit Corp.
5.110%, 01/08/99 (A).......... 7,626,551
9,000,000 Household Finance Corp.
5.113%, 01/13/99.............. 9,000,000
7,000,000 General Motors Acceptance Corp.
5.104%, 01/14/99.............. 7,000,000
4,400,000 Heller Financial, Inc.
5.316%, 01/15/99.............. 4,400,000
3,600,000 Hertz Corp.
5.144%, 01/19/99 (A).......... 3,559,868
6,000,000 International Lease Finance Corp.
5.076%, 01/22/99 (A).......... 5,931,530
-----------
TOTAL COMMERCIAL PAPER 268,655,950
(Cost $268,655,950) -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
ALLEGHANY FUNDS
CHICAGO TRUST MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - CONTINUED OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Par Value Cost
- --------- ----
<S> <C>
GIC WITHIN FUNDING AGREEMENT - 3.55%
$ 10,000,000 Allstate Life Funding Agreement GIC
5.757%, 12/01/98................... $ 10,000,000
-------------
TOTAL GIC WITHIN
FUNDING AGREEMENT.................. 10,000,000
(Cost $10,000,000) -------------
REPURCHASE AGREEMENT - 1.15%
3,236,000 First Chicago
5.200%, dated 10/30/98 to be repurchased
on 11/02/98 at $3,237,402
(Collateralized by U.S. Treasury Bill
4.000%, due 10/14/99)
Total Par $3,435,000.................. 3,236,000
-------------
TOTAL REPURCHASE AGREEMENT............ 3,236,000
(Cost $3,236,000) -------------
TOTAL INVESTMENTS - 100.18%......................... 281,891,950
(Cost $281,891,950)* -------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.18%).. (502,656)
-------------
NET ASSETS - 100.00% $281,389,294
-------------
-------------
</TABLE>
- ----------
(A) Annualized yield at time of purchase
* At October 31, 1998, cost is identical for book and Federal income tax
purposes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
This page intentionally left blank.
31
<PAGE>
ALLEGHANY FUNDS
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1998
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST
MONTAG & CALDWELL GROWTH & INCOME CHICAGO TRUST CHICAGO TRUST
GROWTH FUND FUND TALON FUND BALANCED FUND
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost......................... $ 1,499,700,738 $ 222,034,138 $ 21,463,727 $ 159,853,152
Repurchase agreements....................... -- 21,355,000 -- 7,454,000
Net unrealized appreciation................. 256,348,235 124,384,493 1,267,731 50,116,427
------------------ ------------------ ------------------ ------------------
Total investments at value.................. 1,756,048,973 367,773,631 22,731,458 217,423,579
Cash.......................................... -- 33,107 -- --
Receivables:
Dividends and interest...................... 1,260,078 113,725 13,365 1,224,485
Fund shares sold............................ 4,223,821 200,767 42,271 117,155
Investments sold............................ -- -- -- 1,073,465
Due from Advisor, net....................... -- -- -- --
Deferred organization costs................... 3,338 577 2,944 2,634
Other assets.................................. 36,191 35,860 86 559
------------------ ------------------ ------------------ ------------------
Total assets.............................. 1,761,572,401 368,157,667 22,790,124 219,841,877
------------------ ------------------ ------------------ ------------------
LIABILITIES:
Payables:
Bank overdraft.............................. 63,164 -- 10 2,400
Dividend distribution ...................... -- -- -- --
Investments purchased....................... 16,556,586 -- -- --
Fund shares redeemed........................ 983,007 160,645 88 115,467
Due to Advisor, net......................... 793,778 200,937 10,525 124,534
Distribution fee............................ -- 60,189 29,878 180,676
Trustees fee................................ 3,616 1,454 911 1,221
Accrued expenses and other payables........... 393,743 68,000 21,020 56,037
------------------ ------------------ ------------------ ------------------
Total liabilities......................... 18,793,894 491,225 62,432 480,335
------------------ ------------------ ------------------ ------------------
NET ASSETS....................................... $ 1,742,778,507 $ 367,666,442 $ 22,727,692 $ 219,361,542
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
NET ASSETS CONSIST OF:
Capital paid-in............................... $ 1,422,549,988 $ 220,003,494 $ 21,765,149 $ 155,556,778
Accumulated undistributed (distribution
in excess of) net investment income (loss).. -- -- 3,805 693,191
Accumulated net realized gain (loss)
on investments.............................. 63,880,284 23,278,455 (308,993) 12,995,146
Net unrealized appreciation
on investments.............................. 256,348,235 124,384,493 1,267,731 50,116,427
------------------ ------------------ ------------------ ------------------
TOTAL NET ASSETS................................. $ 1,742,778,507 $ 367,666,442 $ 22,727,692 $ 219,361,542
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING........ 65,621,107 15,946,790 1,726,652 18,230,280
NET ASSET VALUE
Offering and redemption price per share
(Net Assets/Shares Outstanding)............... (A) $ 23.06 $ 13.16 $ 12.03
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
</TABLE>
- ----------
(A) Montag & Caldwell Growth Fund Class N (Retail):
Net Asset Value, offering price and redemption price per share (Based on
net assets of $1,004,355,405 and 37,909,987 shares issued and outstanding)
$26.49
Montag & Caldwell Growth Fund Class I (Institutional):
Net Asset Value, offering price and redemption price per share (Based on
net assets of $738,423,102 and 27,711,120 shares issued and outstanding)
$26.65
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
CHICAGO TRUST CHICAGO TRUST
MONTAG & CALDWELL CHICAGO TRUST MUNICIPAL BOND MONEY MARKET
BALANCED FUND BOND FUND FUND FUND
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
$ 139,967,661 $ 144,316,071 $ 12,869,117 $ 278,655,950
-- 9,753,000 -- 3,236,000
17,517,993 3,461,293 495,151 --
------------------ ------------------ ------------------ ------------------
157,485,654 157,530,364 13,364,268 281,891,950
531 -- 504 1,015
1,056,695 2,182,183 204,791 613,221
192,364 201,533 -- 98,504
-- 1,073,465 -- --
-- -- 7,051 --
3,337 577 577 577
260 381 37 754
------------------ ------------------ ------------------ ------------------
158,738,841 160,988,503 13,577,228 282,606,021
------------------ ------------------ ------------------ ------------------
-- 3,403 -- --
-- -- -- 1,065,122
-- -- 298,499 --
200,606 143,379 -- 20,126
80,549 54,171 -- 94,551
-- 199,836 52,462 --
1,124 1,128 896 1,318
58,214 25,366 15,463 35,610
------------------ ------------------ ------------------ ------------------
340,493 427,283 367,320 1,216,727
------------------ ------------------ ------------------ ------------------
$ 158,398,348 $ 160,561,220 $ 13,209,908 $ 281,389,294
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
$ 131,995,888 $ 155,978,487 $ 12,722,879 $ 281,389,294
351,445 412,661 26,603 --
8,533,022 708,779 (34,725) --
17,517,993 3,461,293 495,151 --
------------------ ------------------ ------------------ ------------------
$ 158,398,348 $ 160,561,220 $ 13,209,908 $ 281,389,294
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
8,997,568 15,636,666 1,274,844 281,389,294
$ 17.60 $ 10.27 $ 10.36 $ 1.00
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
</TABLE>
33
<PAGE>
ALLEGHANY FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST
MONTAG & CALDWELL GROWTH & INCOME CHICAGO TRUST CHICAGO TRUST
GROWTH FUND FUND TALON FUND BALANCED FUND
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................... $ 9,082,746 $ 2,460,911 $ 178,745 $ 979,385
Interest.................................... 2,602,662 757,761 316,698 6,034,686
----------------- ------------------ ------------------ ------------------
Total investment income................... 11,685,408 3,218,672 495,443 7,014,071
----------------- ------------------ ------------------ ------------------
EXPENSES:
Investment advisory fees.................... 9,438,160 2,312,832 224,933 1,453,465
Distribution expenses....................... 1,942,143 826,012 70,291 519,095
Transfer agent fees......................... 336,495 89,857 37,304 22,245
Administration fees......................... 741,210 191,695 18,106 131,063
Registration expenses....................... 311,084 29,781 15,326 18,569
Custodian fees.............................. 23,727 19,795 12,594 22,983
Professional fees........................... 72,728 27,943 17,009 24,340
Amortization of organization costs.......... 3,332 4,997 3,333 1,402
Reports to shareowner expense............... 53,172 15,357 1,247 9,714
Trustees fees............................... 6,663 4,501 3,958 4,268
Other expenses.............................. 178,798 43,349 5,642 36,403
----------------- ------------------ ------------------ ------------------
Total expenses............................ 13,107,512 3,566,119 409,743 2,243,547
----------------- ------------------ ------------------ ------------------
Expenses waived/reimbursed................ -- -- (43,706) --
----------------- ------------------ ------------------ ------------------
Net expenses.............................. 13,107,512 3,566,119 366,037 2,243,547
----------------- ------------------ ------------------ ------------------
NET INVESTMENT INCOME (LOSS).................. (1,422,104) (347,447) 129,406 4,770,524
----------------- ------------------ ------------------ ------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS :
Net realized gain (loss) on investments
(including a net realized (loss) on option
transactions of ($96,126) in the Talon Fund) 63,978,484 23,413,427 (152,152) 13,005,184
Net change in unrealized appreciation
(depreciation) on investments............. 109,207,399 47,348,240 (2,860,775) 16,518,248
----------------- ------------------ ------------------ ------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS................ 173,185,883 70,761,667 (3,012,927) 29,523,432
----------------- ------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS...................... $ 171,763,779 $ 70,414,220 $ (2,883,521) $ 34,293,956
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
<TABLE>
<CAPTION>
CHICAGO TRUST CHICAGO TRUST
MONTAG & CALDWELL CHICAGO TRUST MUNICIPAL BOND MONEY MARKET
BALANCED FUND BOND FUND FUND FUND
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
$ 578,855 $ -- $ -- $ --
3,119,261 9,088,167 606,663 14,477,508
------------------ ------------------ ------------------ ------------------
3,698,116 9,088,167 606,663 14,477,508
------------------ ------------------ ------------------ ------------------
971,351 740,845 78,556 1,026,684
323,784 336,748 19,294 --
33,951 24,946 19,247 34,677
80,312 87,388 12,164 148,930
36,201 26,149 15,116 28,724
19,054 21,980 10,770 21,898
21,522 21,935 17,624 27,124
3,332 4,997 4,997 4,997
6,324 6,816 621 13,176
4,171 4,175 3,943 4,365
30,554 18,256 2,430 31,000
------------------ ------------------ ------------------ ------------------
1,530,556 1,294,235 184,762 1,341,575
------------------ ------------------ ------------------ ------------------
-- (217,546) (138,689) (24,492)
------------------ ------------------ ------------------ ------------------
1,530,556 1,076,689 46,073 1,317,083
------------------ ------------------ ------------------ ------------------
2,167,560 8,011,478 560,590 13,160,425
------------------ ------------------ ------------------ ------------------
8,565,876 720,844 56,385 --
5,973,930 629,065 175,662 --
------------------ ------------------ ------------------ ------------------
14,539,806 1,349,909 232,047 --
------------------ ------------------ ------------------ ------------------
$ 16,707,366 $ 9,361,387 $ 792,637 $ 13,160,425
------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
</TABLE>
35
<PAGE>
ALLEGHANY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL CHICAGO TRUST
GROWTH FUND GROWTH & INCOME FUND
--------------------------------- ---------------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1998 1997 1998 1997
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD $ 748,418,166 $ 218,649,895 $ 274,607,907 $ 205,133,317
---------------- --------------- --------------- ----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) (1,422,104) (1,327,085) (347,447) 1,018,470
Net realized gain (loss) on investments sold
and purchased options transactions 63,978,484 8,570,687 23,413,427 19,177,699
Net change in unrealized appreciation (depreciation)
on investments and assets
and liabilities in purchased options 109,207,399 114,427,550 47,348,240 33,416,450
---------------- --------------- --------------- ----------------
Net increase (decrease) in net assets
from operations 171,763,779 121,671,152 70,414,220 53,612,619
---------------- --------------- --------------- ----------------
DISTRIBUTIONS TO SHAREOWNERS:
From and in excess of net investment income:
Retail Class -- -- (23,963) (1,152,026)
Institutional Class -- (26,630) -- --
From realized gain on investments:
Retail Class (4,750,066) (1,466,613) (19,283,609) (4,334,020)
Institutional Class (2,772,360) (412,803) -- --
Return of Capital -- -- (30,652) --
---------------- --------------- --------------- ----------------
Total distributions (7,522,426) (1,906,046) (19,338,224) (5,486,046)
---------------- --------------- --------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares:
Retail Class 735,037,158 339,687,434 84,420,291 50,803,893
Institutional Class 510,661,778 228,296,239 -- --
Issued to shareowners in reinvestment of distributions:
Retail Class 4,476,035 1,404,998 19,000,003 5,404,887
Institutional Class 2,260,596 396,515 -- --
Cost of shares repurchased:
Retail Class (318,089,688) (115,055,486) (61,437,755) (34,860,763)
Institutional Class (104,226,891) (44,726,535) -- --
---------------- --------------- --------------- ----------------
Net increase from capital
share transactions 830,118,988 410,003,165 41,982,539 21,348,017
---------------- --------------- --------------- ----------------
Total increase (decrease) in net assets 994,360,341 529,768,271 93,058,535 69,474,590
---------------- --------------- --------------- ----------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) $ 1,742,778,507 $ 748,418,166 $ 367,666,442 $ 274,607,907
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
(A) Undistributed net investment income $ -- $ -- $ -- $ --
---------------- --------------- --------------- ----------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Retail Class:
Sold 28,902,833 16,692,907 3,911,120 2,806,114
Issued to shareowner in reinvestment
of distributions 198,582 79,785 1,006,991 326,567
Repurchased (12,333,539) (5,364,133) (2,888,977) (1,902,988)
Institutional Class:
Sold 19,881,332 10,833,116 -- --
Issued to shareowner in reinvestment
of distributions 99,938 22,316 -- --
Repurchased (4,087,111) (2,106,489) -- --
---------------- --------------- --------------- ----------------
Net increase in shares outstanding 32,662,035 20,157,502 2,029,134 1,229,693
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
<TABLE>
<CAPTION>
CHICAGO TRUST CHICAGO TRUST
TALON FUND BALANCED FUND
--------------------------------- ---------------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1998 1997 1998 1997
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
$ 28,459,583 $ 17,417,675 $ 187,993,337 $ 156,703,443
--------------- ---------------- ---------------- ---------------
129,406 162,715 4,770,524 4,843,563
(152,152) 4,497,850 13,005,184 11,378,927
(2,860,775) 1,618,377 16,518,248 15,462,457
--------------- ---------------- ---------------- ---------------
