As filed with the Securities and Exchange Commission
on November 30, 1998
Registration No. 811-8004
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
| | Pre-Effective Amendment No. ___
| | Post-Effective Amendment No. ___
(Check appropriate box or boxes)
ALLEGHANY FUNDS
(Exact Name of Registrant as Specified in Charter)
171 North Clark Street
Chicago, Illinois 60601
(Address of Principal Executive Offices, including Zip Code)
Area Code and Telephone Number: (800) 992-8151
Kenneth C. Anderson, President
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
(Name and Address of Agent for Service)
With copies to:
Arthur J. Simon J.B. Kittredge
SONNENSCHEIN NATH & ROSENTHAL ROPES & GRAY
8000 Sears Tower One International Place
Chicago, Illinois 60606-6404 Boston, Massachusetts 02110
Approximate Date of Proposed Public Offering: As soon as practible after the
Registration Statement becomes effective under the Securities Act of 1933.
Title of Securities being registered: Class I, an indefinite number of shares,
and Class N, an indefinite number of shares, of beneficial interest in
Registrant's Alleghany/Blairlogie Emerging Markets and Alleghany/Blairlogie
International Developed Funds.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ALLEGHANY FUND TRUST
CROSS-REFERENCE SHEET
PART A - INFORMATION REQUIRED IN PROSPECTUS
ITEM NO Item Caption Prospectus Caption
1 Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside Front Cover STATEMENT; CROSS-REFERENCE SHEET;
Page of Prospectus FRONT COVER PAGE OF PROXY
STATEMENT/PROSPECTUS
2 Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
3 Fee Table, Synopsis Information APPENDIX II -- FEE AND
EXPENSE SUMMARIES; and Risk Factors SUMMARY -- PROPOSED
REORGANIZATIONS;
-- PRINCIPAL RISK FACTORS
4 Information About the Transaction INFORMATION RELATING TO THE PROPOSED
REORGANIZATIONS
5 Information About the Registrant COMPARISON OF PIMCO FUNDS AND ALLEGHANY
FUNDS; ADDITIONAL INFORMATION ABOUT ALLEGHANY
6 Information About the Companies Being COMPARISON OF PIMCO FUNDS AND ALLEGHANY FUNDS; ADDITIONAL
Acquired INFORMATION ABOUT THE TRUST
7 Voting Information INFORMATION RELATING TO VOTING MATTERS
8 Interest of Certain Persons and Experts INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS --
DESCRIPTION OF THE SALE OF INTERESTS IN BLAIRLOGIE
9 Additional Information Required for NOT APPLICABLE
Reoffering by Persons Deemed to be
Underwriters
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
ITEM NO. Item Caption Statement of Additional Information Caption
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF
Registrant ADDITIONAL INFORMATION
13 Additional Information About the Company NOT APPLICABLE
Being Acquired
14 Financial Statements AUDITED FINANCIALS DATED 10/31/97 AND UNAUDITED FINANCIALS
DATED 4/30/98
PART C
ITEM NO.
15-17 Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE:
PIMCO FUNDS: MULTI-MANAGER SERIES (the "TRUST")
From Post-Effective Amendment No. 36 of the Trust's Registration Statement (the
"Trust Registration Statement"), filed October 30, 1998 (SEC File Nos. 33-36528;
811-06161), Prospectus for Class A, Class B and Class C Shares and Prospectus
for Administrative Class and Institutional Class Shares of the PIMCO Emerging
Markets Fund and PIMCO International Developed Fund, each a series of PIMCO
Funds: Multi-Manager Series, each dated November 1, 1998 and related Statement
of Additional Information for the Trust, filed November 9, 1998.
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92660
__________________, 1999
Dear Shareholder:
On behalf of the Board of Trustees (the "Trustees") of PIMCO Funds:
Multi-Manager Series (the "Trust"), we are pleased to invite you to a special
meeting of the shareholders of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund (each a "PIMCO Fund" and, together, the "PIMCO
Funds") to be held on ___________ 1999 at [10:00] a.m., Eastern time, at 2187
Atlantic Street, Stamford, Connecticut 06902 (the "Meeting"). At the Meeting,
shareholders of each PIMCO Fund will be asked to consider a proposed
reorganization of their PIMCO Fund into a corresponding newly formed portfolio
of Alleghany Funds ("Alleghany").
PIMCO Advisors L.P. ("PALP") agreed on October 24, 1998 to sell all of
its direct and indirect interests in its subsidiary, Blairlogie Capital
Management ("Blairlogie"), to Alleghany Asset Management, Inc. PALP serves as
the investment adviser and Blairlogie acts as the investment sub-adviser to the
PIMCO Funds. As described more fully in the Proxy Statement/Prospectus, the
Trustees determined that it would be in the best interests of the shareholders
of the PIMCO Funds to approve reorganizations whereby each PIMCO Fund would
reorganize into a portfolio of Alleghany (each such portfolio an "Alleghany
Fund" and, collectively, the "Alleghany Funds"). After the reorganizations (each
a "Reorganization," and, collectively, the "Reorganizations"), Blairlogie would
continue to manage the investment portfolios of the Alleghany Funds as it
currently does for the current PIMCO Funds, but pursuant to different investment
advisory arrangements.
In that regard, at the upcoming Meeting, the Trustees are asking you to
approve a reorganization of your PIMCO Fund into the corresponding Alleghany
Fund. If all approvals are obtained, each PIMCO Fund would be reorganized into
its corresponding Alleghany Fund on or about March 31, 1999, when your PIMCO
Fund shares would be exchanged for shares of equal value of the corresponding
Alleghany Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE THE
PROPOSED REORGANIZATIONS FOR YOUR PIMCO FUND(S).
SHAREHOLDERS SHOULD FILL OUT THE ENCLOSED PROXY FOR EACH OF THOSE PIMCO
FUNDS IN WHICH THEY HOLD SHARES IN ORDER TO VOTE THOSE SHARES.
In considering these matters, you should note:
SUBSTANTIALLY IDENTICAL OBJECTIVES AND POLICIES
The PIMCO Funds are proposed to be reorganized into newly formed
Alleghany Funds with investment policies and objectives that are substantially
identical to those of the corresponding PIMCO Funds.
SAME DAY-TO-DAY PORTFOLIO MANAGEMENT
Blairlogie will enter into an investment advisory arrangement with
Alleghany for management of the Alleghany Funds. Under this arrangement,
Blairlogie will manage the Alleghany Funds in a manner consistent with the way
the PIMCO Funds are managed under the current arrangements, pursuant to which
Blairlogie currently provides portfolio management services to the PIMCO Funds
as sub-adviser.
SAME VALUE OF SHARES
The total dollar value of the Alleghany Fund shares you receive in the
Reorganizations will be the same as the total dollar value of the PIMCO Fund
shares that you hold immediately before the Reorganizations. The Trust and
Alleghany have been advised that the Reorganizations should be tax free to each
of the PIMCO Funds and their shareholders, and no front-end or contingent
deferred sales charges will be charged in connection with the exchange of each
PIMCO Fund's shares for the corresponding Alleghany Fund shares. In addition,
because the Alleghany Funds are no-load funds, there will be no sales charges
imposed upon purchases or redemptions made following the Reorganizations.
OPERATING EXPENSE RATIOS
The annual fund operating expense ratio (after reimbursements and
waivers) for the relevant class of shares in the corresponding Alleghany Fund
after each Reorganization is expected to be equal to or less than the current
annual fund operating expense ratio of your PIMCO Fund class for a period of at
least 2 years after the Reorganizations.
The proposed Reorganizations are expected to benefit PIMCO Fund
shareholders by:
offering actual or potential reductions in total operating expense ratios; and
offering shareholders the opportunity to continue with funds managed by
Blairlogie.
The formal Notice of Special Meeting of shareholders, the Proxy
Statement/Prospectus and a proxy are enclosed. If you own shares in more than
one of the PIMCO Funds named above, more than one proxy is included with these
materials. Whether or not you plan to attend the Meeting, you may vote by proxy
in any of the following ways: by (1) mail, by marking, signing, dating and
mailing the enclosed proxy in the enclosed postage-paid envelope; or (2)
telefacsimile, by marking, signing, dating and faxing the enclosed proxy to
_____________ at ______________ (a confirmation of your telefacsimile vote will
be mailed to you).
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE
TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. SHAREHOLDERS ALSO
MAY RETURN PROXIES BY TELEFAX.
PLEASE RESPOND - YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY OR
PROXIES IN THE ENCLOSED POSTAGE-PAID ENVELOPE, OR FAX THE ENCLOSED PROXY OR
PROXIES TO ________________, SO THAT YOU WILL BE REPRESENTED AT THE MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
THE TRUST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
Shareholders of record on _____________ will be entitled to notice of,
and to vote at, the Meeting.
The proposed Reorganizations and the reasons for the Trustees'
unanimous recommendation are discussed in detail in the enclosed materials,
which you should read carefully. If you have any questions about the
reorganization, please do not hesitate to call PIMCO Funds Distributors LLC toll
free at 1-800-426-0107.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
Stephen J. Treadway
Executive Vice President
11003507\V-11 v
PIMCO FUNDS: MULTI-MANAGER SERIES
PIMCO EMERGING MARKETS FUND
PIMCO INTERNATIONAL DEVELOPED FUND
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
NOTICE OF SPECIAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON , 1999
To PIMCO Emerging Markets Fund and PIMCO International Developed Fund
Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the
"Meeting") of the PIMCO Emerging Markets Fund and PIMCO International Developed
Fund (each a "PIMCO Fund" and, together, the "PIMCO Funds"), each of which is a
series of PIMCO Funds: Multi-Manager Series (the "Trust"), will be held at 2187
Atlantic Street, Stamford, Connecticut 06902, on , 1999 at [10:00] a.m., Eastern
time, for purpose of considering and voting on the following proposals:
Item 1. A proposal to be voted on separately by the shareholders of
each of the PIMCO Funds to approve an Agreement and Plan of Reorganization
providing, with respect to each such PIMCO Fund, for the transfer of the assets
and stated liabilities of such PIMCO Fund to a newly formed portfolio of
Alleghany Funds in exchange for shares of designated classes of such
corresponding Alleghany Fund (each such transaction a "Reorganization," and,
collectively, the "Reorganizations"). Item 1 is described in the attached Proxy
Statement/Prospectus. YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR
OF THE PROPOSAL.
Item 2. Such other business as may properly come before the Meeting or
any adjournment(s).
Shareholders of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund will consider Proposal 1 separately and the
approval of the Reorganization of one of the PIMCO Funds shall not be contingent
upon the approval of the Reorganization of the other PIMCO Fund.
Shareholders of record as of the close of business on , 1999 are entitled to
notice of, and to ------------------------- vote at, the Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE
TRUST'S BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX. PROXIES MAY BE REVOKED AT ANY
TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE TRUST A WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON.
By Order of the Board of Trustees,
Newton B. Schott, Jr., Secretary
, 1999
PIMCO FUNDS: MULTI-MANAGER SERIES
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
1-800-426-0107
PROXY STATEMENT/PROSPECTUS
DATED , 1999
This Proxy Statement/Prospectus is furnished to shareholders of PIMCO
Emerging Markets Fund and PIMCO International Developed Fund (each a "PIMCO
Fund" and, together, the "PIMCO Funds"), each a series of PIMCO Funds:
Multi-Manager Series (the "Trust"), in connection with the solicitation of
proxies by the Board of Trustees of the Trust. The Board of Trustees of the
Trust has called a Special Meeting of Shareholders (the "Meeting") at [10:00]
a.m. (Eastern Time) on , 1999 at 2187 Atlantic Street, Stamford, Connecticut
06902. At the Meeting, shareholders of each PIMCO Fund will be asked to approve
a proposed Agreement and Plan of Reorganization (the "Reorganization Agreement")
by and between the Trust, on behalf of each PIMCO Fund, and Alleghany Funds
("Alleghany"), on behalf of each relevant portfolio of Alleghany. A form of the
Reorganization Agreement is attached as Appendix I.
The accompanying Notice of Special Meeting of Shareholders, this Proxy
Statement/Prospectus and the enclosed form of proxy are being mailed to
shareholders on or about ________________, 1999.
The Trust and Alleghany are both registered open-end series management
investment companies (mutual funds). Alleghany offers money market, tax-exempt,
bond and equity investment portfolios, and the Trust, together with PIMCO Funds:
Pacific Investment Management Series, offers stock, bond and balanced investment
portfolios. The Reorganization Agreement provides for the transfer of assets and
stated liabilities of each PIMCO Fund to a corresponding newly formed portfolio
of Alleghany (each an "Alleghany Fund" and, together, the "Alleghany Funds") in
exchange for shares ("Shares") of equal value of the relevant classes of the
corresponding Alleghany Fund (each such transaction, a "Reorganization" and,
collectively, the "Reorganizations"). As a result of each Reorganization,
shareholders of each PIMCO Fund will become shareholders of the corresponding
Alleghany Fund. Because the Alleghany Funds are no-load funds, holders of Class
A, Class B and Class C shares of the PIMCO Funds will not receive Class A, B or
C Shares of the Alleghany Funds but will instead receive Class N Shares of the
Alleghany Funds. Holders of Administrative Class shares of the PIMCO Funds will
also receive Class N shares of the corresponding Alleghany Fund, while holders
of Institutional Class shares of the PIMCO Funds will receive Class I Shares of
the corresponding Alleghany Fund. The table entitled "Capitalization" under
"Information Relating to the Proposed Reorganization--Capitalization," shows
each class of each PIMCO Fund and the corresponding class of the corresponding
Alleghany Funds.
It is expected that the solicitation of proxies will be made primarily
by mail. Officers and service contractors of the Trust also may solicit proxies
by telephone, telegraph or personal interview. In addition to solicitation of
proxies by mail, officers of the Trust and officers and employees of PIMCO
Advisors L. P. ("PALP"), affiliates of PALP or other representatives of the
Trust may also solicit proxies by telephone or telegraph or in person. The
expenses incurred in connection with the solicitation will not be borne by the
shareholders of the PIMCO Funds but will instead be borne by Alleghany.
Only shareholders of record at the close of business on
[_________________,] 1999 (the "Record Date") will be entitled to notice of and
to vote at the Meeting or any adjournment thereof. Each whole share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional share shall be entitled to a proportionate fractional vote. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions thereon or, if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Proxies may be revoked at any time before they are exercised by submitting to
the Trust written notice of revocation or a subsequently executed Proxy or by
attending the Meeting and voting in person. Shareholders of each PIMCO Fund will
vote only on the approval or disapproval of that PIMCO Fund's Reorganization.
This Proxy Statement/Prospectus sets forth concisely the information
that a PIMCO Fund shareholder should know before voting and before investing in
an Alleghany Fund, and should be retained for future reference. This Proxy
Statement/Prospectus is accompanied by the following documents: (i) the Annual
Report for the Alleghany Funds dated October 31, 1997 and the Semi-Annual Report
for the Alleghany Funds dated April 30, 1998 and (ii) the statement of
additional information relating to this Proxy Statement/Prospectus dated the
date hereof. Additional information is set forth in the prospectuses dated
November 1, 1998, for the PIMCO Funds. Each of these documents is on file with
the Securities and Exchange Commission (the "SEC"), and is available along with
other related materials on the SEC's Internet World Wide Website (www.sec.gov)
and is also available without charge by calling or writing the Trust or
Alleghany at the respective telephone numbers or addresses stated on the cover
sheet of this Proxy Statement/Prospectus. The information contained in the
prospectuses for the PIMCO Funds is incorporated by reference into this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus is the Trust's proxy statement for the
Meeting, and Alleghany's prospectus for the Shares.
THE SECURITIES OF THE ALLEGHANY FUNDS OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, ALLEGHANY OR THEIR RESPECTIVE SPONSORS, IF
ANY, AND DISTRIBUTORS.
MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF YOUR INVESTMENT. THE DISTRIBUTOR OF THE PIMCO FUNDS IS PIMCO FUNDS
DISTRIBUTOR LLC.
TABLE OF CONTENTS
FEE TABLES.................................................................................................1
SUMMARY 1
Proposed Reorganizations........................................................................ 1
Overview of PIMCO Funds and Alleghany Funds..................................................... .1
Federal Income Tax Consequences...................................................................1
Board Consideration by Alleghany and the Trust................................................... 2
Principal Risk Factors............................................................................2
Voting Information...............................................................................2
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS.......................................................2
The Proposed Reorganizations......................................................................2
Description of the Sale of Interests in Blanlogie.................................................3
Description of the Reorganization Agreement.......................................................3
Table - Capitalization...........................................................................5
Consideration by the Board of Trustees of the Trust..............................................5
Federal Income Tax Consequences..................................................................6
COMPARISON OF PIMCO FUNDS AND ALLEGHANY FUNDS.............................................................7
Overview of PIMCO Funds and Alleghany Funds......................................................7
Investment Objectives and Policies...............................................................7
Expense Ratios...................................................................................7
Table - Total Annual Expense Information.........................................................7
Shareholder Transactions and Services............................................................8
Acquisition and Redemption of Shares.............................................................8
Dividends and Other Distributions................................................................8
Forms of Organization............................................................................8
Share Structure..................................................................................9
Portfolio Manager........................................................................... ....9
Risk Factors.....................................................................................10
Governing Documents..............................................................................11
Proposed Investment Management and Administration Agreement;
Other Contractual Arrangements.................................................................13
Table - Other Service Providers For the PIMCO Funds and Alleghany Funds..........................15
INFORMATION RELATING TO VOTING MATTERS....................................................................16
Required Votes; Quorum; Adjournments............................................................16
Solicitation of Proxies.........................................................................17
Annual Meetings and Shareholder Meetings;
Shareholder Proposals for Future Meetings.......................................................17
Shareholder and Board Approvals..................................................................17
Table - 5% Shareholders..........................................................................18
ADDITIONAL INFORMATION ABOUT ALLEGHANY...................................................................20
ADDITIONAL INFORMATION ABOUT THE TRUST...................................................................20
FINANCIAL STATEMENTS.....................................................................................21
OTHER BUSINESS...........................................................................................21
INDEPENDENT PUBLIC ACCOUNTANTS...........................................................................22
SHAREHOLDER INQUIRIES....................................................................................21
APPENDICES
I........Agreement And Plan of Reorganization
II.......Fee and Expense Summaries of PIMCO Funds and the Corresponding Alleghany Funds
III......Investment Objectives
IV.......Shareholder Transactions and Services of the Alleghany Funds and PIMCO Funds
V........Alleghany/Blairlogie Investment Advisory Agreement
23
11003507\V-11
11003507\V-11
FEE TABLES
Pro Forma Expense Information for each Reorganization is included in
Appendix II to this Proxy Statement/Prospectus.
SUMMARY
PROPOSED REORGANIZATIONS. The Reorganization Agreement provides for:
(i) the transfer of all of the assets and stated liabilities of each PIMCO Fund
to a corresponding Alleghany Fund in exchange for Shares of related classes of
the corresponding Alleghany Fund; and (ii) the distribution of Alleghany Fund
Shares to the shareholders of the PIMCO Funds in liquidation of the PIMCO Funds.
The Reorganizations are subject to a number of conditions with respect to each
PIMCO Fund, including shareholder approval. Following the Reorganizations, the
PIMCO Funds will cease to operate as separate Funds and will be liquidated.
As a result of each proposed Reorganization, a PIMCO Fund shareholder
will become a shareholder of the corresponding Alleghany Fund and will hold,
immediately after the closing of such Reorganization (a "Closing" and,
collectively, the "Closings"), Shares of the related class of the corresponding
Alleghany Fund having a total dollar value equal to the total dollar value of
the shares of the PIMCO Fund that the shareholder held immediately before the
Closing(s).
OVERVIEW OF PIMCO FUNDS AND ALLEGHANY FUNDS. The investment objectives,
policies and restrictions of each PIMCO Fund are substantially identical to
those of the corresponding Alleghany Fund. Blairlogie will be the investment
adviser for the Alleghany Funds and is expected to manage their portfolios in a
manner consistent with the way the PIMCO Funds have been managed.
The table entitled "Total Annual Expense Information," under
"Comparison of PIMCO Funds and Alleghany Funds -- Expense Ratios," shows the
current total operating expenses for each class of each PIMCO Fund along with
the total operating expenses (after waivers and reimbursements) that are
expected to be borne by shareholders of each class of each Alleghany Fund after
the Reorganizations. Blairlogie has committed to maintain, for a period of at
least two years after the Closing, the expense ratios for all Alleghany Fund
classes, absent extraordinary circumstances or a reduction in fund assets that
impacts fee levels (the "Expense Commitment"). The proposed Reorganizations may
result in actual or potential reductions in total operating expense ratios.
Appendix II to this Proxy Statement/Prospectus provides additional
information about the fees and expenses for each class of each PIMCO Fund along
with the total operating expenses (after waivers and reimbursements) for each
class of each Alleghany Fund. The PIMCO Funds have a different administrator,
distributor, transfer agent, independent auditor and proposed investment and
administration agreement; other contractual arrangements and different trustees
from the Alleghany Funds. See "Comparison of PIMCO Funds and Alleghany Funds --
Proposed Investment Management and Administration Agreement; Other Contractual
Arrangements."
The Alleghany/Blairlogie Emerging Markets Fund and the
Alleghany/Blairlogie International Developed Fund will each issue two classes of
shares in the Reorganizations, Class N Shares and Class I Shares. Pursuant to
the Reorganizations, holders of Class A, B, C and Administrative Class shares of
the PIMCO Funds shall receive Class N Shares of the corresponding Alleghany Fund
and the Institutional Class shares shall receive Class I Shares of the Alleghany
Funds. See "Comparison of PIMCO Funds and Alleghany Funds -- Share Structure."
The Alleghany Funds are sold at net asset value, with no front-end or
contingent deferred sales load, whereas the PIMCO Funds charge a front-end sales
charge, a servicing fee and a possible contingent deferred sales charge on their
Class A Shares and a contingent deferred sales charge and a distribution and
servicing fee on their Class B and C Shares. NO FRONT-END OR CONTINGENT DEFERRED
SALES CHARGE WILL BE IMPOSED ON ANY OF THE SHAREHOLDERS IN CONNECTION WITH THE
REORGANIZATIONS OR ON PURCHASES OR REDEMPTIONS OF ALLEGHANY FUND SHARES AFTER
THE REORGANIZATIONS.
The purchase, redemption, dividend and other policies and procedures of
the PIMCO Funds and the Alleghany Funds are substantially similar. See
"Comparison of PIMCO Funds and Alleghany Funds -- Shareholder Transactions and
Services" and Appendix IV to this Proxy Statement/Prospectus.
FEDERAL INCOME TAX CONSEQUENCES. Sonnenschein Nath & Rosenthal, legal
counsel to Alleghany, will issue (an) opinion(s) as of the Closings to the
effect that, based on certain assumptions and representations of the PIMCO
Funds, the Alleghany Funds and Blairlogie the Reorganizations should not give
rise to the recognition of gain or loss for federal income tax purposes to the
PIMCO Funds, the Alleghany Funds or their respective shareholders.
BOARD CONSIDERATION BY ALLEGHANY AND THE TRUST. In considering the
Reorganizations, the Boards of Trustees of each of the Trust and Alleghany,
including the disinterested Trustees thereof, were advised by their respective
legal counsel as to their fiduciary duties under the Investment Company Act of
1940 (the "1940 Act") and the required determinations that each Board should
make under the 1940 Act in connection with the Reorganizations. After
considering the relevant factors, as discussed in greater detail below under
"Information Relating to the Proposed Reorganizations -- Consideration by the
Board of Trustees of the Trust," the Trust's Board of Trustees found, on behalf
of the PIMCO Funds, that participation in the Reorganizations, as contemplated
by the Reorganization Agreement, is in the best interests of the PIMCO Funds and
their shareholders and that the interests of the shareholders of the PIMCO Funds
would not be diluted as a result of the Reorganizations. THE TRUST'S BOARD OF
TRUSTEES UNANIMOUSLY RECOMMENDS THAT PIMCO FUND SHAREHOLDERS APPROVE THE
REORGANIZATIONS.
Similarly, after considering the relevant factors, the Alleghany Board,
on behalf of the Alleghany Funds, found that participation in the
Reorganizations, as contemplated by the Reorganization Agreement, is in the best
interests of the Alleghany Funds and that the interests of the shareholders of
the Alleghany Funds would not be diluted as a result of the Reorganizations.
PRINCIPAL RISK FACTORS. Because of the substantially identical nature
of the investment objectives, policies and restrictions of the PIMCO Funds and
the corresponding Alleghany Funds, an investment in an Alleghany Fund involves
risks that are similar to those of the corresponding PIMCO Fund. These
investment risks, in general, include those typically associated with investing
in a portfolio of securities of foreign issuers and, in the case of PIMCO
Emerging Markets Fund, the risks include the fact that the issuers may be based
in countries with developing economies. See "Comparison of PIMCO Funds and
Alleghany Funds -- Risk Factors."
VOTING INFORMATION. This Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by the Trust's Board of Trustees
for the Meeting. Only shareholders of record at the close of business on , 1999
will be entitled to vote at the Meeting. Each whole share shall be entitled to
one vote as to any matter on which it is entitled to vote, and each fractional
share shall be entitled to a proportional fractional vote. Shares represented by
a properly executed proxy will be voted in accordance with the instructions
thereon or, if no specification is made, the persons named as proxies will vote
in favor of each proposal set forth in the Notice of Meeting. Proxies may be
revoked at any time before they are exercised by submitting to the Trust a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person. For additional information, see "Information
Relating to Voting Matters."
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS
THE PROPOSED REORGANIZATIONS. The terms and conditions of the
Reorganizations are set forth in the Reorganization Agreement. Certain
provisions of the Reorganization Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Appendix I to this Proxy
Statement/Prospectus.
The Reorganization Agreement provides for (i) the transfer of all of
the assets and stated liabilities of each PIMCO Fund to the corresponding
Alleghany Fund in exchange for Shares of the corresponding classes of the
corresponding Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares
to the shareholders of the PIMCO Funds in liquidation of the PIMCO Funds. The
Reorganizations are subject to a number of conditions with respect to each PIMCO
Fund, including shareholder approvals and consummation of the Blairlogie
Transaction described below under "Information Relating to the Proposed
Reorganizations -- Description of the Sale of Interests in Blairlogie."
Following the Reorganizations, the PIMCO Funds will cease to operate as separate
funds and will be liquidated.
As a result of the Reorganizations, each PIMCO Fund shareholder will
become a shareholder of the corresponding Alleghany Fund and will hold,
immediately after the Closing with respect to such Alleghany Fund, Shares of the
corresponding Alleghany Fund having an aggregate net asset value per share equal
to the aggregate net asset value per share of the shares of the PIMCO Fund that
the shareholder held immediately before the Closing(s). Because the Shares will
be issued at net asset value in exchange for the net assets of the corresponding
PIMCO Fund, the aggregate net asset value per share of the Alleghany Shares so
issued will equal the aggregate net asset value per share of the shares of the
corresponding PIMCO Fund immediately prior to the Reorganizations. Thus, the
Reorganization will not result in a dilution of any shareholder.
At a meeting held on _________, 1999, the Board of Trustees of the
Trust, including those Trustees who are not "interested persons" of the PIMCO
Funds, as defined in the 1940 Act, considered and approved the Reorganizations.
Under the Reorganization Agreement, each Alleghany Fund would acquire the assets
and assume the stated liabilities of the corresponding PIMCO Fund, in exchange
for Shares of the corresponding classes of the corresponding Alleghany Fund.
Such Alleghany Fund Shares would then be distributed to the corresponding PIMCO
Fund's shareholders, representing full and fractional shares with an aggregate
net asset value in such Alleghany Fund equal to the aggregate net asset value of
the corresponding PIMCO Fund shares held by such shareholder immediately prior
to the Reorganization.
If, with respect to either PIMCO Fund, a Reorganization is approved by
such PIMCO Fund's shareholders and implemented, shareholders of such PIMCO Fund
would become shareholders of the corresponding Alleghany Fund which was
specifically created to acquire the assets and assume the stated liabilities of
such PIMCO Fund. The Alleghany Funds' investment objectives and policies are
substantially identical to those of the corresponding PIMCO Funds. Blairlogie
Capital Management ("Blairlogie"), the PIMCO Funds' current investment
sub-adviser, will serve as adviser to the Alleghany Funds.
There will be certain legal, operational and practical differences
between the PIMCO Funds and the corresponding Alleghany Funds, based on
differences in applicable state law and variations in shareholder services and
redemption procedures. These differences are described below. The fees and
expenses that an Alleghany Fund shareholder will pay, directly or indirectly,
will also differ from those incurred by shareholders of the corresponding PIMCO
Funds, as explained below. It is anticipated that following the Reorganizations,
taking into account voluntary fee waivers and expense reimbursements, the
shareholders of each Alleghany Fund will be subject to operating expenses, as a
percentage of average daily net assets, which are equal to or less than those
currently borne by the shareholders of the corresponding PIMCO Fund. The table
entitled "Total Annual Expense Information" under "Comparison of PIMCO Funds and
Alleghany Funds" contains a summary for each of the Class A, B and C and
Institutional and Administrative Class shares in each of the PIMCO Funds for the
fiscal year ended June 30, 1998 and pro forma projections for the corresponding
classes of Shares of the Alleghany Funds which will be received by the
shareholders of the PIMCO Funds.
DESCRIPTION OF THE SALE OF INTERESTS IN BLAIRLOGIE. PALP has entered
into a Purchase and Sale Agreement (the "Purchase Agreement") dated October 24,
1998 by and among PALP, certain of PALP's affiliates (together with PALP, the
"Sellers"), Blairlogie International LLC ("Blairlogie International") and
certain other parties, pursuant to which the Sellers will sell their direct and
indirect ownership interests in Blairlogie to Blairlogie International and its
subsidiary (together, the "Buyer"). Blairlogie International will be a wholly
owned subsidiary of Alleghany Asset Management, Inc.
Sellers currently own a 75% general partner interest in Blairlogie (the
"Sellers' Interest"). At the closing of the transactions contemplated by the
Purchase Agreement (the "Blairlogie Transaction"), Sellers will transfer the
Sellers' Interest to Buyer. The aggregate consideration to be paid by Buyer to
the Sellers is expected to be approximately $6.6 million, subject to certain
adjustments.
The completion of the Blairlogie Transaction is contingent upon
obtaining the consent of Blairlogie clients representing a significant portion
of the assets currently under the management of Blairlogie. Other conditions
precedent to the closing of the Blairlogie Transaction include, among other
things, that all regulatory filings, applications, notifications and consents
have been duly and properly made or obtained. If the conditions to the
Blairlogie Transaction are not met and the Blairlogie Transaction is therefore
not consummated, it is anticipated that the Reorganizations would not occur.
Certain current employees of Blairlogie, including Mr. Gavin Dobson and
Mr. James Smith, will be offered employment and other compensation arrangements
in connection with the Blairlogie Transaction.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. As noted, the Board of
Trustees of Alleghany has created and designated two new portfolios, the
Alleghany/Blairlogie Emerging Markets Fund and the Alleghany/Blairlogie
International Developed Fund, for the specific purpose of acquiring all of the
assets and the stated liabilities of the corresponding PIMCO Fund. The
Reorganization Agreement provides that at the Closing(s) the assets and stated
liabilities of each PIMCO Fund will be transferred to the corresponding
Alleghany Fund in exchange for full and fractional Shares of the corresponding
Alleghany Fund, as shown in the following table:
PIMCO FUND/SHARE CLASS CORRESPONDING ALLEGHANY FUND/SHARE CLASS
PIMCO EMERGING MARKETS FUND ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
PIMCO INTERNATIONAL DEVELOPED FUND ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
The Shares issued by each Alleghany Fund in each Reorganization will
have an aggregate net asset value equal to the aggregate net asset value of the
shares of the corresponding PIMCO Fund that are outstanding immediately before
the Closing. Immediately after each Closing, each PIMCO Fund will distribute the
Shares of the corresponding Alleghany Fund received in the Reorganization to its
shareholders in liquidation of the PIMCO Fund. Each shareholder owning shares of
a particular PIMCO Fund at the Closing with respect to such PIMCO Fund will
receive Shares of the corresponding class of the corresponding Alleghany Fund,
and will receive any unpaid dividends or distributions that were declared before
the Closing on PIMCO Fund shares. Alleghany will establish an account for each
former shareholder of the PIMCO Funds reflecting the appropriate number of
Alleghany Fund Shares distributed to that shareholder. Shares of the Alleghany
Funds will be in uncertificated form.
The Reorganizations are subject to a number of conditions, including
the following: approval of the Reorganization Agreement and the related matters
described in this Proxy Statement/Prospectus by shareholders of the PIMCO Funds
at the Meeting; the receipt of certain legal opinions described in the
Reorganization Agreement (which include opinions of counsel to Alleghany that
(a) the Alleghany Fund Shares issued in the Reorganizations will be validly
issued, fully paid and non-assessable and (b) even though there is no
controlling legal authority on point, the Reorganizations should not give rise
to recognition of gain or loss for federal income tax purposes to the PIMCO
Funds, the Alleghany Funds or their respective shareholders); the receipt of
certain certificates from the parties concerning the continuing accuracy of the
representations and warranties in the Reorganization Agreement; the receipt of
"comfort letters" from the independent public accountants of the Trust and
Alleghany regarding various financial matters; the receipt of any necessary
exemptive relief or no-action assurances requested from the Securities and
Exchange Commission or its Staff (the "SEC") with respect to Section 17(a) and
17(d) of the 1940 Act and Rule 17d-1 thereunder; and the parties' performance in
all material respects of their respective covenants and undertakings in the
Reorganization Agreement.
The Reorganization Agreement may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Meeting that
would have a material adverse effect on any PIMCO Fund's shareholder's
interests. Assuming satisfaction of the conditions in the Reorganization
Agreement, it is anticipated that the Closing(s) will be effective as of the
close of business on [March 31, 1999] or, in accordance with the Reorganization
Agreement, such other date as agreed to in writing by the officers of the
parties to the Reorganization Agreement.
The Reorganization Agreement provides that Alleghany has committed to
bear the expenses incurred in connection with entering into and carrying out the
provisions of the Reorganization Agreement, provided that the Trust will be
responsible for all accounting fees incurred by it or its affiliates in
connection with entering into or carrying out the Reorganization Agreement.
See Appendix I to this Proxy Statement/Prospectus.
Each PIMCO Fund will be reorganized into a corresponding Alleghany
Fund. The following table sets forth, as of [November 18, 1998], (a) the
capitalization of each PIMCO Fund, separated, for each class of shares of such
fund, into the net asset value of the fund allocable to such class, and (b) the
pro forma capitalization, assuming the consummation of the Reorganizations, of
each Alleghany Fund, separated, for each class of shares of such fund, into the
net asset value of the fund allocable to such class. The Alleghany Funds were
created in anticipation of the Reorganizations. Consequently, neither Alleghany
Fund will have any assets outstanding prior to the Reorganizations and the
capitalization of each PIMCO Fund immediately prior to its Reorganization, and
the capitalization of each corresponding Alleghany Fund immediately following
such Reorganization will be identical. They will, however, be different than as
set forth below as a result of daily share purchase and redemption activity in
the PIMCO Funds as well as the PIMCO Funds' other ongoing operations.
CAPITALIZATION as of November 18, 1998
TOTAL NET ASSETS
ALLOCABLE TO SHARES OUTSTANDING NET ASSET VALUE
CLASS OF SHARES PER SHARE
PIMCO EMERGING MARKETS FUND
Class A 422,454.84 49,501.191 8.53
Class B 310,800.19 36,889.158 8.43
Class C 819,055.54 97,225.908 8.42
Administrative Class 1,436,629.24 167,765.999 8.56
Institutional Class 21,743,015.72 2,528,090.072 8.60
PRO FORMA ALLEGHANY/BLAIRLOGIE
EMERGING MARKETS FUND
Class N 2,988,939.81 349,040.977 8.56
Class I 21,743,015.72 2,528,090.072 8.60
PIMCO INTERNATIONAL DEVELOPED FUND
Class A 5,342,478.49 403,586.969 13.24
Class B 2,677,957.35 204,662.247 13.08
Class C 6,223,129.14 475,337.803 13.09
Administrative Class 6,831,111.95 514,534.970 13.28
Institutional Class 112,063,689.72 8,424,572.473 13.30
PRO FORMA ALLEGHANY
INTERNATIONAL DEVELOPED FUND
Class N 21,074,676.93 1,587,392.849 13.28
Class I 112,063,689.72 8,424,572.473 13.30
The Alleghany/Blairlogie Emerging Markets Fund and the
Alleghany/Blairlogie International Developed Fund will each issue two classes of
shares in the Reorganizations: Class N shares and Class I shares. Pursuant to
the Reorganizations, holders of Class A, B and C and Administrative Class shares
of the PIMCO Funds shall receive Class N shares of the corresponding Alleghany
Fund, and holders of Institutional Class shares shall receive Class I shares of
the corresponding Alleghany Fund.
CONSIDERATION BY THE BOARD OF TRUSTEES OF THE TRUST. [On , 1998, the
Trust's Board of Trustees, including a majority of its Independent Directors,
determined that the Reorganizations are in the best interest of the PIMCO Funds,
that the terms of Reorganizations are fair and reasonable and that the interests
of the shareholders of the PIMCO Funds will not be diluted as a result of the
Reorganizations.]
Similarly, after considering the relevant factors, the Board of
Trustees of Alleghany found that participation in the Reorganizations, as
contemplated by the Reorganization Agreement, is in the best interests of each
of the Alleghany Funds.
In considering whether to approve the proposed Reorganizations, the
Board of Trustees of the Trust was provided with a variety of information about
the Reorganizations, the PIMCO Funds, the Alleghany Funds and Alleghany. These
materials summarized the principal features of the Reorganizations, including
the condition to each Reorganization of the receipt by the Trust and each PIMCO
Fund of an opinion that each Reorganizaiton should be tax free for the
participating PIMCO Funds and Alleghany Funds and their shareholders. In
addition, the Trustees of the Trust received comparative information for the
PIMCO Funds and the corresponding Alleghany Funds with respect to the following
matters: (a) investment objectives and policies; (b) advisory, distribution and
other servicing arrangements; (c) expenses (with and without giving effect to
anticipated expense limitations), including PRO FORMA expenses assuming
consummation of the Reorganizations and expenses relative to peer groups; and
(d) performance relative to peer groups. The Trustees of the Trust were also
provided with information about Alleghany and its investment advisory
organization, including information regarding those individuals with
responsibility for portfolio management services for each Alleghany Fund, and
the anticipated impact of the proposed Reorganizations on the Alleghany Funds'
shareholders.
The Reorganization Agreement provides that Alleghany intends to meet
the conditions of the requirements of the "safe harbor" of Section 15(f) of the
1940 Act with respect to the PIMCO Funds and their successors. Section 15(f) of
the 1940 Act provides that, when a change in control of an investment adviser
occurs, the investment adviser or any of its affiliated persons may receive any
amount or benefit in connection therewith as long as, among other things, no
"unfair burden" is imposed on the investment company as a result of the
transaction relating to the change of control, or any express or implied terms,
conditions or understandings applicable thereto. The term "unfair burden" as
defined by the 1940 Act includes any arrangement during the two-year period
after the transaction whereby the investment adviser (or predecessor or
successor adviser), or any "interested person" of any such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). The "safe harbor" provisions of Section 15(f) also require that, for
the three-year period immediately following the Reorganizations, at least 75% of
the Trustees of Alleghany will not be (a) "interested persons" (as defined in
the 1940 Act) of Blairlogie or (b) interested persons of PALP. The Trustees of
the Trust were informed that the Board of Trustees of Alleghany will satisfy
this requirement prior to the Reorganizations.
At the Board of Trustees' meeting on , 1999 Alleghany represented to
the Trustees of the Trust that Blairlogie would commit to the Expense Commitment
described below under "Comparison of PIMCO Funds and Alleghany Funds -- Overview
of PIMCO Funds and Alleghany Funds" and in Appendix II. Based upon this
commitment and the current expense ratio information provided for both the PIMCO
Funds and the Alleghany Funds and the anticipated expense limitations committed
to by Blairlogie, the Trustees of the Trust concluded that, for the first two
years after the Closings, the Reorganizations would likely result in expenses to
PIMCO Fund shareholders which are equal to or less than those currently
experienced by such PIMCO Fund shareholders.
After consideration of the foregoing and other factors, and with the
advice and assistance of counsel, the Trustees of the Trust unanimously
determined that the Reorganizations are in the best interest of the shareholders
of each PIMCO Fund, and that the shareholders of each PIMCO Fund will not be
diluted as a result of such Reorganizations.
Information about the similarities and differences between the
Alleghany Funds and the PIMCO Funds regarding the identity and compensation of
the investment adviser, the voting rights of shareholders, any restrictions or
material obligations associated with ownership of shares, the share structure,
the identity of the distributor, sales charges, any minimum initial or
subsequent investment, Rule 12b-1 plans (including associated fees and
expenses), and shareholder redemption, repurchase and exchange rights, is
included in other appropriately titled sections within this Proxy
Statement/Prospectus and the Appendices hereto.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of each Reorganization is
subject to the condition that the Trust and Alleghany receive an opinion, based
upon certain representations and assumptions, from Sonnenschein Nath & Rosenthal
to the effect that for federal income tax purposes (A) (i) each of the Alleghany
Funds and each of the PIMCO Funds will be treated as corporations separate from
the other series of Alleghany and the Trust, respectively; (ii) although there
is no controlling authority on point, the transfer by each of the PIMCO Funds of
all or substantially all of its assets in exchange for the corresponding
Alleghany Funds Shares and the assumption by each Alleghany Fund of certain of
the corresponding PIMCO Fund's liabilities and the subsequent liquidation of
each PIMCO Fund pursuant to the Reorganizations should constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
(the "Code"), and each Alleghany Fund and PIMCO Fund should be "a party to a
reorganization" within the meaning of Section 368(b) of the Code; and (B)
assuming that the conclusion set forth in (A) (ii) above is correct; (i) neither
of the PIMCO Funds will recognize any gain or loss as a result of the
Reorganizations; (ii) neither of the Alleghany Funds will recognize any gain or
loss on the receipt of the assets of the corresponding PIMCO Fund in exchange
for Shares of the corresponding Alleghany Fund in the Reorganizations; (iii) the
adjusted tax basis and holding period in the assets of each of the Alleghany
Funds received from the corresponding PIMCO Funds in the Reorganizations will be
the same as the adjusted tax basis and will include the holding period,
respectively, of such assets in the hands of the corresponding PIMCO Fund
immediately prior to the Reorganizations; (iv) the shareholders of each of the
PIMCO Funds who exchange shares of each of the PIMCO Funds solely for Shares of
the corresponding Alleghany Funds in the Reorganizations will not recognize any
gain or loss; (v) the aggregate tax basis of Alleghany Fund Shares received by
each shareholder of the PIMCO Funds in the Reorganizations will be the same as
the aggregate tax basis of the PIMCO Fund shares exchanged therefor; (vii) each
former PIMCO Funds shareholders' holding period of Alleghany Fund Shares
received in the Reorganizations will be determined by including the period for
which PIMCO Fund shares were held by such shareholder at the time of the
Reorganizations provided that such shareholder held the PIMCO Fund shares as a
capital asset; and (viii) each of the Alleghany Funds will succeed to and take
into account the tax attributes of the corresponding PIMCO Fund described in
Section 381(c) of the Code, subject to the conditions and limitations contained
in Section 381(c) of the Code.
If a Reorganization with respect to a PIMCO Fund is subsequently
determined not to constitute a "reorganization" within the meaning of Section
368(a) of the Code, the PIMCO Fund could recognize taxable income on the
transfer of assets to the corresponding Alleghany Fund and incur a tax
liability, and the PIMCO Fund shareholders could recognize capital gain on the
receipt of Alleghany Fund Shares in liquidation of the PIMCO Fund. It is also
possible that the PIMCO Fund may not qualify as a regulated investment company
under Subchapter M of the Code and that the PIMCO Fund, or possibly the PIMCO
Fund shareholders, could be liable for taxes upon the PIMCO Fund's income
recognized during the taxable year.
In the event that the Trust and Alleghany do not receive the foregoing
opinion of Sonnenschein Nath & Rosenthal in a form satisfactory to each of them,
the Reorganizations will not take place and the Trust's Board of Trustees will
consider other alternatives.
COMPARISON OF PIMCO FUNDS AND ALLEGHANY FUNDS
OVERVIEW OF PIMCO FUNDS AND ALLEGHANY FUNDS. The investment objectives,
policies and restrictions of each PIMCO Fund are substantially identical to
those of the corresponding Alleghany Fund. Blairlogie will be the investment
adviser for the Alleghany Funds and is expected to manage their investment
portfolios in a manner consistent with the way the PIMCO Funds have been
managed.
The PIMCO Funds have a different administrator, distributor, transfer
agent, independent auditor and different trustees from the Alleghany Funds.
The Alleghany Funds are sold at net asset value, with no front-end or
contingent deferred sales load, whereas the PIMCO Funds charge a front-end sales
charge, a servicing fee and a possible contingent deferred sales charge on their
Class A Shares, and a contingent deferred sales charge and a distribution and
servicing fee on their Class B and C Shares. NO FRONT-END OR CONTINGENT DEFERRED
SALES CHARGE WILL BE IMPOSED ON ANY OF THE SHAREHOLDERS IN CONNECTION WITH THE
REORGANIZATIONS OR ON PURCHASES OR REDEMPTIONS AFTER THE REORGANIZATIONS.
The purchase, redemption, dividend and other policies and procedures of
the PIMCO Funds and the Alleghany Funds are generally similar.
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies
and restrictions of the Alleghany Funds are substantially identical to those of
the PIMCO Funds. The PIMCO Emerging Markets Fund seeks to provide long-term
growth of capital by investing primarily in common stock of companies located in
foreign countries identified as "emerging markets" countries. The Morgan Stanley
Capital International Emerging Markets Free Index and the International Finance
Corporation Emerging Markets Index are used as the bases for choosing the
countries in which the PIMCO Emerging Markets Fund invests. However, the PIMCO
Emerging Markets Fund is not limited to the countries and weightings of these
indices. The PIMCO International Developed Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities. The Morgan Stanley Capital International EAFE (Europe, Asia,
Far East) Index (the "EAFE Index") is used as a basis for choosing countries in
which the PIMCO International Developed Fund invests. However, the PIMCO
International Developed Fund is not limited to the countries and weightings of
the EAFE Index.
EXPENSE RATIOS. The table below entitled "Total Annual Expense
Information" shows the current total operating expenses for each class of each
PIMCO Fund along with the total operating expenses (after waivers or
reimbursements) that are expected to be borne by shareholders of each class of
Alleghany Fund shares after the Reorganizations. Blairlogie has committed to
maintain for a period of at least two years after the Closing the expense ratios
set forth below under the heading "Pro Forma Combined Total Fund Operating
Expenses" (the "Expense Commitment"). Such expense ratios, as indicated in the
table, are in all cases either equal to or less than those currently experienced
by the PIMCO Funds shareholders.
TOTAL ANNUAL EXPENSE INFORMATION
TOTAL ANNUAL FUND OPERATING EXPENSES (AS A PRO FORMA COMBINED TOTAL
PERCENTAGE OF AVERAGE NET ASSETS)* FUND OPERATING EXPENSES
NAME OF FUND (AFTER WAIVERS AND REIMBURSEMENTS)
Emerging Markets
Class A Shares 1.75% 1.60%
Class B Shares 2.50% 1.60%
Class C Shares 2.50% 1.60%
Administrative Class 1.60% 1.60%
Institutional Class 1.35% 1.35%
International Developed
Class A Shares 1.50% 1.35%
Class B Shares 2.25% 1.35%
Class C Shares 2.25% 1.35%
Administrative Class 1.35% 1.35%
Institutional 1.10% 1.10%
* The administrative fee for each PIMCO Fund, which constitutes a portion of
the total fee listed, is subject to reduction to the extent that the
average net assets attributable in the aggregate to that PIMCO Fund's Class
A, Class B and Class C shares exceeds $2.5 billion.
SHAREHOLDER TRANSACTIONS AND SERVICES. The PIMCO Funds and the
corresponding Alleghany Funds offer generally similar shareholder services and
transactions. There are, however, some differences. For example, while the PIMCO
Funds charge a front-end sales charge, a servicing fee and a possible contingent
deferred sales charge on their Class A Shares, and a contingent deferred sales
charge and a distribution and servicing fee on their Class B and C Shares, the
corresponding classes of the Alleghany Funds do not charge any front-end,
contingent deferred or level sales charge on any of the Shares they offer. In
addition, except as noted below, the minimum initial investment requirements of
the Alleghany Funds are substantially similar to those of the corresponding
classes of shares of the PIMCO Funds. Generally, the minimum initial investment
requirement with respect to Institutional and Administrative Class shares of the
PIMCO Funds is $5,000,000. However, Administrative Class shares of the PIMCO
Funds will be exchanged for Class N shares of Alleghany Funds, which have a
$2,500 minimum investment requirement. Detailed expense information for each
proposed Reorganization is included in Appendix II to this Proxy
Statement/Prospectus.
Alleghany may, upon 60 days' notice, close a shareholder's account and
send the shareholder the proceeds thereof if the account balance of such
shareholder falls below $50. Similarly, the Trust has the ability to
involuntarily redeem shares, upon 60 days' written notice, from shareholders
whose accounts decrease below the amount required for a minimum initial
investment (except in the case of employer-sponsored retirement accounts). In
addition, with certain exceptions, the Trust charges a fee of $16 per annum for
accounts with balances below $2,500.
ACQUISITION AND REDEMPTION OF SHARES. After the Reorganizations,
investors wishing to acquire shares of beneficial interest in the Alleghany
Funds will be able to purchase them from First Data Distributors, Inc., the
Alleghany Funds' distributor, at their then current net asset value.
Shareholders desiring to sell their shares would be able to do so by exercising
their right to have such shares redeemed, on any day that the New York Stock
Exchange ("NYSE") is open for business, by the relevant Alleghany Fund at their
net asset value next determined as of the close of regular trading on the NYSE
for that day, after receipt of a proper redemption request. Detailed information
relating to redemptions and other shareholder transactions for each of the
Alleghany Funds and the PIMCO Funds is included in Appendix IV to this Proxy
Statement/Prospectus.
Payment for any redemption will generally be made within [two] business
days after receipt by Alleghany of a proper request for redemption, but in no
event later than within [seven] days, subject to the suspension of such right
under limited circumstances as described under "Comparison of PIMCO Funds and
Alleghany Funds -- Governing Documents." Alleghany has no current intention to
file with the SEC a notification of election pursuant to Rule 18f-1 under the
1940 Act to permit payment of redemptions in assets other than in cash.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Alleghany Funds' dividend and
other distribution policies will be substantially similar to those of the PIMCO
Funds. Alleghany intends to distribute at least annually to the Alleghany Funds'
shareholders substantially all of the Alleghany Funds' net investment income and
realized net capital gain. Alleghany also intends to provide the opportunity for
shareholders to elect to receive dividends and capital gain distributions in
cash or in additional shares of the Alleghany Funds at net asset value.
FORMS OF ORGANIZATION. The Trust and Alleghany are open-end series
management investment companies registered with the SEC under the 1940 Act. Both
the Trust and Alleghany continuously offer shares to the public. The Trust is
organized as a Massachusetts business trust, and Alleghany is organized as a
Delaware business trust. Each Trust is governed by a Declaration of Trust or
Trust Instrument, as the case may be, By-laws and a Board of Trustees. Each
Trust is also governed by applicable Delaware or Massachusetts and federal law.
Under Massachusetts' law, shareholders could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Trust's Second Amended and Restated Agreement and Declaration of Trust (the
"Declaration of Trust") disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees of the Trust. The Declaration of Trust also provides for
indemnification out of a fund's property for all loss and expense of any
shareholder of that fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which such disclaimer is
inoperative or the fund of which he or she is or was a shareholder is unable to
meet its obligations, and thus should be considered remote.
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Alleghany, a series thereof or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law
and may thereby subject Alleghany shareholders to liability. To guard against
this risk, the Trust Instrument of Alleghany (a) provides that any written
obligation of Alleghany may contain a statement that such obligation may be
enforced only against the assets of Alleghany or the particular series in
question and the obligation is not binding upon the shareholders of Alleghany;
however, the omission of such a disclaimer will not operate to create personal
liability for any shareholders, and (b) provides for indemnification out of
trust property of any shareholder held personally liable for the obligations of
Alleghany. Accordingly, the risk of a shareholder of Alleghany incurring
financial loss beyond that shareholder's investment because of shareholder
liability is limited to circumstances in which (i) the court refuses to apply
Delaware law (ii) no contractual limitation of liability was in effect and (iii)
Alleghany itself would be unable to meet its obligations. In light of Delaware
law, the nature of Alleghany's business and the nature of its assets, the risk
of personal liability to a shareholder of Alleghany is considered remote.
SHARE STRUCTURE. Currently, the Trust consists of twenty-eight
diversified investment series. Immediately after the Reorganizations, Alleghany
Funds will consist of twelve funds. See "Additional Information about Alleghany"
for a more detailed discussion of Alleghany.
Shares of both the PIMCO Funds and the Alleghany Funds are shares of
beneficial interest. Shares of both the PIMCO Funds and Alleghany Funds are
entitled to one vote for each full share held and fractional votes for
fractional shares held. With respect to both the Trust and Alleghany, matters
submitted to shareholder vote must be approved by each fund separately except
(a) when required by the 1940 Act, shares shall be voted together, and (b) when
the Trustees of the Trust determine that the matter does not affect all funds,
then only shareholders of the affected funds(s) shall be entitled to vote
separately on the matter. Each fund votes separately with respect to any
proposal to approve its investment advisory agreement, to change its fundamental
investment objectives or policies or to adopt a plan of reorganization. Each
class of shares of each PIMCO Fund and each Alleghany Fund has identical voting
rights, except that each class of shares has exclusive voting rights on any
matter submitted to shareholders that relates solely to that class, and has
separate voting rights on any matter submitted to shareholders in which the
interest of one class differ from the interests of any other class. Similarly, a
class of a fund votes separately with respect to any proposal to approve a plan
of distribution for that class or as otherwise required by the 1940 Act.
Shares of the PIMCO Funds and Alleghany Funds have no pre-emptive
rights and have only such conversion and exchange rights as the Trustees of the
Trust or the Board of Trustees of Alleghany, respectively, may grant in their
discretion. Class B shares of the PIMCO Funds automatically convert into Class A
shares after they have been held for seven years. When issued for payment as
described in their respective prospectuses, Alleghany Fund shares and PIMCO Fund
shares are fully paid and non-assessable by either Alleghany or the Trust.
Each share of a class of an Alleghany Fund represents an equal
proportionate interest in a particular portfolio with other shares of the same
class and is entitled to cash dividends and distributions earned on such shares
as are declared in the discretion of the Alleghany Trustees.
Additional information concerning the attributes of the shares issued
by the Trust is included in the Trust's prospectuses which are incorporated
herein by reference and, in the case of Alleghany, in the statement of
additional information filed with this Proxy Statement/Prospectus.
