ALLEGHANY FUNDS, 497, 1999-05-04

ALLEGHANY FUNDS
497, 1999-05-04

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PROSPECTUS

May 3, 1999

Alleghany/Blairlogie Emerging Markets Fund
Alleghany/Blairlogie International Developed Fund

(CLASS N SHARES)

ALLEGHANY FUNDS

Blairlogie Capital Management, Investment Adviser
(800) 992-8151

<PAGE>

ALLEGHANY FUNDS
171 North Clark Street
Chicago, IL 60601
(800) 992-8151

http://www.alleghanyfunds.com

PROSPECTUS
May 3, 1999

Alleghany Funds (the "Company") is a no-load, open-end management
investment company which consists of twelve separate diversified investment
series designed to offer investors a variety of investment opportunities. This
Prospectus pertains only to the Class N shares of Alleghany/Blairlogie Emerging
Markets Fund and Alleghany/Blairlogie International Developed Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has distinct investment
objectives and policies. Each Fund's Investment Adviser is Blairlogie Capital
Management ("Blairlogie" or the "Investment Adviser").

Alleghany/Blairlogie Emerging Markets Fund seeks long-term growth of
capital with investments primarily in common stocks of companies located in
emerging market countries.

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital through investment primarily in a diversified portfolio of
international equity securities.

Shares of each Fund are purchased and redeemed without any purchase or
redemption charge imposed by the Company, although institutions may charge their
customers for services provided in connection with their investments.

Shares of the Funds are not deposits, obligations of, or endorsed by
any bank, and are not insured or guaranteed by any bank, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. An
investment in a Fund involves investment risks, including the possible loss of
principal.

This Prospectus sets forth concisely the information a prospective
investor should know before investing in either of the above Funds. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds is contained in the Statement of Additional
Information dated May 3, 1999, as supplemented from time to time, which has been
filed with the Securities and Exchange Commission ("SEC") and is available along
with other related materials on the SEC's Internet Web site
(http://www.sec.gov). The Statement of Additional Information is incorporated by
reference into this Prospectus and is available upon request and without charge
from the Company, at the addresses and telephone numbers below.

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

Fund Company: Investment Adviser:
Alleghany Funds Blairlogie Capital Management
171 North Clark Street 4th Floor, 125 Princes Street
Chicago, IL 60601-3294 Edinburgh EH2 4AD, Scotland
(800) 992-8151 (800) 992-8151

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TABLE OF CONTENTS

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Page
PROSPECTUS SUMMARY........................................................................................ 5

EXPENSE INFORMATION....................................................................................... 6

INVESTMENT OBJECTIVES AND POLICIES........................................................................ 8

ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND........................................................... 8

ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND.................................................... 9

INVESTMENT STRATEGIES AND RISK CONSIDERATIONS............................................................. 10

MANAGEMENT OF THE FUNDS................................................................................... 19

PORTFOLIO MANAGEMENT METHODS.............................................................................. 20

ADMINISTRATION OF THE FUNDS............................................................................... 20

PURCHASE OF SHARES........................................................................................ 21

EXCHANGE OF SHARES........................................................................................ 23

REDEMPTION OF SHARES...................................................................................... 24

ACCOUNT OPTIONS........................................................................................... 26

DISTRIBUTION PLAN......................................................................................... 26

NET ASSET VALUE........................................................................................... 27

DIVIDENDS AND TAXES....................................................................................... 27

PERFORMANCE OF THE FUNDS.................................................................................. 28

GENERAL INFORMATION....................................................................................... 29
</TABLE>

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR A FUND TO MAKE SUCH AN
OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.

<PAGE>

PROSPECTUS SUMMARY

The Funds

The Company is an open-end, management investment company commonly
known as a mutual fund. The Company was established as a Delaware business trust
on September 10, 1993. The Company currently offers twelve separate series of
shares. This Prospectus offers only Class N shares of Alleghany/Blairlogie
Emerging Markets Fund and Alleghany/Blairlogie International Developed Fund.

Investment Definitions

Equity Securities--The term "equity securities" as used herein
typically refers to common stock or preferred stock, which represent a
stockholder's equity or ownership of shares in a domestic or international
company, including those of emerging market countries.

Debt Securities--Examples of "debt securities" are bills, notes and
bonds, each representing a promise by the issuer to re-pay a debt that is
generally secured by the assets of such issuer. Also in this investment category
are debentures, which are bonds or promissory notes that are backed by the
general credit of the issuer, but not secured by specific assets of such issuer.

Convertible Features--Equity or debt securities purchased by the Funds
may have "convertible" features, whereby they can be exchanged for another class
of securities, according to the terms of their respective issuers.

Short-term Instruments--"Short-term (or money market) instruments" are
generally private or Government obligations with maturities of one year or less
and may include (but are not limited to) certificates of deposit, bankers'
acceptances, corporate commercial paper, and Government obligations.

Derivative Investments--The term "derivatives" has been used to
identify a range and variety of financial categories. In general, a derivative
is commonly defined as a financial instrument whose performance is derived, at
least in part, from the performance of an underlying asset, such as a specific
security or an index of securities. Derivatives, which may be used from time to
time by the Funds and the investment risks associated with such instruments, are
discussed in detail under "INVESTMENT STRATEGIES AND RISK CONSIDERATIONS."

Investment Objectives of the Funds

Alleghany/Blairlogie Emerging Markets Fund seeks long-term growth of
capital consistent with investments primarily in common stocks of companies
located in emerging market countries.

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital through investment primarily in a diversified portfolio of
international equity securities.

How to Purchase Shares

The minimum initial investment for regular accounts (other than
Individual Retirement Accounts ("IRAs") and Uniform Gift to Minor Accounts
("UGMAs")) is $2,500 for each Fund and the minimum subsequent investment is $50,
except for accounts opened through a fund network. In such case, the minimums of
the fund network will apply. The minimum initial investment for IRAs and UGMAs
is $500, and the minimum subsequent investment for IRAs and UGMAs is $50. The
minimum initial and subsequent investment for those enrolled in the Automatic
Investment Plan is $50. The Funds do not impose any sales load, redemption or
exchange fees. Each Fund has a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act"). See
"DISTRIBUTION PLAN." The public offering price for shares of each of the Funds
is the net asset value per share next determined after receipt of a purchase
order in proper form. The Funds offer two classes of shares. Only Class N shares
for retail investors are offered by this Prospectus. See "PURCHASE OF SHARES,"
"ACCOUNT OPTIONS" and "GENERAL INFORMATION."

<PAGE>

How to Redeem Shares

Shares of each Fund may be redeemed at the net asset value per
share of Class N shares of the Fund next determined after receipt of a
redemption request in proper form. Signature guarantees may be required.
See "REDEMPTION OF SHARES."

Dividends

Each Fund intends to distribute substantially all of its net investment
income and net realized capital gains, if any, to shareowners. Distributions of
net capital gains, if any, will be made annually. All distributions are
reinvested at net asset value, in additional full and fractional shares of the
respective Fund unless and until the shareowner notifies the Transfer Agent in
writing requesting payments in cash. Each Fund declares and pays dividends, if
any, quarterly. See "DIVIDENDS AND TAXES."

Management of the Funds

Blairlogie, 125 Princes Street, Edinburgh EH2 4AD, Scotland, a
registered investment advisor is the Investment Adviser for each Fund.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organisation in the United
Kingdom. Blairlogie was founded in 1992. Gavin Dobson is the Chief Executive
Officer and James Smith is the Chief Investment Officer.

As of November 23, 1998, Blairlogie managed over $890 million in assets
primarily for institutional clients.

First Data Distributors, Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as the Funds' Distributor. Investors Fiduciary Trust
Company, 801 Pennsylvania, Kansas City, MO 64105, serves as the Custodian of the
Funds' assets. The Chicago Trust Company ("Chicago Trust"), 171 North Clark
Street, Chicago, Illinois 60601, serves as the Funds' Administrator. First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109,
serves as the Funds' Sub-Administrator. First Data Investor Services Group,
Inc., 4400 Computer Drive, Westborough, Massachusetts 01581, serves as the
Funds' Transfer Agent.

EXPENSE INFORMATION
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Shareowner Transaction Expenses for Each Fund:

Maximum Sales Load Imposed on Purchases..........................................................None

Maximum Sales Load Imposed on Reinvested Dividends...............................................None

Maximum Deferred Sales Load......................................................................None

Redemption Fees..................................................................................None

Exchange Fees....................................................................................None
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.........If you want to redeem shares by wire transfer, the Funds' Transfer
Agent charges a fee, currently $20.00, for each wire redemption.
Institutions may independently charge fees for shareowner transactions
or for advisory services; please see their materials for details.

<PAGE>

Annual Fund Operating Expenses as a Percentage of Average Net Assets:

Alleghany/Blairlogie Emerging Markets Fund
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Investment Advisory Fees (after voluntary fee waivers).......................... 0.52%
12b-1 Fees...................................................................... 0.25%
Other Expenses.................................................................. 0.83%
-----
Net Expense Ratio (after voluntary fee waivers)................................. 1.60%
=====

Alleghany/Blairlogie International Developed Fund

Investment Advisory Fees ....................................................... 0.85%
12b-1 Fees...................................................................... 0.25%
Other Expenses.................................................................. 0.25%
-----
Net Expense Ratio .............................................................. 1.35%
=====
</TABLE>

.........The purpose of this table is to assist the investor in understanding
the various expenses that an investor in the Funds will bear directly or
indirectly.

(1) The above table reflects an estimate of the Investment
Adviser's voluntary undertakings to waive investment advisory
fees exceeding the limits shown. Absent such fee waivers, the
estimated investment advisory fees, other expenses, and total
operating expenses, respectively, would be as follows:
Alleghany/Blairlogie Emerging Markets Fund 0.85%, 0.83%, and
1.93%.

(2) Each 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
relates only to the Class N shares. See "GENERAL INFORMATION."

EXAMPLE:

Based on the level of expenses listed above after waivers, the total
expenses relating to an investment of $1,000 would be as follows, assuming a 5%
annual return and redemption at the end of each time period.

Name of Fund 1 Year 3 Years
- ------------ ------ -------
Alleghany/Blairlogie $16 $50
Emerging Markets Fund

Alleghany/Blairlogie $14 $42
International Developed Fund

The foregoing tables are designed to assist the investor in
understanding the various costs and expenses that a shareowner will bear
directly or indirectly. While the example assumes a 5% annual return, each
Fund's actual performance will vary and may result in actual returns greater or
less than 5%. The example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.

<PAGE>

Performance Measures

From time to time, the Funds may advertise performance measures as set
forth under "PERFORMANCE OF THE FUNDS." Performance measures are based on
historical earnings and are not intended to indicate future performance.

Portfolio Turnover

The portfolio turnover rate for each Fund 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 each Fund. 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.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund is fundamental and may not be
changed without a vote of the holders of the majority of the voting securities
of the Fund. Unless otherwise stated in this Prospectus or the Statement of
Additional Information, each Fund's investment policies are not fundamental and
may be changed without shareowner approval. While a non-fundamental policy or
restriction may be changed by the Trustees of the Company without shareowner
approval, the Funds intend to notify shareowners before making any change in any
such policy or restriction. Fundamental policies may not be changed without
shareowner approval.

The Funds strive to attain their investment objectives, but there can,
of course, be no assurance that they will do so. Please refer to the policies
and risk disclosures more fully described under "INVESTMENT STRATEGIES AND RISK
CONSIDERATIONS." Additional investment policies and restrictions are described
in the Statement of Additional Information.

ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND

Alleghany/Blairlogie Emerging Markets Fund seeks long-term growth of
capital. The Fund invests primarily in common stocks of companies located in
countries identified as emerging market countries. The Morgan Stanley Capital
International Emerging Markets Free Index ("MSCI EM Free Index") and the
International Finance Corporation Investable Index ("IFCI Index") are used as
the bases for choosing the countries in which the Fund invests. However, the
Fund is not limited to the countries and weightings of these indexes. The
Investment Adviser applies two levels of screening in selecting investments for
the Fund. First, an active country selection model analyzes world markets and
assigns a relative value ranking, or "favorability weighting," to each country
in the relevant country universe to determine markets which are relatively
undervalued. Second, at the stock selection level, quality analysis and value
analysis are applied to each security, assessing variables such as balance sheet
strength and earnings growth (quality factors), and performance relative to the
industry, price to earnings ratios, and price to book ratios (value factors).
This two-level screening method identifies undervalued securities for purchase
as well as provides a sell discipline for fully valued securities. In selecting
securities, the Investment Adviser considers, to the extent practicable and on
the basis of information available to it for research, a company's environmental
business practices.

For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
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Argentina Czech Republic Indonesia Pakistan Russia Thailand
Brazil Greece Israel Peru South Africa Turkey
Chile Hong Kong Jordan Philippines South Korea Venezuela
China Hungary Malaysia Poland Sri Lanka Zimbabwe
Colombia India Mexico Romania Taiwan
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<PAGE>

For purposes of allocating the Fund's investments, a company is
considered to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.

Most of the foreign securities in which the Fund invests will be
denominated in foreign currencies. The Fund may engage in foreign currency
transactions to protect itself against fluctuations in currency exchange rates
in relation to the U.S. dollar or to the weighting of a particular foreign
currency on the MSCI EM Free Index or the IFCI Index. Such foreign currency
transactions may include forward foreign currency contracts, foreign exchange
futures contracts, and options thereon, currency exchange transactions on a spot
(i.e., cash) basis, and put and call options on foreign currencies. Up to 10% of
the Fund's assets may be invested in the securities of other investment
companies. The Fund may sell (write) call and put options. The Fund may utilize
stock index futures contracts and options thereon for hedging purposes and also
for investment purposes. For instance, the Fund may invest in stock index
futures contracts and related options as an alternative to purchasing individual
stocks to adjust its exposure to a particular foreign market. See "Investment
Strategies and Risk Considerations--Derivative Instruments--Futures Contracts
and Related Options." The Fund may also engage in equity index swap
transactions.

Investing in the securities of foreign issuers, and particularly
emerging market issuers, involves special risks and considerations not typically
associated with investing in U.S. companies. For a discussion of such risks, see
"Investment Strategies and Risk Considerations--Foreign Securities."

ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital. The Fund invests primarily in a diversified portfolio of
international equity securities. The Morgan Stanley Capital International EAFE
(Europe, Australasia, Far East) Index ("MSCI EAFE Index") is used as a basis for
choosing the countries in which the Fund invests. However, the Fund is not
limited to the countries and weightings of the MSCI EAFE Index. Under normal
market conditions, the Fund will invest no more than 15% of its assets in
securities issued by companies located in countries that the Investment Adviser
determines, on the basis of market capitalization, liquidity, and other
considerations, to have underdeveloped securities markets. The Investment
Adviser applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting", to each country in the
relevant country universe to determine markets which are relatively undervalued.
Second, at the stock selection level, quality analysis and value analysis are
applied to each security, assessing variables such as balance sheet strength and
earnings growth (quality factors) and performance relative to the industry,
price to earnings ratios, and price to book ratios (value factors). This
two-level screening method identifies undervalued securities for purchase and
also provides a sell discipline for fully valued securities. In selecting
securities, the Investment Adviser considers, to the extent practicable and on
the basis of information available to it for research, a company's environmental
business practices.

Most of the international equity securities in which the Fund invests
will be traded in foreign currencies. The Fund may engage in foreign currency
transactions to protect itself against fluctuations in currency exchange rates
in relation to the U.S. dollar or to the weighting of a particular foreign
currency on the MSCI EAFE Index. Such foreign currency transactions may include
forward foreign currency contracts, foreign exchange futures contracts, and
options thereon, currency exchange transactions on a spot (i.e., cash) basis,
and put and call options on foreign currencies. Up to 10% of the Fund's assets
may be invested in the securities of other investment companies. The Fund may
sell (write) call and put options. The Fund may utilize stock index futures
contracts and options thereon for hedging purposes and also for investment
purposes. For instance, the Fund may invest in stock index futures contracts and
related options as an alternative to purchasing individual stocks to adjust its
exposure to a particular foreign market. See "Investment Strategies and Risk
Considerations - Derivative Instruments - Futures Contracts and Related
Options." The Fund may also engage in equity index swap transactions.

<PAGE>

Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
companies. For a discussion of such risks, see "Investment Strategies and Risk
Considerations - Foreign Securities."

General

Each Fund will invest primarily (normally at least 65% of its assets)
in common stock. Each Fund may maintain a portion of its assets, which will
usually not exceed 10%, in U.S. Government securities, high quality debt
securities (whose maturity or remaining maturity will not exceed five years),
money market obligations, and in cash to provide for payment of the Fund's
expenses and to meet redemption requests. It is the policy of the Funds to be as
fully invested in common stocks as practicable at all times. This policy
precludes the Funds from investing in debt securities as a defensive investment
posture (although the Funds may invest in such securities to provide for payment
of expenses and to meet redemption requests). Accordingly, investors in the
Funds bear the risk of general declines in stock prices and the risk that a
Fund's exposure to such declines cannot be lessened by investment in debt
securities. The Funds may also invest in World Equity Benchmark Shares ("WEBS")
and Optimised Portfolios as Listed Securities ("OPALS"), convertible securities,
preferred stock, and warrants, subject to certain limitations.

Each Fund may temporarily not be invested primarily in equity
securities immediately following the commencement of operations or after receipt
of significant new monies. While attempting to identify suitable investments,
the Funds may hold assets in cash, short-term U.S. Government securities, and
other money market instruments. Each Fund may temporarily not contain the number
of securities in which the Fund normally invests if the Fund does not have
sufficient assets to be fully invested, or pending the Investment Adviser's
ability to prudently invest new monies.