(2,883,521) 6,278,942 34,293,956 31,684,947
--------------- ---------------- ---------------- ---------------
(163,813) (134,407) (4,710,584) (4,764,936)
-- -- -- --
(4,653,292) (1,458,660) (11,401,639) (2,253,139)
-- -- -- --
-- -- -- --
--------------- ---------------- ---------------- ---------------
(4,817,105) (1,593,067) (16,112,223) (7,018,075)
--------------- ---------------- ---------------- ---------------
6,908,329 6,345,104 36,882,800 28,395,564
-- -- -- --
4,757,368 1,577,255 16,106,383 7,017,789
-- -- -- --
(9,696,962) (1,566,326) (39,802,711) (28,790,331)
-- -- -- --
--------------- ---------------- ---------------- ---------------
1,968,735 6,356,033 13,186,472 6,623,022
--------------- ---------------- ---------------- ---------------
(5,731,891) 11,041,908 31,368,205 31,289,894
--------------- ---------------- ---------------- ---------------
$ 22,727,692 $ 28,459,583 $ 219,361,542 $ 187,993,337
--------------- ---------------- ---------------- ---------------
--------------- ---------------- ---------------- ---------------
$ 3,805 $ 37,253 $ 693,191 $ 624,636
--------------- ---------------- ---------------- ---------------
451,934 397,032 3,317,900 2,757,711
318,839 107,919 1,398,337 699,716
(661,255) (97,875) (3,485,565) (2,774,505)
-- -- -- --
-- -- -- --
-- -- -- --
--------------- ---------------- ---------------- ---------------
109,518 407,076 1,230,672 682,922
--------------- ---------------- ---------------- ---------------
--------------- ---------------- ---------------- ---------------
</TABLE>
37
<PAGE>
ALLEGHANY FUNDS
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL CHICAGO TRUST
BALANCED FUND BOND FUND
--------------------------------- ---------------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1998 1997 1998 1997
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD................. $ 82,719,053 $ 31,472,671 $ 120,532,177 $ 79,210,728
---------------- --------------- --------------- ----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income.......................... 2,167,560 952,704 8,011,478 6,243,541
Net realized gain (loss) on investments sold... 8,565,876 2,102,297 720,844 (36,729)
Net change in unrealized appreciation
of investments............................... 5,973,930 7,581,239 629,065 2,754,254
---------------- --------------- --------------- ----------------
Net increase in net assets
from operations.............................. 16,707,366 10,636,240 9,361,387 8,961,066
---------------- --------------- --------------- ----------------
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income.......................... (2,001,366) (837,377) (8,038,190) (6,043,358)
Net realized gain on investments............... (2,095,351) (2,702,590) -- (16,748)
---------------- --------------- --------------- ----------------
Total distributions.......................... (4,096,717) (3,539,967) (8,038,190) (6,060,106)
---------------- --------------- --------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares.............. 101,273,482 58,631,470 75,297,016 46,817,358
Issued to shareowners in
reinvestment of distributions................ 3,950,066 3,490,623 6,689,047 4,797,389
Cost of shares repurchased..................... (42,154,902) (17,971,984) (43,280,217) (13,194,258)
---------------- --------------- --------------- ----------------
Net increase from
capital share transactions................ 63,068,646 44,150,109 38,705,846 38,420,489
---------------- --------------- --------------- ----------------
Total increase in net assets............... 75,679,295 51,246,382 40,029,043 41,321,449
---------------- --------------- --------------- ----------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A).... $ 158,398,348 $ 82,719,053 $ 160,561,220 $ 120,532,177
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
(A) Undistributed net investment income........... $ 351,445 $ 185,563 $ 412,661 $ 452,597
---------------- --------------- --------------- ----------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold......................................... 6,029,088 3,939,135 7,333,221 4,734,805
Issued to shareholders in reinvestment
of distributions........................... 244,553 255,726 656,919 485,679
Repurchased.................................. (2,443,871) (1,229,194) (4,247,776) (1,334,065)
---------------- --------------- --------------- ----------------
Net increase in shares outstanding......... 3,829,770 2,965,667 3,742,364 3,886,419
---------------- --------------- --------------- ----------------
---------------- --------------- --------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
<TABLE>
<CAPTION>
CHICAGO TRUST CHICAGO TRUST
MUNICIPAL BOND FUND MONEY MARKET FUND
--------------------------------- ---------------------------------
Years Ended October 31, Years Ended October 31,
1998 1997 1998 1997
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
$ 12,379,208 $ 11,186,162 $ 238,551,474 $ 226,535,616
--------------- ---------------- ---------------- ---------------
560,590 430,579 13,160,425 12,701,010
56,385 6,147 -- --
175,662 140,720 -- --
--------------- ---------------- ---------------- ---------------
792,637 577,446 13,160,425 12,701,010
--------------- ---------------- ---------------- ---------------
(561,443) (426,993) (13,160,425) (12,701,010)
-- -- -- --
--------------- ---------------- ---------------- ---------------
(561,443) (426,993) (13,160,425) (12,701,010)
--------------- ---------------- ---------------- ---------------
10,749,139 1,375,126 720,702,583 569,551,234
42,390 21,748 816,231 434,377
(10,192,023) (354,281) (678,680,994) (557,969,753)
--------------- ---------------- ---------------- ---------------
599,506 1,042,593 42,837,820 12,015,858
--------------- ---------------- ---------------- ---------------
830,700 1,193,046 42,837,820 12,015,858
--------------- ---------------- ---------------- ---------------
$ 13,209,908 $ 12,379,208 $ 281,389,294 $ 238,551,474
--------------- ---------------- ---------------- ---------------
--------------- ---------------- ---------------- ---------------
$ 26,603 $ 27,456 $ -- $ --
--------------- ---------------- ---------------- ---------------
1,049,531 135,835 720,702,583 569,551,234
4,135 2,159 816,231 434,377
(994,156) (35,025) (678,680,994) (557,969,753)
--------------- ---------------- ---------------- ---------------
59,510 102,969 42,837,820 12,015,858
--------------- ---------------- ---------------- ---------------
--------------- ---------------- ---------------- ---------------
</TABLE>
39
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL GROWTH FUND
---------------------------------------------------------------------
RETAIL CLASS
---------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 22.68 $ 17.08 $ 13.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.05) (0.05) -- 0.02
Net realized and unrealized gain
on investments ................................ 4.07 5.79 3.93 3.16
---------------- ------------ ----------- -----------
Total from investment operations .............. 4.02 5.74 3.93 3.18
---------------- ------------ ----------- -----------
LESS DISTRIBUTIONS:
Distributions from and in excess
of net investment income ...................... -- -- (0.01) (0.02)
Distributions from net realized
gain on investments ........................... (0.21) (0.14) -- --
---------------- ------------ ----------- -----------
Total distributions ........................... (0.21) (0.14) (0.01) (0.02)
---------------- ------------ ----------- -----------
Net increase in net asset value ...................... 3.81 5.60 3.92 3.16
---------------- ------------ ----------- -----------
Net Asset Value, End of Period ....................... $ 26.49 $ 22.68 $ 17.08 $ 13.16
---------------- ------------ ----------- -----------
---------------- ------------ ----------- -----------
TOTAL RETURN ......................................... 17.90% 33.82% 29.91% 31.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) ................. $ 1,004,356 $ 479,557 $ 166,243 $ 40,355
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 1.12% 1.24% 1.32% 1.87%
After reimbursement of expenses
by Advisor(1)..................................... 1.12% 1.23% 1.28% 1.30%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... (0.22)% (0.38)% (0.10)% (0.36)%
After reimbursement of expenses
by Advisor(1)..................................... (0.22)% (0.37)% (0.06)% 0.20%
Portfolio Turnover(1).................................. 29.81% 18.65% 26.36% 34.46%
</TABLE>
- ---------------------------------------------------
(1) Annualized.
(a) Montag & Caldwell Growth Fund Retail Class commenced investment operations
on November 2, 1994.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL GROWTH FUND
-----------------------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96(a)
-------------- -------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 22.75 $ 17.08 $ 15.59
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.01 -- 0.02
Net realized and unrealized gain
on investments............................. 4.10 5.81 1.49
-------------- ---------------- -----------------
Total from investment operations........... 4.11 5.81 1.51
-------------- ---------------- -----------------
LESS DISTRIBUTIONS:
Distributions from and in excess
of net investment income................... -- -- (0.02)
Distributions from net realized
gain on investments........................ (0.21) (0.14) --
-------------- ---------------- -----------------
Total distributions...................... (0.21) (0.14) (0.02)
-------------- ---------------- -----------------
Net increase in net asset value................... 3.90 5.67 1.49
-------------- ---------------- -----------------
Net Asset Value, End of Period.................... $ 26.65 $ 22.75 $ 17.08
-------------- ---------------- -----------------
-------------- ---------------- -----------------
TOTAL RETURN...................................... 18.24% 34.26% 9.67%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's).............. $ 738,423 $ 268,861 $ 52,407
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)................................ 0.85% 0.93% 0.98%
After reimbursement of expenses
by Advisor(1)................................ 0.85% 0.93% 0.98%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)................................ 0.05% (0.07)% 0.17%
After reimbursement of expenses
by Advisor(1)................................ 0.05% (0.06)% 0.17%
Portfolio Turnover(1)............................. 29.81% 18.65% 26.36%
</TABLE>
- ----------------------------------------------------
(1) Annualized.
(a) Montag & Caldwell Growth Fund Institutional Class commenced investment
operations on June 28, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST GROWTH & INCOME FUND
--------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 19.73 $ 16.17 $ 12.90 $ 10.11 $ 10.00
INCOME FROM INVESTMENT OPERATIONS: ----------- ----------- ----------- ----------- -----------
Net investment income (loss) ...................... (0.02) 0.08 0.11 0.09 0.07
Net realized and unrealized gain
on investments .................................. 4.73 3.91 3.34 2.79 0.10
----------- ----------- ----------- ----------- ------------
Total from investment operations .............. 4.71 3.99 3.45 2.88 0.17
----------- ----------- ----------- ----------- ------------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income ............................... (0.01) (0.09) (0.11) (0.09) (0.06)
Distributions from net realized gain on investments (1.37) (0.34) (0.07) -- --
----------- ----------- ----------- ----------- ------------
Total distributions ........................... (1.38) (0.43) (0.18) (0.09) (0.06)
----------- ----------- ----------- ----------- ------------
Net increase in net asset value ........................ 3.33 3.56 3.27 2.79 0.11
----------- ----------- ----------- ----------- ------------
Net Asset Value, End of Period ......................... $ 23.06 $ 19.73 $ 16.17 $ 12.90 $ 10.11
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
TOTAL RETURN ........................................... 25.43% 25.16% 26.98% 28.66% 1.73%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's).................... $ 367,666 $ 274,608 $ 205,133 $ 172,296 $ 12,282
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)....................................... 1.08% 1.12% 1.15% 1.50% 2.21%
After reimbursement of expenses
by Advisor(1)....................................... 1.08% 1.07%(2) 1.00% 1.09%(3) 1.20%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)....................................... (0.11)% 0.36% 0.62% 0.33% (0.15)%
After reimbursement of expenses
by Advisor(1)....................................... (0.11)% 0.41% 0.77% 0.74% 0.86%
Portfolio Turnover(1)................................... 34.21% 30.58% 25.48% 9.00% 37.01%
</TABLE>
- -------------------------------------------
(1) Annualized.
(2) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 1.00% to 1.10% on February 28, 1997.
(3) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 1.20% to 1.00% on September 21, 1995.
(a) Chicago Trust Growth & Income Fund commenced investment operations on
December 13, 1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST TALON FUND
-------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(a)
------------ ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.60 $ 14.39 $ 12.07 $ 10.25 $ 10.00
INCOME FROM INVESTMENT OPERATIONS: ------------ ---------- --------- --------- ---------
Net investment income ............................. 0.07 0.11 0.04 0.09 0.02
Net realized and unrealized gain (loss)
on investments and options ...................... (1.59) 4.38 3.01 1.84 0.23
------------ ---------- --------- --------- ---------
Total from investment operations .............. (1.52) 4.49 3.05 1.93 0.25
------------ ---------- --------- --------- ---------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income and options ................... (0.09) (0.09) (0.03) (0.11) --
Distributions from net realized gain on investments (2.83) (1.19) (0.70) -- --
------------ ---------- --------- --------- ---------
Total distributions ........................... (2.92) (1.28) (0.73) (0.11) --
------------ ---------- --------- --------- ---------
Net increase (decrease) in net asset value ............. (4.44) 3.21 2.32 1.82 0.25
------------ ---------- --------- --------- ---------
Net Asset Value, End of Period.......................... $ 13.16 $ 17.60 $ 14.39 $ 12.07 $ 10.25
------------ ---------- --------- --------- ---------
------------ ---------- --------- --------- ---------
TOTAL RETURN............................................ (10.54)% 33.47% 26.51% 18.92% 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's).................... $ 22,728 $ 28,460 $ 17,418 $ 10,538 $ 4,355
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)....................................... 1.46% 1.67% 1.98% 3.04% 7.82%
After reimbursement of expenses
by Advisor(1)....................................... 1.30% 1.30% 1.30% 1.30% 1.30%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)....................................... 0.30% 0.34% (0.38)% (0.97)% (4.13)%
After reimbursement of expenses
by Advisor(1)....................................... 0.46% 0.71% 0.30% 0.77% 2.39%
Portfolio Turnover(1)................................... 78.33% 112.72% 126.83% 229.43% 33.66%
</TABLE>
- --------------------------------------------------------------
(1) Annualized.