PORTFOLIO MANAGER. The persons at Blairlogie presently responsible for
the management of the PIMCO Funds' portfolios will continue to manage the
portfolios of the Alleghany Funds following the Reorganizations. James Smith is,
and after the Reorganizations will continue to be, primarily responsible for the
day-to-day management of the PIMCO Funds. Mr. Smith is a Managing Director and
the Chief Investment Officer of Blairlogie and is responsible for managing an
investment team of six professionals who, in turn, specialize in selection of
stocks within Europe, Asia and the Americas, and in currency and derivatives. He
previously served as a Senior Portfolio Manager at Murray Johnstone in Glasgow,
Scotland, responsible for international investment management for North American
clients, and at Schroder Investment Management in London. Mr. Smith received his
bachelor's degree in Economics from London University and his MBA from Edinburgh
University. He is an Associate of the Institute of Investment Management and
Research.
RISK FACTORS.
Foreign Markets. The risks attending an investment in the Alleghany
Funds are similar to the risks involved with an investment in the PIMCO Funds,
and relate largely to risks of investing in companies in foreign markets and,
for the PIMCO Emerging Markets Fund and the Alleghany/Blairlogie Emerging
Markets Fund, in developing or "emerging markets" countries.
Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in U.S.
companies. These risks include: difference in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of nationalization, expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations (which
may include suspension of the ability to transfer currency from a country); and
political instability which could affect U.S. investments in foreign countries.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency, and balance of payments
position. The securities markets, values of securities, yields and risks
associated with securities markets may change independently of each other.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit great price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar.
A Fund's investments in foreign currency-denominated debt obligations
and hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's income
distributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
Each of the PIMCO Emerging Markets Fund and Alleghany/Blairlogie
Emerging Markets Fund may invest in the securities of issuers based in countries
with developing economies. Investing in developing (or "emerging market")
countries involves certain risks not typically associated with investing in U.S.
securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. A number of emerging market countries
restrict, to varying degrees, foreign investment in securities. Repatriation of
investment income, capital, and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some emerging market
countries. A number of the currencies of emerging market countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these currencies by the PIMCO
Emerging Markets Fund or the Alleghany/Blairlogie Emerging Markets Fund.
Inflation and rapid fluctuations in inflation rates have had, and may continue
to have, negative effects on the economies and securities markets of certain
emerging market countries. Many of the emerging securities markets are
relatively small, have low trading volumes, suffer periods of relative
illiquidity and are characterized by significant price volatility. There is a
risk in emerging market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization or creation of government
monopolies, any of which may have a detrimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgement in a court outside the
United States; and significantly smaller market capitalization of securities
markets. Also, any change in the leadership or policies of emerging market
countries, or the countries that exercise a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.
In addition, emerging securities markets may have different clearance
and settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment or delay
in disposing of a portfolio security. Such a delay could result in possible
liability to a purchaser of the security.
Special Risks of Investing in Russian and Other Eastern European
Securities. Both the Alleghany/Blairlogie Emerging Markets Fund and the PIMCO
Emerging Markets Fund may invest a portion of their assets in securities of
issuers located in Russia and in other Eastern European countries. While
investments in securities of such issuers are subject generally to the same
risks associated with investments in other emerging market countries described
above, the political, legal and operational risks of investing in Russian and
other Eastern European issuers, and of having assets custodied within these
countries, may be particularly acute. A risk of particular note with respect to
direct investment in Russian securities is the way in which ownership of shares
of companies is normally recorded. When a Fund invests in a Russian issuer, it
will normally receive a "share extract," but that extract is not legally
determinative of ownership. The company's share registrar maintains the official
record of ownership of a company's share. Such share registrars are completely
under the control of the issuer, and investors are provided with few legal
rights against such registrars.
Foreign Currency Transactions. Foreign currency exchange rates may
fluctuate significantly over a short period of time. They generally are
determined by the forces of supply and demand in the foreign exchange markets
and the relative merits of investments in different countries, actual or
perceived changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention (or the failure to intervene) by U.S. or foreign
governments or central banks, or by currency controls or political developments
in the U.S. or abroad. For example, significant uncertainty surrounds the
proposed introduction of the euro (a common currency unit for the European
Union) in January 1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which the assets of an
Alleghany Fund or PIMCO Fund are denominated may be devalued against the U.S.
dollar, resulting in a loss to such Fund.
Each of the PIMCO Funds and the Allegheny Funds may enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. In addition, each of the PIMCO Funds and the Alleghany
Funds may buy and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures and may enter into forward foreign
currency exchange contracts to reduce the risk of adverse changes in foreign
exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. By entering into a forward
foreign currency exchange contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes in
the value of the currency it will deliver and increases its exposure to changes
in the value of the currency it will exchange into. The effect on the value of a
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another currency. Contracts to sell foreign currency
would limit any potential gain, which might be realized by a Fund if the value
of the hedged currency increases. A Fund may enter into these contracts for the
purpose of hedging against foreign exchange risk arising from the Fund's
investment or anticipated investment in securities denominated in foreign
currencies. Suitable hedging transactions may not be available in all
circumstances and there can be no assurance that a Fund will engage in such
transactions at any given time or from time to time. Also, such hedging
transactions may not be successful and may eliminate any chance for a Fund to
benefit from favorable fluctuations in relevant foreign currencies. Each of the
PIMCO Funds and the Alleghany Funds may enter into forward contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one currency to another. To the extent that
they do, both the PIMCO Funds and the Alleghany Funds will be subject to the
additional risk that the relative value of currencies will be different than
anticipated by the particular Fund's portfolio manager. Each of the PIMCO Funds
and the Alleghany Funds may use one currency (or a basket of currencies) to
hedge against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. Each of the PIMCO Funds and the Alleghany Funds will segregate
assets determined to be liquid by the Adviser or portfolio manager in accordance
with procedures established by the applicable Board of Trustees to cover their
respective obligations under forward foreign currency exchange contracts entered
into for nonhedging purposes.
Additional Risks. In addition to the risks of foreign securities and
currencies, each Fund is subject to a variety of other risks, including the risk
of general market declines and other factors. Please see the Prospectuses and
the Statement of Additional Information for the PIMCO Funds, which are
incorporated herein by reference, for a description of these risks.
GOVERNING DOCUMENTS.
Trustees. Each of the Trust and Alleghany is governed by its respective
trust documents, in the case of the Trust its Declaration of Trust and, in the
case of Alleghany, its Trust Instrument, and By-laws (each a "Governing
Document" and, collectively, the "Governing Documents"). Each of the Governing
Documents require that the affairs of the Trust or Alleghany, as appropriate, be
administered by a Board of Trustees (each a "Board"). The Trust's Governing
Documents require its Board to consist of at least three Trustees, whereas
Alleghany's Board may consist of one Trustee. Alleghany's Board is elected by
the shareholders of Alleghany; except that the remaining Trustees of the
Alleghany Board are entitled to fill any vacancy occurring on the Board as a
result of (a) the declination to serve, death, resignation, retirement, removal,
physical or mental incapacity by reason of death, disease or otherwise of a
Trustee, (b) other inability of a Trustee to serve, or (c) an increase in the
number of Trustees. Pursuant to the Trust's Governing Documents, either its
Board or the shareholders of the Trust may elect Trustees. In either case,
Trustees serve until they resign or are removed. The Governing Documents contain
provisions protecting third parties relying on the authority of Trustees
apparently acting in their capacities as Trustees. Consequently, each of the
Trust and Alleghany is liable for the actions of its Trustees. Pursuant to the
Trust's Governing Documents, a Trustee is entitled to receive compensation for
his services to the Trust, which compensation is set by its Board. Similarly,
the Alleghany Board has the authority, pursuant to the Alleghany Governing
Documents, to set the compensation, if any, of officers and Trustees. Trustees
of the Trust may be removed at any time by a majority of the other Trustees,
whereas two-thirds of the Trustees or shareholders of Alleghany are required to
remove a Trustee of Alleghany.
Personal Liability; Indemnification. Trustees and officers of Alleghany
are relieved from personal liability for any actions taken in their capacities
as Trustees or officers so long as those actions do not constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties
as Trustees or officers. The Trust's Declaration of Trust provides in general
that a Trustee, officer or other person acting under their direction is entitled
to indemnification by the Trust except with respect to any matter as to which
such person shall have been finally adjudicated in any action, suit or other
proceeding (a) not to have acted in good faith in the reasonable belief that
such person's action was in or not opposed to the best interest of the Trust or
(b) to be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office. The indemnity provided by the
Governing Documents requires the Trust or Alleghany, as the case may be, to pay
expenses for the defense of and reimburse the indemnified party for any
liability arising out of any lawsuit or other action brought against a Trustee
or officer for actions taken in his or her capacity as an officer or Trustee,
subject to the limitations set forth above. In addition, Alleghany is permitted
and the Trust is required to advance the expenses of an indemnified party's
defense prior to a final disposition of the action, provided that the party
receiving the advance provides an undertaking to reimburse such payment in the
event that it is found that the liability arose out of actions taken for which
indemnification is prohibited by the relevant Governing Document. The Trust is
subject, pursuant to its Governing Documents, to an additional requirement that
indemnity be provided to officers and Trustees, even in the absence of a final
disposition of the matter, if a majority of the disinterested Trustees acting on
such matter approves such indemnification or the Trust receives an opinion of
legal counsel to the effect that a court would find the Trustee or officer not
to have been guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties. The Governing Documents provide that a
shareholder is not personally liable by virtue of having been a shareholder, and
that such shareholder is entitled to indemnification out of the assets of the
series in which such shareholder's shares are held for indemnification arising
from such liability.
Redemption of Shares. The Governing Documents allow shareholders to
make requests for redemptions at any time, except that the Alleghany Governing
Documents allow the Trustees to suspend the right to redemptions at any time for
an indefinite period of time. The Alleghany Trustees may also elect to make
redemptions to the extent ownership of shares has or may become concentrated and
such redemptions are deemed necessary by the Trustees to maintain Alleghany's
qualifications as a regulated investment company under the Internal Revenue
Code. The Governing Documents for the Trust also allow the Trust to make certain
optional redemptions of shares if (a) the holder of such shares holds fewer than
a minimum amount determined by the Trustees, (b) the shareholder whose shares
are to be redeemed owns shares of a particular series equal or greater than a
percentage of the outstanding shares of that series determined by the Trustees
or (c) the shareholder whose shares are to be redeemed owns the number of shares
of the Trust representing a greater than acceptable percentage of the total
outstanding shares, as determined by the Trustees.
Assets of Trust. The Governing Documents of both Alleghany and the
Trust provide that each series of shares represents a beneficial interest in
only the assets of that series, for which separate accounts are kept. In
addition, the Alleghany Governing Documents specify that creditors of a
particular series are entitled to look to the assets of only that series to
satisfy indebtedness of that series. The Governing Documents of Alleghany allow
the Trustees in their sole discretion to allocate assets and liabilities among
the various series, if such assets and liabilities are not readily identifiable
as allocable to a particular series.
Determination of Net Asset Value. The net asset value for any series of
Alleghany is determined by subtracting the liabilities of that particular series
from the assets thereof (such assets to be valued at market value, if a market
is readily identifiable, or fair value as determined in good faith by the Board
of Trustees of Alleghany if no market can be identified). The Trustees of
Alleghany may, however, adopt an alternative method of valuation. If the net
asset value of any Alleghany series is negative, Alleghany's Trustees are
permitted, pursuant to the Governing Documents, to (a) offset the negative sum
pro rata against the accrued dividends of the shareholders of such series, (b)
reduce the outstanding shares of such series and/or (c) reduce the payment of
declared dividends until such net number reaches zero. The Trust values
portfolio securities and other assets for which market quotations are readily
available at market value. Fixed income securities are normally valued on the
basis of quotations obtained from brokers and dealers or pricing services, which
take into account appropriate factors such as institutional-sized trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Trust's Board of Trustees,
with reference to fixed income securities whose prices are more readily
obtainable and whose durations are comparable to the securities being valued.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, when the Trust's Board of Trustees determines that amortized
cost is their fair value. Exchange-traded options, futures and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. Other securities and assets are valued at their fair value
as determined in good faith by the Trustees of the Trust or by persons acting at
the direction of the Trustees.
Quotations of foreign securities in foreign currency are converted to
U.S. dollar equivalents using foreign exchange quotations received from
independent dealers. The calculation of the net asset value of the PIMCO Funds
may not take place contemporaneously with the determination of the prices of
certain portfolio securities of foreign issuers used in such calculation.
Further, under the Trust's procedures, the prices of foreign securities are
determined using information derived from pricing services and other sources.
Information that becomes known to the Trust or its agents after the time that
net asset value is calculated on any business day may be assessed in determining
net asset value per share after the time of receipt of the information, but will
not be used to retroactively adjust the price of the security so determined
earlier or on a prior day. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of regular
trading on the Exchange (normally 4:00 p.m., Eastern time) may not be reflected
in the calculation of net asset value. If events materially affecting the value
of such securities occur during such period, then these securities may be valued
at fair value as determined by PALP or Blairlogie and approved in good faith by
the Board of Trustees of the Trust.
Each PIMCO Fund's liabilities are allocated among its classes. The
total of such liabilities allocated to a class, plus that class's distribution
and/or servicing fees and any other expenses specially allocated to that class,
are then deducted from the class's proportionate interest in the Fund's assets,
and the resulting amount for each class is divided by the number of shares of
that class outstanding to produce the class's net asset value per share.
Custodian. Alleghany is at all times required by its Governing
Documents to employ a Custodian for the accounts of Alleghany. The Trust is not
subject to a similar requirement under its Governing Documents, but is so
required under the 1940 Act.
PROPOSED INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS; OTHER CONTRACTUAL
ARRANGEMENTS.
Advisory Arrangements. PALP serves as investment adviser and Blairlogie
serves as the sub-adviser for each of the PIMCO Funds. PALP's address is 800
Newport Center Drive, Newport Beach, California 92660. Blairlogie's address is
4th Floor, 125 Princes Street, Edinburgh EH2 4AD Scotland. After the
Reorganizations, Blairlogie will serve as the sole investment adviser to the
Alleghany Funds. The PIMCO Funds currently receive investment advisory services
from Blairlogie pursuant to an Amended and Restated Investment Advisory
agreement (the "PALP Advisory Agreement") between each PIMCO Fund and PALP and
an Amended and Restated Portfolio Management Agreement between PALP and
Blairlogie (collectively, the "Current Agreements"). The Alleghany Funds will
receive investment advisory services directly from Blairlogie as investment
adviser pursuant to an Investment Advisory Agreement between Blairlogie and each
Alleghany Fund (the "New Agreement"). Subject to the general supervision of
Alleghany's Trustees, and in accordance with the investment policies of each
Alleghany Fund, Blairlogie will formulate guidelines and lists of approved
investments and make decisions with respect to and place orders for the
Alleghany Funds' purchases and sales of portfolio securities and maintain
records relating to such purchases and sales. [______________], as sole
shareholder of each Alleghany Fund prior to the Reorganizations, will approve
the New Agreement.
The material differences between the New Agreement and the Current
Agreements are discussed below. A form of the New Agreement is attached to this
Proxy Statement/Prospectus as Appendix V. The following discussion is qualified
in its entirety by reference to the text of the New Agreement. The New Agreement
will take effect with respect to either Alleghany Fund, upon consummation of the
related Reorganization.
Advisory Services. Pursuant to both the Current Agreements and the New
Agreement (collectively, the "Advisory Agreements"), PALP and Blairlogie (in the
case of the Current Agreements) and Blairlogie (in the case of the New
Agreement) (each of which may sometimes be referred to hereafter as an
"Adviser"), have the responsibility (in the case of the Current Agreements, on a
nonexclusive basis, with Blairlogie acting as sub-adviser to PALP, and in the
case of the New Agreement, on an exclusive basis) for the management of the
investment portfolio of, and the making and execution of investment decisions
for, each Fund which is a party to such agreement, subject to the investment
objectives and investment policies and restrictions of such Fund and the
supervision of the appropriate Board of Trustees. Under each Advisory Agreement,
the Adviser is required to pay its own expenses in connection with servicing the
investments of the Fund, except that the Current Agreements also set forth those
expenses which the Adviser is not expected to pay, primarily relating to matters
not directly related to the Adviser's activities under the Current Agreements.
These expenses include, without limitation, brokerage fees and commissions, and
expenses of (a) audits by the Trust's accountants, (b) the Trust's transfer
agent, registrar, dividend dispersing agents and shareholder recordkeeping
services, (c) the Trust's custodial services, (d) obtaining quotations for
calculating the value of a Fund's assets, (e) obtaining portfolio activity
reports, and (f) maintaining tax records.
Compensation. Under the PALP Advisory Agreement, as compensation for
PALP's services, each PIMCO Fund is obligated to pay to PALP a monthly
investment advisory fee based on the average daily net assets of such PIMCO
Fund. This fee, at an annualized rate, is .85% with respect to the PIMCO
Emerging Markets Fund and .60% with respect to the PIMCO International Developed
Fund. PALP, in turn, pays Blairlogie a fee at an annual rate of .75% and .50% of
the average daily net assets of the PIMCO Emerging Markets Fund and the PIMCO
International Developed Fund, respectively, for Blairlogie's portfolio
management services under the Amended and Restated Portfolio Management
Agreement. The New Agreement provides that the Adviser will be paid an annual
fee of 0.85% of the average daily net assets of the Alleghany Funds, payable
monthly based on the actual number of days in the month for which payment is
being made.
Fee and Expense Limitations. Neither the New Agreement nor the Current
Agreements include any contractual expense limitation provisions. Pursuant to
the Expense Commitment, Blairlogie has committed, for a period of at least two
years from the date of the Closings, to waive fees and/or pay Alleghany Fund
expenses to the extent necessary to comply with the Expense Commitment. From
time to time, Blairlogie may waive or reimburse (either voluntarily or pursuant
to applicable limitations) advisory fees or expenses payable by an Alleghany
Fund.
Ability to Retain a Sub-Adviser. The PALP Advisory agreement authorizes
PALP, at PALP's expense, to retain a sub-adviser or sub-advisers to perform some
or all of the services for which PALP is responsible under the PALP Advisory
agreement, subject to approval by the Trustees. PALP retains Blairlogie to
manage the PIMCO Funds' investment portfolios pursuant to that authority. The
New Agreement does not address whether the duties of the Adviser may be
delegated to a sub-adviser, and any such delegation would require shareholder
approval under the 1940 Act.
Administration Plans. The PIMCO Funds have entered into an
Administration Agreement with PALP (the "PIMCO Administrator"). Administrative
services are provided to the Alleghany Funds by The Chicago Trust Company (the
"Alleghany Administrator") and First Data as sub-administrator. The address for
the Alleghany Administrator is The Chicago Trust Company, 171 N. Clark Street,
Chicago, Illinois 60601.
The PIMCO Administrator provides or procures administrative services
for the PIMCO Funds, which include clerical help and accounting, bookkeeping,
internal audit services and certain other services required by the PIMCO Funds,
and preparation of reports to the PIMCO Funds' shareholders and regulatory
filings. The PIMCO Administrator has retained Pacific Investment Management
Company to provide such services as sub-administrator (the "Sub-Administrator").
The PIMCO Administrator and/or the Sub-Administrator may also retain other
affiliates to provide certain of these services. In addition, the PIMCO
Administrator, at its own expense, arranges for the provision of legal, audit,
custody, transfer agency (including sub-transfer agency and other administrative
services) and other services necessary for the ordinary operation of the PIMCO
Funds, and is responsible for the costs of registration of the PIMCO Funds'
shares and the printing of prospectuses and shareholder reports for current
shareholders.
The Trust (and not the PIMCO Administrator) is responsible for the
following expenses: (i) salaries and other compensation of any of the Trust's
executive officers and employees who are not officers, directors, stockholders
or employees of PALP, Pacific Investment Management Company, or their
subsidiaries or affiliates; (ii) taxes and governmental fees; (iii) brokerage
fees and commissions and other portfolio transaction expenses; (iv) the costs of
borrowing money, including interest expenses; (v) fees and expenses of the
Trustees who are not "interested persons" of the PIMCO Administrator, any
portfolio manager of a series of the Trust or PALP, and any counsel retained
exclusively for their benefit; (vi) extraordinary expenses, including costs of
litigation and indemnification expenses; (vii) expenses which are capitalized in
accordance with generally accepted accounting principles; and (viii) any
expenses allocated or allocable to a specific class of shares, which include
distribution and/or service fees payable with respect to Class A, Class B and
Class C and Administrative Class shares, and may include certain other expenses
as permitted by the Trust's Multiple Class Plan adopted pursuant to Rule 18f-3
under the 1940 Act, subject to review and approval by the Trustees.
Under the Administration Agreement with the Alleghany Funds, the
Alleghany Administrator is responsible for: (1) coordinating with the Custodian
and Transfer Agent for Alleghany and monitoring the services they provide to the
Alleghany Funds; (2) coordinating with and monitoring any other third parties
furnishing services to the Alleghany Funds; (3) providing the Alleghany Funds
with necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervising the maintenance by third parties of such books and records of the
Alleghany Funds as may be required by applicable federal or state law; (5)
preparing or supervising the preparation by third parties of all federal, state
and local tax returns and reports of the Funds required by applicable law; (6)
preparing and, after approval by the Alleghany Funds, filing and arranging for
the distribution of proxy materials and periodic reports to shareholders of the
Alleghany Funds as required by applicable law; (7) preparing and, after approval
by the Alleghany Funds, arranging for the filing of such registration statements
and other documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (8) reviewing and submitting
to the officers of the Alleghany Funds for their approval invoices or other
requests for payment of the Alleghany Funds' expenses and instructing the
Custodian to issue checks in payment thereof; and (9) taking such other action
with respect to Alleghany or the Alleghany Funds as may be necessary in the
opinion of the Alleghany Administrator to perform its duties under the
Administration Agreement.
The accrued expenses of the Alleghany Funds, as well as certain
expenses attributable to each class of shares, are deducted from accrued income
before dividends are declared. The Alleghany Funds' expenses include, but are
not limited to: fees paid to Blairlogie and First Data; interest; Trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by Blairlogie or the Alleghany
Administrator under their respective agreements with Alleghany; and any
extraordinary expenses. Each class of Shares may bear certain class specific
costs associated with retail transfer agency, shareholder servicing, sales
support and distribution. Any general expenses of Alleghany that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bear to
the assets of Alleghany or in such other manner as Alleghany's Board of Trustees
deems appropriate.
As compensation for services performed under the Administration
Agreement, the Alleghany Administrator receives a fee payable monthly at an
annual rate of [ ___ %] of the average daily net assets of the Alleghany Funds.
Investor's Fiduciary Trust Company ("IFTC") is custodian for each of
the PIMCO Funds. Pursuant to separate sub-custody agreements between IFTC and
The Chase Manhattan Bank, N.A. ("Chase"), and IFTC and State Street Bank and
Trust Company ("State Street"), Chase and State Street serve as sub-custodians
of the Trust for the custody of the foreign securities acquired by the PIMCO
Funds. Under the sub-custody agreements, Chase and State Street may hold foreign
securities at their principal offices and their branches, and subject to
approval by PIMCO's Board of Trustees, at a foreign branch of a qualified U.S.
bank, with an eligible foreign sub-custodian, or with an eligible foreign
securities depository.
Pursuant to rules or other exemptions under the 1940 Act, the Trust may
maintain foreign securities and cash in the custody of certain eligible foreign
banks and securities depositories. Selection of these foreign custodial
institutions is currently made by the Board of Trustees of the Trust following a
consideration of a number of factors, including (but not limited to) the
reliability and financial stability of the institution, the ability of the
institution to perform capably custodial services for the Trust, the reputation
of the institution in its national market, the political and economic stability
of the country in which the institution is located, and further risks of
potential nationalization or expropriation of the Trust's assets, although the
Trust's Board of Trustees reserves the right to delegate their selection
responsibilities in light of recent amendments to Rule 17f-5 under the 1940 Act,
in which case the factors for consideration would differ from those referenced
above. Currently, the Trust's Board of Trustees reviews annually the continuance
of foreign custodial arrangements for the Trust, but reserves the right to
discontinue this practice as permitted by the recent amendments to Rule 17f-5.
[IFTC] serves as Custodian of Alleghany's assets pursuant to a
Custodian Agreement. Under such Agreement, [IFTC] (a) maintains a separate
account or accounts in the name of each Fund, (b) holds and transfers portfolio
securities on account of each Fund; (c) accepts receipts and makes disbursements
of money on behalf of each Fund; (d) collects and receives all income and other
payments and distributions on account of each Fund's securities; and (e) makes
periodic reports to Alleghany's Board of Trustees concerning each Fund's
operations.
Other Service Providers. The other service providers for the PIMCO Funds and the
Alleghany Funds are set forth in the table below.
OTHER SERVICE PROVIDERS
FOR THE PIMCO FUNDS AND ALLEGHANY FUNDS
PIMCO Funds Alleghany Funds
Distributor PIMCO Funds Distributors LLC First Data Distributors, Inc.
Administrator PIMCO Advisors L.P. The Chicago Trust Company
Sub-Administrator Pacific Investment Management Company First Data Investor Services Group,
Inc. ("First Data")
Transfer Agent [Shareholder Services, Inc.] First Data
Custodian Investor's Fiduciary Trust Company [IFTC] [IFTC]
Independent Accountants PricewaterhouseCoopers LLP KPMG Peat Marwick LLP
Distribution Plan. Shares of the PIMCO Funds are distributed by PIMCO
Funds Distributor LLC ("PFD"), a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). PFD's address is
2187 Atlantic Street, Stamford, Connecticut 06902. Pursuant to separate
Distribution and Servicing Plans for Class A, Class B and Class C shares of the
PIMCO Funds (the "Retail Plans"), PFD receives from the Trust: (a) in connection
with the distribution of Class B and Class C shares of the PIMCO Funds,
distribution fees up to the annual rate of .75% of each PIMCO Fund's average
daily net assets attributable to Class B and C Shares, respectively, and (b) in
connection with personal services rendered to Class A, B and C shareholders of
the Trust and the maintenance of shareholder accounts, certain servicing fees up
to the annual rate of .25% of each PIMCO Fund's average daily net assets
attributable to Class A, Class B and C shares, respectively. The Retail Plans
were adopted pursuant to Rule 12b-1 under the 1940 Act, and are of the type
known as "compensation plans." This means that, although the Trustees of the
Trust are expected to take into account the expenses of PFD and its predecessors
in their periodic review of the Retail Plans, the fees are payable to compensate
PFD for services rendered even if the amounts paid exceeds PFD's expenses. From
time to time, expenses of PFD incurred in connection with the distribution of
Class B and C shares of the PIMCO Funds, and in connection with the servicing of
Class A, B and C shareholders of the Funds and the maintenance of Class A, B and
C shareholder accounts, may exceed the distribution and/or servicing fees
collected by PFD.
The Trust has adopted an Administrative Services Plan with respect to
Administrative Class shares of each of the PIMCO Funds, and a Distribution Plan
with respect to the Administrative Class shares of the PIMCO International
Developed Fund (the "Institutional Plans"). Under the terms of the Institutional
Plans, the Trust is permitted to reimburse, out of the Administrative Class
assets of each of the PIMCO Funds, in an amount up to .25% on an annual basis of
the average daily net assets attributable to that class, financial
intermediaries that provide services in connection with the distribution and
marketing of shares and/or the provision of certain shareholder services (in the
case of the Distribution Plan) or the administration of plans or programs that
use PIMCO Fund shares as their funding medium (in the case of the Administrative
Services Plan), and to reimburse certain other related expenses. Total
reimbursements under the Institutional Plans may be paid in an amount up to .25%
on an annual basis of the average daily net assets attributable to the
Administrative Class shares of each PIMCO Fund. The same entity may not receive
both distribution and administrative services fees with respect to the same
assets but may with respect to separate assets receive fees under each
Institutional Plan. Each Institutional Plan has been adopted in accordance with
the requirements of Rule 12b-1 and is administered in accordance with the
provisions of that rule, except that shareholders will not have the voting
rights set forth in Rule 12b-1 with respect to the Administrative Services Plan
that they will have with respect to the Distribution Plan.
Shares of the Alleghany Funds are distributed by First Data
Distributors, Inc. ("First Data"), a broker-dealer registered with the SEC under
the 1934 Act, pursuant to a distribution agreement (the "Distribution
Agreement"). The Alleghany Funds adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for its Class N Shares. There is no distribution plan
for the Class I Shares. Pursuant to the Distribution Agreement, First Data will
receive certain payments for services rendered for the purpose of selling shares
issued by an Alleghany Fund. Distribution expenses which are attributable to a
particular Fund will be charged against that Alleghany Fund's assets. Under
Alleghany's Plan of Distribution, each Alleghany Fund may reimburse the
Distributor for actual expenses not exceeding, on an annual basis, 0.25% of
average daily net assets.
INFORMATION RELATING TO VOTING MATTERS
REQUIRED VOTES; QUORUM; ADJOURNMENTS. The affirmative vote of a
plurality of the quorum required for the transaction of business of each PIMCO
Fund is necessary for the approval of the Reorganization Agreement with respect
to that PIMCO Fund. The holders of 30% of the shares of each PIMCO Fund
outstanding as of the Record Date, present in person or represented by proxy,
constitute a quorum for the transaction of business by the shareholders of such
PIMCO Fund at the Meeting. Votes cast by proxy or in person at the Meeting will
be counted by persons appointed by the Trust as tellers for the Meeting. The
tellers will count the total number of votes cast "for" approval of Proposal 1
for purposes of determining whether sufficient affirmative votes have been cast.
The tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (a) instructions have not been received from the beneficial owners or
the persons entitled to vote and (b) the broker or nominee does not have
discretionary voting power on a particular matter) as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
Assuming the presence of a quorum, abstentions have the effect of a negative
vote on Proposal 1.
In the event that a quorum is not present for purposes of acting on
Proposal 1, or if sufficient votes in favor of Proposal 1 are not received by
the time of the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a plurality of the shares
present in person or represented by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of any Proposal that has
not then been adopted. They will vote against any such adjournment those proxies
required to be voted against each Proposal that has not then been adopted and
will not vote any proxies that direct them to abstain from voting on such
Proposals.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present or
knows that others will present is Proposal 1, mentioned in the Notice of Special
Meeting. However, shareholders are being asked on the enclosed proxy to
authorize the persons named therein to vote in accordance with their judgment
with respect to any additional matters which properly come before the Meeting,
and on all matters incidental to the conduct of the Meeting. Proxies may be
revoked at any time before they are exercised by submitting to the Trust a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person.
SOLICITATION OF PROXIES. In addition to solicitation of proxies by
mail, officers of the Trust and officers and employees of PALP, affiliates of
PALP or other representatives of the Trust may also solicit proxies by telephone
or telegraph or in person. The expenses incurred in connection with the
solicitation will not be borne by the shareholders of the PIMCO Funds but will
instead be borne by Alleghany.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS; SHAREHOLDER PROPOSALS FOR
FUTURE MEETINGS. Neither Alleghany nor the Trust presently intends to hold
annual meetings of shareholders for the election of trustees or other business
unless otherwise required by the 1940 Act. Shareholder proposals to be presented
at any future meeting of shareholders of the Trust must be received by the Trust
at a reasonable time before the Trust's solicitation of proxies for that meeting
in order for such proposals to be considered for inclusion in the proxy
materials relating to that meeting. Under certain circumstances, shareholders
may request that the Trustees of Alleghany call a shareholder meeting; the
Secretary of Alleghany shall call a meeting upon the written request of
shareholders owning at least 10% of the outstanding shares entitled to vote and
upon payment by such shareholders of the estimated cost of preparing and mailing
a notice of the meeting. All shareholder proposals for inclusion in a Proxy
Statement/Prospectus for any subsequent meeting of shareholders of an Alleghany
Fund must be received by the relevant fund a reasonable period of time prior to
any such meeting.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement and
related matters are being submitted for approval by each PIMCO Fund's
shareholders at the Meeting pursuant to the provisions of the Trust's
Declaration of Trust. With respect to each PIMCO Fund. The affirmative vote of a
plurality of the quorum required for the transaction of business is necessary
for the approval of the Reorganization Agreement. The Reorganization Agreement
provides that, in the event the Reorganization Agreement is approved by the
shareholders of only one of the PIMCO Funds, the failure of a PIMCO Fund to
consummate the transactions contemplated by the Reorganization Agreement shall
not affect the consummation or validity of any other transaction or
Reorganization contemplated by the Reorganization Agreement. The consummation of
the Blairlogie transaction is, however, subject to several conditions, including
the approval thereof by a certain number of Blairlogie clients, including the
PIMCO Funds.
Only shareholders of record at the close of business on
[_________________,] 1999 (the "Record Date") will be entitled to notice of and
to vote at the Meeting or any adjournment thereof. Each whole share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional share shall be entitled to a proportionate fractional vote. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions thereon or, if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Shareholders of each PIMCO Fund will vote only on the approval or disapproval of
that PIMCO Fund's Reorganization Agreement. On the Record Date, the following
shares of each PIMCO Fund were outstanding and entitled to be voted:
NAME OF PIMCO
FUND AND CLASS SHARES ENTITLED TO VOTE
PIMCO EMERGING MARKETS FUND
Class A Shares
Class B Shares
Class C Shares
Administrative Class Shares
Institutional Class Shares
PIMCO INTERNATIONAL DEVELOPED FUND
Class A Shares
Class B Shares
Class C Shares
Administrative Class Shares
Institutional Class Shares
If the accompanying proxy is executed and returned in time for the
Meeting, the shares represented thereby will be voted as discussed above under
"Required Votes; Quorum; Adjournments."
The approval of the Reorganization Agreement by the Trustees of the
Trust is discussed above under "Information Relating to the Proposed
Reorganization -- Consideration by the Board of Trustees of the Trust." The
Reorganization Agreement was approved by the Trustees of Alleghany at a meeting
held on [December ___, 1998].
As of , 1999, the officers and Trustees of the Trust as a group owned
less than 1% of any of the PIMCO Funds. As of , 1999 the officers and Trustees
of Alleghany as a group owned less than 1% of any of the Alleghany Funds. The
table below entitled "5% Shareholders" shows the name, address and share
ownership of each person known to the Trust to have beneficial or record
ownership with respect to 5% or more of a class of a PIMCO Fund as of November
18, 1998. There are no persons known to Alleghany to have beneficial or record
ownership with respect to 5% or more of a class of Alleghany Fund as of , 1999.
5% SHAREHOLDERS
Class; Amount of
Shares Owned; Percentage Percentage Percentage of
PIMCO FUND NAME AND ADDRESS Type of of Class of Fund Fund
Ownership Post-Closing
PIMCO Emerging Markets Fund
Institutional Pacific Life Insurance Company 779,103.642 30.32%
-------------
Employee's Retirement Plan Trust
700 Newport Center Drive
New Port Beach, California
92660
Charles Schwab & Co., 603,082.978 23.86%
Inc.-Reinvest**
The Schwab Building
101 Montgomery Street
San Francisco, California
94104-4122
Pacific Life Insurance Company 575,190.664 22.76%
700 Newport Center Drive
New Port Beach, California
92660
Donaldson Lufkin & Jenrette** 138,773.973 5.49%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey
07303-2052
Administrative FTC & Company 735.560 100.00%
--------------
Attn: DATAlynx #165
P.O. Box 173736
Denver, Colorado 80217-3736
Class A Paine Webber FBO 14,459.406 29.21%
-------
Don A. Gill as Trustee for
Joseph A. Gill New Trust
U/A DTD 11-08-94
9992 Mackey Circle
Overland Park, Kansas
66212-3458
Paine Webber FBO 6,407.993 12.94%
Don A. Gill as Trustee for
Joseph A. Gill New Trust
U/A DTD 11-08-94
9992 Mackey Circle
Overland Park, Kansas
66212-3458
Class B RPSS Trust IRA FBO 3,103.734 8.41%
-------
Gregory D. McDonald
15618 Gettysburg Drive
Tomball, Texas 77375-8609
PAF Sales Inc. 2,347.418 6.36%
Profit Sharing Plan
P.O. Box 307
Scarborough, New York
10510-0807
Class C Merrill Lynch Pierce 6,324,000 6.50%
-------
Fenner & Smith, Inc.
Attn: Book Entry Department
4800 Deer Lake Drive E., F. 3
Jacksonville, Florida
32246-6484
PIMCO International
Developed Fund
Institutional Pacific Life Insurance Company 1,954,302.202 23.20%
-------------
Employee's Retirement Plan Trust
700 Newport Center Drive
New Port Beach, California
92660
Charles Schwab & Co., 1,313,618.922 15.59%
Inc.-Reinvest**
Attn: Mutual Fund Operations
The Schwab Building
101 Montgomery Street
San Francisco, California
94104-4122
Citibank, N.A., Trustee for the 1,033,755.715 12.27%
benefit of
Nissan Motor Mfg. Corp. U.S.A.
983 Nissan Drive
Smyrna, Tennessee 37167-4400
Wachovia Bank NA as Trustee for 1,030,330.936 12.23%
the
Atlanta Gas Light Company
Retirement Plan
301 N. Main Street - MC NC 31057
Winston-Salem, North Carolina
27150
Pacific Asset Management LLC 667,985.181 7.93%
700 Newport Center Drive
New Port Beach, California
92660
FTC & Co. Datalynx House 509,342.016 6.05%
Account*
P.O. Box 173736
Denver, Colorado 80217-3736
Administrative Sandra Hogue Trust 950.596 38.24%
--------------
P.O. Box 92956
Chicago, Illinois 60675
National Financial Services 891.308 35.86%
Corporation**
1 World Financial Center
200 Liberty Street
New York, New York 10281
FTC & Company 643,885 25.90%
Attn: DATAlynx #165
P.O. Box 173736
Denver, Colorado 80217-3736
Class A Prudential Securities Inc. FBO 130,368.098 32.15%
-------
Mill ENCO L.P.
111 Broadway Floor 20
New York, New York 10006-1901
American National Bank of 115,003.017 28.36%
Chicago TR
UT #36307007 FBO Lincoln Group LP 40
Skokie Boulevard, Suite 105 Northbrook,
Illinois 60062-1614
Class B Merrill Lynch Pierce 17,023.318 8.31%
-------
Fenner & Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., F. 3
Jacksonville, Florida 32246-6484
National Financial Services 10,330.427 5.04%
Corporation**
1 World Financial Center
200 Liberty Street
New York, New York 10281
Class C Merrill Lynch Pierce 25,762.229 5.41%
-------
Fenner & Smith Inc.**
Attn: Book Entry Department
4800 Deer Lake Drive E., F. 3
Jacksonville, Florida 32246-6484
* Entity owned 25% or more of the outstanding shares of beneficial
interest of the Funds, and therefore may be presumed to "control" the Funds, as
that term is defined in the 1940 Act.
** Shares are believed to be held only as nominee.
For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class of shares, or is identified as the holder of
record of more than 25% of a class of shares and has voting and/or investment
power, such shareholder may be presumed to control such class.
ADDITIONAL INFORMATION ABOUT ALLEGHANY
Alleghany is a no-load, open-end management investment company which
currently (prior to the Reorganizations) offers ten series of shares of
beneficial interest representing separate portfolios of investments as follows:
Montag & Caldwell Growth Fund, Chicago Trust Growth & Income Fund, Chicago Trust
Talon Fund, Chicago Trust Balanced Fund, Montag & Caldwell Balanced Fund,
Chicago Trust Bond Fund, Chicago Trust Municipal Bond Fund, Chicago Trust Money
Market Fund, Alleghany/Chicago Trust SmallCap Value Fund, and Alleghany/Veredus
Aggressive Growth Fund.
Additional information about the Alleghany Funds is included in their
prospectuses and statements of additional information dated __________________,
1998, as supplemented through the date hereof, copies of which, to the extent
not included herewith, may be obtained without charge by writing or calling
Alleghany at the address and telephone number set forth on the first page of
this Proxy Statement/Prospectus. Alleghany is subject to the informational
requirements of the 1934 Act and in accordance therewith it files reports, proxy
materials and other information with the SEC. Reports and other information
filed by Alleghany can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the offices of Alleghany listed above. In addition, these materials
can be inspected and copied at the SEC's Regional Offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials also can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates. The SEC maintains an Internet World
Wide Web site (at www.sec.gov) which contains the statement of additional
information, materials that are incorporated by reference into this Proxy
Statement/Prospectus and other information about the Alleghany Funds.
ADDITIONAL INFORMATION ABOUT THE TRUST
TRUSTEES AND OFFICERS. The Trustees and Officers of the Trust are
listed below. Each trustee who is an "interested person" of the
Trust, as defined in the 1940 Act, is indicated by an asterisk.
Name Position with PIMCO
- ---- -------------------
E. Philip Cannon Trustee
Donald P. Carter Trustee
Gary A. Childress Trustee
William D. Cvengros* Trustee, Chairman of the Board
Richard L. Nelson Trustee
Lyman W. Porter Trustee
Alan Richards Trustee
Joel Segall Trustee
W. Bryant Stooks Trustee
Gerald M. Thorne Trustee
Stephen J. Treadway* Trustee, President and Chief Executive Officer
R. Wesley Burns Executive Vice President
Newton B. Schott, Jr. Vice President and Secretary
Jeffrey M. Sargent Vice President
Richard M. Weil Vice President
John P. Hardaway Treasurer
Joseph D. Hattesohl Assistant Treasurer
Garlin G. Flynn Assistant Secretary
Additional information about the PIMCO Funds is included in their
prospectuses and statements of additional information, dated November 1, 1998,
as supplemented through the date hereof, which have been filed with the SEC.
Copies of these prospectuses and the related statements of additional
information may be obtained without charge by writing or calling the Trust at
the address and telephone number set forth on the first page of this Proxy
Statement/Prospectus. Reports and other information filed by the Trust can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of the Trust
listed above. In addition, these materials can be inspected and copied at the
SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
The SEC maintains an Internet World Wide Web site (www.sec.gov) which contains
the statement of additional information, materials that are incorporated by
reference into this Proxy Statement/Prospectus and other information about the
PIMCO Funds.
FINANCIAL STATEMENTS
The audited financial statements and condensed financial information
for shares of the PIMCO Funds for the annual period ended June 30, 1998 are
included or incorporated by reference in their prospectuses or statements of
additional information or in the statement of additional information related to
this Proxy Statement/Prospectus, or are included herein.
The annual financial statements and financial highlights have been
audited by independent auditors to the extent indicated in their reports
thereon, also incorporated by reference or included in such prospectuses and
statements of additional information, and have been incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The financial statements and financial highlights of the Trust as of
and for the year ended June 30, 1998, have been incorporated by reference herein
and in the Registration Statement. These financial statements have been audited
by PricewaterhouseCoopers LLP, independent certified public accountants, as
stated in their reports, which have also been incorporated by reference herein,
and have been so included upon the report of such firm given upon their
authority as experts in accounting and auditing.
The Alleghany Funds have no operations and will not begin operations
until after the Reorganizations. Accordingly, no financial statements for
Alleghany Funds have been included herein.
OTHER BUSINESS
The only business that management intends to present or knows will be
presented is Proposal 1, mentioned in the Notice of Special Meeting. However,
shareholders are being asked on the enclosed proxy to authorize the persons
named therein to vote in accordance with their judgment with respect to any
additional matters which properly come before the Meeting, and on all matters
incidental to the conduct of the Meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, Missouri 64105
presently serves as independent public accountants for the Trust. If requested
by any PIMCO Fund shareholder in writing addressed to and received by the
Secretary of the Trust at least five days prior to the Meeting, a representative
of the Trust's independent public accountants will attend the Meeting with the
opportunity to make a statement if desired and to respond to appropriate
questions.
SHAREHOLDERS MAY REQUEST, WITHOUT CHARGE, COPIES OF ANNUAL REPORTS TO
ANY SHAREHOLDER BY WRITING TO THE TRUST AT 840 NEWPORT CENTER DRIVE, SUITE 300,
NEWPORT BEACH, CALIFORNIA 92660 OR BY CALLING 1-800-426-0107.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the
addresses, or by phone by calling the phone numbers, on the cover page of this
Proxy Statement/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFACSIMILE OR VOTE BY TELEPHONE.
11003507\V-11
11003507\V-11
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ___ day of _______, 1999, by and between Alleghany Funds ("Alleghany"),
a Delaware business trust, for itself and on behalf of Alleghany Emerging
Markets Fund and Alleghany International Developed Fund (each an "Acquiring
Fund," and collectively, the "Acquiring Funds"), and PIMCO Funds: Multi-Manager
Series (the "MMS Trust"), a Massachusetts business trust, for itself and on
behalf of PIMCO Emerging Markets Fund and PIMCO International Developed Fund
(each an "Acquired Fund," and collectively, the "Acquired Funds").
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of each Acquired Fund be
transferred to each Acquiring Fund corresponding thereto, as set forth in the
table attached hereto as Schedule A, in exchange for shares of specified classes
of the corresponding Acquiring Fund ("Acquiring Fund Shares") and the assumption
by each Acquiring Fund of the Stated Liabilities (as defined in paragraph 1.3)
of each corresponding Acquired Fund, and that such Acquiring Fund Shares be
distributed immediately after the Closing(s), as defined in this Agreement, by
each Acquired Fund to its shareholders in liquidation of each Acquired Fund. It
is expected that the reorganization described in this Agreement will be a
reorganization for each Acquired Fund within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each Acquired Fund
shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2 (the "Fund Assets") as of the applicable Valuation Time (as
defined below) to its corresponding Acquiring Fund identified in Schedule A, and
such corresponding Acquiring Fund shall, as consideration therefor, on the
Closing Date (as defined in paragraph 3.1), (i) deliver to such Acquired Fund
(a) a number of full and fractional Class N shares of beneficial interest of the
Acquiring Fund having an aggregate net asset value equal to the value of the
assets of the Acquired Fund attributable to Class A, Class B, Class C and
Administrative Class shares of the Acquired Fund transferred to the Acquiring
Fund on such date less the value of the liabilities of the Acquired Fund
attributable to Class A, Class B, Class C shares and Administrative Class of the
Acquired Fund assumed by the Acquiring Fund on that date, and (b) a number of
full and fractional Class I shares of beneficial interest of the Acquiring Fund
having an aggregate net asset value equal to the value of the assets of the
Acquired Fund attributable to Institutional Class shares of the Acquired Fund
transferred to the Acquiring Fund on such date less the value of the liabilities
of the Acquired Fund attributable to Administrative Class shares of the Acquired
Fund assumed by the Acquiring Fund on that date, and (ii) assume the Acquired
Fund's Stated Liabilities as of the applicable Valuation Time (as defined
below). Such transfer, delivery and assumption shall take place at the
closing(s) provided for in paragraph 3.1 (hereinafter sometimes referred to as
the "Closing(s)"). Promptly after the Closing(s), each Acquired Fund shall
distribute the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided in paragraph 1.4 hereof. Such
transaction(s) are hereinafter sometimes collectively referred to as the
"Reorganization(s)."
1.2. With respect to each Acquired Fund, the Fund Assets shall consist
of all property (including, without limitation, the books and records) and
assets of any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and interest
receivables) owned by each Acquired Fund, and any prepaid expenses shown as an
asset on each Acquired Fund's books as of the Applicable Valuation Time on the
Closing Date.
1.3. Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. Each Acquiring Fund will
assume all liabilities and obligations disclosed on an unaudited statement of
assets and liabilities of the corresponding Acquired Fund prepared by or on
behalf of the MMS Trust as of the Applicable Valuation Time (as defined in
paragraph 2.1), in accordance with generally accepted accounting principles
consistently applied from the prior audited period ("Stated Liabilities"). The
Acquiring Fund shall assume only the Stated Liabilities of its corresponding
Acquired Fund, and no other liabilities or obligations, whether absolute or
contingent, known or unknown, accrued or unaccrued.
1.4. Promptly after the Closing with respect to each Acquired Fund, the
Acquired Fund will distribute (i) the Class N shares received by the Acquired
Fund pursuant to paragraph 1.1 PRO RATA (in accordance with the relation that
the number of Class A, Class B, Class C and Administrative Class shares held by
each shareholder bears to the total number of Class A, Class B, Class C and
Administrative Class shares then outstanding) to holders of Class A, Class B,
Class C and Administrative Class shares and (ii) the Class I shares PRO RATA (in
accordance with the relation that the number of Institutional Class shares held
by each shareholder bears to the total number of Institutional Class shares then
outstanding) to the holders of Institutional Class shares, the holders entitled
to such distributions being the shareholders of record determined as of the
close of business on the Closing Date ("Acquired Fund Investors") in complete
liquidation of the Acquired Fund. Such distribution will be accomplished by an
instruction, signed by an appropriate officer of the MMS Trust, to transfer the
Acquiring Fund Shares then credited to the Acquired Fund's account on the books
of the Acquiring Fund to open accounts on the books of the Acquiring Fund
established and maintained by the Acquiring Fund's transfer agent in the names
of record of the Acquired Fund Investors and representing the respective PRO
RATA number of shares of the Acquiring Fund due such Acquired Fund Investor. In
exchange for Acquiring Fund Shares distributed, all issued and outstanding
shares of beneficial interest of the Acquired Fund will be redeemed and canceled
simultaneously therewith on the Acquired Fund's books; any outstanding share
certificates representing interests in the Acquired Fund thereafter will
represent the right to receive such number of Acquiring Fund Shares after the
Closing(s) as determined in accordance with Section 1.1.
1.5. If a request shall be made for a change of the registration of
shares of each Acquiring Fund to another person from the account of the
shareholder in which name the shares are registered in the records of the
Acquired Fund it shall be a condition of such registration of shares that there
be furnished the Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in proper form for
transfer and, if any of such shares are outstanding in certificate form, the
certificates representing such shares, and that the person requesting such
registration shall pay to such Acquiring Fund any transfer or other taxes
required by reason of such registration or establish to the reasonable
satisfaction of the Acquiring Fund that such tax has been paid or is not
applicable.
1.6. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund, the assumption of the Acquired Fund's Stated
Liabilities by the Acquiring Fund, and the distribution by the Acquired Fund of
the Acquiring Fund Shares received by it pursuant to paragraph 1.4, the MMS
Trust, to the extent required by law, shall terminate the qualification,
classification and registration of such Acquired Fund at all appropriate federal
and state agencies. All reporting and other obligations of the MMS Trust with
respect to the Acquired Funds shall remain the exclusive responsibility of the
MMS Trust up to and including the date on which the particular Acquired Fund is
terminated and/or deregistered (as necessary), subject to any reporting or other
obligations described in paragraph 4.10.
1.7. The failure of one Acquired Fund to consummate the transactions
contemplated hereby shall not affect the consummation or validity of a
Reorganization with respect to the other Acquired Fund, and the provisions of
this Agreement shall be construed to effect this intent, including, without
limitation, as the context requires, construing the terms "Acquiring Fund" and
"Acquired Fund" as meaning only that series of Alleghany and the MMS Trust,
respectively, which are involved in a Reorganization as of a Closing Date.
2. VALUATION
2.1. With respect to each Acquired Fund, the value of the Fund Assets
shall be the value of such assets computed as of the time at which its net asset
value is calculated pursuant to the valuation procedures set forth in each
Acquired Fund's then current prospectus and statement of additional information
on the Closing Date (such time and date being herein called the "Applicable
Valuation Time").
2.2. The net asset value of a class of shares of an Acquiring Fund
shall be the net asset value per share of such class computed on the Applicable
Valuation Time, using the valuation procedures set forth in the Acquiring Fund's
then current prospectus and statement of additional information.
3. CLOSING(S) AND CLOSING DATE
3.1. The Closing(s) for the Reorganization(s) shall occur on , 1999,
and/or on such other date(s) as may be mutually agreed upon in writing by the
officers of the parties hereto (each a "Closing Date"). The Closing(s) shall be
held at __________________
__________________________________________________________ or at such other
location as is mutually agreeable to the parties. All acts taking place at the
Closing(s) shall be deemed to take place simultaneously as of _____ _____.m.
__________ time on the Closing Date unless otherwise provided.
3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a
certificate of an authorized officer stating that: (a) each Acquired Fund's
portfolio securities, cash and any other assets have been delivered in proper
form to the corresponding Acquiring Fund on the Closing Date and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment shall have been made,
by such Acquired Fund in conjunction with the delivery of portfolio securities.
Proper delivery of cash shall be by wire to ___________________________,
pursuant to instruction to be delivered prior to the Closing(s).
3.3. Notwithstanding anything herein to the contrary, in the event that
at the Applicable Valuation Time (a) the New York Stock Exchange shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of both Alleghany and the MMS Trust, accurate appraisal of the
value of the net assets of an Acquiring Fund or an Acquired Fund is
impracticable, the Applicable Valuation Time and Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall have been
restored.
3.4. With respect to each Acquired Fund, the MMS Trust shall provide
Alleghany and its transfer agents with immediate access from and after the
Closing Date to (a) the computer, electronic or such other forms of records
containing the names, addresses and taxpayer identification numbers of all of
the Acquired Fund investors ("Acquired Fund Investor") and the number and
percentage ownership of outstanding Acquired Fund shares owned by such Acquired
Fund Investor, all as of the Applicable Valuation Time, and (b) all original
documentation (including all applicable Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Acquired Fund
Investors' taxpayer identification numbers and their liability for or exemption
from back-up withholding. Each corresponding Acquiring Fund shall issue and
deliver to the Secretary or Assistant Secretary of the MMS Trust, acting on
behalf of the Acquired Fund, a confirmation evidencing the Acquiring Fund Shares
credited on the Closing Date or shall provide evidence satisfactory to each
Acquired Fund that such Acquiring Fund Shares have been credited to each
Acquired Fund's account on the books of each Acquiring Fund. At the Closing(s),
each party shall deliver to the other such bills of sale, checks, assignments,
share certificates, if any, receipts or other documents of transfer, assignment
or conveyance as such other party or its counsel may reasonably request.
3.5. Within thirty (30) days after the Closing Date, each Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the corresponding
Acquiring Fund a statement of the Fund Assets and Stated Liabilities, together
with a list of such Acquired Fund's portfolio securities and other assets
showing the respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by an appropriate officer of the MMS
Trust.
3.6 Each Acquiring Fund will cause a confirmation statement to be
mailed or delivered to each corresponding Acquired Fund Investor setting forth
the number of Acquiring Fund Shares registered in such Acquired Fund Investor's
name.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. The MMS Trust, with respect to each class of shares of each of the
Acquired Funds, has called or will call a meeting of Acquired Funds shareholders
to consider and act upon this Agreement, and to take all other actions
reasonably necessary to obtain the approval of the transactions contemplated
herein, including approval for each Acquired Fund's liquidating distribution of
the Acquiring Fund Shares contemplated hereby, and for the MMS Trust, to the
extent required by law, to terminate each Acquired Fund's qualification,
classification and registration if requisite approvals are obtained with respect
to each Acquired Fund. Alleghany and the MMS Trust will jointly prepare the
notice of meeting, form of proxy and Proxy Statement/Prospectus (collectively,
"Proxy Materials") to be used in connection with such meeting; provided that
Alleghany has furnished or will furnish the MMS Trust with a current, effective
prospectus, including any supplements, relating to the class of shares of each
Acquiring Fund to be issued to the shareholders of each Acquired Fund then
outstanding for incorporation within and/or distribution with the Proxy
Materials, and with such other information relating to the Acquiring Funds as is
reasonably necessary for the preparation of the Proxy Materials.