Each Fund may also lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements; purchase and sell securities on a
when-issued or delayed delivery basis; and enter into forward commitments to
purchase securities. Each Fund may invest in American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs"). Each Fund may invest a portion of its assets in debt securities and
money market obligations issued by U.S. and foreign issuers that are either U.S.
dollar-denominated or denominated in foreign currency. For more information on
these and other investment practices, see "Investment Strategies and Risk
Considerations" in this Prospectus and "Investment Objectives and Policies" in
the Statement of Additional Information.

Special Considerations

An investor should be aware that investment in small capitalization
issuers carries more risk than issuers with market capitalization greater than
$1 billion. Generally, small companies rely on limited product lines, financial
resources, and business activities that may make them more susceptible to
setbacks or downturns. In addition, the stock of such companies may be more
thinly traded. As a result, in order to sell this type of security the Fund may
need to dispose of such securities over a long period and accordingly, the
performance of small capitalization issuers may be more volatile.

Please refer to the policies and risk disclosures, as well as the other
specified practices below with respect to the Fund in "INVESTMENT STRATEGIES AND
RISK CONSIDERATIONS."

INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

In General

Shareowners should understand that all investments involve risk and
there can be no guarantee against loss resulting from an investment in the
Funds, nor can there be any assurance that the Funds' investment objectives will
be attained. Unless otherwise indicated, all percentage limitations governing
the investments of the Funds 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 represented by such investment which
results from a relative change in values or from a change in a Fund's total
assets will not be considered a violation.

<PAGE>

Money Market Securities

Each Fund may invest in money market securities, including bank
obligations and commercial paper. 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.

Domestic and foreign banks are subject to extensive but different
government regulations that 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 Adviser believes that the credit risk with respect to the investment
is minimal.

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

Each Fund 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
assets, except that each Fund may mortgage, pledge, or hypothecate assets 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.
A Fund will not purchase securities while its borrowings (including reverse
repurchase agreements) exceed 5% of its total assets. A Fund may borrow money as
a temporary measure for extraordinary purposes or to facilitate redemptions.
Neither Fund will borrow money in excess of 25% of the value 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%, a Fund shall, within three days thereafter (not including
Sundays or holidays) or such longer period as the 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%.

<PAGE>

Illiquid Securities

Each Fund may invest up to 15% of its respective net assets in
securities that 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 Securities Act of 1933
(the "1933 Act").

Repurchase Agreements

Each Fund 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 the 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.

Reverse Repurchase Agreements

Each Fund may enter into reverse repurchase agreements with banks and
broker-dealers. Reverse repurchase agreements involve sales by the Fund of
portfolio assets concurrently with an agreement by that Fund to repurchase the
same assets at a later date at a fixed price. During the reverse repurchase
agreement period, a Fund continues to receive principal and interest payments on
these securities. During the time a reverse repurchase agreement is outstanding,
a Fund will maintain a segregated custodial account consisting of cash or liquid
securities having a value at least equal to the resale price. Reverse repurchase
agreements are considered to be borrowings by a Fund, and as such are subject to
the investment limitations discussed above under the sub-section titled
"Borrowing."

Rule 144A Securities

Each Fund 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 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 the Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities.

Securities Lending

Each Fund may seek additional income from time to time by lending its
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. Each Fund will not 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. The Investment Adviser will monitor
creditworthiness on an ongoing basis.

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Securities of Other Investment Companies

Each Fund may invest in securities issued by other investment companies
such as closed-end management investment companies, or in pooled accounts or
other investment vehicles that invest in foreign markets. As a shareowner of
another investment company, a Fund would bear, along with other shareowners, its
pro rata portion of 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.

Short-Term Trading

Each Fund 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 the Fund believes to be a
temporary disparity in the normal yield relationship between the two securities.
Such trading may be expected to increase the Fund's portfolio turnover rate and
the expenses incurred in connection with such trading.

Foreign Securities

The Funds may invest directly in foreign equity securities; U.S. dollar
or foreign currency-denominated foreign corporate debt securities; foreign
preferred securities; certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks; obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies and
supranational entities; and securities represented by ADRs, EDRs, or GDRs. ADRs
are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States and
also trade in public or private markets in other countries.

The Funds may invest in WEBS and OPALS. These investment vehicles
create optimised baskets of ordinary shares that seek to provide investment
returns that track the performance of each relevant index. WEBS have been
designed by a group involving Morgan Stanley, BZW Barclays and others, whereas
OPALS have been designed exclusively by Morgan Stanley. WEBS are issued by
Foreign Fund Inc., an open-ended investment company registered under the 1940
Act. Purchasers of WEBS become equity owners in the Foreign Fund. OPALS have a
hybrid structure. They have debt characteristics such as fixed redemption and
semi-annual interest payments, but performance is equity-driven. Both WEBS and
OPALS offer an efficient way to gain access to foreign markets. Their use would
primarily be to facilitate asset allocation switches and to overcome
difficulties in markets with structural peculiarities.

Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in U.S.
companies. Shareholders should consider carefully the substantial risks involved
in investing in securities issued by companies and governments of foreign
nations. These risks include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of nationalization, expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations (which
may include suspension of the ability to transfer currency from a country); and
political instability which could affect U.S. investments in foreign countries.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency, and balance of payments
position. The securities markets, values of securities, yields, and risks
associated with securities markets may change independently of each other.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar.

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A Fund's investments in foreign currency denominated debt obligations
and hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's income
distributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.

Alleghany/Blairlogie Emerging Markets Fund (up to 100% of its assets)
and Alleghany/Blairlogie International Developed Fund (up to 15% of its assets)
may invest in the securities of issuers based in countries with developing
economies. Investing in developing (or "emerging market") countries involves
certain risks not typically associated with investing in U.S. securities, and
imposes risks greater than, or in addition to, risks of investing in foreign,
developed countries. A number of emerging market countries restrict, to varying
degrees, foreign investment in securities. Repatriation of investment income,
capital, and the proceeds of sales by foreign investors may require governmental
registration and/or approval in some emerging market countries. A number of the
currencies of emerging market countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent to
investments in these currencies by a Fund. Inflation and rapid fluctuations in
inflation rates have had, and may continue to have, negative effects on the
economies and securities markets of certain emerging market countries. Many of
the emerging securities markets are relatively small, have low trading volumes,
suffer periods of relative illiquidity, and are characterized by significant
price volatility. There is a risk in emerging market countries that a future
economic or political crisis could lead to price controls, forced mergers of
companies, expropriation or confiscatory taxation, seizure, nationalization, or
creation of government monopolies, any of which may have a detrimental effect on
a Fund's investment.

Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and significantly smaller market capitalization of securities markets.
Also, any change in the leadership or politics of emerging market countries, or
the countries that exercise a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and adversely affect existing investment opportunities.

In addition, emerging securities markets may have different clearance
and settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment, or delay
in disposing of a portfolio security. Such a delay could result in possible
liability to a purchaser of the security.

Foreign Currency Transactions

Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention (or the failure to
intervene) by U.S. or foreign governments or central banks, or by currency
controls or political developments in the U.S. or abroad. For example,
significant uncertainty surrounds the proposed introduction of the euro (a
common currency unit for the European Union) in January 1999 and its effect on
the value of securities denominated in local European currencies. These and
other currencies in which the Funds' assets are denominated may be devalued
against the U.S. dollar, resulting in a loss to the Funds.

The Funds may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, the
Funds may buy and sell foreign currency futures contracts and option on foreign
currencies and foreign currency futures. The Funds may enter into forward
foreign currencies and foreign currency futures. The Fund may enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. By entering into a forward
foreign currency exchange contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes in
the value of the currency it will deliver and increases its exposure to changes
in the value of the currency it will exchange into. The effect on the value of a
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another. Contracts to sell foreign currency would
limit any potential gain that might be realized by a Fund if the value of the
hedged currency increases. A Fund may enter into these contracts for the purpose
of hedging against foreign exchange risk arising from the Fund's investment or
anticipated investment in securities denominated in foreign currencies. Such
hedging transactions may not be successful and may eliminate any chance for a
Fund to benefit from favorable fluctuations in relevant foreign currencies. The
Funds also may enter into these contracts for purposes of increasing exposure to
a foreign currency or to shift exposure to foreign currency fluctuations from
one country to another. To the extent that they do so, the Funds will be subject
to the additional risks that the relative value of currencies will be different
than anticipated by the Funds' Investment Adviser. The Funds may use one
currency (or a basket of currencies) to hedge against adverse changes in the
value of another currency (or a basket of currencies) when exchange rates
between the two currencies are positively correlated. Each Fund will segregate
assets determined to be liquid by the Investment Adviser in accordance with
procedures established by the Board of Trustees in a segregated account to cover
its obligations under forward foreign currency exchange contracts entered into
for non-hedging purposes.

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.

A Fund 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 the 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 a 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.

1. Options:

Each Fund may engage in options, including those described below.

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
Funds' total assets. A Fund will only sell or write calls options on a covered
basis (e.g. on securities it holds in its portfolio).

<PAGE>

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 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.

Each Fund may buy or sell put and call options on foreign currencies as
a hedge against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which a Fund's securities may be denominated.
Currency options traded on U.S. or other exchanges may be subject to position
limits, which may limit the ability of a Fund to reduce foreign currency risk
using such options.

Over-the-counter options in which the Funds may invest differ from
traded options in that they are two-party contracts, with price and other terms
negotiated between buyer and seller, and generally do not have as much market
liquidity as exchange-traded options. The Funds may be required to treat as
illiquid over-the-counter options purchased and securities being used to cover
certain written over-the-counter options.

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. Please see "General Risk Factors" below and refer to the
Statement of Additional Information for a more detailed discussion of the
applicable risk considerations.

2. Forward Commitments, When-Issued Securities, and Delayed-Delivery
Transactions:

Each 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 deems it appropriate to do so.
Please see "General Risk Factors" below and refer to the Statement of Additional
Information for a more detailed discussion of the applicable risk
considerations.

3. Futures Contracts and Related Options:

Each 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 the 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 a 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 the 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. Please see "General Risk Factors" below and refer to the Statement
of Additional Information for a more detailed discussion of the applicable risk
considerations.

Each Fund may purchase and sell futures contracts on various securities
indexes ("Index Futures") and related options for hedging purposes and for
investment purposes. A Fund's purchase and sale of Index Futures is limited to
contracts and exchanges which have been approved by the Commodity Futures
Trading Commission ("CFTC").

Each Fund may invest to a significant degree in Index Futures on stock
indexes and related options (including those which may trade outside of the
United States) as an alternative to purchasing individual stocks in order to
adjust the Fund's exposure to a particular market. The Funds may invest in Index
Futures and related options when the Investment Adviser believes that there are
not enough attractive securities available to maintain the standards of
diversification and liquidity set for a Fund pending investment in such
securities if or when they do become available. Through the use of Index Futures
and related options, a Fund may diversify risk in its portfolio without
incurring the substantial brokerage costs, which may be associated with
investment in the securities of multiple issuers. A Fund may also avoid
potential market and liquidity problems that may result from increases in
positions already held by the Fund.

A Fund may close open positions on the futures exchanges on which Index
Futures are traded at any time up to and including the expiration day. All
positions which remain open at the close of the last business day of the
contract's life are required to settle on the next business day (based upon the
value of the relevant index on the expiration day), with settlement made with
the appropriate clearing house. Because the specific procedures for trading
foreign stock Index Futures on futures exchanges are still under development,
additional or different margin requirements as well as settlement procedures may
be applicable to foreign stock Index Futures at the time a Fund purchases such
instruments.

Positions in Index Futures may be closed out by a Fund only on the
futures exchanges upon which the Index Futures are then traded. There can be no
assurance that a liquid market will exist for any particular contract at any
particular time. Also, the price of Index Futures may not correlate perfectly
with movement in the relevant index due to certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions that could distort the normal relationship between the index and
futures markets. Second, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market, and as a result, the
futures market may attract more speculators than does the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions. In addition, trading hours for foreign stock Index
Futures may not correspond perfectly to hours of trading on the foreign exchange
to which a particular foreign stock Index Futures relates. This may result in a
disparity between the price of Index Futures and the value of the relevant index
due to the lack of continuous arbitrage between the Index Futures price and the
value of the underlying index.

<PAGE>

The Funds will only enter into futures contracts or futures options
that are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. Each Fund
will use futures contracts and related options for "bona fide hedging" purposes,
as such term is defined in applicable regulations of the CFTC, or, with respect
to positions in futures and related options that do not qualify as "bona fide
hedging" positions, will enter such positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money," would
not exceed 5% of the Fund's net assets.

4. Equity Index Swaps:

Each Fund may enter into equity index swap agreements for purposes of
gaining exposure to the stocks making up an index of securities without actually
purchasing those stocks. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a few weeks to
more than one year. In a standard swap transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted for
an interest factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," i.e., the
return on or increase in value of a particular dollar amount invested at a
particular interest rate, or in a "basket" of securities representing a
particular index.

Most swap agreements entered into by the Funds calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Fund), and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of assets determined to be liquid
by the Investment Adviser in accordance with procedures established by the Board
of Trustees to limit any potential leveraging of the Fund's portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of the Fund's investment restriction concerning senior
securities. A Fund will not enter into a swap agreement with any single party if
the net amount owed or to be received under existing contracts with that party
would exceed 5% of the Fund's assets.

Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Investment Adviser's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid investments. Moreover, a Fund bears
the risk of loss of the amount expected to be received under a swap agreement in
the event of the default or bankruptcy of a swap agreement counterparty. The
Funds will enter into swap agreements only with counterparties that meet certain
standards for creditworthiness (generally, such counterparties would have to be
eligible counterparties under the terms of the Funds' repurchase agreement
guidelines). Certain restrictions imposed on the Funds by the Internal Revenue
Code may limit the Funds' ability to use swap agreements. The swaps market is a
relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Fund's ability to terminate existing swap agreements or
to realize amounts to be received under such agreements.

General Risk Factors

1. Options, Futures and Forward Contracts:

Each Fund may engage in such investment practices. The primary risks
associated with the use of futures contracts and options are: (i) imperfect
correlation between the change in market value of the securities held by a Fund
and the price of futures contracts and options; (ii) possible lack of a liquid
secondary market for a futures contract and the resulting inability to close a
futures contract when desired; (iii) losses, which are potentially unlimited,
due to unanticipated market movements; and (iv) the Investment Adviser's
inability to predict correctly the direction of security prices, interest rates
and other economic factors. For a further discussion, see "INVESTMENT POLICIES
AND RISK CONSIDERATIONS" in the Statement of Additional Information.

<PAGE>

2. Fixed Income Investing

Each Fund may engage in limited fixed income investment practices.
There are two principal types of risks associated with investing in debt
securities: (1) market (or interest rate) risk and (2) credit risk.

Market risk relates to the change in market value caused by
fluctuations in prevailing rates, while credit risk relates to the ability of
the issuer to make timely interest payments and to repay the principal upon
maturity. The value of debt securities will normally increase in periods of
falling interest rates; conversely, the value of these instruments will normally
decline in periods of rising interest rates.

In an effort to obtain maximum income consistent with its investment
objective, each Fund may, at times, change the average maturity of its
investment portfolio, consistent with a three- to ten-year weighted average
maturity range, by investing a larger portion of its assets in relatively
longer-term obligations when periods of declining interest rates are anticipated
and, conversely, emphasizing shorter- and intermediate-term maturities when a
rise in interest rates is indicated.

Credit risk refers to the possibility that a bond issuer will fail to
make timely payments of interest or principal. The ability of an issuer to make
such payments could be affected by general conditions, litigation, legislation
or other events including the bankruptcy of the issuer. For a further
discussion, see "INVESTMENT POLICIES AND RISK CONSIDERATIONS" in the Statement
of Additional Information.

MANAGEMENT OF THE FUNDS

The Board of Trustees

Under Delaware law, the business and affairs of the Company are managed
under the direction of the Board of Trustees. The Statement of Additional
Information contains the name of each Trustee and background information
regarding the Trustees.

Blairlogie Capital Management

The Investment Adviser for the Funds is Blairlogie Capital Management
("Blairlogie"), located at 125 Princes Street, Edinburgh EH2 4AD, Scotland.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organisation in the United
Kingdom. Blairlogie Capital Management Ltd. commenced operations in 1992 and
changed its name to Blairlogie Capital Management in 1994. Blairlogie is
currently an indirect subsidiary of the Alleghany Corporation. Alleghany
Corporation is engaged through its subsidiaries in the business of title
insurance, reinsurance, other financial services and industrial minerals and is
located at Park Avenue Plaza, New York, New York 10055.

Pursuant to an Investment Advisory Agreement with the Company,
Blairlogie provides an investment program for each Fund in accordance with their
respective investment policies, limitations and restrictions, and Chicago Trust
furnishes executive, administrative and clerical services required for the
transaction of each Fund's business.

For providing investment advisory services, each Fund has agreed to pay
a monthly fee at the following rates based on each Fund's average daily net
assets. Effective on the date of this Prospectus, Alleghany/Blairlogie Emerging
Markets Fund's fee is 0.85% and Alleghany/Blairlogie International Developed
Fund's fee is 0.85%.

Blairlogie has voluntarily undertaken to reduce its advisory fee for
Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund for operating expenses (as defined previously) in
excess of 1.60% and 1.35%, respectively. Such waivers may be terminated at the
discretion of Blairlogie.

<PAGE>

PORTFOLIO MANAGEMENT METHODS

Investment Management Team

James Smith is primarily responsible for the day-to-day management of
each Fund. Mr. Smith is a Managing Director and the Chief Investment Officer of
Blairlogie and is responsible for managing an investment team of country
analysts who, in turn, specialize in selection of stocks within Europe, Asia,
and the Americas, and in currency and derivatives. He previously served as a
Senior Portfolio Manager at Murray Johnstone in Glasgow, Scotland, responsible
for international investment management for North American clients, and at
Schroder Investment Management in London. Mr. Smith received his bachelor's
degree in Economics from London University and his MBA from Edinburgh
University. He is an Associate of the Institute of Investment Management and
Research.