(a) Chicago Trust Talon Fund commenced investment operations on September 19,
1994.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST BALANCED FUND
----------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95(a)
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 11.06 $ 9.60 $ 8.43 $ 8.34
----------- ---------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.27 0.28 0.27 0.03
Net realized and unrealized gain
on investments ................................ 1.65 1.60 1.16 0.06
----------- ---------- ----------- ----------
Total from investment operations ............ 1.92 1.88 1.43 0.09
----------- ---------- ----------- ----------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income ............................. (0.27) (0.28) (0.26) --
Distributions from net realized gain on
investments ................................... (0.68) (0.14) -- --
----------- ---------- ----------- ----------
Total distributions ......................... (0.95) (0.42) (0.26) --
----------- ---------- ----------- ----------
Net increase in net asset value ...................... 0.97 1.46 1.17 0.09
----------- ---------- ----------- ----------
Net Asset Value, End of Period ....................... $ 12.03 $ 11.06 $ 9.60 $ 8.43
----------- ---------- ----------- ----------
TOTAL RETURN ......................................... 18.50% 20.10% 17.21% 1.08%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) ................. $ 219,362 $ 187,993 $ 156,703 $ 152,820
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 1.08% 1.13% 1.17% 1.19%
After reimbursement of expenses
by Advisor(1)..................................... 1.08% 1.07%(2) 1.00% 1.00%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 2.30% 2.70% 2.79% 2.56%
After reimbursement of expenses
by Advisor(1)..................................... 2.30% 2.76% 2.96% 2.73%
Portfolio Turnover(1)................................. 40.28% 34.69% 34.29% 0.72%
</TABLE>
- --------------------------------------------------
(1) Annualized.
(2) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 1.00% to 1.10% on February 28, 1997.
(a) Chicago Trust Balanced Fund (formerly the Chicago Trust Asset Allocation
Fund) commenced investment operations on September 21, 1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONTAG & CALDWELL BALANCED FUND
--------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95(a)
---------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 16.01 $ 14.29 $ 12.12 $ 10.00
-------------- -------------- -------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.27 0.25 0.27 0.26
Net realized and unrealized gain
on investments............................. 1.97 2.93 2.17 2.09
-------------- -------------- -------------- --------------
Total from investment operations......... 2.24 3.18 2.44 2.35
-------------- -------------- -------------- --------------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income.......................... (0.27) (0.25) (0.27) (0.23)
Distributions from net realized gain on
investments................................ (0.38) (1.21) -- --
-------------- -------------- -------------- --------------
Total distributions...................... (0.65) (1.46) (0.27) (0.23)
-------------- -------------- -------------- --------------
Net increase in net asset value................... 1.59 1.72 2.17 2.12
-------------- -------------- -------------- --------------
Net Asset Value, End of Period.................... $ 17.60 $ 16.01 $ 14.29 $ 12.12
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
TOTAL RETURN...................................... 14.46% 24.26% 20.37% 23.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's).............. $ 158,398 $ 82,719 $ 31,473 $ 21,908
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)................................. 1.18% 1.33% 1.58% 2.50%
After reimbursement of expenses
by Advisor(1)................................. 1.18% 1.25% 1.25% 1.25%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)................................. 1.67% 1.70% 1.83% 1.38%
After reimbursement of expenses
by Advisor(1)................................. 1.67% 1.78% 2.16% 2.63%
Portfolio Turnover(1)............................. 59.02% 28.13% 43.58% 27.33%
</TABLE>
- ------------------------------------------------------------------
(1) Annualized.
(a) Montag & Caldwell Balanced Fund commenced investment operations on November
2, 1994.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST BOND FUND
-----------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 10.13 $ 9.89 $ 9.94 $ 9.21 $ 10.00
----------- ----------- ------------ ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.60 0.61 0.60 0.60 0.50
Net realized and unrealized gain (loss)
on investments ................................ 0.15 0.23 (0.05) 0.73 (082)
----------- ----------- ------------ ------------ -----------
Total from investment operations ............ 0.75 0.84 0.55 1.33 (0.32)
----------- ----------- ------------ ------------ -----------
LESS DISTRIBUTIONS FROM AND IN EXCESS
OF NET INVESTMENT INCOME ........................ (0.61) (0.60) (0.60) (0.60) (0.47)
----------- ----------- ------------ ------------ -----------
Net increase (decrease) in net asset value ........... 0.14 0.24 (0.05) 0.73 (0.79)
----------- ----------- ------------ ------------ -----------
Net Asset Value, End of Period ....................... $ 10.27 $10.13 $9.89 $9.94 $ 9.21
----------- ----------- ------------ ------------ -----------
----------- ----------- ------------ ------------ -----------
TOTAL RETURN ......................................... 7.66% 8.84% 5.76% 14.89% (3.23)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) ................. $ 160,561 $ 120,532 $ 79,211 $ 70,490 $ 12,546
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 0.96% 1.02% 1.10% 1.54% 2.02%
After reimbursement of expenses
by Advisor(1)..................................... 0.80% 0.80% 0.80% 0.80% 0.80%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 5.79% 6.02% 5.89% 5.78% 4.83%
After reimbursement of expenses
by Advisor(1)..................................... 5.95% 6.24% 6.19% 6.52% 6.05%
Portfolio Turnover(1)................................. 45.29% 17.76% 41.75% 68.24% 20.73%
</TABLE>
- --------------------------------------------------
(1) Annualized.
(a) Chicago Trust Bond Fund commenced investment operations on December 13,
1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST MUNICIPAL BOND FUND
---------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(a)
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 10.19 $ 10.06 $ 10.08 $ 9.56 $ 10.00
------------- ----------- ------------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.44 0.38 0.38 0.35 0.27
Net realized and unrealized gain (loss)
on investments ................................ 0.17 0.12 (0.02) 0.52 (0.46)
------------- ----------- ------------- ---------- -----------
Total from investment operations ............ 0.61 0.50 0.36 0.87 (0.19)
------------- ----------- ------------- ---------- -----------
LESS DISTRIBUTIONS FROM AND IN EXCESS
OF NET INVESTMENT INCOME ........................ (0.44) (0.37) (0.38) (0.35) (0.25)
------------- ----------- ------------- ---------- -----------
Net increase (decrease) in net asset value ........... 0.17 0.13 (0.02) 0.52 (0.44)
------------- ----------- ------------- ---------- -----------
Net Asset Value, End of Period ....................... $ 10.36 $ 10.19 $ 10.06 $ 10.08 $ 9.56
------------- ----------- ------------- ---------- -----------
------------- ----------- ------------- ---------- -----------
TOTAL RETURN ......................................... 6.17% 5.13% 3.59% 9.29% (1.92)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) ................. $ 13,210 $ 12,379 $ 11,186 $ 11,679 $ 10,462
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 1.41% 1.64% 1.53% 2.16% 2.09%
After reimbursement of expenses
by Advisor(1)..................................... 0.35%(2) 0.90% 0.90% 0.90% 0.90%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 3.22% 3.00% 3.11% 2.37% 1.90%
After reimbursement of expenses
by Advisor(1)..................................... 4.28% 3.74% 3.74% 3.63% 3.09%
Portfolio Turnover(1)................................. 34.33% 16.19% 27.47% 42.81% 14.85%
</TABLE>
- --------------------------------------------------------------------------------
(1) Annualized.
(2) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 0.90% to 0.10% on February 27, 1998.
(a) Chicago Trust Municipal Bond Fund commenced investment operations on
December 13, 1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS OCTOBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHICAGO TRUST MONEY MARKET FUND
-----------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(a)
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.05 0.05 0.05 0.05 0.03
---------- ---------- ---------- ---------- -----------
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME ..... (0.05) (0.05) (0.05) (0.05) (0.03)
---------- ---------- ---------- ---------- -----------
Net Asset Value, End of Period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
TOTAL RETURN ......................................... 5.24% 5.15% 5.14% 5.56% 3.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) ................. $ 281,389 $ 238,551 $ 226,536 $ 206,075 $ 122,929
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 0.52% 0.56% 0.59% 0.63% 0.64%
After reimbursement of expenses
by Advisor(1)..................................... 0.51%(3) 0.50% 0.50% 0.43%(2) 0.40%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(1)..................................... 5.13% 5.00% 4.93% 5.24% 3.49%
After reimbursement of expenses
by Advisor(1)..................................... 5.14% 5.06% 5.02% 5.44% 3.73%
</TABLE>
- --------------------------------------------------
(1) Annualized.
(2) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 0.40% to 0.50% on July 12, 1995.
(3) As of February 27, 1998, the Advisor is no longer waiving fees or
reimbursing expenses.
(a) Chicago Trust Money Market Fund commenced investment operations on December
14, 1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES: The Alleghany Funds (formerly CT&T
Funds) (the "Company") operate as a series company currently issuing eight
series of shares of beneficial interest: Montag & Caldwell Growth Fund (the
"Growth Fund"), Chicago Trust Growth & Income Fund (the "Growth & Income Fund"),
Chicago Trust Talon Fund (the "Talon Fund"), Chicago Trust Balanced Fund (the
"CT Balanced Fund"), Montag & Caldwell Balanced Fund (the "M&C Balanced Fund"),
Chicago Trust Bond Fund (the "Bond Fund"), Chicago Trust Municipal Bond Fund
(the "Municipal Bond Fund"), and Chicago Trust Money Market Fund (the "Money
Market Fund") (each a "Fund" and collectively, the "Funds"). The Company
constitutes an open-end management investment company which is registered under
the Investment Company Act of 1940 as amended (the "Act"). The Company was
organized as a Delaware business trust on September 10, 1993.
The Growth Fund seeks long-term capital appreciation consistent with investments
primarily in a combination of equity, convertible, fixed income, and short-term
securities. Capital appreciation is emphasized, and generation of income is
secondary. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994. Effective June 28, 1996,
the Fund offered two classes of shares: Class I (Institutional) shares and Class
N (Retail) shares.
The Growth & Income Fund seeks long-term total return through a combination of
capital appreciation and current income. In seeking to achieve its investment
objective, the Fund invests primarily in common stocks, preferred stocks,
securities convertible into common stocks, and fixed income securities. The
Chicago Trust Company ("Chicago Trust") is the Investment Advisor for the Fund,
which commenced investment operations on December 13, 1993.
The Talon Fund seeks long-term total return through capital appreciation. The
Fund invests primarily in stocks of companies with capitalization levels
believed by Talon Asset Management, Inc. ("Talon") to have prospects for capital
appreciation. The Fund, which commenced investment operations on September 19,
1994, may also invest in preferred stock and debt securities, including those
which may be convertible into common stock. Chicago Trust is the Investment
Advisor for the Fund with Talon as Sub-Investment Advisor.
The CT Balanced Fund seeks growth of capital with current income through asset
allocation. The Fund seeks to achieve this objective by holding a varying
combination of generally two or more of the following investment categories:
common stocks (both dividend and non-dividend paying); preferred stocks;
convertible preferred stocks; fixed income securities, including bonds and bonds
convertible into common stocks; and short-term interest-bearing obligations.
Chicago Trust is the Investment Advisor for the Fund, which commenced investment
operations on September 21, 1995.
The M&C Balanced Fund seeks long-term total return through investment primarily
in a combination of equity, fixed income, and short-term securities. The
allocation between asset classes may vary over time in accordance with the
expected rates of return of each asset class; however, primary emphasis is
placed upon selection of particular investments as opposed to allocation of
assets. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994.
The Bond Fund seeks high current income consistent with what Chicago Trust
believes to be prudent risk of capital. The Fund primarily invests in a broad
range of bonds and other fixed income securities (bonds and debentures) with an
average weighted portfolio maturity between three and ten years. Chicago Trust
is the Investment Advisor for the Fund, which commenced investment operations on
December 13, 1993.
The Municipal Bond Fund seeks a high level of current interest income exempt
from Federal income taxes consistent with the conservation of capital. The Fund
seeks to achieve its objective by investing substantially all of its assets in a
diversified portfolio of municipal debt obligations. Chicago Trust is the
Investment Advisor for the Fund, which commenced investment operations on
December 13, 1993.
The Money Market Fund seeks to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund seeks to achieve its objective by investing in short-term, high
quality, U.S. dollar-denominated money market instruments. Chicago Trust is the
Investment Advisor for the Fund, which commenced investment operations on
December 14, 1993.
49
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS--CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
(1) SECURITY VALUATION: For the Growth Fund, the Growth & Income Fund, the
Talon Fund, the CT Balanced Fund and the M&C Balanced Fund, equity securities
and index options traded on a national exchange and over-the-counter
securities listed in the NASDAQ National Market System are valued at the last
reported sales price at the close of the respective exchange. Securities for
which there have been no sales on the valuation date are valued at the mean
of the last reported bid and asked prices on their principal exchange.
Over-the-counter securities not listed on the NASDAQ National Market System
are valued at the mean of the current bid and asked prices. For the CT
Balanced Fund, the M&C Balanced Fund, the Bond Fund, and the Municipal Bond
Fund, fixed income securities, except short-term, are valued on the basis of
prices provided by a pricing service when such prices are believed by the
Advisor to reflect the fair market value of such securities. When fair market
value quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith by the Board of Trustees.
For all Funds, short-term investments, that is, those with a remaining
maturity of 60 days or less, are valued at amortized cost, which approximates
market value. For the Money Market Fund, all securities are valued at
amortized cost, which approximates market value. Under the amortized cost
method, discounts and premiums are accreted and amortized ratably to maturity
and are included in interest income.
(2) REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements
with financial institutions deemed to be credit worthy by the Fund's Advisor,
subject to the seller's agreement to repurchase and the Fund's agreement to
resell such securities at a mutually agreed upon price. Securities purchased
subject to repurchase agreements are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, must have an aggregate
market value greater than or equal to the repurchase price plus accrued
interest at all times. If the value of the underlying securities falls below
the value of the repurchase price plus accrued interest, the Fund will
require the seller to deposit additional collateral by the next business day.
If the request for additional collateral is not met, or the seller defaults
on its repurchase obligation, the Fund has the right to sell the underlying
securities at market value and may claim any resulting loss against the
seller.
(3) DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in
very general terms refers to a security whose value is "derived" from the
value of an underlying asset, reference rate or index. A Fund has a variety
of reasons to use derivative instruments, such as to attempt to protect the
Fund against possible changes in the market value of its portfolio and to
manage the portfolio's effective yield, maturity and duration. All of a
Fund's portfolio holdings, including derivative instruments, are marked to
market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain
or loss is recognized accordingly, except for exercised option contracts
where the recognition of gain or loss is postponed until the disposal of the
security underlying the option contract.
An option contract gives the buyer the right, but not the obligation to buy
(call) or sell (put) an underlying item at a fixed exercise price during a
specified period. These contracts are used by a Fund to manage the
portfolio's effective maturity and duration.