4.2. Alleghany, on behalf of each Acquiring Fund, will use its best
efforts to meet the requirements for the statutory "safe harbor" exemption
provided by Section 15(f) of the Investment Company Act of 1940 (the "1940
Act").
4.3. The MMS Trust, on behalf of each Acquired Fund, covenants that the
corresponding Acquiring Fund Shares to be issued hereunder are not being
acquired for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
4.4. The MMS Trust, on behalf of each Acquired Fund, will provide the
Acquiring Fund with all such information as the Acquiring Fund reasonably
requests concerning the record and beneficial ownership of shares of each class
of each Acquired Fund.
4.5. Subject to the provisions hereof, Alleghany, on its own behalf and
on behalf of each Acquiring Fund; and the MMS Trust, on its own behalf and on
behalf of each Acquired Fund, will take, or cause to be taken, all actions, and
do, or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated herein.
4.6. The MMS Trust, on behalf of each Acquired Fund, shall furnish to
its corresponding Acquiring Fund on the Closing Date, a final statement of the
total amount of each Acquired Fund's assets and liabilities as of the Applicable
Valuation Time on the Closing Date, which statement shall be certified by an
appropriate officer of the MMS Trust as being determined in accordance with
generally accepted accounting principles consistently applied and as being
valued in accordance with paragraph 2.1 hereof. As promptly as practicable, but
in any case within sixty (60) days after the relevant Closing Date, the MMS
Trust, on behalf of each Acquired Fund, shall furnish its corresponding
Acquiring Fund, in such form as is reasonably satisfactory to Alleghany, on
behalf of each Acquiring Fund, a statement certified by an officer of the MMS
Trust of such Acquired Fund's federal income tax attributes that will be carried
over to the corresponding Acquiring Fund in the Reorganization pursuant to
Section 381 of the Code.
4.7. Alleghany, on behalf of each Acquiring Fund, has prepared and
filed, or will prepare and file with the SEC a registration statement on Form
N-14 under the Securities Act of 1933, as amended (the "1933 Act"), relating to
the Acquiring Fund Shares, which, without limitation, shall include a proxy
statement of the PIMCO Funds and the prospectuses of the Acquiring Funds of
Alleghany relating to the transactions contemplated by this Agreement (the
"Registration Statement"). PIMCO Funds, on behalf of each Acquired Fund, has
provided or will provide each corresponding Acquiring Fund with the materials
and information necessary to prepare the Proxy Materials for inclusion in the
Registration Statement, prepared in accordance with paragraph 4.1, and with such
other information and documents relating to each Acquired Fund as are requested
by the corresponding Acquiring Fund and as are reasonably necessary for the
preparation of the Registration Statement.
4.8. After the Closing Date within the time period required by law, the
MMS Trust, on behalf of each Acquired Fund: (a) shall prepare and file all
federal and other tax returns and reports of each Acquired Fund required by law
to be filed with respect to all periods ending on or before the Closing Date but
not theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were unpaid as of the Closing
Date.
4.9. With respect to each Acquiring Fund, Alleghany agrees to operate
in accordance with its then current prospectus and statement of additional
information prepared in accordance with Form N-1A, including qualifying as a
regulated investment company under Subchapter M of the Code.
4.10. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares and the
assumption of the Stated Liabilities of the Acquired Fund as contemplated
herein, the MMS Trust will file any final regulatory reports, including but not
limited to any Form N-SAR and Rule 24f-2 filings with respect to such Acquired
Fund(s), after the Closing Date within the time period required by law and also
will take, to the extent required by law, all other steps as are necessary and
proper to effect the termination or declassification of such Acquired Funds of
the MMS Trust in accordance with the laws of the Commonwealth of Massachusetts
and other applicable requirements.
4.11. Each Acquired Fund will pay or cause to be paid to the
corresponding Acquiring Fund any interest, cash or such dividends, rights and
other payments received by it on or after the Closing Date with respect to the
investments and other properties and assets of the Acquired Fund, whether
accrued or contingent, received by it on or after the Closing Date. Any such
distribution shall be deemed included in the assets transferred to the Acquiring
Fund at the Closing Date and shall not be separately valued unless the
securities in respect of which such distribution is made shall have gone "ex"
such distribution prior to the Applicable Valuation Time, in which case any such
distribution which remains unpaid at the Closing Date shall be included in the
determination of the value of the assets of the relevant Acquired Fund acquired
by the corresponding Acquiring Fund.
5. REPRESENTATIONS AND WARRANTIES
5.1 Alleghany, on behalf of itself and each Acquiring Fund, represents and
warrants to the MMS Trust as follows:
5.1.a. Alleghany was duly created pursuant to its Trust Instrument by
the Trustees for the purpose of acting as a management
investment company under the 1940 Act and is validly existing
under the laws of the State of Delaware, and the Trust
Instrument directs the Trustees to manage the affairs of
Alleghany and grants them all powers necessary or desirable to
carry out such responsibility, including administering
Alleghany business as conducted by Alleghany and as described
in the Proxy Materials and current prospectuses of Alleghany;
Alleghany is registered as an investment company classified as
an open-end management company under the 1940 Act and its
registration with the SEC as an investment company is in full
force and effect;
5.1.b The Registration Statement, including the current prospectuses
and statement of additional information of each Acquiring
Fund, conform or will conform, at all times up to and
including the Closing Date, in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and
the regulations thereunder and do not include or will not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the execution,
delivery and performance of this Agreement by Alleghany for
itself and on behalf of each Acquiring Fund will not (i)
violate Alleghany's Trust Instrument or By-laws or (ii) result
in a breach or violation of, or constitute a default under any
material agreement or material instrument, to which Alleghany
is a party or by which its properties or assets are bound;
5.1.d. Except as previously disclosed in writing to the MMS Trust, no
litigation or administrative proceeding or investigation of or before any
court or governmental body is presently pending or, to Alleghany's
knowledge, threatened against Alleghany or its business, the Acquiring
Funds or any of their properties or assets, which, if adversely determined,
would materially and adversely affect Alleghany or an Acquiring Fund's
financial condition or the conduct of their business, and Alleghany knows
of no facts that might form the basis for the institution of any such
proceeding or investigation, and no Acquiring Fund is a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely to materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
5.1.e. All shares to be issued in connection with the Reorganization
of the classes of each Acquiring Fund will, as of the Closing
Date, be duly authorized and validly issued and outstanding,
fully paid and non-assessable by Alleghany and neither
Acquiring Fund has outstanding any options, warrants or other
rights to subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this Agreement on
behalf of each Acquiring Fund will have been duly authorized
prior to the Closing Date by all necessary action on the part
of Alleghany and the Alleghany Board of Trustees, and this
Agreement constitutes a valid and binding obligation of
Alleghany and each Acquiring Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles;
5.1.g. The Acquiring Fund Shares to be issued and delivered to the
corresponding Acquired Fund for the account of the Acquired
Fund Investors, pursuant to the terms hereof, will have been
duly authorized as of the Closing Date and, when so issued and
delivered, will be duly and validly issued, fully paid and
non-assessable;
5.1.h. On the effective date of the Registration Statement, at the
time of the meeting of the Acquired Fund shareholders and on
the Closing Date, any written information furnished by
Alleghany with respect to an Acquiring Fund for use in the
Proxy Materials, the Registration Statement or any other
materials provided in connection with the Reorganization does
not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
information provided not misleading;
5.1.i. No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act or Delaware law for the execution of this Agreement by
Alleghany, for itself and on behalf of each Acquiring Fund, or the
performance of the Agreement by Alleghany, for itself and on behalf of each
Acquiring Fund, except for the effectiveness of the Registration Statement,
any necessary exemptive relief or no-action assurances requested from the
SEC or its Staff with respect to Sections 17(a) and 17(d) of the 1940 Act
and Rule 17d-1 thereunder, and such other consents, approvals,
authorizations and filings as have been made or received, and except for
such consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date;
5.1.j. All federal and other tax returns and reports of Alleghany and
each Acquiring Fund required by law to be filed on or before
the Closing Date have been or will be filed, and all federal
and other taxes owed by Alleghany on behalf of the Acquiring
Funds have been or will be paid so far as due, and to the best
of Alleghany's knowledge, after due inquiry, no such return is
currently under audit and no assessment has been asserted with
respect to any such return;
5.1.k. At the Closing Date, the Acquiring Funds will have good and
marketable title to their assets and full right, power and
authority to assign, deliver and otherwise transfer such
assets; and
5.1.l. The Acquiring Funds were established by the Board of Trustees
of Alleghany in order to effect the transactions described in
this Agreement. The Acquiring Funds have not yet filed their
first federal income tax returns and, thus, have not yet
elected to be treated as "regulated investment companies" for
federal income tax purposes. However, upon filing their first
income tax return at the completion of their first taxable
year, the Acquiring Funds will elect to be "regulated
investment companies" and until such time will take all steps
necessary to ensure that they qualify for taxation as
"regulated investment companies" under Sections 851 and 852 of
the Code.
5.2. The MMS Trust, on behalf of itself and each Acquired Fund,
represents and warrants to Alleghany as follows:
5.2.a. The MMS Trust was duly created pursuant to its Agreement and
Declaration of Trust by the MMS Trust Board of Trustees for the
purpose of acting as a management investment company under the 1940
Act and is validly existing under the laws of the Commonwealth of
Massachusetts, and the Agreement and Declaration of Trust directs the
Trustees to manage the affairs of the MMS Trust and grants them all
powers necessary or desirable to carry out such responsibility,
including administering MMS Trust business as currently conducted by
the MMS Trust and as described in the current prospectuses of the MMS
Trust; the MMS Trust is registered as an investment company,
classified as an open-end management company under the 1940 Act and
its registration with the SEC as an investment company is in full
force and effect;
5.2.b. All of the issued and outstanding shares representing units of
beneficial interest of each Acquired Fund have been offered
and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state
securities laws;
5.2.c. The Acquired Funds are not in violation of, and the execution
and the performance of the Agreement by the MMS Trust for
itself and on behalf of each Acquired Fund does not and will
not (i) violate the MMS Trust's Agreement and Declaration of
Trust or By-Laws, or (ii) result in a breach or violation of,
or constitute a default under, any term of any material
agreement or material instrument to which the MMS Trust is a
party or by which its properties or assets are bound, except
as otherwise disclosed in writing to the Acquiring Funds;
5.2.d. No litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or, to
the MMS Trust's knowledge, threatened against any Acquired Fund or any
of its properties or assets which, if adversely determined, would
materially and adversely affect such Acquired Fund's financial
condition or the conduct of its business, and the MMS Trust knows of
no facts that might form the basis for the institution of any such
proceeding or investigation, and no Acquired Fund is a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body that materially and adversely affects, or
is reasonably likely to materially and adversely affect, its business
or its ability to consummate the transactions contemplated herein;
5.2.e. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of each
Acquired Fund as of and for the year ended June 30, 1998,
audited by PricewaterhouseCoopers LLP (copies of which have
been or will be furnished to the Acquiring Funds) fairly
present, in all material respects, the financial condition of
each Acquired Fund as of such date and its results of
operations for such period in accordance with generally
accepted accounting principles consistently applied, and as of
such date there were no liabilities of either Acquired Fund
(contingent or otherwise) known to the MMS Trust that were not
disclosed therein but that would be required to be disclosed
therein in accordance with generally accepted accounting
principles;
5.2.f. Since June 30, 1998, there has not been any material adverse
change in any Acquired Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by an Acquired
Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed
in writing to and accepted by the corresponding Acquiring
Fund, prior to the Closing Date (for the purposes of this
subparagraph (f), neither a decline in an Acquired Fund's net
asset value per share nor a decrease in an Acquired Fund's
size due to redemptions shall be deemed to constitute a
material adverse change);
5.2.g. All federal and other tax returns and reports of the MMS Trust
and each Acquired Fund required by law have been or will be
filed, and all federal and other taxes owed by the MMS Trust
and each Acquired Fund shall, with respect to all periods
ending on or before the Closing Date, have been or will be
paid so far as due, and to the best of the MMS Trust's
knowledge, after due inquiry, no such return is currently
under audit and no assessment has been asserted with respect
to any such return;
5.2.h. For the full and partial taxable year from its inception
through the Closing Date, each Acquired Fund has qualified, or
will qualify, as a separate regulated investment company under
Subchapter M of the Code and will take all necessary and
required actions to maintain such status;
5.2.i. All issued and outstanding shares of each Acquired Fund are,
and on the Closing Date will be, duly authorized and validly
issued and outstanding, and fully paid and non-assessable by
the MMS Trust or any Acquired Fund, and all such shares will,
at the time of the Closing(s), be held by the persons and in
the amounts set forth in the list of Acquired Fund Investors
provided to each corresponding Acquiring Fund pursuant to
paragraph 3.4, and no Acquired Fund has outstanding any
options, warrants or other rights to subscribe for or purchase
any of its shares, nor is there outstanding any security
convertible into any of its shares;
5.2.j At the Closing Date, each Acquired Fund will have good and
marketable title to its Fund Assets and full right, power and
authority to assign, deliver and otherwise transfer such Fund
Assets hereunder, and upon delivery and payment for such Fund
Assets as contemplated herein, the corresponding Acquiring
Fund will acquire good and marketable title thereto, subject
to no restrictions on the ownership or transfer thereof other
than such restrictions as might arise under the 1933 Act;
5.2.k. The execution, delivery and performance of this Agreement on
behalf of the Acquired Funds will have been duly authorized
prior to the Closing Date by all necessary action on the part
of the MMS Trust and the Board of Trustees thereof, and this
Agreement constitutes a valid and binding obligation of the
MMS Trust and each Acquired Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles;
5.2.l. From the effective date of the Registration Statement,
through the time of the meeting of the Acquired Fund Investors
and on the Closing Date, the Registration Statement and the Proxy
Materials insofar as they relate to materials provided by the MMS
Trust or the Acquired Funds, used in connection with the
Registration Statement: (i) will comply in all material respects
with the applicable provisions of the 1934 Act and the 1940 Act
and the regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and as of such dates and
times, any written information furnished by the MMS Trust, on
behalf of the Acquired Funds, for use in the Proxy Materials or
in any other manner that may be necessary in connection with the
transactions contemplated hereby will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading;
5.2.m. No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the
MMS Trust, for itself and on behalf of each Acquired Fund, or
the performance of the Agreement by the MMS Trust for itself
and on behalf of each Acquired Fund, except for any necessary
exemptive relief or no-action assurances requested from the
SEC or its Staff with respect to Section 17(a) and 17(d) of
the 1940 Act and Rule 17d-1 thereunder, and except for such
other consents, approvals, authorizations and filings as have
been made or received, and except for such consents,
approvals, authorizations and filings as may be required
subsequent to the Closing Date; and
5.2.n. There are no material contracts outstanding to which the
Acquired Fund is a party, other than as disclosed in the Proxy
Materials or the registration statement of the MMS Trust.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS
The obligations of the MMS Trust to consummate the Reorganization with
respect to each Acquired Fund shall be subject to the performance by Alleghany,
for itself and on behalf of each Acquiring Fund, of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions with respect to each corresponding Acquiring
Fund:
6.1. All representations and warranties of Alleghany with respect to
each Acquiring Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated herein, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2. Alleghany, on behalf of each Acquiring Fund, shall have delivered
to the MMS Trust at the Closing(s) a certificate executed on behalf of each
corresponding Acquiring Fund by Alleghany's President, Secretary, Assistant
Secretary, or other authorized officer, in a form reasonably satisfactory to the
MMS Trust and dated as of the Closing Date, to the effect that the
representations and warranties of Alleghany with respect to each Acquiring Fund
made herein are true and correct at and as of the Closing Date, except as they
may be affected by the transactions contemplated herein, and as to such other
matters as such Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received at the Closing(s) a
favorable opinion of Sonnenschein Nath & Rosenthal, counsel to Alleghany (based
upon or subject to such representations, assumptions, limitations or opinions of
local counsel as such counsel may deem appropriate or necessary), dated as of
the Closing Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or to which it
is subject) reasonably satisfactory to each Acquired Fund and its counsel,
substantially to the effect that:
6.3.a. Alleghany is a duly registered, open-end, management
investment company, and its registration with the SEC as an
investment company under the 1940 Act is in full force and
effect;
6.3.b. each Acquiring Fund is a portfolio of Alleghany, which is a
business trust duly created pursuant to its Trust Instrument,
is validly existing and in good standing under the laws of the
State of Delaware and has the power to own all of its
properties and to carry on its business as presently conducted
and as it intends to be conducted, and the Trust Instrument
directs the Board of Trustees thereof to manage the affairs of
Alleghany and grants them all powers necessary or desirable to
carry out such responsibility, including administering
Alleghany's business as described in the current prospectuses
of Alleghany;
6.3.c. this Agreement has been duly authorized, executed and
delivered on behalf of Alleghany and each Acquiring Fund and,
assuming due authorization, execution and delivery of this
Agreement on behalf of the Acquiring Funds, is a valid and
binding obligation of Alleghany enforceable against Alleghany
in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds
Investors pursuant to this Agreement are duly registered under
the 1933 Act on the appropriate form, and are duly authorized
and upon such issuance will be validly issued and outstanding
and fully paid and non-assessable, and no shareholder of an
Acquiring Fund has any preemptive rights to subscription or
purchase in respect thereof;
6.3.e. the Registration Statement has become effective with the SEC
and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or threatened;
6.3.f. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation by Alleghany of the
Reorganization with respect to each Acquiring Fund;
6.3.g. the execution and delivery of the Agreement and the
performance of its terms by Alleghany, and each Acquiring
Fund, do not violate or result in a violation of the Alleghany
Trust Instrument or By-laws or any judgment, order or decree
known to such counsel, of any court or arbiter, to which
Alleghany is a party, and will not constitute a material
breach of the terms, conditions or provisions of, or
constitute a default under, any contract, undertaking,
indenture or other agreement by which Alleghany is now bound
or to which it is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials, involving Alleghany or the Acquiring Funds,
are required to be described in the Proxy Materials which are
not described as required and (b) there are no contracts or
documents relating to Alleghany or the Acquiring Funds, known
to such counsel, of a character required to be described in
the Proxy Materials that are not described as required or to
be filed as exhibits to the Registration Statement that are
not filed as required;
6.3.i. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Alleghany or an Acquiring Fund or any of their properties or
assets and neither Alleghany nor any Acquiring Fund is a party
to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business; and
6.3.j. in addition, such counsel shall also state that they have
participated in conferences with officers and other
representatives of the Acquiring Funds at which the contents of
the Proxy Materials and related matters were discussed, and,
although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Proxy Materials, on the basis of the
foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Acquiring
Funds), no facts have come to their attention that lead them to
believe that the Proxy Materials as of its date, as of the date
of the Acquired Fund shareholders' meeting, or as of the Closing
Date, contained an untrue statement of a material fact regarding
the Acquiring Funds or omitted to state a material fact required
to be stated therein or necessary to make the statements therein
regarding the Acquiring Funds, in light of the circumstances
under which they were made, not misleading. Such opinion may
state that such counsel does not express any opinion or belief as
to the financial statements or other financial data, or as to the
information relating to the Acquired Funds, contained in the
Proxy Materials, and that such opinion is solely for the benefit
of the Acquired Fund, its Board of Trustees and its officers.
6.4. As of the Closing Date with respect to the Reorganization of each
Acquired Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any material change in the investment
management fees, fee levels payable pursuant to the 12b-1 plan of distribution,
other fees payable for services provided to the Acquiring Funds, fee waiver or
expense reimbursement undertakings, of the Acquiring Funds from those fee
amounts, undertakings described in the prospectus of each Acquiring Fund
delivered to the corresponding Acquired Fund pursuant to paragraph 4.1 and in
the Proxy Materials.
6.5. With respect to each Acquiring Fund, the Board of Trustees of
Alleghany, including a majority of the "non-interested" (as defined in the 1940
Act) Trustees, has determined that the Reorganization is in the best interests
of each Acquiring Fund and that the interests of the existing shareholders of
each Acquiring Fund would not be diluted as a result of the Reorganization.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
The obligations of Alleghany to consummate the Reorganization with
respect to each Acquiring Fund shall be subject to the performance by the MMS
Trust of all the obligations to be performed by it hereunder, with respect to
each corresponding Acquired Fund, on or before the Closing Date and, in addition
thereto, the following conditions:
7.1. All representations and warranties of the MMS Trust with respect
to the Acquired Funds contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date.
7.2. The MMS Trust, on behalf of each Acquired Fund, shall have
delivered to each corresponding Acquiring Fund at the Closing(s) a certificate
executed on behalf of each Acquired Fund, by the MMS Trust's President,
Secretary or Assistant Secretary, or other authorized officer, in form and
substance satisfactory to the Acquiring Funds and dated as of the relevant
Closing Date, to the effect that the representations and warranties of the MMS
Trust with respect to each Acquired Fund made herein are true and correct at and
as of such Closing Date, except as they may be affected by the transactions
contemplated herein and as to such other matters as each Acquiring Fund shall
reasonably request.
7.3. Each Acquiring Fund shall have received at the Closing(s) a
favorable opinion from Ropes & Gray, counsel to the MMS Trust (based upon or
subject to such representations, assumptions, limitations or opinions of local
counsel as such counsel may deem appropriate or necessary), dated as of the
relevant Closing Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or to which it
is subject) reasonably satisfactory to such Acquiring Fund, substantially to the
effect that:
7.3.a. The MMS Trust is a duly registered, open-end investment
company, and its registration with the SEC as an investment
company under the 1940 Act is in full force and effect;
7.3.b. each Acquired Fund is a portfolio of the MMS Trust, the MMS
Trust is a business trust duly created pursuant to its
Agreement and Declaration of Trust, is validly existing and in
good standing under the laws of the Commonwealth of
Massachusetts, and the Agreement and Declaration of Trust
directs the Trustees to manage the affairs of the MMS Trust
and grants them all powers necessary or desirable to carry out
such responsibility, including administering the MMS Trust's
business as described in the current prospectuses of the MMS
Trust;
7.3.c. this Agreement has been duly authorized, executed and
delivered by the MMS Trust on behalf of the MMS Trust and each
Acquired Fund and, assuming that the Alleghany prospectus and
the Proxy Materials comply with the 1933 Act, the 1934 Act and
the 1940 Act and assuming due authorization, execution and
delivery of this Agreement on behalf of each Acquiring Fund,
is a valid and binding obligation of the MMS Trust,
enforceable against the MMS Trust in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
7.3.d. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation of the Reorganization
with respect to each Acquired Fund, except for such consents,
approvals, authorizations and filings as have been made or
received, and except for such consents, approvals,
authorizations and filings as may be required under state
securities or blue sky laws or required subsequent to the
Closing Date;
7.3.e. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by the MMS Trust,
and each Acquired Fund, do not violate or result in a violation
of the MMS Trust's Agreement and Declaration of Trust or By-Laws,
or any judgment, order or decree known to such counsel, of any
court or arbiter, to which the MMS Trust is a party, and, to such
counsel's knowledge, will not constitute a material breach of the
terms, conditions or provisions of, or constitute a default
under, any contract, undertaking, indenture or other agreement by
which the MMS Trust is now bound or to which it is now a party,
it being understood that with respect to investment restrictions
contained in the MMS Trust Instrument and Declaration of Trust,
By-laws or then current prospectus or statements of additional
information, such counsel may rely on a certificate of an officer
of the MMS Trust whose responsibility it is to advise the MMS
Trust and the Acquired Funds;
7.3.f. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Proxy Materials involving the MMS Trust or the Acquired Funds,
are required to be described in the Proxy Materials which are
not described as required and (b) there are no contracts or
documents relating to the MMS Trust or the Acquired Funds,
known to such counsel, of a character required to be described
in the Proxy Materials that are not described as required;
7.3.g. to such counsel's knowledge, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
the MMS Trust or an Acquired Fund or any of their properties
or assets and neither the MMS Trust nor an Acquired Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects, or would materially and adversely affect,
its business; and
7.3.h. in addition, such counsel shall also state that they have
participated in conferences with officers and other
representatives of the Acquired Funds at which the contents of
the Proxy Materials and related matters were discussed, and,
although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Proxy Materials, on the basis of the
foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Acquired
Fund), no facts have come to their attention that lead them to
believe that the Proxy Materials as of its date, as of the date
of the Acquired Fund shareholders' meeting, or as of the Closing
Date, contained an untrue statement of a material fact regarding
the Acquired Funds or omitted to state a material fact required
to be stated therein or necessary to make the statements therein
regarding the Acquired Funds, in light of the circumstances under
which they were made, not misleading. Such opinion may state that
such counsel does not express any opinion or belief as to the
financial statements or other financial data, or as to the
information relating to the Acquiring Fund, contained in the
Proxy Materials, and that such opinion is solely for the benefit
of the Acquiring Funds, and the Board of Trustees and officers of
the Acquiring Fund.
7.4 Alleghany, on behalf of each Acquiring Fund, shall have received
from PricewaterhouseCoopers LLP, a letter addressed to Alleghany, on behalf of
each Acquiring Fund, and dated as of the Closing Date with respect to the
Acquired Funds, in form and substance satisfactory to Alleghany, to the effect
that:
7.4.a. they are independent accountants with respect to the MMS Trust
and each Acquired Fund within the meaning of the 1933 Act and
the applicable regulations thereunder;
7.4.b. in their opinion, the audited financial statements and the Per
Share Data provided in accordance with Items 9 and 22 in Form
N-1A (the "Per Share Data") of the Acquired Fund included or
incorporated by reference in the Registration Statement
previously reported on by them comply as to form in all
material aspects with the applicable accounting requirements
of the 1933 Act and the published rules and regulations
thereunder;
7.4.c. on the basis of limited procedures agreed upon by Alleghany,
on behalf of the Acquiring Funds, and the MMS Trust, on behalf
of the Acquired Funds, and described in such letter (but not
an examination in accordance with generally accepted auditing
standards), the information relating to the Acquired Funds
appearing in the Registration Statement or incorporated
therein that is expressed in dollars or percentages of dollars
(with the exception of performance comparisons) has been
obtained from the accounting records of the Acquired Funds or
from schedules prepared by officers of the MMS Trust having
responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or
computations made therefrom.
7.5. The MMS Trust shall have delivered to the Acquiring Funds,
pursuant to paragraph 5.2(e), copies of financial statements of each Acquired
Fund as of and for the period ended June 30, 1998, audited by
PricewaterhouseCoopers LLP.
7.6. With respect to each Acquired Fund, the Board of Trustees of the
MMS Trust, including a majority of "non-interested" Trustees, has determined
that the Reorganization is in the best interests of each Acquired Fund and that
the interests of the existing investors in each Acquired Fund would not be
diluted as a result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUNDS AND THE ACQUIRED FUNDS
The obligations of each Acquiring Fund and of each corresponding
Acquired Fund herein are subject to the satisfaction of the following further
conditions on or before the Closing Date with respect to each Acquiring Fund and
each corresponding Acquired Fund:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
beneficial interest in each Acquired Fund in accordance with the provisions of
the MMS Trust's Agreement and Declaration of Trust and the requirements of the
1940 Act, and certified copies of the resolutions evidencing such approval shall
have been delivered to each corresponding Acquiring Fund.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or any of the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC and of state securities
authorities) deemed necessary by Alleghany, on behalf of the Acquiring Funds or
by the MMS Trust, on behalf of the Acquired Funds, to permit consummation, in
all material respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or permit would
not, in the opinion of the party asserting that the condition to closing has not
been satisfied, involve a risk of a material adverse effect on the assets or
properties of any Acquiring Fund or its corresponding Acquired Fund.
8.4. The Registration Statement shall have become effective under the
1933 Act, no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated under
the 1940 Act, each Acquired Fund shall have declared a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to each Acquired Fund's shareholders all of its investment company
taxable income for all taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and all of its net
capital gain realized in each taxable year ending on or prior to the Closing
Date (after reduction for any capital loss carry forward.)
8.6. The Acquiring Funds and the Acquired Funds shall have received
from KPMG Peat Marwick LLP a letter dated as of the Closing Date, in form and
substance satisfactory to Alleghany and to the MMS Trust, to the effect that on
the basis of limited procedures agreed upon by Alleghany, on behalf of the
Acquiring Funds and the MMS Trust, on behalf of the Acquired Funds (but not an
examination in accordance with generally accepted auditing standards): (i) the
data utilized in the calculations of the projected expense ratio appearing in
the Proxy Materials agree with underlying accounting records of the Acquiring
Funds and the Acquired Funds and (ii) certain other procedures as considered
necessary by Alleghany.
8.7. Alleghany and the MMS Trust shall have received an opinion of Sonnenschein
Nath & Rosenthal addressed to both Alleghany and the MMS Trust which will be
based upon the representations and assumptions provided by Alleghany, the MMS
Trust and Blairlogie Captial Management substantially to the effect that, for
federal income tax purposes:
8.7.a. Each of the Acquiring Funds and each of the Acquired Funds
will be treated as corporations separate from the other series
of the Alleghany and the MMS Trust, respectively;
8.7.b Although there is no controlling authority on point, the
transfer by each of the Acquired Funds of all or substantially
all of their assets in exchange for the corresponding
Acquiring Funds shares and the assumption by each Acquiring
Fund of certain of corresponding Acquired Fund's liabilities
and the subsequent liquidation of each Acquired Fund pursuant
to the Reorganizations should constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code (the "Code"), and each Acquiring Fund and Acquired Fund
should be "a party to reorganization" within the meaning of
Section 368(b) of the Code. The conclusions set forth below
assume that the conclusion set forth in this Section 8.7.b. is
correct;
8.7.c Neither of the Acquired Funds will recognize any gain or loss as
a result of the Reorganizations;
8.7.d. Neither of the Acquiring Funds will recognize any gain or loss
on the receipt of the assets of the corresponding Acquiring
Fund in exchange for shares of the corresponding Acquiring
Fund in the Reorganizations;
8.7.e. The adjusted tax basis and holding period in the assets of
each of the Acquiring Funds received from the corresponding
Acquired Funds in the Reorganizations will be the same as the
adjusted tax basis and will include the holding period,
respectively, of such assets in the hands of the corresponding
Acquiring Fund immediately prior to the Reorganizations;
8.7.f. The shareholders of each of the Acquired Funds who exchange
shares of each of the Acquired Funds solely for shares of the
corresponding Acquiring Funds in the Reorganizations will not
recognize any gain or loss;
8.7.g. The aggregate tax basis of Acquiring Fund shares received by
each shareholder of the Acquired Funds in the Reorganizations
will be the same as the aggregate tax basis of the Acquired
Fund shares exchanged therefor;
8.7.h. Each former Acquired Fund shareholders' holding period of
Acquiring Funds shares received in the Reorganizations will be
determined by including the period for which Acquired Fund
shares were held by such shareholder at the time of the
Reorganizations provided that such shareholder held the
Acquired Fund shares as a capital asset; and
8.7.i. Each of the Acquiring Funds will succeed to and take into
account the tax attributes of the corresponding Acquired Funds
described in Section 381(c) of the Code, subject to the
conditions and limitations contained in Section 381(c) of the
Code.
Notwithstanding anything herein to the contrary, neither an Acquiring
Fund nor its corresponding Acquired Fund may waive the conditions set forth in
this paragraph 8.7.
9. BROKERAGE FEES AND EXPENSES
9.1. Alleghany, for itself and on behalf of the Acquiring Funds, and
the MMS Trust, on behalf of itself and on behalf of the Acquired Funds,
represent and warrant that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
9.2. Except as otherwise provided herein, Alleghany will bear the
expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, provided that the MMS Trust shall be responsible
for all accounting fees incurred by it or its affiliates in connection with
entering into and carrying out this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the
parties and supersedes any prior or contemporaneous understanding or arrangement
with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
11.1.a. by the mutual written consent of Alleghany and the MMS Trust;
11.1.b. by either Alleghany or the MMS Trust by notice to the other,
without liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
default or breach of this Agreement by such terminating
party), if such Closing(s) shall not have occurred on or
before March 31, 1999; or
11.1.c by either of Alleghany or the MMS Trust, in writing without
liability to the terminating party on account of such
termination (provided any such termination shall not excuse
the terminating party from any liability arising out of a
material default or breach of this Agreement by such
terminating party), if (i) the other party shall fail to
perform in any material respect its agreements contained
herein required to be performed prior to the Closing Date,
(ii) the other party materially breaches or shall have
breached any of its representations, warranties or covenants
contained herein, or (iii) any other express condition
precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot
be met.
11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or
(b) shall terminate all obligations of the parties hereunder with respect to the
Acquired Fund and Acquiring Fund affected by such termination, or with respect
to Alleghany and the MMS Trust, as the case may be, and there shall be no
liability for damages on the part of Alleghany or the MMS Trust or the Trustees
or officers of Alleghany or the MMS Trust, to any other party or its Trustees or
officers on account of termination pursuant to paragraphs 11.1(a) or (b);
provided, however, that notwithstanding any termination of this Agreement
pursuant to paragraph 11.1, such termination shall not relieve either party of
its respective obligations pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of
Alleghany, acting on behalf of each Acquiring Fund and the authorized officers
of the MMS Trust, acting on behalf of the shareholders of each Acquired Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Funds, no such amendment may have the effect of changing the provisions
for determining the number of shares of the corresponding Acquiring Funds to be
issued to the Acquired Fund Investors under this Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
such Acquired Fund, without the Acquired Fund obtaining the Acquired Fund
Investors' further approval except that nothing in this paragraph 12 shall be
construed to prohibit any Acquiring Fund and the corresponding Acquired Fund
from amending this Agreement to change the Closing Date or Applicable Valuation
Time by mutual agreement.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For Alleghany, on behalf of itself and each Acquiring Fund:
Alleghany Funds
171 North Clark Street
Chicago, Illinois 60601
Attention: President
with copies (which shall not constitute notice) to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Arthur J. Simon
For the MMS Trust, on behalf of itself and each Acquired Fund:
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Attention: __________________
with copies (which shall not constitute notice) to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: J.B. Kittredge
14. INDEMNIFICATION
14.1. The MMS Trust will indemnify and hold harmless, out of its assets
but no other assets, the Acquiring Funds and such Funds' Trustees, officers or
other agents (for purposes of this paragraph 14, the "Alleghany Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the
Alleghany Indemnified Parties in connection with, arising out of, or resulting
from any claim, action, suit or proceeding in which any one or more of the
Alleghany Indemnified Parties may be involved or with which any one or more of
the Alleghany Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact, provided or made by
the MMS Trust or the Acquired Funds, and relating to the MMS Trust or the
Acquired Fund, contained in the Proxy Materials or Registration Statement, or
any amendment or supplement thereto, or arising out of or based upon the
omission or alleged omission to state in the Registration Statement a material
fact relating to the MMS Trust or the Acquired Funds, required to be stated
therein or necessary to make the statements therein not misleading, including,
without limitation, any amounts paid by any one or more of the Alleghany
Indemnified Parties in a reasonable compromise or settlement of any such claim,
action, suit or proceeding, or threatened claim, action, suit or proceeding made
with the consent of the Acquired Funds. Each Acquired Fund, however, will not
indemnify or hold harmless the Alleghany Indemnified Parties, identified in this
paragraph 14, for any expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of the Alleghany
Indemnified Parties in connection with, arising out of, or resulting from any
claim, action, suit or proceeding in which any one or more of the Alleghany
Indemnified Parties may be involved or with which any one or more of the
Alleghany Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact relating to Alleghany
or the Acquiring Funds contained in the representations, warranties and
covenants of this Agreement or arising out of or based upon the omission or
alleged omission to state in the foregoing representations, warranties and
covenants, a material fact relating to Alleghany or the Acquiring Funds required
to be stated therein or necessary to make the statements relating to the
Alleghany or the Acquiring Funds therein not misleading. The Alleghany
Indemnified Parties will notify the Acquired Funds in writing within ten days
after the receipt by any one or more of the Alleghany Indemnified Parties of any
notice of legal process or any suit brought against or claim made against such
Alleghany Indemnified Parties as to any matters covered by this paragraph 14.
The Acquired Funds shall be entitled to participate at their own expense in the
defense of any claim, action, suit or proceeding covered by this paragraph 14,
or, if they so elect, to assume at their expense by counsel satisfactory to the
Alleghany Indemnified Parties the defense of any such claim, action, suit or
proceeding, and if the Acquired Funds elect to assume such defense, the
Alleghany Indemnified Parties shall be entitled to participate in the defense of
any such claim, action, suit or proceeding at their own expense. The Acquired
Funds' obligation under this paragraph 14 to indemnify and hold harmless the
Alleghany Indemnified Parties shall constitute a guarantee of payment so that
the MMS Trust or the Acquired Funds will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be paid by them under this
paragraph 14 without the necessity of the Alleghany Indemnified Parties first
paying the same.
14.2 Alleghany will indemnify and hold harmless, out of its assets but
no other assets, the Acquired Funds and such Funds' Trustees, officers or other
agents (for purposes of this paragraph 14, the "PIMCO Indemnified Parties")
against any and all expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of the PIMCO
Indemnified Parties in connection with, arising out of, or resulting from any
claim, action, suit or proceeding in which any one or more of the PIMCO
Indemnified Parties may be involved or with which any one or more of the PIMCO
Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact, provided or made by the Alleghany
or the Acquiring Funds, and relating to Alleghany or the Acquired Funds,
contained in the Proxy Materials or Registration Statement, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state in the foregoing Registration Statement a material fact
relating to Alleghany or the Acquiring Funds, required to be stated therein or
necessary to make the statements therein not misleading, including, without
limitation, any amounts paid by any one or more of the PIMCO Indemnified Parties
in a reasonable compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding made with the
consent of the Acquiring Funds. Each Acquired Fund, however, will not indemnify
or hold harmless the PIMCO Indemnified Parties, identified in this paragraph 14,
for any expenses, losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the PIMCO Indemnified Parties
in connection with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the PIMCO Indemnified Parties may be
involved or with which any one or more of the PIMCO Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue statement of a
material fact relating to the MMS Trust or the Acquired Funds contained in the
representations, warranties and covenants of this Agreement or arising out of or
based upon the omission or alleged omission to state in the foregoing
representations, warranties and covenants, a material fact relating to the MMS
Trust or the Acquired Funds required to be stated therein or necessary to make
the statements relating to the MMS Trust or the Acquired Funds therein not
misleading. The PIMCO Indemnified Parties will notify the Acquiring Funds in
writing within ten days after the receipt by any one or more of the PIMCO
Indemnified Parties of any notice of legal process or any suit brought against
or claim made against such PIMCO Indemnified Parties as to any matters covered
by this paragraph 14. The Acquiring Funds shall be entitled to participate at
their own expense in the defense of any claim, action, suit or proceeding
covered by this paragraph 14, or, if they so elect, to assume at its expense by
counsel satisfactory to the PIMCO Indemnified Parties the defense of any such
claim, action, suit or proceeding, and if the Acquiring Funds elect to assume
such defense, the PIMCO Indemnified Parties shall be entitled to participate in
the defense of any such claim, action, suit or proceeding at their own expense.
The Acquiring Funds' obligation under this paragraph 14 to indemnify and hold
harmless the PIMCO Indemnified Parties shall constitute a guarantee of payment
so that Alleghany or the Acquiring Funds will pay in the first instance any
expenses, losses, claims, damages and liabilities required to be paid by them
under this paragraph 14 without the necessity of the PIMCO Indemnified Parties
first paying the same.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
15.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to Articles, paragraphs,
subparagraphs or Exhibits shall be construed as referring to Articles,
paragraphs or subparagraphs hereof or Exhibits hereto, respectively. Whenever
the terms hereto, hereunder, herein or hereof are used in this Agreement, they
shall be construed as referring to this entire Agreement, rather than to any
individual Article, paragraph, subparagraph or sentence.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
15.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5. It is expressly agreed that the obligations of Alleghany
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of Alleghany personally, but shall bind only the
assets and the property of the respective Acquiring Fund of Alleghany, as
provided in its Trust Instrument. The execution and delivery by such officers
shall not be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the assets and the
property of the respective Acquiring Fund of Alleghany as provided in its Trust
Instrument.
15.6. No Acquired Fund shall have any liability for the obligations of
any other Acquired Fund hereunder and no Acquiring Fund shall have any liability
for the obligation of any other Acquiring Fund hereunder.
15.7. A copy of the Second Amended Agreement and Declaration of Trust
of the MMS Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the trustees of the MMS Trust on behalf of the Acquired Funds as
trustees and not individually and that the obligations of this instrument are
not binding upon any of the trustees, officers or shareholders of the MMS Trust
individually but are binding only upon the assets and property of the Acquired
Funds.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its authorized officer, and attested by its
Secretary.
ALLEGHANY FUNDS, for itself and on
behalf of each Acquiring Fund
ATTEST:
________________________________ By: ________________________________
Secretary Stuart Bilton
Chairman of the Board
PIMCO FUNDS: MULTI-
MANAGER SERIES, for itself and
ATTEST: on behalf of each Acquired Fund
________________________________ By: ________________________________
Secretary William D. Cvengros
Chief Executive Officer
SCHEDULE A
PIMCO FUND/SHARE CLASS CORRESPONDING ALLEGHANY/SHARE CLASS
PIMCO EMERGING MARKET FUND ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
PIMCO INTERNATIONAL ALLEGHANY/BLAIRLOGIE INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
Class A Shares Class N Shares
Class B Shares Class N Shares
Class C Shares Class N Shares
Administrative Class Shares Class N Shares
Institutional Class Shares Class I Shares
11003507\V-11
11003507\V-10
III
APPENDIX II
FEE AND EXPENSE SUMMARIES OF PIMCO FUNDS
AND THE CORRESPONDING ALLEGHANY FUN
-----------------------------------------------
The following tables (a) compare the fees and expenses for the PIMCO
Funds for the year ended June 30, 1998 and (b) show the estimated fees and
expenses for the corresponding Alleghany Funds on a pro forma basis after giving
effect to the Reorganizations. The purpose of these tables is to assist
shareholders in understanding the various costs and expenses that investors in
these portfolios will bear as shareholders. The tables do not reflect any
charges that may be imposed by institutions directly on their customer accounts
in connection with investments in the portfolios. Blairlogie has committed to
maintain (after waivers and reimbursements) current expense ratios for all
Alleghany Fund share classes for a period of at least two years after the
Closing.
PIMCO EMERGING MARKETS FUND - CLASS A
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 5.50% None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 1.00%* None
Redemption Fees........................................ None None
Exchange Fee .......................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%**
Distribution/12b-1 Fees....................................... 0.25% 0.25%
Other Expenses***...................................... 0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 1.75% 1.60%
* Imposed in certain circumstances where Class A shares are purchased without front-end sales charges at the time of
purchase.
** After waivers and reimbursements. Before waivers and reimbursements, the Alleghany Management/Advisory Fee would be
0.85%.
*** Other expenses for each Alleghany fund will be based on estimated amounts
for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $ 72 $ 16
3 years.............................................................. 107 50
5 years.............................................................. 145 86
10 years............................................................. 250 187
- --------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO EMERGING MARKETS FUND - CLASS B
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 5.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deduced from the fund assets
as a percentage of average net assets):
Management/Advisory Fees...............................
Distribution/12b-1 Fees................................ 0.85% 0.52%**
Other Expenses***...................................... 1.00% 0.25%
0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 2.50% 1.60%
* The maximum deferred sales load is imposed on shares redeeded within
the first year. For shares held longer than one year, the maximum
deferred salesload declines to 4% in the second year, 3% in the third
year, 2% in the fifth year and 1% in the sixth year. In the seventh
year, redemption may be made with no deferred sales load.
** After waivers and reimbursements. Before waivers and reimbursements, the Alleghany Management/Advisory Fee would be
0.85%.
*** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end
of
each time period.
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $ 75 $16
3 years.............................................................. 108 50
5 years.............................................................. 153 86
10 years............................................................. 256 187
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO EMERGING MARKETS FUND - CLASS C
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deduced from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%**
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses***...................................... 0.65% 0.83%
TOTAL FUND OPERATING EXPENSES 2.50% 1.60%
* Imposed only when shares redeemed in first year.
** After waivers and reimbursements. Before waivers and reimbursements, the Alleghany Management/Advisory Fee would be
0.85%.
*** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $35 $16
3 years.............................................................. 78 50
5 years.............................................................. 133 86
10 years............................................................. 284 187
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO EMERGING MARKETS FUND - INSTITUTIONAL CLASS
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS I
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%*
Distribution/12b-1 Fees................................ None None
Other Expenses**....................................... 0.50% 0.83%
TOTAL FUND OPERATING EXPENSES 1.35% 1.35%
* After waivers and reimbursements. Before waivers and reimbursements, the Alleghany Management/Advisory Fee would be
0.85%.
** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $14 $14
3 years.............................................................. 43 43
5 years.............................................................. 74 74
10 years............................................................. 163 163
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO EMERGING MARKETS FUND - ADMINISTRATIVE CLASS
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
SHAREHOLDER FEES (fees paid directly from Shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.85% 0.52%*
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses**....................................... 0.50% 0.83%
TOTAL FUND OPERATING EXPENSES 1.60% 1.60%
* After waivers and reimbursements. Before waivers and reimbursements, the Alleghany Management/Advisory Fee would be
0.85%.
** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
EMERGING EMERGING
MARKETS FUND MARKETS FUND
1 year............................................................... $16 $16
3 years.............................................................. 50 50
5 years.............................................................. 87 86
10 years............................................................. 190 187
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS A
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 5.50% None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Maximum Deferred Sales Load............................ 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 1.50% 1.35%
* Imposed in certain circumstances where Class A Shares are purchased
without front end sales changes at the time of purchase.
** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $69 $14
3 years.............................................................. 100 43
5 years.............................................................. 132 74
10 years............................................................. 244 163
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS B
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 5.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 2.25% 1.35%
* The maximum deferred sales load is imposed on shares redeeded within
the first year. For shares held longer than one year, the maximum
deferred salesload declines to 4% in the second year, 3% in the third
year, 2% in the fifth year and 1% in the sixth year. In the seventh
year, redemption may be made with no deferred sales load.
** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $73 $14
3 years.............................................................. 100 43
5 years.............................................................. 140 74
10 years............................................................. 230 163
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO INTERNATIONAL DEVELOPED FUND - CLASS C
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... 1.00%* None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 1.00% 0.25%
Other Expenses**....................................... 0.65% 0.25%
TOTAL FUND OPERATING EXPENSES 2.25% 1.35%
* Only imposed when shares redeemed in first year.
** Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end
of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $33 $14
3 years.............................................................. 70 43
5 years.............................................................. 120 74
10 years............................................................. 258 163
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO INTERNATIONAL DEVELOPED FUND - ADMINISTRATIVE CLASS
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS N
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None
Deferred Sales Load.................................... None None
Redemption Fees........................................ None None
Exchange Fee........................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................... 0.60% 0.85%
Distribution/12b-1 Fees................................ 0.25% 0.25%
Other Expenses*........................................ 0.50% 0.25%
TOTAL FUND OPERATING EXPENSES 1.35% 1.35%
* Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $14 $14
3 years.............................................................. 43 43
5 years.............................................................. 74 74
10 years............................................................. 163 163
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
PIMCO INTERNATIONAL DEVELOPED FUND - INSTITUTIONAL CLASS
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND - CLASS I
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
SHAREHOLDER FEES (fees paid directly from shareholder investment):
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... None None
Maximum Sales Load Imposed on
Reinvested Dividends........................ None None
Deferred Sales Load.................................. None None
Redemption Fees...................................... None None
Exchange Fee......................................... None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets as a
percentage of average net assets):
Management/Advisory Fees............................. 0.60% 0.85%
Distribution/12b-1 Fees.............................. None None
Other Expenses*...................................... 0.50% 0.25%
TOTAL FUND OPERATING EXPENSES 1.10% 1.10%
* Other expenses for each Alleghany fund are based on estimated amounts for the current fiscal year.
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at
the end of each time period:
PRO FORMA
PIMCO ALLEGHANY/BLAIRLOGIE
INTERNATIONAL INTERNATIONAL
DEVELOPED FUND DEVELOPED FUND
1 year............................................................... $11 $11
3 years.............................................................. 35 35
5 years.............................................................. 61 61
10 years............................................................. 134 134
- -------------------------------------------------------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
APPENDIX III
INVESTMENT OBJECTIVES
THIS APPENDIX CONTAINS INVESTMENT OBJECTIVES AND LIMITATIONS AND
CERTAIN SIGNIFICANT INVESTMENT POLICIES OF THE EXISTING ALLEGHANY
FUNDS AND THE CORRESPONDING PIMCO FUNDS. THE INVESTMENT
OBJECTIVES, POLICIES AND LIMITATIONS OF EACH ALLEGHANY FUND WILL
BE IDENTICAL TO THOSE OF THE CORRESPONDING PIMCO FUND.
.
11003507\V-11
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND SERVICES OF
THE ALLEGHANY FUNDS AND THE PIMCO FUNDS
A. PURCHASE POLICIES
ALLEGHANY FUNDS PIMCO FUNDS
Class N Classes A, B and C
Minimum Initial Investment $2,500, + except IRAs, and UGMAs $2,500, except IRAs and certain other
Tax-Qualified Retirement Plans, UGMAs
and PIMCO Funds Auto-Exchange and
Auto-Invest Plans
$500 for IRAs and UGMAs $1,000 for PIMCO Funds Auto-Invest
and IRAs, except employer sponsored
IRAs
$50 under Alleghany's Automatic $50 for employer-sponsored IRAs
Investment Plan
Minimum Subsequent Investment $50* $100, except employer-sponsored IRAs
and certain other Tax-Qualified
Retirement Plans
$50 for employer-sponsored IRAs and
certain other Tax-Qualified
Retirement Plans
Class I Institutional and Administrative Class
Minimum Initial $1 Million ++ $5 million, except Institutional
Investment Class shares purchased through
omnibus accounts, for which the
amount is $250,000
Minimum Subsequent Investment None None
Purchase Methods
By Exchange Yes*** Yes
By Mail** Yes Yes
By Wire Yes Yes****
By Telephone Yes*** Yes***
Through Dealer or Broker Yes Yes*****
+ There is no minimum initial investment for Institutional Class Shares
purchased through broker-dealers under the fee based program approved
by the Distributor where the fee is at least .50% of the assets in the
account.
++ For purposes of this minimum, the accounts of a financial consultant's
clients may be aggregated in determining whether the $1 million minimum
has been met. In addition, aggregation may be applied to the accounts
of immediate family members as well as to the related accounts of a
corporation or other legal entity. The Fund may also waive the minimum
initial investment for investors who have signed a letter of intent.
* For accounts opened through a fund network, the network minimums will apply.
** Checks drawn only on banks located in the U.S.
*** Not available for initial investment.
**** Automatic transfers may also be arranged under PIMCO Funds Auto-Invest plan or Fund-Link plan.
***** The dealer or broker must have a dealer agreement with the Trust's distributor, PIMCO Funds
Distributors LLC.
B. REDEMPTION PROCEDURES
ALLEGHANY FUNDS PIMCO FUNDS
Through an authorized selling or servicing agent Yes Yes
By mail Yes Yes
By telephone Yes Yes*
By wire Yes Yes
By automatic withdrawal plan Yes** Yes***
* Redemptions of more than $10 million must be confirmed in writing.
** Net asset value of account must be $50,000.
*** Net value of account must be at least $10,000.
Alleghany may, upon 60 days' notice, close a shareholder's account and
send the shareholder the proceeds if the balance falls below $50.
The Trust similarly may, subject to certain restrictions, redeem
involuntarily, upon 60 days' written notice, shares of a shareholder whose
account decreases to a value below the amount necessary to fund the account. In
addition, PIMCO charges a fee of $16 per annum for accounts with balances below
$2,000, except UGMAs, IRAs (including Ruth IRAs) and Auto-Invest Accounts, for
which the minimum balance is $1,000.
C. ADDITIONAL SHAREHOLDER SERVICES
PIMCO FUNDS ALLEGHANY FUNDS
Share exchange privilege for shares of same class in Automatic
investing from checking or savings account another PIMCO Fund
Free interfund transfers
PIMCO Funds Automated Telephone System for certain Automatic dividend reinvestment
transactions related to established accounts
Automatic Withdrawal Plan for accounts of $10,000 or Investor website
for checking account balances, obtaining more which allows for a
designated distribution paid fund information and making transactions
online monthly to any person designated by the investor
D. DIVIDENDS AND DISTRIBUTIONS
The following table shows the Funds' policies concerning the
declaration and payment of dividends and net capital gains.
PIMCO FUNDS ALLEGHANY FUNDS
Frequency and Dividends Net investment
income from interest and Net
income from interest and
dividends, if any, and net
capital gains dividends and
net capital gain from sale of
portfolio securities paid at
from sale of portfolio least
annually securities paid
quarterly
Payment Method Dividend income and capital gain Dividend income and capital
reinvested in Fund shares unless investor gain reinvested in Fund Shares
instructs otherwise unless investor instructs
otherwise
Reinvested Dividends Sales Charge None. Dividends paid on Class B and
Class C shares may be lower as a result
of the distribution fee applicable to N/A
those shares.
APPENDIX V
FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of _________________, 1998 by and between
Alleghany Funds, a Delaware business trust (the "Trust") on behalf of the
Alleghany/Blairlogie Emerging Markets Fund and the Alleghany/Blairlogie
International Developed Fund (individually a "Fund" and collectively, the
"Funds") and Blairlogie Capital Management (the "Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end series management investment
company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Funds, and the Adviser is willing to furnish such
services to each Fund.
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Duties of Adviser. As investment adviser, the Adviser shall: (i)
manage the investment and reinvestment of the assets of each Fund, (ii)
continuously review, supervise and administer the investment program of each
Fund, (iii) determine in its discretion, the assets to be held uninvested, (iv)
provide the Trust with records concerning the Adviser's activities which are
required to be maintained by the Trust, and (v) render regular reports to the
Trust's officers and Board of Trustees concerning the Adviser's discharge of the
foregoing responsibilities. The Adviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in each Fund's then effective prospectus and statement of
additional information. The Adviser accepts such employment and agrees to render
such services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform such services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Adviser shall select and monitor the
selection of the brokers or dealers that will execute the purchases and sales of
securities for each Fund and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities transactions
for each Fund are obtained. Subject to policies established by the Board of
Trustees and communicated to the Adviser, it is understood that the Adviser will
not be deemed to have acted unlawfully, or to have breached a fiduciary duty to
the Trust or in respect of a Fund, or be in breach of any obligation owing to
the Trust or in respect of a Fund under this Agreement, or otherwise, solely by
reason of its having caused such Fund to pay a member of a securities exchange,
a broker or a dealer a commission for effecting a securities transaction for
such Fund in excess of the amount of commission another member of an exchange,
broker or dealer would have charged, if the Adviser determines in good faith
that the commission paid was reasonable in relation to the brokerage or research
services provided by such member, broker or dealer, viewed in terms of that
particular transaction or the Adviser's overall responsibilities with respect to
the accounts, including such Fund, as to which it exercises investment
discretion. The Adviser will promptly communicate to the officers and Trustees
of the Trust such information relating to Fund transactions as they may
reasonably request.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 2 and 3 of this Agreement, each Fund shall pay to
the Adviser within five business days after the end of each calendar month, a
monthly fee equal to the product of (a) 0.85% of such Fund's average daily net
assets for that month times (b) the quotient of (i) the actual number of days
elapsed in that month divided by (ii) 365. In the event of termination of this
Agreement, the fee provided in this Section 4 shall be paid on a pro-rata basis,
based on the number of days during which this Agreement was in effect.