Blairlogie Capital Management

Blairlogie's philosophy has always been that the international markets,
whether developed or emerging, can be analyzed from a base of measurable,
numerical data. They have developed a country model that covers a broad-based
collection of current and historical data. Their quantitative analysis is
enhanced with significant qualitative assessments to evaluate things a model
cannot review. Blairlogie continuously strives for the optimum combination of
quantitative and judgmental inputs but believe that objective, measurable facts
must always be the starting point for making sound investment decisions. Their
specific investment style is based upon an underlying objective of producing
premium returns above the benchmark consistently in any market environment while
consciously controlling risk and limiting volatility. The major components of
Blairlogie's investment style are summarized below:

top-down country allocation followed by bottom-up stock selection;

active management with a focus on consistent value-added broad
diversification in international markets portfolios by country and stock;

performance objective designed to consistently outperform their
benchmark, which through time should facilitate investment success
over competitors; and

advanced technology used to enhance portfolio management and maintain
efficient administration

ADMINISTRATION OF THE FUNDS

The Administrator and Sub-Administrator

Chicago Trust (the "Administrator") acts as the Company's Administrator
pursuant to an Administration Agreement with the Company. For services provided
as Administrator, Chicago Trust receives a fee at the annual rate of: 0.060% of
the first $2 billion of the Company's average daily net aggregate assets; 0.045%
of the Company's average daily net assets between $2 billion and $3.5 billion
and 0.040% of the Company's average daily net assets in excess of $3.5 billion.
Chicago Trust also receives a custody liaison fee equal to an annual fee per
Fund of $10,000 for average daily net assets up to $100 million, $15,000 for
average daily net assets between $100 million and $500 million, and $20,000 for
average daily net assets in excess of $500 million.

Pursuant to a Sub-Administration Agreement, First Data Investor
Services Group, Inc. (the "Sub-Administrator"), 53 State Street, Boston,
Massachusetts 02109, acts as Sub-Administrator and receives a fee from the
Administrator equal to that received by the Administrator as set out above. The
Sub-Administrator also receives a custody liaison fee from Chicago Trust equal
to that received by the Administrator as set out above.

The services provided to the Funds under these Agreements include:
coordinating and monitoring of any third parties furnishing services to the
Funds; providing the necessary office space, equipment and personnel to perform
administrative and clerical functions for the Funds; preparing, filing and
distributing proxy materials, periodic reports to shareowners, registration
statements and other documents; and responding to shareowner inquiries.

<PAGE>

The Sub-Administrator also performs certain accounting and pricing
services for the Funds, including the daily calculation of the Funds' respective
net asset values.

The Transfer Agent

First Data Investor Services Group, Inc. (the "Transfer Agent"), 4400
Computer Drive, Westborough, Massachusetts 01581, performs the following duties
in its capacity as Transfer Agent to each Fund: maintains the records of each
shareowner's account; answers shareowner inquiries concerning accounts;
processes purchases and redemptions of Fund shares; acts as dividend and
distribution disbursing agent; and performs other shareowner service functions.
Shareowner inquiries should be addressed to the Transfer Agent at (800)
992-8151.

The Distributor

First Data Distributors, Inc. (the "Distributor"), 4400 Computer
Drive, Westborough, Massachusetts 01581, is the principal underwriter and
distributor of the Funds pursuant to a distribution agreement with the Funds.

The Custodian

Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas
City, MO 64105, is Custodian for the cash and securities of each Fund.

Expenses

Expenses attributable to the Company, but not to a particular Fund,
will be allocated to each Fund thereof 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 thereof 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 among 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.

PURCHASE OF SHARES

In General

Shares of each Fund may be purchased directly from the Fund at the net
asset value next determined after receipt of the order in proper form. Shares of
the Funds may be purchased through broker-dealers, banks and trust departments
that may charge the investor a transaction fee or other fee for their services
at time of purchase. Such fees would not otherwise be charged if the shares were
purchased directly from the Funds.

<PAGE>

The minimum initial investment for regular accounts (other than IRAs
and UGMAs) is $2,500 for each Fund, and the minimum subsequent investment is
$50, except for accounts opened through a fund network. In such case, the
minimums of the fund network will apply. The minimum initial investment for IRAs
and UGMAs is $500, and the minimum subsequent investment for IRAs and UGMAs is
$50. The minimum initial and subsequent investment for those enrolled in the
Automatic Investment Plan is $50. 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 any Fund. Each Fund also
reserves the right to vary the initial and additional investment minimums, or to
waive the minimum investment requirements for any investor.

Purchase orders for shares of a Fund which are received by the Transfer
Agent or an authorized broker or its designee in proper form, including money
order, check or bank draft by the regular closing time of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m. Eastern time) will be purchased at such
Fund's net asset value determined that day. If you invest by check, or
non-federal funds wire, allow one business day after receipt for conversion into
federal funds. Checks must be made payable to "Alleghany Funds." If you wire
money in the form of federal funds, your money will be invested at the share
price next determined after receipt of the wire. Orders for shares received in
proper form after 4:00 p.m. will be priced at the net asset value determined on
the next day that the NYSE is open for trading.

The Funds offer two classes of shares. Only Class N shares may be
purchased under this Prospectus. Class I shares are available for purchase by
shareowners investing $1 million or more in the Funds and clients of certain
financial consultants which have agreements with the Funds.

Each Fund may accept orders by telephone from broker-dealers or service
organizations that have been previously approved by a Fund. It is the
responsibility of such broker-dealers or service organizations or their
authorized designees to promptly forward purchase orders and payments for same
to the Company.

Purchases may be made in one of the following ways:

Initial Purchases by Mail

Shares of each Fund may be purchased initially by completing an
application and mailing it to the Transfer Agent, together with a check payable
to "Alleghany Funds", c/o First Data Investor Services Group, Inc., P.O. Box
5164, Westborough, Massachusetts 01581. The Funds will not accept third party
checks for the purchase of shares. Third party checks are those that are made
out to someone other than a Fund and are endorsed over to the Fund.

Initial Purchases by Wire

An investor desiring to purchase shares of a Fund by wire should call
the Transfer Agent first at (800) 992-8151 and request an account number and
furnish the Fund with your tax identification number. Following such
notification to the Transfer Agent, federal funds and registration instructions
should be wired through the Federal Reserve System to:

BOSTON SAFE DEPOSIT & TRUST
ABA # 011001234
FOR: Alleghany Funds
A/C 140414
FBO "FUND NUMBER"
"SHAREOWNER ACCOUNT NUMBER"

A completed application with original signature(s) of registrant(s)
must be filed with the Transfer Agent immediately subsequent to the initial
wire. Investors should be aware that some banks might impose a wire service fee.

<PAGE>

Initial Purchases by Internet

An investor desiring to purchase shares of a Fund by Internet should
(i) verify first that the bank or credit union being used is a member of the
Automated Clearing House (ACH) system; (ii) complete the "Purchase, Exchange and
Redemption Authorization" section of the account application; (iii) call the
Transfer Agent at (800) 992-8151 to obtain a personal identification number
(PIN) from Alleghany Funds for use on Alleghany Funds' Web site. Once these
steps have been taken, an investor can access the account through the Alleghany
Funds' Web Site and enter the purchase instructions in the highly secure area
for shareowners only.

The Trust reserves the right to suspend or terminate purchases by
telephone or Internet, thereby only allowing purchases by mail.

Subsequent Investments

Once an account has been opened, subsequent purchases in the minimum
amounts may be made by mail, bank wire, exchange or by telephone. When making
additional investments by mail, simply return the investment slip from a
previous confirmation or statement with your investment in the envelope
provided. Your check must be made payable to "Alleghany Funds" and mailed to the
Alleghany Funds, P.O. Box 5163, Westborough, Massachusetts 01581. The Funds will
not accept third party checks for the subsequent purchase of shares.

All investments must be made in U.S. dollars, and, to avoid fees and
delays, checks must be drawn only on banks located in the U.S. In order to help
ensure the receipt of good funds, the Company reserves the right to delay
sending your redemption proceeds up to 15 days if you purchased shares by check.
A charge ($20 minimum) will be imposed if any check used for the purchase of
shares is returned. The Funds and the Transfer Agent reserve the right to reject
any purchase order in whole or in part.

EXCHANGE OF SHARES

In General

Shares of any of the Funds within the Company may be exchanged for shares
of the same class of any of the other Funds within the Company. The Company
currently offers Class N shares of the following Funds: Alleghany/Chicago Trust
Small Cap Value Fund, Alleghany/Veredus Aggressive Growth Fund, Montag &
Caldwell Growth Fund, Chicago Trust Growth & Income Fund, Chicago Trust Talon
Fund, Chicago Trust Balanced Fund, Montag & Caldwell Balanced Fund, Chicago
Trust Bond Fund, Chicago Trust Municipal Bond Fund, Chicago Trust Money Market
Fund, Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund.

The exchange privilege is a convenient way to respond to changes in
your investment goals or in market conditions. This privilege is not designed
for frequent trading in response to short-term market fluctuations. You may make
exchanges by mail or by telephone if you have previously elected the telephone
authorization privilege on the application form. The telephone exchange
privilege may be difficult to implement during times of drastic economic or
market changes. The purchase of shares of any Fund through an exchange
transaction is accepted at the net asset value next determined. You should keep
in mind that for tax purposes, an exchange is treated as a redemption and a new
purchase, each at net asset value of the appropriate Fund. The Funds and the
Transfer Agent reserve the right to limit, amend, impose charges upon, terminate
or otherwise modify the exchange privilege on prior written notice to
shareowners.

Exchanges may be made only for shares of a Fund then offering its
shares for sale in your state of residence and are subject to the minimum
initial investment requirement. Requests for telephone exchanges must be
received by the Transfer Agent by the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern time) on any day that the NYSE is open for regular
trading.

<PAGE>

REDEMPTION OF SHARES

In General

Shares of each Fund may be redeemed without charge on any business day
that the NYSE is open for business. Redemptions will be effective at the net
asset value per share next determined after the receipt by the Transfer Agent or
an authorized broker or its designee of a redemption request meeting the
requirements described below. Each Fund normally sends redemption proceeds on
the next business day, but in any event redemption proceeds are sent within
seven calendar days of receipt of a redemption request in proper form. However,
your redemption proceeds may be delayed up to 15 days if you purchased the
shares to be redeemed by check until such check has cleared. Payment may also be
made by wire directly to any bank previously designated by the shareowner in a
shareowner account application. A shareowner will be charged $20 for redemptions
by wire. Also, please note that the shareowner's bank may impose a fee for this
wire service.

If your account is an Individual Retirement Account (IRA), your
redemption request must be submitted in writing. Please call a customer service
representative at (800-992-8151) to request an IRA Distribution Request form or
for further information.

Except as noted below, redemption requests received in proper form by
the Transfer Agent or an authorized broker or its designee prior to the close of
regular trading hours on the NYSE on any business day that the Fund calculates
its per share net asset value are effective that day.

Redemption requests received after the close of the NYSE are effective
as of the time the net asset value per share is next determined. No redemption
will be processed until the Transfer Agent has received a completed application
with respect to the account.

The Funds will satisfy redemption requests in cash to the fullest
extent feasible, so long as such payments would not, in the opinion of the Board
of Trustees, result in the necessity of a Fund selling assets under
disadvantageous conditions or to the detriment of the remaining shareowners of
the Fund. Pursuant to the Company's Trust Instrument, payment for shares
redeemed may be made either in cash or in-kind, or partly in cash and partly
in-kind. However, the Company may elect pursuant to Rule 18f-1 under the 1940
Act to redeem its shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund, during any ninety-day period for any one
shareowner. Payments in excess of this limit by a Fund will also be made wholly
in cash unless the Board of Trustees believes that economic conditions exist
which would make such a practice detrimental to the best interests of any such
Fund. Any portfolio securities paid or distributed in-kind would be valued as
described under `'NET ASSET VALUE." In the event that an in-kind distribution is
made, a shareowner may incur additional expenses, such as the payment of
brokerage commissions, on the sale or other disposition of the securities
received from a Fund. In-kind payments need not constitute a cross-section of
the Fund's portfolio.

Minimum Balances

Due to the relatively high cost of maintaining smaller accounts, the
Funds reserve the right to involuntarily redeem shares in any account for its
then current net asset value (which will be promptly paid to the shareowner) if
at any time the total investment does not have a value of at least $50. The
shareowner will be notified that the value of his or her account is less than
the required minimum and will be allowed at least sixty days to bring the value
of the account up to the minimum before the redemption is processed.

Shares may be redeemed in one of the following ways:

Redemptions by Mail

Shareowners may submit a written request for redemption to: Alleghany
Funds, P.O. Box 5164, Westborough, Massachusetts 01581. The request must be in
good order which means that it must: (I) identify the shareowner's account name
and account number; (ii) state the fund name, (iii) state the number of shares
to be redeemed; and (iv) be signed by each registered owner exactly as the
shares are registered.

<PAGE>

To prevent fraudulent redemptions, a signature guarantee for the
signature of each person in whose name the account is registered is required on
all written redemption requests over $50,000. A guarantee may be obtained from
any commercial bank, trust company, savings and loan association, federal
savings bank, a member firm of a national securities exchange or other eligible
financial institution. Credit unions must be authorized to issue signature
guarantees; notary public endorsements will not be accepted. The Transfer Agent
may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees, guardians, and retirement
plans.

A redemption request will not be deemed to be properly received until the
Transfer Agent receives all required documents in proper form. Questions with
respect to the proper form for redemption requests should be directed to the
Transfer Agent at (800) 992-8151.

Redemptions by Telephone

Shareowners who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by instructing the
Transfer Agent by telephone at (800) 992-8151.

In order to arrange for redemption by wire or telephone after an
account has been opened, or to change the bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent at the
address listed under `'Redemptions by Mail" above. Such requests must be signed
by the shareowner, with signatures guaranteed (see `'Redemptions by Mail" for
details regarding signature guarantees). Further documentation may be requested
from corporations, executors, administrators, trustees, or guardians.

The Funds reserve the right to refuse a wire or telephone redemption if
it is believed advisable to do so. Procedures for redeeming Fund shares by wire
or telephone may be modified or terminated at any time by any of the Funds.
Neither the Funds nor any of their service contractors will be liable for any
loss or expense in acting upon telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, the Funds will use such procedures as are considered reasonable,
including requesting a shareowner to correctly state his or her Fund account
number, the name in which his or her account is registered, his or her social
security number, banking institution, bank account number, and the name in which
his or her bank account is registered.

Shares of the Funds may be redeemed through certain broker-dealers, banks
and bank trust departments who may charge the investor a transaction fee or
other fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed from the Company.

Redemptions by Internet

Shareowners who have so indicated on the application may redeem shares
by Internet by calling the Transfer Agent at (800) 992-8151 to obtain a personal
identification number (PIN) from Alleghany Funds for use on Alleghany Funds' Web
site. Once these steps have been taken, an investor can access the account
through the Alleghany Funds' Web Site and enter the redemption instructions in
the highly secure area for shareowners only.

A check for redemption proceeds can be mailed or can be sent directly
to your bank account provided the bank or credit union being used is a member of
the Automated Clearing House (ACH) system. The ACH sales proceeds will be sent
on the next business day (allow 3 days to be received by bank). There is no fee
to sell shares by ACH.

The Trust reserves the right to suspend or terminate redemptions by
telephone or Internet, thereby only allowing redemptions by mail.

<PAGE>

ACCOUNT OPTIONS

In General

The following special services are available to shareowners. There are
no charges for the programs noted below and an investor may change or stop these
plans at any time by written notice to the Funds.

Automatic Investment Plan

This service allows you to make regular investments once your account
is established. You simply authorize the automatic withdrawal of funds from your
bank account into the Fund of your choice. The minimum initial and subsequent
investment pursuant to this plan is $50 per month. Your initial account must be
established prior to participating in this plan. Please complete the appropriate
section on a new account application.

Systematic Withdrawal Program

The Funds offer a Systematic Withdrawal Program as another option which
may be utilized by an investor who wishes to withdraw funds from his or her
account on a regular basis. To participate in this option, an investor must
either own or purchase shares having a value of $50,000 or more. Automatic
payments by check will be mailed to the investor on either a monthly, quarterly,
semi-annual, or annual basis in amounts of $50 or more. All withdrawals are
processed on the 25th of the month or, if such day is not a business day, on the
next business day and paid promptly thereafter.

Individual Retirement Accounts

An Individual Retirement Account (IRA) is a custodial account created
for the exclusive benefit of you and your beneficiaries. There are many types of
IRAs available including Individual, Spousal, Rollover, SEP-IRA, SIMPLE-IRA,
Roth-Contributory and Roth-Conversion.

The annual maintenance fee for an IRA is $15.00 per year. This fee will
be paid through an automatic liquidation of shares from your account each
December. You may choose to pay this fee prior to December by sending in a
check. Shareowners with a cumulative balance greater than or equal to $50,000
will have IRA fees waived.

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 that 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 reimburse the Distributor for actual
expenses not exceeding, on an annual basis, 0.25% of a Fund's average daily net
assets.