Transactions in purchased options for the Talon Fund for the year ended
October 31, 1998 were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
--------- ----------
<S> <C> <C>
Outstanding at October 31, 1997 ............................. 50 $(120,125)
Options purchased (Net) ..................................... -- --
Options exercised or terminated in closing transactions (Net) (50) 120,125
Options expired (Net) ....................................... -- --
--------- ----------
Outstanding at October 31, 1998 ............................. -- $ --
--------- ----------
--------- ----------
</TABLE>
(4) MORTGAGE BACKED SECURITIES: The CT Balanced Fund, the M&C Balanced Fund
and the Bond Fund may invest in Mortgage Backed Securities (MBS),
representing interests in pools of mortgage loans. These securities provide
shareholders with payments consisting of both principal and interest as the
mortgages in the underlying mortgage pools are paid. Most of the securities
are guaranteed by federally sponsored agencies - Government National Mortgage
Association (GNMA), Federal National Mortgage Association (FNMA) or Federal
Home Loan Mortgage Corporation (FHLMC). However, some securities may be
issued by private,
50
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS--CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
non-government corporations. MBS issued by private agencies are not
government securities and are not directly guaranteed by any government
agency. They are secured by the underlying collateral of the private issuer.
Yields on privately issued MBS tend to be higher than those of government
backed issues. However, risk of loss due to default and sensitivity to
interest rate fluctuations are also higher.
The CT Balanced Fund, the M&C Balanced Fund and the Bond Fund may also invest
in Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage
Investment Conduits (REMICs). A CMO is a bond which is collateralized by a
pool of MBS, and a REMIC is similar in form to a CMO. These MBS pools are
divided into classes or tranches with each class having its own
characteristics. The different classes are retired in sequence as the
underlying mortgages are repaid. A Planned Amortization Class (PAC) is a
specific class of mortgages which over its life will generally have the most
stable cash flows and the lowest prepayment risk. Prepayment may shorten the
stated maturity of the CMO and can result in a loss of premium, if any has
been paid.
The CT Balanced Fund and the Bond Fund may utilize Interest Only (IO)
securities to increase the diversification of the portfolio and manage risk.
An IO security is a class of MBS representing ownership in the cash flows of
the interest payments made from a specified pool of MBS. The cash flow on
this instrument decreases as the mortgage principal balance is repaid by the
borrower.
(5) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
Securities transactions are accounted for on the date securities are
purchased or sold. The cost of securities sold is determined using the
first-in-first-out method.
(6) FEDERAL INCOME TAXES: The Funds have elected to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and to
distribute substantially all of their respective net taxable income.
Accordingly, no provisions for federal income taxes have been made in the
accompanying financial statements. The Funds intend to utilize provisions of
the federal income tax laws which allow them to carry a realized capital loss
forward for eight years following the year of the loss and offset such losses
against any future realized capital gains. At October 31, 1998, the losses
amounted to $306,661 for the Talon Fund and $34,725 for the Municipal Bond
Fund, which will expire October 31, 2006 and October 31, 2003, respectively.
Net realized gains or losses may differ for financial and tax reporting
purposes for the M&C Growth Fund, the CT Balanced Fund and the M&C Balanced
Fund primarily as a result of losses from wash sales which are not recognized
for tax purposes until the corresponding shares are sold.
(7) DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to shareowners
are recorded on the ex-dividend date.
(8) ORGANIZATION COSTS: The Funds have reimbursed the Advisors for certain
costs incurred in connection with the Funds' and the Company's organization.
The costs are being amortized on a straight-line basis over five years
commencing on December 13, 1993 for the Growth & Income Fund, Bond Fund and
the Municipal Bond Fund; December 14, 1993 for the Money Market Fund;
September 19, 1994 for the Talon Fund; November 2, 1994 for the Growth Fund
and the M&C Balanced Fund; and September 21, 1995 for the CT Balanced Fund.
(9) USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE (B) DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL
GAINS: With respect to the Growth Fund, the Growth & Income Fund, the Talon
Fund, the CT Balanced Fund and the M&C Balanced Fund, dividends from net
investment income are distributed quarterly and net realized gains from
investment transactions, if any, are distributed to shareowners annually. The
Bond Fund and the Municipal Bond Fund distribute their respective net investment
income to shareowners monthly and capital gains, if any, are distributed
annually. The Money Market Fund declares dividends daily from its net investment
income. The Money Market Fund's dividends are payable monthly and are
automatically reinvested in additional Fund shares, at the month-end net asset
value, for those shareowners that have elected the reinvestment option.
Differences in dividends per share between classes of the Growth Fund
51
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS--CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
are due to different class expenses. For the year ended October 31, 1998,
100.00% of the income distributions made by the Municipal Bond Fund were exempt
from federal income taxes. Additionally during the year, the Growth Fund, the
Growth & Income Fund, the Talon Fund, the CT Balanced Fund and the M&C Balanced
Fund paid 28% rate gain distributions of $555,907, $2,931,736, $1,211,558,
$1,151,566 and $1,080,213 and 20% rate gain distributions of $6,966,519,
$16,217,422, $1,544,488, $10,250,073 and $730,402, respectively. In January
1999, the Funds will provide tax information to shareowners for the 1998
calendar year.
Net investment income and realized gains and losses for federal income tax
purposes may differ from that reported on the financial statements because of
permanent book and tax basis differences. Permanent book and tax differences of
$2,511, $312 and $13,224 were reclassified at October 31, 1998 from accumulated
net realized gain on investments to undistributed net investment income in the
CT Balanced Fund, the M&C Balanced Fund and the Bond Fund, respectively, due to
losses on paydown adjustments from mortgage backed securities. In addition,
permanent book and tax differences in the CT Balanced Fund relating to the sale
of IO securities totaling $11,126 were reclassified from accumulated net
realized gain to undistributed net investment income. Also, permanent book and
tax differences in the Talon Fund relating to the sale of real estate investment
trusts totaling $959 were reclassified from undistributed net investment income
to accumulated net realized gain.
The Growth Fund and the Growth & Income Fund had net operating losses for tax
purposes, net of short-term capital gains, of $1,422,104 and $347,447,
respectively, for the year ended October 31, 1998. In addition, the Growth &
Income Fund made excise tax distributions of $54,615 in December 1997 which
included a return of capital of $30,652. These amounts were reclassified from
undistributed net investment income to capital paid-in as permanent differences
at October 31, 1998.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included as ordinary income for tax purposes.
All of the income dividends paid by each fund were ordinary income for federal
income tax purposes. The percentage of income dividends that were qualifying
dividends for the corporate dividends received deduction were 10.50%, 20.84% and
24.86% for the Talon Fund, the CT Balanced Fund, and the M&C Balanced Fund,
respectively.
NOTE (C) SHARES OF BENEFICIAL INTEREST: Each Fund is authorized to issue an
unlimited number of shares of beneficial interest with no par value. At October
31, 1998, Chicago Trust and its affiliates owned 2,500 shares of the Growth &
Income Fund, 2,500 shares of the Bond Fund and 2,500 shares of the Municipal
Bond Fund.
NOTE (D) INVESTMENT TRANSACTIONS: Aggregate purchases and proceeds from sales of
investment securities (other than short-term investments) for the year ended
October 31, 1998 were:
<TABLE>
<CAPTION>
AGGREGATE PROCEEDS FROM
PURCHASES SALES
--------------- --------------
<S> <C> <C>
GROWTH FUND $ 1,148,411,078 $ 367,441,899
GROWTH & INCOME FUND 123,331,121 107,580,829
TALON FUND 18,040,090 18,786,408
CT BALANCED FUND 85,176,321 79,848,334
M&C BALANCED FUND 134,224,898 73,007,945
BOND FUND 88,481,054 57,769,611
MUNICIPAL BOND FUND 5,258,949 4,335,798
</TABLE>
NOTE (E) ADVISORY, ADMINISTRATION AND DISTRIBUTION SERVICES AGREEMENTS: Under
various Advisory Agreements with the Funds, each Advisor provides investment
advisory services to the Funds. The Funds will pay advisory fees at the
following annual percentage rates of the average daily net assets of each Fund:
0.80% on the first $800,000,000 of average daily net assets and 0.60% of average
daily net assets over $800,000,000 (effective February 27, 1998) for the Growth
Fund, 0.70% for the Growth & Income Fund, 0.80% for the Talon Fund, 0.70% for
the CT Balanced Fund, 0.75% for the M&C Balanced Fund, 0.55% for the Bond Fund,
0.60% for the
52
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS--CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
Municipal Bond Fund and 0.40% for the Money Market Fund. These fees are accrued
daily and paid monthly. The Advisors have voluntarily undertaken to reimburse
the Growth Fund (Institutional Class and Retail Class), the Growth & Income
Fund, the Talon Fund, the CT Balanced Fund, the M&C Balanced Fund, the Bond
Fund, and the Municipal Bond Fund for operating expenses which cause total
expenses to exceed 0.98%, 1.30%, 1.10%, 1.30%, 1.10%, 1.25%, 0.80%, and 0.10%,
respectively. Effective February 27, 1998, the expense reimbursement level for
the Municipal Bond Fund changed from 0.90% to 0.10% and the Advisor for the
Money Market Fund will no longer waive fees or reimburse expenses. Expense
reimbursements may be terminated at the discretion of the Advisors. For the year
ended October 31, 1998, the Advisor waived/reimbursed expenses of $43,706 for
the Talon Fund, $217,546 for the Bond Fund, $138,689 for the Municipal Bond Fund
and $24,492 for the Money Market Fund.
First Data Investor Services Group, Inc. ("Investor Services Group") serves as
sub-administrator of the Funds. Chicago Trust is the Funds' Administrator. For
services provided as the Funds' Administrator, Chicago Trust receives the
following fees, which are paid in total to Investor Services Group.
<TABLE>
<CAPTION>
ADMINISTRATION FEES CUSTODY LIAISON FEES
------------------- --------------------
FEE (% OF FUNDS' AGGREGATE ANNUAL FEE AVERAGE DAILY NET ASSETS
DAILY NET ASSETS) AVERAGE DAILY NET ASSETS (PER FUND) (PER FUND)
----------------- ------------------------ ---------- ----------
<S> <C> <C> <C>
0.060 up to $2 billion $10,000 up to $100 million
0.045 $2 billion to $3.5 billion $15,000 $100 million to $500 million
0.040 over $3.5 billion $20,000 over $500 million
</TABLE>
First Data Distributors, Inc. serves as principal underwriter and distributor of
the Funds' shares. Pursuant to Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act, the Growth Fund Retail Class, the Growth & Income
Fund, the Talon Fund, the CT Balanced Fund, the M&C Balanced Fund, the Bond
Fund, and the Municipal Bond Fund have adopted a Plan of Distribution (the
"Plan"). The Plan permits the participating Funds to pay certain expenses
associated with the distribution of their shares. Under the Plan, each Fund may
pay actual expenses not exceeding, on an annual basis, 0.25% (currently, the
Municipal Bond Fund's Rule 12b-1 fee is reduced to 0.10%) of each participating
Fund's average daily net assets. The Growth Fund Institutional Class and the
Money Market Fund do not have distribution plans.
For the year ended October 31, 1998, the class specific expenses of the Growth
Fund were:
<TABLE>
<CAPTION>
CLASS N (RETAIL) CLASS I (INSTITUTIONAL)
---------------- -----------------------
<S> <C> <C>
Transfer agent fees $ 317,202 $ 19,293
Registration expenses 160,248 150,836
Legal fees 26,417 27,811
Reports to shareowner expenses 37,388 15,784
</TABLE>
Certain officers and Trustees of the Funds are also officers and directors of
Chicago Trust. The Funds do not compensate its officers or affiliated Trustees.
Effective January 1, 1998, the Company pays each unaffiliated Trustee $2,000 per
Board of Trustees' meeting attended and an annual retainer of $2,000.
NOTE (F) YEAR 2000 COMPLIANCE (UNAUDITED):
Alleghany Funds (Alleghany) utilizes a number of computer programs across its
entire operation relying on both internal software systems as well as external
software systems provided by third parties. Like other businesses around the
world, Alleghany could be adversely affected if these or other systems are
unable to perform their intended functions effectively after 1999 because of the
systems' inability to distinguish the year 2000 from the year 1900. This is
commonly known as the "Year 2000 problem." Alleghany is taking the steps that it
believes are reasonably designed to address this potential Year 2000 problem and
to obtain satisfactory assurances that comparable steps are being taken by the
Funds' other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Funds' from
this problem, but we do not anticipate that the move to Year 2000 will have a
material impact on the Funds.
53
<PAGE>
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS--CONTINUED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
NOTE (G) SUBSEQUENT EVENTS:
The Company filed a Post-Effective Amendment on August 21, 1998 for the purpose
of adding two new Series to the Trust, Alleghany/Chicago Trust SmallCap Value
Fund and Alleghany/Veredus Aggressive Growth Fund. The filing was effective on
November 4, 1998 and Alleghany/Chicago Trust SmallCap Value Fund commenced
operations on November 10, 1998.
On December 4, 1998, pursuant to an Agreement and Plan of Reorganization, the
assets and liabilities of the Veredus Aggressive Growth Fund (the "Acquired
Fund") were transferred to a newly formed portfolio of the Trust,
Alleghany/Veredus Aggressive Growth Fund (the "Acquiring Fund"), in exchange for
shares of the Acquiring Fund. The Acquiring Fund commenced operations on
December 7, 1998.
The Company filed a Post-Effective Amendment on November 11, 1998 for the
purpose of adding Class I shares to the Montag & Caldwell Balanced Fund and
Chicago Trust Bond Fund. Class I shares are expected to be offered to the public
after January 1, 1999.
As of December 17, 1998, the following name changes are effective for certain
Series of the Alleghany Funds:
Alleghany/Montag & Caldwell Growth Fund
Alleghany/Chicago Trust Growth & Income Fund
Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
The Company filed a Post-Effective Amendment on November 25, 1998 to add two new
international funds, Alleghany/Blairlogie Emerging Markets Fund and
Alleghany/Blairlogie International Developed Fund. A Special Meeting of
Shareholders will be held to consider an Agreement and Plan of Reorganization
relative to the two new Series.
Effective December 17, 1998, the Administration fees paid to the Funds'
Administrator will be as follows:
.06% of less than $2 billion of the aggregate average daily net assets of
the Funds; and
.05% of aggregate average daily net assets of the Funds of at least $2
billion but not more than $7 billion; and
.045% of the Funds' aggregate average daily net assets over $7 billion.
The custody liaison and the fees paid to Investor Services Group as
sub-administrator of the Funds remain the same.