5. Reports. Each Fund and the Adviser agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
6. Status of Adviser. The services of the Adviser to the Funds are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Funds are not impaired thereby.
7. Liability of Adviser. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Adviser of its obligations
and duties hereunder, the Adviser shall not be subject to any liability
whatsoever to either Fund, or to any shareholder of either Fund, for any error
of judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of a Fund.
8. Duration and Termination. The term of this Agreement, with respect
to a Fund, shall commence on the date which an amendment to the Trust's
registration statement establishing such Fund becomes effective (the "Effective
Date"), provided that first it is approved by the Board of Trustees of the
Trust, including a majority of those Trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the 1940 Act, and by the holders of a majority of the
outstanding voting securities of such Fund; and shall continue in effect for two
years thereafter. This Agreement may continue in effect after its initial term
only if such continuance is approved at least annually by, (i) the Board of
Trustees or, (ii) the vote of a majority of the outstanding voting securities of
the relevant Fund; and in either event by a vote of a majority of those Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party in the manner provided in Section 15(c) of the 1940 Act.
Notwithstanding the foregoing, this Agreement may be terminated with respect to
a Fund: (a) at any time without penalty by such Fund upon the vote of a majority
of such Trustees or by vote of the majority of such Fund's outstanding voting
securities, upon sixty (60) days' written notice to the Adviser or (b) by the
Adviser at any time without penalty, upon sixty (60) days' written notice to
such Fund. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postage prepaid, to the
other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person"
and "a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
9. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of each Fund, and (ii) a majority of the Trustees, including a
majority of the Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
ALLEGHANY FUNDS for
ATTEST ALLEGHANY/BLAIRLOGIE EMERGING
MARKETS FUND and
ALLEGHANY/BLAIRLIGIE
INTERNATIONAL DEVELOPED FUND
- -------------------------------
By:___________________________________
, President
ATTEST BLAIRLOGIE CAPITAL MANAGEMENT
_______________________________ By:_______________________________________
STATEMENT OF ADDITIONAL INFORMATION
DATED , 1998
PIMCO FUNDS: MULTI-MANAGER SERIES
840 Newport Center Drive
Newport Beach, California 92660
1-800-426-0107
ALLEGHANY FUNDS
171 North Clark Street
Chicago, Illinois 60601
1-800-992-8151
( , 1998 SPECIAL MEETING OF SHAREHOLDERS OF THE PIMCO EMERGING
MARKETS FUND AND PIMCO
INTERNATIONAL DEVELOPED FUND (THE "PIMCO FUNDS")). EACH A SERIES
OF PIMCO FUNDS: MULTI-MANAGER SERIES.
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Proxy Statement/Prospectus dated the date
hereof, for the Special Meeting of Shareholders of PIMCO Funds to be held on ,
1999. Copies of the Proxy Statement/Prospectus may be obtained at no charge by
writing or calling the Trust or Alleghany at the addresses or telephone numbers
set forth above. Unless otherwise indicated, capitalized terms used herein and
not otherwise defined have the same meanings as are given to them in the Proxy
Statement/Prospectus.
GENERAL INFORMATION
The proposed Reorganizations contemplate: (i) the transfer of all of
the assets and stated liabilities of each PIMCO Fund to a corresponding
Alleghany Fund in exchange for Shares of comparable classes of the corresponding
Alleghany Fund; and (ii) the distribution of Alleghany Fund Shares to the
shareholders of the PIMCO Funds in liquidation of the PIMCO Funds. The
consummation of the Reorganizations is subject to a number of conditions with
respect to each PIMCO Fund, including shareholder approval. Following the
Reorganizations, the PIMCO Funds will distribute the Shares of Alleghany Funds
received in the Reorganization and will liquidiate. As a result of the proposed
Reorganization, each PIMCO Fund shareholder will become a shareholder of the
corresponding Alleghany Fund and will hold, immediately after the Closing(s),
Shares of a comparable class of the corresponding Alleghany Fund having a total
dollar value equal to the total dollar value of the shares of the PIMCO Fund
that the shareholder held immediately before the Closing(s).
Further information relating to the PIMCO Funds is set forth in the
Statement of Additional Information of the Trust, dated November 1, 1998, which
is incorporated herein by reference.
PRO FORMA FINANCIAL INFORMATION.
The total assets and stated liabilities of each Alleghany Fund
immediately following the Reorganizations shall be identical to the total assets
and stated liabilities of the corresponding PIMCO Fund immediately prior to such
transfer. Reference is therefore made to the audited financial statements and
related independent auditors' report for PIMCO International Developed Fund and
PIMCO Emerging Markets Fund for the year ended June 30, 1998, contained in the
Trust's Annual Report which is incorporated herein by reference.
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Proxy Statement/Prospectus in connection with the offering made by the Proxy
Statement/Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or its
distributor. The Proxy Statement/Prospectus does not constitute an offering by
the Company or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
IV-2
11003507\V-11
11003507\V-11
TABLE OF CONTENTS
Page
THE FUNDS................................................................................................. 2
INVESTMENT POLICIES AND RISK CONSIDERATIONS............................................................... 2
INVESTMENT RESTRICTIONS................................................................................... 18
TRUSTEES AND OFFICERS..................................................................................... 19
PRINCIPAL HOLDERS OF SECURITIES........................................................................... 19
INVESTMENT ADVISORY AND OTHER SERVICES.................................................................... 19
Investment Advisory Agreements....................................................................... 20
The Administrator and Sub-Administrator.............................................................. 21
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................................................... 22
TAXES..................................................................................................... 22
PERFORMANCE INFORMATION................................................................................... 26
OTHER INFORMATION......................................................................................... 27
11003507\V-11
THE FUNDS
Alleghany Funds, 171 North Clark Street, Chicago, Illinois 60601, is a
no-load, open-end management investment company which currently offers twelve
series of shares of beneficial interest representing separate portfolios of
investments: Montag & Caldwell Growth Fund, Chicago Trust Growth & Income Fund,
Chicago Trust Talon Fund, Chicago Trust Balanced Fund, Montag & Caldwell
Balanced Fund, Chicago Trust Bond Fund, Chicago Trust Municipal Bond Fund,
Chicago Trust Money Market Fund, Alleghany/Chicago Trust SmallCap Value Fund,
Alleghany/Veredus Aggressive Growth Fund, Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund. This Statement of
Additional Information pertains only to Alleghany/Blairlogie Emerging Markets
Fund and Alleghany/Blairlogie International Developed Fund (collectively
referred to as "Funds" or individually as a "Fund").
INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following supplements the information contained in the Proxy
Statement/Prospectus concerning the investment policies of the Funds. Except as
otherwise stated below or in the Proxy Statement/Prospectus, each Fund may
invest in the portfolio investments included in this section.
The investment practices described below, except for the discussion of
portfolio loan transactions, are not fundamental and may be changed by the Board
of Trustees without the approval of the shareowners.
As discussed in the Proxy Statement/Prospectus, certain of the
following investment instruments are generally considered "derivative" in nature
and are so noted. While not a fundamental policy, each Fund that is permitted
the use of such instruments will generally limit its aggregate holdings of such
instruments to 20% or less of its total assets.
Restricted Securities
Each Fund will limit investments in securities of issuers which the
Fund is restricted from selling to the public without registration under the
1933 Act to no more than 5% of the Fund's total assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Investment Advisor, pursuant to guidelines adopted by
the Company's Board of Trustees.
Convertible Securities
Common stock occupies the most junior position in a company's capital
structure. Convertible securities entitle the holder to exchange the securities
for a specified number of shares of common stock, usually of the same company,
at specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior to the claims
of preferred and common shareowners. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareowners.
Money Market Instruments and Related Risks
Money market instruments in which the Funds may invest include, but are
not limited to the following: short-term corporate obligations; Certificates of
Deposit ("CDs"); Eurodollar Certificates of Deposit ("Euro CDs"); Yankee
Certificates of Deposit ("Yankee CDs"); foreign bankers' acceptances; foreign
commercial paper; letter of credit-backed commercial paper; time deposits; loan
participations ("LPs"); variable- and floating-rate instruments; and master
demand notes.
Euro CDs, Yankee CDs and foreign bankers' acceptances involve risks
that are different from investments in securities of U.S. banks. The major risk,
which is sometimes referred to as "sovereign risk," pertains to possible future
unfavorable political and economic developments, possible withholding taxes,
seizures of foreign deposits, currency controls, interest limitations, or other
governmental restrictions which might affect payment of principal or interest.
Investment in foreign commercial paper also involves risks that are different
from investments in securities of commercial paper issued by U.S. companies.
Non-U.S. securities markets generally are not as developed or efficient as those
in the United States. Such securities may be less liquid and more volatile than
securities of comparable U.S. corporations. Non-U.S. issuers are not generally
subject to uniform accounting and financial reporting standards, practices and
requirements comparable to those applicable to U.S. issuers. In addition, there
may be less public information available about foreign banks, their branches and
other issuers.
Time deposits usually trade at a premium over Treasuries of the same
maturity. Investors regard such deposits as carrying some credit risk, which
Treasuries do not; also, investors regard time deposits as being sufficiently
less liquid than Treasuries; hence, investors demand some extra yield for buying
time deposits rather than Treasuries. The investor in a loan participation has a
dual credit risk to both the borrower and also the selling bank. The second risk
arises because it is the selling bank that collects interest and principal and
sends it to the investor.
Foreign Securities
Each Fund may invest in U.S. Dollar or foreign currency-denominated
corporate debt securities of foreign issuers; preferred securities of foreign
issuers; certain foreign bank obligations; and U.S. dollar- or foreign
currency-denominated obligations of foreign governments or their subdivisions,
agencies and instrumentalities, international agencies and supranational
entities. Each Fund may invest in American Depositary Receipts ("ADRs"). Each
Fund may also invest in common stock issued by foreign companies or in
securities represented by European Depositary Receipts ("EDRs"), or Global
Depositary Receipts ("GDRs"). ADRs are dollar-denominated receipts issued
generally by domestic banks and represent the deposit with the bank of a
security of a foreign issuer. EDRs are foreign currency-denominated receipts
similar to ADRs and are issued and traded in Europe, and are publicly traded on
exchanges or over-the-counter in the United States. GDRs may be offered
privately in the United States and also trade in public or private markets in
other countries. ADRs, EDRs and GDRs may be issued as sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities trade in the for of ADRs, EDRs or GDRs. In unsponsored programs, the
issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program.
Investing in the securities of foreign issuers involves special risks
and considerations not typically associated with investing in U.S. companies.
These include: differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. Investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
The risks of investing in foreign securities are particularly high when
securities of issuers based in developing (or "emerging market") countries are
involved. Investing in emerging market countries involves certain risks not
typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social economic and political
uncertainty and instability (including the risk of war); more substantial
government involvement in the economy; higher rates of inflation; less
government supervision and regulation of the securities markets and participants
in those markets; controls on foreign investment and limitations on repatriation
of invested capital and on the Fund's ability to exchange local currencies for
U.S. dollars; unavailability of currency hedging techniques in certain emerging
market countries; the fact that companies in emerging market countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.
Special Risks of Investing in Russian and Other Eastern European Securities
Alleghany/Blairlogie Emerging Markets Fund may invest a portion of its
assets in securities of issuers located in Russia and in other Eastern European
countries. The political, legal and operational risks of investing in the
securities of Russian and other Eastern European issuers, and of having assets
custodied within these countries, may be particularly acute. Investment in
Eastern European countries may involve acute risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. Also, certain
Eastern economies, are characterized by an absence of developed legal structures
governing private and foreign investments and private property in European
countries, which do not have market economies, are characterized by an absence
of developed legal structures governing private and foreign investments and
private property.
In addition, governments in certain Eastern European countries may
require that a governmental or quasi-governmental authority act as custodian of
a Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the 1940 Act
to act as foreign custodians of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required to be effected
through intermediaries. The risk of loss through governmental confiscation may
be increased in such circumstances.
Investments in securities of Russian issuers may involve a particularly
high degree of risk and special considerations not typically associated with
investing in U.S. and other more developed markets, many of which stem from
Russia's continuing political and economic instability and the slow-paced
development of its market economy. Investments in Russian securities should be
considered highly speculative. Such risks and special considerations include:
(a) delays in settling portfolio transactions and the risk of loss arising out
of Russia's system of share registration and custody (see below); (b)
pervasiveness of corruption, insider trading, and crime in the Russian economic
system; (c) difficulties associated in obtaining accurate market valuations of
many Russian securities, based partly on the limited amount of publicly
available information; (d) the general financial condition of Russian companies,
which may involve particularly large amounts of inter-company debt; and (e) the
risk that the Russian tax system will not be reformed to prevent inconsistent,
retroactive and/or exorbitant taxation or, in the alternative, the risk that a
reformed tax system may result in the inconsistent and unpredictable enforcement
of the new tax laws. Also, there is the risk that the government of Russia or
other executive or legislative bodies may decide not to continue to support the
economic reform programs implemented since the dissolution of the Soviet Union
and could follow radically different political and/or economic policies to the
detriment of investors, including non-market-oriented policies such as the
support of certain industries at the expense of other sectors or investors, a
return to the centrally planned economy that existed prior to the dissolution of
the Soviet Union, or the nationalization of privatized enterprises.
A risk of particular note with respect to direct investment in Russian
securities is the way in which ownership of shares of companies is normally
recorded. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the
register or, in certain limited circumstances, by formal share certificates.
However, there is no central registration system for shareholders and these
services are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision nor are they licensed with any governmental entity. It is
possible for a Fund to lose its registration through fraud, negligence or even
mere oversight. While a Fund will endeavor to ensure that is interest continues
to be appropriately recorded, which may involve a custodian or other agent
inspecting the share register and obtaining extracts of share registers through
regular confirmations, these extracts have no legal enforceability and it is
possible that subsequent illegal amendment or other fraudulent act may deprive
the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for a Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration.
Also, although a Russian public enterprise with more than 500
shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, this
regulation has not always been strictly enforced in practice. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. In addition, so-called "financial-industrial groups" have emerged in
recent years that seek to deter outside investors from interfering in the
management of companies they control. These practices may prevent a Fund from
investing in the securities of certain Russian companies deemed suitable by the
Fund's Investment Advisor. Further, this also could cause a delay in the sale of
Russian securities held by a Fund if a potential purchases is deemed unsuitable,
which may expose the Fund to potential loss on the investment.
Foreign Currencies
Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, each
Fund may but and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures.
Each Fund may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency exchange contract, the
fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, a Fund
reduces its exposure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it will exchange
into. Contracts to sell foreign currencies would limit any potential gain which
might be realized by a Fund if the value of the hedged currency increases. A
Fund may enter into these contracts of the purpose of hedging against foreign
exchange risks arising from the Fund's investment or anticipated investment in
securities denominated in foreign currencies. Such hedging transactions may not
be successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies.
Each Fund may also enter into forward foreign currency exchange
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one currency to another. To the
extent that they do so, the Funds will be subject to the additional risk that
the relative value of currencies will be different than anticipated by the
particular Fund's Investment Advisor. A Fund may use one currency (or a basket
of currencies) to hedge against adverse changes in the value of another currency
(or a basket of currencies) when exchange rates between the two currencies are
positively correlated. A Fund will segregate assets determined to be liquid by
the Investment Advisor in accordance with procedures established by the Board of
Trustees in a segregated account to cover forward currency contracts entered
into for non-hedging purposes. The Funds may also use foreign currency futures
contracts and related options on currencies for the same reasons for which
forward foreign currency exchange contracts are used.
Loans of Portfolio Securities and Related Risks
Each Fund may lend portfolio securities to broker-dealers and financial
institutions provided: (1) the loan is secured continuously by collateral
marked-to-market daily and maintained in an amount at least equal to the current
market value of the securities loaned; (2) the Fund may call the loan at any
time and receive the securities loaned; (3) the Fund will receive any interest
or dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned by the Fund will not at any time exceed 25% of the total
assets of such Fund.
Collateral will consist of U.S. Government securities, cash
equivalents, or irrevocable letters of credit. Loans of securities involve a
risk that the borrower may fail to return the securities or may fail to maintain
the proper amount of collateral. Therefore, the Fund will only enter into
portfolio loans after a review by the Investment Advisor, under the supervision
of the Board of Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored on an ongoing basis.
Loan Participations ("LPs")
Each Fund may engage in LPs. LPs are loans sold by the lending bank to
an investor. The loan participant borrower may be a company with highly-rated
commercial paper that finds it can obtain cheaper funding through an LP than
with commercial paper and can also increase the company's name recognition in
the capital markets. LPs often generate greater yield than commercial paper.
The borrower of the underlying loan will be deemed to be the issuer
except to the extent the Fund derives its rights from the intermediary bank
which sold the LPs. Because LPs are undivided interests in a loan made by the
issuing bank, the Fund may not have the right to proceed against the LP borrower
without the consent of other holders of the LPs. In addition, LPs will be
treated as illiquid if, in the judgment of the Investment Advisor, they cannot
be sold within seven days.
Foreign Bankers' Acceptances
Each Fund may purchase foreign bankers' acceptances. Foreign bankers'
acceptances are short-term (270 days or less), non-interest-bearing notes sold
at a discount and redeemed by the accepting foreign bank at maturity for full
face value and denominated in U.S. dollars. Foreign bankers' acceptances are the
obligations of the foreign bank involved, to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and the
drawer to pay the face amount of the instrument upon maturity.
Foreign Commercial Paper
Each Fund may purchase foreign commercial paper. Foreign commercial
paper consists of short-term unsecured promissory notes denominated in U.S.
dollars, either issued directly by a foreign firm in the U.S., or issued by a
"domestic shell" subsidiary of a foreign firm established to raise dollars for
the firm's operations abroad or for its U.S. subsidiary. Like commercial paper
issued by U.S. companies, foreign commercial paper is rated by the rating
agencies (Moody's Investors Service, Inc; Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies, Inc.) as to the issuer's creditworthiness.
Foreign commercial paper can potentially provide the investor with a greater
yield than domestic commercial paper.
Eurodollar Certificates of Deposit ("Euro CDs")
A Euro CD is a receipt from a bank for funds deposited at that bank for
a specific period of time at some specific rate of return and denominated in
U.S. dollars. It is the liability of a U.S. bank branch or foreign bank located
outside the U.S. Almost all Euro CDs are issued in London.
Yankee Certificates of Deposit ("Yankee CDs")
Yankee CDs are certificates of deposit that are issued domestically by
foreign banks. It is a means by which foreign banks may gain access to U.S.
markets through their branches which are located in the United States, typically
in New York. These CDs are treated as domestic securities.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered loans by a Fund under the Investment Company Act of
1940, as amended (the "1940 Act").
The financial institutions with which a Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Investment Advisor. The Investment Advisor will continue to monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement at not less than the repurchase price.
Each Fund will only enter into a repurchase agreement where the market
value of the underlying security, including interest accrued, will be at all
times equal to or exceed the value of the repurchase agreement.
Reverse Repurchase Agreements
Reverse repurchase agreements involve the sale of securities held by a
Fund pursuant to a Fund's agreement to repurchase the securities at an agreed
upon price, date and rate of interest. Such agreements are considered to be
borrowings under the 1940 Act, and may be entered into only for temporary or
emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account cash, or liquid, securities in an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement. (Liquid securities as used in this Statement
of Additional Information include equity securities and debt securities that are
unencumbered and market-to-market daily.) Reverse repurchase agreements involve
the risk that the market value of the securities sold by the Fund may decline
below the price at which the Fund is obligated to repurchase such securities.
Securities of Other Investment Companies
Each Fund intends to limit its investments in securities issued by
other investment companies so that, as determined immediately after a purchase
of such securities is made: (i) not more than 5% of the value of the Fund's
total assets will be invested in the securities of any one investment company;
(ii) not more than 10% of its total assets will be invested in the aggregate in
securities of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the Fund
as a whole. Each Fund will also limit investments in securities of other
investment companies as described in the Prospectus under "INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS" and in this Statement of Additional Information under
"INVESTMENT RESTRICTIONS."
Options and Related Risks
Each Fund may buy put and call options and write covered call and
secured put options. These options are generally considered to be derivative
securities. Such options may relate to particular securities, stock indices, or
financial instruments and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.
The Funds will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if a Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities, in such amount are held in
a segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if a
Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value.
A call option is also covered if a Fund holds a call on the same
security or index as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written; or (ii)
greater than the exercise price of the call written provided the difference is
maintained by the Fund in cash or liquid securities in a segregated account with
its custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds' Custodian in an
amount not less than the exercise price of the option at all times during the
option period.
A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the
Fund's execution of a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series as the previously written
option. Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being called, to
permit the sale of the underlying security, or to permit the writing of a new
option containing different terms on such underlying security. The cost of such
a liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event the Fund will have incurred a
loss in the transaction.
There is no assurance that a liquid secondary market will exist for any
particular option. An option writer, unable to effect a closing purchase
transaction, will not be able to sell the underlying security (in the case of a
covered call option) or liquidate the segregated account (in the case of a
secured put option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline or appreciation in the security
during such period.
Purchasing Call Options.--Each Fund may purchase call options to the
extent that premiums paid by such Fund do not aggregate more than 20% of that
Fund's total assets. When a Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that a Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with transactions, except the cost of the option.
A Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction by selling an option of the
same series as the option previously purchased. The Fund will realize a profit
from a closing sale transaction if the price received on the transaction is more
than the premium paid to purchase the original call option; the Fund will
realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.
Although a Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Fund may expire without any value to
the Fund, in which event the Fund would realize a capital loss which will be
short-term unless the option was held for more than one year.
Covered Call Writing -- Each Fund may write covered call options from
time to time on such portions of their portfolios, without limit, as the
Investment Advisor determines is appropriate in pursuing a Fund's investment
objective. The advantage to a Fund of writing covered calls is that the Fund
receives a premium which is additional income. However, if the security rises in
value, the Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase transaction,
in which a Fund, as writer of an option, terminates its obligation by purchasing
an option of the same series as the option previously written, cannot be
effected with respect to an option once the option writer has received an
exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, a Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
A Fund will write call options only on a covered basis, which means
that a Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell or deliver a security it would want to hold. The exercise
price of a call option may be below, equal to, or above the current market value
of the underlying security at the time the option is written.
Purchasing Put Options -- Each Fund may invest up to 20% of its total
assets in the purchase of put options. A Fund will, at all times during which it
holds a put option, own the security covered by such option. With regard to the
writing of put options, each Fund will limit the aggregate value of the
obligations underlying such put options to 50% of its total assets. The purchase
of the put on substantially identical securities held will constitute a short
sale for tax purposes, the effect of which is to create short-term capital gain
on the sale of the security and to suspend running of its holding period (and
treat it as commencing on the date of the closing of the short sale) or that of
a security acquired to cover the same if at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. A Fund would purchase put
options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options allows a Fund to
protect unrealized gains in an appreciated security in their portfolios without
actually selling the security. If the security does not drop in value, a Fund
will lose the value of the premium paid. A Fund may sell a put option which it
has previously purchased prior to the sale of the securities underlying such
option. Such sale will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
Each Fund may sell a put option purchased on individual portfolio
securities. Additionally, a Fund may enter into closing sale transactions. A
closing sale transaction is one in which a Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
Foreign Currency Options. Each Fund may buy or sell put and call
options on foreign currencies either on exchanges or in the over-the-counter
market. A put option on a foreign currency gives the purchaser of the option the
right to sell a foreign currency at the exercise price until the option expires.
A call option on a foreign currency gives the purchaser of the option the right
to purchase the currency at the exercise price until the option expires.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of a Fund to reduce foreign currency risk
using such options.
Writing Put Options -- Each Fund may also write put options on a
secured basis which means that a Fund will maintain in a segregated account with
its Custodian, cash or U.S. Government securities in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash or U.S. Government securities held in the segregated account will be
adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Investment Advisor wishes
to purchase the underlying security for a Fund's portfolio at a price lower than
the current market price of the security. In such event, that Fund would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.
Following the writing of a put option, a Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
Futures Contracts and Related Risks
Each Fund may enter into contracts for the purchase or sale for future
delivery of securities, including index contracts. The Funds may use interest
rate, foreign currency or index futures contracts. Futures contracts are
generally considered to be derivative securities. While futures contracts
provide for the delivery of securities, deliveries usually do not occur.
Contracts are generally terminated by entering into offsetting transactions.
Each Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in security prices, or interest rates without
actually buying or selling the securities. For example, if interest rates are
expected to increase, a Fund might enter into futures contracts for the sale of
debt securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund. If interest rates did
increase, the value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at approximately
the same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in anticipation
of subsequent purchases of securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt securities,
the Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund could then buy debt
securities on the cash market.
A stock index futures contract obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement was made. Open
futures contracts are valued on a daily basis and a Fund may be obligated to
provide or receive cash reflecting any decline or increase in the contract's
value. No physical delivery of the underlying stocks in the index is made in the
future.
With respect to options on futures contracts, when a Fund is
temporarily not fully invested, it may purchase a call option on a futures
contract to hedge against a market advance. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based, or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when a Fund is not fully invested, it may purchase a call
option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the value of the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is higher than the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing price of the futures contract on the expiration date.
If a put or call option which a Fund has written is exercised, the Fund
may incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities and for 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 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.
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
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.
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
Stuart D. Bilton* 52 Chairman, Board of Trustee Mr. Bilton is Executive Vice President of Chicago Title and
171 North Clark Street (Chief Executive Officer) Trust Company and President and Chief Executive Officer of
Chicago, IL 60601 The Chicago Trust Company, where he is responsible for the
Financial
Services
Group.
Mr.
Bilton
has
held
a
variety
of
positions
within
Chicago
Title
and
Trust
Company
including:
Chief
Economist;
Senior
Vice
President--Corporate
Marketing
and
Strategic
Planning;
Vice
President--Lincoln
National
Life;
and
Manager
of
Eastern
Region
Reinsurance
Operations.
Mr.
Bilton
was
educated
at
the
London
School
of
Economics
and
at
the
University
of
Wisconsin.
He
is
a
Chartered
Financial
Analyst,
a
Director
of
Montag
&
Caldwell,
Inc.,
and
a
Director
of
Baldwin
&
Lyons,
Inc.,
an
Indianapolis-based
insurance
company,
and
of
the
Boys
and
Girls
Clubs
of
Chicago.
Dorothea C. Gilliam* 45 Trustee Ms. Gilliam is Vice President of Investments of the
171 North Clark Street Alleghany Corporation, the parent company of Chicago Title
Chicago, IL 60601 and Trust Company. Previously, she was an Assistant Vice
President of Chicago Title and Trust Company.
POSITION PRINCIPAL OCCUPATIONS
NAME AGE WITH COMPANY FOR PAST FIVE YEARS
Leonard F. Amari 55 Trustee Mr. Amari is a Partner at the law offices of Amari &
734 North Wells Street Locallo, a practice confined exclusively to the real estate
Chicago, IL 60610 tax assessment process.
Gregory T. Mutz 52 Trustee Mr. Mutz is the Chairman of the Board for both the Amli
125 South Wacker Drive Realty and Amli Residential Properties Inc. As Chairman,
Suite 3100 he is responsible for the operation of the two real estate
Chicago, IL 60606 companies whose principal businesses are multi-family
apartments, land, and business, office and industrial parks.
Nathan Shapiro 61 Trustee Mr. Shapiro is the President of SF Investments, Inc., a
1700 Ridge broker/dealer and investment banking firm. Previously, he
Highland Park, IL 60035 was President of SLD Corporation, a consulting firm, and
Senior
Vice
President
of
Pekin,
Singer
and
Shapiro,
an
investment
advisory
firm.
He
is
a
Director
of
Baldwin
&
Lyons,
Inc.
Kenneth C. Anderson 33 President Mr. Anderson is a Senior Vice President of The Chicago
171 North Clark Street (Chief Operating Officer) Trust Company and has been an officer since 1993. He is
Chicago, IL 60601 responsible for the mutual fund operations and marketing.
Mr.
Anderson is a Certified Public Accountant.
Gerald F. Dillenburg 31 Vice President, Secretary,
and Mr. Dillenburg is a Vice President of The Chicago Trust
171 North Clark Street Treasurer (Chief Financial Company and has been the operations manager and compliance
Chicago, IL 60601 Officer and Compliance Officer) officer of the mutual funds since 1996. Previously, he was
an
audit
manager
with
KPMG
Peat
Marwick
LLP,
specializing
in
investment
services,
including
mutual
and
trust
funds,
broker/dealers
and
investment
advisors.
Mr.
Dillenburg
is
a
Certified
Public
Accountant.
*These Trustees are considered "interested persons" of the Funds as
defined under the 1940 Act.
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.
PRINCIPAL HOLDERS OF SECURITIES
Listed below are the names and addresses of those shareowners who, as
of [ ], 1998, owned of record or beneficially of 5% or more of the shares of the
Funds. Shareowners who have the power to vote a large percentage of shares of a
particular Fund can control the Fund and determine the outcome of a
shareholders' meeting.
[TO BE UPDATED]
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class N
Percentage
Shareowners
Owned
ALLEGHANY/BLAIRLOGIE EMERGING MARKETS FUND
Class I
Percentage
Shareowners
Owned
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND
Class N
Percentage
Shareowners
Owned
ALLEGHANY/BLAIRLOGIE INTERNATIONAL DEVELOPED FUND
CLASS I
Percentage
Shareowners
Owned
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreements
The advisory services provided by the Investment Advisor of each Fund,
and the fees received by it for such services, are described in the Prospectus.
The Investment Advisor of each Fund may from time to time voluntarily waive a
portion of its advisory fees with respect to such Fund and/or reimburse a
portion of the Fund's expenses.
Under the Investment Advisory Agreements, the Investment Advisor of
each Fund is not liable for any error of judgment or mistake of law or for any
loss suffered by the Company or a Fund in connection with the performance of the
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its duties and obligations thereunder.
Each Investment Advisory Agreement is terminable with respect to a Fund
by vote of the Board of Trustees or by the holders of a majority of the
outstanding voting securities of the Fund, at any time without penalty, on 60
days' written notice to the Investment Advisor. An Investment Advisor may also
terminate its advisory relationship with respect to a Fund on 60 days' written
notice to the Company. Each Investment Advisory Agreement terminates
automatically in the event of its assignment.
Under each Investment Advisory Agreement, the Fund pays the following
expenses: (1) the fees and expenses of the Company's disinterested directors;
(2) the salaries and expenses of any of the Company's officers or employees who
are not affiliated with the Investment Advisor; (3) interest expenses; (4) taxes
and governmental fees; (5) brokerage commissions and other expenses incurred in
acquiring or disposing of portfolio securities; (6) the expenses of registering
and qualifying shares for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees
and expenses of the Company's Custodian, Administrator, Sub-Administrator and
Transfer Agent and any related services; (10) expenses of obtaining quotations
of the Funds' portfolio securities and of pricing the Funds' shares; (11)
expenses of maintaining the Company's legal existence and of shareowners'
meetings; (12) expenses of preparation and distribution to existing shareowners
of reports, proxies and prospectuses; and (13) fees and expenses of membership
in industry organizations.
The Investment Advisor for the Funds is Blairlogie Capital Management
("Blairlogie"), located at 125 Princes Street, Edinburgh EH2 4AD, Scotland.
Blairlogie is registered as an investment advisor with the SEC in the United
States and with the Investment Management Regulatory Organization in the United
Kingdom. Blairlogie Capital Management Ltd., the predecessor investment adviser
to Blairlogie, commenced operations in 1992. Blairlogie was founded in ______
and will become an indirect wholly-owned subsidiary of the Alleghany
Corporation, which is engaged through its subsidiaries in the business of title
insurance, reinsurance, other financial services and industrial minerals.
Alleghany Corporation is located at Park Avenue Plaza, New York, New York 10055.
Blairlogie managed approximately $______ million in assets at December
31, 1998, primarily for institutional clients.
The Administrator and Sub-Administrator
As Administrator, Chicago Trust, 171 North Clark Street, Chicago,
Illinois 60601, provides certain administrative services to the Company pursuant
to an Administration Agreement. First Data Investor Services Group, Inc.
("Investor Services Group"), 53 State Street, Boston, Massachusetts 02109,
provides certain administrative services for the Funds and Chicago Trust
pursuant to a Sub-Administration Agreement.
Under the Administration Agreement, the Administrator is responsible
for: (1) coordinating with the Custodian and Transfer Agent and monitoring the
services they provide to the Funds; (2) coordinating with and monitoring any
other third parties furnishing services to the Funds; (3) providing the Funds
with necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervising the maintenance by third parties of such books and records of the
Funds as may be required by applicable Federal or state law; (5) preparing or
supervising the preparation by third parties of all Federal, state and local tax
returns and reports of the Funds required by applicable law; (6) preparing and,
after approval by the Funds, filing and arranging for the distribution of proxy
materials and periodic reports to shareowners of the Funds as required by
applicable law; (7) preparing and, after approval by the Company, arranging for
the filing of such registration statements and other documents with the SEC and
other Federal and state regulatory authorities as may be required by applicable
law; (8) reviewing and submitting to the Officers of the Company for their
approval invoices or other requests for payment of the Funds' expenses and
instructing the Custodian to issue checks in payment thereof; and (9) taking
such other action with respect to the Company or the Funds as may be necessary
in the opinion of the Administrator to perform its duties under the Agreement.
As compensation for services performed under the Administration
Agreement, the Administrator receives a fee payable monthly at an annual rate
(as described in the Prospectus) multiplied by the average daily net assets of
the Company.
First Data Distributors, Inc. is principal underwriter and
distributor of the Funds' shares.
Distribution Plan
The Board of Trustees of the Company has adopted a Plan of Distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Class N
shares of each Fund to pay certain expenses associated with the distribution of
its shares. Under the Plan, each Fund may pay actual expenses not exceeding, on
an annual basis, 0.25% of a Fund's average daily net assets. To the Company's
knowledge, no interested person of the Company, nor any of its Trustees who are
not "interested persons," has a direct or indirect financial interest in the
operation of the Plan. The Company anticipates that each Fund will benefit from
additional shareholders and assets as a result of implementation of the Plan.
The terms of such Plan are more fully described in the Prospectus under
"DISTRIBUTION PLAN."
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Investment Advisor is responsible for decisions to buy and sell
securities for the Funds and for the placement of its portfolio business and the
negotiation of commissions, if any, paid on such transactions. The Investment
Advisor, in placing trades for a Fund, will follow the Company's policy of
seeking best execution of orders. Securities traded in the over-the-counter
market are generally traded on a net basis. These securities are generally
traded on a net basis with dealers acting as principal for their own accounts
without a stated commission. In over-the-counter transactions, orders are placed
directly with a principal market-maker unless a better price and execution can
be obtained by using a broker. Brokerage commissions are paid on transactions in
listed securities, futures contracts, and options.
The Investment Advisor effects portfolio transactions for other
investment companies and advisory accounts. Research services furnished by
broker-dealers through whom the Funds effect securities transactions may be used
by the Investment Advisor in servicing all of their respective accounts; not all
such services may be used in connection with the Funds. The Investment Advisor
will attempt to equitably allocate portfolio transactions among the Funds and
others whenever concurrent decisions are made to purchase or sell securities by
the Funds and other accounts. In making such allocations between the Funds and
others, the main factors to be considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held, and the opinions of the persons responsible for
recommending investments to the Funds and the others. In some cases, this
procedure could have an adverse effect on the Funds. In the opinion of the
Investment Advisor, however, the results of such procedures will, on the whole,
be in the best interest of each of the clients.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of purchases or sales of portfolio investments for the
reporting period by the monthly average value of the portfolio investments owned
during the reporting period. The calculation excludes all securities, including
options, whose maturities or expiration dates at the time of acquisition are one
year or less. Portfolio turnover may vary greatly from year to year as well as
within a particular year, and may be affected by cash requirements for
redemption of units 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).]
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/n) - 1
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of
the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms of years
The Funds compute their aggregate total returns over a specified period
by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
Aggregate Annual Total Return = (ERV/P) - 1
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of
the period
P = hypothetical initial payment of $1,000
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.
FINANCIAL STATEMENTS
CT&T
FUNDS
Annual
Report
October 31, 1997
[ART WORK APPEARS HERE]
A Report on the Operations and Performance of Your Investment in
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
The Chicago Trust Company, Investment Advisor
Montag & Caldwell, Inc., Investment Advisor
(800) 992-8151
CT&T Funds -- Shareowner Benefits
- --------------------------------------------------------------------------------
The CT&T Funds offer a variety of special features and options for shareowners.
If you are not already taking advantage of these features and wish to do so,
call us! A customer service representative at (800) 992-8151 will help you gain
access to our free share owner options.
[ART WORK]
Low Minimum Investments
The minimum initial investment is $2,500 and any subsequent investment is $50.
[ART WORK]
Automatic Investment
You may elect to make regular investments into your account automatically by
approving electronic funds transfers into your CT&T Funds. The minimum initial
investment for the automatic investment plan is $50.
[ART WORK]
Savings for Retirement
Our easy and convenient IRA offers you a selection of mutual funds especially
suitable for your retirement accounts while your assets benefit from tax-
deferred growth.
[ART WORK]
Automatic Dividend Reinvestment
You can compound your investment earnings by reinvesting them automatically.
Monthly or quarterly dividends and annual capital gain distributions are
reinvested free of charge.
[ART WORK]
Exchange Privileges
Should your personal investment needs change, you have the flexibility to move
your investments among the CT&T Funds. Transfers between the Funds are free of
charge, and simple to make.
[ART WORK]
Check Writing
Free check writing services may be authorized and are available in the Chicago
Trust Money Market Fund. The per check minimum is $500.
Our automated shareowners account information line is available for your
convenience 24-hours a day, 7 days a week by calling (800) 992-8151.
Dear Shareowner:
The fiscal year ended October 31, 1997 has been financially rewarding for all
investors in our funds. Holders of our equity portfolios have realized returns
ranging from 25.2% in the Chicago Trust Growth & Income Fund (Growth & Income)
to 34.3% in the Montag & Caldwell Growth Fund (Growth) "I" Class of shares. Our
Chicago Trust Talon Fund (Talon) has earned a very impressive 33.5% total return
despite holding significant cash reserves throughout the period. Fixed income
returns have ranged from 5.1% in our tax-free Municipal Bond Fund to 8.8% in the
taxable Bond Fund. Holders of our Money Market Fund have realized a 5.17% return
over the past twelve months.
Obviously, there is more information printed about mutual funds than anyone can
reasonably read or would want to read. However, on the assumption that most of
our shareowners do not read all of the financial advisory publications now
available, we thought you might like to know a sample of who has written about
our Funds during the last twelve months.
Publication Date Funds
- ----------- ---- -----
Crain's Chicago Business December 23, 1996 Growth & Income
"Chicago Trust Fund
Manager Takes Long Views in Stock Picks"
Kiplinger's Magazine March 1997 Growth
"Best Funds: Investing for College"
Money Magazine March 1997 Growth
"Invest Like a Millionaire with these Funds"
Ft. Lauderdale Sun-Sentinel May 11, 1997 Growth & Income
"A Few Strong Growth Stocks Power Chicago Trust"
Financial Planning Magazine May 1997 Growth & Income, Talon
"Undiscovered Funds Still Abound"
Louis Rukeyser's Mutual Funds September 1997 Growth & Income
"A Wealth of Experience"
Louis Rukeyser's Mutual Funds October 1997 Growth
"A Global Opportunist"
Money Magazine November 1997 Talon
"What to Do Now to Protect Your Profits"
It is customary in letters of this sort to fill space with prognostications
about the economic and financial outlook. We do not believe that is a very
useful exercise in a world where the batting average of most forecasters is less
than 50%. Instead, we wish to assure you that despite recent market returns our
enthusiasm will remain in check. We will continue to pursue our bottom-up
disciplined investment approaches, choosing securities based on fundamentals of
the business and our time-tested valuation techniques.
To all of our long-term investors, we hope we have met your expectations. To our
newer investors, we thank you for choosing the Chicago Trust/Montag & Caldwell
Funds. We will do all that we can to help you reach your financial goals. In
March 1998, to enhance and simplify your investment process, we will introduce
our website. Thank you for investing with Chicago Trust/Montag & Caldwell Funds.
Sincerely,
/s/ Stuart D. Bilton
Stuart D. Bilton
Chairman
1
CT&T Funds -- Summary Information
Performance for the Fiscal Year Ended October 31, 1997
- -------------------------------------------------------------------------------
Montag & Caldwell Growth Fund
Class N (Retail) Class I (Institutional) Chicago Trust Growth & Income Fund
Total Returns:
1 Year 33.82% 34.26% 25.16%
Three Year
Average Annual N/A N/A 26.93%
Average Annual
Since Inception 31.92% 33.56% 20.78%
Value of $10,000 $22,925 $ 14,724 $20,801
from Inception
Date 11/2/94 6/28/96 12/13/93
Top Ten Holdings as of October 31, 1997
Company and Cisco Systems, Inc. 4.5% Federal Home Loan Mortgage Corp. 3.9%
% of Total Net Microsoft Corp. 4.0% Illinois Tool Works, Inc. 3.9%
Assets Gillette Co. 4.0% Royal Dutch Petroleum Co., NY, ADR 3.9%
Pfizer, Inc. 3.8% American International Group, Inc. 3.8%
Coca-Cola Co. 3.8% Norwest Corp. 3.8%
Procter & Gamble Co. 3.7% Cardinal Health, Inc. 3.7%
Johnson & Johnson 3.6% Pfizer, Inc. 3.6%
Intel Corp. 3.2% Microsoft Corp. 3.5%
Oracle Corp. 3.2% Newell Co. 3.3%
Home Depot, Inc. 3.2% Sysco Corp. 3.2%
Chicago Trust Talon Fund Chicago Trust Balanced Fund
Total Returns:
1 Year 33.47% 20.10%
Three Year
Average Annual 26.16% N/A
Average Annual
Since Inception 26.08% 18.20%
Value of $10,000 $20,582 $14,229
from Inception
Date 9/19/94 9/21/95
Top Ten Holdings as of October 31, 1997
Company and Mylan Laboratories, Inc. 5.4% Pfizer, Inc. 2.3%
% of Total Net U. S. Treasury Note, 5.875%, 07/31/99 5.3% Norwest Corp. 2.0%
Assets Vitalink Pharmacy Services, Inc. 5.1% American International Group, Inc. 1.9%
Robotic Vision Systems, Inc. 5.1% Schlumberger Ltd. 1.9%
Circus Circus Enterprises, Inc. 4.9% Federal Home Loan Mortgage Corp. 1.8%
North American Vaccine, Inc. 4.9% Cisco Systems, Inc. 1.7%
Pep Boys -- Manny, Moe & Jack 4.9% Microsoft Corp. 1.7%
R.R. Donnelley & Sons Co. 4.7% Illinois Tool Works, Inc. 1.7%
Danielson Holdings Corp. 4.4% MBNA Corp. 1.7%
Equity Office Properties Trust, REIT 4.3% Newell Co. 1.5%
2
CT&T Funds -- Summary Information
Performance for the Fiscal Year Ended October 31, 1997
- --------------------------------------------------------------------------------
Montag & Caldwell Balanced Fund Chicago Trust Bond Fund
Total Returns:
1 Year 24.26% 8.84%
Three Year
Average Annual N/A 9.77%
Average Annual
Since Inception 22.83% 6.56%
Value of $10,000 $18,509 $12,797
from Inception
Date 11/2/94 12/13/93
Top Ten Holdings as of October 31, 1997
Company and U.S. Treasury Note, 7.250%, 05/15/16 4.1% U.S. Treasury Bond, 7.125%, 02/15/23 2.3%
% of Total Net U.S. Treasury Note, 6.500%, 10/15/06 3.1% U.S. Treasury Note, 7.250%, 05/15/04 2.2%
Assets Cisco Systems, Inc. 2.5% U.S. Treasury Note, 7.875%, 08/15/01 2.2%
U.S. Treasury Note, 6.500%, 08/15/05 2.5% U.S. Treasury Note, 7.125%, 02/29/00 2.1%
Federal National Mortgage Association, U.S. Treasury Note, 6.375%, 08/15/02 2.1%
7.250%, 01/17/21, CMO, REMIC 2.5% U.S. Treasury Note, 5.750%, 10/31/00 2.1%
U.S. Treasury Note, 5.875%, 02/15/04 2.4% U.S. Treasury Note, 5.500%, 02/28/99 2.1%
Gillette Co. 2.3% U.S. Treasury Note, 5.750%, 08/15/03 2.1%
Procter & Gamble Co. 2.2% U.S. Treasury Note, 5.125%, 11/30/98 2.1%
Microsoft Corp. 2.2% Chemical Master Credit Card Trust, Class A
Johnson & Johnson 2.2% 5.550%, 09/15/03 2.1%
Chicago Trust Municipal Bond Fund
Total Returns:
1 Year 5.13%
Three Year
Average Annual 5.97%
Average Annual
Since Inception 4.07%
Value of $10,000 $11,673
from Inception
Date 12/13/93
Top Ten Holdings as of October 31, 1997
Company and King County, Washington, Series A, Commonwealth of Puerto Rico, Series A, G.O.
% of Total Net G.O., 5.800%, 01/01/04 4.1% 6.500%, 07/01/03 3.6%
Assets Jordan School District, Utah, Clark County, Nevada, School District, G.O.
Series A, G.O., 5.250%, 06/15/00 4.0% 6.400%, 06/15/06 3.1%
Cook County, Illinois, Series B, G.O. Arlington Independent School District, Texas,
4.700%, 11/15/01 3.9% Refunding, G.O., 5.400%, 02/15/99 3.1%
Salt River Project Electric System Mohave County, AZ, IDA, 6.000%, 07/01/00 3.0%
Revenue, AZ, Refunding, Series A, Tulsa, Oklahoma Metropolitan Utility Authority
5.500%, 01/01/05 3.9% Revenue, 5.500%, 07/01/00 2.9%
Texas State Water Development Board,
G.O. Escrowed to Maturity, 5.000%,
08/01/99 3.7%
3
CT&T Funds
Montag & Caldwell Growth Fund
Management Discussion & Analysis October 31, 1997
- --------------------------------------------------------------------------------
The Montag & Caldwell Growth Fund (the "Fund") did particularly well in this
past fiscal year ended October 31, 1997. The Fund had a total return of 33.8% as
compared to a gain of 32.0% for the S&P 500 Index. During this same period, the
Lipper Growth Fund Index returned 28.4%. The Fund's multinational consumer,
healthcare and technology holdings contributed to the Fund's good results.
The outlook for the stock market continues to be positive. Sustained growth in
the economy and corporate profits; continued prospects for low rates of
inflation and steady to eventually lower levels of bond yields; and favorable
supply/demand factors for equities coupled with guarded views among investors on
the stock market outlook suggest a positive backdrop for share prices. It is our
view that the recent stock market correction associated with the currency
turmoil in Southeast Asia is an "overdue correction" rather than the beginning
of a substantial decline in share prices. From January 1, 1995, through
September 30, 1997, the S&P 500 Index has provided a total return of 119.3%, so
a pullback in share prices was not all that surprising. Our favorable view on
the stock market is predicated on the belief that U. S. economic growth will
moderate to a non-inflationary rate and that the Federal Reserve is in a
flexible position to implement policies that will extend the economic expansion.
The currency and financial market turmoil in Southeast Asia should contribute to
that moderating process.
We continue to be quite positive on the outlook for shares of high quality
growth companies. Because we expect more moderate growth in the U. S. economy
and corporate profits in the future, superior and consistent earnings growth
rates of these companies will become increasingly attractive. We do not expect
the turmoil in Southeast Asia to have a significant impact on the U. S.
multinational companies in the Fund. While economic growth will slow in
Southeast Asia, the region is not expected to experience an economic downturn as
severe as that of Mexico and other Latin American countries during their period
of financial stress. Most importantly, the multinational companies in the
Portfolio sell consumer non-durable products that we don't think will be
affected proportionately by a slowdown. Even in a U.S. recession, demand does
not slow significantly for products such as soft drinks, blades and detergent.
Also, other areas of the world are showing good growth, which offsets the
weakness in Southeast Asia. Such geographic diversity is one of the reasons the
Fund's multinational holdings have consistently produced solid earnings over the
years.
[PIE CHART APPEARS HERE]
Portfolio Allocation By Market Sector
Cash & Other Net Liabilities 3%
Technology 28%
Consumer Non-Durables 15%
Pharmaceuticals 9%
Health Care Services 7%
Retail 6%
Finance 7%
Food & Beverage 6%
Other Common Stocks 19%
Comparative Performance Measurement: Growth of $10,000 Invested in Montag &
Caldwell Growth Fund,
S&P 500 Index and the Lipper Growth Fund Index
since Fund's Inception
[GRAPH APPEARS HERE]
Montag &
Caldwell
Lipper Growth Fund
S&P 500 Growth Class N
Values/Years Index Fund Index Shares
- ------------ ------- ---------- -----------
November 1994 10,000 10,000 10,000
January 1995 10,032 9,739 10,005
April 1995 11,046 10,699 10,999
July 1995 12,142 12,075 12,630
October 1995 12,641 12,398 13,187
January 1996 13,907 13,183 14,178
April 1996 14,380 13,789 15,065
July 1996 14,152 13,145 14,874
October 1996 15,685 14,498 17,131
January 1997 17,568 15,915 19,367
April 1997 17,992 15,733 19,245
July 1997 21,527 18,897 23,571
October 1997 20,720 18,617 22,925
Montag &
Caldwell
Lipper Growth Fund
S&P 500 Growth Class I
Values/Years Index Fund Index Shares
- ------------ ------- ---------- -----------
June 1996 10,000 10,000 10,000
October 1996 10,593 10,433 10,967
January 1997 11,865 11,453 12,087
April 1997 12,152 11,322 12,341
July 1997 14,539 13,598 15,125
October 1997 13,994 13,397 14,724
These charts compare a $10,000 investment made in Class N Shares and Class I
Shares of the Fund on their respective inception dates to a $10,000 investment
made in the indices on that date. All dividends and capital gains are
reinvested. Further information relating to the Fund's performance, including
expense reimbursements, is contained in the Condensed Financial Information
section of the Prospectus and elsewhere in this report. Past performance is not
indicative of future performance. Indices are unmanaged and investors cannot
invest in them.
4
CT&T Funds
Chicago Trust Growth & Income Fund
Management Discussion & Analysis October 31, 1997
================================================================================
The Chicago Trust Growth & Income Fund (the"Fund")had a strong gain of 25.2% for
the fiscal year ended October 31, 1997. While the one year return was less than
that of the S&P 500 Index or the Lipper Growth & Income Fund Index, on a three
year basis, the Fund's 26.9% annualized rate of return was in line with that of
the S&P 500 Index, at 27.5%. The Fund's return was well above that of the Lipper
Growth & Income Fund Index, at 23.2%. The Fund ranked 43rd out of 382 Growth &
Income Funds listed by Lipper Analytical Services, Inc. based on total return
fund performance for the three-year period ended October 31, 1997. These Lipper
rankings include all classes of multiple class funds, and certain expenses of
the Fund were subsidized during the ranking period.
While the stock market's gain in fiscal 1997 was the strongest of the past three
years, there was little doubt that the advance became more labored during the
closing months of the year. Two of the last three months were down with the
final quarter having the poorest return for any such period during the last
three fiscal years. October was particularly volatile as it incorporated the
often anticipated 10% market correction, several single day price change
records, and a single session volume record.
As a long-term investor, we recognize that volatility may occur in the Portfolio
during periods when the stock market is dominated by themes which are contrary
to the Fund's investment strategy. Our long term stock selection process will
continue to focus on fundamentally strong companies which are able to
demonstrate traits of consistent top and bottom line growth. Volatile markets
may result in short-term underperformance, but can also represent attractive
entry points for long-term investors.
[PIE CHART APPEARS HERE]
Portfolio Allocation By Market Sector
Consumer Durables 6%
Capital Goods 6%
Energy 7%
Consumer Non-Durables 11%
Health Care Services 10%
Technology 14%
Other Common Stocks 19%
Cash & Other Net Assets 6%
Finance 21%
Comparative Performance Measurement: Growth of
$10,000 invested in Chicago Trust Growth & Income Fund,
S&P 500 Index and the Lipper Growth & Income Fund
Index since Fund's Inception
[GRAPH APPEARS HERE]
LIPPER GROWTH CHICAGO TRUST
S&P & INCOME FUND GROWTH &
Values/Years 500 INDEX INDEX INCOME FUND
- ------------ ---------- ------------- -------------
12/93 $10,000 $10,000 $10,000
4/94 $ 9,745 $ 9,807 $ 9,797
7/94 $ 9,979 $ 9,993 $ 9,945
10/94 $10,360 $10,241 $20,173
1/95 $10,394 $10,115 $10,365
4/95 $11,444 $11,036 $11,231
7/95 $12,580 $12,011 $12,327
10/95 $13,096 $12,318 $13,088
1/96 $14,408 $13,448 $14,350
4/96 $14,898 $14,021 $14,983
7/96 $14,663 $13,587 $14,933
10/96 $16,250 $14,953 $16,619
1/97 $18,201 $16,463 $18,002
4/97 $18,641 $16,616 $18,258
7/97 $22,303 $19,584 $21,812
10/97 $21,466 $19,144 $20,801
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
5
CT&T Funds
Chicago Trust Talon Fund
Management Discussion & Analysis October 31, 1997
================================================================================
For the fiscal year ending October 31, 1997, the Chicago Trust Talon Fund (the
"Fund") had a total return of 33.5% versus 32.7% for the S&P 400 Mid Cap Index.
From its inception on September 19, 1994 through October 31, 1997, the Fund's
cumulative return was 105.8% versus 88.4% for the S&P 400 Mid Cap Index.
The recent disarray in Asian markets points out that diversification in itself
may not protect one from loss of principal and that globalization can work as
unfavorably for corporate profits on the way down as it does favorably on the
way up. Globalization and diversification will be subjects of future quarterly
reports. We hope that previous quarterly reports have been helpful in conveying
our investment philosophy and thought process. If you are a new shareowner and
would like to receive a few of our past quarterly reports, please call Janice
Gonnella at 312-422-5403.
We believe we are entering a period that will be characterized by greater
volatility and that stock picking will become even more important than in the
recent past. As we enter our new fiscal year, patience and discipline will
remain a cornerstone of our investment process.