The Plan authorizes a Fund to compensate the Distributor for the
following: (1) services rendered by the Distributor pursuant to the Distribution
Agreement between the Company and the Distributor; (2) payments the Distributor
makes to financial institutions and industry professionals, such as insurance
companies, investment counselors, accountants, estate planning firms and
broker-dealers, including affiliates and subsidiaries of the Distributor
(collectively, "Participating Organizations"), in consideration for distribution
services provided or expenses assumed in connection with distribution
assistance, market research, and promotional services, including, but not
limited to, printing and distributing prospectuses to persons other than current
shareowners of a Fund, printing and distributing advertising and sales
literature and reports to shareowners and prospective shareowners used in
connection with the sale of a Fund's shares, and personnel and communication
equipment used in servicing shareowner accounts and prospective shareowner
inquiries; and (3) payments the Distributor makes to Participating Organizations
pursuant to an agreement to provide administrative support services to the
holders of a Fund's shares. Participating Organizations that are compensated for
distribution services may be required to register as dealers in certain
jurisdictions.

<PAGE>

Payments for market research and promotional services may be based in
whole or in part on a percentage of the regular salary expense for those
employees of Participating Organizations engaged in marketing research and
promotional services specifically relating to the distribution of Fund shares
based on the amount of time devoted by such employees to such activities, and
any out-of-pocket expenses associated with the distribution of Fund shares.

All such payments made by a Fund pursuant to the Plan shall be made for
the purpose of selling shares issued by the Fund. Distribution expenses that are
attributable to a particular Fund will be charged against that Fund's assets.
Distribution expenses that are attributable to more than one Fund will be
allocated among the Funds in proportion to their relative net assets.

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.

Quotations of foreign securities in foreign currency are converted to
U.S. dollar equivalents using foreign exchange quotations received from
independent dealers. The calculation of the net asset value of each Fund may not
take place contemporaneously with the determination of the prices of certain
portfolio securities of foreign issuers used in such calculation. Further, under
the Company's procedures, the prices of foreign securities are determined using
information derived from pricing services and other sources. Information that
becomes known to the Company or its agents after the time that net asset value
is calculated on any Business Day may be assessed in determining net asset value
per share after the time of receipt of the information, but will not be used to
retroactively adjust the price of the security so determined earlier or on a
prior day. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE (normally 4:00 p.m., Eastern time) may not be reflected in the
calculation of net asset value. If events materially affecting the value of such
securities occur during such period, then these securities may be valued at fair
value as determined by the Investment Adviser and approved in good faith by the
Board of Trustees.

DIVIDENDS AND TAXES

Dividends

Dividends, if any, from net investment income will be declared and paid
quarterly by each Fund. Aggregate net profits realized from the sale of
portfolio securities, if any, are distributed at least once each year unless
they are used to offset losses carried forward from prior years, in which case
no such gain will be distributed.

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
ex-dividend 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 each Fund with respect to Class I shares are
calculated in the same manner and at the same time as Class N shares. Both Class
N and Class I shares of each 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 as discussed in "Expenses" under
"ADMINISTRATION OF THE FUNDS."

Taxes

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code ("the Code"). Such qualification
relieves a Fund of liability for Federal income taxes to the extent the Fund's
earnings are distributed in accordance with the Code. Each Fund is treated as a
separate corporate entity for Federal tax purposes. Distributions of any net
investment income and of any net realized short-term capital gains are taxable
to shareowners as ordinary income. Distributions of net capital gain (the excess
of net long-term capital gain over net short-term capital loss) are taxable to
shareowners as long-term capital gain regardless of how long a shareowner may
have held shares of a Fund. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareowner reinvests the
distributions or elects to receive them in cash. A distribution will be treated
as paid on December 31 of the current calendar year if it is declared in
October, November or December with a record date in such a month and paid during
January of the following calendar year. Such distributions will be taxable to
shareowners in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.

Shareowners will be advised annually of the source and tax status of
all distributions for Federal income tax purposes. Dividends and distributions
may be subject to state and local income taxes. Further information regarding
the tax consequences of investing in the Funds is included in the Statement of
Additional Information. The above discussion is intended for general information
only. Investors should consult their own tax advisors for more specific
information on the tax consequences of particular types of distributions.

Redemptions of Fund shares, and the exchange of shares between Funds of
the Company, are taxable events and, accordingly, shareowners may realize
capital gains or losses on these transactions.

Shareowners may be subject to back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Fund, or if, to the Fund's
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.

PERFORMANCE OF THE FUNDS

In General

Performance, whether it be "total return" or "average annual total
return" of a Fund, may be advertised to present or prospective shareowners. The
figures are based on historical performance and should not be considered
representative of future results. The value of an investment in a Fund will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. Performance information for a Fund may be compared to
various unmanaged indices such as the EAFE Index and the MSCI EM Free Index, and
to the performance of other mutual funds tracked by mutual fund rating services.
Further information about the performance of the Funds is included in the
Statement of Additional Information, which may be obtained without charge by
contacting the Fund at (800) 992-8151.

<PAGE>

Total Return

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.

GENERAL INFORMATION

Organization

Each Fund is a separate, diversified, series of the Company, a Delaware
business trust organized pursuant to a Trust Instrument dated September 10,
1993. The Company is registered under the 1940 Act as an open-end management
investment company, commonly known as a mutual fund. The Trustees of the Company
may establish additional series or classes of shares without the approval of
shareowners. The assets of each series belong only to that series, and the
liabilities of each series are borne solely by that series and no other.

Description of Shares

Each Fund is authorized to issue an unlimited number of shares of
beneficial interest without par value. Currently, there are two classes of
shares issued by each Fund: Class N shares which are offered by this Prospectus
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 the Funds have no rights with respect
to the Funds' 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. Class I shares are available
for purchase to shareowners that invest $1 million or more in each Fund and
clients of certain investment advisors which have agreements with the Funds.
Information about Class I shares is available by calling the Funds at (800)
992-8151.

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 or class 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 class, in
which case the shareowners of all such classes 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.

<PAGE>

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.

Portfolio Transactions and Brokerage Commissions

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
the Investment Adviser 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 that have sold shares of
that Fund. Any such transactions, however, will comply with Rule 17e-1 under the
1940 Act.

Shareowner Reports and Inquires

Shareowners will receive Semi-Annual Reports showing portfolio
investments and other information as of April 30 and Annual Reports audited by
independent accountants as of October 31. Shareowners with inquiries should call
the Company at (800) 992-8151 or write Alleghany Funds, P.O. Box 5164,
Westborough, Massachusetts 01581.

<PAGE>

INVESTMENT ADVISER

Blairlogie Capital Management
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland

ADMINISTRATOR

The Chicago Trust Company
171 North Clark Street
Chicago, IL 60601-3294

CUSTODIAN

Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, MO 64105

For Additional Information about Alleghany Funds, call:
(800) 992-8151

<PAGE>

PROSPECTUS

May 3, 1999

Alleghany/Blairlogie Emerging Markets Fund
Alleghany/Blairlogie International Developed Fund

(Class I Shares)

ALLEGHANY FUNDS

Blairlogie Capital Management, Investment Adviser
(800) 992-8151

<PAGE>

ALLEGHANY FUNDS

171 North Clark Street
Chicago, IL 60601
(800) 992-8151
http://www.alleghanyfunds.com

For Institutional Shareowners

Class I Shares

PROSPECTUS
May 3, 1999

ALLEGHANY FUNDS (the "Company") is a no-load, open-end management
investment company which consists of twelve separate diversified investment
series designed to offer investors a variety of investment opportunities. This
Prospectus pertains only to the Class I shares of Alleghany/Blairlogie Emerging
Markets Fund and Alleghany/Blairlogie International Developed Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has distinct investment
objectives and policies. Each Fund's Investment Adviser is Blairlogie Capital
Management ("Blairlogie" or the "Investment Adviser").

Alleghany/Blairlogie Emerging Markets Fund seeks long-term growth of
capital with investments primarily in common stocks of companies located in
emerging market countries.

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital through investment primarily in a diversified portfolio of
international equity securities.

Shares of each Fund may be purchased or redeemed without any purchase
or redemption charge imposed by the Company, although institutions may charge
their customers for services provided in connection with their investments.

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

Fund Company: Investment Adviser:
Alleghany Funds Blairlogie Capital Management

171 North Clark Street 4th Floor, 125 Princes Street
Chicago, IL 60601-3294 Edinburgh EH2 4AD, Scotland
(800) 992-8151 (800) 992-8151

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page

PROSPECTUS SUMMARY........................................................................................ 4
EXPENSE INFORMATION....................................................................................... 5
INVESTMENT OBJECTIVES AND POLICIES........................................................................ 7
Alleghany/Blairlogie Emerging Markets Fund....................................................... 7
Alleghany/Blairlogie International Developed Fund................................................ 8
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS............................................................. 9
MANAGEMENT OF THE FUNDS................................................................................... 18
PORTFOLIO MANAGEMENT METHODS.............................................................................. 18
ADMINISTRATION OF THE FUNDS............................................................................... 19
PURCHASE OF SHARES........................................................................................ 20
EXCHANGE OF SHARES........................................................................................ 22
REDEMPTION OF SHARES...................................................................................... 22
NET ASSET VALUE........................................................................................... 24
DIVIDENDS AND TAXES....................................................................................... 24
PERFORMANCE OF THE FUNDS.................................................................................. 26
GENERAL INFORMATION....................................................................................... 26
</TABLE>

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED
IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR A FUND TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS.

<PAGE>

PROSPECTUS SUMMARY

The Funds

The Company is an open-end, management investment company commonly
known as a mutual fund. The Company was established as a Delaware business trust
on September 10, 1993. The Company currently offers twelve separate series of
shares. This Prospectus offers only Class I shares of Alleghany/Blairlogie
Emerging Markets Fund and Alleghany/Blairlogie International Developed Fund.

Investment Definitions

Short-Term Instruments--"Short-term (or money market) instruments" are
generally private or Government obligations with maturities of one year or less
and may include (but are not limited to) certificates of deposit, bankers'
acceptances, corporate commercial paper, and Government obligations.

Investment Objectives of the Funds

Alleghany/Blairlogie Emerging Markets Fund seeks long-term growth of
capital consistent with investments primarily in common stocks of companies
located in emerging market countries.

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital through investment primarily in a diversified portfolio of
international equity securities.

How to Purchase Shares

The minimum initial investment for Class I shares of
Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund is $1 million. For purposes of this minimum, the
accounts of a financial consultant's clients may be aggregated in determining
whether the $1 million minimum has been met. In addition, aggregation may be
applied to the accounts of immediate family members as well as to the related
accounts of a corporation or other legal entity. The Funds may also waive the
minimum initial investment for investors who have signed a letter of intent.

Class I shares of each Fund do not impose any sales load, redemption or
exchange fees or have a Distribution Plan pursuant to Rule 12b-1 ("12b-1 Plan")
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
public offering price is the net asset value per share next determined after
receipt of a purchase order in proper form. The Funds offer two classes of
shares; this Prospectus offers only Class I shares for institutional investors.
See "PURCHASE OF SHARES and "GENERAL INFORMATION."

<PAGE>

How to Redeem Shares

Shares of each Fund may be redeemed at the net asset value per
share of Class I shares of the Fund next determined after receipt of a
redemption request in proper form. Signature guarantees may be required.
See "REDEMPTION OF SHARES."

Dividends

Management of the Funds

Blairlogie, 125 Princes Street, Edinburgh EH2 4AD, Scotland, a
registered investment advisor, is the Investment Adviser for each Fund.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organisation in the United
Kingdom. Blairlogie was founded in 1992. Gavin Dobson is the Chief Executive
Officer and James Smith is the Chief Investment Officer.

As of November 23, 1998, Blairlogie managed over $890 million in assets
primarily for institutional clients.

EXPENSE INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Shareowner Transaction Expenses for Each Fund:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Maximum Deferred Sales Load None
Redemption Fees None
Exchange Fees None
</TABLE>

If you want to redeem shares by wire transfer, the Funds' Transfer
Agent charges a fee, currently $20.00, for each wire redemption. Institutions
may independently charge fees for shareowner transactions or for advisory
services; please see their materials for details.

<PAGE>

Annual Fund Operating Expenses as a Percentage of Average Net Assets:

Alleghany/Blairlogie Emerging Markets Fund

Investment Advisory Fees (after voluntary fee waivers)............ 0.52%
12b-1 Fees........................................................ None
Other Expenses.................................................... 0.83%
-----
Net Expense Ratio (after voluntary fee waivers).................... 1.35%
=====

Alleghany/Blairlogie International Developed Fund

Investment Advisory Fees........................................... 0.85%
12b-1 Fees......................................................... None
Other Expenses..................................................... 0.25%
-----
Net Expense Ratio ................................................. 1.10%
=====

.........The purpose of this table is to assist the investor in understanding
the various expenses that an investor in the Funds will bear directly or
indirectly.

(2) The above table reflects an estimate of the Investment
Adviser's voluntary undertakings to waive investment advisory
fees exceeding the limits shown. Absent such fee waivers, the
investment advisory fees, other expenses, and total operating
expenses, respectively, would be as follows:
Alleghany/Blairlogie Emerging Markets Fund 0.85%, 0.83%, and
1.68%.

(2) Each 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 relates only to the Class I shares. See "GENERAL INFORMATION."

EXAMPLE:

Based on the level of expenses listed above, the total expenses
relating to an investment of $1,000 would be as follows, assuming a 5% annual
return and redemption at the end of each time period.

Name of Fund 1 Year 3 Years
- ------------ ------ -------
Alleghany/Blairlogie $14 $42
Emerging Markets Fund

Alleghany/Blairlogie $11 $34
International Developed Fund

Performance Measures

<PAGE>

Portfolio Turnover

The portfolio turnover rate for each Fund 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 a favorable tax
treatment. In any event, portfolio turnover is generally not expected to exceed
100% in each Fund. 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.

INVESTMENT OBJECTIVES AND POLICIES

The Funds strive to attain their investment objectives, but there can,
of course, be no assurance that it will do so. Please refer to the policies and
risk disclosures more fully described under "INVESTMENT STRATEGIES AND RISK
CONSIDERATIONS." Additional investment policies and restrictions are described
in the Statement of Additional Information.

ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND

For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Argentina Czech Republic Indonesia Pakistan Philippines Thailand
Brazil Greece Israel South Africa Poland Turkey
Chile Hong Kong Jordan South Korea Romania Venezuela
China Hungary Malaysia Sri Lanka Russia Zimbabwe
Colombia India Mexico Peru Taiwan
</TABLE>

<PAGE>

ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND

Alleghany/Blairlogie International Developed Fund seeks long-term
growth of capital. The Fund invests primarily in a diversified portfolio of
international equity securities. The Morgan Stanley Capital International EAFE
(Europe, Australasia, Far East) Index ("MSCI EAFE Index") is used as a basis for
choosing the countries in which the Fund invests. However, the Fund is not
limited to the countries and weightings of the MSCI EAFE Index. Under normal
market conditions, the Fund will invest no more than 15% of its assets in
securities issued by companies located in countries that the Investment Adviser
determines, on the basis of market capitalization, liquidity, and other
considerations, to have underdeveloped securities markets. The Investment
Adviser applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting," to each country in the
relevant country universe to determine markets which are relatively undervalued.
Second, at the stock selection level, quality analysis and value analysis are
applied to each security, assessing variables such as balance sheet strength and
earnings growth (quality factors) and performance relative to the industry,
price to earnings ratios, and price to book ratios (value factors). This
two-level screening method identifies undervalued securities for purchase and
also provides a sell discipline for fully valued securities. In selecting
securities, the Investment Adviser considers, to the extent practicable and on
the basis of information available to it for research, a company's environmental
business practices.

Most of the international equity securities in which the Fund invests
will be traded in foreign currencies. The Fund may engage in foreign currency
transactions to protect itself against fluctuations in currency exchange rates
in relation to the U.S. dollar or to the weighting of a particular foreign
currency on the MSCI EAFE Index. Such foreign currency transactions may include
forward foreign currency contracts, foreign exchange futures contracts, and
options thereon, currency exchange transactions on a spot (i.e., cash) basis,
and put and call options on foreign currencies. Up to 10% of the Fund's assets
may be invested in the securities of other investment companies. The Fund may
sell (write) call and put options. The Fund may utilize stock index futures
contracts and options thereon for hedging purposes and also for investment
purposes. For instance, the Fund may invest in stock index futures contracts and
related options as an alternative to purchasing individual stocks to adjust its
exposure to a particular foreign market. See "Investment Strategies and Risk
Considerations--Derivative Instruments--Futures Contracts and Options." The Fund
may also engage in equity index swap transactions.

<PAGE>

General

Each Fund may also lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements; purchase and sell securities on a
when-issued or delayed delivery basis; and enter into forward commitments to
purchase securities. Each Fund may invest in American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs"). Each Fund may invest a portion of its assets in debt securities and
money market obligations issued by U.S. and foreign issuers that are either U.S.
dollar-denominated or denominated in foreign currency. For more information on
these and other investment practices, see "Investment Strategies and Risk
Consideration" in this Prospectus and "Investment Objectives and Policies" in
the Statement of Additional Information.

INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

In General

Shareowners should understand that all investments involve risk and
there can be no guarantee against loss resulting from an investment in the
Funds, nor can there be any assurance that each Fund's investment objective will
be attained. 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 represented by such investment which
results from a relative change in values or from a change in a Fund's total
assets will not be considered a violation.

Money Market Securities

<PAGE>

Borrowing

Each Fund 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. Each Fund may not mortgage, pledge, or hypothecate
any assets, except that each Fund may mortgage, pledge, or hypothecate its
assets 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. A Fund will not purchase securities while its borrowings (including
reverse repurchase agreements) exceed 5% of its total assets. Each Fund may
borrow money as a temporary measure for extraordinary purposes or to facilitate
redemptions. Each Fund will not borrow money in excess of 25% of the value 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 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

Each Fund may invest up to 15% of its net assets in securities that 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 Securities Act of 1933 (the "1933 Act").

Repurchase Agreements

Each Fund 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.