Effective December 17, 1998, the Advisor will reimburse each Fund to the extent
necessary to maintain its total ordinary operating expenses at the following
percentages of net assets, as computed on an annual basis:
<TABLE>
<CAPTION>
CLASS N
<S> <C>
Alleghany/Chicago Trust Talon Fund 1.30%
Alleghany/Chicago Trust Bond Fund 0.80%
</TABLE>
54
<PAGE>
Independent Auditors' Report
THE BOARD OF TRUSTEES AND SHAREOWNERS OF ALLEGHANY FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Alleghany Funds (comprising, respectively,
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, and Chicago Trust
Money Market Fund) as of October 31, 1998, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the periods presented in the two-year period then ended, and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of Alleghany Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securites owned as of
October 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the Alleghany Funds as of October 31, 1998,
the results of their operations for the year then ended, the changes in their
net assets for each of the periods presented in the two-year period then ended,
and the financial highlights for each of the periods presented, in comformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
December 17, 1998
55
<PAGE>
This page intentionally left blank.
<PAGE>
ENJOY A FULL RANGE OF
SHAREOWNER BENEFITS
GROW YOUR ACCOUNT THE EASY WAY
WITH AN AUTOMATIC INVESTMENT PLAN.(1)
Alleghany Funds makes systematic investing easy and effortless--to help you
reach any investment goal. Simply choose a fixed amount, and we'll automatically
invest it in your Alleghany Funds account on a regular schedule from your
checking or savings account. The service is free, and the minimum investment is
only $50 per month.
AUTOMATIC DIVIDEND REINVESTMENT
COMPOUNDS YOUR EARNINGS.
Monthly and quarterly dividends, and annual capital gain distributions, can
be automatically reinvested into your Alleghany Funds account, at no charge
which may significantly increase your investment earnings.
FREE, FLEXIBLE EXCHANGE PRIVILEGES.
As your personal needs change, so can your Alleghany Funds investments.
Exchanges between our funds are free of charge, and it only takes a telephone
call or a visit to our web site.
ACCESS INFORMATION AND MAKE
TRANSACTIONS ONLINE WITH OUR
NEW INVESTOR WEB SITE.
24 hours a day, 7 days a week, you can access account balances, obtain fund
information and make transactions online--in complete security. Alleghany Funds
was among the first mutual fund companies to provide these capabilities.
WWW.ALLEGHANYFUNDS.COM
AT YOUR SERVICE 24 HOURS A DAY ...
OUR SHAREOWNER SERVICES LINE.
Shareowner Services Representatives are available to assist you Monday -
Friday 8:00 a.m. to 7:00 p.m., EST. Or, call any time, day or night, for
automated account information, to make exchanges or check fund performance.
1-800-992-8151
- ----------
(1) Periodic investment plans involve continuous investments in securities
regardless of price. You should consider your financial ability to continue
to purchase during low price levels.
<PAGE>
TRUSTEES
Leonard F. Amari*
Stuard D. Bilton, Chairman
Dorothea C. Gilliam
Gregory T. Mutz*
Nathan Shapiro*
*Unafilliated Trustee
ADVISORS
The Chicago Trust Company
171 North Clark Street
Chicago, IL 60601-3294
Montag & Caldwell, Inc.
3343 Peachtree Road, NE, Suite 1100
Atlanta, GA 30326-1022
SHAREOWNER
SERVICES
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 01581
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581
OFFICERS
Kenneth C. Anderson, President
David F. Seng, Senior Vice President
Gerald F. Dillenburg, Vice President,
Secretary and Treasurer
CUSTODIAN
Bankers Trust
One Bankers Trust Place
New York, NY 10001
LEGAL COUNSEL
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
AUDITOR
KPMG Peat Marwick LLP
303 East Wacker Drive
Chicago, IL 60601
[LOGO] ALLEGHANY FUNDS
Distributed by First Data Distributors, Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581, 1/99
This report is submitted for general information of the shareowners of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Fund's objectives, policies, expenses and other
information.
Alleghany/Montag & Caldwell Growth Fund
Alleghany/Chicago Trust Growth & Income Fund
Alleghany/Chicago Trust Talon Fund
Alleghany/Chicago Trust Small Cap Value Fund
Alleghany/Veredus Aggressive Growth Fund
Alleghany/Montag & Caldwell Balanced Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Chicago Trust Bond Fund
Alleghany/Chicago Trust Municipal Bond Fund
Alleghany/Chicago Trust Money Market Fund
Semi-Annual Period Ended
April 30, 1999
SEMI-ANNUAL REPORT TO SHAREOWNERS
[TO BE INSERTED]
PART C: OTHER INFORMATION
Item 23. Exhibits.
(a) Trust Instrument dated September 10, 1993 is incorporated by reference
to Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
(b) By-Laws are incorporated by reference to Exhibit No. (2) to
Registration Statement No. 33-68666 filed via EDGAR on February 22, 1996.
(c) Not Applicable.
(d) 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 are incorporated 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 are incorporated 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 is incorporated 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
are incorporated 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 are
incorporated by reference to Exhibit No. (5)(a) to Registration Statement No.
33-68666 filed via EDGAR on April 16, 1996.
Investment Advisory Agreement for Alleghany/Chicago Trust Small Cap
Value Fund with Chicago Title and Trust Company dated September 17,
1998 is incorporated by reference to Exhibit (d) to Registration
Statement No. 33-68666 filed via EDGAR on March 1, 1999.
Investment Advisory Agreement for Alleghany/Veredus Aggressive Growth
Fund with Veredus Asset Management LLC, dated September 17, 1998 is
incorporated by reference to Exhibit (d) to Registration Statement No.
33-68666 filed via EDGAR on March 1, 1999.
Investment Advisory Agreement for Alleghany/Blairlogie Emerging Markets
Fund with Blairlogie Capital Management, dated September 17, 1998 is
incorporated by reference to Exhibit (d) to Registration Statement No.
33-68666 filed via EDGAR on March 1, 1999.
Investment Advisory Agreement for Alleghany/Blairlogie International
Developed Fund with Blairlogie Capital Management, dated September 17,
1998 is incorporated by reference to Exhibit (d) to Registration
Statement No. 33-68666 filed via EDGAR on March 1, 1999.
Amended and Restated Sub-Investment Advisory Agreement for CT&T Talon Fund
with Talon Asset Management, Inc., dated December 21, 1995 is incorporated by
reference to Exhibit No. 5(b) to Registration Statement No. 33-68666 filed via
EDGAR on February 27, 1997.
Investment Advisory Assignment dated October 30, 1995, between and among
Chicago Title and Trust Company, The Chicago Trust Company, and CT&T Funds is
incorporated by reference to Exhibit No. (5)(d) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(e) Underwriting Agreement for all Funds with FPS Broker Services, Inc.,
dated November 30, 1993 is incorporated 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 is incorporated 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 is incorporated by reference to Registration
Statement No. 33-68666 filed via EDGAR on April 16, 1996.
Underwriter Compensation Agreement for all Funds with FPS Broker Services,
Inc., dated November 30, 1993 is incorporated 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 is incorporated by
reference to Exhibit No. (6)(a) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Distribution Agreement dated June 1, 1997 between CT&T Funds and First
Data Distributors, Inc. is incorporated by reference to Exhibit No.
6(c) to Registration Statement No. 33-68666 filed via EDGAR on February
27, 1998.
Amendment to Distribution Agreement between Alleghany Funds and First
Data Distributors, Inc, dated September 17, 1998 is incorporated by
reference to Exhibit (e) to Registration Statement No. 33-68666 filed
via EDGAR on March 1, 1999.
(f) Not Applicable.
(g) Custodian Agreement between Bankers Trust Company and CT&T Funds, dated
June 1, 1997 is incorporated 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 September 17, 1998 is incorporated by
reference to Exhibit (g) to Registration Statement No. 33-68666 filed
via EDGAR on December 31, 1998.
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
is incorporated 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 is incorporated 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 is incorporated by
reference to Registration Statement No. 33-68666 filed via EDGAR on
April 16, 1996.
(h) Transfer Agency and Services Agreement between CT&T Funds and First
Data Investor Services Group, Inc., dated June 1, 1997 is incorporated
by reference to Exhibit No. 9(a) to Registration Statement No. 33-68666
filed via EDGAR on February 27, 1998.
Amendment to Transfer Agency and Services Agreement between Alleghany
Funds and First Data Investor Services Group, Inc., dated September 17,
1998 is incorporated by reference to Exhibit (h) to Registration
Statement No. 33-68666 filed via EDGAR on March 1, 1999.
Administration Agreement between the Company and Chicago Title and Trust
Company, dated June 15, 1995 is incorporated by reference to Exhibit No. (9)(b)
to Registration Statement No. 33-68666 filed via EDGAR on February 22, 1996.
Amendment dated December 21, 1995 to Administration Agreement, reflecting
name changes of certain Series and the Administrator is incorporated 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 is incorporated by reference to Registration
Statement No. 33-68666 filed via EDGAR on April 16, 1996.
Amendment to Administration Agreement between Alleghany Funds and
Chicago Title and Trust Company, dated September 17, 1998 is
incorporated by reference to Exhibit (h) to Registration Statement No.
33-68666 filed via EDGAR on December 31, 1998.
Form of Administration Agreement between Alleghany Funds and Alleghany
Investment Services Inc., dated June 17, 1999, is filed herewith.
Sub-Administration Agreement between First Data Investor Services Group,
Inc. and The Chicago Trust Company, dated June 1, 1997 is incorporated by
reference to Exhibit No. 9(c) to Registration Statement No. 33-68666 filed via
EDGAR on February 27, 1998.
Amendment to Sub-Administration Agreement between Alleghany Funds and
First Data Investor Services Group, Inc., dated September 17, 1998 is
incorporated by reference to Exhibit (h) to Registration Statement No.
33-68666 filed via EDGAR on March 1, 1999.
Accounting Services Agreement between CT&T Funds and FPS Services, Inc.,
dated November 30, 1993 is incorporated 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 is incorporated 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 is incorporated by Reference to
Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
Amended and Restated Guaranty Agreement dated December 23, 1996,
between Chicago Title and Trust Company and CT&T Funds is incorporated
by reference to Exhibit No. 5(c) to Registration Statement No. 33-68666
filed via EDGAR on February 27, 1998.
Master Services Agreement dated October 30, 1995, between Chicago Title and
Trust Company and certain of its subsidiaries is incorporated by reference to
Exhibit No. (5)(e) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
(i) Opinion of Counsel is filed herewith.
(j) Not Applicable.
(k) Not Applicable.
(l) Not Applicable.
(m) Distribution and Service Plan for all Funds except Chicago Trust Money
Market Fund, with FPS Broker Services, Inc. is incorporated 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 is incorporated by reference to
Exhibit No. (15)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Servicing Agreement for Distribution Assistance and Shareholder
Administrative Support Services for all Funds except Money Market Fund, with FPS
Broker Services, Inc. is incorporated by reference to Exhibit No. (15)(b) to
Registration Statement No. 33-68666 filed via EDGAR on February 22, 1996.
Amendment to Servicing Agreement for Distribution Assistance and
Shareholder Administrative Support Services dated December 21, 1995,
reflecting name changes to certain Series is incorporated by reference
to Exhibit No. (15)(b) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
Amendment to Amended and Restated Distribution and Services Plan
pursuant to Rule 12b-1 between Alleghany Funds and First Data
Distributors, Inc. dated September 17, 1998 is incorporated by
reference to Exhibit (m) to Registration Statement No.
33-68666 filed via EDGAR on March 1, 1999.
Amended Schedule A dated March 18, 1999 to the Amended and Restated
Distribution and Services Plan pursuant to Rule 12b-1 is incorporated
by reference to Exhibit (m) to Registration Statement. No 33-68666
filed via EDGAR on April 30, 1999.
(n) Financial Data Schedules for each Fund are filed herewith.
(o) Amended Multiple Class Plan pursuant to Rule 18f-3, dated March 18,
1999, is incorporated by reference to Exhibit (m) to Registration
Statement. No 33-68666 filed via EDGAR on April 30, 1999.
Amended Multiple Class Plan pursuant to Rule 18f-3, dated June 17,
1999, is filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant.
None.
Item 25. 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 of fires, 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.
Item 26. Business and Other Connections of Advisers and Sub-Advisor.
The Chicago Trust Company conducts a general financial services
business in four areas. The institutional investment management group
manages equity and fixed income institutional assets in excess of $6.0
billion, primarily in employee benefit plans, foundation accounts and
insurance company accounts. The employee benefits services group offers
profit sharing plans, matching savings plans, money purchase pensions
and consulting services, and has become one of the leading providers of
401 (k) salary deferral plans to mid-sized companies. The personal
trust and investment services group provides investment management and
trust and estate planning primarily for accounts in the $500,000 to $10
million range. The real estate trust services group provides the means
whereby real estate can be conveyed to a trustee while reserving to the
beneficiaries the full management and control of the property. This
group also facilitates tax-deferred exchanges of income-producing real
property.
Montag & Caldwell's sole business is managing assets primarily for
employee benefit, endowment, charitable, and other institutional
clients, as well as high net worth individuals.
At Talon Asset Management, Mr. Terry Diamond is Chairman and a Director,
Mr. Alan R. Wilson is President and a Director, and Barbara Rumminger,
Secretary, are, respectively, Chairman and a Director, President and a Director,
and Secretary of Talon Securities, Inc., One North Franklin Street, Chicago,
Illinois, a registered broker dealer. Mr. Diamond is also a director of Amli
Realty Company, 125 South Wacker Drive, Chicago Illinois, a private real estate
investment company.
Alleghany Asset Management holds a 40% minority interest in Veredus
Asset Management, with certain options over the next nine years to
acquire up to a 70% interest.
Blairlogie Capital Management is an indirect, wholly-owned subsidiary
of the Alleghany Corporation.
The directors and officers of the Trust's Investment Advisors and
Sub-Investment Advisor are set forth below. To the knowledge of the
Registrant, unless so noted, none of these individuals is or has been
at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
<S> <C> <C>
THE CHICAGO TRUST COMPANY
- ---------------------------- --------------------------- ---------------------
Name TITLE/POSITION OTHER BUSINESS
- ---------------------------- --------------------------- ----------------------
- ---------------------------- --------------------------- -------------------
Richard P. Toft Director
Director and Chairman,
Chicago Title and Trust
Company; Director,
Chairman and Chief
Executive Officer,
Alleghany Asset
Management, Inc.;
Director of Chicago
Title Insurance Co.,
Director, The Chicago
Trust Company.
Allan P. Kirby, Jr. Director President, Liberty
Square, Inc.;
Director, Alleghany
Corporation;
Director, Chicago
Title and Trust Company;
Director, Chicago Title Insurance
Company; Director,
Kirby Investments, Inc.; Director,
The Chicago Trust Company.
John J. Burns, Jr. Director President and Chief
Operating Officer, Alleghany
Corporation; Director of Burlington
Santa Fe Corporation;
Director of Chicago Trust Company.