Talon Asset Management, Inc. is a sub-agent of the Chicago Trust Company. As
such, we are responsible for managing your Fund. We at Talon would like to
express our appreciation to Chicago Trust for that opportunity and for their
patience and support over the last three years. The Talon "personality", which
has taken shape over that period of time, could not have happened without the
confidence that both Chicago Trust and you, our shareowners, have placed in us.
[PIE CHART APPEARS HERE]
Portfolio Allocation By Market Sector
Cash & Other Net Liabilities 3%
Finance 12%
Pharmaceuticals 15%
Restaurants 6%
Technology 11%
Other Common Stocks 26%
Preferred Stocks 1%
U.S. Government & Agency Obligations 26%
Comparative Performance Measurement: Growth of $10,000
invested in Chicago Trust Talon Fund and
the S&P 400 Mid Cap Index since Fund's Inception
[GRAPH APPEARS HERE]
S&P 400 CHICAGO TRUST
VALUES/YEARS MID CAP INDEX TALON FUND
------------ ------------- ----------
9/94 $10,000 $10,000
10/94 $ 9,921 $10,250
1/95 $ 9,660 $10,151
4/95 $10,551 $10,766
7/95 $11,829 $12,173
10/95 $12,025 $12,189
1/96 $12,701 $12,762
4/96 $13,695 $14,580
7/96 $12,747 $13,530
10/96 $14,111 $15,420
1/97 $15,482 $18,020
4/97 $15,082 $16,935
7/97 $18,531 $20,074
10/97 $18,721 $20,582
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
6
CT&T Funds
Chicago Trust Balanced Fund
Management Discussion & Analysis October 31, 1997
================================================================================
For the fiscal year ended October 31, 1997 the Chicago Trust Balanced Fund (the
"Fund") reported a total return of 20.1%. Again this year, common stocks
produced the greatest component of total return. The equities in the Portfolio
returned 32% and bonds produced approximately 11.5%, for this fiscal year. Both
bond and equity returns were competitive when measured against the S&P 500 Index
return of 32.5% and the Lehman Brothers Aggregate Bond Index return of 10.1%.
Over the course of the year, the asset allocation for stocks remained in the 52%
to 56% range and bonds in the 34% to 39% range, while cash reserves were
maintained in the 6% to 11% range.
When reviewing stock market history, October is many times the cruelest month of
the year--consider 1929 and 1987. Again, on October 27, 1997, the stock market
experienced a significant drop of 554 points. Such volatility demonstrates the
advantages of a balanced fund. Over the past few years, a debate has been
brewing in academic circles regarding the value and contribution of asset
allocation. A 1986 research study by Brinson, Hood and Beebower contends that,
on average, 93.6% of a portfolio return is explained by the mix of stocks, bonds
and cash. Other studies contend that asset mix explains approximately 20% to 25%
of return. We continue to believe that asset allocation is incredibly important
in your total long-term return and a well diversified balanced fund can enhance
your expected return.
The outlook for equity investment remains positive but investors should exercise
caution in making new investment commitments with special attention paid to
valuation levels on individual stocks and bonds. This is no time to "pay up" for
stocks and bonds. The Fund will continue to stress individual company
fundamentals and reasonable prices in its selection process.
Equity investment in health care, finance, energy and consumer staples has
enhanced the performance of the stock portfolio. The bond portfolio continues to
stress quality and intermediate term maturities. By diversifying investments
among various asset classes, the total risk of significant loss declines as
compared to investing in a single asset class.
[PIE CHART APPEARS HERE]
Portfolio Allocation By Market Sector
Cash & Other Net Assets 7%
Common Stocks 53%
Corporate Notes & Bonds 18%
U.S. Government & Agency Obligations 18%
Other 2%
Asset Backed Securities 2%
Comparative Performance Measurement: Growth of
$10,000 invested in Chicago Trust Balanced Fund, Lehman
Brothers Aggregate Bond Index/S&P 500 Index and the
Lipper Balanced Fund Index since Fund's Inception
[GRAPH APPEARS HERE]
Lehman Brothers
Aggregate
Bond Index/ Lipper
S&P 500 Balanced Chicago Trust
Values/Years Index Fund Index Balanced Fund
- -------------- --------------- ---------- -------------
September 1995 10,000 10,000 10,000
October 1995 10,039 9,975 10,108
January 1996 10,752 10,635 10,796
April 1996 10,817 10,751 10,893
July 1996 10,783 10,616 10,926
October 1996 11,625 11,420 11,847
January 1997 12,493 12,187 12,612
April 1997 12,708 12,213 12,720
July 1997 14,481 13,874 14,438
October 1997 14,237 13,715 14,229
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
7
CT&T Funds
Montag & Caldwell Balanced Fund
Management Discussion & Analysis October 31, 1997
================================================================================
The Montag & Caldwell Balanced Fund (the "Fund") achieved a strong gain of 24.3%
for the fiscal year ended October 31, 1997. During the same period, the combined
index of the S&P 500 Index and the Lehman Brothers Aggregate Bond Index
increased 21.4%. The Lipper Balanced Fund Index gained 20.1% during the same
interval. The Fund's multinational consumer, healthcare and technology equity
holdings contributed to the Fund's good results.
The outlook for the stock market continues to be positive. Sustained growth in
the economy and corporate profits; continued prospects for low rates of
inflation and steady to eventually lower levels of bond yields; and favorable
supply/demand factors for equities coupled with guarded views among investors on
the stock market outlook suggest a positive backdrop for share prices. It is our
view that the recent stock market correction associated with the currency
turmoil in Southeast Asia is an "overdue correction" rather than the beginning
of a substantial decline in share prices. From January 1, 1995, through
September 30, 1997, the S&P 500 Index has provided a total return of 119.3%, so
a pullback in share prices was not all that surprising. Our favorable view on
the stock market is predicated on the belief that U. S. economic growth will
moderate to a non-inflationary rate and that the Federal Reserve is in a
flexible position to implement policies that will extend the economic expansion.
The currency and financial market turmoil in Southeast Asia should contribute to
that moderating process.
We continue to be quite positive on the outlook for shares of high quality
growth companies. Because we expect moderate growth in the U. S. economy and
corporate profits in the future, the superior and consistent earnings growth
rates of these companies will become increasingly attractive. We do not expect
the turmoil in Southeast Asia to have a significant impact on the U. S.
multinational companies in the Portfolio. While economic growth will slow in
Southeast Asia, the region is not expected to experience an economic downturn as
severe as that of Mexico and other Latin American countries during their period
of financial stress. Most importantly, the multinational companies in the
Portfolio sell consumer non-durable products that we don't think will be
affected proportionately by a slowdown. Even in a U.S. recession, demand does
not slow significantly for products such as soft drinks, blades and detergent.
Also, other areas of the world are showing good growth, which offsets the
weakness in Southeast Asia. Such geographic diversity is one of the reasons the
Fund's multinational holdings have consistently produced solid earnings gains
over the years.
With economic growth likely to slow and inflation well-controlled, we think
there is the potential for positive bond market returns in the period ahead. In
addition to gradually lengthening bond maturities, we will seek to add yield,
where appropriate, through the purchase of quality corporate bonds as well as
agency issues.
[PIE CHART APPEARS HERE]
Portfolio Allocation By Market Sector
Cash & Other Net Assets 4%
Common Stocks 58%
U.S. Government & Agency Obligations 26%
Corporate Notes & Bonds 9%
Asset Backed Securities 3%
Comparative Performance Measurement:
Growth of $10,000 invested in Montag & Caldwell Balanced
Fund, Lehman Brothers Aggregate Bond Index/S&P 500
Index and the Lipper Balanced Fund Index
since Fund's Inception
[GRAPH APPEARS HERE]
Lehman Brothers Aggregate Lipper Balanced Montag & Caldwell
Values/Yrs. Bond Index/ S&P Index Fund Index Balanced Fund
11/94 10,000 10,000 10,000
1/95 10,128 9,983 10,079
4/95 10,891 10,652 10,817
7/95 11,706 11,424 11,944
10/95 12,539 11,759 12,375
1/96 13,040 12,537 13,172
4/96 13,141 12,674 13,446
7/96 13,090 12,515 13,410
10/96 14,881 13,462 14,895
1/97 15,230 14,343 16,162
4/97 15,498 14,397 16,071
7/97 17,717 16,355 18,635
10/97 17,894 16,168 18,509
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
8
CT&T Funds
Chicago Trust Bond Fund
Management Discussion & Analysis October 31, 1997
- --------------------------------------------------------------------------------
Bond market performance over the twelve months ended October 31, 1997, has been
influenced by a range of circumstances. At the beginning of the fiscal year,
investors were anticipating the need for the Federal Reserve to raise interest
rates to help moderate economic growth. A federal funds overnight lending rate
increase of .25% occurred at the end of March 1997. As the year elapsed,
sentiment quickly changed. Many traditional signs of economic strength such as
low unemployment, industrial production and a declining government deficit
raised concerns. Most people felt that the Federal Reserve would be forced to
raise rates in order to avoid higher inflation. Productivity, growth and global
competition has kept inflation lower than predicted by many economic "experts."
At the time of this writing, a new theme of "deflation" has become increasingly
popular due to the renewed risks of investing in emerging market countries.
For the fiscal year ended October 31, 1997, the Chicago Trust Bond Fund (the
"Fund") had a total return of 8.84%. The Fund compares its performance to both
the Lehman Brothers Aggregate Bond Index, with a total return of 8.89% for the
same period, and the Lipper Intermediate Investment Grade Debt Fund Index, which
had a total return of 8.04% during the same period.
The Fund continues to emphasize corporates and mortgages which represent 66% of
total assets. We believe that superior returns are achieved from the results of
independent, fundamental security analysis combined with the rigorous
application of a precise, disciplined portfolio construction process. Rather
than attempting to time the market, we firmly believe in adding value through
sector analysis, credit quality research and security structure analysis. We
believe our focus on long term, intrinsic value captures yield without
increasing portfolio risk.
Throughout the year, corporate bonds contributed favorably to the Fund's
comparatively strong investment results. The Fund focuses on selecting corporate
obligations that will enhance the Fund's overall return while maintaining a
strict adherence to required risk parameters. Both asset-backed and mortgage
bonds also can provide investors with strong relative returns. Prepayment risk
is analyzed under numerous interest rate scenarios to evaluate sensitivity to
changes in rates. Government bonds are used to capture risk neutral anomalies
based on the slope of the yield curve.
Changes in the Portfolio's duration are made based on our 12- to 18-month
outlook for bond returns. We are not market timers. Duration changes are
constrained to a range of plus or minus 10% of the duration of the Lehman
Brothers Aggregate Bond Index. We will also adjust the distribution of our
Portfolio's maturity and duration based on the current slope of the yield curve
to capture incremental return and to control systematic risk. Over the last
year, the Fund's effective duration has ranged from a high of 4.7 years to a low
of 4.5 years. Currently, the effective portfolio duration is 4.6 years.
[PIE CHART PORTFOLIO ALLOCATION BY MARKET SECTOR GOES HERE]
Portfolio Allocation By Market Sector
Cash & Other Net Assests 4%
U.S. Government & Agency Obligations 47%
Corporate Notes & Bonds 40%
Other 4%
Asset Backed Securities 5%
Comparative Performance Measurement:
Growth of $10,000 invested in Chicago Trust Bond Fund,
Lehman Brothers Aggregate Bond Index and the Lipper
Intermediate Investment Grade Debt Fund Index since
Fund's Inception
[CHART COMPARATIVE PERFORMANCE MEASUREMENT GOES HERE]
Lehman Brothers Aggregate Lipper Intermediate Investment Chicago Trust
Values/Yrs. Bond Index Grade Debt Fund Index Bond Fund
12/93 10,000 10,000 10,000
4/94 9,507 9,524 9,682
7/94 9,674 9,640 9,768
10/94 9,535 9,537 9,677
1/95 9,769 9,720 9,894
4/95 10,203 10,121 10,307
7/95 10,651 10,520 10,735
10/95 11,026 10,885 11,117
1/96 11,424 11,267 11,507
4/96 11,085 10,930 11,169
7/96 11,241 11,070 11,331
10/96 11,671 11,465 11,758
1/97 11,797 11,589 11,926
4/97 11,870 11,641 11,972
7/97 12,451 12,191 12,555
10/97 12,709 12,388 12,797
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
9
CT&T Funds
Chicago Trust Municipal Bond Fund
Management Discussion & Analysis October 31, 1997
- --------------------------------------------------------------------------------
Over the past year the bond markets can be characterized as having an overall
downward interest rate bias with a notable flattening of the yield curve--in
other words, rates are down and the additional yield gained from extending from
one-year to 30-year maturities has fallen. For example, in October 1996, moving
from one-year to 30 year maturities in AA-rated General Obligation bonds added
almost 2.00% in yield. This October, however, investors added only about 1.50%
in additional yield for the same extension. Also, it is typical to earn 0.10%
additional yield per year in intermediate maturities for each year of extension;
however, for most of 1997, seven- to twelve-year municipal bonds added only
0.05% to 0.07% for annual extensions.
The other significant market anomaly evident this October is the under-
performance of municipals versus taxable bonds. Expressed as a percent of U.S.
Treasury prices, municipal bonds now range from 70% to 87% for one- to 30-year
maturities. These percentages are higher than normal since U.S. Treasury yields
moved up rapidly as a result of the flight to quality from volatile equity and
international markets. Conversely, high seasonal supply in municipals held tax-
exempt bond prices down.
For the fiscal year ended October 31, 1997, total return for the Chicago Trust
Municipal Bond Fund (the "Fund") was 5.13%. The Fund earned an average annual
return of 5.97% for the three year period ended October 31, 1997. While 30-year
municipal bond yields under 6% tend to limit retail buying, this relative
"cheapness" of municipals versus taxables has increased interest in the tax-
exempt market from corporate buyers, especially insurance companies. Year to
year, municipal rates are down, with October 31, 1997, yields on five-year AA-
rated General Obligation bonds at 4.25%, 10 year maturities at 4.65%, and 30
years at 5.20%. Contributions to bond funds for most of the period were slow,
but with continuing volatility in the domestic stock market and weakness
internationally, the coming year should see greater allocations to fixed income
securities.
Activity in the Fund for the fiscal year concentrated on increasing current
income with purchases of 5% to 6% coupon bonds, as well as taking advantage of
attractive levels on issuers from "specialty" states, such as California,
Michigan, and New York. Because of local tax advantages for in-state buyers,
issuers in these states usually sell at lower yields than non-specialty issuers
such as those in Illinois, Washington, or Wisconsin, for example. Due to recent
sizable new issuance from several specialty states, we were able to take
advantage of attractive yield levels for the Fund. At October 31, 1997, the
Fund's average credit quality has been maintained at AA, average maturity at 5.6
years and duration at 4.5 years.
Comparative Performance Measurement:
Growth of $10,000 invested in Chicago Trust Municipal
Bond Fund and the Lehman Brothers Five-Year
Government Obligations Index since Fund's Inception
[COMPARATIVE PERFORMANCE MEASUREMENT CHART APPEARS HERE]
LEHMAN BROTHERS
5-YEAR GOVERNMENT CHICAGO TRUST
VALUES/YEARS OBLIGATIONS INDEX MUNICIPAL BOND FUND
------------ ----------------- -------------------
12/93 $10,000 $10,000
1/94 $10,094 $10,106
4/94 $ 9,782 $ 9,803
7/94 $ 9,921 $ 9,922
10/94 $ 9,838 $ 9,808
1/95 $ 9,956 $ 9,958
4/95 $10,288 $10,218
7/95 $10,669 $10,518
10/95 $10,855 $10,719
1/96 $11,138 $10,969
4/96 $11,025 $10,811
7/96 $11,156 $10,935
10/96 $11,368 $11,103
1/97 $11,540 $11,230
4/97 $11,548 $11,201
7/97 $11,990 $11,600
10/97 $12,107 $11,673
[PIE CHART APPEARS HERE]
Portfolio Allocation By Quality Rating
A 8%
Aa 33%
Aaa 56%
Not Rated 3%
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the indices on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this report.
Past performance is not indicative of future performance. Indices are unmanaged
and investors cannot invest in them.
10
CT&T Funds
Chicago Trust Money Market Fund
Management Discussion & Analysis October 31, 1997
- --------------------------------------------------------------------------------
Once again the most recent Federal Reserve Open Market Committee meeting came
and went without a change in interest rates. Policymakers left the Federal Funds
overnight lending rate unchanged at 5.50%. This is the same rate it has been
since late March.
While domestic economic activity continues to show strength, the picture from
overseas, Southeast Asia in particular, remains cloudy. What, if any, effect
this may have on policymaking decisions in the near future remains to be seen.
The short-term yield curve remains very flat. This means that the yield earned
for investing for seven days is approximately the same as the yield for
investing for 270 days. The Chicago Trust Money Market Fund (the "Fund") is
positioned to take advantage of this type of yield curve profile. It has a
weighted average maturity of 33 days, which is almost half the average maturity
of a "typical" prime domestic money market fund.
The performance of the Fund has exceeded its benchmark, the Donaghue's First
Tier Money Market Fund Index, by 0.23% for the quarter ended October 31, 1997.
For the previous 12 months, the outperformance has been 0.20%. The low expenses
of the Fund coupled with the effective structure of the Fund have been the
primary reasons it has continued to outperform other money market funds in the
peer group.
[PIE CHART PORTFOLIO ALLOCATION BY MARKET SECTOR APPEARS HERE]
Portfolio Allocation By Market Sector
Time Deposits 4%
Certificates of Deposit 5%
Commercial Paper 77% [INSERT PIE CHART HERE]
Cash & Other Net Assets 10%
GIC within Funding Agreement 4%
11
CT&T Funds
Montag & Caldwell Growth Fund
Schedule of Investments October 31, 1997
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ ------
COMMON STOCKS - 97.44%
Business Services - 2.26%
440,100 Manpower, Inc...........................................$ 16,888,838
------------
Consumer Durables - 1.82%
490,000 Harley Davidson, Inc.................................... 13,597,500
------------
Consumer Non-Durables - 14.87%
802,500 CUC International, Inc.*................................ 23,673,750
335,000 Gillette Co............................................. 29,835,938
280,000 Interpublic Group of Companies, Inc..................... 13,300,000
427,600 Mattel, Inc............................................. 16,622,950
410,000 Procter & Gamble Co..................................... 27,880,000
------------
111,312,638
------------
Electrical - 2.80%
324,700 General Electric Co..................................... 20,963,444
------------
Entertainment and Leisure - 2.58%
235,000 Walt Disney Co.......................................... 19,328,750
------------
Finance - 6.74%
265,000 American Express Co..................................... 20,670,000
217,400 American International Group, Inc....................... 22,188,387
260,000 First Data Corp......................................... 7,556,250
------------
50,414,637
------------
Food and Beverage - 6.22%
500,000 Coca-Cola Co............................................ 28,250,000
200,000 Pioneer Hi-Bred International, Inc...................... 18,325,000
------------
46,575,000
------------
Health Care Services - 7.47%
475,000 Johnson & Johnson....................................... 27,253,125
405,000 Pfizer, Inc............................................. 28,653,750
------------
55,906,875
------------
Lodging - 2.61%
280,000 Marriott International, Inc............................. 19,530,000
------------
Medical Supplies - 2.67%
460,000 Medtronic, Inc.......................................... 20,010,000
------------
Pharmaceuticals - 8.74%
270,000 Bristol-Myers Squibb Co.................................$ 23,692,500
330,000 Eli Lilly & Co.......................................... 22,068,750
220,000 Merck & Co., Inc........................................ 19,635,000
------------
65,396,250
------------
Restaurants - 2.90%
280,000 Cracker Barrell
Old Country Store, Inc.................................. 8,260,000
300,000 McDonald's Corp......................................... 13,443,750
------------
21,703,750
------------
Retail - 5.68%
350,000 Gap, Inc................................................ 18,615,625
430,000 Home Depot, Inc......................................... 23,918,750
------------
42,534,375
------------
Technology - 27.95%
330,000 Adaptec, Inc.*........................................ 15,984,375
410,000 Cisco Systems, Inc.*.................................. 33,632,812
350,600 Compaq Computer Corp.*................................ 22,350,750
400,000 Electronic Arts, Inc.*................................ 13,550,000
313,700 Intel Corp............................................ 24,154,900
230,000 Microsoft Corp.*...................................... 29,900,000
670,000 Oracle Corp.*......................................... 23,973,438
307,400 Seagate Technology, Inc.*............................. 8,338,225
380,000 Solectron Corp.*...................................... 14,915,000
540,000 3Com Corp.*........................................... 22,376,250
------------
209,175,750
------------
Telecommunications - 2.13%
360,000 Ericsson (LM)
Telefonaktiebolaget, ADR
Class B, Series 10...................................... 15,930,000
------------
Total Common Stocks..................................... 729,267,807
------------
(Cost $582,126,971)
See accompanying Notes to Financial Statements.
12
CT&T Funds
Montag & Caldwell Growth Fund
Schedule of Investments - continued October 31, 1997
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ ------
INVESTMENT COMPANIES - 3.31%
15,205,543 Bankers Trust Institutional
Cash Management Fund.................. $ 15,205,543
9,534,733 Bankers Trust Institutional
Treasury Money Fund................... 9,534,733
--------------
Total Investment Companies............ 24,740,276
--------------
(Cost $24,740,276)
Total Investments - 100.75%......................... 754,008,083
--------------
(Cost $606,867,247)**
Liabilities Net of Cash and Other Assets - (0.75%).. (5,589,917)
--------------
Net Assets - 100.00%................................ $ 748,418,166
==============
- -----------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $606,962,652.
Gross unrealized appreciation $ 155,538,447
Gross unrealized (depreciation) (8,493,016)
--------------
Net unrealized appreciation $ 147,045,431
==============
ADR American Depositary Receipt
See accompanying Notes to Financial Statements.
13
CT&T Funds
Chicago Trust Growth & Income Fund
Schedule of Investments October 31, 1997
- --------------------------------------------------------------------------------
Market
Shares Value
- ----------- ------------
COMMON STOCKS - 94.65%
Business Services - 1.17%
84,000 Paychex, Inc. ..................................... $ 3,202,500
------------
Capital Goods - 5.64%
155,000 AlliedSignal, Inc. ................................ 5,580,000
273,000 Federal Signal Corp. .............................. 6,603,187
41,500 Pitney Bowes, Inc. ................................ 3,291,469
------------
15,474,656
------------
Chemicals - 1.93%
121,400 Praxair, Inc. ..................................... 5,288,487
------------
Consumer Durables - 6.47%
218,000 Illinois Tool Works, Inc. ......................... 10,722,875
157,000 Johnson Controls, Inc. ............................ 7,045,375
------------
17,768,250
------------
Consumer Non-Durables - 11.39%
80,600 Cintas Corp. ...................................... 5,823,350
71,500 Lancaster Colony Corp. ............................ 3,539,250
179,000 Mattel, Inc. ...................................... 6,958,625
234,100 Newell Co. ........................................ 8,983,587
88,000 Procter & Gamble Co. .............................. 5,984,000
------------
31,288,812
------------
Electrical - 2.70%
114,800 General Electric Co. .............................. 7,411,775
------------
Energy - 6.84%
132,800 Exxon Corp. ....................................... 8,158,900
202,000 Royal Dutch Petroleum Co., NY, ADR ................ 10,630,250
------------
18,789,150
------------
Finance - 21.47%
100,000 AFLAC, Inc. ....................................... 5,087,500
102,975 American International Group, Inc. ................ 10,509,886
57,000 Associates First Capital Corp., Class A ........... 3,626,625
284,600 Federal Home Loan Mortgage Corp. .................. 10,779,225
108,000 First Data Corp. .................................. 3,138,750
25,950 General Re Corp. .................................. 5,117,016
145,000 Green Tree Financial Corp. ........................ 6,108,125
158,287 MBNA Corp. ........................................ 4,164,927
325,200 Norwest Corp. ..................................... 10,426,725
------------
58,958,779
------------
Food and Beverage - 4.41%
138,500 Richfood Holdings, Inc., Class A .................. 3,341,313
219,000 Sysco Corp. ....................................... 8,760,000
------------
12,101,313
------------
Health Care Services - 10.23%
137,000 Cardinal Health, Inc. ............................. 10,172,250
333,375 Health Management Associates, Inc., Class A* ...... 8,126,016
138,600 Pfizer, Inc. ...................................... 9,805,950
------------
28,104,216
------------
Pharmaceuticals - 1.85%
57,000 Merck & Co, Inc. .................................. 5,087,250
------------
Retail - 4.26%
51,000 Kohl's Corp.* ..................................... 3,423,375
294,000 Walgreen Co. ...................................... 8,268,750
------------
11,692,125
------------
Technology - 13.70%
76,400 Cisco Systems, Inc.* .............................. 6,267,187
58,600 Computer Sciences Corp.* .......................... 4,156,938
88,000 HBO & Co. ......................................... 3,828,000
73,400 Microsoft Corp.* .................................. 9,542,000
156,000 Oracle Corp.* ..................................... 5,581,875
124,000 Sun Microsystems, Inc.* ........................... 4,247,000
96,250 3Com Corp.* ....................................... 3,988,359
------------
37,611,359
------------
Telecommunications - 2.59%
132,000 Tellabs, Inc.* .................................... 7,128,000
------------
Total Common Stocks ............................... 259,906,672
(Cost $182,870,419) ------------
Par Value
- -----------
REPURCHASE AGREEMENT - 3.65%
$10,017,000 First Chicago,
5.7000%, dated 10/31/97 to be repurchased on
11/03/97 at $10,021,758 (Collateralized by U.S.
Treasury Note 6.000%, due 06/30/99; Total Par
$9,965,000) ....................................... 10,017,000
------------
Total Repurchase Agreement ........................ 10,017,000
(Cost $10,017,000) ------------
See accompanying Notes to Financial Statements.
14
CT&T Funds
Chicago Trust Growth & Income Fund
Schedule of Investments -- Continued October 31, 1997
- --------------------------------------------------------------------------------
Total Investments - 98.30% ...................................... $269,923,672
(Cost $192,887,419) ** ------------
Net Other Assets and Liabilities - 1.70% ........................ 4,684,235
------------
Net Assets - 100.00% ............................................ $274,607,907
============
- ----------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $192,887,419.
Gross unrealized appreciation $81,936,543
Gross unrealized (depreciation) (4,900,290)
-----------
Net unrealized appreciation $77,036,253
===========
ADR American Depositary Receipt
See accompanying Notes to Financial Statements.
15
CT&T Funds
Chicago Trust Talon Fund
Schedule of Investments October 31, 1997
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ ------
COMMON STOCKS - 69.93%
Aerospace / Defense - 4.14%
14,500 General Dynamics Corp. ....................... $ 1,177,219
-----------
Cable Television - 0.16%
11,417 Tescorp, Inc.*(A)............................. 44,241
-----------
Consumer Cyclical - 4.93%
63,000 Circus Circus Enterprises, Inc.*.............. 1,401,750
-----------
Electrical - 2.46%
30,000 Berg Electronics Corp.*....................... 701,250
-----------
Finance - 12.22%
160,000 Danielson Holdings Corp. ..................... 1,260,000
52,000 Risk Capital Holdings, Inc. .................. 1,183,000
43,125 St. Paul Bancorp, Inc. ....................... 1,035,000
-----------
3,478,000
-----------
Pharmaceuticals - 15.36%
70,000 Mylan Laboratories, Inc. ..................... 1,535,625
55,000 North American Vaccine, Inc.*................. 1,381,875
67,544 Vitalink Pharmacy Services, Inc.*............. 1,456,418
-----------
4,373,918
-----------
Printing and Publishing - 4.70%
41,000 R.R. Donnelley & Sons Co. .................... 1,337,625
-----------
Real Estate - 4.30%
40,000 Equity Office Properties Trust, REIT.......... 1,222,500
-----------
Restaurants - 6.04%
28,000 Starbucks Corp.*.............................. 924,000
122,500 Unique Casual Restaurants..................... 796,250
-----------
1,720,250
-----------
Retail - 4.87%
55,000 Pep Boys-Manny Moe & Jack..................... 1,385,312
-----------
Technology - 10.75%
50,000 American Management Systems, Inc.*............ 1,081,250
22,000 Cerner Corp.*................................. 533,500
105,000 Robotic Vision Systems, Inc.*................. 1,443,750
-----------
3,058,500
-----------
Total Common Stocks........................... 19,900,565
-----------
(Cost $15,980,250)
PREFERRED STOCK - 1.27%
Cable Television
3,000 Tescorp, Inc. 8.0000% Conv. Pfd. (A).......... 363,000
-----------
Total Preferred Stock......................... 363,000
-----------
(Cost $300,000)
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 26.26%
Federal Home Loan Bank - 3.52%
$1,000,000 5.8750%, 02/26/98............................. 1,002,210
---------
U.S. Treasury Bills (B) - 13.94%
1,000,000 4.9984%, 11/13/97............................. 998,382
1,000,000 4.8465%, 11/13/97............................. 998,382
1,000,000 5.0290%, 12/11/97............................. 994,488
1,000,000 5.1407%, 04/16/98............................. 976,900
-----------
3,968,152
-----------
U.S. Treasury Notes - 8.80%
1,000,000 5.2500%, 07/31/98............................. 998,380
1,500,000 5.8750%, 07/31/99............................. 1,505,355
-----------
2,503,735
-----------
Total U.S. Government
and Agency Obligations........................ 7,474,097
-----------
(Cost $7,466,281)
Shares
------
INVESTMENT COMPANY - 2.71%
769,994 Bankers Trust Institutional
Cash Management Fund.......................... 769,994
-----------
Total Investment Company...................... 769,994
-----------
(Cost $769,994)
PURCHASED PUT OPTIONS - 0.90%
Number of Exercise Expiration
Issuer Contracts Price Date
------ --------- -------- ----------
S & P 500 30 $9.60 11/22/97 142,500
S & P 500 20 $9.60 12/20/97 115,000
--------- -----------
50
Total Purchased Put Options............................... 257,500
-----------
(Cost $120,125)
Total Investments - 101.07%............................... 28,765,156
-----------
(Cost $24,636,650) **
Liabilities Net of Cash and Other Assets - (1.07%)........ (305,573)
-----------
Net Assets - 100.00%...................................... $28,459,583
===========
- ---------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $24,792,119.
Gross unrealized appreciation $4,336,501
Gross unrealized (depreciation) (363,464)
----------
Net unrealized appreciation $3,973,037
==========
(A) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold, in transactions exempt
from registration, to qualified institutional buyers. At October 31,
1997, these securities amounted to $407,241 or 1.43% of net assets.
(B) Annualized yield at time of purchase
REIT Real Estate Investment Trust
See accompanying Notes to Financial Statements.
16
CT&T Funds
Chicago Trust Balanced Fund
Schedule of Investments October 31, 1997
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ ------
COMMON STOCKS - 53.40%
Aerospace - 1.02%
40,000 Boeing Co. ................................... $ 1,915,000
------------
Business Services - 1.01%
50,000 Paychex, Inc. ................................ 1,906,250
------------
Capital Goods - 3.11%
50,000 AlliedSignal Corp. ........................... 1,800,000
85,000 Federal Signal Corp. ......................... 2,055,937
25,000 Pitney Bowes, Inc. ........................... 1,982,812
------------
5,838,749
------------
Chemicals - 1.04%
45,000 Praxair, Inc. ................................ 1,960,312
------------
Consumer Durables - 2.89%
65,000 Illinois Tool Works, Inc. .................... 3,197,187
50,000 Johnson Controls, Inc. ....................... 2,243,750
------------
5,440,937
------------
Consumer Non-Durables - 6.35%
25,000 Cintas Corp. ................................. 1,806,250
50,000 Lancaster Colony Corp. ....................... 2,475,000
60,000 Mattel, Inc. ................................. 2,332,500
75,000 Newell Co. ................................... 2,878,125
36,000 Procter & Gamble Co. ......................... 2,448,000
------------
11,939,875
------------
Electrical - 1.37%
40,000 General Electric Co. ......................... 2,582,500
------------
Energy - 6.25%
30,000 Amoco Corp. .................................. 2,750,625
45,000 Exxon Corp. .................................. 2,764,687
52,000 Royal Dutch Petroleum Co., NY, ADR ........... 2,736,500
40,000 Schlumberger Ltd. ............................ 3,500,000
------------
11,751,812
------------
Finance - 10.12%
35,000 American International Group, Inc. ........... 3,572,188
30,000 Associates First Capital Corp., Class A....... 1,908,750
90,000 Federal Home Loan Mortgage Corp. ............. 3,408,750
50,000 First Data Corp. ............................. 1,453,125
40,000 Green Tree Financial Corp. ................... 1,685,000
120,000 MBNA Corp. ................................... 3,157,500
120,000 Norwest Corp. ................................ 3,847,500
------------
19,032,813
------------
Food and Beverage - 1.85%
45,000 Richfood Holdings, Inc., Class A.............. 1,085,625
60,000 Sysco Corp. .................................. 2,400,000
------------
3,485,625
------------
Health Care Services - 5.62%
25,000 Abbott Laboratories........................... 1,532,813
35,000 Cardinal Health, Inc. ........................ 2,598,750
90,000 Health Management
Associates, Inc., Class A*.................... 2,193,750
60,000 Pfizer, Inc. ................................. 4,245,000
------------
10,570,313
------------
Medical Supplies - 1.39%
60,000 Medtronic, Inc. .............................. 2,610,000
------------
Pharmaceuticals - 1.42%
30,000 Merck & Co, Inc. ............................. 2,677,500
------------
Retail - 1.50%
100,000 Walgreen Co. ................................. 2,812,500
------------
Technology - 7.60%
40,000 Cisco Systems, Inc.*.......................... 3,281,250
35,000 Computer Sciences Corp.*...................... 2,482,812
56,500 Electronic Data Systems Co. .................. 2,185,844
25,000 Microsoft Corp.*.............................. 3,250,000
52,500 Oracle Corp.*................................. 1,878,516
35,000 Sun Microsystems, Inc.*...................... 1,198,750
------------
14,277,172
------------
Telecommunications - 0.86%
30,000 Tellabs, Inc.*................................ 1,620,000
------------
Total Common Stocks........................... 100,421,358
------------
(Cost $68,550,142)
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 18.09%
U.S. Treasury Notes - 7.86%
$2,000,000 9.0000%, 05/15/98............................. 2,037,280
1,500,000 5.5000%, 02/28/99............................. 1,497,795
1,500,000 8.0000%, 08/15/99............................. 1,559,055
2,000,000 7.1250%, 02/29/00............................. 2,061,360
2,000,000 5.2500%, 01/31/01............................. 1,973,480
2,000,000 7.8750%, 08/15/01............................. 2,141,680
1,500,000 5.7500%, 08/15/03............................. 1,494,015
2,000,000 5.8750%, 02/15/04............................. 2,005,480
------------
14,770,145
------------
See accompanying Notes to Financial Statements.
17
CT&T Funds
Chicago Trust Balanced Fund
Schedule of Investments - continued October 31, 1997
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- ------
U. S. Treasury Bonds - 1.69%
$150,0000 7.1250%, 02/15/23.................................... $ 1,667,520
150,0000 6.2500%, 08/15/23.................................... 1,503,645
-----------
3,171,165
-----------
Federal Home Loan Mortgage Corporation - 3.75%
600,000 5.5000%, 08/15/04.................................... 598,086
1,000,000 5.8500%, 02/21/06.................................... 986,980
800,000 6.0000%, 03/15/07.................................... 800,456
1,000,000 6.5000%, 09/15/07.................................... 1,014,760
570,206 7.5000%, 04/01/08.................................... 585,704
1,016,287 6.5000%, 06/01/09.................................... 1,016,602
469,525 5.1500%, 11/15/12.................................... 468,037
602,995 7.0000%, 07/01/13.................................... 606,196
692,800 7.0000%, 11/15/13, IO................................ 14,438
1,000,000 6.0000%, 12/15/23.................................... 954,150
-----------
7,045,409
-----------
Federal National Mortgage Association - 1.05%
458,555 6.0000%, 06/25/02, CMO............................... 456,987
800,365 6.9000%, 12/25/03, CMO............................... 816,101
993,359 7.0000%, 07/25/17, CMO, IO........................... 84,000
582,401 9.0000%, 05/01/25.................................... 619,710
-----------
1,976,798
-----------
Government National Mortgage Association - 3.74%
509,484 7.0000%, 06/15/08.................................... 518,558
634,229 8.0000%, 03/15/17.................................... 658,405
876,773 8.0000%, 06/15/17.................................... 910,196
1,653,925 7.0000%, 09/15/23.................................... 1,663,733
1,081,615 7.0000%, 10/15/23.................................... 1,088,029
784,192 7.0000%, 10/15/23.................................... 788,843
1,422,928 6.5000%, 03/15/26.................................... 1,407,802
-----------
7,035,566
-----------
Total U. S. Government
and Agency Obligations............................... 33,999,083
(Cost $33,455,048) -----------
CORPORATE NOTES AND BONDS - 17.72%
Cable Television - 0.44%
700,000 Continental Cablevision, Debenture
9.5000%, 08/01/13.................................... 824,250
-----------
Consumer Non-Durables - 0.68%
500,000 Anheuser Busch Co.
7.0000%, 12/01/25.................................... 495,625
750,000 Brown Group, Inc., Senior Notes
9.5000%, 10/15/06.................................... 776,250
-----------
1,271,875
-----------
Finance - 10.22%
1,000,000 Advanta Corp., MTN
7.0000%, 05/01/01.................................... 1,001,250
650,000 Associates Corp. NA
6.3750%, 08/15/98.................................... 653,361
750,000 Bankers Trust-NY, Subordinated Notes
8.1250%, 04/01/02.................................... 802,500
250,000 Chelsea GCA Realty Partnership, REIT
7.2500%, 10/21/07.................................... 252,500
1,500,000 Chrysler Financial Corp.
6.6250%, 08/15/00.................................... 1,522,500
1,000,000 Continental Corp. Notes
7.2500%, 03/01/03.................................... 1,032,500
750,000 DR Investment Corp.
7.4500%, 05/15/07 (A)................................ 793,125
945,000 Federal Realty Investment Trust
Covertible Subordinated Bonds, REIT
5.2500%, 10/28/03.................................... 907,200
1,000,000 First Chicago Bank
7.7500%, 12/01/26 (A)................................ 1,013,750
1,250,000 Goldman Sachs Group LP
6.2500%, 02/01/03 (A)................................ 1,240,625
1,000,000 International Bank for Reconstruction &
Development Notes
9.7700%, 05/27/98.................................... 1,023,750
1,000,000 John Deere Capital Corp., Debenture
8.6250%, 08/01/19.................................... 1,088,750
500,000 Leucadia National Corp.
Senior Subordinated Notes
7.8750%, 10/15/06.................................... 519,375
975,000 Leucadia National Corp.
Senior Subordinated Notes
8.2500%, 06/15/05.................................... 1,034,719
1,000,000 Merrill Lynch & Co., Inc.
7.0000%, 04/27/08.................................... 1,041,250
1,500,000 Metropolitan Life Insurance Co.
6.3000%, 11/01/03 (A)................................ 1,488,750
600,000 Olympic Financial Ltd.
11.5000%, 03/15/07................................... 622,500
1,000,000 Pacific Mutual Life Insurance Co.
7.9000%, 12/30/23 (A)................................ 1,070,000
1,000,000 Prudential Insurance Co. of America
8.3000%, 07/01/25 (A)................................ 1,095,000
1,000,000 Wells Fargo Capital
7.7300%, 12/01/26 (A)................................ 1,005,000
-----------
19,208,405
-----------
Food and Beverage - 0.54%
1,000,000 Nabisco, Inc.
6.7000%, 06/15/02.................................... 1,017,500
-----------
See accompanying Notes to Financial Statements.
18
CT&T Funds
Chicago Trust Balanced Fund
Schedule of Investments - continued October 31, 1997
================================================================================
Market
Par Value Value
- --------- ------
Healthcare Services - 0.47%
$ 1,100,000 Hospital Corp. of America
Debenture
7.6485%, 06/01/00 (B).............................. $ 884,125
-----------
Printing and Publishing - 1.00%
750,000 News America Holdings
7.7500%, 02/01/24................................... 753,750
520,693 Time Warner, Inc., Series M
10.2500%, 07/01/16*(A).............................. 600,099
500,000 Valassis Inserts, Inc.
Senior Subordinated Notes
9.3750%, 03/15/99.................................. 516,875
-----------
1,870,724
-----------
Retail - 0.51%
1,000,000 K-mart Corp., Debenture
7.9500%, 02/01/23.................................. 960,000
-----------
Transportation - 0.25%
433,477 Delta Air Lines, Inc.
Equipment Trust, Series 1992A
8.5400%, 01/02/07.................................. 465,898
-----------
Utilities - 3.61%
1,000,000 CalEnergy Co, Inc.
7.6300%, 10/15/07.................................. 1,012,500
1,000,000 Commonwealth Edison Bond, First Mortgage
7.7500%, 07/15/23.................................. 1,023,750
1,000,000 Gulf States Utilities, First Mortgage, Series A
8.2500%, 04/01/04.................................. 1,076,250
1,000,000 Long Island Lighting Co., Debenture
9.0000%, 11/01/22.................................. 1,128,750
1,000,000 Niagara Mohawk Power, First Mortgage
8.0000%, 06/01/04.................................. 1,057,500
500,000 Philadelphia Electric Co., First Mortgage
5.6250%, 11/01/01.................................. 490,625
922,000 WorldCom, Inc. GA, Senior Note
8.8750%, 01/15/06................................ 995,760
-----------
6,785,135
-----------
Total Corporate Notes and Bonds.................... 33,287,912
(Cost $32,193,167) -----------
YANKEE BONDS - 1.42%
$ 1,750,000 Chilgener S.A. Yankee (Chile)
6.5000%, 01/15/06.................................. $ 1,732,500
416,667 Province of Mendoza
Collateral Oil Royalty Note
10.0000%, 07/25/02 (A)............................. 442,405
500,000 Skandinaviska Enskilda,
Subordinated Notes
6.6250%, 03/29/49 (A).............................. 503,443
-----------
Total Yankee Bonds................................. 2,678,348
(Cost $2,622,867) -----------
GOVERNMENT TRUST CERTIFICATES - 0.55%
142,858 Greece Trust, Class G-2
8.0000%, 05/15/98.................................. 143,572
837,831 Israel Collateral Trust, Class 1-C
9.2500%, 11/15/01.................................. 881,817
-----------
Total Government
Trust Certificates................................. 1,025,389
(Cost $1,061,200) -----------
ASSET-BACKED SECURITIES - 1.94%
1,000,000 BA Mortgage Securities, CMO
7.3500%, 07/25/26.................................. 998,750
1,000,000 Chemical Master Credit Card Trust I, Class A
5.5500%, 09/15/03.................................. 989,210
1,000,000 Citibank Credit Card Master Trust I, Class A
6.8390%, 02/10/04.................................. 1,023,190
600,000 Midland Realty Acceptance Corp. CMO
7.4750%, 08/25/28.................................. 632,625
-----------
Total Asset-Backed Securities...................... 3,643,775
(Cost $3,575,262) -----------
REPURCHASE AGREEMENT - 6.35%
11,933,000 First Chicago,
5.7000%, dated 10/31/97 to be repurchased
on 11/03/97 at $11,938,668
(Collateralized by U.S. Treasury Note
6.0000%, due 07/31/02;
Total Par $11,895,000)............................. 11,933,000
-----------
Total Repurchase Agreement......................... 11,933,000
(Cost $11,933,000) -----------
See accompanying Notes to Financial Statements.
19
CT&T FUNDS
Chicago Trust Balanced Fund
Schedule of Investments - continued October 31, 1997
=================================================================================================
Total Investments - 99.47%...................................................... $ 186,988,865
-----------------
(Cost $153,390,686) **
Net Other Assets and Liabilities - 0.53%........................................ 1,004,472
-----------------
Net Assets - 100.00% $187,993,337
- ----------------------------------------------------------------------- =================
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $153,390,686.
Gross unrealized appreciation $ 34,994,384
Gross unrealized (depreciation) (1,396,205)
---------------
Net unrealized appreciation $ 33,598,179
===============
IO Interest Only
ADR American Depositary Receipt
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At October 31, 1997, these
securities amounted to $9,252,197 or 4.92% of net assets.
(B) Annualized yield at time of purchase
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REIT Real Eastate Investment Trust
Portfolio Composition (Moody's Ratings)
- ---------------------
Common Stock 53%
Repurchase Agreement 6%
U.S. Government Obligations 10%
U.S. Government Agency Obligations 8%
Government Trust Certificates 1%
Aaa 2%
AA 2%
A 6%
Baa 6%
Ba 5%
NR 1%
----
100%
====
See accompanying Notes to Financial Statements.
20
CT&T Funds
Montag & Caldwell Balanced Fund
Schedule of Investments October 31, 1997
================================================================================
Market
Shares Value
- ------ ------
COMMON STOCKS - 58.33%
Business Services - 1.13%
24,300 Manpower, Inc. ............................... $ 932,512
-----------
Consumer Durables - 1.19%
35,400 Harley Davidson, Inc. ........................ 982,350
-----------
Consumer-Nondurables - 8.84%
51,100 CUC International, Inc.*...................... 1,507,450
21,000 Gillette Co. ................................. 1,870,312
22,000 Interpublic Group of Companies., Inc. ........ 1,045,000
27,000 Mattel, Inc. ................................. 1,049,625
27,000 Procter & Gamble Co. ......................... 1,836,000
-----------
7,308,387
-----------
Electrical - 1.66%
21,300 General Electric Co. ......................... 1,375,181
-----------
Entertainment and Leisure - 1.69%
17,000 Walt Disney Co. .............................. 1,398,250
-----------
Finance - 4.14%
19,000 American Express Co. ......................... 1,482,000
14,300 American International Group, Inc. ........... 1,459,494
16,500 First Data Corp. ............................. 479,530
-----------
3,421,024
-----------
Food and Beverage - 3.65%
30,000 Coca-Cola Co. ................................ 1,695,000
14,400 Pioneer Hi-Bred International, Inc. .......... 1,319,400
-----------
3,014,400
-----------
Health Care Services - 6.12%
22,690 Eli Lilly & Co. .............................. 1,517,394
31,000 Johnson & Johnson............................. 1,778,625
25,000 Pfizer, Inc. ................................. 1,768,750
-----------
5,064,769
-----------
Lodging - 1.69%
20,000 Marriott International, Inc. ................. 1,395,000
-----------
Medical Supplies - 1.86%
35,400 Medtronic, Inc. .............................. 1,539,900
-----------
Pharmaceuticals - 3.63%
19,000 Bristol-Myers Squibb Co. ..................... 1,667,250
15,000 Merck & Co., Inc. ............................ 1,338,750
-----------
3,006,000
-----------
Restaurants - 1.82%
22,100 Cracker Barrell Old Country Store, Inc. ...... 651,950
19,000 McDonald's Corp. ............................. 851,437
-----------
1,503,387
-----------
Retail - 3.70%
26,500 Gap, Inc. .................................... 1,409,468
29,800 Home Depot, Inc. ............................. 1,657,625
-----------
3,067,093
-----------
Telecommunications - 1.18%
22,100 Ericsson (LM) Telefonaktiebolaget, ADR
Class B, Series 10............................ 977,925
-----------
Technology - 16.03%
22,100 Adaptec, Inc.*................................ 1,070,469
25,400 Cisco Systems, Inc.*.......................... 2,083,594
22,350 Compaq Computer Corp.*........................ 1,424,812
28,000 Electronic Arts, Inc.*........................ 948,500
19,800 Intel Corp. .................................. 1,524,600
14,000 Microsoft Corp.*.............................. 1,820,000
43,000 Oracle Corp.*................................. 1,538,594
14,800 Seagate Technology, Inc.*..................... 401,450
24,400 Solectron Corp.*.............................. 957,700
36,000 3Com Corp.*................................... 1,491,750
-----------
13,261,469
-----------
Total Common Stocks........................... 48,247,647
-----------
(Cost $37,414,304)
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 25.66%
U.S. Treasury Notes - 17.89%
$1,500,000 5.750%, 08/15/03.............................. 1,494,015
2,000,000 5.875%, 02/15/04.............................. 2,005,480
1,500,000 7.250%, 05/15/04.............................. 1,612,620
1,500,000 7.875%, 11/15/04.............................. 1,671,195
2,000,000 6.500%, 08/15/05.............................. 2,073,780
2,500,000 6.500%, 10/15/06.............................. 2,597,725
3,000,000 7.250%, 05/15/16.............................. 3,347,640
-----------
14,802,455
-----------
See accompanying Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
CT&T FUNDS
Montag & Caldwell Balanced Fund
Schedule of Investments - continued October 31, 1997
================================================================================
Market
Par Value Value
- ---------- ------
Federal Home Loan Bank - 0.61%
$ 500,000 6.940%, 02/12/04................................ $ 506,500
------------
Federal Home Loan
Mortgage Corporation- 4.04%
100,000 7.730%, 08/10/04, Debenture, Series A........... 103,593
750,000 6.400%, 12/13/06, Debenture..................... 768,638
750,000 6.700%, 01/05/07, Series B...................... 782,775
600,000 7.500%, 03/15/07, CMO, Class J.................. 606,312
175,000 6.000%, 04/15/08, CMO, Class K.................. 174,689
500,000 6.500%, 07/15/20, CMO, Class F.................. 503,810
400,000 6.500%, 11/15/20, CMO. Class H.................. 404,924
------------
3,344,741
------------
Federal National
Mortgage Association - 3.10%
500,000 7.070%, 03/08/11, MTN........................... 505,960
2,000,000 7.250%, 01/17/21, CMO, REMIC.................... 2,054,940
------------
2,560,900
------------
Government National
Mortgage Association - 0.02%
8,447 8.500%, 06/15/01................................ 8,809
2,975 9.000%, 09/15/08................................ 3,174
------------
11,983
------------
Total U.S. Government
and Agency Obligations.......................... 21,226,579
------------
(Cost $20,702,195)
CORPORATE NOTES AND BONDS - 9.33%
Finance - 7.73%
1,500,000 American Express Co., Senior Notes
6.750%, 06/23/04................................ 1,537,500
55,000 American General Finance, Senior Notes
7.200%, 07/08/99................................ 56,100
1,000,000 Citicorp, Subordinated Notes
7.125%, 05/15/06................................ 1,036,250
500,000 First National Bank Commerce, Senior Notes, MTN
6.500%, 01/14/00................................ 505,625
1,000,000 First Union National, Subordinated Notes, MTN
7.125%, 10/15/06................................ 1,036,250
750,000 General Motors Acceptance Corp.
7.125%, 05/01/03................................ 777,188
500,000 Household Finance Corp.
7.250%, 05/15/06................................ 525,000
100,000 National Re Corp., Senior Notes
8.850%, 01/15/05................................ 112,500
500,000 Salomon, Inc.
7.300%, 05/15/02................................ 519,375
285,000 Salomon, Inc., Senior Notes
7.125%, 08/01/99................................ 290,344
------------
6,396,132
------------
Retail - 1.60%
500,000 Penney (J.C.) & Co., Debenture
9.750%, 06/15/21................................ 558,750
750,000 Sears Roebuck Acceptance Corp.
6.700%, 11/15/06................................ 765,938
------------
1,324,688
------------
Total Corporate Notes and Bonds................. 7,720,820
------------
(Cost $7,564,432)
ASSET-BACKED SECURITIES - 2.93%
445,000 AT&T Universal Card Master Trust
Series 1995-2, Class A
5.950%, 10/17/02................................ 445,352
1,150,000 Chase Auto Owner Trust
Series 1997-B, Class A3
6.350%, 02/15/01................................ 1,161,661
300,000 Chemical Master Credit Card Trust
6.230%, 06/15/03................................ 302,508
500,000 Citibank Credit Card Master Trust
Series 1997-2, Class A
6.550%, 02/16/04................................ 509,460
------------
Total Asset-Backed Securities................... 2,418,981
------------
(Cost $2,389,033)
Shares
- ------
INVESTMENT COMPANY - 3.59%
2,970,204 Bankers Trust Institutional
Cash Management Fund............................ 2,970,204
------------
Total Investment Company........................ 2,970,204
------------
(Cost $2,970,204)
Total Investments - 99.84%...................................... 82,584,231
------------
(Cost $71,040,168)**
Net Other Assets and Liabilities - 0.16%........................ 134,822
------------
Net Assets - 100.00%............................................ $ 82,719,053
============
- ---------------------------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $71,072,517
Gross unrealized appreciation $11,988,370
Gross unrealized (depreciation) (476,656)
-----------
Net unrealized appreciation $11,511,714
===========
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
Portfolio Composition (Moody's Ratings)
- ---------------------
Common Stocks 58%
U.S. Government Obligations 19%
U.S. Government Agency Obligations 8%
Aaa 1%
A 10%
Investment Company 4%
----
100%
====
See accompanying Notes to Financial Statements.
22
CT&T Funds
Chicago Trust Bond Fund
Schedule of Investments October 31, 1997
================================================================================
Market
Par Value Value
- --------- ------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 46.84%
U.S. Treasury Notes - 19.69%
$ 1,250,000 7.375%, 11/15/97................................... $ 1,250,588
2,000,000 5.625%, 01/31/98................................... 2,000,600
2,500,000 5.125%, 11/30/98................................... 2,488,400
2,500,000 5.500%, 02/28/99................................... 2,496,325
2,500,000 7.125%, 02/29/00................................... 2,576,700
2,500,000 5.750%, 10/31/00................................... 2,499,950
2,500,000 7.875%, 08/15/01................................... 2,677,100
2,500,000 6.375%, 08/15/02................................... 2,562,125
2,500,000 5.750%, 08/15/03................................... 2,490,025
2,500,000 7.250%, 05/15/04................................... 2,687,700
------------
23,729,513
------------
U.S. Treasury Bonds - 5.33%
2,000,000 7.500%, 05/15/02................................... 2,137,020
2,500,000 7.125%, 02/15/23................................... 2,779,200
1,500,000 6.250%, 08/15/23................................... 1,503,645
------------
6,419,865
------------
Federal Home Loan
Mortgage Corporation - 12.03%
2,500,000 5.850%, 02/21/06, Debenture........................ 2,467,450
1,123,421 7.000%, 10/15/06, CMO.............................. 1,133,441
1,500,000 6.000%, 03/15/07, CMO.............................. 1,500,855
1,000,000 6.500%, 09/15/07, CMO.............................. 1,014,760
500,000 5.750%, 01/15/08, CMO.............................. 494,135
570,206 7.500%, 04/01/08, Debenture........................ 585,704
1,500,000 6.000%, 03/15/09, CMO.............................. 1,439,415
1,355,049 6.500%, 06/01/09, CMO.............................. 1,355,469
1,693,227 6.500%, 01/01/11................................... 1,693,752
1,480,425 6.500%, 11/01/11................................... 1,480,884
1,400,000 6.000%, 12/15/23, CMO.............................. 1,335,810
------------
14,501,675
------------
Federal National
Mortgage Association - 4.48%
382,130 6.000%, 06/25/02, CMO.............................. 380,823
1,067,154 6.900%, 12/25/03, CMO.............................. 1,088,134
390,121 7.000%, 07/01/08................................... 395,360
1,449,716 7.000%, 05/01/12................................... 1,469,185
931,842 9.000%, 05/01/25................................... 991,535
1,093,948 6.500%, 02/01/26................................... 1,075,482
------------
5,400,519
------------
Government National
Mortgage Association - 5.31%
876,773 8.000%, 06/15/17................................... 910,196
1,372,337 7.000%, 10/15/23................................... 1,380,475
1,442,154 7.000%, 10/15/23................................... 1,450,706
1,422,928 6.500%, 03/15/26................................... 1,407,802
1,248,893 7.000%, 08/20/27................................... 1,250,837
------------
6,400,016
------------
Total U.S. Government
and Agency Obligations............................. 56,451,588
------------
(Cost $55,587,648)
CORPORATE NOTES AND BONDS - 40.49%
Cable Television - 1.47%
1,500,000 Continental Cablevision, Debenture
9.500%, 08/01/13................................... 1,766,250
------------
Consumer Non-Durables - 1.68%
1,000,000 Anheuser Busch Co.