<PAGE>

Reverse Repurchase Agreements

Each Fund may enter into reverse repurchase agreements with banks and
broker-dealers. Reverse repurchase agreements involve sales by a Fund of
portfolio assets concurrently with an agreement by that Fund to repurchase the
same assets at a later date at a fixed price. During the reverse repurchase
agreement period, the Fund continues to receive principal and interest payments
on these securities. During the time a reverse repurchase agreement is
outstanding, the Fund will maintain a segregated custodial account consisting of
cash or liquid securities having a value at least equal to the resale price.
Reverse repurchase agreements are considered to be borrowings by the Fund, and
as such are subject to the investment limitations discussed above under the
sub-section titled "Borrowing."

Rule 144A Securities

Each Fund 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 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

Each Fund may seek additional income from time to time by lending its
respective portfolio securities on a short-term basis to banks, brokers and
dealers under agreements. Loans of portfolio securities by a 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. Each Fund will not 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

Each Fund may invest in securities issued by other investment
companies, such as closed-end management investment companies, or in pooled
accounts or other investment vehicles that invest in foreign markets. As a
shareowner of another investment company, each Fund would bear, along with other
shareowners, its pro rata portion of 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.

Short-Term Trading

Each Fund 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.

Foreign Securities

Each Fund may invest directly in foreign equity securities; U.S. dollar
or foreign currency-denominated foreign corporate debt securities; foreign
preferred securities; certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks; obligations of foreign governments or their
subdivisions, agencies and

<PAGE>

instrumentalities, international agencies and supranational entities; and
securities represented by ADRs, EDRs, or GDRs. ADRs are dollar-denominated
receipts issued generally by domestic banks and representing the deposit with
the bank of a security of a foreign issuer, and are publicly traded on exchanges
or over-the-counter in the United States. EDRs are receipts similar to ADRs and
are issued and traded in Europe. GDRs may be offered privately in the United
States and also trade in public or private markets in other countries.

Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in U.S.
companies. Shareowners should consider carefully the substantial risks involved
in investing in securities issued by companies and governments of foreign
nations. These risks include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of nationalization, expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations (which
may include suspension of the ability to transfer currency from a country); and
political instability which could affect U.S. investments in foreign countries.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency, and balance of payments
position. The securities markets, values of securities, yields, and risks
associated with securities markets may change independently of each other.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar.

<PAGE>

Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgement in a court outside the
United States; and significantly smaller market capitalization of securities
markets. Also, any change in the leadership or politics of emerging market
countries, or the countries that exercise a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.

Foreign Currency Transactions

The Funds may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, the
Funds may buy and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures. Each Fund may enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. By entering into a forward
foreign currency exchange contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes in
the value of the currency it will deliver and increases its exposure to changes
in the value of the currency it will exchange into. The effect on the value of a
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another. Contracts to sell foreign currency would
limit any potential gain that might be realized by a Fund if the value of the
hedged currency increases. A Fund may enter into these contracts for the purpose
of hedging against foreign exchange risk arising from the Fund's investment or
anticipated investment in securities denominated in foreign currencies. Such
hedging transactions may not be successful and may eliminate any chance for a
Fund to benefit from favorable fluctuations in relevant foreign currencies. The
Funds also may enter into these contracts for purposes of increasing exposure to
a foreign currency or to shift exposure to foreign currency fluctuations from
one country to another. To the extent that they do so, the Funds will be subject
to the additional risk that the relative value of currencies will be different
than anticipated by the Fund's Investment Adviser. The Funds may use one
currency (or a basket of currencies) to hedge against adverse changes in the
value of another currency (or a basket of currencies) when exchange rates
between the two currencies are positively correlated. Each Fund will segregate
assets determined to be liquid by the Investment Adviser in accordance with
procedures established by the Board of Trustees in a segregated account to cover
its obligations under forward foreign currency exchange contracts entered into
for non-hedging purposes.

<PAGE>

Derivative Investments

Each Fund may engage in such practices for hedging purposes, or to
maintain liquidity, or in anticipation of changes in the composition of its
portfolio holdings. Each Fund will not 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 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 each 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 the Funds are permitted to invest that are considered by the
Investment Adviser to be derivative in nature.

1. Options:

Each Fund may engage in options, including those described below.

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).

Each Fund may buy or sell put and call options on foreign currencies as
a hedge against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which a Fund's securities may be denominated.
Currency options traded on U.S. or other exchanges may be subject to position
limits that may limit the ability of a Fund to reduce foreign currency risk
using such options.

<PAGE>

2. Forward Commitments, When-Issued Securities, and Delayed-Delivery
Transactions:

Each 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 deems it appropriate to do so.
Please see "General Risk Factors" below and refer to the Statement of Additional
Information for a more detailed discussion of the applicable risk
considerations.

3. Futures Contracts and Related Options:

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 that 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. Please see "General Risk Factors" below and refer to the Statement
of Additional Information for a more detailed discussion of the applicable risk
considerations.

<PAGE>

Each Fund may invest to a significant degree in Index Futures on stock
indexes and related options (including those which may trade outside of the
United States) as an alternative to purchasing individual stocks in order to
adjust the Fund's exposure to a particular market. These Funds may invest in
Index Futures and related options when the Investment Adviser believes that
there are not enough attractive securities available to maintain the standards
of diversification and liquidity set for a Fund pending investment in such
securities if or when they do become available. Through the use of Index Futures
and related options, a Fund may diversify risk in its portfolio without
incurring the substantial brokerage costs that may be associated with investment
in the securities of multiple issuers. A Fund may also avoid potential market
and liquidity problems that may result from increases in positions already held
by the Fund.

4. Equity Index Swaps:

<PAGE>

Most swap agreements entered into by the Funds calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Fund), and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees to limit any potential leveraging of the Fund's portfolio. Obligations
under swap agreements so covered will not be construed to be "senior securities"
for purposes of a Fund's investment restriction concerning senior securities. A
Fund will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Fund's assets.

General Risk Factors

1. Options, Futures, and Forward Contracts:

2. Fixed Income Investing:

<PAGE>

Credit risk refers to the possibility that a bond issuer will fail to
make timely payments of interest or principal. The ability of an issuer to make
such payments could be affected by general economic conditions, litigation,
legislation or other events including the bankruptcy of the issuer. For a
further discussion, see "INVESTMENT POLICIES AND RISK CONSIDERATIONS" in the
Statement of Additional Information.

MANAGEMENT OF THE FUNDS

The Board of Trustees

Blairlogie Capital Management

Blairlogie has voluntarily undertaken to reduce its advisory fee for
Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund for operating expenses (as defined previously) in
excess of 1.35% and 1.10%, respectively. Such waivers may be terminated at the
discretion of Blairlogie.

PORTFOLIO MANAGEMENT METHODS

Investment Management Team

Blairlogie Capital Management

Blairlogie's philosophy has always been that the international markets,
whether developed or emerging, can be analyzed from a base of measurable,
numerical data. They have developed a country model that covers a broad- based
collection of current and historical data. Their quantitative analysis is
enhanced with significant qualitative assessments to evaluate things a model
cannot review. Blairlogie continuously strives for the optimum combination of
quantitative and judgmental inputs but believe that objective, measurable facts
must always be the starting point for making sound investment decisions. Their
specific investment style is based upon an underlying objective of producing
premium returns above the benchmark consistently in any market environment while
consciously controlling risk and limiting volatility. The major components of
Blairlogie's investment style are summarized below:

top-down country allocation followed by bottom-up stock selection;

active management with a focus on consistent value-added broad
diversification in international markets portfolios by country
and stock;

performance objective designed to consistently outperform their
benchmark, which through time should facilitate investment success over
competitors; and

advanced technology used to enhance portfolio management and maintain
efficient administration

ADMINISTRATION OF THE FUNDS

The Administrator and Sub-Administrator

Chicago Trust (the "Administrator") acts as the Company's Administrator
pursuant to an Administration Agreement with the Company. For services provided
as Administrator, Chicago Trust receives a fee at the annual rate of: 0.060% of
the first $2 billion of the Company's average daily net assets; 0.045% of the
Company's average daily net assets between $2 billion and $3.5 billion and
0.040% of the Company's average daily net assets in excess of $3.5 billion.
Chicago Trust also receives a custody liaison fee equal to an annual fee per
Fund of $10,000 for average daily net assets up to $100 million, $15,000 for
average daily net assets between $100 million and $500 million, and $20,000 per
Fund for average daily net assets in excess of $500 million.

Pursuant to a Sub-Administration Agreement with the Administrator,
First Data Investor Services Group, Inc. (the "Sub-Administrator"), 53 State
Street, Boston, Massachusetts 02109, acts as Sub-Administrator and receives a
fee from the Administrator equal to that received by the Administrator, as set
out above. The Sub-Administrator also receives a custody liaison fee from
Chicago Trust equal to that received by the Administrator as set out above.

The Sub-Administrator also performs certain accounting and pricing
services for the Funds, including the daily calculation of the Funds' respective
net asset values.

The Transfer Agent

First Data Investor Services Group, Inc. (the "Transfer Agent"), 4400
Computer Drive, Westborough, Massachusetts 01581, performs the following duties
in its capacity as Transfer Agent to each Fund: maintains the records of
shareowner's accounts; answers shareowner inquiries concerning accounts;
processes purchases and redemptions of Fund shares; acts as dividend and
distribution disbursing agent; and performs other shareowner service functions.
Shareowner inquiries should be addressed to the Transfer Agent at (800)
992-8151.

The Distributor

<PAGE>

The Custodian

Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas
City, MO 64105, is Custodian for the cash and securities of each Fund.

Expenses

Class-specific expenses which may differ among classes, or which are
determined by the Trustees to be class-specific, will be borne solely by
shareowners of the relevant class. These expenses 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.

PURCHASE OF SHARES

In General

Shares of each Fund may be purchased directly from the Fund at the net
asset value next determined after receipt of the order in proper form. The
minimum initial investment is $1 million; there is no minimum subsequent
investment. For purposes of the investment minimum, the balances of each Fund's
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 Fund
may waive the minimum initial investment by obtaining a letter of intent,
evidencing an investor's intention of meeting the minimum 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 each Fund. Each Fund
also reserves the right to change the initial and subsequent investment
minimums.

Purchase orders for shares of a Fund which are received by the Transfer
Agent or an authorized broker or its designee in proper form, including money
order, check or bank draft, by the regular closing of the New York Stock
Exchange ("NYSE") (currently 4:00 p.m. Eastern time) will be priced at such
Fund's net asset value determined that day. If you invest by check or
non-federal funds wire, allow one business day after receipt for conversion into
federal funds. Checks must be made payable to the Fund or to "Alleghany Funds."
If you wire money in the form of federal funds, your money will be invested at
the share price next determined after receipt of the wire. Orders for shares
received in proper form after 4:00 p.m. will be priced at the net asset value
determined on the next day that the NYSE is open for trading.

Each Fund offers two classes of shares. Only the Class I shares for
each Fund are offered under this Prospectus.

<PAGE>

Each Fund may accept telephone orders from broker-dealers or service
organizations or their authorized designee, which have been previously approved
by a Fund. It is the responsibility of such broker-dealers or service
organizations to promptly forward purchase orders and payments for same to the
Company. Shares of each Fund may be purchased through broker-dealers, banks and
bank trust departments which may charge the investor a transaction fee or other
fee for their services at the time of purchase. Such fees would not otherwise be
charged if the shares were purchased directly from the Company.

Purchases may be made in one of the following ways:

Initial Purchases by Mail

Shares of each Fund may be purchased initially by completing an
application and mailing it to the Transfer Agent, together with a check payable
to "Alleghany/Blairlogie Emerging Markets Fund- Class I Shares" or
"Alleghany/Blairlogie International Developed Fund-Class I Shares", as
applicable, c/o First Data Investor Services Group Inc., P.O. Box 5164,
Westborough, Massachusetts 01581. The Funds will not accept third party checks
for the purchase of shares. Third party checks are those that are made out to
someone other than the Fund and are endorsed over to the Fund.

Initial Purchases by Wire

An investor desiring to purchase shares of any Fund by wire should call
the Transfer Agent first at (800) 992-8151 and request an account number and
furnish the Fund with your tax identification number. Following such
notification to the Transfer Agent, federal funds and registration instructions
should be wired through the Federal Reserve System to:

BOSTON SAFE DEPOSIT & TRUST
ABA # 01-10-01234
FOR: Alleghany Funds
A/C 140414
FBO "FUND NUMBER"
"SHAREOWNER ACCOUNT NUMBER"

Initial Purchases by Internet

The Trust reserves the right to suspend or terminate purchases by
telephone or Internet, thereby only allowing purchases by mail.

Subsequent Investments

Once an account has been opened, subsequent purchases may be made by
mail, bank wire, or by telephone. When making additional investments by mail,
simply return the investment slip from a previous confirmation or statement with
your investment in the envelope provided. Your check must be made payable to
"Alleghany/Blairlogie Emerging Markets Fund-Class I Shares" or
"Alleghany/Blairlogie International Developed Fund-Class I Shares", as
applicable, and mailed to the Alleghany Funds, P.O. Box 5163, Westborough,
Massachusetts 01581. The Funds will not accept third party checks for the
subsequent purchase of shares.

<PAGE>

All investments must be made in U.S. dollars, and, to avoid fees and
delays, checks must be drawn only on banks located in the U.S. In order to help
ensure the receipt of good funds, the Trust reserves the right to delay sending
your redemption proceeds up to 15 days if you purchased shares by check. A
charge ($20 minimum) will be imposed if any check used for the purchase of
shares is returned. The Funds and the Transfer Agent each reserve the right to
reject any purchase order in whole or in part.

EXCHANGE OF SHARES

In General

Shares of any of the Funds within the Company may be exchanged for
shares of the same class of any of the other Funds within the Company. The
Company currently offers Class I shares of the following Funds: Montag &
Caldwell Growth Fund, Montag & Caldwell Balanced Fund, Alleghany/Blairlogie
Emerging Markets Fund and Alleghany/Blairlogie International Developed Fund.

The exchange privilege is a convenient way to respond to changes in
your investment goals or in market conditions. This privilege is not designed
for frequent trading in response to short-term market fluctuations. You may make
exchanges by mail or by telephone if you have previously elected the telephone
authorization privilege on the application form. The telephone exchange
privilege may be difficult to implement during times of drastic economic or
market changes. The purchase of shares of any Fund through an exchange
transaction is accepted at the net asset value next determined. You should keep
in mind that for tax purposes an exchange is treated as a redemption and a new
purchase, each at net asset value of the appropriate Fund. The Funds and the
Transfer Agent reserve the right to limit, amend, impose charges upon, terminate
or otherwise modify the exchange privilege on prior written notice to
shareowners.

REDEMPTION OF SHARES

In General

<PAGE>

The Funds will satisfy redemption requests in cash to the fullest
extent feasible, so long as such payments would not, in the opinion of the Board
of Trustees, result in the necessity of a Fund selling assets under
disadvantageous conditions or to the detriment of the remaining shareowners of
the Fund. Pursuant to the Company's Trust Instrument, payment for shares
redeemed may be made either in cash or in-kind, or partly in cash and partly
in-kind. However, the Company may elect pursuant to Rule 18f-1 under the 1940
Act to redeem its shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of a Fund, during any ninety-day period for any one
shareowner. Payments in excess of this limit by a Fund will also be made wholly
in cash unless the Board of Trustees believes that economic conditions exist
which would make such a practice detrimental to the best interests of any such
Fund. Any portfolio securities paid or distributed in-kind would be valued as
described under "NET ASSET VALUE." In the event that an in-kind distribution is
made, a shareowner may incur additional expenses, such as the payment of
brokerage commissions, on the sale or other disposition of the securities
received from a Fund. In-kind payments need not constitute a cross-section of
the Fund's portfolio.

Shares may be redeemed in one of the following ways:

Redemptions by Mail

Shareowners may submit a written request for redemption to: Alleghany
Funds, P.O. Box 5164, Westborough, Massachusetts 01581. The request must be in
good order which means that it must: (i) identify the shareowner's account name
and account number; (ii) state the fund name; (iii) state the number of shares
to be redeemed; and (iv) be signed by each registered owner exactly as the
shares are registered.

A redemption request will not be deemed to be properly received until
the Transfer Agent receives all required documents in proper form. Questions
with respect to the proper form for redemption requests should be directed to
the Transfer Agent at (800) 992-8151.

Redemptions by Telephone

Shareowners who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by instructing the
Transfer Agent by telephone at (800) 992-8151.

In order to arrange for redemption by wire or telephone after an
account has been opened, or to change the bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent at the
address listed under "Redemptions by Mail" above. Such requests must be signed
by the shareowner, with signatures guaranteed (see "Redemptions by Mail" for
details regarding signature guarantees). Further documentation may be requested
from corporations, executors, administrators, trustees, or guardians.

The Funds reserve the right to refuse a wire or telephone redemption if
it is believed advisable to do so. Procedures for redeeming Fund shares by wire
or telephone may be modified or terminated at any time by the Funds. Neither the
Funds nor any of their service contractors will be liable for any loss or
expense in acting upon telephone instructions that are reasonably believed to be
genuine. In attempting to confirm that telephone instructions are genuine, the
Funds will use such procedures as are considered reasonable, including
requesting a shareowner to correctly state his or her Fund account number, the
name in which his or her account is registered, his or her social security
number, banking institution, bank account number, and the name in which his or
her bank account is registered.

Shares of the Funds may be redeemed through certain broker-dealers,
banks and bank trust departments who may charge the investor a transaction fee
or other fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed from the Company.

<PAGE>

Redemptions by Internet

The Trust reserves the right to suspend or terminate redemptions by
telephone or Internet, thereby only allowing redemptions by mail.

NET ASSET VALUE

DIVIDENDS AND TAXES

Dividends

Dividends, if any, from net investment income will be declared and paid
quarterly by each Fund. Aggregate net profits, if any, realized from the sale of
portfolio securities, if any, are distributed at least once each year unless
they are used to offset losses carried forward from prior years, in which case
no such gain will be distributed.