<PAGE>
M. Leanne Lachman Director Managing Director, Schroder
Real Estate Associates; Director,
Chicago Title and Trust Company;
Director, Chicago Title Insurance Company; Director, The Chicago
Trust Company.
Dana G. Leavitt Director President, Leavitt Management Company;
Director, Chicago
Title and Trust Company;
Director, Chicago Title
Insurance Company; Director,
The Chicago Trust Company.
Lawrence F. Levy Director Chairman, The Levy
Organization; Director,
Chicago Title and Trust
Company; Director,
Chicago Title Insurance
Company; Director, The
Chicago Trust Company.
NAME TITLE/POSITION OTHER BUSINESS
Robert Riley Director President and Chief
Executive Officer of
Leggat McCall Properties;
Director, Chicago Title
and Trust Company; Director,
Chicago Title Insurance
Company.
Steven Newman Director Chairman, President and
Chief Executive
Officer, URC Holdings
Corporation; Director,
Chicago Title and Trust
Company; Director,
Chicago Title Insurance
Company.
Margaret P. MacKimm Director Director, Woolworth
Corporation; Director, E.I. DuPont
deNemours & Company; Director,
Chicago Title and Trust
Company; Director, Chicago Title
Insurance Company.
Walter D. Scott Director Professor of Management, J.L. Kellogg
Graduate School of
Management, Northwestern
University; Director, Chicago
Title and Trust Company; Director,
Chicago Title
Insurance Company
Earl L. Neal Director Principal Attorney, Earl L.
Neal and Associates;
Director, Chicago Title and
Trust Company Chicago Title
Insurance Company.
Peter H. Dailey Director Director of Chicago Trust
Company; Director of Jacobs
Engineering Group, Pinkerton,
Inc., Sizzler, Inc.,
Krauses's Sofa Factory,
Worthland Worldwide, Chairman and
Director of FedCo.
John J. Rau Director President and Chief Executive
Officer, Chicago Trust Company;
Director, President and Chief Executive
Officer of Chicago Title Insurance Company
and Ticor Title Insurance Company; Director, Chairman and President,
Security Union Title Insurance Company; Director, Ticor Title
Guaranty Company.
INSTITUTIONAL INVESTMENT GROUP:
- ---------------------------- -------------------------------
Charles F. Henderson Executive Vice President
And Chief Investment Officer
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Carla V. Straeten Senior Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Frederick W. Engimann Senior Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
David J. Cox Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Lynn Pfieffer Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Thomas J. Marthaler Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Lois A. Pasquale Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Nancy M. Scinto Vice President
- ---------------------------- -------------------------------
- ---------------------------- -------------------------------
Jerold L. Stodden Vice President
- ---------------------------- -------------------------------
MUTUAL FUNDS:
Kenneth C. Anderson Senior Vice President President,
Alleghany Funds
Gerald Dillenburg Vice President Vice President and
Chief Financial Officer,
Alleghany Funds
Stephen Ferrone Senior Vice President
- -------------------------------------------------------------
OPERATIONS AND FINANCIAL PLANNING:
Skip Neuman Senior Vice President and
Chief Financial Officer
- ---------------------------- --------------------------------
<PAGE>
- -------------------------------------------------------------
PERSONAL TRUST & INVESTMENT SERVICES:
- -------------------------------------------------------------
- ---------------------------- --------------------------------
George Vanden Vennett Senior Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Hubert A. Adams Senior Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Alan B. Shidler Senior Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Roger Meier Senior Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Susan Elwart Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Judith French Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Joan Perkins Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Bernard Myszkowski Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Louis R. Marchi Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
David Nyberg Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Joan Giardina Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Charles Rammalt Vice President
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Michael Pollard Vice President and
Senior Portfolio Manager
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Denise Seminetta Vice President
And Senior Portfolio Manager
- ---------------------------- --------------------------------
- -----
REAL ESTATE SERVICES:
B. Wyckliffe Pattishall, Jr. Executive Vice President
CHICAGO DEFERRED EXCHANGE CORP:
Naomi Weitzel Vice President
Mary Cunningham-Watson Vice President
SECURITY TRUST:
J. Paul Spring President and Chief Executive Officer
William Exeter Vice President and Chief Financial
Officer
RETIREMENT TRUST RESOURCES:
Terry L. Zirkle Senior Vice President
Mark D. Berman Vice President
Daniel R. Joyce Vice President
Michael Lambert Vice President
Karen Fisher Prange Vice President
Ronald S. Quesenberry Vice President
Jeanne D. Reder Vice President
Robert F. Stuark Vice President
<PAGE>
MONTAG & CALDWELL, INC.
Solon P. Patterson Chairman of the Board
Stuart D. Bilton Director
Director, Alleghany Funds
David B. Cumming Director
Ronald E. Canakaris President, Chief Executive Officer and
Chief Investment Officer
David F. Seng Executive Vice President, Chief
Operating Officer and Treasurer
Elizabeth C. Chester Senior Vice President and Secretary
Homer W. Whitman, Jr. Senior Vice President
William A. Vogel Senior Vice President
Sandra M. Barker Vice President
Janet B. Bunch Vice President
Debra Bunde Comsudes Vice President
Jane R. Davenport Vice President
James L. Deming Vice President
Brion D. Friedman Vice President
Richard W. Haining Vice President
Charles Jefferson Hagood Vice President
Lana M. Jordan Vice President
Rebecca M. Keister Vice President
Charles E. Markwalter Vice President
Grover C. Maxwell, III Vice President
Michael A. Nadal Vice President
M. Scott Thompson Vice President
John Whitney Vice President
TALON ASSET MANAGEMENT, INC.
Terry D. Diamond Chairman and Director
Director of Amli Realty
Alan R. Wilson President and Director
Barbara L. Rumminger Secretary
Bernard H. Kailin Vice President
Sophia A. Erskine Corporate Secretary
VEREDUS ASSET MANAGEMENT LLC.
Stuart D. Bilton Director Director, Montag & Caldwell,
Inc.; Director, Alleghany
James R. Jenkins Director, Vice President and Chief
Operating Officer
Trust Officer, Shelby County Trust Bank
Jefferson W. Kirby Director Vice President,
Alleghany Corporation; Trustee,
Lafayette College and The
Peck School; Director,
Commerce Security Bancorp,
Inc.
Charles P. McCurdy, Jr. Director;
Executive Vice President
and Director of Research,
Director of Research,
SMC Capital, Inc.
Charles F. Mercer, Jr. Vice President of Research
John S. Poole Vice President of Business Development
Vice President, SMC Capital, Inc.
Bruce A. Weber Director, President and Chief
Investment Officer
President, SMC Capital, Inc.; Vice President, SMC
Advisers, Inc.
BLAIRLOGIE CAPITAL MANAGEMENT
Gavin Dobson Chief Executive Officer
James Smith Chief Investment Officer
</TABLE>
Item 27. Principal Underwriters.
(a) First Data Distributors, Inc. (the
"Distributor"), a wholly owned subsidiary of First
Data Investor Services Group, Inc. and an indirect
wholly owned subsidiary of First Data Corporation,
acts as distributor for Alleghany Funds pursuant to a
distribution agreement dated June 1, 1997. The
Distributor also acts as underwriter for ABN AMRO
Funds, BT Insurance Funds Trust, First Choice Funds
Trust, LKCM Funds, The Galaxy Fund, The Galaxy VIP
Fund, Galaxy Fund II, IBJ Funds Trust, the ICM Series
Trust, Panorama Trust, Potomac Funds, Undiscovered
Managers Fund, Forward Funds, Inc., Light Index
Funds, Inc. Weiss Peck & Greer Funds Trust, Weiss
Peck & Greer International Fund, WPG Growth Fund, WPG
Growth & Income Fund, WPG Tudor Fund, RWB/WPG U.S.
Large Stock Fund, Tomorrow Funds Retirement Trust,
The Govett Funds, Inc., IAA Trust Growth Fund, Inc.,
IAA Trust Asset Allocation Fund, Inc., IAA Trust Tax
Exempt Bond Fund, Inc., IAA Trust Taxable Fixed
Income Series Fund, Inc., Matthews International
Funds, MCM Funds, Metropolitan West Funds, Smith
Breeden Series Fund, Smith Breeden Trust, Stratton
Growth Fund, Inc., Stratton Monthly Dividend REIT
Shares, Inc., The Stratton Funds, Inc., Trainer,
Wortham First Mutual Funds, Wilshire Target Funds,
Inc. and Worldwide Index Funds. The Distributor is
registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
(b) The information required by this Item 27(b) with
respect to each director, officer, or partner of
First Data Distributors, Inc. is incorporated by
reference to Schedule A of Form BD filed by First
Data Distributors, Inc. with the Securities and
Exchange Commission pursuant to the Securities Act of
1934 (File No. 8-45467).
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act and the
Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Fund's Investment Advisors as listed below,
except for those maintained by each Fund's Custodian, Bankers
Trust Company, 16 Wall Street, New York, New York 10005 and
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
MO 64105, and the Fund's Sub-Administrator, Transfer, Redemption,
Dividend Disbursing and Accounting Agent, First Data Investor
Services Group, Inc., 101 Federal Street, Boston, MA 02110.
The Chicago Trust Company
171 North Clark Street
Chicago, IL 60601
Montag & Caldwell, Inc.
3343 Peachtree Road, N.E.
Atlanta, GA 30326
<PAGE>
Talon Asset Management, Inc.
One North Franklin
Chicago, IL 60606
Veredus Asset Management LLC
6900 Bowling Blvd., Suite 250
Louisville, KY 40207
Blairlogie Capital Management
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment 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 28th day of June, 1999.
ALLEGHANY FUNDS
By: 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 28th day of June, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Capacity
STUART D. BILTON Chairman, Board of Trustees 06/28/99
Stuart D. Bilton
NATHAN SHAPIRO Trustee 06/28/99
Nathan Shapiro
GREGORY T. MUTZ Trustee 06/28/99
Gregory T. Mutz
LEONARD F. AMARI Trustee 06/28/99
Leonard F. Amari
DOROTHEA C. GILLIAM Trustee 06/28/99
Dorothea C. Gilliam
ROBERT A. KUSHNER Trustee 06/28/99
Robert A. Kushner
ROBERT B. SCHERER Trustee 06/28/99
Robert B. Scherer
DENIS SPRINGER Trustee 06/28/99
Denis Springer
KENNETH C. ANDERSON President 06/28/99
Kenneth C. Anderson (Principal Executive Officer)
GERALD F. DILLENBURG Secretary, Treasurer and Vice President
Gerald F. Dillenburg (Principal Accounting & Financial Officer)
06/28/99
</TABLE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(h) Form of Administration Agreement
(i) Opinion of Counsel
(n) Financial Data Schedules for each Fund.
(o) Amended Multiple Class Plan pursuant to
Rule 18f-3
EXHIBIT (h)
FORM OF ADMINISTRATION AGREEMENT
This Agreement, dated as of the 17th day of June , 1999, made by and
between Alleghany Funds, a Delaware business trust (the "Trust") operating as a
registered investment company under the Investment Company Act of 1940, as
amended, duly organized and existing under the laws of the State of Delaware and
Alleghany Investment Services Inc. ("AIS"), a corporation duly organized and
existing under the laws of the State of Illinois (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Parties, as new Series are added to the Trust; and
WHEREAS, the Parties desire to enter into an Administration Agreement
whereby AIS will provide certain administration services to each of the Series
on the terms and conditions set forth in this Agreement; and
WHEREAS, AIS is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust, on behalf of each of its Series, will provide
certain information concerning the Series to AIS as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. Appointment
The Trust hereby appoints and AIS hereby accepts such
appointment as Administrator to each Series of the Trust. The Trust further
agrees to appoint AIS as Administrator to any additional series which, from time
to time, may be added to the Trust.
Section 2. Duties and Obligations of AIS
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the Trust, AIS
shall provide all administrative services to each of the Series as set forth in
Schedule "A" attached hereto and incorporated by reference into this Agreement.
In addition to the obligations set forth in Schedule "A", AIS shall (i) provide
its own office space, facilities and equipment and personnel for the performance
of its duties under this Agreement; and (ii) take all actions it deems necessary
to properly execute the administration of the Series.
(b) So that AIS may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the Trust's Officers,
Investment Advisers, Distributor, Legal Counsel, Independent Accountants, and
Custodian of the Trust to fully cooperate with AIS and to provide such
information, documents and advice relating to the Series as is within the
possession or knowledge of such persons. In connection with its duties, AIS
shall be entitled to rely, and shall be held harmless by the Trust when acting
in reasonable reliance upon, the instruction, advice or any documents relating
to the Series as provided by the Trust to AIS by any of the aforementioned
persons. All fees charged by any such persons shall be deemed an expense of the
Trust.
(c) Any activities performed by AIS under this Agreement shall conform to
the requirements of:
(1) the provisions of the Investment Company Act
of 1940, as amended (the "Act") and the
Securities Act of 1933, as amended, and of
any rules or regulations in force
thereunder;
(2) any other applicable provisions of state and federal law;
(3) the provisions of the Declaration of Trust and By-Laws of the Trust, as
amended from time to time;
(4) any policies and determinations of the Board of Trustees of the Trust;
and
(5) the fundamental policies of the Series as reflected in its registration
statement under the Act.
(d) AIS agrees that all records that it maintains for the
Trust are property of the Trust and will be surrendered promptly to the Trust
upon written request. AIS will preserve, for the periods prescribed under Rule
31a-2 under the Act, all such records required to be maintained under Rule 31a-1
of the Act.
(e) Nothing in this Agreement shall prevent AIS or any officer
thereof from acting as administrator for or with any other person, firm or
corporation. While the administrative services supplied to the Trust may be
different than those supplied to other persons, firms or corporations, AIS shall
provide the Trust equitable treatment in supplying services. The Trust
recognizes that it will not receive preferential treatment from AIS as compared
with the treatment provided to other AIS clients. AIS agrees to maintain the
records and all other information of the Trust in a confidential manner and
shall not use such information for any purpose other than the performance of
AIS's duties under this Agreement.
(f) The Trust agrees that AIS may, in its sole discretion,
engage the services of another entity or entities in connection with the
provisions of the services under this Agreement; provided, that AIS will
continue to be responsible for all services furnished to the Trust under this
Agreement. At the election of the Trust, it shall be entitled to be subrogated
to the rights of AIS with respect to any claims against any other entity
providing services to the Trust contemplated by this Agreement as a consequence
of any loss, damage, cost, expense, liability or claim if and to the extent the
Trust has not been made whole for any such loss, damage, cost, expense,
liability or claim.