7.000%, 12/01/25................................... 991,250
1,000,000 Brown Group, Inc. Senior Note
9.500%, 10/15/06................................... 1,035,000
------------
2,026,250
------------
See accompanying Notes to Financial Statements
23
CT&T Funds
Chicago Trust Bond Fund
Schedule of Investments - continued October 31, 1997
================================================================================
Market
Par Value Value
- --------- ------
Finance - 22.34%
$ 1,250,000 Advanta Corp., MTN
7.000%, 05/01/01................................... $ 1,251,563
1,250,000 Associates Corp. NA
6.375%, 08/15/98................................... 1,256,463
2,000,000 Bankers Trust-NY, Subordinated Notes
7.500%, 01/15/02................................... 2,090,000
650,000 Chelsea GCA Realty Partnership, REIT
7.250%, 10/21/07................................... 656,500
1,750,000 Chrysler Financial Corp.
6.625%, 08/15/00................................... 1,776,250
1,500,000 Continental Corp. Notes
7.250%, 03/01/03................................... 1,548,750
1,000,000 Federal Realty Investment Trust
Convertible Subordinated Bonds, REIT
5.250%, 10/28/03................................... 960,000
2,000,000 First Chicago Bank
7.750%, 12/01/26 (A)............................... 2,027,500
1,000,000 Goldman Sachs Group LP
6.200%, 12/15/00 (A)............................... 997,500
500,000 Goldman Sachs Group LP
6.250%, 02/01/03 (A)............................... 496,250
1,275,000 John Deere Capital Corp., Debenture
8.625%, 08/01/19................................... 1,388,156
750,000 Leucadia National Corp.
Senior Subordinated Notes
7.875%, 10/15/06................................... 779,063
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
8.250%, 06/15/05................................... 1,061,250
2,000,000 Merrill Lynch & Co., Inc.
7.000%, 04/27/08................................... 2,082,500
2,000,000 Metropolitan Life Insurance Co.
6.300%, 11/01/03 (A)............................... 1,985,000
1,000,000 Olympic Financial Ltd.
11.500%, 03/15/07.................................. 1,037,500
1,250,000 Pacific Mutual Life Insurance Co.
7.900%, 12/30/23 (A)............................... 1,337,500
2,000,000 Prudential Insurance Co. of America
8.300%, 07/01/25 (A)............................... 2,190,000
2,000,000 Wells Fargo Capital
7.730%, 12/01/26 (A)............................... 2,010,000
-----------
26,931,745
-----------
Food and Beverage - 0.42%
$ 500,000 Nabisco, Inc.
6.700%, 06/15/02................................... $ 508,750
-----------
Manufacturing - 0.87%
1,000,000 Figgie International, Inc., Senior Notes
9.875%, 10/01/99................................... 1,045,000
-----------
Printing and Publishing - 2.46%
1,250,000 News America Holdings
7.750%, 01/20/24................................... 1,256,250
809,967 Time Warner, Inc., Series M
10.250%, 07/01/16.................................. 933,487
750,000 Valassis Inserts, Inc.
Senior Subordinated Notes
9.375%, 03/15/99................................... 775,313
-----------
2,965,050
-----------
Retail - 1.19%
1,500,000 K-mart Corp., Debenture
7.950%, 02/01/23................................... 1,440,000
-----------
Transportation - 0.58%
209,478 Delta Air Lines, Inc.
9.375%, 09/11/07................................... 234,353
433,477 Delta Air Lines, Inc.
Equipment Trust, Series 1992A
8.540%, 01/02/07................................... 465,898
-----------
700,251
-----------
See accompanying Notes to Financial Statements.
24
CT&T Funds
Chicago Trust Bond Fund
Schedule of Investments - continued October 31, 1997
================================================================================
Market
Par Value Value
- --------- ------
Utilities - 9.48%
$ 1,675,000 CalEnergy Co., Inc.
7.630%, 10/15/07.................................. $ 1,695,938
1,000,000 Commonwealth Edison Co., First Mortgage
7.750%, 07/15/23.................................. 1,023,750
2,000,000 Gulf States Utilities, First Mortgage, Series A
8.250%, 04/01/04.................................. 2,152,500
1,250,000 Long Island Lighting Co., Debenture
9.000%, 11/01/22.................................. 1,410,938
1,500,000 Niagra Mohawk Power, First Mortgage
8.000%, 06/01/04.................................. 1,586,250
2,000,000 Philadelphia Electric Co., First Mortgage
5.625%, 11/01/01.................................. 1,962,500
1,475,000 WorldCom, Inc. GA, Senior Note
8.875%, 01/15/06.................................. 1,593,000
------------
11,424,876
------------
Total Corporate Notes and Bonds................... 48,808,172
------------
(Cost $47,005,037)
YANKEE BONDS - 3.13%
2,000,000 Chilgener S.A. Yankee (Chile)
6.500%, 01/15/06................................... 1,980,000
593,750 Province of Mendoza
Collateral Oil Royalty Note
10.000%, 07/25/02 (A).............................. 630,428
1,150,000 Skandinaviska Enskilda, Subordinated Notes
6.625%, 03/29/49 (A)............................... 1,157,918
------------
Total Yankee Bonds................................. 3,768,346
------------
(Cost $3,673,871)
GOVERNMENT TRUST CERTIFICATE - 0.53%
607,427 Israel Collateral Trust, Class 1-C
9.250%, 11/15/01................................... 639,317
------------
Total Government Trust Certificate................. 639,317
------------
(Cost $664,635)
ASSET-BACKED SECURITIES - 4.90%
1,750,000 BA Mortgage Securities, CMO
7.350%, 07/25/26................................... 1,747,813
2,500,000 Chemical Master Credit Card Trust I, Class A
5.550%, 09/15/03................................... 2,473,025
750,000 Citibank Credit Card Master Trust I, Class A
6.839%, 02/10/04................................... 767,393
875,000 Midland Realty Acceptance Corp., CMO
7.475%, 08/25/28................................... 922,578
------------
Total Asset-Backed Securities...................... 5,910,809
------------
(Cost $5,814,813)
REPURCHASE AGREEMENT - 2.72%
$3,281,000 First Chicago,
5.700%, dated 10/31/97 to be repurchased
on 11/03/97 at $3,282,558
(Collateralized by U.S. Treasury Note
6.000%, due 07/31/02;
Total Par $3,270,000).............................. $ 3,281,000
------------
Total Repurchase Agreement......................... 3,281,000
------------
(Cost $3,281,000)
Total Investments -98.61%......................................... 118,859,232
------------
(Cost $116,027,004)*
Net Other Assets and Liabilities - 1.39%.......................... 1,672,945
------------
Net Assets - 100.00%.............................................. $120,532,177
============
- ---------------------------------------------
* Aggregage cost for Federal income tax purposes is $116,027,004.
Gross unrealized appreciation $ 2,932,363
Gross unrealized (depreciation) (100,135)
------------
Net unrealized appreciation $ 2,832,228
============
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At October 31, 1997,
these securities amounted to $12,832,096 or 10.65% of net assets.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REIT Real Estate Investment Trust
Portfolio Composition (Mood's Ratings)
- ---------------------
Repurchase Agreement 3%
U.S. Government Obligations 25%
U.S. Government Agency Obligations 22%
Government Trust Certificates 1%
Aaa 3%
AA 3%
A 14%
Baa 13%
Ba 13%
B 1%
NR 2%
----
100%
====
See accompanying Notes to Financial Statements.
25
CT&T Funds
Chicago Trust Municipal Bond Fund
Schedule of Investments October 31, 1997
================================================================================
Market
Par Value Value
- --------- -----
MUNICIPAL SECURITIES - 97.45%
Arizona - 8.53%
$ 350,000 Mohave County, IDA
6.000%, 07/01/00...................................... $ 366,569
450,000 Salt River Project Electric System Revenue
Refunding, Series A
5.500%, 01/01/05...................................... 477,842
200,000 Tucson, Arizona Water Revenue
5.400%, 07/01/05...................................... 211,152
----------
1,055,563
----------
California - 2.07%
250,000 California State
5.250%, 10/01/10...................................... 256,250
----------
Florida - 2.21%
265,000 Dade County, Florida State School District, G.O.
5.000%, 07/15/02
Insured: MBIA......................................... 273,949
----------
Georgia - 4.14%
250,000 State of Georgia, Series A, G.O.
6.100%, 03/01/05...................................... 276,045
200,000 State of Georgia, Series D, G.O.
6.700%, 08/01/09...................................... 235,980
----------
512,025
----------
Illinois - 8.21%
250,000 Chicago, Illinois Metropolitan Water
Reclamation, G.O.
6.600%, 01/01/02...................................... 271,903
475,000 Cook County, Illinois Series B, G.O.
4.700%, 11/15/01
Insured: MBIA......................................... 484,614
250,000 State of Illinois, G.O.
5.150%, 09/01/02
Insured: FGIC......................................... 259,390
----------
1,015,907
----------
Maryland - 2.03%
250,000 University of Maryland Revenue, Series B
Auxiliary Facilities and Tuition Revenue
5.400%, 04/01/98...................................... 251,718
----------
Michigan - 5.92%
250,000 Lanse Creuse Public Schools
5.000%, 05/01/03...................................... 258,368
200,000 Rochester Community School District
4.550%, 05/01/04...................................... 201,006
260,000 Utica Community Schools
5.375%, 05/01/04...................................... 273,296
----------
732,670
----------
Minnesota - 2.01%
245,000 St. Paul Housing Finance Board Revenue
5.050%, 11/01/07...................................... 249,236
----------
Nevada - 3.12%
350,000 Clark County, Nevada School District, G.O.
6.400%, 06/15/06...................................... 386,547
Insured: FGIC ----------
New Jersey - 7.24%
295,000 Camden County
Municipal Utilities Authority Revenue
6.000%, 07/15/04...................................... 321,237
350,000 State of New Jersey Transportation
Trust Fund Revenue, Series A,
Escrowed to Maturity
5.200%, 12/15/00
Insured: AMBAC........................................ 362,289
200,000 State of New Jersey, Series D, G.O.
5.500%, 02/15/04...................................... 212,296
----------
895,822
----------
New York - 6.27%
250,000 Municipal Assistance Corporation
4.500%, 07/01/01...................................... 252,850
250,000 New York City Transitional Finance
Authority Revenue
5.500%, 08/15/08...................................... 266,103
250,000 New York State Dormitory Authority
Revenue, Series C
5.100%, 05/15/03...................................... 257,463
----------
776,416
----------
Ohio - 1.67%
200,000 Ohio State Public Facilities Commission
(Higher Education), Series II-A
5.200%, 05/01/01
Insured: AMBAC........................................ 206,974
----------
Oklahoma - 2.93%
350,000 Tulsa, Oklahoma Metropolitan Utilities
Authority Revenue
5.500%, 07/01/00...................................... 362,506
----------
Oregon - 2.22%
250,000 Portland, Oregon Series A, G.O.
7.000%, 06/01/01...................................... 274,445
----------
See accompanying Notes to Financial Statements.
26
CT&T Funds
Chicago Trust Municipal Bond Fund
Schedule of Investments-continued October 31, 1997
================================================================================
Market
Par Value Value
- --------- ------
Pennsylvania - 3.74%
$ 250,000 Commonwealth of Pennsylvania,
Green County, G.O.
5.100%, 06/15/03
Insured: MBIA..................................... $ 259,503
200,000 Commonwealth of Pennsylvania, G.O.
5.250%, 05/15/99
Insured: FGIC..................................... 204,052
------------
$ 463,555
------------
Puerto Rico - 3.59%
400,000 Commonwealth of Puerto Rico,
Series A, G.O.
6.500%, 07/01/03
Insured: MBIA..................................... 444,660
------------
Rhode Island - 2.38%
275,000 State of Rhode Island, Series A, G.O.
6.000%, 06/15/02
Insured: FGIC..................................... 294,751
------------
Texas - 10.30%
375,000 Arlington Independent School District,
Refunding, G.O.
5.400%, 02/15/99.................................. 382,050
210,000 Tarrant County Health Faciltities
Development Corp.
Health System Revenue, Series A
5.500%, 02/15/05.................................. 222,243
200,000 Texas State Public Finance Authority
Series A, G.O.
5.600%, 10/01/02.................................. 212,314
450,000 Texas State Water Development Board, G.O.
Escrowed to Maturity
5.000% 08/01/99................................... 458,537
------------
1,275,144
------------
Utah - 8.35%
300,000 Intermountain Power Agency
Power Supply Revenue
6.250%, 07/01/07.................................. 336,762
475,000 Jordan School District, Series A, G.O.
5.250%, 06/15/00.................................. 488,903
200,000 Utah State Building Ownership Authority
Lease Revenue, Series A
5.125%, 05/15/03.................................. 207,552
------------
1,033,217
------------
Virginia - 4.23%
250,000 Henrico County,Virginia
Industrial Redevelopment
Authority Revenue
5.300%, 12/01/11.................................. 258,808
250,000 Virigina State Public School
Authority Revenue
5.500%, 08/01/03.................................. 264,600
------------
523,408
------------
Washington - 4.12%
475,000 King County, Washington, Series A, G.O.
5.800%, 01/01/04.................................. 509,741
------------
Wisconsin - 2.17%
250,000 State of Wisconsin, Series A, G.O.
5.750%, 05/01/04.................................. 268,463
------------
Total Municipal Securities........................ $ 12,062,967
(Cost $11,743,478)................................ ------------
Shares
------
INVESTMENT COMPANIES - 0.51%
4,954 Goldman Sachs Tax Exempt Fund..................... 4,954
58,695 Provident Munifund................................ 58,695
------------
Total Investment Companies................. 63,649
(Cost $63,649) ------------
Total Investments - 97.96%......................................... 12,126,616
(Cost $11,807,127)* ------------
Net Other Assets and Liabilities - 2.04%........................... 252,592
------------
Net Assets - 100.00%............................................... $ 12,379,208
------------
- -------------------------------
* Aggregage cost for Federal income tax purposes is $11,807,127.
Gross unrealized appreciation $ 319,637
Gross unrealized (depreciation) (148)
-----------
Net unrealized appreciation $ 319,489
===========
AMBAC American Municipal Bond Assurance Corp.
FGIC Federal Guaranty Insurance Corp.
G.O. General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Insurance Association
Portfolio Composition (Moody's Ratings)
- ---------------------
Investment Companies 1%
Aaa 56%
Aa 33%
A 8%
NR 2%
----
100%
====
See accompanying Notes to Financial Statements.
27
CT&T Funds
Chicago Trust Money Market Fund
Schedule of Investments October 31, 1997
================================================================================
Amortized
Par Value Cost
- --------- ---------
COMMERCIAL PAPER - 77.33%
$ 4,500,000 Beneficial Corp.
5.5520%, 11/03/97.................................. $ 4,500,000
4,500,000 Associates Corp. of North America
5.5530%, 11/04/97.................................. 4,500,000
4,500,000 Household Finance Corp.
5.5580%, 11/05/97.................................. 4,500,000
4,545,000 Chrysler Financial Corp.
5.5540%, 11/06/97(A)............................... 4,541,528
4,300,000 AVCO Financial Services, Inc.
5.5700%, 11/10/97.................................. 4,300,000
600,000 General Electric Capital Corp.
5.5710%, 11/12/97.................................. 600,000
3,900,000 Heller Financial, Inc.
5.6070%, 11/12/97.................................. 3,900,000
3,500,000 AVCO Financial Services, Inc.
5.5760%, 11/13/97.................................. 3,500,000
1,000,000 Prudential Funding Corp.
5.5100%, 11/13/97.................................. 1,000,000
4,500,000 Sears Roebuck Acceptance Corp.
5.5700%, 11/14/97.................................. 4,500,000
4,500,000 American Express Credit Corp.
5.5800%, 11/17/97.................................. 4,500,000
420,000 Prudential Funding Corp.
5.5000%, 11/18/97.................................. 420,000
3,090,000 Chrysler Financial Corp.
5.5200%, 11/18/97.................................. 3,081,945
1,034,124 Bank of America
5.5300%, 11/18/97.................................. 1,031,423
4,500,000 General Motors Acceptance Corp.
5.5860%, 11/19/97.................................. 4,500,000
3,500,000 Norwest Financial, Inc.
5.6040%, 11/20/97.................................. 3,500,000
1,000,000 American Express Credit Corp.
5.5830%, 11/20/97.................................. 1,000,000
3,500,000 General Motors Acceptance Corp.
5.5829%, 11/21/97.................................. 3,500,000
4,560,000 Chrysler Financial Corp.
5.5850%, 11/21/97(A)............................... 4,546,042
4,500,000 Commercial Credit Co.
5.5570%, 11/24/97.................................. 4,500,000
4,500,000 Heller Financial, Inc.
5.6370%, 11/25/97.................................. 4,500,000
4,500,000 AVCO Financial Services, Inc.
5.5910%, 11/26/97.................................. 4,500,000
2,500,000 First National Bank of Chicago
5.5000%, 12/01/97(A)............................... 2,488,542
2,000,000 American Express Credit Corp.
5.5568%, 12/01/97.................................. 2,000,000
4,500,000 IBM Credit Corp.,
5.5420%, 12/02/97.................................. 4,500,000
4,500,000 Beneficial Corp.
5.5585%, 12/03/97.................................. 4,500,000
4,500,000 Household Finance Corp.
5.5288%, 12/04/97.................................. 4,500,000
4,500,000 Prudential Funding Corp.
5.5381%, 12/05/97.................................. 4,500,000
4,500,000 Commercial Credit Co.
5.5296%, 12/08/97.................................. 4,500,000
4,550,000 Southern California Edison
5.5650%, 12/09/97(A)............................... 4,523,585
4,500,000 CIT Group Holdings
5.5279%, 12/10/97.................................. 4,500,000
4,500,000 CIT Group Holdings
5.5271%, 12/11/97.................................. 4,500,000
3,000,000 American General Finance
5.5271%, 12/12/97.................................. 3,000,000
1,500,000 General Electric Capital Corp.
5.5440%, 12/12/97.................................. 1,500,000
2,122,117 Bank of America
5.5100%, 12/15/97(A)............................... 2,107,825
3,300,000 Associates Corp. of North America
5.5760%, 12/15/97.................................. 3,300,000
1,419,364 Bank of America
5.5100%, 12/16/97(A)............................... 1,409,588
3,000,000 Sears Roebuck Acceptance Corp.
5.5697%, 12/16/97.................................. 3,000,000
4,500,000 Prudential Funding Corp.
5.5576%, 12/17/97.................................. 4,500,000
1,200,000 Prudential Funding Corp.
5.5680%, 12/18/97.................................. 1,200,000
400,000 General Electric Capital Corp.
5.5500%, 12/19/97.................................. 400,000
4,100,000 General Motors Acceptance Corp.
5.5722%, 12/19/97.................................. 4,100,000
4,500,000 American General Finance
5.5407%, 12/22/97.................................. 4,500,000
2,000,000 CIT Group Holdings
5.5706%, 12/23/97.................................. 2,000,000
2,500,000 Beneficial Corp.
5.5808%, 12/23/97.................................. 2,500,000
4,500,000 Sears Roebuck Acceptance Corp.
5.5732%, 12/24/97.................................. 4,500,000
4,100,000 American Express Credit Corp.
5.5713%, 12/31/97.................................. 4,100,000
400,000 General Electric Capital Corp.
5.5603%, 12/31/97.................................. 400,000
1,000,000 Commercial Credit Co.
5.6376%, 01/05/98.................................. 1,000,000
3,700,000 Associates Corp. of America
5.6478%, 01/05/98.................................. 3,700,000
4,100,000 General Electric Capital Corp.
5.5807%, 01/09/98.................................. 4,100,000
See accompanying Notes to Financial Statements.
28
CT&T Funds
Chicago Trust Money Market Fund
Schedule of Investments-continued October 31, 1997
================================================================================
Amortized
Par Value Cost
- --------- ----
$ 400,000 CIT Group Holdings
5.6113%, 01/09/98....................... $ 400,000
4,500,000 John Deere Capital Corp.
5.6184%, 01/15/98....................... 4,500,000
4,500,000 General Electric Capital Corp.
5.6741%, 01/15/98....................... 4,500,000
4,500,000 Norwest Financial, Inc.
5.6647%, 01/22/98....................... 4,500,000
3,300,000 Heller Financial, Inc.
5.7067%, 01/22/98....................... 3,300,000
-------------
Total Commercial Paper.................. 184,450,478
(Cost $184,450,478) -------------
CERTIFICATES OF DEPOSIT - 5.16%
4,500,000 Old Kent Bank
5.5000%, 11/07/97....................... 4,500,000
3,300,000 Old Kent Bank
5.5600%, 12/18/97....................... 3,300,000
4,500,000 Old Kent Bank
5.5700%, 12/26/97....................... 4,500,000
-------------
Total Certificates of Deposit........... 12,300,000
(Cost $12,300,000) -------------
GIC WITHIN FUNDING AGREEMENT - 4.19%
10,000,000 Allstate Life Funding Agreement GIC
5.7575%, 12/01/97....................... 10,000,000
-------------
Total GIC Within
Funding Agreement....................... 10,000,000
(Cost $10,000,000) -------------
TIME DEPOSITS - 3.77%
$ 4,500,000 Canadian Imperial Bank of Commerce
5.5400%, 12/30/97....................... $ 4,500,000
4,500,000 Canadian Imperial Bank of Commerce
5.5600%, 12/29/97....................... 4,500,000
-------------
Total Time Deposits..................... 9,000,000
(Cost $9,000,000) -------------
REPURCHASE AGREEMENT - 9.52%
22,718,000 First Chicago,
5.6600%, dated 10/31/97 to be repurchased
on 11/03/97 at $22,728,715
(Collateralized by U.S. Treasury Note
8.500%, due 11/15/00;
Total Par $20,785,000).................. 22,718,000
------------
Total Repurchase Agreement.............. 22,718,000
(Cost $22,718,000) ------------
Total Investments - 99.97%...................................... 238,468,478**
------------
Net Other Assets and Liabilities -0.03%......................... 82,996
------------
Net Assets - 100.00%............................................ $238,551,474
============
- ---------------------------
(A) Annualized yield at time of purchase
** At October 31, 1997 cost is idenitical for book and Federal income tax
purposes.
See accompanying Notes to Financial Statements.
29
CT&T Funds
Statement of Assets and Liabilities OCTOBER 31, 1997
================================================================================
Chicago Trust
Montag & Caldwell Growth & Income Chicago Trust Chicago Trust
Growth Fund Fund Talon Fund Balanced Fund
----------------- --------------- ------------- -------------
ASSETS:
Investments:
Investments at cost.......... $606,867,247 $182,870,419 $24,636,650 $141,457,686
Repurchase agreements........ -- 10,017,000 -- 11,933,000
Net unrealized appreciation.. 147,140,836 77,036,253 4,128,506 33,598,179
------------ ------------ ----------- ------------
Total investments at value... 754,008,083 269,923,672 28,765,156 186,988,865
Cash.......................... 234 1,399 231 --
Receivables:
Dividends and interest....... 502,350 37,066 88,732 1,193,984
Fund shares sold............. 3,895,259 471,113 5,073 263,527
Investments sold............. -- 4,672,930 -- --
Due from Advisor, net........ -- -- -- --
Deferred organization costs... 6,670 5,574 6,277 4,036
Other assets.................. 10,220 31,068 6,158 1,244
------------ ------------ ----------- ------------
Total assets................ 758,422,816 275,142,822 28,871,627 188,451,656
------------ ------------ ----------- ------------
LIABILITIES:
Payables:
Bank overdraft............... -- -- -- 24,283
Dividend distribution........ -- -- -- --
Investments purchased........ 8,311,553 -- 359,975 --
Fund shares redeemed......... 791,859 78,981 -- 90,857
Due to Advisor, net.......... 517,213 167,934 12,747 113,036
Distribution fees............ 130,197 221,436 17,630 180,966
Accrued expenses.............. 253,828 66,564 21,692 49,177
------------ ------------ ----------- ------------
Total liabilities........... 10,004,650 534,915 412,044 458,319
------------ ------------ ----------- ------------
NET ASSETS..................... $748,418,166 $274,607,907 $28,459,583 $187,993,337
============ ============ =========== ============
NET ASSETS consist of:
Capital paid-in............... $593,853,104 $178,423,017 $19,796,414 $142,370,306
Accumulated undistributed
(distribution in excess of)
net investment income (loss). -- -- 37,253 624,636
Accumulated net realized gain
(loss) on investments........ 7,424,226 19,148,637 4,497,410 11,400,216
Net unrealized appreciation
on investments............... 147,140,836 77,036,253 4,128,506 33,598,179
------------ ------------ ----------- ------------
TOTAL NET ASSETS............... $748,418,166 $274,607,907 $28,459,583 $187,993,337
============ ============ =========== ============
Shares of beneficial interest
outstanding................... 32,959,072 13,917,656 1,617,134 16,999,608
NET ASSET VALUE
Offering and redemption price
per share (Net Assets/Shares
outstanding)................. (A) $ 19.73 $ 17.60 $ 11.06
============ ============ =========== ============
- ------------------------
(A) Montag & Caldwell Growth Fund Class N (Retail):
Net Asset Value, offering price and redemption price per share (Based on net
assets of $479,557,025 and 21,142,111 shares issued and outstanding) $22.68
Montag & Caldwell Growth Fund Class I (Institutional):
Net Asset Value, offering price and redemption price per share (Based on net
assets of $268,861,141 and 11,816,961 shares issued and outstanding) $22.75
See accompanying Notes to Financial Statements.
30
Chicago Trust Chicago Trust
Montag & Caldwell Chicago Trust Municipal Bond Money Market
Balanced Fund Bond Fund Fund Fund
- ----------------- --------------- -------------- -------------
$ 71,040,168 $ 112,746,004 $ 11,807,127 $ 215,750,478
-- 3,281,000 -- 22,718,000
11,544,063 2,832,228 319,489 --
- ----------------- --------------- -------------- -------------
82,584,231 118,859,232 12,126,616 238,468,478
-- 7,486 417 --
589,290 1,755,024 202,811 1,054,958
206,223 117,111 100,098 168,650
355 -- -- --
-- -- 105 --
6,670 5,574 5,574 5,574
1,356 1,152 26,647 12,392
- ----------------- --------------- -------------- -------------
83,388,125 120,745,579 12,462,268 239,710,052
- ----------------- --------------- -------------- -------------
397 -- -- 652
1,345 -- -- 1,029,742
577,478 -- -- --
3,677 3,552 -- 13,230
52,295 38,587 -- 77,330
2,808 142,791 43,249 --
31,072 28,472 39,811 37,624
- ----------------- --------------- -------------- -------------
669,072 213,402 83,060 1,158,578
- ----------------- --------------- -------------- -------------
$ 82,719,053 $ 120,532,177 $ 12,379,208 $ 238,551,474
================= =============== =============== =============
$ 68,927,242 $ 117,272,641 $ 12,123,373 $ 238,551,474
185,563 452,597 27,456 --
2,062,185 (25,289) (91,110) --
11,544,063 2,832,228 319,489 --
- ----------------- --------------- --------------- -------------
$ 82,719,053 $ 120,532,177 $ 12,379,208 $ 238,551,474
================= =============== =============== =============
5,167,798 11,894,302 1,215,334 238,551,474
$ 16.01 $ 10.13 $ 10.19 $ 1.00
================= =============== ============== =============
31
CT&T Funds
Statement of Operations
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
CHICAGO TRUST
MONTAG & CALDWELL GROWTH & INCOME CHICAGO TRUST CHICAGO TRUST
GROWTH FUND FUND TALON FUND BALANCED FUND
----------------- --------------- ------------- -------------
INVESTMENT INCOME:
Dividends................................................ $ 3,062,695 $ 2,616,520 $ 93,313 $ 1,115,889
Interest................................................. 1,035,399 1,054,079 366,033 5,603,622
------------ ----------- ---------- -----------
Total Investment Income................................ 4,098,094 3,670,599 459,346 6,719,511
------------ ----------- ---------- -----------
EXPENSES:
Investment advisory fees................................. 3,800,124 1,734,260 182,742 1,228,508
Distribution expenses.................................... 836,514 619,130 57,092 438,574
Transfer agent fees...................................... 167,566 98,959 53,658 33,312
Administration fees...................................... 242,224 121,926 11,675 85,382
Accounting fees.......................................... 66,037 49,168 18,045 47,067
Registration expenses.................................... 209,681 14,322 10,503 12,499
Custodian fees........................................... 47,481 32,124 13,857 30,396
Professional fees........................................ 48,246 26,954 11,515 22,630
Amortization of organization costs....................... 3,332 4,997 3,332 1,401
Report to shareholder expense............................ 33,756 12,666 1,194 8,709
Trustees fees............................................ 2,703 2,703 2,703 2,703
Other expenses........................................... 8,943 64,777 15,911 66,970
------------ ----------- ---------- -----------
Total expenses......................................... 5,466,607 2,781,986 382,227 1,978,151
------------ ----------- ---------- -----------
Expenses reimbursed.................................... (41,428) (129,857) (85,596) (102,203)
------------ ----------- ---------- -----------
Net expenses........................................... 5,425,179 2,652,129 296,631 1,875,948
------------ ----------- ---------- -----------
NET INVESTMENT INCOME (LOSS).............................. (1,327,085) 1,018,470 162,715 4,843,563
------------ ----------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (including
a net realized (loss) on option transactions of
($169,276) in the Talon Fund)............................ 8,570,687 19,177,699 4,497,850 11,378,927
Net change in unrealized appreciation
on investments (including a net
unrealized appreciation on option transactions of
$137,375 in the Talon Fund).............................. 114,427,550 33,416,450 1,618,377 15,462,457
------------ ----------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS...................................... 122,998,237 52,594,149 6,116,227 26,841,384
------------ ----------- ---------- -----------
NET INCREASE IN NET
ASSETS FROM OPERATIONS................................... $121,671,152 $53,612,619 $6,278,942 $31,684,947
============ =========== ========== ===========
See accompanying Notes to Financial Statements.
32
Chicago Trust Chicago Trust
Montag & Caldwell Chicago Trust Municipal Bond Money Market
Balanced Fund Bond Fund Fund Fund
----------------- ------------- -------------- -------------
$ 219,468 $ -- $ -- $ --
1,399,409 7,043,490 534,204 13,958,204
----------------- ------------- -------------- -------------
1,618,877 7,043,490 534,204 13,958,204
----------------- ------------- -------------- -------------
400,868 550,514 69,127 1,004,607
131,861 247,590 28,790 --
47,730 42,264 23,435 54,844
27,230 49,334 5,686 121,794
29,879 42,584 17,743 52,303
22,362 18,235 6,333 10,426
17,386 23,135 7,512 39,465
14,288 17,723 11,566 27,534
3,332 4,997 4,997 4,997
3,041 5,111 559 12,374
2,703 2,703 2,703 2,703
10,466 17,298 10,533 68,479
----------------- ------------- -------------- -------------
711,146 1,021,488 188,984 1,399,526
----------------- ------------- -------------- -------------
(44,973) (221,539) (85,359) (142,332)
----------------- ------------- -------------- -------------
666,173 799,949 103,625 1,257,194
----------------- ------------- -------------- -------------
952,704 6,243,541 430,579 12,701,010
----------------- ------------- -------------- -------------
2,102,297 (36,729) 6,147 --
7,581,239 2,754,254 140,720 --
----------------- ------------- -------------- -------------
9,683,536 2,717,525 146,867 --
----------------- ------------- -------------- -------------
$ 10,636,240 $ 8,961,066 $ 577,446 $ 12,701,010
================= ============= ============== =============
33
CT&T FUNDS
Statement of Changes in Net Assets
====================================================================================================================================
Montag & Caldwell Growth Fund Chicago Trust Growth & Income Fund
----------------------------- ----------------------------------
Year Ended Year Ended
October 31, 1997 October 31, 1996* October 31, 1997 October 31, 1996
---------------- ---------------- ---------------- ----------------
NET ASSETS at beginning of period................. $ 218,649,895 $ 40,355,049 $205,133,317 $172,295,705
------------- ------------ ------------ ------------
Increase in net asset
from operations:
Net investment income (loss).................... (1,327,085) (28,035) 1,018,470 1,451,728
Net realized gain on investments sold
and purchased options transactions............. 8,570,687 2,171,050 19,177,699 4,305,113
Net change in unrealized appreciation
on investments and assets
and liabilities in purchased options........... 114,427,550 26,825,183 33,416,450 39,311,048
------------- ------------ ------------ ------------
Net increase in net assets
from operations................................ 121,671,152 28,968,198 53,612,619 45,067,889
------------- ------------ ------------ ------------
Distributions to shareowners from:
Net investment income:
Retail Class................................. -- (28,975) (1,152,026) (1,444,903)
Institutional Class.......................... (26,630) (45,883) -- --
Net realized gain on investments:
Retail Class................................. (1,466,613) (24,401) (4,334,020) (976,557)
Institutional Class.......................... (412,803) -- -- --
------------- ------------ ------------ ------------
Total distributions.......................... (1,906,046) (99,259) (5,486,046) (2,421,460)
------------- ------------ ------------ ------------
Capital share transactions:
Net proceeds from sales of shares:
Retail Class................................. 339,687,434 118,083,887 50,803,893 43,023,005
Institutional Class.......................... 228,296,239 51,795,147 -- --
Issued to shareowners in reinvestment
of distributions:
Retail Class................................. 1,404,998 53,046 5,404,887 2,391,580
Institutional Class.......................... 396,515 45,883 -- --
Cost of shares repurchased:
Retail Class................................. (115,055,486) (16,878,640) (34,860,763) (55,223,402)
Institutional Class.......................... (44,726,535) (3,673,416) -- --
------------- ------------ ------------ ------------
Net increase (decrease) from capital
share transactions........................ 410,003,165 149,425,907 21,348,017 (9,808,817)
------------- ------------ ------------ ------------
Total increase in net assets............... 529,768,271 178,294,846 69,474,590 32,837,612
------------- ------------ ------------ ------------
NET ASSETS at end of period (including line A).... $ 748,418,166 $218,649,895 $274,607,907 $205,133,317
============= ============ ============ ============
(A) Undistributed (distribution in excess of)
net investment income (loss).................. $ -- $ (73,703) $ -- $ 133,556
------------- ------------ ------------ ------------
OTHER INFORMATION:
Share transactions:
Retail Class:
Sold......................................... 16,692,907 7,779,869 2,806,114 2,994,709
Issued to shareowners in reinvestment
of distributions............................ 79,785 3,770 326,567 170,324
Repurchased.................................. (5,364,133) (1,115,729) (1,902,988) (3,829,976)
Institutional Class:
Sold......................................... 10,833,116 3,302,194 -- --
Issued to shareowners in reinvestment
of distributions............................ 22,316 2,812 -- --
Repurchased.................................. (2,106,489) (236,988) -- --
------------- ------------ ------------ ------------
Net increase (decrease) in shares
outstanding.............................. 20,157,502 9,735,928 1,229,693 (664,943)
============= ============ ============ ============
- --------------------------------------------------------------------------------
* Montag & Caldwell Growth Fund Institutional Class commenced investment
operations on June 28, 1996.
See accompanying Notes to Financial Statements.
34
CHICAGO TRUST TALON FUND CHICAGO TRUST BALANCED FUND
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ---------------- ---------------- ----------------
$ 17,417,675 $ 10,537,854 $ 156,703,443 $ 152,820,466
---------------- ---------------- ---------------- ----------------
162,715 42,177 4,843,563 4,547,650
4,497,850 1,453,661 11,378,927 2,227,691
1,618,377 1,649,993 15,462,457 17,768,218
---------------- ---------------- ---------------- ----------------
6,278,942 3,145,831 31,684,947 24,543,559
---------------- ---------------- ---------------- ----------------
(134,407) (35,795) (4,764,936) (4,421,473)
-- -- -- --
(1,458,660) (634,240) (2,253,139) (7,294)
-- -- -- --
---------------- ---------------- ---------------- ----------------
(1,593,067) (670,035) (7,018,075) (4,428,767)
---------------- ---------------- ---------------- ----------------
6,345,104 4,424,049 28,395,564 26,178,729
-- -- -- --
1,577,255 662,762 7,017,789 4,428,767
-- -- -- --
(1,566,326) (682,786) (28,790,331) (46,839,311)
-- -- -- --
---------------- ---------------- ---------------- ----------------
6,356,033 4,404,025 6,623,022 (16,231,815)
---------------- ---------------- ---------------- ----------------
11,041,908 6,879,821 31,289,894 3,882,977
---------------- ---------------- ---------------- ----------------
$ 28,459,583 $ 17,417,675 $ 187,993,337 $ 156,703,443
================ ================ ================ ================
$ 37,253 $ 8,945 $ 624,636 $ 567,503
---------------- ---------------- ---------------- ----------------
397,032 336,046 2,757,711 2,932,312
107,919 55,106 699,716 495,015
(97,875) (54,225) (2,774,505) (5,245,177)
-- -- -- --
-- -- -- --
-- -- -- --
---------------- ---------------- ---------------- ----------------
407,076 336,927 682,922 (1,817,850)
================ ================ ================ ================
35
CT&T Funds
Statement of Changes in Net Assets (continued) OCTOBER 31, 1997
====================================================================================================================================
Montag & Caldwell Balanced Fund Chicago Trust Bond Fund
----------------------------------- -----------------------------------
Year Ended Year Ended
October 31, 1997 October 31, 1996 October 31, 1997 October 31, 1996
---------------- ---------------- ---------------- ----------------
NET ASSETS at beginning of period.................... $ 31,472,671 $ 21,908,174 $ 79,210,728 $ 70,490,335
---------------- ---------------- ---------------- ---------------
Increase in net assets
from operations:
Net investment income.............................. 952,704 562,623 6,243,541 4,684,008
Net realized gain (loss) on investments sold....... 2,102,297 2,720,967 (36,729) (21,824)
Net change in unrealized appreciation
(depreciation) of investments..................... 7,581,239 1,750,771 2,754,254 (427,461)
---------------- ---------------- ---------------- ---------------
Net increase in net assets
from operations................................... 10,636,240 5,034,361 8,961,066 4,234,723
---------------- ---------------- ---------------- ---------------
Distributions to shareowners from:
Net investment income.............................. (837,377) (544,785) (6,043,358) (4,576,113)
Net realized gain on investments................... (2,702,590) -- (16,748) (26,301)
---------------- ---------------- ---------------- ---------------
Total distributions............................. (3,539,967) (544,785) (6,060,106) (4,602,414)
---------------- ---------------- ---------------- ---------------
Capital share transactions:
Net proceeds from sales of shares.................. 58,631,470 17,019,049 46,817,358 18,394,655
Issued to shareowners in
reinvestment of distributions..................... 3,490,623 544,624 4,797,389 4,131,546
Cost of shares repurchased......................... (17,971,984) (12,488,752) (13,194,258) (13,438,117)
---------------- ---------------- ---------------- ---------------
Net increase (decrease) from
capital share transactions..................... 44,150,109 5,074,921 38,420,489 9,088,084
---------------- ---------------- ---------------- ---------------
Total increase (decrease) in net assets......... 51,246,382 9,564,497 41,321,449 8,720,393
---------------- ---------------- ---------------- ---------------
NET ASSETS at end of period (including line A)....... $ 82,719,053 $ 31,472,671 $ 120,532,177 $ 79,210,728
================ ================ ================ ===============
(A) Undistributed (distribution in excess of)
net investment income........................... $ 185,563 $ 70,787 $ 452,597 $ 258,643
---------------- ---------------- ---------------- ---------------
OTHER INFORMATION:
Share transactions:
Sold............................................... 3,939,135 1,269,601 4,734,805 1,866,993
Issued to shareowners in reinvestment
of distributions.................................. 255,726 41,681 485,679 422,144
Repurchased........................................ (1,229,194) (916,526) (1,334,065) (1,373,273)
---------------- ---------------- ---------------- ---------------
Net increase (decrease) in shares outstanding... 2,965,667 394,756 3,886,419 915,864
================ ================ ================ ===============
See accompanying Notes to Financial Statements.
36
CHICAGO TRUST MUNICIPAL BOND FUND CHICAGO TRUST MONEY MARKET FUND
- ------------------------------------ -----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1996
- ---------------- ---------------- ---------------- ----------------
$ 11,186,162 $ 11,679,498 $ 226,535,616 $ 206,075,314
- ------------- ------------- -------------- -------------
430,579 421,107 12,701,010 10,298,196
6,147 30,220 -- --
140,720 (54,373) -- --
- ------------- ------------- -------------- -------------
577,446 396,954 12,701,010 10,298,196
- ------------- ------------- -------------- -------------
(426,993) (419,021) (12,701,010) (10,298,196)
-- -- -- --
- ------------- ------------- -------------- -------------
(426,993) (419,021) (12,701,010) (10,298,196)
- ------------- ------------- -------------- -------------
1,375,126 394,557 569,551,234 494,444,216
21,748 22,047 434,377 331,446
(354,281) (887,873) (557,969,753) (474,315,360)
- ------------- ------------- -------------- -------------
1,042,593 (471,269) 12,015,858 20,460,302
------------- ------------- -------------- -------------
1,193,046 (493,336) 12,015,858 20,460,302
- ------------- ------------- -------------- -------------
$ 12,379,208 $ 11,186,162 $ 238,551,474 $ 226,535,616
============= ============= ============== =============
$ 27,456 $ 23,870 $ -- $ --
- ------------- ------------- -------------- -------------
135,835 39,198 569,551,234 494,444,216
2,159 2,203 434,377 331,446
(35,025) (87,989) (557,969,753) (474,315,360)
- ------------- ------------- -------------- -------------
102,969 (46,588) 12,015,858 20,460,302
============= ============= ============== =============
37
CT&T FUNDS
Financial Highlights October 31, 1997
=====================================================================================================================
Montag & Caldwell Growth Fund
-----------------------------------------------------------
Retail Class Institutional Class
----------------------------------- ----------------------
Year Year Period Year Period
Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95/(a)/ 10/31/97 10/31/96/(b)/
-------- -------- ------------- -------- -------------
Net Asset Value, Beginning of Period................. $ 17.08 $ 13.16 $ 10.00 $ 17.08 $ 15.59
Income from Investment Operations:
Net investment income (loss)....................... (0.05) -- 0.02 -- 0.02
Net realized and unrealized gain
on investments.................................... 5.79 3.93 3.16 5.81 1.49
-------- -------- ------- -------- --------
Total from investment operations.................. 5.74 3.93 3.18 5.81 1.51
-------- -------- ------- -------- --------
Less Distributions:
Distributions from and in excess
of net investment income.......................... -- (0.01) (0.02) -- (0.02)
Distributions from net realized
gain on investments............................... (0.14) -- -- (0.14) --
-------- -------- ------- -------- --------
Total distributions............................. (0.14) (0.01) (0.02) (0.14) (0.02)
-------- -------- ------- -------- --------
Net increase in net asset value...................... 5.60 3.92 3.16 5.67 1.49
-------- -------- ------- -------- --------
Net Asset Value, End of Period....................... $ 22.68 $ 17.08 $ 13.16 $ 22.75 $ 17.08
======== ======== ======= ======== ========
Total Return/1/...................................... 33.82% 29.91% 31.87% 34.26% 9.67%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)................. $479,557 $166,243 $40,355 $268,861 $ 52,407
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor/2/...................................... 1.24% 1.32% 1.87% 0.93% 0.98%
After reimbursement of expenses
by Advisor/2/...................................... 1.23% 1.28% 1.30% 0.93% 0.98%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor/2/...................................... (0.38)% (0.10)% (0.36)% (0.07)% 0.17%
After reimbursement of expenses
by Advisor/2/...................................... (0.37)% (0.06)% 0.20% (0.06)% 0.17%
Portfolio Turnover................................... 18.65% 26.36% 34.46% 18.65% 26.36%
Average Commission Rate Paid......................... $ 0.0592 $ 0.0639 N/R $ 0.0592 $ 0.0639
- -----------------------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
(a) Montag & Caldwell Growth Fund Retail Class commenced investment operations
on November 2, 1994.
(b) Montag & Caldwell Growth Fund Institutional Class commenced investment
operations on June 28, 1996.
N/R: Not required.
See accompanying Notes to Financial Statements.
38
CT&T Funds
Financial Highlights October 31, 1997
================================================================================
Chicago Trust Growth & Income Fund
-------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94/(a)/
-------- -------- -------- -------------
Net Asset Value, Beginning of Period.......................... $ 16.17 $ 12.90 $ 10.11 $ 10.00
-------- -------- -------- -----------
Income from Investment Operations:
Net investment income....................................... 0.08 0.11 0.09 0.07
Net realized and unrealized gain on investments............. 3.91 3.34 2.79 0.10
-------- -------- -------- -----------
Total from investment operations......................... 3.99 3.45 2.88 0.17
-------- -------- -------- -----------
Less Distributions:
Distributions from and in excess of net investment income... (0.09) (0.11) (0.09) (0.06)
Distributions from net realized gain on investments......... (0.34) (0.07) -- --
-------- -------- -------- -----------
Total distributions...................................... (0.43) (0.18) (0.09) (0.06)
-------- -------- -------- -----------
Net increase in net asset value............................... 3.56 3.27 2.79 0.11
-------- -------- -------- -----------
Net Asset Value, End of Period................................ $ 19.73 $ 16.17 $ 12.90 $ 10.11
======== ======== ======== ===========
Total Return/1/............................................... 25.16% 26.98% 28.66% 1.73%
Ratios/supplemental Data:
Net Assets, End of Period (in 000's).......................... $274,608 $205,133 $172,296 $ 12,282
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/............... 1.12% 1.15% 1.50% 2.21%
After reimbursement of expenses by Advisor/2/................ 1.07%/3/ 1.00% 1.09%/4/ 1.20%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/............... 0.36% 0.62% 0.33% (0.15)%
After reimbursement of expenses by Advisor/2/................ 0.41% 0.77% 0.74% 0.86%
Portfolio Turnover............................................ 30.58% 25.48% 9.00% 37.01%
Average Commission Rate Paid.................................. $ 0.0530 $ 0.0571 N/R N/R
- ----------------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
/3/ The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 1.00% to 1.10% on February 28, 1997.
/4/ The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 1.20% to 1.00% on September 21, 1995.
(a) Chicago Trust Growth & Income Fund commenced investment operations on
December 13, 1993.
N/R: Not required.
See accompanying Notes to Financial Statements.
39
CT&T Funds
Financial Highlights October 31, 1997
================================================================================
Chicago Trust Talon Fund
-------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94/(a)/
-------- -------- -------- -------------
Net Asset Value, Beginning of Period.......................... $ 14.39 $ 12.07 $ 10.25 $ 10.00
-------- -------- -------- -----------
Income from Investment Operations:
Net investment income....................................... 0.11 0.04 0.09 0.02
Net realized and unrealized gain on investments
and options................................................. 4.38 3.01 1.84 0.23
-------- -------- -------- -----------
Total from investment operations......................... 4.49 3.05 1.93 0.25
-------- -------- -------- -----------
Less Distributions:
Distributions from and in excess of net investment income... (0.09) (0.03) (0.11) --
Distributions from net realized gain on investments......... (1.19) (0.70) -- --
-------- -------- -------- -----------
Total distributions...................................... (1.28) (0.73) (0.11) --
-------- -------- -------- -----------
Net increase in net asset value............................... 3.21 2.32 1.82 0.25
-------- -------- -------- -----------
Net Asset Value, End of Period................................ $ 17.60 $ 14.39 $ 12.07 $ 10.25
======== ======== ======== ===========
Total Return/1/............................................... 33.47% 26.51% 18.92% 2.50%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's).......................... $ 28,460 $ 17,418 $ 10,538 $ 4,355
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/............... 1.67% 1.98% 3.04% 7.82%
After reimbursement of expenses by Advisor/2/................ 1.30% 1.30% 1.30% 1.30%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/............... 0.34% (0.38)% (0.97)% (4.13)%
After reimbursement of expenses by Advisor/2/................ 0.71% 0.30% 0.77% 2.39%
Portfolio Turnover............................................ 112.72% 126.83% 229.43% 33.66%
Average Commission Rate Paid.................................. $ 0.0591 $ 0.0612 N/R N/R
- ----------------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
(a) Chicago Trust Talon Fund commenced investment operations on
September 19, 1994.
N/R: Not required.
See accompanying Notes to Financial Statements.
40
CT&T FUNDS
Financial Highlights October 31, 1997
- --------------------------------------------------------------------------------
Chicago Trust Balanced Fund
---------------------------------------
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95/(a)/
-------- -------- -------------
Net Asset Value, Beginning of Period......... $ 9.60 $ 8.43 $ 8.34
-------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.28 0.27 0.03
Net realized and unrealized gain on
investments............................. 1.60 1.16 0.06
-------- -------- --------
Total from investment operations....... 1.88 1.43 0.09
-------- -------- --------
Less Distributions:
Distributions from and in excess of net
investment income....................... (0.28) (0.26) --
Distributions from net realized gain on
investments............................. (0.14) -- --
-------- -------- --------
Total distributions.................... (0.42) (0.26) --
-------- -------- --------
Net increase in net asset value.............. 1.46 1.17 0.09
-------- -------- --------
Net Asset Value, End of Period............... $ 11.06 $ 9.60 $ 8.43
======== ======== ========
Total return/1/.............................. 20.10% 17.21% 1.08%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)......... $187,993 $156,703 $152,820
Ratios of expenses to average net assets:
Before reimbursement of expenses by
Advisor/2/................................ 1.13% 1.17% 1.19%
After reimbursement of expenses by
Advisor/2/................................ 1.07%/3/ 1.00% 1.00%
Ratios of net investment income to average
net assets:
Before reimbursement of expenses by
Advisor/2/................................ 2.70% 2.79% 2.56%
After reimbursement of expenses by
Advisor/2/................................ 2.76% 2.96% 2.73%
Portfolio Turnover........................... 34.69% 34.29% 0.72%
Average Commission Rate Paid................. $ 0.0576 $ 0.0596 N/R
- ------------------------------------
/1/ Not Annualized.
/2/ Annualized.
/3/ The Advisor's expense reimbursement level, which affects the net
expense ratio, changed from 1.00% to 1.10% on February 28, 1997.
(a) Chicago Trust Balanced Fund (formerly the Chicago Trust Asset Allocation
Fund) commenced investment operations on September 21, 1995.
N/R: Not Required.
See accompanying Notes to Financial Statements.
41
CT&T Funds
Financial Highlights October 31, 1997
================================================================================
Montag & Caldwell Balanced Fund
----------------------------------------
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95/(a)/
-------- -------- -------------
Net Asset Value, Beginning of Period........................... $ 14.29 $ 12.12 $ 10.00
------- ------- -------
Income from Investment Operations:
Net investment income....................................... 0.25 0.27 0.26
Net realized and unrealized gain on investments............. 2.93 2.17 2.09
------- ------- -------
Total from investment operations...................... 3.18 2.44 2.35
------- ------- -------
Less Distributions:
Distributions from and in excess of net investment income... (0.25) (0.27) (0.23)
Distributions from net realized gain on investments......... (1.21) -- --
------- ------- -------
Total distributions................................... (1.46) (0.27) (0.23)
------- ------- -------
Net increase in net asset value................................ 1.72 2.17 2.12
------- ------- -------
Net Asset Value, End of Period................................. $ 16.01 $ 14.29 $ 12.12
======= ======= =======
Total Return/1/................................................ 24.26% 20.37% 23.75%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)........................... $82,719 $31,473 $21,908
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/............... 1.33% 1.58% 2.50%
After reimbursement of expenses by Advisor/2/................ 1.25% 1.25% 1.25%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/............... 1.70% 1.83% 1.38%
After reimbursement of expenses by Advisor/2/................ 1.78% 2.16% 2.63%
Portfolio Turnover............................................. 28.13% 43.58% 27.33%
Average Commission Rate Paid................................... $0.0591 $0.0644 N/R
- ----------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
(a) Montag & Caldwell Balanced Fund commenced investment operations on
November 2, 1994.
N/R: Not required.
See accompanying Notes to Financial Statements.
42
CT&T Funds
Financial Highlights October 31, 1997
================================================================================
Chicago Trust Bond Fund
--------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94/(a)/
-------- -------- -------- -------------
Net Asset Value, Beginning of Period....................... $ 9.89 $ 9.94 $ 9.21 $ 10.00
-------- ------- ------- -------
Income from Investment Operations:
Net investment income.................................. 0.61 0.60 0.60 0.50
Net realized and unrealized gain (loss) on investments. 0.23 (0.05) 0.73 (0.82)
-------- ------- ------- -------
Total from investment operations.................. 0.84 0.55 1.33 (0.32)
-------- ------- ------- -------
Less distributions from and in excess
of net investment income................................ (0.60) (0.60) (0.60) (0.47)
-------- ------- ------- -------
Net increase (decrease) in net asset value................. 0.24 (0.05) 0.73 (0.79)
-------- ------- ------- -------
Net Asset Value, End of Period............................. $ 10.13 $ 9.89 $ 9.94 $ 9.21
======== ======= ======= =======
Total Return/1/............................................ 8.84% 5.76% 14.89% (3.23)%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)....................... $120,532 $79,211 $70,490 $12,546
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/........... 1.02% 1.10% 1.54% 2.02%
After reimbursement of expenses by Advisor/2/............ 0.80% 0.80% 0.80% 0.80%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/........... 6.02% 5.89% 5.78% 4.83%
After reimbursement of expenses by Advisor/2/............ 6.24% 6.19% 6.52% 6.05%
Portfolio Turnover......................................... 17.76% 41.75% 68.24% 20.73%
- ------------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
(a) Chicago Trust Bond Fund commenced investment operations on December 13,
1993.
See accompanying Notes to Financial Statements.