<PAGE>

Dividends paid by each Fund with respect to Class N shares are
calculated in the same manner and at the same time as Class I shares. Both Class
N and Class I shares of each 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 as discussed in "Expenses" under
"ADMINISTRATION OF THE FUNDS."

Taxes

Each Fund intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code ("the Code"). Such
qualification relieves a Fund of liability for Federal income taxes to the
extent the Fund's earnings are distributed in accordance with the Code. Each
Fund is treated as a separate corporate entity for Federal tax purposes.
Distributions of any net investment income and of any net realized short-term
capital gains are taxable to shareowners as ordinary income. Distributions of
net capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to shareowners as long-term capital gain regardless of
how long a shareowner may have held shares of a Fund. The tax treatment of
distributions of ordinary income or capital gains will be the same whether the
shareowner reinvests the distributions or elects to receive them in cash. A
distribution will be treated as paid on December 31 of the current calendar year
if it is declared in October, November or December with a record date in such a
month and paid during January of the following calendar year. Such distributions
will be taxable to shareowners in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received.

Redemptions of Fund shares, and the exchange of shares between Funds of
the Company, are taxable events and, accordingly, shareowners may realize
capital gains or losses on these transactions.

<PAGE>

PERFORMANCE OF THE FUNDS

In General

Total Return

GENERAL INFORMATION

Organization

Description of Shares

Each Fund is authorized to issue an unlimited number of shares of
beneficial interest without par value. 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 the Funds have no rights with respect to the Funds' 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. Currently, there is only one class of shares issued by the
Company, except for Montag & Caldwell Growth Fund, Montag & Caldwell Balanced
Fund, Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund which each offer two classes of shares: Class I
shares and Class N shares. Class N shares are offered to retail investors.

Information about Class N shares is available by calling the Funds at (800)
992-8151.

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
except that Class I shares have no voting rights with respect to the
distribution plan. Shareowners do not have cumulative voting rights. On any
matter submitted to a vote of shareowners, shares of a Fund or class 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 the Fund, in which case the shareowners of the Fund shall be entitled to vote
thereon. The business and affairs of each Fund are managed under the direction
of the Board of Trustees. See "PRINCIPAL HOLDERS OF SECURITIES" in the Statement
of Additional Information.

<PAGE>

Shareowner Meetings

Certain Provisions of Trust Instrument

Portfolio Transactions and Brokerage Commissions

Shareowner Reports and Inquiries

Shareowners will receive Semi-Annual Reports showing portfolio
investments and other information as of April 30 and Annual Reports audited by
independent accountants as of October 31. Shareowners with inquiries should call
the Company at (800) 992-8151 or write to Alleghany Funds, P.O. Box 5164,
Westborough, Massachusetts 01581.

<PAGE>

INVESTMENT ADVISER

Blairlogie Capital Management
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland

ADMINISTRATOR

The Chicago Trust Company
171 North Clark Street
Chicago, IL 60601-3294

CUSTODIAN

Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, MO 64105

For Additional Information about Alleghany Funds, call:
(800) 992-8151

<PAGE>

ALLEGHANY FUNDS

Alleghany/Blairlogie Emerging Markets Fund
Alleghany/Blairlogie International Developed Fund

STATEMENT OF ADDITIONAL INFORMATION

May 3, 1999

This Statement of Additional Information provides supplementary
information pertaining to shares representing interests in two investment
portfolios of Alleghany Funds (the "Company"): Alleghany/Blairlogie Emerging
Markets Fund and Alleghany/Blairlogie International Developed Fund. Each Fund
offers Class N shares for retail investors and Class I shares for institutional
investors.

This Statement of Additional Information is not a Prospectus, and
should be read only in conjunction with the Class I Shares Prospectus for
Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund dated May 3, 1999 or the Class N Shares Prospectus
for Alleghany/Blairlogie Emerging Markets Fund and Alleghany/Blairlogie
International Developed Fund dated May 3, 1999 (the "Prospectus"). No investment
in shares should be made without first reading the Prospectus. A copy of the
Prospectus may be obtained without charge from the Company at the address and
telephone number below.

Alleghany Funds: Investment Advisor to the Funds:
171 North Clark Street BLAIRLOGIE CAPITAL MANAGEMENT
Chicago, IL 60601 4th Floor, 125 Princes Street
(800) 992-8151 Edinburgh EH2 4AD, Scotland
(800) 992-8151

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

<TABLE>
<CAPTION>
<S> <C>
Page

THE FUNDS................................................................................................. 3
INVESTMENT POLICIES AND RISK CONSIDERATIONS............................................................... 3
INVESTMENT RESTRICTIONS................................................................................... 17
TRUSTEES AND OFFICERS..................................................................................... 18
INVESTMENT ADVISORY AND OTHER SERVICES.................................................................... 20
Investment Advisory Agreements....................................................................... 20
The Administrator and Sub-Administrator.............................................................. 20
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................................................... 21
TAXES..................................................................................................... 22
PERFORMANCE INFORMATION................................................................................... 25
OTHER INFORMATION......................................................................................... 26
</TABLE>

<PAGE>

THE FUNDS

Alleghany Funds, 171 North Clark Street, Chicago, Illinois 60601, is a
no-load, open-end management investment company which currently offers twelve
series of shares of beneficial interest representing separate portfolios of
investments: Montag & Caldwell Growth Fund, Chicago Trust Growth & Income Fund,
Chicago Trust Talon Fund, Chicago Trust Balanced Fund, Montag & Caldwell
Balanced Fund, Chicago Trust Bond Fund, Chicago Trust Municipal Bond Fund,
Chicago Trust Money Market Fund, Alleghany/Chicago Trust SmallCap Value Fund,
Alleghany/Veredus Aggressive Growth Fund, Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund. This Statement of
Additional Information pertains only to Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund (collectively
referred to as "Funds" or individually as a "Fund").

INVESTMENT POLICIES AND RISK CONSIDERATIONS

The following supplements the information contained in the Prospectus
concerning the investment policies of the Funds. Except as otherwise stated
below or in the Prospectus, each Fund may invest in the portfolio investments
included in this section.

The investment practices described below, except for the discussion of
portfolio loan transactions, are not fundamental and may be changed by the Board
of Trustees without the approval of the shareowners.

As discussed in the Prospectus, certain of the following investment
instruments are generally considered "derivative" in nature and are so noted.
While not a fundamental policy, each Fund that is permitted the use of such
instruments will generally limit its aggregate holdings of such instruments to
20% or less of its total assets.

RESTRICTED SECURITIES

Each Fund will limit investments in securities of issuers which the
Fund is restricted from selling to the public without registration under the
1933 Act to no more than 5% of the Fund's total assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Investment Advisor, pursuant to guidelines adopted by
the Company's Board of Trustees.

CONVERTIBLE SECURITIES

Common stock occupies the most junior position in a company's capital
structure. Convertible securities entitle the holder to exchange the securities
for a specified number of shares of common stock, usually of the same company,
at specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior to the claims
of preferred and common shareowners. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareowners.

MONEY MARKET INSTRUMENTS AND RELATED RISKS

Money market instruments in which the Funds may invest include, but are
not limited to the following: short-term corporate obligations; Certificates of
Deposit ("CDs"); Eurodollar Certificates of Deposit ("Euro CDs"); Yankee
Certificates of Deposit ("Yankee CDs"); foreign bankers' acceptances; foreign
commercial paper; letter of credit-backed commercial paper; time deposits; loan
participations ("LPs"); variable- and floating-rate instruments; and master
demand notes.

Euro CDs, Yankee CDs and foreign bankers' acceptances involve risks
that are different from investments in securities of U.S. banks. The major risk,
which is sometimes referred to as "sovereign risk," pertains to possible future
unfavorable political and economic developments, possible withholding taxes,
seizures of foreign deposits, currency controls, interest limitations, or other
governmental restrictions which might affect payment of principal or interest.
Investment in foreign commercial paper also involves risks that are different
from investments in securities of commercial paper issued by U.S. companies.
Non-U.S. securities markets generally are not as developed or efficient as those
in the United States. Such securities may be less liquid and more volatile than
securities of comparable U.S. corporations. Non-U.S. issuers are not generally
subject to uniform accounting and financial reporting standards, practices and
requirements comparable to those applicable to U.S. issuers. In addition, there
may be less public information available about foreign banks, their branches and
other issuers.

Time deposits usually trade at a premium over Treasuries of the same
maturity. Investors regard such deposits as carrying some credit risk, which
Treasuries do not; also, investors regard time deposits as being sufficiently
less liquid than Treasuries; hence, investors demand some extra yield for buying
time deposits rather than Treasuries. The investor in a loan participation has a
dual credit risk to both the borrower and also the selling bank. The second risk
arises because it is the selling bank that collects interest and principal and
sends it to the investor.

Foreign Securities

Each Fund may invest in U.S. Dollar or foreign currency-denominated
corporate debt securities of foreign issuers; preferred securities of foreign
issuers; certain foreign bank obligations; and U.S. dollar- or foreign
currency-denominated obligations of foreign governments or their subdivisions,
agencies and instrumentalities, international agencies and supranational
entities.

Each Fund may invest in American Depositary Receipts ("ADRs"). Each
Fund may also invest in common stock issued by foreign companies or in
securities represented by European Depositary Receipts ("EDRs"), or Global
Depositary Receipts ("GDRs"). ADRs are dollar-denominated receipts issued
generally by domestic banks and represent the deposit with the bank of a
security of a foreign issuer. EDRs are foreign currency-denominated receipts
similar to ADRs and are issued and traded in Europe, and are publicly traded on
exchanges or over-the-counter in the United States. GDRs may be offered
privately in the United States and also trade in public or private markets in
other countries. ADRs, EDRs and GDRs may be issued as sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities trade in the for of ADRs, EDRs or GDRs. In unsponsored programs, the
issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program.

Each Fund may invest in World Equity Benchmark Shares (WEBS) and
Optimized Portfolios as Listed Securities (OPALS). These investments provide
investors with access to global equity markets and are primarily used to
facilitate asset allocation switches and to overcome difficulties in markets
with structural peculiarities. WEBS are issued by Foreign Fund, Inc., an
open-ended investment company registered under the 1940 Act in a number of
country-specific series. Each series is a diversified, country-specific index
portfolio designed to track a specific Morgan Stanley Capital International
(MSCI) country index. WEBS are listed on the American Stock Exchange in U.S.
Dollars and the investment adviser is BZW Barclays Global Fund Advisors. Each
series of OPALS is designed to track the performance of a given MSCI or local
index. OPALS, securities offered through Morgan Stanley Capital, LLC., have a
hybrid structure. They have debt characteristics (fixed redemption and
semi-annual interest payments) but performance is equity driven. There are both
industry-specific and country-specific OPALS. Globally, OPALS are available to
gain exposure to developed and emerging markets. OPALS were established for
qualifying U.S. investors and are not listed on any U.S. exchange. To qualify
for purchase, U.S. investors must be (i) qualified institutional buyers (QIBs),
(ii) qualified purchasers (QPs) and (iii) not subject to ERISA. QIB and QP
status is generally conferred on those clients controlling over $100 million in
assets.

Investing in the securities of foreign issuers involves special risks
and considerations not typically associated with investing in U.S. companies.
These include: differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. Investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.

The risks of investing in foreign securities are particularly high when
securities of issuers based in developing (or "emerging market") countries are
involved. Investing in emerging market countries involves certain risks not
typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social economic and political
uncertainty and instability (including the risk of war); more substantial
government involvement in the economy; higher rates of inflation; less
government supervision and regulation of the securities markets and participants
in those markets; controls on foreign investment and limitations on repatriation
of invested capital and on the Fund's ability to exchange local currencies for
U.S. dollars; unavailability of currency hedging techniques in certain emerging
market countries; the fact that companies in emerging market countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.

Special Risks of Investing in Russian and Other Eastern European Securities

Alleghany/Blairlogie Emerging Markets Fund may invest a portion of its
assets in securities of issuers located in Russia and in other Eastern European
countries. The political, legal and operational risks of investing in the
securities of Russian and other Eastern European issuers, and of having assets
custodied within these countries, may be particularly acute. Investment in
Eastern European countries may involve acute risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. Also, certain
Eastern economies, are characterized by an absence of developed legal structures
governing private and foreign investments and private property in European
countries, which do not have market economies, are characterized by an absence
of developed legal structures governing private and foreign investments and
private property.

In addition, governments in certain Eastern European countries may
require that a governmental or quasi-governmental authority act as custodian of
a Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the 1940 Act
to act as foreign custodians of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required to be effected
through intermediaries. The risk of loss through governmental confiscation may
be increased in such circumstances.

Investments in securities of Russian issuers may involve a particularly
high degree of risk and special considerations not typically associated with
investing in U.S. and other more developed markets, many of which stem from
Russia's continuing political and economic instability and the slow-paced
development of its market economy. Investments in Russian securities should be
considered highly speculative. Such risks and special considerations include:
(a) delays in settling portfolio transactions and the risk of loss arising out
of Russia's system of share registration and custody (see below); (b)
pervasiveness of corruption, insider trading, and crime in the Russian economic
system; (c) difficulties associated in obtaining accurate market valuations of
many Russian securities, based partly on the limited amount of publicly
available information; (d) the general financial condition of Russian companies,
which may involve particularly large amounts of inter-company debt; and (e) the
risk that the Russian tax system will not be reformed to prevent inconsistent,
retroactive and/or exorbitant taxation or, in the alternative, the risk that a
reformed tax system may result in the inconsistent and unpredictable enforcement
of the new tax laws. Also, there is the risk that the government of Russia or
other executive or legislative bodies may decide not to continue to support the
economic reform programs implemented since the dissolution of the Soviet Union
and could follow radically different political and/or economic policies to the
detriment of investors, including non-market-oriented policies such as the
support of certain industries at the expense of other sectors or investors, a
return to the centrally planned economy that existed prior to the dissolution of
the Soviet Union, or the nationalization of privatized enterprises.

A risk of particular note with respect to direct investment in Russian
securities is the way in which ownership of shares of companies is normally
recorded. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the
register or, in certain limited circumstances, by formal share certificates.
However, there is no central registration system for shareholders and these
services are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision nor are they licensed with any governmental entity. It is
possible for a Fund to lose its registration through fraud, negligence or even
mere oversight. While a Fund will endeavor to ensure that is interest continues
to be appropriately recorded, which may involve a custodian or other agent
inspecting the share register and obtaining extracts of share registers through
regular confirmations, these extracts have no legal enforceability and it is
possible that subsequent illegal amendment or other fraudulent act may deprive
the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for a Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration.

Also, although a Russian public enterprise with more than 500
shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, this
regulation has not always been strictly enforced in practice. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. In addition, so-called "financial-industrial groups" have emerged in
recent years that seek to deter outside investors from interfering in the
management of companies they control. These practices may prevent a Fund from
investing in the securities of certain Russian companies deemed suitable by the
Fund's Investment Advisor. Further, this also could cause a delay in the sale of
Russian securities held by a Fund if a potential purchases is deemed unsuitable,
which may expose the Fund to potential loss on the investment.

Foreign Currencies

Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, each
Fund may but and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures.

Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency exchange contract, the
fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, a Fund
reduces its exposure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it will exchange
into. Contracts to sell foreign currencies would limit any potential gain which
might be realized by a Fund if the value of the hedged currency increases. A
Fund may enter into these contracts of the purpose of hedging against foreign
exchange risks arising from the Fund's investment or anticipated investment in
securities denominated in foreign currencies. Such hedging transactions may not
be successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies.

Each Fund may also enter into forward foreign currency exchange
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one currency to another. To the
extent that they do so, the Funds will be subject to the additional risk that
the relative value of currencies will be different than anticipated by the
particular Fund's Investment Advisor. A Fund may use one currency (or a basket
of currencies) to hedge against adverse changes in the value of another currency
(or a basket of currencies) when exchange rates between the two currencies are
positively correlated. A Fund will segregate assets determined to be liquid by
the Investment Advisor in accordance with procedures established by the Board of
Trustees in a segregated account to cover forward currency contracts entered
into for non-hedging purposes. The Funds may also use foreign currency futures
contracts and related options on currencies for the same reasons for which
forward foreign currency exchange contracts are used.

Loans of Portfolio Securities and Related Risks

Each Fund may lend portfolio securities to broker-dealers and financial
institutions provided: (1) the loan is secured continuously by collateral
marked-to-market daily and maintained in an amount at least equal to the current
market value of the securities loaned; (2) the Fund may call the loan at any
time and receive the securities loaned; (3) the Fund will receive any interest
or dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned by the Fund will not at any time exceed 25% of the total
assets of such Fund.

Collateral will consist of U.S. Government securities, cash
equivalents, or irrevocable letters of credit. Loans of securities involve a
risk that the borrower may fail to return the securities or may fail to maintain
the proper amount of collateral. Therefore, the Fund will only enter into
portfolio loans after a review by the Investment Advisor, under the supervision
of the Board of Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored on an ongoing basis.

Loan Participations ("LPs")

Each Fund may engage in LPs. LPs are loans sold by the lending bank to
an investor. The loan participant borrower may be a company with highly-rated
commercial paper that finds it can obtain cheaper funding through an LP than
with commercial paper and can also increase the company's name recognition in
the capital markets. LPs often generate greater yield than commercial paper.

The borrower of the underlying loan will be deemed to be the issuer
except to the extent the Fund derives its rights from the intermediary bank
which sold the LPs. Because LPs are undivided interests in a loan made by the
issuing bank, the Fund may not have the right to proceed against the LP borrower
without the consent of other holders of the LPs. In addition, LPs will be
treated as illiquid if, in the judgment of the Investment Advisor, they cannot
be sold within seven days.