Section 3. Allocation of Expenses
All costs and expenses of the Trust shall be paid by the
Trust including, but not limited to:
(a) fees paid to the Investment Adviser(s);
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are
not affiliated persons of the Trust,
any Investment Adviser(s) or AIS;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder
servicing agent, fees and expenses;
(h) fees and expenses incident to the registration
of the shares of the Trust under
Federal or state securities laws;
(i) expenses related to preparing, setting in type,
printing and mailing prospectuses, statements of
additional information, reports and notices and proxy
material to shareholders of the Trust;
(j) all expenses incidental to holding meetings of
shareholders and Trustees of the Trust;
and
(k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal
obligations which the Trust may have regarding
indemnification of its officers and trustees.
Section 4. Compensation of AIS
The Trust agrees to pay AIS compensation for its services and
to reimburse it for expenses, at the rates and amounts as set forth in Schedule
"B" attached hereto, and as shall be set forth in any future amendments to such
Schedule "B" approved by the Parties. The Trust agrees and understands that
AIS's compensation will be comprised of two components and payable on a monthly
basis as follows:
(i) A fixed fee for each Series, together with a combined
asset-based fee that the Trust hereby authorizes AIS to collect by debiting the
Trusts' custody account for invoices which are rendered for the services
performed. The invoices for the services performed will be sent to the Trust
after such debiting with the indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by AIS
on behalf of the Trust, which out-of-pocket expenses will be billed to the Trust
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Trust agrees to reimburse AIS for
such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to AIS, the value
of Series' net assets shall be computed at the times and in the manner specified
in Series' Prospectuses and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek
additional or fewer services or functions beyond those outlined above, or in
Schedule "A" attached, a written amendment to this Agreement reflecting such
shall be signed by both Parties, and any compensation stated herein may be
adjusted accordingly.
Section 5. Duration and Termination
(a) The term of this Agreement shall be for a period of one
(1) year, commencing on the date hereof and shall continue in force from year to
year thereafter, but only so long as such continuance is approved annually: (1)
by AIS; and (2) by vote of a majority of the Trust's Trustees who are not
"interested persons" of either Party, as such term is defined in the Act.
(b) The fee schedule will be fixed for a one (1) year period
from the date of the Agreement. After each one (1) year period, the fee will be
subject to annual review and an inflationary adjustment consistent with the
actual level of services provided by AIS as compared with those services set
forth in Schedule "A".
(c) Subject to the terms of the preceding paragraph, this
Agreement may be terminated by AIS at any time without penalty upon giving the
Trust one hundred eighty (180) days' written notice (which notice may be waived
in writing by the Trust) and may be terminated by the Trust at any time upon
giving AIS one hundred eighty (180) days' written notice (which notice may be
waived in writing by AIS) provided that such termination by the Trust shall be
directed or approved by the vote of a majority of its Trustees in office at the
time who are not "interested persons" of either Party, as such term is defined
in the Act.
(d) This Agreement shall extend to and shall be binding upon
the Parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust without the
written consent of AIS or by AIS without the written consent of the Trust,
authorized or approved by resolution of the Trust's Board of Trustees; provided,
however, no such consent shall be required with respect to an assignment to, and
the Trust expressly permits the assignment of the rights and obligations
hereunder to, a direct or indirect wholly-owned subsidiary of AIS (or of the
direct parent corporation of AIS) to which is transferred prior to any
assignment the management and personnel from AIS responsible for the Trust's
operations.
Section 6. Amendment
No provision of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by the
Parties.
Section 7. Applicable Law
This Agreement shall be governed by the laws of the State of
Illinois and the venue of any action arising under this Agreement shall be Cook
County, State of Illinois.
Section 8. Limitation of Liability
(a) The execution and delivery of this contract has been duly
authorized by the Board of Trustees of the Trust and executed on behalf of the
Trust by the undersigned officer, in that officer's capacity as an officer of
the Trust. The obligations under this Agreement shall be binding upon the assets
and property of the Trust and shall not be binding upon any Trustee, officer or
shareholder individually.
(b) AIS, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement, except a loss resulting from willful misfeasance, bad faith, or
negligence or reckless disregard on the part of AIS in the performance of its
obligations and duties under this Agreement.
(c) Any person, even though also a director, officer,
employee, shareholder or agent of AIS, who may be or become an officer, trustee,
employee or agent of the Trust shall be deemed, when rendering services to such
entity or acting on any business of such entity (other than services or business
in connection with AIS's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of AIS
even though such person receives compensation from AIS.
(d) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless AIS, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which AIS may sustain or incur or which may be asserted against AIS by
any person by reason of, or as a result of: (i) any action taken or omitted to
be taken by AIS in good faith; (ii) any action taken or omitted to be taken by
AIS in good faith in reliance upon any certificate, instrument, order or stock
certificate or other document reasonably believed by AIS to be genuine and to be
signed, countersigned or executed by any duly authorized person, upon the oral
instructions or written instruction of an authorized person of the Trust or upon
the opinion of legal counsel for the Trust; or (iii) any action taken or omitted
to be taken by AIS in connection with its appointment in good faith in reliance
upon any law, act, regulation or interpretation of the same even though the same
may thereafter have been altered, changed, amended or repealed. Indemnification
under this subparagraph shall not apply, however, to actions or omissions of AIS
or its directors, officers, employees, shareholders or agents in cases of its or
their own negligence, misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
(e) AIS shall give written notice to the Trust within ten (10)
business days of receipt by AIS of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, unless such failure
prejudices the Trust.
(f) For any legal proceeding giving rise to this
indemnification, the Trust shall be entitled to defend or prosecute any claim in
the name of AIS at its own expense and through counsel of its own choosing if it
gives written notice to AIS within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, AIS may participate in the
litigation at its own expense through counsel of its own choosing. If the Trust
does choose to defend or prosecute such claim, then the Parties shall cooperate
in the defense or prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(g) The terms of this Section 8 shall survive the termination
of this Agreement.
Section 9. Notices
Except as otherwise provided in this Agreement, any notice or
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective Parties as follows:
If to the Trust: If to AIS:
ALLEGHANY FUNDS ALLEGHANY INVESTMENT SERVICES INC.
171 North Clark Street 171 North Clark Street
Chicago, IL 60601 Chicago, IL 60601
Attention: Kenneth C. Anderson, Attention: Gerald F. Dillenburg,
President Senior Vice President
<PAGE>
Section 10. Severability
If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not affected,
and the rights and obligations of the Parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
Section 11. Section Headings
Section and Paragraph headings are for convenience only and
shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
together with Schedules "A", "B" and "C", to be signed by their duly
authorized officers and their corporate seals hereunto duly affixed and
attested, as of the day and year first above written.
ALLEGHANY FUNDS AIS
- ------------------------------ ------------------------------
By: Kenneth C. Anderson, By: Gerald F. Dillenburg,
President Senior Vice President
- ------------------------------ ------------------------------
Attest: Attest:
<PAGE>
SCHEDULE "A"
Fund Accounting and Administrative Services
Routine Projects
Daily, weekly, and monthly reporting Portfolio and general ledger
accounting Daily pricing of all securities Daily valuation and NAV
calculation Comparison of NAV to market movement Review of price
tolerance/fluctuation report
Research items appearing on the price exception report
Weekly costs monitoring along with mark-to-market valuations in
accordance with Rule 2a-7 Preparation of monthly ex-dividend monitor
Daily cash reconciliation with the custodian bank Daily updating of
price and rate information to the Transfer Agent/Insurance Agent Daily
support and report delivery to Portfolio Management Daily calculation
of fund adviser fees and waivers Daily calculation of distribution
rates Daily maintenance of each fund's general ledger including expense
accruals Daily price notification to other vendors as required
Calculation of 30-day adjusted SEC yields Preparation of month-end
reconciliation package Monthly reconciliation of fund expense records
Preparation of monthly pay down gain/loss summaries Preparation of all
annual and semi-annual audit work papers Preparation and printing of
financial statements Providing shareholder tax information to Transfer
Agent Producing drafts of IRS and state tax returns Treasury Services
including:
Provide Officer for the Company
Expense Accrual Monitoring
Determination of Dividends
Prepare materials for review by the board, e.g., 2a-7, 10f-3,
17a-7, 17e-1, Rule 144a Tax and Financial Counsel
Monthly compliance testing including Section 817H
Distribution and Legal, Regulatory and Board of Trustees Support
Provide 1940 Act attorney to assist in organization
Prepare agenda and background materials for legal approval at Board
Meetings; make presentations where appropriate; prepare minutes; follow
up on issues
Review and file Form N-SAR
Review and file annual and semi-annual financial reports Assist in
preparation of fund Registration Statements Review of all sales
material and advertising
Coordinate all aspects of the printing and mailing process with
outside printers for all shareholder
publications
Support for all quarterly board meetings
Preparation of proxy materials for one meeting per two year period
Annual update of Post-Effective Amendment (PEA) Prospectus supplements,
as needed Consultations regarding legal issues as needed SEC audit
report Arrange insurance and fidelity bond coverage Support for one
special board meeting per year and consent votes where needed One
additional PEA (other than annual update) One exemptive order
application Assist with marketing strategy and product development
Special Projects*
Proxy material preparation for additional meetings beyond one per two
year period N-14 preparation (merger document) Additional PEAs beyond
two per year Prospectus simplification Additional exemptive order
applications beyond one per year Extraordinary non-recurring projects -
e.g., arranging CDSC financing programs Basic sales, mutual funds, and
product training to branch and sales representatives
*Charged on a project-by-project basis.
INDIVIDUAL RETIREMENT ACCOUNT ADMINISTRATIVE SERVICES
* Process new accounts, verify completeness of application forms;
establish new account records with standard abbreviations and
registration formats, including proper account identification codes.
* Examine and process contributions and invest monies received in
accordance with the written instructions of the Shareholders.
* Process transactions upon receipt of proper documentation and in
accordance with the terms of the IRA documentation.
* Reinvest income dividends and capital gains distributions.
* Send a confirmation to the proper person(s) with respect to each
transaction in the account.
* Examine and process requests for distributions, subject to receipt of
required legal documents; verify eligibility of the recipient and make
payments.
* Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess
contributions, etc.).
* Record method of distribution requested and/or made.
* Distribute the account in the event of death as required in writing by
the Shareholder/Beneficiary, subject to receipt of required legal
documents.
* Receive and process designation of the beneficiary forms.
* Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over the successor assets in the
account and records pertaining thereto as requested.
* Send to each Shareholder/Beneficiary/Employer notices, prospectuses,
account statements, proxies and other documents or communications
relating to fund shares; send such other notices, documents or other
communications to Shareholders/Beneficiaries/Employers as the fund may
direct.
* Maintain records of contributions, distributions, and other transactions.
* Prepare any annual reports or returns required to be prepared and/or
filed by a custodian of a Plan, including but not limited to, an annual
fair market value report, Forms 1099R and 5498 and file with the IRS
and provide to Shareholder/Beneficiary.
* Send Shareholder/Beneficiaries an annual TEFRA notice regarding
required
federal tax withholding.
* Answer Shareholder/Beneficiary telephone, written or other inquiries
concerning the IRA.
* Process requested changes to account information.
* Retain original source documents, such as applications and
correspondence, microfilm original source documents, as required.
* Respond to research inquiries from fund or as requested by Custodian if
Custodian is directed by the fund.
* Perform applicable withholding for accounts.
* Purge "closed" accounts as directed by the fund.
<PAGE>
SCHEDULE "B"
FEE SCHEDULE
Each Fund will pay the Administrator on the first business day of each
month a fee for the previous month at the rates listed below. The fee for the
period from the effective date of this Agreement to the end of such month shall
be prorated according to the proportion that such period bears to the full
monthly period. Upon any termination of this Agreement before the end of any
month, the fee for such part of a month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
I. ADMINISTRATION FEES:
.06% of less than $2 billion of the aggregate average daily net assets of
the Funds; and
.05% of aggregate average daily net assets of the Funds of at least $2
billion but not more than $7 billion; and
.045% of the Funds' aggregate average daily net assets over $7 billion.
II. CUSTODY LIAISON FEES:
$10,000 for average daily net assets of a Fund less than $100 million; and
$15,000 for average daily net assets of a Fund of at least $100 million but
not more than $500 million; and
$20,000 for average daily net assets of a Fund over $500 million.
III. OUT-OF POCKET EXPENSES:
The Administrator shall be entitled to collect all out-of-pocket expenses.
Out-of-pocket expenses include, but are not limited to, the following:
- Postage of Board meeting materials and other materials to the
Trust's Board members and service providers (including
overnight or other courier services)
- Telecommunications charges (including FAX) with respect to
communications with the Trust's trustees, officers and service
providers
- Duplicating charges with respect to filings with federal and
state authorities
and Board meeting materials
- Courier services
- Pricing services
- Forms and supplies for the preparation of Board meetings and
other materials for the Trust by the Administrator
- Vendor set-up charges for Blue Sky services
- Customized programming requests
- Travel expenses
- Such other expenses as are agreed to by the Administrator and
the Trust
IV. IRA ADMINISTRATIVE SERVICES
Shareholder Account Fees: $15.00 per account per year
The account fee shall be waived for shareholders who maintain an
aggregate IRA balance of $50,000 or greater.
<PAGE>
SCHEDULE "C"
As of June 17, 1999
IDENTIFICATION OF SERIES
Below are listed the Series to which services under this Agreement are to be
performed as of the execution date of this Agreement:
ALLEGHANY FUNDS
Alleghany/Chicago Trust Growth & Income Fund
Alleghany/Chicago Trust Balanced Fund
Alleghany/Chicago Trust Bond Fund Alleghany/Chicago
Trust Municipal Bond Fund Alleghany/Chicago Trust
Money Market Fund Alleghany/Chicago Trust Talon Fund
Alleghany/Montag & Caldwell Growth Fund - Class N shares
Montag & Caldwell Growth Fund - Class I shares
Alleghany/Montag & Caldwell Balanced Fund - Class N
shares Montag & Caldwell Balanced Fund - Class I
shares Alleghany/Chicago Trust Small Cap Value Fund
Alleghany/Veredus Aggressive Growth Fund
Alleghany/Blairlogie Emerging Markets Fund - Class N
and Class I
Alleghany/Blairlogie International Developed Fund -
Class N and Class I
This Schedule "C" may be amended from time to time by agreement of the Parties.
EXHIBIT (i)
SONNENSCHEIN NATH & ROSENTHAL
KANSAS CITY 8000 SEARS TOWER (312) 876-8000
LONDON
LOS ANGELES CHICAGO, ILLINOIS 60606-6404 FACSIMILE
NEW YORK (312) 876-7934
SAN FRANCISCO
ST. LOUIS
WASHINGTON, D.C.