43
CT&T FUNDS
Financial Highlights October 31, 1997
===============================================================================
Chicago Trust Municipal Bond Fund
-----------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94/(a)/
--------- -------- -------- -------------
Net Asset Value, Beginning of Period............................. $ 10.06 $ 10.08 $ 9.56 $ 10.00
--------- -------- -------- -------------
Income from Investment Operations:
Net investment income.......................................... 0.38 0.38 0.35 0.27
Net realized and unrealized gain (loss) on investments......... 0.12 (0.02) 0.52 (0.46)
--------- -------- -------- -------------
Total from investment operations............................ 0.50 0.36 0.87 (0.19)
--------- -------- -------- -------------
Less distributions from and in excess
of net investment income..................................... (0.37) (0.38) (0.35) (0.25)
--------- -------- -------- -------------
Net increase (decrease) in net asset value....................... 0.13 (0.02) 0.52 (0.44)
--------- -------- -------- -------------
Net Asset Value, End of Period................................... $ 10.19 $ 10.06 $ 10.08 $ 9.56
========= ======== ======== =============
Total Return/1/.................................................. 5.13% 3.59% 9.29% (1.92)%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)............................. $ 12,379 $ 11,186 $ 11,679 $ 10,462
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/.................. 1.64% 1.53% 2.16% 2.09%
After reimbursement of expenses by Advisor/2/................... 0.90% 0.90% 0.90% 0.90%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/.................. 3.00% 3.11% 2.37% 1.90%
After reimbursement of expenses by Advisor/2/................... 3.74% 3.74% 3.63% 3.09%
Portfolio Turnover............................................... 16.19% 27.47% 42.81% 14.85%
- -----------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
(a) Chicago Trust Municipal Bond Fund commenced investment operations
on December 13, 1993.
See accompanying Notes to Financial Statements.
44
CT&T FUNDS
Financial Highlights October 31, 1997
===============================================================================
Chicago Trust Money Market Fund
--------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94/(a)/
-------- -------- -------- -------------
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------------
Income from Investment Operations:
Net investment income..................................... 0.05 0.05 0.05 0.03
-------- -------- -------- -------------
Less Distributions from net investment income.............. (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== =============
Total Return/1/............................................. 5.15% 5.14% 5.56% 3.20%
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)........................ $238,551 $226,536 $206,075 $ 122,929
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor/2/............. 0.56% 0.59% 0.63% 0.64%
After reimbursement of expenses by Advisor/2/.............. 0.50% 0.50% 0.43%/3/ 0.40%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor/2/............. 5.00% 4.93% 5.24% 3.49%
After reimbursement of expenses by Advisor/2/.............. 5.06% 5.02% 5.44% 3.73%
- ---------------------------------------------------------------------
/1/ Not Annualized.
/2/ Annualized.
/3/ The Advisor's expenses reimbursement level, which affects the net expenses
ratio, changed from 0.40% to 0.50% on July 12, 1995.
(a) Chicago Trust Money Market Fund commenced investment operations on
December 14, 1993.
See accompanying Notes to Financial Statements.
45
CT&T Funds
Notes to Financial Statements October 31, 1997
================================================================================
Note (A) Significant Accounting Policies: CT&T Funds (the "Company") operates as
a series company currently issuing eight series of shares of beneficial
interest: Montag & Caldwell Growth Fund (the "Growth Fund"), Chicago Trust
Growth & Income Fund (the "Growth & Income Fund"), Chicago Trust Talon Fund (the
"Talon Fund"), Chicago Trust Balanced Fund (formerly Chicago Trust Asset
Allocation Fund) (the "CT Balanced Fund"), Montag & Caldwell Balanced Fund (the
"M&C Balanced Fund"), Chicago Trust Bond Fund (the "Bond Fund"), Chicago Trust
Municipal Bond Fund (the "Municipal Bond Fund"), and Chicago Trust Money Market
Fund (the "Money Market Fund") (each a "Fund" and collectively, the "Funds").
The Company constitutes an open-end management investment company which is
registered under the Investment Company Act of 1940 as amended (the "Act"). The
Company was organized as a Delaware business trust on September 10, 1993.
The Growth Fund seeks long-term capital appreciation consistent with investments
primarily in a combination of equity, convertible, fixed income, and short-term
securities. Capital appreciation is emphasized, and generation of income is
secondary. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994. Effective June 28, 1996,
the Fund offered two classes of shares: Class I (Institutional) shares and Class
N (Retail) shares.
The Growth & Income Fund seeks long-term total return through a combination of
capital appreciation and current income. In seeking to achieve its investment
objective, the Fund invests primarily in common stocks, preferred stocks,
securities convertible into common stocks, and fixed income securities. The
Chicago Trust Company ("Chicago Trust") is the Investment Advisor for the Fund,
which commenced investment operations on December 13, 1993.
The Talon Fund seeks long-term total return through capital appreciation. The
Fund invests primarily in stocks of companies with capitalization levels
believed by Talon Asset Management, Inc. ("Talon") to have prospects for capital
appreciation. The Fund, which commenced investment operations on September 19,
1994, may also invest in preferred stock and debt securities, including those
which may be convertible into common stock. Chicago Trust is the Investment
Advisor for the Fund with Talon as Sub-Investment Advisor.
The CT Balanced Fund seeks growth of capital with current income through asset
allocation. The Fund seeks to achieve this objective by holding a varying
combination of generally two or more of the following investment categories:
common stocks (both dividend and non-dividend paying); preferred stocks;
convertible preferred stocks; fixed income securities, including bonds and bonds
convertible into common stocks; and short-term interest-bearing obligations.
Chicago Trust is the Investment Advisor for the Fund, which commenced investment
operations on September 21, 1995 .
The M&C Balanced Fund seeks long-term total return through investment primarily
in a combination of equity, fixed income, and short-term securities. The
allocation between asset classes may vary over time in accordance with the
expected rates of return of each asset class; however, primary emphasis is
placed upon selection of particular investments as opposed to allocation of
assets. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994.
The Bond Fund seeks high current income consistent with what Chicago Trust
believes to be prudent risk of capital. The Fund primarily invests in a broad
range of bonds and other fixed income securities (bonds and debentures) with an
average weighted portfolio maturity between three and ten years. Chicago Trust
is the Investment Advisor for the Fund, which commenced investment operations on
December 13, 1993.
The Municipal Bond Fund seeks a high level of current interest income exempt
from Federal income taxes consistent with the conservation of capital. The Fund
seeks to achieve its objective by investing substantially all of its assets in a
diversified portfolio of primarily intermediate-term municipal debt obligations.
Chicago Trust is the Investment Advisor for the Fund, which commenced investment
operations on December 13, 1993.
The Money Market Fund seeks to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund seeks to achieve its objective by investing in short-term, high
quality, U.S. dollar-denominated money market instruments. Chicago Trust is the
Investment Advisor for the Fund, which commenced investment operations on
December 14, 1993.
46
CT&T Funds
Notes to Financial Statements - continued October 31, 1997
================================================================================
The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
(1) Security Valuation: For the Growth Fund, the Growth & Income Fund, the
Talon Fund, the CT Balanced Fund and the M&C Balanced Fund, equity securities
and index options traded on a national exchange and over-the-counter securities
listed in the NASDAQ National Market System are valued at the last reported
sales price at the close of the respective exchange. Securities for which there
have been no sales on the valuation date are valued at the mean of the last
reported bid and asked prices on their principal exchange. Over-the-counter
securities not listed on the NASDAQ National Market System are valued at the
mean of the current bid and asked prices. For the CT Balanced Fund, the M&C
Balanced Fund, the Bond Fund, and the Municipal Bond Fund, fixed income
securities, except short-term, are valued on the basis of prices provided by a
pricing service when such prices are believed by the Advisor to reflect the
fair market value of such securities. When fair market value quotations are not
readily available, securities and other assets are valued at fair value as
determined in good faith by the Board of Trustees. For all Funds, short-term
investments, that is, those with a remaining maturity of 60 days or less, are
valued at amortized cost, which approximates market value. For the Money Market
Fund, all securities are valued at amortized cost, which approximates market
value. Under the amortized cost method, discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
(2) Repurchase Agreements: Each Fund may enter into repurchase agreements with
financial institutions deemed to be credit worthy by the Fund's Advisor,
subject to the seller's agreement to repurchase and the Fund's agreement to
resell such securities at a mutually agreed upon price. Securities purchased
subject to repurchase agreements are deposited with the Fund's custodian and,
pursuant to the terms of the repurchase agreement, must have an aggregate
market value greater than or equal to the repurchase price plus accrued
interest at all times. If the value of the underlying securities falls below
the value of the repurchase price plus accrued interest, the Fund will require
the seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Fund has the right to sell the underlying securities
at market value and may claim any resulting loss against the seller.
(3) Derivative Financial Instruments: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of
an underlying asset, reference rate or index. A Fund has a variety of reasons
to use derivative instruments, such as to attempt to protect the Fund against
possible changes in the market value of its portfolio and to manage the
portfolio's effective yield, maturity and duration. All of a Fund's portfolio
holdings, including derivative instruments, are marked to market each day with
the change in value reflected in the unrealized appreciation/depreciation on
investments. Upon disposition, a realized gain or loss is recognized
accordingly, except for exercised option contracts where the recognition of
gain or loss is postponed until the disposal of the security underlying the
option contract.
An option contract gives the buyer the right, but not the obligation to buy
(call) or sell (put) an underlying item at a fixed exercise price during a
specified period. These contracts are used by a Fund to manage the portfolio's
effective maturity and duration.
Transactions in purchased options for the Talon Fund for the year ended October
31, 1997 were as follows:
Contracts Premium
--------- ---------
Outstanding at October 31, 1996.................................... 0 $ 0
Options purchased (Net)............................................ 215 (305,450)
Options exercised or terminated in closing transactions (Net)...... (65) 61,450
Options expired (Net).............................................. (100) 123,875
---- ---------
Outstanding at October 31, 1997.................................... 50 $(120,125)
==== =========
(4) Mortgage Backed Securities: The CT Balanced Fund, the M&C Balanced Fund and
the Bond Fund may invest in Mortgage Backed Securities (MBS), representing
interests in pools of mortgage loans. These securities provide shareholders
with payments consisting of both principal and interest as the mortgages in the
underlying mortgage pools are paid. Most of the securities are guaranteed by
federally sponsored agencies - Government National Mortgage Association (GNMA),
Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage
Corporation (FHLMC). However, some securities may be issued by private,
47
CT&T Funds
Notes to Financial Statements-continued October 31, 1997
================================================================================
non-government corporations. MBS issued by private agencies are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. Yields on privately
issued MBS tend to be higher than those of government backed issues. However,
risk of loss due to default and sensitivity to interest rate fluctuations are
also higher.
The CT Balanced Fund, the M&C Balanced Fund and the Bond Fund may also invest in
Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage Investment
Conduits (REMICs). A CMO is a bond which is collateralized by a pool of MBS, and
a REMIC is similar in form to a CMO. These MBS pools are divided into classes or
tranches with each class having its own characteristics. The different classes
are retired in sequence as the underlying mortgages are repaid. A Planned
Amortization Class (PAC) is a specific class of mortgages which over its life
will generally have the most stable cash flows and the lowest prepayment risk.
Prepayment may shorten the stated maturity of the CMO and can result in a loss
of premium, if any has been paid.
The CT Balanced Fund and the Bond Fund may utilize Interest Only (IO) securities
to increase the diversification of the portfolio and manage risk. An Interest
Only security is a class of MBS representing ownership in the cash flows of the
interest payments made from a specified pool of MBS. The cash flow on this
instrument decreases as the mortgage principal balance is repaid by the
borrower.
(5) Investment Income And Securities Transactions: Dividend income is recorded
on the ex-dividend date. Interest income is accrued daily. Securities
transactions are accounted for on the date securities are purchased or sold. The
cost of securities sold is determined using the first-in-first-out method.
(6) Federal Income Taxes: The Funds have elected to be treated a "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and to
distribute substantially all of their respective net taxable income.
Accordingly, no provisions for federal income taxes have been made in the
accompanying financial statements. The Funds intend to utilize provisions of the
federal income tax laws which allow them to carry a realized capital loss
forward for eight years following the year of the loss and offset such losses
against any future realized capital gains. At October 31, 1997, the losses
amounted to $91,110 for the Municipal Bond Fund and $25,289 for the Bond Fund,
which will expire October 31, 2003 and October 31, 2005, respectively.
Net realized gains or losses may differ for financial and tax reporting purposes
for the Talon Fund, the M&C Balanced Fund and the Growth Fund primarily as a
result of losses from wash sales which are not recognized for tax purposes until
the corresponding shares are sold and as a result of gains or losses recognized
for tax purposes on the mark-to-market of open options transactions at October
31, 1997.
(7) Dividends and Distributions: Dividends and distributions to shareowners are
recorded on the ex-dividend date.
(8) Organization Costs: The Funds have reimbursed the Advisors for certain costs
incurred in connection with the Funds' and the Company's organization. The costs
are being amortized on a straight-line basis over five years commencing on
December 13, 1993 for the Growth & Income Fund, Bond Fund and the Municipal Bond
Fund; December 14, 1993 for the Money Market Fund; September 19, 1994 for the
Talon Fund; November 2, 1994 for the Growth Fund and the M&C Balanced Fund; and
September 21, 1995 for the CT Balanced Fund.
(9) Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note (B) Dividends from Net Investment Income and Distributions of Capital
Gains: With respect to the Growth Fund, the Growth & Income Fund, the Talon
Fund, the CT Balanced Fund and the M&C Balanced Fund, dividends from net
investment income are distributed quarterly and net realized gains from
investment transactions, if any, are distributed to shareowners annually. The
Bond Fund and the Municipal Bond Fund distribute their respective net investment
income to shareowners monthly and capital gains, if any, are distributed
annually. The Money Market Fund declares dividends daily from its net investment
income. The Money Market
48
CT&T Funds
Notes to Financial Statements-continued October 31, 1997
================================================================================
Fund's dividends are payable monthly and are automatically reinvested in
additional Fund shares, at the month-end net asset value, for those shareowners
that have elected the reinvestment option. Differences in dividends per share
between classes of the Growth Fund are due to different class expenses. For the
year ended October 31, 1997, 100.00% of the income distributions made by the
Municipal Bond Fund were exempt from federal income taxes. Additionally during
the period, the Growth Fund, the Growth & Income Fund, the Talon Fund, the CT
Balanced Fund, the M&C Balanced Fund and the Bond Fund paid 28% rate gain
distributions of $1,879,416, $1,444,866, $973,259, $205, $2,336,074 and $16,748,
respectively. In January 1998, the Funds will provide tax information to
shareowners for the 1997 calendar year.
Net investment income and realized gains and losses for federal income tax
purposes may differ from that reported on the financial statements because of
permanent book and tax basis differences. Permanent book and tax differences of
$21,494, $11,440 and $551 were reclassified at October 31, 1997 from accumulated
net realized gain on investments to undistributed net investment income in the
CT Balanced Fund, the Bond Fund and the M&C Balanced Fund, respectively, due to
losses on paydown adjustments from mortgage backed securities. In addition,
permanent book and tax basis differences in the Bond Fund relating to the sale
of interest only securities totaling $5,211 were reclassified from accumulated
net realized gain to undistributed net investment income.
The Growth Fund had a net operating loss for tax purposes, net of short-term
capital gains, of $187,503 for the year ended October 31, 1997. In addition, the
Growth Fund made required distributions of class specific allocations of net
investment income of $26,630 to the institutional class shareowners. These
amounts, along with the distribution in excess as of October 31, 1996 of
$73,703, were reclassified from undistributed net investment income to capital
paid-in as permanent differences at October 31, 1997.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included as ordinary income for tax purposes.
All of the income dividends paid by each fund were ordinary income for federal
income tax purposes. The percentage of income dividends that were qualifying
dividends for the corporate dividends received deduction were 21%, 70%, 8% and
17%, for the CT Balanced Fund, the Growth & Income Fund, the Talon Fund and the
M&C Balanced Fund, respectively.
Note (C) Shares of Beneficial Interest: Each Fund is authorized to issue an
unlimited number of shares of beneficial interest with no par value. At October
31, 1997, Chicago Trust owned 2,500, 2,500 and 1,002,500 shares of the Growth &
Income Fund, the Bond Fund and the Municipal Bond Fund, respectively.
Note (D) Investment Transactions: Aggregate purchases and proceeds from sales of
investment securities (other than short-term investments) for the year ended
October 31, 1997 were:
Aggregate Proceeds from
Purchases Sales
--------- -------------
Growth Fund $483,482,033 $84,626,624
Growth & Income Fund 84,712,809 69,309,780
Talon Fund 24,428,453 20,975,822
Ct Balanced Fund 61,644,515 55,976,823
M&C Balanced Fund 61,424,202 14,486,433
Bond Fund 60,725,202 16,480,883
Municipal Bond Fund 2,979,200 1,817,090
49
CT&T Funds
Notes to Financial Statements-continued October 31, 1997
================================================================================
Note (E) Advisory, Administration and Distribution Services Agreements: Under
various Advisory Agreements with the Funds, each Advisor provides investment
advisory services to the Funds. The Funds will pay advisory fees at the
following annual percentage rates of the average daily net assets of each Fund:
0.80% for the Growth Fund, 0.70% for the Growth & Income Fund, 0.80% for the
Talon Fund, 0.70% for the CT Balanced Fund, 0.75% for the M&C Balanced Fund,
0.55% for the Bond Fund, 0.60% for the Municipal Bond Fund and 0.40% for the
Money Market Fund. These fees are accrued daily and paid monthly. The Advisors
have voluntarily undertaken to reimburse the Growth Fund (Institutional Class
and Retail Class), the Growth & Income Fund, the Talon Fund, the CT Balanced
Fund, the M&C Balanced Fund, the Bond Fund, the Municipal Bond Fund, and the
Money Market Fund for operating expenses which cause total expenses to exceed
0.98%, 1.30%, 1.10%, 1.30%, 1.10%, 1.25%, 0.80%, 0.90% and 0.50%, respectively.
Such expense reimbursements may be terminated at the discretion of the Advisors.
For the year ended October 31, 1997, the Advisors reimbursed expenses of $0 and
$41,428 for the Growth Fund (Institutional Class and Retail Class), $129,857 for
the Growth & Income Fund, $85,596 for the Talon Fund, $102,203 for the CT
Balanced Fund, $44,973 for the M&C Balanced Fund, $221,539 for the Bond Fund,
$85,359 for the Municipal Bond Fund and $142,332 for the Money Market Fund.
Effective June 1, 1997, First Data Investor Services Group, Inc. ("Investor
Services Group") replaced FPS Services, Inc. as sub-administrator of the Funds.
Chicago Trust is the Funds' Administrator. For services provided as the Funds'
Administrator, Chicago Trust receives the following fees, which are paid in
total to Investor Services Group.
Administration Fees Custody Liaison Fees
------------------- --------------------
Fee (% of Funds' aggregate Average Daily Net Assets Annual Fee Average Daily Net Assets
- --------------------------- ------------------------ ---------- ------------------------
daily net assets) (Per Fund) (per Fund)
----------------- ---------- ----------
0.060 up to $2 billion $10,000 up to $100 million
0.045 $2 billion to $3.5 billion $15,000 $100 million to $500 million
0.040 over $3.5 billion $20,000 over $500 million
Effective June 1, 1997, First Data Distributors, Inc. replaced FPS Broker
Services, Inc. as principal underwriter and distributor of the Funds' shares.
Pursuant to Rule 12b-1 adopted by the Securities and Exchange Commission under
the Act, the Growth Fund Retail Class, the Growth & Income Fund, the Talon Fund,
the CT Balanced Fund, the M&C Balanced Fund, the Bond Fund, and the Municipal
Bond Fund have adopted a Plan of Distribution (the "Plan"). The Plan permits the
participating Funds to pay certain expenses associated with the distribution of
their shares. Under the Plan, each Fund may pay actual expenses not exceeding,
on an annual basis, 0.25% of each participating Fund's average daily net assets.
The Growth Fund Institutional Class and the Money Market Fund do not have a
distribution plan.
For the year ended October 31, 1997, the class specific expenses of the Growth
Fund were:
Class N (Retail) Class I (Institutional)
Transfer agent fees..................... $ 158,588 $ 8,978
Registration expenses................... 151,157 58,524
Legal fees.............................. 21,778 8,983
Report to shareowner expense............ 19,597 14,159
Certain officers and trustees of the Funds are also officers and directors of
Chicago Trust. The Funds do not compensate its officers or affiliated trustees.
Effective January 1, 1997, the Company pays each unaffiliated trustee $1,500 per
Board of Trustees meeting attended and an annual retainer of $1,500.
50
Independent Auditors' Report
The Board of Trustees and Shareowners of CT&T Funds:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of CT&T Funds (comprising, respectively, Montag &
Caldwell Growth Fund, Chicago Trust Growth & Income Fund, Chicago Trust Talon
Fund, Chicago Trust Balanced Fund, Montag & Caldwell Balanced Fund, Chicago
Trust Bond Fund, Chicago Trust Municipal Bond Fund, and Chicago Trust Money
Market Fund) as of October 31, 1997, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
periods presented in the two-year period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of CT&T Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the CT&T Funds as of October 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the periods presented in the two-year period then ended, and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
December 16, 1997
This page left blank intentionally
CT&T Funds
Trustees & Officers
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
Leonard F. Amari, Trustee* Kenneth C. Anderson
President
Stuart D. Bilton, Chairman David F. Seng
Senior Vice President
Dorothea C. Gilliam, Trustee Gerald F. Dillenburg
Vice President, Secretary and Treasurer
Gregory T. Mutz, Trustee* Thomas J. Adams, III
Vice President
Nathan Shapiro, Trustee* CUSTODIAN
Bankers Trust
One Bankers Trust Place
New York, New York 10001
ADVISORS
The Chicago Trust Company LEGAL COUNSEL
171 North Clark Street Sonnenschein Nath & Rosenthal
Chicago, Illinois 60601-3294 8000 Sears Tower
Chicago, Illinois 60606
Montag & Caldwell, Inc.
1100 Atlanta Financial Center AUDITOR
3343 Peachtree Road, NE KPMG Peat Marwick LLP
Atlanta, GA 30326-1450 303 East Wacker Drive
Chicago, Illinois 60601
SHAREOWNER SERVICES
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 01581
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581
*Unaffiliated Trustees
Distributed by First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
This report is submitted for general information of the shareowners of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Fund's objectives, policies, expenses and other
information.
APRIL 30, 1998
SEMI-
ANNUAL
REPORT
MONTAG & CALDWELL GROWTH FUND
CHICAGO TRUST GROWTH & INCOME FUND
CHICAGO TRUST TALON FUND
CHICAGO TRUST BALANCED FUND
MONTAG & CALDWELL BALANCED FUND
CHICAGO TRUST BOND FUND
CHICAGO TRUST MUNICIPAL BOND FUND
CHICAGO TRUST MONEY MARKET FUND
[LOGO] ALLEGHANY FUNDS
MANAGING YOUR MONEY
THROUGH PRINCIPLES THAT ENDURE
CORPORATE PROFITS? MERGERS AND ACQUISITIONS? POLITICS? ATTRACTIVE
VALUATIONS? THERE ARE NUMEROUS GOOD REASONS FOR CHOOSING VARIOUS INVESTMENT
OPPORTUNITIES - AND AT ALLEGHANY FUNDS, OUR PORTFOLIO MANAGERS FOLLOW BOTH THE
FUNDS' STATED OBJECTIVES AND THEIR INDIVIDUAL CULTIVATED PREFERENCES. YET AS A
GROUP, WE BELIEVE OUR MANAGERS ARE OF LIKE MINDS WHEN IT COMES TO FOLLOWING
TIME-HONORED INVESTMENT PRINCIPLES. SIMPLY PUT, THEY MAKE THEIR SELECTIONS BASED
ON SUBSTANCE, NOT FADS.
TO ILLUSTRATE THIS, WE RECENTLY POLLED OUR PORTFOLIO MANAGERS TO FIND OUT
WHAT THEY WILL LOOK FOR (IN ADDITION TO THE CUSTOMARY QUALITATIVE AND
QUANTITATIVE ANALYSIS) FOR THEIR PORTFOLIO SELECTIONS DURING THE SECOND HALF OF
1998. AS WE EXPECTED, THEY WERE IN CLOSE AGREEMENT THAT THE FOLLOWING FIVE
TRAITS ARE MOST IMPORTANT:
1. PRICE (NOT TO MENTION PRICE, PRICE, PRICE AND PRICE) REMAINS A KEY FACTOR.
2. EXPECTED RETURNS ARE CRUCIAL SHOULD INTEREST RATES CHANGE.
3. GOOD DIVERSIFICATION IS MORE IMPORTANT THAN EVER IN AN INCREASINGLY
VOLATILE MARKET.
4. THE ABILITY TO ACHIEVE CONSISTENT EARNINGS GROWTH SHOULD BE EMPHASIZED.
5. IT'S WISE TO INCLUDE SECURITIES THAT REDUCE THE VOLATILITY OF THE PORTFOLIO
ITSELF.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1 Letter from the Chairman
2 Summary Information
Schedule of Investments:
4 Montag & Caldwell Growth Fund
5 Chicago Trust Growth & Income Fund
6 Chicago Trust Talon Fund
7 Chicago Trust Balanced Fund
11 Montag & Caldwell Balanced Fund
14 Chicago Trust Bond Fund
17 Chicago Trust Municipal Bond Fund
20 Chicago Trust Money Market Fund
22 Statement of Assets and Liabilities
24 Statement of Operations
26 Statement of Changes in Net Assets
30 Financial Highlights
39 Notes to Financial Statements
[LOGO] ALLEGHANY FUNDS
GUIDE TO SHAREHOLDER BENEFITS
We're delighted to offer all Alleghany Funds shareowners a full assortment of
special features and convenient options. To receive more information about any
of these benefits, simply call an Investor Services Representative Monday -
Friday, 9 am - 7 pm E.S.T.
THE EASY WAY TO GROW YOUR ACCOUNT:
START AN AUTOMATIC INVESTMENT PLAN(1)
Systematic investing is an easy, effortless way to help reach any
investment goal. Simply choose a fixed amount, and we'll automatically deduct
it from your checking or savings account on a regular schedule - every month,
for example - and invest it in your Alleghany Funds account. The service is
free, and the minimum initial investment is $50.
COMPOUND YOUR EARNINGS WITH
AUTOMATIC DIVIDEND REINVESTMENT
By automatically reinvesting your dividends into your Alleghany Funds
account, your profits can mount. Monthly and quarterly dividends, and annual
capital gain distributions, are reinvested at no charge.
FREE, FLEXIBLE EXCHANGE PRIVILEGES
As your personal needs change, so can your Alleghany Funds investment.
Transfers between our funds are free of charge, and it only takes a telephone
call.
LOW MINIMUM INITIAL INVESTMENTS
The minimum initial investment for all Alleghany Funds is just $2,500 ($500
for IRAs). And subsequent investments can be as low as $50.
FREE CHECK WRITING SERVICES AVAILABLE
If you are an investor of the Chicago Trust Money Market Fund, you can take
advantage of free check writing privileges. The minimum amount for each check is
$500.
CONVENIENT INVESTOR WEBSITE:
www.alleghanyfunds.chicago-trust.com
Now you can access account balances, obtain fund information and make
transactions online - 24 hours a day, in complete security. And we're among the
just 10% of mutual fund companies who provide these capabilities.
FUND PERFORMANCE INFORMATION
IS AVAILABLE 24 HOURS A DAY
1-800-992-8151
(1) Periodic investment plans involve continuous investments in securities
regardless of price. You should consider your financial ability to continue to
purchase shares during periods of high and low prices.
Dear Shareowner,
Our portfolio managers' perspectives on securities markets are not always
uniform. However, there is one constant -- they stick to their investment
disciplines. While it is difficult to sustain consistent long-term investment
performance, it may only occur if we continue to do those things that have
brought us success over the life of our funds.
We view these semi-annual reports as an opportunity to provide you with our
report card. I am therefore pleased to inform you that your funds are growing.
On May Day (May 1, 1998), one day after the end of our semi-annual reporting
period, our assets under management topped $2.5 billion! Not bad for a group
that had less than $700 million under management on December 31, 1995. We are
not foolish enough to ignore the fact that a lot of this growth has come from a
raging bull market in equities, but a significant amount has come from new
shareowners entrusting us with their assets. We welcome new shareowners to our
fund family, and we will do all that we can to help all of you reach your
financial goals.
Our investment performance continues to be strong, with most of our funds
showing very good results for the three years ended April 30, 1998. As managers,
we like to take stock of our record on a rolling three-year basis. We believe
that one year is too short a period to reach any valid conclusion about
investment capability, but after three years, some reasonable judgments can be
made.
M&C CT GROWTH M&C CT MONEY
GROWTH & INCOME CT TALON BALANCED CT BOND MARKET
-------------------------------------------------------------------------------------------------
Total Return For 3 Years
Ended 4/30/98* 151.76% 127.38% 98.03% 93.94% 28.18% 16.60%
Rank Among Similar 19 out of 536 33 out of 430 69 out of 160 6 out of 248 45 out of 159 45 out of 251
Funds (Lipper) For Growth Funds Growth & Mid Cap Balanced Interm. Inv. Money Market
3 Years Ended 4/30/98* Income Funds Funds Funds Grade Bond Funds
Funds
Total Return For 1 Year
Ended 4/30/98 43.88% 39.86% 25.89% 30.54% 10.35% 5.29%
Rank Among Similar 224 out of 860 164 out of 647 269 out of 275 47 out of 360 67 out of 210 55 out of 305
Funds (Lipper) For Growth Funds Growth & Mid Cap Balanced Interm. Inv. Money Market
1 Year Ended 4/30/98* Income Funds Funds Funds Grade Bond Funds
Funds
Average Annual Total
Return Since (Inception) 33.88% 23.90% 23.32% 23.65% 6.57% 4.96%
as of 4/30/98 (11/2/94) (12/13/93) (9/19/94) (11/2/94) (12/13/93) (12/14/93)
We are proud of this record and hope you too are pleased with your investments.
Thank you for your confidence in the Alleghany Funds. Please visit our website
at www.alleghanyfunds.chicago-trust.com
Sincerely,
Stuart D. Bilton
Chairman and Chief Executive Officer
- --------------------------
The performance data quoted represents past performance and is no guarantee of
future performance.
* Lipper Analytical Services, Inc. (Lipper) is the source of the rankings, which
are based on total return fund performance for the one year ended April 30,
1998, and three years ended April 30, 1998, for funds of similar investment
objectives. The Lipper rankings listed include all classes of multiple-class
funds. Certain expenses for all of the ranked Alleghany Funds were subsidized
(by the Chicago Trust Company and Montag & Caldwell, Inc.) during the ranking
period for the one year ended April 30, 1998, and three years ended April 30,
1998.
The Alleghany Funds are no-load mutual funds distributed by First Data
Distributors, Inc., Westborough, MA 01581. This is not an offer to sell or a
solicitation of an offer to buy shares of any of the Funds described. Investment
return and principal value of an investment will fluctuate so that an Investor's
shares, when redeemed, may be worth more or less than their original cost. This
information must be accompanied or preceded by a prospectus.
1
ALLEGHANY FUNDS -- SUMMARY INFORMATION
PERFORMANCE FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
MONTAG & CALDWELL GROWTH FUND
CLASS N (RETAIL) CLASS I (INSTITUTIONAL) CHICAGO TRUST GROWTH & INCOME FUND
--------------------------------------------- --------------------------------------------
Total Returns:
6 Months 20.79% 20.99% 22.76%
1 Year 43.88% 44.36% 39.86%
Three Year
Average Annual N/A N/A 31.50%
Average Annual
Since Inception 33.88% 37.03% 23.90%
Value of $10,000 $27,690 $17,814 $25,536
from Inception
Date 11/2/94 6/28/96 12/13/93
--------------------------------------------- --------------------------------------------
TOP TEN HOLDINGS as of April 30, 1998
--------------------------------------------- --------------------------------------------
Company and Eli Lilly & Co. 4.70% Illinois Tool Works, Inc. 4.02%
% of Total Net Coca-Cola Co. 4.65% EMC Corp. 3.64%
Assets Gillette Co. 4.53% General Electric Co. 3.62%
Procter & Gamble Co. 4.52% Sysco Corp. 3.55%
Bristol-Myers Squibb Co. 4.51% Pfizer, Inc. 3.52%
Johnson & Johnson 4.45% Tellabs, Inc. 3.38%
Schlumberger, Ltd. 4.20% Health Management Associates, Inc. 3.28%
McDonald's Corp. 4.09% AlliedSignal, Inc. 3.26%
Walt Disney Co. 4.06% Paychex, Inc. 3.16%
Boston Scientific Corp. 3.72% American International Group, Inc. 3.12%
--------------------------------------------- --------------------------------------------
CHICAGO TRUST TALON FUND CHICAGO TRUST BALANCED FUND
--------------------------------------------- --------------------------------------------
Total Returns:
6 Months 3.58% 14.99%
1 Year 25.89% 28.63%
Three Year
Average Annual 25.58% N/A
Average Annual
Since Inception 23.32% 20.78%
Value of $10,000 $21,320 $16,362
from Inception
Date 9/19/94 9/21/95
--------------------------------------------- ---------------------------------------------
TOP TEN HOLDINGS as of April 30, 1998
--------------------------------------------- ---------------------------------------------
Company and Cerner Corp. 6.04% Paychex, Inc. 2.27%
% of Total Net Columbia HCA Healthcare Corp. 5.92% General Electric Co. 2.18%
Assets Mylan Laboratories, Inc. 5.31% American International Group, Inc. 2.14%
U.S. Treasury Bill, 4.680%, 05/14/98 4.89% Tellabs, Inc. 2.14%
Vitalink Pharmacy Services, Inc. 4.74% Illinois Tool Works, Inc. 2.13%
R.R. Donnelley & Sons Co. 4.60% Pfizer, Inc. 2.12%
Capital Trust, Class A 4.59% Microsoft Corp. 2.10%
Starbucks Corp. 4.40% Health Management Associates, Inc.,
Danielson Holdings Corp. 4.05% Class A 2.05%
St. Paul Bancorp, Inc. 3.93% Cisco Systems, Inc. 2.04%
Norwest Corp. 2.03%
--------------------------------------------- ---------------------------------------------
2
ALLEGHANY FUNDS -- SUMMARY INFORMATION
PERFORMANCE FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
MONTAG & CALDWELL BALANCED FUND CHICAGO TRUST BOND FUND
------------------------------------------- ---------------------------------------------
Total Returns:
6 Months 13.34% 3.23%
1 Year 30.54% 10.35%
Three Year
Average Annual 24.71% 8.63%
Average Annual
Since Inception 23.65% 6.57%
Value of $10,000 $20,979 $13,211
from Inception
Date 11/2/94 12/13/93
--------------------------------------------- -----------------------------------------------
TOP TEN HOLDINGS as of April 30, 1998
--------------------------------------------- -----------------------------------------------
Company and Eli Lilly & Co. 2.99% U.S. Treasury Note, 6.370%, 08/15/02 3.26%
% of Total Net Gillette Co. 2.85% Merrill Lynch & Co., Inc., 7.000%,
Assets Coca-Cola Co. 2.82% 04/27/08 2.59%
Bristol-Myers Squibb Co. 2.77% U.S. Treasury Note, 7.250%, 05/15/04 2.28%
Walt Disney Co. 2.76% U.S. Treasury Note, 6.250%, 10/31/01 2.16%
Procter & Gamble Co. 2.74% Metropolitan Life
Johnson & Johnson 2.71% Insurance Co. 6.300%, 11/01/03 2.11%
McDonald's Corp. 2.66% Countrywide Home
U.S. Treasury Note, 6.500%, 10/15/06 2.63% Loans, CMO 6.750%, 04/25/28 2.06%
U.S. Treasury Note, 6.250%, 02/15/07 2.59% U.S. Treasury Bond, 7.125%, 02/15/23 2.01%
Chilgener S.A. Yankee
(Chile), 6.500%, 01/15/06 2.00%
U.S. Treasury Note, 7.875%, 08/15/01 1.88%
HSBC America Capital II, 8.380%,
05/15/27 1.85%
--------------------------------------------- ------------------------------------------------
CHICAGO TRUST MUNICIPAL BOND FUND
Total Returns:
---------------------------------------------------------------------------------------------------
6 Months 1.70%
1 Year 5.98%
Three Year
Average Annual 5.12%
Average Annual
Since Inception 4.00%
Value of $10,000 $11,871
from Inception
Date 12/13/93
---------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS as of April 30, 1998
---------------------------------------------------------------------------------------------------
Company and King County, Washington, Series A, Arlington Independent School District,
% of Total Net G.O., 5.800%, 01/01/04 3.94% Texas, Refunding, G.O., 5.400%,02/15/99 2.95%
Assets Salt River Project Electric System Revenue, Mohave County, AZ, IDA, 6.000%, 07/01/00 2.83%
AZ, Refunding, Series A, 5.500%, 01/01/05 3.69% State of New Jersey Transportation Trust
Texas State Water Development Board, G.O. Fund Revenue, 5.200%, 12/15/00 2.80%
Escrowed to Maturity, 5.000%, 08/01/99 3.55% Tulsa, Oklahoma Metropolitan Utility
Commonwealth of Puerto Rico, Series A, G.O. Authority Revenue, 5.500%, 07/01/00 2.80%
6.500%, 07/01/03 3.42% Tooele County, Utah, Hazardous Waste
Clark County, Nevada School District, G.O. Treatment Revenue, 5.700%, 11/01/26 2.71%
6.400%, 06/15/06 3.00%
---------------------------------------------------------------------------------------------------
3
ALLEGHANY FUNDS
MONTAG & CALDWELL GROWTH FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
COMMON STOCKS - 96.96%
BUSINESS SERVICES - 1.78%
550,000 Manpower, Inc. . . . . . . . . . . . . . . . . . $ 24,234,375
----------------
CONSUMER NON-DURABLES - 14.85%
535,000 Gillette Co. . . . . . . . . . . . . . . . . . . 61,759,062
530,000 Interpublic Group Of Companies, Inc. . . . . . . 33,853,750
1,175,000 Mattel, Inc. . . . . . . . . . . . . . . . . . . 45,017,187
750,000 Procter & Gamble Co. . . . . . . . . . . . . . . 61,640,625
----------------
202,270,624
----------------
ELECTRICAL - 2.97%
475,000 General Electric Co. . . . . . . . . . . . . . . 40,434,375
----------------
ENERGY - 6.13%
650,000 Baker Hughes, Inc. . . . . . . . . . . . . . . . 26,325,000
690,000 Schlumberger, Ltd. . . . . . . . . . . . . . . . 57,183,750
----------------
83,508,750
----------------
ENTERTAINMENT AND LEISURE - 4.06%
445,000 Walt Disney Co. . . . . . . . . . . . . . . . . 55,319,063
----------------
FINANCE - 6.41%
430,000 American Express Co. . . . . . . . . . . . . . . 43,860,000
330,000 American International Group, Inc. . . . . . . . 43,415,625
----------------
87,275,625
----------------
FOOD AND BEVERAGE - 4.77%
835,000 Coca-Cola Co.. . . . . . . . . . . . . . . . . . 63,355,625
43,000 Pioneer Hi-Bred International, Inc. . . . . . . 1,623,250
----------------
64,978,875
----------------
HEALTH CARE SERVICES - 7.80%
850,000 Johnson & Johnson. . . . . . . . . . . . . . . . 60,668,750
401,000 Pfizer, Inc. . . . . . . . . . . . . . . . . . . 45,638,813
----------------
106,307,563
----------------
LODGING - 2.32%
540,000 Marriott International, Inc. . . . . . . . . . . 17,820,000
432,400 Marriott International, Inc., Class A. . . . . . 13,836,800
----------------
31,656,800
----------------
MEDICAL SUPPLIES - 3.38%
875,000 Medtronic, Inc. . . . . . . . . . . . . . . . . 46,046,875
----------------
PHARMACEUTICALS - 12.21%
580,000 Bristol-Myers Squibb Co. . . . . . . . . . . . . 61,407,500
920,000 Eli Lilly & Co. . . . . . . . . . . . . . . . . 63,997,500
340,000 Merck & Co., Inc. . . . . . . . . . . . . . . . 40,970,000
----------------
166,375,000
----------------
Market
Shares Value
- ------ -----
RESTAURANTS - 5.62%
400,000 Cracker Barrell Old Country Store, Inc. . . . . $ 14,700,000
1,000,000 McDonald's Corp. . . . . . . . . . . . . . . . . 61,875,000
----------------
76,575,000
----------------
RETAIL - 6.44%
825,000 Gap, Inc. . . . . . . . . . . . . . . . . . . . 42,435,938
650,000 Home Depot, Inc. . . . . . . . . . . . . . . . . 45,256,250
----------------
87,692,188
----------------
TECHNOLOGY - 15.29%
700,000 Boston Scientific Corp.* . . . . . . . . . . . . 50,618,750
590,000 Cisco Systems, Inc.* . . . . . . . . . . . . . . 43,217,500
550,000 Electronic Arts, Inc.* . . . . . . . . . . . . . 25,437,500
70,000 Hewlett-Packard Co. . . . . . . . . . . . . . . 5,271,875
159,100 Intel Corp.. . . . . . . . . . . . . . . . . . . 12,857,269
442,600 Microsoft Corp.* . . . . . . . . . . . . . . . . 39,889,325
700,000 Solectron Corp.* . . . . . . . . . . . . . . . . 31,018,750
----------------
208,310,969
----------------
TELECOMMUNICATIONS - 2.93%
775,500 Ericsson (LM) Telefonaktiebolaget, ADR
Class B, Series 10 . . . . . . . . . . . . . . . 39,889,781
----------------
TOTAL COMMON STOCKS. . . . . . . . . . . . . . . 1,320,875,863
(Cost $996,809,509) ----------------
INVESTMENT COMPANIES - 4.24%
49,121,510 Bankers Trust Institutional
Cash Management Fund . . . . . . . . . . . . . . 49,121,510
8,603,387 Bankers Trust Institutional
Treasury Money Fund. . . . . . . . . . . . . . . 8,603,387
----------------
TOTAL INVESTMENT COMPANIES . . . . . . . . . . . 57,724,897
(Cost $57,724,897) ----------------
TOTAL INVESTMENTS - 101.20%. . . . . . . . . . . . . . . . . . 1,378,600,760
(Cost $1,054,534,406)** ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (1.20%) . . . . . . (16,332,286)
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 1,362,268,474
----------------
----------------
- --------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $1,054,534,406.
Gross unrealized appreciation $ 327,662,730
Gross unrealized (depreciation) (3,596,376)
--------------
Net unrealized appreciation $ 324,066,354
--------------
--------------
ADR American Depositary Receipt
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
ALLEGHANY FUNDS
CHICAGO TRUST GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
COMMON STOCKS - 97.58%
BUSINESS SERVICES - 3.16%
206,000 Paychex, Inc. . . . . . . . . . . . . . . . . . $ 11,188,375
----------------
CAPITAL GOODS - 6.16%
264,000 AlliedSignal, Inc. . . . . . . . . . . . . . . . 11,566,500
214,000 Pitney Bowes, Inc. . . . . . . . . . . . . . . . 10,272,000
----------------
21,838,500
----------------
CHEMICALS - 2.39%
168,000 Praxair, Inc. . . . . . . . . . . . . . . . . . 8,452,500
----------------
CONSUMER DURABLES - 6.82%
202,000 Illinois Tool Works, Inc. . . . . . . . . . . . 14,241,000
167,000 Johnson Controls, Inc. . . . . . . . . . . . . . 9,915,625
----------------
24,156,625
----------------
CONSUMER NON-DURABLES - 11.67%
200,200 Cintas Corp. . . . . . . . . . . . . . . . . . . 9,534,525
124,250 Lancaster Colony Corp. . . . . . . . . . . . . . 4,799,156
265,000 Mattel, Inc. . . . . . . . . . . . . . . . . . . 10,152,813
170,100 Newell Co. . . . . . . . . . . . . . . . . . . . 8,217,956
105,000 Procter & Gamble Co. . . . . . . . . . . . . . . 8,629,687
----------------
41,334,137
----------------
ELECTRICAL - 3.62%
150,800 General Electric Co. . . . . . . . . . . . . . . 12,836,850
----------------
ENERGY - 1.59%
96,000 Smith International, Inc.* . . . . . . . . . . . 5,640,000
----------------
FINANCE - 18.30%
100,000 AFLAC, Inc. . . . . . . . . . . . . . . . . . . 6,500,000
83,975 American International Group, Inc. . . . . . . . 11,047,961
133,000 Associates First Capital Corp., Class A . . . . 9,941,750
216,600 Federal Home Loan Mortgage Corp. . . . . . . . . 10,031,287
108,000 First Data Corp. . . . . . . . . . . . . . . . . 3,658,500
205,287 MBNA Corp. . . . . . . . . . . . . . . . . . . . 6,954,097
221,200 Norwest Corp. . . . . . . . . . . . . . . . . . 8,778,875
226,000 Schwab (Charles) Corp. . . . . . . . . . . . . . 7,910,000
----------------
64,822,470
----------------
FOOD AND BEVERAGE - 4.81%
163,500 Richfood Holdings, Inc., Class A . . . . . . . . 4,486,031
528,000 Sysco Corp. . . . . . . . . . . . . . . . . . . 12,573,000
----------------
17,059,031
----------------
HEALTH CARE SERVICES - 12.45%
114,000 Cardinal Health, Inc. . . . . . . . . . . . . . 10,972,500
369,375 Health Management
Associates, Inc., Class A* . . . . . . . . . . . 11,635,313
Market
Shares Value
- ------ -----
HEALTH CARE SERVICES (CONTINUED)
264,000 Omnicare, Inc. . . . . . . . . . . . . . . . . . $ 9,042,000
109,600 Pfizer, Inc. . . . . . . . . . . . . . . . . . . 12,473,850
----------------
44,123,663
----------------
PHARMACEUTICALS - 2.74%
80,700 Merck & Co., Inc. . . . . . . . . . . . . . . . 9,724,350
----------------
RETAIL - 3.77%
102,000 Kohl's Corp.* . . . . . . . . . . . . . . . . . 4,213,875
265,000 Walgreen Co. . . . . . . . . . . . . . . . . . . 9,142,500
----------------
13,356,375
----------------
TECHNOLOGY - 16.72%
139,600 Cisco Systems, Inc.* . . . . . . . . . . . . . . 10,225,700
135,000 Computer Associates International, Inc. . . . . 7,905,938
127,200 Computer Sciences Corp.* . . . . . . . . . . . . 6,709,800
279,300 EMC Corp.* . . . . . . . . . . . . . . . . . . . 12,882,713
177,000 HBO & Co.. . . . . . . . . . . . . . . . . . . . 10,586,812
64,800 Microsoft Corp.* . . . . . . . . . . . . . . . . 5,840,100
124,000 Sun Microsystems, Inc.* . . . . . . . . . . . . 5,107,250
----------------
59,258,313
----------------
TELECOMMUNICATIONS - 3.38%
169,000 Tellabs, Inc.* . . . . . . . . . . . . . . . . . 11,977,875
----------------
TOTAL COMMON STOCKS. . . . . . . . . . . . . . . 345,769,064
(Cost $229,357,104) ----------------
Par Value
- ---------
REPURCHASE AGREEMENT - 2.49%
$ 8,823,000 First Chicago,
5.400%, dated 04/30/98 to be repurchased
on 05/01/98 at $8,824,323
(Collateralized by U.S. Treasury Note
6.250%, due 05/31/00;
Total Par $8,675,000). . . . . . . . . . . . . . 8,823,000
----------------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . 8,823,000
(Cost $8,823,000) ----------------
TOTAL INVESTMENTS - 100.07%. . . . . . . . . . . . . . . . . . 354,592,064
----------------
(Cost $238,180,104)**
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.07%) . . . . . . (259,419)
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 354,332,645
----------------
----------------
- --------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $238,180,104.
Gross unrealized appreciation $ 119,070,438
Gross unrealized (depreciation) (2,658,478)
--------------
Net unrealized appreciation $ 116,411,960
--------------
--------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
ALLEGHANY FUNDS
CHICAGO TRUST TALON FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
COMMON STOCKS - 78.77%
CONSUMER CYCLICAL - 3.54%
60,000 Circus Circus Enterprises, Inc.* . . . . . . . . $ 1,083,750
----------------
CONSUMER STAPLE - 2.44%
20,000 Philip Morris Cos., Inc. . . . . . . . . . . . . 746,250
----------------
ELECTRICAL - 2.33%
30,000 Berg Electronics Corp.*. . . . . . . . . . . . . 714,375
----------------
FINANCE - 18.36%
125,000 Capital Trust, Class A*. . . . . . . . . . . . . 1,406,250
160,000 Danielson Holdings Corp.*. . . . . . . . . . . . 1,240,000
48,125 St. Paul Bancorp, Inc. . . . . . . . . . . . . . 1,203,125
30,000 TIG Holdings, Inc. . . . . . . . . . . . . . . . 721,875
25,000 Travelers Property Casualty, Class A . . . . . . 1,050,000
----------------
5,621,250
----------------
HEALTHCARE SERVICES - 5.91%
55,000 Columbia HCA Healthcare Corp.. . . . . . . . . . 1,811,563
----------------
LODGING - 3.13%
30,000 Hilton Hotels Corp. . . . . . . . . . . . . . . 958,125
----------------
PHARMACEUTICALS - 13.51%
60,000 Mylan Laboratories, Inc. . . . . . . . . . . . . 1,627,500
65,000 North American Vaccine, Inc.* . . . . . . . . . 1,056,250
67,544 Vitalink Pharmacy Services, Inc.*. . . . . . . . 1,452,196
----------------
4,135,946
----------------
PRINTING AND PUBLISHING - 4.60%
32,000 R.R. Donnelley & Sons Co. . . . . . . . . . . . 1,410,000
----------------
REAL ESTATE - 2.88%
31,000 Equity Office Properties Trust, REIT . . . . . . 881,562
----------------
RESTAURANTS - 6.70%
28,000 Starbucks Corp.* . . . . . . . . . . . . . . . . 1,347,500
122,500 Unique Casual Restaurants* . . . . . . . . . . . 704,375
----------------
2,051,875
----------------
TECHNOLOGY - 12.54%
62,000 Cerner Corp.* . . . . . . . . . . . . . . . . . 1,848,375
40,000 Compaq Computer Corp.. . . . . . . . . . . . . . 1,122,500
115,000 Robotic Vision Systems, Inc.*. . . . . . . . . . 869,687
----------------
3,840,562
----------------
Market
Shares Value
- ------ -----
TELECOMMUNICATIONS - 2.83%
125,000 Data Broadcasting Corp.* . . . . . . . . . . . . $ 867,188
----------------
TOTAL COMMON STOCKS. . . . . . . . . . . . . . . 24,122,446
(Cost $19,840,801) ----------------
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.70%
FEDERAL HOME LOAN BANK - 3.22%
$ 1,000,000 5.317%, 08/03/98 . . . . . . . . . . . . . . . . 985,970
----------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 3.24%
1,000,000 5.217%, 06/11/98 . . . . . . . . . . . . . . . . 993,850
----------------
U.S. TREASURY BILLS (A) - 12.97%
1,500,000 4.680%, 05/14/98 . . . . . . . . . . . . . . . . 1,497,270
1,000,000 4.827%, 05/28/98 . . . . . . . . . . . . . . . . 996,246
1,000,000 4.783%, 07/23/98 . . . . . . . . . . . . . . . . 988,840
500,000 5.012%, 10/15/98 . . . . . . . . . . . . . . . . 488,305
----------------
3,970,661
----------------
U.S. TREASURY NOTE - 3.27%
1,000,000 5.250%, 07/31/98 . . . . . . . . . . . . . . . . 1,000,450
----------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS . . . . . . . . . . . . . 6,950,931
(Cost $6,949,249) ----------------
Shares
- ------
INVESTMENT COMPANY - 3.17%
970,973 Bankers Trust Institutional
Cash Management Fund . . . . . . . . . . . . . . 970,973
----------------
TOTAL INVESTMENT COMPANY . . . . . . . . . . . . 970,973
(Cost $970,973) ----------------
TOTAL INVESTMENTS - 104.64%. . . . . . . . . . . . . . . . . . 32,044,350
(Cost $27,761,023)** ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (4.64%) . . . . . . (1,421,301)
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 30,623,049
----------------
----------------
- --------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $27,761,025.