Foreign Bankers' Acceptances

Each Fund may purchase foreign bankers' acceptances. Foreign bankers'
acceptances are short-term (270 days or less), non-interest-bearing notes sold
at a discount and redeemed by the accepting foreign bank at maturity for full
face value and denominated in U.S. dollars. Foreign bankers' acceptances are the
obligations of the foreign bank involved, to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and the
drawer to pay the face amount of the instrument upon maturity.

Foreign Commercial Paper

Each Fund may purchase foreign commercial paper. Foreign commercial
paper consists of short-term unsecured promissory notes denominated in U.S.
dollars, either issued directly by a foreign firm in the U.S., or issued by a
"domestic shell" subsidiary of a foreign firm established to raise dollars for
the firm's operations abroad or for its U.S. subsidiary. Like commercial paper
issued by U.S. companies, foreign commercial paper is rated by the rating
agencies (Moody's Investors Service, Inc; Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies, Inc.) as to the issuer's creditworthiness.
Foreign commercial paper can potentially provide the investor with a greater
yield than domestic commercial paper.

Eurodollar Certificates of Deposit ("Euro CDs")

A Euro CD is a receipt from a bank for funds deposited at that bank for
a specific period of time at some specific rate of return and denominated in
U.S. dollars. It is the liability of a U.S. bank branch or foreign bank located
outside the U.S. Almost all Euro CDs are issued in London.

Yankee Certificates of Deposit ("Yankee CDs")

Yankee CDs are certificates of deposit that are issued domestically by
foreign banks. It is a means by which foreign banks may gain access to U.S.
markets through their branches which are located in the United States, typically
in New York. These CDs are treated as domestic securities.

Repurchase Agreements

The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered loans by a Fund under the Investment Company Act of
1940, as amended (the "1940 Act").

The financial institutions with which a Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Investment Advisor. The Investment Advisor will continue to monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement at not less than the repurchase price.

Each Fund will only enter into a repurchase agreement where the market
value of the underlying security, including interest accrued, will be at all
times equal to or exceed the value of the repurchase agreement.

Reverse Repurchase Agreements

Reverse repurchase agreements involve the sale of securities held by a
Fund pursuant to a Fund's agreement to repurchase the securities at an agreed
upon price, date and rate of interest. Such agreements are considered to be
borrowings under the 1940 Act, and may be entered into only for temporary or
emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account cash, or liquid, securities in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. (Liquid securities as used in the prospectus
and this Statement of Additional Information include equity securities and debt
securities that are unencumbered and market-to-market daily.) Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
such securities.

Securities of Other Investment Companies

Each Fund intends to limit its investments in securities issued by
other investment companies so that, as determined immediately after a purchase
of such securities is made: (i) not more than 5% of the value of the Fund's
total assets will be invested in the securities of any one investment company;
(ii) not more than 10% of its total assets will be invested in the aggregate in
securities of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the Fund
as a whole. Each Fund will also limit investments in securities of other
investment companies as described in the Prospectus under "INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS" and in this Statement of Additional Information under
"INVESTMENT RESTRICTIONS."

Options and Related Risks

Each Fund may buy put and call options and write covered call and
secured put options. These options are generally considered to be derivative
securities. Such options may relate to particular securities, stock indices, or
financial instruments and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.

The Funds will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if a Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities, in such amount are held in
a segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if a
Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value.

A call option is also covered if a Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written; or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in cash or liquid securities in a segregated account with
its custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds' Custodian in an
amount not less than the exercise price of the option at all times during the
option period.

A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the
Fund's execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series as the previously written
option. Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being called, to
permit the sale of the underlying security, or to permit the writing of a new
option containing different terms on such underlying security. The cost of such
a liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Fund will have incurred a
loss in the transaction.

There is no assurance that a liquid secondary market will exist for any
particular option. An option writer, unable to effect a closing purchase
transaction, will not be able to sell the underlying security (in the case of a
covered call option) or liquidate the segregated account (in the case of a
secured put option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline or appreciation in the security
during such period.

Purchasing Call Options -- Each Fund may purchase call options to the
extent that premiums paid by such Fund do not aggregate more than 20% of that
Fund's total assets. When a Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that a Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with transactions, except the cost of the option.

A Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction by selling an option of the
same series as the option previously purchased. The Fund will realize a profit
from a closing sale transaction if the price received on the transaction is more
than the premium paid to purchase the original call option; the Fund will
realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.

Although a Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Fund may expire without any value to
the Fund, in which event the Fund would realize a capital loss which will be
short-term unless the option was held for more than one year.

Covered Call Writing -- Each Fund may write covered call options from
time to time on such portions of their portfolios, without limit, as the
Investment Advisor determines is appropriate in pursuing a Fund's investment
objective. The advantage to a Fund of writing covered calls is that the Fund
receives a premium which is additional income. However, if the security rises in
value, the Fund may not fully participate in the market appreciation.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase transaction,
in which a Fund, as writer of an option, terminates its obligation by purchasing
an option of the same series as the option previously written, cannot be
effected with respect to an option once the option writer has received an
exercise notice for such option.

Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.

If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, a Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.

A Fund will write call options only on a covered basis, which means
that a Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell or deliver a security it would want to hold. The exercise
price of a call option may be below, equal to, or above the current market value
of the underlying security at the time the option is written.

Purchasing Put Options -- Each Fund may invest up to 20% of its total
assets in the purchase of put options. A Fund will, at all times during which it
holds a put option, own the security covered by such option. With regard to the
writing of put options, each Fund will limit the aggregate value of the
obligations underlying such put options to 50% of its total assets. The purchase
of the put on substantially identical securities held will constitute a short
sale for tax purposes, the effect of which is to create short-term capital gain
on the sale of the security and to suspend running of its holding period (and
treat it as commencing on the date of the closing of the short sale) or that of
a security acquired to cover the same if at the time the put was acquired, the
security had not been held for more than one year.

A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. A Fund would purchase put
options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options allows a Fund to
protect unrealized gains in an appreciated security in their portfolios without
actually selling the security. If the security does not drop in value, a Fund
will lose the value of the premium paid. A Fund may sell a put option which it
has previously purchased prior to the sale of the securities underlying such
option. Such sale will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.

Each Fund may sell a put option purchased on individual portfolio
securities. Additionally, a Fund may enter into closing sale transactions. A
closing sale transaction is one in which a Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.

Foreign Currency Options. Each Fund may buy or sell put and call
options on foreign currencies either on exchanges or in the over-the-counter
market. A put option on a foreign currency gives the purchaser of the option the
right to sell a foreign currency at the exercise price until the option expires.
A call option on a foreign currency gives the purchaser of the option the right
to purchase the currency at the exercise price until the option expires.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of a Fund to reduce foreign currency risk
using such options.

Writing Put Options -- Each Fund may also write put options on a
secured basis which means that a Fund will maintain in a segregated account with
its Custodian, cash or U.S. Government securities in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash or U.S. Government securities held in the segregated account will be
adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Investment Advisor wishes
to purchase the underlying security for a Fund's portfolio at a price lower than
the current market price of the security. In such event, that Fund would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.

Following the writing of a put option, a Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.

Futures Contracts and Related Risks

Each Fund may enter into contracts for the purchase or sale for future
delivery of securities, including index contracts. The Funds may use interest
rate, foreign currency or index futures contracts. Futures contracts are
generally considered to be derivative securities. While futures contracts
provide for the delivery of securities, deliveries usually do not occur.
Contracts are generally terminated by entering into offsetting transactions.

Each Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in security prices, or interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, a Fund might enter into futures contracts for the sale of
debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at approximately
the same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt securities,
the Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund could then buy debt
securities on the cash market.

A stock index futures contract obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement was made. Open
futures contracts are valued on a daily basis and a Fund may be obligated to
provide or receive cash reflecting any decline or increase in the contract's
value. No physical delivery of the underlying stocks in the index is made in the
future.

With respect to options on futures contracts, when a Fund is
temporarily not fully invested, it may purchase a call option on a futures
contract to hedge against a market advance. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested, it may purchase a call
option on a futures contract to hedge against a market advance.

The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the value of the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is higher than the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase.

Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.

If a put or call option which a Fund has written is exercised, the Fund
may incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities and for 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.

Options on securities, futures contracts, options on futures contracts,
and options on currencies may be traded on foreign exchanges. Such transactions
may not be regulated as effectively as similar transactions in the United
States; may not involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in, or the prices
of, foreign securities. Some foreign exchanges may be principal markets so that
no common clearing facility exists and a trader may look only to the broker for
performance of the contract. The value of such positions also could be adversely
affected by (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decision, (iii) delays in the Company's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lesser
trading volume. In addition, unless a Fund hedges against fluctuations in the
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that a Fund might realize in trading
could be eliminated by adverse changes in the exchange rate, or the Fund could
incur losses as a result of those changes.

Further, with respect to options on futures contracts, a Fund may seek
to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.

Forward Commitments, When-Issued Securities, and Delayed Delivery Transactions
and Related Risks

Each Fund may dispose of or negotiate a when-issued or forward
commitment after entering into these transactions. Such transactions are
generally considered to be derivative transactions. The Funds will normally
realize a capital gain or loss in connection with these transactions. For
purposes of determining a Fund's average dollar-weighted maturity, the maturity
of when-issued or forward commitment securities will be calculated from the
commitment date.

When a Fund purchases securities on a when-issued, delayed delivery or
forward commitment basis, the Fund's Custodian will maintain in a segregated
account: cash, or liquid securities having a value (determined daily) at least
equal to the amount of the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the Custodian will hold the portfolio
securities themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that the Fund will maintain
sufficient assets at all times to cover its obligations under when-issued
purchases, forward commitments and delayed delivery transactions.

Swap Agreements. Each Fund may enter into equity index swap agreements
for purposes of attempting to gain exposure to the stocks making up an index of
securities in a market without actually purchasing those stocks. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested in a "basket" of
securities representing a particular index.

Most swap agreements entered into by the Funds calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counter party will be covered by the
maintenance of a segregated account consisting of assets determined to be liquid
by the Investment Advisor in accordance with procedures established by the Board
of Trustees, to avoid any potential leveraging of the Fund's portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of a Fund's investment restriction concerning senior
securities. A Fund will not enter into a swap agreement with any single party if
the net amount owed or to be received under existing contracts with that party
would exceed 5% of the Fund's assets.

Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Investment Advisor's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid. Moreover, a Fund bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain standards
of crreditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
the Funds' ability to use swap agreements. The Swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect a
Fund's ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.

Asset-Backed Securities and Related Risks

Each Fund may invest in asset-backed securities. Asset-backed
securities are securities backed by installment contracts, credit card and other
receivables, or other financial type assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
payments made by the individual borrowers on the assets underlying securities,
net of any fees paid to the issuer or guarantor of the securities. The average
life of asset-backed securities varies with the maturities of the underlying
instruments. An asset-backed security's stated maturity may be shortened, and
the security's

<PAGE>

Mortgage-Backed Securities and Mortgage Pass-Through Securities and Related
Risks

Each Fund may also invest in mortgage-backed securities. The timely
payment of principal and interest on mortgage-backed securities issued or
guaranteed by Ginnie Mae (formerly known as the Government National Mortgage
Association) ("GNMA") is backed by GNMA and the full faith and credit of the
U.S. Government. Also, securities issued by GNMA and other mortgage-backed
securities may be purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and would be lost if
prepayment occurs. Mortgage-backed securities issued by U.S. Government agencies
or instrumentalities other than GNMA are not "full faith and credit"
obligations. Certain obligations, such as those issued by the Federal Home Loan
Bank are supported by the issuer's right to borrow from the U.S. Treasury; while
others, such as those issued by the Federal National Mortgage Association
("FNMA"), are supported only by the credit of the issuer. Unscheduled or early
payments on the underlying mortgages may shorten the securities' effective
maturities and reduce returns. The Funds may agree to purchase or sell these
securities with payment and delivery taking place at a future date.

Mortgage-backed securities have greater market volatility then other
types of securities. In addition, because prepayments often occur at times when
interest rates are low or are declining, the Funds may be unable to reinvest
such funds in securities which offer comparable yields. The yields provided by
these mortgage securities have historically exceeded the yields on other types
of U.S. Government securities with comparable maturities in large measure due to
the risks associated with prepayment features. (See "General Risks of Mortgage
Securities" herein.)

For Federal tax purposes other than diversification under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), mortgage-backed
securities are not considered to be separate securities but rather "grantor
trusts" conveying to the holder an individual interest in each of the mortgages
constituting the pool.

The mortgage securities which are issued or guaranteed by GNMA, Federal
Home Loan Mortgage Corporation ("FHLMC"), or FNMA ("certificates") are called
pass-through certificates because a pro-rata share of both regular interest and
principal payments (less GNMA's, FHLMC's, or FNMA's fees and any applicable loan
servicing fees), as well as unscheduled early prepayments on the underlying
mortgage pool, are passed through monthly to the holder of the certificate
(i.e., the portfolio).

Each Fund may also invest in pass-through certificates issued by
non-governmental issuers. Pools of conventional residential mortgage loans
created by such issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payment. Timely payment of interest and principal of
these pools is, however, generally supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance. The
insurance and guarantees are issued by government entities, private insurance
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets the Fund's quality standards. The Fund may buy
mortgage-related securities without insurance or guarantees if through an
examination of the loan experience and practices of the poolers, the investment
manager determines that the securities meet the Fund's quality standards.

Collateralized Mortgage Obligations ("CMOs"), Real Estate Mortgage Investment
Conduits ("REMICs"), Multi-Class Pass-Throughs, and Related Risks

Each Fund may also invest in certain debt obligations which are
collateralized by mortgage loans or mortgage pass-through securities. These
obligations are generally considered to be derivative securities. CMOs and
REMICs are debt instruments issued by special-purpose entities which are secured
by pools or mortgage loans or other mortgage-backed securities. Multi-class
pass-through securities are equity interests in a trust composed of mortgage
loans or other mortgage-backed securities. Payments of principal and interest on
underlying collateral provides the funds to pay debt service on the CMO or REMIC
or make scheduled distributions on the multi-class pass-through securities.
CMOs, REMICs, and multi-class pass-through securities (collectively, CMOs unless
the context indicates otherwise) may be issued by agencies or instrumentalities
of the U.S. Government or by private organizations.

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specified coupon rate or adjustable rate tranche (to be discussed in the next
paragraph) and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO on a monthly, quarterly, or
semi-annual basis. The principal and interest on the underlying mortgages may be
allocated among several classes of a series of a CMO in many ways. In a common
structure, payments of principal, including any principal prepayments, on the
underlying mortgages are applied to the classes of a series of a CMO in the
order of their respective stated maturities or final distribution dates, so that
no payment of principal will be made on any class of a CMO until all other
classes having an earlier stated maturity or final distribution date have been
paid in full.

One or more tranches of a CMO may have coupon rates which reset
periodically at a specified increment over an index such as the London Interbank
Offered Rate ("LIBOR"). These adjustable-rate tranches, known as "floating-rate
CMOs," will be considered as adjustable-rate mortgage securities ("ARMs") by the
Funds. Floating-rate CMOs may be backed by fixed-rate or adjustable-rate
mortgages; to date, fixed-rate mortgages have been more commonly utilized for
this purpose. Floating-rate CMOs are typically issued with lifetime "caps" on
the coupon rate thereon. These "caps," similar to the "caps" on adjustable-rate
mortgages, represent a ceiling beyond which the coupon rate on a floating-rate
CMO may not be increased regardless of increases in the interest rate index to
which the floating-rate CMO is geared.

REMICs are private entities formed for the purpose of holding a fixed
pool of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities. As with CMOs, the
mortgages which collateralize the REMICs in which the Funds may invest include
mortgages backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or issued
by private entities, which are not guaranteed by any government agency.

Yields on privately issued CMOs as described above have been
historically higher than the yields on CMOs issued or guaranteed by U.S.
Government agencies. However, the risk of loss due to default on such
instruments is higher since they are not guaranteed by the U.S. Government. The
Funds will not invest in subordinated privately issued CMOs.

Resets -- The interest rates paid on the ARMs and CMOs in which the
Funds may invest generally are readjusted at intervals of one year or less to an
increment over some predetermined interest rate index. There are three main
categories of indices: those based on U.S. Treasury securities; those derived
from a calculated measure such as a cost of funds index; or a moving average of
mortgage rates. Commonly utilized indices include: the one-year, three-year and
five-year constant maturity Treasury rates; the three-month Treasury bill rate;
the six-month Treasury bill rate; rates on longer-term Treasury securities; the
11th District Federal Home Loan Bank Cost of Funds; the National Median Cost of
Funds; the one-month, three-month, six-month or one-year LIBOR; the prime rate
of a specific bank; or commercial paper rates. Some indices, such as the
one-year constant maturity Treasury rate, closely mirror changes in market
interest rate levels. Others, such as the 11th District Federal Home Loan Bank
Cost of Funds index, tend to lag behind changes in market rate levels and tend
to be somewhat less volatile.

Caps and Floors -- The underlying mortgages which collateralize the
ARMs and CMOs in which the Funds may invest will frequently have caps and floors
which limit the maximum amount by which the loan rate to the residential
borrower may change up or down (1) per reset or adjustment interval and (2) over
the life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and interest
payments rather than limiting interest rate changes.
These payment caps may result in negative amortization.

Stripped Mortgage Securities and Related Risks

Each Fund may also invest in stripped mortgage securities. The stripped
mortgage securities in which the Funds may invest will only be issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Stripped
mortgage securities have greater market volatility than other types of mortgage
securities in which the Funds invest.

Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the yield to maturity
of any such IOs held by a Fund. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment in these securities even if the securities are
rated in the highest rating categories--"Aaa" or "AAA" by Moody's or S&P,
respectively.

Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed; accordingly,
certain of these securities may generally be illiquid. The 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 Advisor,
subject to the supervision of the Board of Trustees. The staff of the Securities
and Exchange Commission (the "SEC") has indicated that it views such securities
as illiquid. Until further clarification of this matter is provided by the
staff, a Fund's investment in stripped mortgage securities will be treated as
illiquid and will, together with any other illiquid investments, not exceed 15%
of such Fund's net assets.

Other Mortgage-Backed Securities

Each Fund may invest in other mortgage-backed securities. The
Investment Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed-rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Investment Advisor will,
consistent with each Fund's investment objective, policies and quality
standards, consider making investments in such new types of mortgage-related
securities.

General Risks of Mortgage Securities

The mortgage securities in which a Fund invests differ from
conventional bonds in that principal is paid back over the life of the mortgage
security rather than at maturity. As a result, the holder of the mortgage
securities (i.e., the Fund) receives monthly scheduled payments of principal and
interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the holder reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest which is lower than the rate on the existing mortgage securities.
For this reason, mortgage securities may be less effective than other types of
securities as a means of "locking in" long-term interest rates.

A decline in interest rates may lead to a faster rate of repayment of
the underlying mortgages and expose a Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Fund, the prepayment right of mortgagors may decrease or limit the increase in
net asset value of the Fund because the value of the mortgage-backed securities
held by the Fund may decline more than or may not appreciate as much as the
price of non-callable debt securities. To the extent market interest rates
increase beyond the applicable cap or maximum rate on a mortgage security, the
market value of the mortgage security would likely decline to the same extent as
a conventional fixed-rate security. The volatility of the security would likely
increase, however, because the expected decline in prepayments would lead to
longer effective maturity of the underlying mortgages.

In addition, to the extent mortgage securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the holder's principal investment to the extent of the premium
paid. On the other hand, if mortgage securities are purchased at a discount,
both a scheduled payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the recognition of
income which when distributed to shareowners will be taxable as ordinary income.

With respect to pass-through mortgage pools issued by non-governmental
issuers, there can be no assurance that the private insurers associated with
such securities can meet their obligations under the policies. Although the
market for such non-governmental issued or guaranteed mortgage securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable. The purchase of such securities is subject to
each Fund's limit with respect to investment in illiquid securities.

Other Investments

The Board of Trustees may, in the future, authorize a Fund to invest in
securities other than those listed here and in the Prospectus, provided that
such investment would be consistent with that Fund's investment objective and
that it would not violate any fundamental investment policies or restrictions
applicable to that Fund.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental policies
and may not be changed as to a Fund without the approval of a majority of the
outstanding voting shares (as defined in the 1940 Act) of the Fund. Unless
otherwise indicated, all percentage limitations governing the investments of
each Fund apply only at the time of transaction. Accordingly, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in the percentage which results from a relative change in values or
from a change in a Fund's total assets will not be considered a violation.

Except as set forth under "INVESTMENT OBJECTIVES AND POLICIES" and
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS" in the Prospectus, each Fund may
not:

(1) As to 75% of the total assets of each Fund, purchase the securities of
any one issuer (other than securities issued by the U.S. Government or
its agencies or instrumentalities) if immediately after such purchase,
more than 5% of the value of the Fund's total assets would be invested
in securities of such issuer;

(2) Purchase or sell real estate (but this restriction shall not prevent
the Funds from investing directly or indirectly in portfolio
instruments secured by real estate or interests therein or acquiring
securities of real estate investment trusts or other issuers that deal
in real estate), interests in oil, gas and/or mineral exploration or
development programs or leases;

(3) Purchase or sell commodities or commodity contracts, except that a Fund
may enter into futures contracts and options thereon in accordance with
such Fund's investment objectives and policies;

(4) Make investments in securities for the purpose of exercising control;

(5) Purchase the securities of any one issuer if, immediately after
such purchase, a Fund would own more than 10% of the outstanding
voting securities of such issuer;

(6) Sell securities short or purchase securities on margin, except such
short-term credits as are necessary for the clearance of transactions.
For this purpose, the deposit or payment by a Fund for initial or
maintenance margin in connection with futures contracts is not
considered to be the purchase or sale of a security on margin;

(7) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with a Fund's
investment objectives and policies, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or
broker-dealers;

(8) Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of the value of its total
assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the total assets of the Fund at the
time of its borrowing. All borrowings will be done from a bank and
asset coverage of at least 300% is required. A Fund will not purchase
securities when borrowings exceed 5% of that Fund's total assets;

(9) Purchase the securities of issuers conducting their principal business
activities in the same industry (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities)
if immediately after such purchase the value of a Fund's investments in
such industry would exceed 25% of the value of the total assets of the
Fund;

(10) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Fund may be deemed to be an
"underwriter" as that term is defined in the 1933 Act;

(11) Invest in puts, calls, straddles or combinations thereof except to the
extent disclosed in the Prospectus;

(12) Invest more than 5% of its total assets in securities of companies less
than three years old. Such three year periods shall include the
operation of any predecessor company or companies.

TRUSTEES AND OFFICERS

Information pertaining to the Trustees and Executive Officers of the
Company is set forth below.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
- -------- -------- -------------------------- ---------------------------
Stuart D. Bilton* 52 Chairman, Board of Trustees Mr. Bilton is 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 with Chicago Title and
Trust Company. He is a Director of
Alleghany Asset Management Inc., Montag
and Caldwell, Veredus Asset Management
Inc., Baldwin & Lyons, Inc., and the Boys
and Girls Clubs of Chicago.

Leonard F. Amari 56 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.

Gregory T. Mutz 53 Trustee Mr. Mutz is President & 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.
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
- --------------- --- ------------ ------------------------------
Nathan Shapiro 62 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 ons, Inc.

Kenneth C. Anderson 34 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 mutualfunds 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 Center & Caldwell, Inc. since 1996. Previously,
3343 Peachtree Road, NE she was a Portfolio Manager and Chief
Atlanta, GA 30326-8151 Investment Officer at Randy Seckman &
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.

The Trustees of the Company who are not "interested persons" of the
Funds receive fees and expenses for each meeting of the Board of Trustees they
attend. Prior to January 1, 1997, such Trustees received $1,500 for each Board
Meeting attended, and an annual retainer of $1,500. Effective January 1, 1998,
such Trustees now receive $2,000 for each Board Meeting attended, and an annual
retainer of $2,000. No officer or employee of Chicago Title and Trust Company or
The Chicago Trust Company ("Chicago Trust") or their affiliates receives any
compensation from the Funds for acting as a Trustee of the Company. The Officers
of the Company receive no compensation directly from the Funds for performing
the duties of their offices.

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Advisory Agreements

The advisory services provided by the Investment Advisor of each Fund,
and the fees received by it for such services, are described in the Prospectus.
The Investment Advisor of each Fund may from time to time voluntarily waive a
portion of its advisory fees with respect to such Fund and/or reimburse a
portion of the Fund's expenses.

Under the Investment Advisory Agreements, the Investment Advisor of
each Fund is not liable for any error of judgment or mistake of law or for any
loss suffered by the Company or a Fund in connection with the performance of the
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its duties and obligations thereunder.

Each Investment Advisory Agreement is terminable with respect to a Fund
by vote of the Board of Trustees or by the holders of a majority of the
outstanding voting securities of the Fund, at any time without penalty, on 60
days' written notice to the Investment Advisor. An Investment Advisor may also
terminate its advisory relationship with respect to a Fund on 60 days' written
notice to the Company. Each Investment Advisory Agreement terminates
automatically in the event of its assignment.

Under each Investment Advisory Agreement, the Fund pays the following
expenses: (1) the fees and expenses of the Company's disinterested directors;
(2) the salaries and expenses of any of the Company's officers or employees who
are not affiliated with the Investment Advisor; (3) interest expenses; (4) taxes
and governmental fees; (5) brokerage commissions and other expenses incurred in
acquiring or disposing of portfolio securities; (6) the expenses of registering
and qualifying shares for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees
and expenses of the Company's Custodian, Administrator, Sub-Administrator and
Transfer Agent and any related services; (10) expenses of obtaining quotations
of the Funds' portfolio securities and of pricing the Funds' shares; (11)
expenses of maintaining the Company's legal existence and of shareowners'
meetings; (12) expenses of preparation and distribution to existing shareowners
of reports, proxies and prospectuses; and (13) fees and expenses of membership
in industry organizations.

The Investment Advisor for the Funds is Blairlogie Capital Management
("Blairlogie"), located at 125 Princes Street, Edinburgh EH2 4AD, Scotland.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organisation in the United
Kingdom. Blairlogie Capital Management Ltd. (now known as Blairlogie Capital
Management) commenced operations in 1992. Blairlogie is currently an indirect
subsidiary of the Alleghany Corporation. Alleghany Corporation is engaged
through its subsidiaries in the business of title insurance, reinsurance, other
financial services and industrial minerals and is located at Park Avenue Plaza,
New York, New York 10055.

Blairlogie managed approximately $890 million in assets at November 23,
1998, primarily for institutional clients.

The Administrator and Sub-Administrator

As Administrator, Chicago Trust, 171 North Clark Street, Chicago,
Illinois 60601, provides certain administrative services to the Company pursuant
to an Administration Agreement. First Data Investor Services Group, Inc.
("Investor Services Group"), 53 State Street, Boston, Massachusetts 02109,
provides certain administrative services for the Funds and Chicago Trust
pursuant to a Sub-Administration Agreement.

Under the Administration Agreement, the Administrator is responsible
for: (1) coordinating with the Custodian and Transfer Agent and monitoring the
services they provide to the Funds; (2) coordinating with and monitoring any
other third parties furnishing services to the Funds; (3) providing the Funds
with necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervising the maintenance by third parties of such books and records of the
Funds as may be required by applicable Federal or state law; (5) preparing or
supervising the preparation by third parties of all Federal, state and local tax
returns and reports of the Funds required by applicable law; (6) preparing and,
after approval by the Funds, filing and arranging for the distribution of proxy
materials and periodic reports to shareowners of the Funds as required by
applicable law; (7) preparing and, after approval by the Company, arranging for
the filing of such registration statements and other documents with the SEC and
other Federal and state regulatory authorities as may be required by applicable
law; (8) reviewing and submitting to the Officers of the Company for their
approval invoices or other requests for payment of the Funds' expenses and
instructing the Custodian to issue checks in payment thereof; and (9) taking
such other action with respect to the Company or the Funds as may be necessary
in the opinion of the Administrator to perform its duties under the Agreement.

As compensation for services performed under the Administration
Agreement, the Administrator receives a fee payable monthly at an annual rate
(as described in the Prospectus) multiplied by the average daily net assets of
the Company.

First Data Distributors, Inc. is principal underwriter and distributor of the
Funds' shares. Distribution Plan

The Board of Trustees of the Company has adopted a Plan of Distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Class N
shares of each Fund to pay certain expenses associated with the distribution of
its shares. Under the Plan, each Fund may pay actual expenses not exceeding, on
an annual basis, 0.25% of a Fund's average daily net assets. To the Company's
knowledge, no interested person of the Company, nor any of its Trustees who are
not "interested persons," has a direct or indirect financial interest in the
operation of the Plan. The Company anticipates that each Fund will benefit from
additional shareholders and assets as a result of implementation of the Plan.
The terms of such Plan are more fully described in the Prospectus under
"DISTRIBUTION PLAN."
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

The Investment Advisor is responsible for decisions to buy and sell
securities for the Funds and for the placement of its portfolio business and the
negotiation of commissions, if any, paid on such transactions. The Investment
Advisor, in placing trades for a Fund, will follow the Company's policy of
seeking best execution of orders. Securities traded in the over-the-counter
market are generally traded on a net basis. These securities are generally
traded on a net basis with dealers acting as principal for their own accounts
without a stated commission. In over-the-counter transactions, orders are placed
directly with a principal market-maker unless a better price and execution can
be obtained by using a broker. Brokerage commissions are paid on transactions in
listed securities, futures contracts, and options.

The Investment Advisor effects portfolio transactions for other
investment companies and advisory accounts. Research services furnished by
broker-dealers through whom the Funds effect securities transactions may be used
by the Investment Advisor in servicing all of their respective accounts; not all
such services may be used in connection with the Funds. The Investment Advisor
will attempt to equitably allocate portfolio transactions among the Funds and
others whenever concurrent decisions are made to purchase or sell securities by
the Funds and other accounts. In making such allocations between the Funds and
others, the main factors to be considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held, and the opinions of the persons responsible for
recommending investments to the Funds and the others. In some cases, this
procedure could have an adverse effect on the Funds. In the opinion of the
Investment Advisor, however, the results of such procedures will, on the whole,
be in the best interest of each of the clients.

Portfolio Turnover

The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of purchases or sales of portfolio investments for the
reporting period by the monthly average value of the portfolio investments owned
during the reporting period. The calculation excludes all securities, including
options, whose maturities or expiration dates at the time of acquisition are one
year or less. Portfolio turnover may vary greatly from year to year as well as
within a particular year, and may be affected by cash requirements for
redemption of units 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. 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.

TAXES

Each Fund intends 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.

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.

Passive Foreign Investment Companies

Each Fund may invest in the stock of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself may be subject
to tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to stockholders.

In general, under the PFIC rules, an excess distribution is treated as
having been realized ratably over the period during which the Fund held the PFIC
stock. A Fund itself will be subject to a U.S. federal income tax (including
interest) on the portion, if any, of an excess distribution that is so allocated
to prior taxable years. Certain distributions from a PFIC as well as gain from
the sale of PFIC stock are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.

A Fund may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Fund generally would be required to include its share of the
PFIC's income and net capital gain annually, regardless of whether distributions
are received from the PFIC in a given year. If this election were made, the
special rules discussed above relating to the taxation of excess distributions
would not apply. In addition, another election may be available that would
involve marking to market a Fund's PFIC shares at the end of each taxable year
(and on certain other dates prescribed in the Code), with the result that
unrealized gains are treated as though they were realized. If this election were
made, tax at the Fund level under the PFIC rules would generally be eliminated,
but the Fund could, in limited circumstances, incur nondeductible interest
charges. A Fund's intention to qualify annually as a regulated investment
company may limit its elections with respect to PFIC shares.

Because the application of the PFIC rules may affect, among other
things, the character of gains and the amount of gain or loss and the timing of
the recognition of income with respect to PFIC shares, and may subject a Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders and will be taxed to shareholders as ordinary income
or long-term capital gain may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.

Foreign Currency Transactions

Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liability denominated in a foreign
currency and the time the Fund actually collects such receivable or pays such
liabilities generally are treated as ordinary income or loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain other instruments, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.

Foreign Taxation

Income received by the Funds from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce of eliminate such
taxes. In addition, the Investment Advisor intends to manage the Funds with the
intention of minimizing foreign taxation in cases where it is deemed prudent to
do so. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, such Fund will
be eligible to elect to "pass through" to the Fund's shareholders the amount of
eligible foreign income and similar taxes paid by the Fund. If this election is
made, a shareholder generally subject to tax will be required to include in
gross income (in addition to taxable dividends actually received) his or her pro
rata share of foreign taxes in computing his or her taxable income or to use it
as a foreign tax credit against his or her U.S. federal income tax liability,
subject to certain limitations. In particular, shareholders must hold their
shares (without protection from risk of loss) on the ex-dividend date and for at
least 15 more days during the 30-day period surrounding the ex-dividend date to
be eligible to claim a foreign tax credit with respect to a gain dividend. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year.

Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election is
made, the source of the electing Fund's income will flow through to shareholders
of the Company. With respect to such Funds, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign currency-denominated debt
securities, receivables and payables will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Shareholders may be unable to claim a credit for the full amount of
their proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit can be used to offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.

Dividends and distributions also may be subject to state and local
taxes. Shareowners are urged to consult their tax advisors 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 advisors concerning the tax
consequences of ownership of shares of the Funds, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

<PAGE>

PERFORMANCE INFORMATION

In General

From time to time, the Company may include general comparative
information, such as statistical data regarding inflation, securities indices or
the features or performance of alternative investments, in advertisements, sales
literature and reports to shareowners. The Company may also include
calculations, such as hypothetical compounding examples or tax-free compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any Fund. In addition, the Company may
include charts comparing various tax-free yields versus taxable yield
equivalents at different income levels.

From time to time, the yield and total return of a Fund may be quoted
in advertisements, shareowner reports or other communications to shareowners.

Total Return Calculations

Each Fund computes its average annual total return by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result.
This calculation can be expressed as follows:

Average Annual Total Return = ERV = P (1+T)(n)

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 compute their aggregate total returns over a specified period
by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:

Aggregate Annual Total Return = [ERV - 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

The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations. Such calculations are not
necessarily indicative of future results and do not take into account Federal,
state and local taxes that shareowners must pay on a current basis.

Since performance will fluctuate, performance data for the Funds should
not be used to compare an investment in the Funds' shares with bank deposits,
savings accounts and similar investment alternatives which often provide an
agreed or guaranteed fixed yield for a stated period of time. Shareowners should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.

OTHER INFORMATION

Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information forms a part. Each such statement is qualified in all respects by
such reference.

Custodian

Investors Fiduciary Trust Company ("IFTC"), serves as Custodian of the
Company's assets pursuant to a Custodian Agreement. Under such Agreement, IFTC:
(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.

Reports to Shareowners

Shareowners will receive unaudited semi-annual reports describing each
Fund's investment operations and annual financial statements audited by the
Funds' independent certified public accountants. Inquiries regarding the Funds
may be directed to the Investment Advisor or the Administrator at (800)
992-8151.

KPMG LLP, 303 E. Wacker Drive, Chicago, Illinois is the Company's
independent public accountant and auditor.