June 25, 1999
Board of Trustees
Alleghany Funds
c/o The Chicago Trust Company
171 N. Clark Street
Chicago, Illinois 60606-3294
Re: Alleghany Funds
Ladies and Gentlemen:
We have acted as counsel to Alleghany Funds, a Delaware business trust (the
"Trust"), in connection with Post-Effective Amendment No. 17 to the Trust's
Registration Statement on Form N-1A filed with the Securities and Exchange
Commission on or about June 29, 1999 (the "Post-Effective Amendment"), and
relating to the issuance by the Trust of an indefinite number of Class I shares
of beneficial interest (the "Shares") in each of two series of the Trust, the
Alleghany/Chicago Trust Balanced Fund and the Alleghany/Chicago Trust Growth &
Income Trust (the "Funds"). In connection with this opinion, we have assumed the
authenticity of all records, documents and instruments submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons, and the conformity to the originals of all records, documents, and
instruments submitted to us as copies. We have based our opinion on the
following: (a) the Trust's Trust Instrument dated September 10, 1993 (the "Trust
Instrument"), the Trust's Certificate of Trust (the "Certificate of Trust") as
filed with the Secretary of State of Delaware and oral confirmation of good
standing of the Trust given by the Secretary of State of Delaware on June 24,
1999; (b) resolutions of the Trustees of the Trust adopted at a meeting on June
17, 1999, authorizing the issuance of the Shares; and (c) the Post-Effective
Amendment. Our opinion below is limited to the federal law of the United States
of America and the business trust law of the State of Delaware. We are not
licensed to practice law in the State of Delaware, and we have based our opinion
below solely on our review of Chapter 38 of Title 12 of the Delaware Code and
the case law interpreting such Chapter as reported in Delaware Code Annotated.
We have not undertaken a review of other Delaware law or of any administrative
decisions or other court decisions in connection with rendering this opinion.
Based on the foregoing and our examination of such questions of law as we have
deemed necessary and appropriate for the purpose of this opinion, and assuming
that (i) all of the Shares will be issued and sold for cash at the per-share
public offering price on the date of their issuance in accordance with
statements in the Trust's Prospectus included in the Post-Effective Amendment
and in accordance with the Trust Instrument, (ii) all consideration for the
Shares will be actually received by the Trust, and (iii) all applicable
securities laws will be complied with, it is our opinion that, when issued and
sold by the Trust, the Shares will be legally issued, fully paid and
nonassessable. This opinion is rendered to you in connection with the
Post-Effective Amendment and is solely for the benefit. This opinion may not be
relied upon by you for any other purpose or relied upon by any other person,
firm, corporation or other entity for any purpose, without our prior written
consent. This opinion is rendered on the date hereof and we have no continuing
obligation hereunder to inform you of changes of law or fact subsequent to the
date hereof or facts of which we have become aware after the date hereof. We
hereby consent to (i) the reference to our firm as Legal Counsel in the
Prospectus included in the Post-Effective Amendment, and (ii) the filing of this
opinion as an exhibit to the Post-Effective Amendment.
Very truly yours,
SONNENSCHEIN NATH & ROSENTHAL
By: ARTHUR J. SIMON
Arthur J. Simon
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
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<SERIES>
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<NAME> CHICAGO TRUST BOND FUND
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<EXPENSE-RATIO> .008
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[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> CHICAGO TRUST BALANCED FUND
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<PERIOD-END> APR-30-1998
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<TOTAL-LIABILITIES> 460,488
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,364,728
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<INTEREST-INCOME> 2,955,841
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<REALIZED-GAINS-CURRENT> 9,909,956
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<DISTRIBUTIONS-OF-GAINS> 11,401,639
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<NUMBER-OF-SHARES-SOLD> 17,356,662
<NUMBER-OF-SHARES-REDEEMED> 18,356,257
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<NET-CHANGE-IN-ASSETS> 27,039,564
<ACCUMULATED-NII-PRIOR> 624,636
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1,094,240
<AVERAGE-NET-ASSETS> 200,698,235
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<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.43
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> (0.68)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.80
<EXPENSE-RATIO> .011
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> CHICAGO TRUST GROWTH & INCOME
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<PERIOD-END> APR-30-1998
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<TOTAL-LIABILITIES> 549,324
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<DISTRIBUTIONS-OF-GAINS> 19,149,159
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<NUMBER-OF-SHARES-REDEEMED> 22,550,182
<SHARES-REINVESTED> 19,000,002
<NET-CHANGE-IN-ASSETS> 79,724,738
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19,148,637
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,072,479
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,683,237
<AVERAGE-NET-ASSETS> 308,961,849
<PER-SHARE-NAV-BEGIN> 19.73
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 4.23
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (1.37)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.57
<EXPENSE-RATIO> 0.011
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MONTAG & CALDWELL GROWTH FUND-CLASS I
<S> <C>
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<PERIOD-END> APR-30-1998
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<ACCUMULATED-NET-GAINS> 27,177,089
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 324,066,354
<NET-ASSETS> 1,362,268,474
<DIVIDEND-INCOME> 3,513,382
<INTEREST-INCOME> 1,192,970
<OTHER-INCOME> 0
<EXPENSES-NET> 5,560,254
<NET-INVESTMENT-INCOME> (853,902)
<REALIZED-GAINS-CURRENT> 27,275,289
<APPREC-INCREASE-CURRENT> 176,925,518
<NET-CHANGE-FROM-OPS> 203,346,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 2,772,360
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<NUMBER-OF-SHARES-SOLD> 219,014,110
<NUMBER-OF-SHARES-REDEEMED> 45,582,644
<SHARES-REINVESTED> 2,260,596
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<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,424,226
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,942,606
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,560,254
<AVERAGE-NET-ASSETS> 388,384,146
<PER-SHARE-NAV-BEGIN> 22.75
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 4.73
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.21)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 27.27
<EXPENSE-RATIO> .009
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MONTAG & CALDWELL GROWTH FUND-CLASS N
<S> <C>
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<PERIOD-END> APR-30-1998
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<NET-INVESTMENT-INCOME> (853,902)
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,560,254
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<PER-SHARE-NAV-BEGIN> 22.68
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 4.70
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.21)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 27.14
<EXPENSE-RATIO> 0.012
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> MONTAG & CALDWELL BALANCED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 116,910,900
<INVESTMENTS-AT-VALUE> 139,018,870
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<TOTAL-ASSETS> 140,119,870
<PAYABLE-FOR-SECURITIES> 244,654
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<TOTAL-LIABILITIES> 449,364
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<PAID-IN-CAPITAL-COMMON> 114,473,183
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<SHARES-COMMON-PRIOR> 5,167,798
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<ACCUMULATED-NET-GAINS> 2,786,148
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,107,970
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<DISTRIBUTIONS-OF-GAINS> 2,095,351
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<NUMBER-OF-SHARES-SOLD> 55,627,337
<NUMBER-OF-SHARES-REDEEMED> 12,910,155
<SHARES-REINVESTED> 2,828,759
<NET-CHANGE-IN-ASSETS> 56,951,453
<ACCUMULATED-NII-PRIOR> 185,563
<ACCUMULATED-GAINS-PRIOR> 2,062,185
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 415,654
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 689,715
<AVERAGE-NET-ASSETS> 111,759,717
<PER-SHARE-NAV-BEGIN> 16.01
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.94
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (0.38)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.57
<EXPENSE-RATIO> .013
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> CHICAGO TRUST MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 12,664,270
<INVESTMENTS-AT-VALUE> 12,928,733
<RECEIVABLES> 218,456
<ASSETS-OTHER> 74,821
<OTHER-ITEMS-ASSETS> 3,354
<TOTAL-ASSETS> 13,225,364
<PAYABLE-FOR-SECURITIES> 300,426
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,941
<TOTAL-LIABILITIES> 358,367
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,660,144
<SHARES-COMMON-STOCK> 1,267,571
<SHARES-COMMON-PRIOR> 1,215,334
<ACCUMULATED-NII-CURRENT> 22,620
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 80,230
<ACCUM-APPREC-OR-DEPREC> 264,463
<NET-ASSETS> 12,866,997
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 297,615
<OTHER-INCOME> 0
<EXPENSES-NET> 39,348
<NET-INVESTMENT-INCOME> 258,267
<REALIZED-GAINS-CURRENT> 10,880
<APPREC-INCREASE-CURRENT> (55,026)
<NET-CHANGE-FROM-OPS> 214,121
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 263,103
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 866,702
<NUMBER-OF-SHARES-REDEEMED> 347,327
<SHARES-REINVESTED> 17,396
<NET-CHANGE-IN-ASSETS> 487,789
<ACCUMULATED-NII-PRIOR> 27,456
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 91,110
<GROSS-ADVISORY-FEES> 37,735
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92,167
<AVERAGE-NET-ASSETS> 12,682,468
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 0.006
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> CHICAGO TRUST MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 225,413,768
<INVESTMENTS-AT-VALUE> 239,814,768
<RECEIVABLES> 1,230,708
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 240,591,933
<SHARES-COMMON-STOCK> 240,591,933
<SHARES-COMMON-PRIOR> 238,551,474
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 240,591,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,116,190
<OTHER-INCOME> 0
<EXPENSES-NET> 636,203
<NET-INVESTMENT-INCOME> 6,479,987
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,479,987
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,479,987
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 284,113,157
<NUMBER-OF-SHARES-REDEEMED> 282,238,211
<SHARES-REINVESTED> 165,513
<NET-CHANGE-IN-ASSETS> 2,040,459
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 501,524
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 660,654
<AVERAGE-NET-ASSETS> 252,840,013
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.005
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> CHICAGO TRUST TALON FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
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EXHIBIT (o)
alleghany funds
(FORMERLY KNOWN AS CT&T FUNDS)
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
Alleghany Funds (formerly known as CT&T Funds) (the "Fund") hereby adopts this
plan pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act"), which sets forth the separate distribution arrangements and expenses
allocations of each of the classes of the series of the Fund's shares.
CLASS CHARACTERISTICS
Each class of shares will represent interest in the same portfolio of
investments of a series of the Fund, and be identical in all respects to each
other class, except as set forth below.
Class N: Class N shares will not be subject to an initial sales
charge or a contingent deferred sales charge and will have a
Rule 12b-1 plan with a fee of .25% of average daily net
assets. Class N shares would be offered to investors with a
minimum initial investment of $2,500 (or as may from
time-to-time be provided in the Prospectus).
ClassI: Class I shares will not be subject to an initial
sales charge or a contingent deferred sales chare or a
Rule 12b-1 fee. Class I shares would be offered to
investors with a minimum investment as shown on
Schedule A. The balances of Fund accounts of a
financial consultant's clients may be aggregated in
determining whether the minimum investment has been
met. In addition, this aggregation may be applied to
the accounts of immediate family members (i.e., a
person's spouse, parents, children, siblings and
in-laws) and to the related accounts of a corporation
or other legal entity. The Fund may waive the minimum
initial investment by obtaining a letter of intent,
evidencing an intent to meet the stated minimum
investment in a specified period of time. Trustees of
the Trust and employees of the Investment Advisor and
its affiliates may purchase Class I shares for their
personal accounts.
The only differences among the various classes of shares of the same
series of the Fund will relate solely to: (a) distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares and any other
costs relating to implementing or amending such plan (including obtaining
shareholder approval of such plan or any amendment thereto), which will be borne
solely by shareholders of such class or classes; (b) different class expenses,
which will be limited to the following expenses determined by the Trustees to be
attributable to a specific class of shares: (i) printing and postage expenses
related to preparing and distribution materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a specific class;
(ii) Securities and Exchange Commission registration fees and state "blue sky"
fees incurred by a specific class; (iii) litigation or other legal expenses
relating to a specific class; (iv) Trustee fees or expenses incurred as a result
of issues relating to a specific class; and (v) accounting expenses relating to
a specific class; (voting rights related to any Rule 12b-1 Plan affecting a
specific class of shares; (c) different transfer agency fees attributable to a
specific class; (d) exchange privileges; and (e) class names or designations.
Any additional incremental expenses not specifically identified above that are
subsequently identified and determine to be properly applied to one class of
shares of any series of the Fund shall be so applied to one class of shares of a
series of the Fund upon approval by a majority of the Trustees, including a
majority of Trustees who are not interested persons of the Fund.
INCOME AND EXPENSE ALLOCATION
Certain expenses attributable to the Fund, and not to a particular
series will be borne by each class on the basis of the relative aggregate net
assets of the series. Expenses that are attributable to a particular series, but
not to a particular class thereof, will be borne by each class of such series on
the basis of relative net assets of the classes. Notwithstanding the foregoing,
the investment manager or other service provider may waive or reimburse the
expenses of a specific class or classes to the extent permitted under Rule 18f-3
under the 1940 Act.
A class of shares may bear expenses that are directly attributable to
such class as set forth above.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by a series of the Fund to each
class of shares, to the extent that any dividends are paid, will be calculated
in the same manner, at the same time, on the same day, and will be in the same
amount, except that any distribution fees, service fees and class expenses
allocated to a class will be borne exclusively by that class.
EXCHANGES AND CONVERSIONS
Shares of any series of the Fund will be exchangeable with shares of
the same class of shares of another series of the Fund to the extent such shares
are available. Exchanges will comply with all applicable provisions of Rule
11a-3 under the 1940 Act. Shares will not convert into shares of another class.
GENERAL
Any distribution arrangement of the Fund, including distribution
fees pursuant to Rule 12b-1 under the 1940 Act, will comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
Any material amendment to this Plan must be approved by a majority of
the Board of Trustees of the Fund, including a majority of those Trustees who
are not interested persons of the Fund.
Date: March 15, 1996
As Amended: June 18, 1998
As Amended: September 17, 1998
As Amended: December 17, 1998
As Amended: March 18, 1999
As Amended: June 17, 1999
<PAGE>
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
SCHEDULE "A"
Class I Minimum Initial Investment
SERIES MINIMUM INVESTMENT
Montag & Caldwell Growth Fund $5 million
Montag & Caldwell Balanced Fund $1 million
Alleghany/Chicago Trust Bond Fund $5 million
Alleghany/Blairlogie Emerging Markets Fund $1 million
Alleghany/Blairlogie International Developed Fund $1 million
Alleghany/Chicago Trust Money Market Fund $1 million
Alleghany/Chicago Trust Growth & Income Fund $5 million
Alleghany/Chicago Trust Balanced Fund $5 million
DATED: June 17, 1999