Gross unrealized appreciation $ 5,319,977
Gross unrealized (depreciation) (1,036,650)
------------
Net unrealized appreciation $ 4,283,327
------------
------------
(A) Annualized yield at time of purchase
REIT Real Estate Investment Trust
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
COMMON STOCKS - 59.56%
BUSINESS SERVICES - 2.27%
90,000 Paychex, Inc. . . . . . . . . . . . . . . . . . $ 4,888,125
----------------
CAPITAL GOODS - 3.51%
90,000 AlliedSignal Corp. . . . . . . . . . . . . . . . 3,943,125
75,000 Pitney Bowes, Inc. . . . . . . . . . . . . . . . 3,600,000
----------------
7,543,125
----------------
CHEMICALS - 1.05%
45,000 Praxair, Inc. . . . . . . . . . . . . . . . . . 2,264,062
----------------
CONSUMER DURABLES - 3.51%
65,000 Illinois Tool Works, Inc. . . . . . . . . . . . 4,582,500
50,000 Johnson Controls, Inc. . . . . . . . . . . . . . 2,968,750
----------------
7,551,250
----------------
CONSUMER NON-DURABLES - 7.36%
85,000 Cintas Corp. . . . . . . . . . . . . . . . . . . 4,048,125
75,000 Lancaster Colony Corp. . . . . . . . . . . . . . 2,896,875
60,000 Mattel, Inc. . . . . . . . . . . . . . . . . . . 2,298,750
75,000 Newell Co. . . . . . . . . . . . . . . . . . . . 3,623,437
36,000 Procter & Gamble Co. . . . . . . . . . . . . . . 2,958,750
----------------
15,825,937
----------------
ELECTRICAL - 2.18%
55,000 General Electric Co. . . . . . . . . . . . . . . 4,681,875
----------------
ENERGY - 1.09%
40,000 Smith International, Inc.* . . . . . . . . . . . 2,350,000
----------------
FINANCE - 12.18%
40,000 AFLAC, Inc. . . . . . . . . . . . . . . . . . . 2,600,000
35,000 American International Group, Inc. . . . . . . . 4,604,687
30,000 Associates First Capital Corp., Class A . . . . 2,242,500
90,000 Federal Home Loan Mortgage Corp. . . . . . . . . 4,168,125
50,000 First Data Corp. . . . . . . . . . . . . . . . . 1,693,750
110,000 MBNA Corp. . . . . . . . . . . . . . . . . . . . 3,726,250
110,000 Norwest Corp. . . . . . . . . . . . . . . . . . 4,365,625
80,000 Schwab (Charles) Corp. . . . . . . . . . . . . . 2,800,000
----------------
26,200,937
----------------
FOOD AND BEVERAGE - 2.35%
45,000 Richfood Holdings, Inc., Class A . . . . . . . . 1,234,687
160,000 Sysco Corp. . . . . . . . . . . . . . . . . . . 3,810,000
----------------
5,044,687
----------------
HEALTH CARE SERVICES - 7.33%
35,000 Cardinal Health, Inc. . . . . . . . . . . . . . 3,368,750
140,000 Health Management
Associates, Inc., Class A* . . . . . . . . . . . 4,410,000
Market
Shares Value
- ------ -----
HEALTH CARE SERVICES (CONTINUED)
100,000 Omnicare, Inc. . . . . . . . . . . . . . . . . . $ 3,425,000
40,000 Pfizer, Inc. . . . . . . . . . . . . . . . . . . 4,552,500
----------------
15,756,250
----------------
PHARMACEUTICALS - 1.68%
30,000 Merck & Co., Inc. . . . . . . . . . . . . . . . 3,615,000
----------------
RETAIL - 2.57%
50,000 Kohl's Corp.* . . . . . . . . . . . . . . . . . 2,065,625
100,000 Walgreen Co. . . . . . . . . . . . . . . . . . . 3,450,000
----------------
5,515,625
----------------
TECHNOLOGY - 10.34%
60,000 Cisco Systems, Inc.* . . . . . . . . . . . . . . 4,395,000
35,000 Computer Associates International, Inc. . . . . 2,049,687
50,000 Computer Sciences Corp.* . . . . . . . . . . . . 2,637,500
85,000 EMC Corp.* . . . . . . . . . . . . . . . . . . . 3,920,625
55,000 HBO & Co.. . . . . . . . . . . . . . . . . . . . 3,289,687
50,000 Microsoft Corp.* . . . . . . . . . . . . . . . . 4,506,250
35,000 Sun Microsystems, Inc.* . . . . . . . . . . . . 1,441,562
----------------
22,240,311
----------------
TELECOMMUNICATIONS - 2.14%
65,000 Tellabs, Inc.* . . . . . . . . . . . . . . . . . 4,606,875
----------------
TOTAL COMMON STOCKS. . . . . . . . . . . . . . . 128,084,059
(Cost $80,206,668) ----------------
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 18.10%
U.S. TREASURY NOTES - 7.37%
$ 1,500,000 9.000%, 05/15/98 . . . . . . . . . . . . . . . . 1,502,580
2,000,000 5.500%, 02/28/99 . . . . . . . . . . . . . . . . 2,000,300
2,000,000 7.125%, 02/29/00 . . . . . . . . . . . . . . . . 2,053,100
2,000,000 7.875%, 08/15/01 . . . . . . . . . . . . . . . . 2,132,200
2,000,000 6.375%, 08/15/02 . . . . . . . . . . . . . . . . 2,052,800
2,000,000 5.750%, 08/15/03 . . . . . . . . . . . . . . . . 2,007,920
2,000,000 5.875%, 02/15/04 . . . . . . . . . . . . . . . . 2,018,780
2,000,000 6.500%, 08/15/05 . . . . . . . . . . . . . . . . 2,088,060
----------------
15,855,740
----------------
U.S. TREASURY BONDS - 1.51%
1,500,000 7.125%, 02/15/23 . . . . . . . . . . . . . . . . 1,707,600
1,500,000 6.250%, 08/15/23 . . . . . . . . . . . . . . . . 1,542,345
----------------
3,249,945
----------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.49%
350,717 5.500%, 08/15/04 . . . . . . . . . . . . . . . . 350,082
1,000,000 5.850%, 02/21/06 . . . . . . . . . . . . . . . . 988,810
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
FEDERAL HOME LOAN
MORTGAGE CORPORATION (CONTINUED)
$ 1,000,000 6.500%, 09/15/07 . . . . . . . . . . . . . . . . $ 1,016,750
495,164 7.500%, 04/01/08 . . . . . . . . . . . . . . . . 510,019
954,908 6.500%, 06/01/09 . . . . . . . . . . . . . . . . 960,275
544,580 7.000%, 07/01/13 . . . . . . . . . . . . . . . . 551,556
198,726 7.000%, 11/15/13, IO . . . . . . . . . . . . . . 976
1,000,000 6.000%, 12/15/23 . . . . . . . . . . . . . . . . 970,490
----------------
5,348,958
----------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 2.99%
2,000,000 5.625%, 03/15/01 . . . . . . . . . . . . . . . . 1,992,760
746,989 6.900%, 12/25/03, CMO. . . . . . . . . . . . . . 756,379
1,403,207 7.000%, 01/01/13 . . . . . . . . . . . . . . . . 1,429,518
990,089 7.000%, 03/01/13 . . . . . . . . . . . . . . . . 1,008,653
773,371 7.000%, 07/25/17, CMO, IO. . . . . . . . . . . . 56,181
443,830 9.000%, 05/01/25 . . . . . . . . . . . . . . . . 469,625
718,184 6.500%, 02/01/28 . . . . . . . . . . . . . . . . 711,226
----------------
6,424,342
----------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 3.74%
429,655 7.000%, 06/15/08 . . . . . . . . . . . . . . . . 439,859
573,582 8.000%, 03/15/17 . . . . . . . . . . . . . . . . 595,625
806,042 8.000%, 06/15/17 . . . . . . . . . . . . . . . . 837,018
1,568,161 7.000%, 09/15/23 . . . . . . . . . . . . . . . . 1,587,763
734,497 7.000%, 10/15/23 . . . . . . . . . . . . . . . . 743,679
1,004,766 7.000%, 10/15/23 . . . . . . . . . . . . . . . . 1,017,325
1,387,579 6.500%, 03/15/26 . . . . . . . . . . . . . . . . 1,375,868
474,370 7.500%, 06/15/27 . . . . . . . . . . . . . . . . 487,709
961,802 6.500%, 08/15/27 . . . . . . . . . . . . . . . . 954,887
----------------
8,039,733
----------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS . . . . . . . . . . . . . 38,918,718
(Cost $38,280,783) ----------------
CORPORATE NOTES AND BONDS - 15.87%
CABLE TELEVISION - 0.38%
700,000 Continental Cablevision, Debenture
9.500%, 08/01/13 . . . . . . . . . . . . . . . . 815,500
----------------
ENERGY - 1.30%
1,700,000 Ashland, Inc.
6.625%, 02/15/08 (A) . . . . . . . . . . . . . . 1,696,000
375,000 Petroliam Nasional Berhad
7.125%, 10/18/06 (A) . . . . . . . . . . . . . . 351,094
750,000 Williams Co., Inc.
5.950%, 02/15/00 (A) . . . . . . . . . . . . . . 739,688
----------------
2,786,782
----------------
Market
Par Value Value
- --------- -----
FINANCE - 8.79%
$ 1,000,000 Advanta Corp., MTN
7.000%, 05/01/01 . . . . . . . . . . . . . . . . $ 923,750
650,000 Associates Corp. NA
6.375%, 08/15/98 . . . . . . . . . . . . . . . . 650,767
750,000 Chelsea GCA Realty Partnership, REIT
7.250%, 10/21/07 . . . . . . . . . . . . . . . . 765,000
1,000,000 Continental Corp. Notes
7.250%, 03/01/03 . . . . . . . . . . . . . . . . 1,027,500
750,000 DR Investment Corp.
7.450%, 05/15/07 (A) . . . . . . . . . . . . . . 796,875
1,250,000 Goldman Sachs Group LP
6.250%, 02/01/03 (A) . . . . . . . . . . . . . . 1,246,875
1,000,000 HSBC America Capital II
8.380%, 05/15/27 (A) . . . . . . . . . . . . . . 1,048,750
1,500,000 Heller Financial, Inc.
5.625%, 03/15/00 . . . . . . . . . . . . . . . . 1,486,875
1,000,000 International Bank for Reconstruction &
Development Notes
9.770%, 05/27/98 . . . . . . . . . . . . . . . . 1,002,500
1,000,000 John Deere Capital Corp., Debenture
8.625%, 08/01/19 . . . . . . . . . . . . . . . . 1,092,500
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
8.250%, 06/15/05 . . . . . . . . . . . . . . . . 1,063,750
500,000 Leucadia National Corp.
Senior Subordinated Notes
7.875%, 10/15/06 . . . . . . . . . . . . . . . . 521,875
1,500,000 Merrill Lynch & Co., Inc.
7.000%, 04/27/08 . . . . . . . . . . . . . . . . 1,571,250
1,500,000 Metropolitan Life Insurance Co.
6.300%, 11/01/03 (A) . . . . . . . . . . . . . . 1,494,375
600,000 Olympic Financial Ltd.
11.500%, 03/15/07. . . . . . . . . . . . . . . . 597,000
1,000,000 Pacific Mutual Life Insurance Co.
7.900%, 12/30/23 (A) . . . . . . . . . . . . . . 1,090,000
1,000,000 Prudential Insurance Co. of America
8.300%, 07/01/25 (A) . . . . . . . . . . . . . . 1,117,500
375,000 SB Treasury Co., LLC
9.400%, 12/29/49 (A) . . . . . . . . . . . . . . 386,719
1,000,000 Wells Fargo Capital
7.730%, 12/01/26 (A) . . . . . . . . . . . . . . 1,026,250
----------------
18,910,111
----------------
FOOD AND BEVERAGE - 0.47%
1,000,000 Nabisco, Inc.
6.700%, 06/15/02 . . . . . . . . . . . . . . . . 1,013,750
----------------
HEALTHCARE SERVICES - 0.42%
1,100,000 Hospital Corp. of America
Debenture
8.123%, 06/01/00 (B) . . . . . . . . . . . . . . 911,625
----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
PRINTING AND PUBLISHING - 0.90%
$ 1,000,000 News America Holdings
7.750%, 02/01/24 . . . . . . . . . . . . . . . . $ 1,055,000
782,000 Time Warner, Inc., Series M
10.250%, 07/01/16. . . . . . . . . . . . . . . . 876,818
----------------
1,931,818
----------------
RETAIL - 0.47%
1,000,000 K-mart Corp., Debenture
7.950%, 02/01/23 . . . . . . . . . . . . . . . . 1,005,000
----------------
TRANSPORTATION - 0.21%
413,123 Delta Air Lines, Inc.
Equipment Trust, Series 1992A
8.540%, 01/02/07 . . . . . . . . . . . . . . . . 445,380
----------------
UTILITIES - 2.93%
1,000,000 CalEnergy Co., Inc.
7.630%, 10/15/07 . . . . . . . . . . . . . . . . 1,002,500
1,000,000 Commonwealth Edison Co., First Mortgage
7.750%, 07/15/23 . . . . . . . . . . . . . . . . 1,027,500
1,000,000 Gulf States Utilities, First Mortgage, Series A
8.250%, 04/01/04 . . . . . . . . . . . . . . . . 1,077,500
1,000,000 Long Island Lighting Co., Debenture
9.000%, 11/01/22 . . . . . . . . . . . . . . . . 1,137,500
1,000,000 Niagra Mohawk Power, First Mortgage
8.000%, 06/01/04 . . . . . . . . . . . . . . . . 1,067,500
1,000,000 Philadelphia Electric Co., First Mortgage
5.625%, 11/01/01 . . . . . . . . . . . . . . . . 986,250
----------------
6,298,750
----------------
TOTAL CORPORATE NOTES AND BONDS. . . . . . . . . 34,118,716
(Cost $33,224,995) ----------------
Market
Par Value Value
- --------- -----
YANKEE BONDS - 1.80%
$ 1,750,000 Chilgener S.A. Yankee (Chile)
6.500%, 01/15/06 . . . . . . . . . . . . . . . . $ 1,655,938
943,503 Province of Mendoza
Collateral Oil Royalty Note
10.000%, 07/25/02 (A). . . . . . . . . . . . . . 974,534
1,250,000 Skandinaviska Enskilda, Subordinated Notes
6.625%, 03/29/49 (A) . . . . . . . . . . . . . . 1,250,000
----------------
TOTAL YANKEE BONDS . . . . . . . . . . . . . . . 3,880,472
(Cost $3,918,272) ----------------
GOVERNMENT TRUST CERTIFICATES - 0.38%
51,490 Greece Trust, Class G-2
8.000%, 05/15/98 . . . . . . . . . . . . . . . . 51,490
745,803 Israel Collateral Trust, Class 1-C
9.250%, 11/15/01 . . . . . . . . . . . . . . . . 770,042
----------------
TOTAL GOVERNMENT TRUST CERTIFICATES. . . . . . . 821,532
(Cost $867,920) ----------------
ASSET-BACKED SECURITIES - 2.56%
1,000,000 BA Mortgage Securities, CMO
7.350%, 07/25/26 . . . . . . . . . . . . . . . . 1,004,688
1,400,000 Chemical Master Credit Card Trust I, Class A
5.550%, 09/15/03 . . . . . . . . . . . . . . . . 1,388,002
1,000,000 Citibank Credit Card Master Trust I, Class A
6.839%, 02/10/04 . . . . . . . . . . . . . . . . 1,017,840
1,500,000 Countrywide Home Loans, CMO
6.750%, 04/25/28 . . . . . . . . . . . . . . . . 1,458,750
600,000 Midland Realty Acceptance Corp., CMO
7.475%, 08/25/28 . . . . . . . . . . . . . . . . 630,188
----------------
TOTAL ASSET-BACKED SECURITIES. . . . . . . . . . 5,499,468
(Cost $5,459,599) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
ALLEGHANY FUNDS
CHICAGO TRUST BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
REPURCHASE AGREEMENTS - 1.26%
$ 2,446,000 First Chicago,
5.400%, dated 04/30/98 to be repurchased
on 05/01/98 at $2,446,367
(Collateralized by U.S. Treasury Note
6.250%, due 05/31/00;
Total Par $2,405,000). . . . . . . . . . . . . . $ 2,446,000
257,000 First Chicago,
5.400%, dated 04/30/98 to be repurchased
on 05/01/98 at $257,039
(Collateralized by U.S. Treasury Note
6.875%, due 08/31/99;
Total Par $260,000). . . . . . . . . . . . . . . 257,000
----------------
TOTAL REPURCHASE AGREEMENTS. . . . . . . . . . . 2,703,000
(Cost $2,703,000) ----------------
TOTAL INVESTMENTS - 99.53% . . . . . . . . . . . . . . . . . . 214,025,965
(Cost $164,661,237)** ----------------
NET OTHER ASSETS AND LIABILITIES - 0.47% . . . . . . . . . . . 1,006,936
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 215,032,901
----------------
----------------
- --------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $164,661,237.
Gross unrealized appreciation $ 50,441,633
Gross unrealized (depreciation) (1,076,905)
--------------
Net unrealized appreciation $ 49,364,728
--------------
--------------
(A) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold, in transactions exempt
from registration, to qualified institutional buyers. At April 30,
1998, these securities amounted to $13,218,660 or 6.15% of net assets.
(B) Annualized yield at time of purchase
CMO Collateralized Mortgage Obligation
IO Interest Only
MTN Medium Term Note
REIT Real Estate Investment Trust
PORTFOLIO COMPOSITION (Moody's Ratings)
Common Stock 60%
Repurchase Agreement 1%
U.S. Government Obligations 10%
U.S. Government Agency Obligations 9%
Rated Corporate Notes and Bonds:
Aaa 3%
AA 1%
A 5%
Baa 6%
Ba 4%
B 1%
-----
100%
-----
-----
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
COMMON STOCKS - 61.18%
BUSINESS SERVICES - 1.41%
44,800 Manpower, Inc. . . . . . . . . . . . . . . . . . $ 1,974,000
----------------
CONSUMER NON-DURABLES - 9.13%
34,500 Gillette Co. . . . . . . . . . . . . . . . . . . 3,982,594
29,400 Interpublic Group Of Companies, Inc. . . . . . . 1,877,925
80,000 Mattel, Inc. . . . . . . . . . . . . . . . . . . 3,065,000
46,500 Procter & Gamble Co. . . . . . . . . . . . . . . 3,821,719
----------------
12,747,238
----------------
ELECTRICAL - 1.98%
32,500 General Electric Co. . . . . . . . . . . . . . . 2,766,563
----------------
ENERGY - 3.77%
42,000 Baker Hughes, Inc. . . . . . . . . . . . . . . . 1,701,000
43,000 Schlumberger, Ltd. . . . . . . . . . . . . . . . 3,563,625
----------------
5,264,625
----------------
ENTERTAINMENT AND LEISURE - 2.76%
31,000 Walt Disney Co . . . . . . . . . . . . . . . . . 3,853,688
----------------
FINANCE - 4.05%
27,000 American Express Co. . . . . . . . . . . . . . . 2,754,000
22,000 American International Group, Inc. . . . . . . . 2,894,375
----------------
5,648,375
----------------
FOOD AND BEVERAGE - 2.82%
52,000 Coca-Cola Co.. . . . . . . . . . . . . . . . . . 3,945,500
----------------
HEALTH CARE SERVICES - 7.82%
60,000 Eli Lilly & Co. . . . . . . . . . . . . . . . . 4,173,750
53,000 Johnson & Johnson. . . . . . . . . . . . . . . . 3,782,875
26,100 Pfizer, Inc. . . . . . . . . . . . . . . . . . . 2,970,506
----------------
10,927,131
----------------
Market
Shares Value
- ------ -----
LODGING - 1.51%
32,400 Marriott International, Inc. . . . . . . . . . . $ 1,069,200
32,400 Marriott International, Inc., Class A. . . . . . 1,036,800
----------------
2,106,000
----------------
MEDICAL SUPPLIES - 2.19%
58,000 Medtronic, Inc. . . . . . . . . . . . . . . . . 3,052,250
----------------
PHARMACEUTICALS - 4.66%
36,500 Bristol-Myers Squibb Co. . . . . . . . . . . . . 3,864,437
22,000 Merck & Co., Inc. . . . . . . . . . . . . . . . 2,651,000
----------------
6,515,437
----------------
RESTAURANTS - 3.85%
38,700 Cracker Barrell Old Country Store, Inc. . . . . 1,422,225
64,000 McDonald's Corp. . . . . . . . . . . . . . . . . 3,960,000
----------------
5,382,225
----------------
RETAIL - 3.98%
54,000 Gap, Inc. . . . . . . . . . . . . . . . . . . . 2,777,625
40,000 Home Depot, Inc. . . . . . . . . . . . . . . . . 2,785,000
----------------
5,562,625
----------------
TECHNOLOGY - 9.38%
43,500 Boston Scientific Corp.* . . . . . . . . . . . . 3,145,593
36,200 Cisco Systems, Inc.* . . . . . . . . . . . . . . 2,651,650
39,000 Electronic Arts, Inc.* . . . . . . . . . . . . . 1,803,750
11,500 Intel Corp . . . . . . . . . . . . . . . . . . . 929,344
28,100 Microsoft Corp.* . . . . . . . . . . . . . . . . 2,532,513
46,000 Solectron Corp.* . . . . . . . . . . . . . . . . 2,038,375
----------------
13,101,225
----------------
TELECOMMUNICATIONS - 1.87%
50,700 Ericsson (LM) Telefonaktiebolaget, ADR
Class B, Series 10 . . . . . . . . . . . . . . . 2,607,881
----------------
TOTAL COMMON STOCKS. . . . . . . . . . . . . . . 85,454,763
(Cost $63,527,739) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 25.66%
U.S. TREASURY NOTES - 15.12%
$ 3,000,000 6.250%, 08/31/00 . . . . . . . . . . . . . . . . $ 3,041,760
3,000,000 6.250%, 04/30/01 . . . . . . . . . . . . . . . . 3,051,450
3,500,000 6.625%, 04/30/02 . . . . . . . . . . . . . . . . 3,618,020
3,000,000 5.750%, 08/15/03 . . . . . . . . . . . . . . . . 3,011,880
1,000,000 7.875%, 11/15/04 . . . . . . . . . . . . . . . . 1,115,560
3,500,000 6.500%, 10/15/06 . . . . . . . . . . . . . . . . 3,668,875
3,500,000 6.250%, 02/15/07 . . . . . . . . . . . . . . . . 3,619,000
----------------
21,126,545
----------------
U.S. TREASURY BONDS - 5.29%
2,500,000 7.250%, 05/15/16 . . . . . . . . . . . . . . . . 2,841,425
2,000,000 8.000%, 11/15/21 . . . . . . . . . . . . . . . . 2,486,020
2,000,000 6.250%, 08/15/23 . . . . . . . . . . . . . . . . 2,056,460
----------------
7,383,905
----------------
FEDERAL LOAN HOME BANK - 0.36%
500,000 6.940%, 02/12/04 . . . . . . . . . . . . . . . . 503,200
----------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 3.07%
750,000 6.400%, 12/13/06, Debenture. . . . . . . . . . . 767,858
1,750,000 6.700%, 01/05/07, Series B . . . . . . . . . . . 1,832,932
600,000 7.500%, 03/15/07, CMO, Class J . . . . . . . . . 610,368
175,000 6.000%, 04/15/08, CMO, Class K . . . . . . . . . 174,386
500,000 6.500%, 07/15/20, CMO, Class F . . . . . . . . . 500,190
400,000 6.500%, 11/15/20, CMO, Class H . . . . . . . . . 400,580
----------------
4,286,314
----------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 1.82%
500,000 7.070%, 03/08/11, MTN. . . . . . . . . . . . . . 500,050
2,000,000 7.250%, 01/17/21, CMO, REMIC . . . . . . . . . . 2,038,060
----------------
2,538,110
----------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 0.00% (A)
3,659 8.500%, 06/15/01 . . . . . . . . . . . . . . . . 3,827
2,379 9.000%, 09/15/08 . . . . . . . . . . . . . . . . 2,548
----------------
6,375
----------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS . . . . . . . . . . . . . 35,844,449
(Cost $35,767,617) ----------------
Market
Par Value Value
- --------- -----
CORPORATE NOTES AND BONDS - 10.35%
CONSUMER NON-DURABLE - 1.45%
$ 2,000,000 NIKE, Inc.
6.375%, 12/01/03 . . . . . . . . . . . . . . . . $ 2,025,000
----------------
FINANCE - 7.04%
1,500,000 American Express Co., Senior Notes
6.750%, 06/23/04 . . . . . . . . . . . . . . . . 1,543,125
55,000 American General Finance Senior Notes
7.200%, 07/08/99 . . . . . . . . . . . . . . . . 55,756
2,500,000 Citicorp Subordinated Notes
7.125%, 05/15/06 . . . . . . . . . . . . . . . . 2,609,375
500,000 First National Bank Commerce
Senior Notes, MTN
6.500%, 01/14/00 . . . . . . . . . . . . . . . . 503,750
750,000 General Motors Acceptance Corp.
7.125%, 05/01/03 . . . . . . . . . . . . . . . . 775,313
1,000,000 Household Finance Corp.
7.250%, 05/15/06 . . . . . . . . . . . . . . . . 1,052,500
500,000 Household Finance Corp.
7.300%, 07/30/12 . . . . . . . . . . . . . . . . 516,875
285,000 Salomon Inc., Senior Notes
7.125%, 08/01/99 . . . . . . . . . . . . . . . . 289,343
500,000 Salomon, Inc.
7.300%, 05/15/02 . . . . . . . . . . . . . . . . 517,500
2,000,000 Salomon Smith Barney
6.250%, 01/15/05 . . . . . . . . . . . . . . . . 1,967,500
----------------
9,831,037
----------------
RETAIL - 1.86%
500,000 Penney (J.C.) & Co., Debenture
9.750%, 06/15/21 . . . . . . . . . . . . . . . . 556,875
2,000,000 Sears Roebuck Acceptance Corp.
6.700%, 11/15/06 . . . . . . . . . . . . . . . . 2,040,000
----------------
2,596,875
----------------
TOTAL CORPORATE NOTES AND BONDS. . . . . . . . . 14,452,912
(Cost $14,355,292) ----------------
ASSET-BACKED SECURITIES - 0.83%
1,150,000 Chase Auto Owner Trust
Series 1997-B, Class A3
6.350%, 02/15/01 . . . . . . . . . . . . . . . . 1,156,963
----------------
TOTAL ASSET-BACKED SECURITIES. . . . . . . . . . 1,156,963
(Cost $1,150,469) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
ALLEGHANY FUNDS
MONTAG & CALDWELL BALANCED FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
INVESTMENT COMPANIES - 1.51%
1,897,563 Bankers Trust Institutional
Cash Management Fund . . . . . . . . . . . . . . $ 1,897,563
212,220 Bankers Trust Institutional
Treasury Money Fund. . . . . . . . . . . . . . . 212,220
----------------
TOTAL INVESTMENT COMPANIES . . . . . . . . . . . 2,109,783
(Cost $2,109,783) ----------------
TOTAL INVESTMENTS - 99.53% . . . . . . . . . . . . . . . . . . 139,018,870
(Cost $116,910,900)** ----------------
NET OTHER ASSETS AND LIABILITIES - 0.47% . . . . . . . . . . . 651,636
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 139,670,506
----------------
----------------
- --------------------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is $116,910,900.
Gross unrealized appreciation $ 22,531,686
Gross unrealized (depreciation) (423,716)
-------------
Net unrealized appreciation $ 22,107,970
-------------
-------------
(A) Amount represents less than 0.1%
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
PORTFOLIO COMPOSITION (Moody's Ratings)
Common Stock 61%
U.S. Government Obligations 21%
U.S. Government Agency Obligations 5%
Investment Company 2%
Rated Corporate Notes and Bonds:
Aaa 1%
A 10%
-----
100%
-----
-----
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 43.89%
U.S. TREASURY NOTES - 17.31%
$ 1,250,000 5.120%, 11/30/98 . . . . . . . . . . . . . . . . $ 1,248,050
2,500,000 5.500%, 02/28/99 . . . . . . . . . . . . . . . . 2,500,375
2,500,000 7.120%, 02/29/00 . . . . . . . . . . . . . . . . 2,566,375
2,500,000 7.875%, 08/15/01 . . . . . . . . . . . . . . . . 2,665,250
3,000,000 6.250%, 10/31/01 . . . . . . . . . . . . . . . . 3,056,430
2,000,000 7.500%, 05/15/02 . . . . . . . . . . . . . . . . 2,130,380
4,500,000 6.370%, 08/15/02 . . . . . . . . . . . . . . . . 4,618,800
2,500,000 5.750%, 08/15/03 . . . . . . . . . . . . . . . . 2,509,900
3,000,000 7.250%, 05/15/04 . . . . . . . . . . . . . . . . 3,234,630
----------------
24,530,190
----------------
U.S. TREASURY BONDS - 3.82%
2,500,000 7.125%, 02/15/23 . . . . . . . . . . . . . . . . 2,846,000
2,500,000 6.250%, 08/15/23 . . . . . . . . . . . . . . . . 2,570,575
----------------
5,416,575
----------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 8.15%
2,500,000 5.850%, 02/21/06, Debenture . . . . . . . . . . 2,472,025
1,000,000 6.500%, 09/15/07, CMO . . . . . . . . . . . . . 1,016,750
500,000 5.750%, 01/15/08, CMO. . . . . . . . . . . . . . 493,985
495,164 7.500%, 04/01/08, Debenture. . . . . . . . . . . 510,019
1,500,000 6.000%, 03/15/09, CMO . . . . . . . . . . . . . 1,453,005
1,273,211 6.500%, 06/01/09, CMO . . . . . . . . . . . . . 1,280,366
1,561,912 6.500%, 01/01/11 . . . . . . . . . . . . . . . . 1,570,690
1,381,774 6.500%, 11/01/11 . . . . . . . . . . . . . . . . 1,389,539
1,400,000 6.000%, 12/15/23, CMO . . . . . . . . . . . . . 1,358,686
----------------
11,545,065
----------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 7.71%
2,500,000 5.625%, 03/15/01 . . . . . . . . . . . . . . . . 2,490,950
995,986 6.900%, 12/25/03, CMO . . . . . . . . . . . . . 1,008,505
375,604 7.000%, 07/01/08 . . . . . . . . . . . . . . . . 382,646
1,337,042 7.000%, 05/01/12 . . . . . . . . . . . . . . . . 1,362,111
2,338,679 7.000%, 01/01/13 . . . . . . . . . . . . . . . . 2,382,529
1,485,134 7.000%, 03/01/13 . . . . . . . . . . . . . . . . 1,512,980
710,128 9.000%, 05/01/25 . . . . . . . . . . . . . . . . 751,401
1,047,739 6.500%, 02/01/26 . . . . . . . . . . . . . . . . 1,037,586
----------------
10,928,708
----------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 6.90%
806,042 8.000%, 06/15/17 . . . . . . . . . . . . . . . . 837,018
1,285,371 7.000%, 10/15/23 . . . . . . . . . . . . . . . . 1,301,438
1,339,687 7.000%, 10/15/23 . . . . . . . . . . . . . . . . 1,356,433
1,387,579 6.500%, 03/15/26 . . . . . . . . . . . . . . . . 1,375,868
Market
Par Value Value
- --------- -----
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (CONTINUED)
$ 2,371,399 7.000%, 06/15/27 . . . . . . . . . . . . . . . . $ 2,409,935
1,224,660 7.000%, 08/20/27 . . . . . . . . . . . . . . . . 1,234,604
1,281,914 6.500%, 09/20/27 . . . . . . . . . . . . . . . . 1,265,480
----------------
9,780,776
----------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS . . . . . . . . . . . . . 62,201,314
(Cost $61,145,573) ----------------
CORPORATE NOTES AND BONDS - 38.01%
CABLE TELEVISION - 1.23%
1,500,000 Continental Cablevision, Debenture
9.500%, 08/01/13 . . . . . . . . . . . . . . . . 1,747,500
----------------
ENERGY - 2.74%
2,000,000 Ashland, Inc.
6.625%, 02/15/08 (A) . . . . . . . . . . . . . . 1,995,294
700,000 Petroliam Nasional Berhad
7.125%, 10/18/06 (A) . . . . . . . . . . . . . . 655,375
1,250,000 Williams Co., Inc.
5.950%, 02/15/00 (A) . . . . . . . . . . . . . . 1,232,813
----------------
3,883,482
----------------
FINANCE - 20.20%
1,250,000 Advanta Corp., MTN
7.000%, 05/01/01 . . . . . . . . . . . . . . . . 1,154,688
1,250,000 Associates Corp. NA
6.375%, 08/15/98 . . . . . . . . . . . . . . . . 1,251,475
1,250,000 Chelsea GCA Realty Partnership, REIT
7.250%, 10/21/07 . . . . . . . . . . . . . . . . 1,275,000
1,500,000 Continental Corp. Notes
7.250%, 03/01/03 . . . . . . . . . . . . . . . . 1,541,250
1,000,000 Goldman Sachs Group LP
6.200%, 12/15/00 (A) . . . . . . . . . . . . . . 1,000,000
500,000 Goldman Sachs Group LP
6.250%, 02/01/03 (A) . . . . . . . . . . . . . . 498,750
2,500,000 HSBC America Capital II
8.380%, 05/15/27 (A) . . . . . . . . . . . . . . 2,621,875
1,750,000 Heller Financial, Inc.
5.625%, 03/15/00 . . . . . . . . . . . . . . . . 1,734,688
1,275,000 John Deere Capital Corp., Debenture
8.625%, 08/01/19 . . . . . . . . . . . . . . . . 1,392,938
1,000,000 Leucadia National Corp.
Senior Subordinated Notes
8.250%, 06/15/05 . . . . . . . . . . . . . . . . 1,063,750
750,000 Leucadia National Corp.
Senior Subordinated Notes
7.875%, 10/15/06 . . . . . . . . . . . . . . . . 782,813
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
FINANCE (CONTINUED)
$ 3,500,000 Merrill Lynch & Co., Inc.
7.000%, 04/27/08 . . . . . . . . . . . . . . . . $ 3,666,250
3,000,000 Metropolitan Life Insurance Co.
6.300%, 11/01/03 (A) . . . . . . . . . . . . . . 2,988,750
1,000,000 Olympic Financial Ltd.
11.500%, 03/15/07. . . . . . . . . . . . . . . . 995,000
1,520,000 Pacific Mutual Life Insurance Co.
7.900%, 12/30/23 (A) . . . . . . . . . . . . . . 1,656,800
2,000,000 Prudential Insurance Co. of America
8.300%, 07/01/25 (A) . . . . . . . . . . . . . . 2,235,000
700,000 SB Treasury Co., LLC
9.400%, 12/29/49 (A) . . . . . . . . . . . . . . 721,875
2,000,000 Wells Fargo Capital
7.730%, 12/01/26 (A) . . . . . . . . . . . . . . 2,052,500
----------------
28,633,402
----------------
FOOD AND BEVERAGE - 2.16%
500,000 Nabisco, Inc.
6.700%, 06/15/02 . . . . . . . . . . . . . . . . 506,875
2,500,000 Nabisco, Inc.
6.850%, 06/15/05 . . . . . . . . . . . . . . . . 2,546,875
----------------
3,053,750
----------------
HEALTHCARE SERVICES - 0.91%
1,300,000 Columbia Healthcare
6.1250%12-15-2000. . . . . . . . . . . . . . . . 1,285,375
----------------
PRINTING AND PUBLISHING - 2.17%
1,500,000 News America Holdings
7.750%, 01/20/24 . . . . . . . . . . . . . . . . 1,582,500
1,329,000 Time Warner, Inc., Series M
10.250%, 07/01/16. . . . . . . . . . . . . . . . 1,490,141
----------------
3,072,641
----------------
RETAIL - 1.06%
1,500,000 K-mart Corp., Debenture
7.950%, 02/01/23 . . . . . . . . . . . . . . . . 1,507,500
----------------
TRANSPORTATION - 0.48%
413,123 Delta Air Lines, Inc.
Equipment Trust, Series 1992A
8.540%, 01/02/07 . . . . . . . . . . . . . . . . 445,380
203,489 Delta Air Lines, Inc.
9.375%, 09/11/07 . . . . . . . . . . . . . . . . 226,891
----------------
672,271
----------------
Market
Par Value Value
- --------- -----
UTILITIES - 7.06%
$ 1,825,000 Calenergy Co., Inc.
7.630%, 10/15/07 . . . . . . . . . . . . . . . . $ 1,829,563
1,000,000 Commonwealth Edison Co., First Mortgage
7.750%, 07/15/23 . . . . . . . . . . . . . . . . 1,027,500
2,000,000 Gulf States Utilities, First Mortgage, Series A
8.250%, 04/01/04 . . . . . . . . . . . . . . . . 2,155,000
1,250,000 Long Island Lighting Co., Debenture
9.000%, 11/01/22 . . . . . . . . . . . . . . . . 1,421,875
1,500,000 Niagra Mohawk Power, First Mortgage
8.000%, 06/01/04 . . . . . . . . . . . . . . . . 1,601,250
2,000,000 Philadelphia Electric Co., First Mortgage
5.625%, 11/01/01 . . . . . . . . . . . . . . . . 1,972,500
----------------
10,007,688
----------------
TOTAL CORPORATE NOTES AND BONDS. . . . . . . . . 53,863,609
(Cost $52,332,878) ----------------
YANKEE BONDS - 5.01%
3,000,000 Chilgener S.A. Yankee (Chile)
6.500%, 01/15/06 . . . . . . . . . . . . . . . . 2,838,750
1,699,505 Province of Mendoza
Collateral Oil Royalty Note
10.000%, 07/25/02 (A). . . . . . . . . . . . . . 1,755,402
2,500,000 Skandinaviska Enskilda, Subordinated Notes
6.625%, 03/29/49 (A) . . . . . . . . . . . . . . 2,500,000
----------------
TOTAL YANKEE BONDS . . . . . . . . . . . . . . . 7,094,152
(Cost $7,144,224) ----------------
GOVERNMENT TRUST CERTIFICATE - 0.39%
540,707 Israel Collateral Trust, Class 1-C
9.250%, 11/15/01 . . . . . . . . . . . . . . . . 558,280
----------------
TOTAL GOVERNMENT TRUST CERTIFICATE . . . . . . . 558,280
(Cost $591,660) ----------------
ASSET-BACKED SECURITIES - 6.23%
1,750,000 BA Mortgage Securities, CMO
7.350%, 07/25/26 . . . . . . . . . . . . . . . . 1,758,202
2,500,000 Chemical Master Credit Card Trust I, Class A
5.550%, 09/15/03 . . . . . . . . . . . . . . . . 2,478,575
750,000 Citibank Credit Card Master Trust I, Class A
6.839%, 02/10/04 . . . . . . . . . . . . . . . . 763,380
3,000,000 Countrywide Home Loans, CMO
6.750%, 04/25/28 . . . . . . . . . . . . . . . . 2,917,500
875,000 Midland Realty Acceptance Corp., CMO
7.475%, 08/25/28 . . . . . . . . . . . . . . . . 919,023
----------------
TOTAL ASSET-BACKED SECURITIES. . . . . . . . . . 8,836,680
(Cost $8,789,582) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
ALLEGHANY FUNDS
CHICAGO TRUST BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
REPURCHASE AGREEMENT - 5.48%
$ 7,771,000 First Chicago,
5.400%, dated 04/30/98 to be repurchased
on 05/01/98 at $7,772,166
(Collateralized by U.S. Treasury Note
6.250%, due 05/31/00;
Total Par $7,645,000). . . . . . . . . . . . . . $ 7,771,000
----------------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . 7,771,000
(Cost $7,771,000) ----------------
TOTAL INVESTMENTS - 99.01% . . . . . . . . . . . . . . . . . . 140,325,035
(Cost $137,774,917)* ----------------
NET OTHER ASSETS AND LIABILITIES - 0.99% . . . . . . . . . . . 1,401,830
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 141,726,865
----------------
----------------
- --------------------
* Aggregate cost for Federal income tax purposes is $137,774,917.
Gross unrealized appreciation $ 2,956,200
Gross unrealized (depreciation) (406,082)
------------
Net unrealized appreciation $ 2,550,118
------------
------------
(A) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold, in
transactions exempt from registration, to qualified institutional
buyers. At April 30, 1998, these securities amounted to
$21,914,434 or 15.46% of net assets.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
REIT Real Estate Investment Trust
PORTFOLIO COMPOSITION (Moody's Ratings)
Repurchase Agreement 6%
U.S. Government Obligations 21%
U.S. Government Agency Obligations 23%
Rated Corporate Notes and Bonds:
Aaa 6%
AA 3%
A 12%
Baa 16%
Ba 9%
B 3%
NR 1%
-----
100%
-----
-----
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
MUNICIPAL SECURITIES - 96.75%
ARIZONA - 8.16%
$ 350,000 Mohave County, IDA
6.000%, 07/01/00 . . . . . . . . . . . . . . . . $ 363,608
450,000 Salt River Project Electric System Revenue
Refunding, Series A
5.500%, 01/01/05 . . . . . . . . . . . . . . . . 475,384
200,000 Tucson, Arizona Water Revenue
5.400%, 07/01/05 . . . . . . . . . . . . . . . . 210,788
----------------
1,049,780
----------------
CALIFORNIA - 2.01%
250,000 California State
5.250%, 10/01/10 . . . . . . . . . . . . . . . . 258,437
----------------
FLORIDA - 2.89%
265,000 Dade County, Florida State School District, G.O.
5.000%, 07/15/02
Insured: MBIA. . . . . . . . . . . . . . . . . . 272,044
100,000 St. Lucie County, Florida Pollution
Control Revenue
4.200%, 01/01/26 . . . . . . . . . . . . . . . . 100,000
----------------
372,044
----------------
GEORGIA - 3.97%
250,000 State of Georgia, Series A, G.O.
6.100%, 03/01/05 . . . . . . . . . . . . . . . . 274,375
200,000 State of Georgia, Series D, G.O.
6.700%, 08/01/09 . . . . . . . . . . . . . . . . 236,110
----------------
510,485
----------------
ILLINOIS - 4.10%
250,000 Chicago, Illinois Metropolitan Water
Reclamation, G.O.
6.600%, 01/01/02 . . . . . . . . . . . . . . . . 269,220
250,000 State of Illinois, G.O.
5.150%, 09/01/02
Insured: FGIC. . . . . . . . . . . . . . . . . . 257,682
----------------
526,902
----------------
MICHIGAN - 6.51%
250,000 Lanse Creuse Public Schools
5.000%, 05/01/03 . . . . . . . . . . . . . . . . 257,122
300,000 Clarkston Community Schools
5.000%, 05/01/06 . . . . . . . . . . . . . . . . 307,554
260,000 Utica Community Schools
5.375%, 05/01/04 . . . . . . . . . . . . . . . . 272,407
----------------
837,083
----------------
Market
Par Value Value
- --------- -----
MINNESOTA - 3.49%
$ 200,000 Shakopee Independent School District, G.O.
4.500%, 02/01/06 . . . . . . . . . . . . . . . . $ 199,212
245,000 St. Paul Housing Finance Board Revenue
5.050%, 11/01/07 . . . . . . . . . . . . . . . . 250,456
----------------
449,668
----------------
NEVADA - 3.00%
350,000 Clark County, Nevada School District, G.O.
6.400%, 06/15/06
Insured: FGIC. . . . . . . . . . . . . . . . . . 386,319
----------------
NEW JERSEY - 6.92%
295,000 Camden County
Municipal Utilities Authority Revenue
6.000%, 07/15/04 . . . . . . . . . . . . . . . . 319,210
350,000 State of New Jersey Transportation
Trust Fund Revenue, Series A
Escrowed to Maturity
5.200%, 12/15/00
Insured: AMBAC . . . . . . . . . . . . . . . . . 360,070
200,000 State of New Jersey, Series D, G.O.
5.500%, 02/15/04 . . . . . . . . . . . . . . . . 211,650
----------------
890,930
----------------
NEW YORK - 6.00%
250,000 Municipal Assistance Corporation
4.500%, 07/01/01 . . . . . . . . . . . . . . . . 251,895
250,000 New York City Transitional Finance
Authority Revenue
5.500%, 08/15/08 . . . . . . . . . . . . . . . . 264,063
250,000 New York State Dormitory Authority
Revenue, Series C
5.100%, 05/15/03 . . . . . . . . . . . . . . . . 256,297
----------------
772,255
----------------
OHIO - 1.60%
200,000 Ohio State Public Facilities Commission
(Higher Education), Series II-A
5.200%, 05/01/01
Insured: AMBAC . . . . . . . . . . . . . . . . . 205,474
----------------
OKLAHOMA - 2.80%
350,000 Tulsa, Oklahoma Metropolitan Utilities
Authority Revenue
5.500%, 07/01/00 . . . . . . . . . . . . . . . . 359,979
----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Par Value Value
- --------- -----
OREGON - 2.10%
$ 250,000 Portland, Oregon Series A, G.O.
7.000%, 06/01/01 . . . . . . . . . . . . . . . . $ 270,375
----------------
PENNSYLVANIA - 1.58%
200,000 Commonwealth of Pennsylvania, G.O.
5.250%, 05/15/99
Insured: FGIC. . . . . . . . . . . . . . . . . . 203,002
----------------
PUERTO RICO - 3.42%
400,000 Commonwealth of Puerto Rico,
Series A, G.O.
6.500%, 07/01/03
Insured: MBIA. . . . . . . . . . . . . . . . . . 440,372
----------------
RHODE ISLAND - 2.27%
275,000 State of Rhode Island, Series A, G.O.
6.000%, 06/15/02
Insured: FGIC. . . . . . . . . . . . . . . . . . 291,789
----------------
TEXAS - 13.04%
375,000 Arlington Independent School District
Refunding, G.O.
5.400%, 02/15/99 . . . . . . . . . . . . . . . . 379,759
200,000 Humble Independent School District
Refunding, G.O.
5.500%, 02/15/10 . . . . . . . . . . . . . . . . 212,386
200,000 Round Rock Independent School District
Refunding, G.O.
4.700%, 08/01/09 . . . . . . . . . . . . . . . . 198,366
210,000 Tarrant County Health Facilities
Development Corp.
Health System Revenue, Series A
5.500%, 02/15/05 . . . . . . . . . . . . . . . . 220,901
200,000 Texas State Public Finance Authority
Series A, G.O.
5.600%, 10/01/02 . . . . . . . . . . . . . . . . 210,232
450,000 Texas State Water Development Board, G.O.
Escrowed to Maturity
5.000%, 08/01/99 . . . . . . . . . . . . . . . . 456,502
----------------
1,678,146
----------------
Market
Par Value Value
- --------- -----
UTAH - 8.51%
$ 300,000 Intermountain Power Agency
Power Supply Revenue
6.250%, 07/01/07 . . . . . . . . . . . . . . . . $ 334,530
200,000 Jordan School District, Series A, G.O.
5.250%, 06/15/00 . . . . . . . . . . . . . . . . 204,614
350,000 Tooele County, Utah Hazardous Waste
Treatment Revenue
5.700%, 11/01/26 . . . . . . . . . . . . . . . . 348,922
200,000 Utah State Building Ownership Authority
Lease Revenue, Series A
5.125%, 05/15/03 . . . . . . . . . . . . . . . . 206,488
----------------
1,094,554
----------------
VIRGINIA - 6.03%
250,000 Henrico County, Virginia
Industrial Redevelopment
Authority Revenue
5.300%, 12/01/11 . . . . . . . . . . . . . . . . 260,375
250,000 Virginia State Housing Development Authority
Commonwealth Mortgage, Series H
4.750%, 07/01/07 . . . . . . . . . . . . . . . . 250,908
250,000 Virginia State Public School
Authority Revenue
5.500%, 08/01/03 . . . . . . . . . . . . . . . . 265,128
----------------
776,411
----------------
WASHINGTON - 3.94%
475,000 King County, Washington, Series A, G.O.
5.800%, 01/01/04 . . . . . . . . . . . . . . . . 507,476
----------------
WISCONSIN - 4.41%
300,000 Wisconsin Housing & Economic Development
Authority Home Ownership Revenue
Series A
5.375%, 09/01/17 . . . . . . . . . . . . . . . . 299,439
250,000 State of Wisconsin, Series A, G.O.
5.750%, 05/01/04 . . . . . . . . . . . . . . . . 267,363
----------------
566,802
----------------
TOTAL MUNICIPAL SECURITIES . . . . . . . . . . . 12,448,283
(Cost $12,183,820) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
ALLEGHANY FUNDS
CHICAGO TRUST MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- ------ -----
INVESTMENT COMPANIES - 3.73%
267,919 Goldman Sachs Tax Exempt Fund . . . . . . . . . $ 267,919
212,531 Provident Munifund . . . . . . . . . . . . . . . 212,531
----------------
TOTAL INVESTMENT COMPANIES . . . . . . . . . . . 480,450
(Cost $480,450) ----------------
TOTAL INVESTMENTS - 100.48%. . . . . . . . . . . . . . . . . . 12,928,733
(Cost $12,664,270)* ----------------
LIABILITIES NET OF CASH AND OTHER ASSETS - (0.48%) . . . . . . (61,736)
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 12,866,997
----------------
----------------
- --------------------
* Aggregate cost for Federal income tax purposes is $12,664,270.
Gross unrealized appreciation $ 286,175
Gross unrealized (depreciation) (21,712)
----------
Net unrealized appreciation $ 264,463
----------
----------
AMBAC American Municipal Board Assurance Corp.
FGIC Federal Guaranty Insurance Corp.
G.O. General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Insurance Association
PORTFOLIO COMPOSITION (Moody's Ratings)
Investment Companies 4%
Rated Corporate Notes and Bonds:
Aaa 51%
Aa 31%
A 8%
Baa 3%
NR 3%
-----
100%
-----
-----
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
ALLEGHANY FUNDS
CHICAGO TRUST MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Amortized
Par Value Cost
- --------- ----
COMMERCIAL PAPER - 84.46%
$ 2,600,000 Heller Financial, Inc.
5.754%, 05/01/98 . . . . . . . . . . . . . . . . $ 2,600,000
3,900,000 Sears Roebuck Acceptance Corp.
5.587%, 05/01/98 . . . . . . . . . . . . . . . . 3,900,000
4,000,000 Northern Trust Co.
5.291%, 05/04/98 (A) . . . . . . . . . . . . . . 3,998,167
10,000,000 BankAmerica Corp.
6.150%, 05/05/98 . . . . . . . . . . . . . . . . 10,000,342
1,900,000 Transamerica Financial Group
5.556%, 05/05/98 (A) . . . . . . . . . . . . . . 1,898,835
3,022,000 Transamerica Finance Group
5.527%, 05/06/98 (A) . . . . . . . . . . . . . . 3,019,687
10,000,000 Norwest Financial, Inc.
5.556%, 05/07/98 . . . . . . . . . . . . . . . . 10,000,000
6,000,000 General Electric Capital Corp.
5.568%, 05/08/98 . . . . . . . . . . . . . . . . 6,000,000
12,660,000 Toyota Motor Credit Corp.
0.000%, 05/08/98 (A) . . . . . . . . . . . . . . 12,646,412
2,500,000 Sears Roebuck Acceptance Corp.
5.581%, 05/11/98 . . . . . . . . . . . . . . . . 2,500,000
6,500,000 IBM Credit Corp.
5.518%, 05/11/98 . . . . . . . . . . . . . . . . 6,500,000
12,000,000 Pitney Bowes Credit Corp.
5.513%, 05/13/98 (A) . . . . . . . . . . . . . . 11,978,040
1,175,000 General Electric Capital Corp.
5.583%, 05/15/98 . . . . . . . . . . . . . . . . 1,175,000
2,500,000 Household Finance Corp.
5.570%, 05/15/98 . . . . . . . . . . . . . . . . 2,500,000
2,200,000 Sears Roebuck Acceptance Corp.
5.573%, 05/15/98 . . . . . . . . . . . . . . . . 2,200,000
1,200,000 General Electric Capital Corp.
5.577%, 05/18/98 . . . . . . . . . . . . . . . . 1,200,000
5,000,000 Bell Atlantic
5.528%, 05/19/98 (A) . . . . . . . . . . . . . . 4,986,225
3,000,000 General Motors Acceptance Corp.
5.537%, 05/19/98 . . . . . . . . . . . . . . . . 3,000,000
1,057,000 Transamerica Financial Group
5.543%, 05/19/98 (A) . . . . . . . . . . . . . . 1,054,083
5,000,000 Commercial Credit Co.
5.529%, 05/20/98 . . . . . . . . . . . . . . . . 5,000,000
6,000,000 IBM Credit Corp.
5.536%, 05/21/98 . . . . . . . . . . . . . . . . 6,000,000
3,000,000 Beneficial Corp. Int Bearing
5.509%, 05/21/98 . . . . . . . . . . . . . . . . 3,000,000
2,300,000 Associates Corp. of North America
5.547%, 05/22/98 . . . . . . . . . . . . . . . . 2,300,000
6,000,000 Associates Corp. N. A.
5.570%, 05/22/98 . . . . . . . . . . . . . . . . 6,000,000
Amortized
Par Value Cost
- --------- ----
COMMERCIAL PAPER (CONTINUED)
$ 3,400,000 Sears Roebuck Acceptance Corp.
5.563%, 05/26/98 . . . . . . . . . . . . . . . . $ 3,400,000
4,500,000 Household Finance Corp.
5.540%, 05/26/98 . . . . . . . . . . . . . . . . 4,500,000
6,700,000 Prudential Funding Corp.
5.541%, 05/27/98 . . . . . . . . . . . . . . . . 6,700,000
5,000,000 Transamerica Financial
5.548%, 05/28/98 (A) . . . . . . . . . . . . . . 4,979,338
4,000,000 American Express Credit Corp.
5.536%, 06/02/98 . . . . . . . . . . . . . . . . 4,000,000
5,000,000 Household Finance Corp.
5.534%, 06/03/98 . . . . . . . . . . . . . . . . 5,000,000
1,500,000 Trans America Financial
5.537%, 06/05/98 (A) . . . . . . . . . . . . . . 1,491,979
5,500,000 Chrysler Financial Corp.
5.558%, 06/12/98 (A) . . . . . . . . . . . . . . 5,464,644
1,500,000 Chrysler Financial Corp.
6.500%, 06/15/98 . . . . . . . . . . . . . . . . 1,501,183
2,300,000 American Express Credit Corp.
5.536%, 06/17/98 . . . . . . . . . . . . . . . . 2,300,000
2,500,000 General Motors Acceptance Corp.
5.529%, 06/19/98 . . . . . . . . . . . . . . . . 2,500,000
7,000,000 Commercial Credit Co.
5.540%, 06/22/98 . . . . . . . . . . . . . . . . 7,000,000
10,000,000 Coca Cola Co.
5.597%, 06/22/98 (A) . . . . . . . . . . . . . . 9,919,833
6,000,000 Corestates Bank
5.520%, 07/10/98 . . . . . . . . . . . . . . . . 6,000,000
6,000,000 Ford Motor Credit Co.
5.551%, 07/14/98 . . . . . . . . . . . . . . . . 6,000,000
2,000,000 Ford Motor Credit Co.
5.562%, 07/16/98 . . . . . . . . . . . . . . . . 2,000,000
4,000,000 Ford Motor Credit Co.
5.556%, 07/16/98 . . . . . . . . . . . . . . . . 4,000,000
7,000,000 American General Finance
5.565%, 07/22/98 . . . . . . . . . . . . . . . . 7,000,000
6,000,000 Corestates Bank
5.600%, 09/25/98 . . . . . . . . . . . . . . . . 6,000,000
----------------
TOTAL COMMERCIAL PAPER . . . . . . . . . . . . . 203,213,768
(Cost $203,213,768) ----------------
GIC WITHIN FUNDING AGREEMENT - 4.16%
10,000,000 Allstate Life Funding Agreement GIC
5.758%,12/01/98. . . . . . . . . . . . . . . . . 10,000,000
----------------
TOTAL GIC WITHIN FUNDING AGREEMENT . . . . . . . 10,000,000
(Cost $10,000,000) ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
ALLEGHANY FUNDS
CHICAGO TRUST MONEY MARKET FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Amortized
Par Value Cost
- --------- ----
TIME DEPOSITS - 5.07%
$ 5,400,000 Canadian Imperial of Commerce
5.560%,05/01/98. . . . . . . . . . . . . . . . . $ 5,400,000
4,300,000 Canadian Imperial of Commerce
5.560%,05/29/98. . . . . . . . . . . . . . . . . 4,300,000
2,500,000 Canadian Imperial of Commerce
5.530%,07/20/98. . . . . . . . . . . . . . . . . 2,500,000
----------------
TOTAL TIME DEPOSITS. . . . . . . . . . . . . . . 12,200,000
(Cost $12,200,000) ----------------
REPURCHASE AGREEMENTS - 5.99%
14,401,000 J P Morgan
5.350%,dated 04/30/98 to be repurchased
on 05/01/98 at $14,403,140
(Collateralized by U.S. Treasury Note
6.3750%, due 04/30/99)
Total Par $14,598,000. . . . . . . . . . . . . . 14,401,000
----------------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . 14,401,000
(Cost $14,401,000) ----------------
TOTAL INVESTMENTS - 99.68% . . . . . . . . . . . . . . . . . . 239,814,768
(Cost $239,814,768)* ----------------
NET OTHER ASSETS AND LIABILITIES - 0.32% . . . . . . . . . . . 777,165
----------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . $ 240,591,933
----------------
----------------
- --------------------
(A) Annualized yield at time of purchase
* At April 30, 1998, cost is identical for book and Federal income tax
purposes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
ALLEGHANY FUNDS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST
MONTAG & CALDWELL GROWTH & INCOME CHICAGO TRUST CHICAGO TRUST
GROWTH FUND FUND TALON FUND BALANCED FUND
----------------- --------------- ------------- -------------
ASSETS:
Investments:
Investments at cost. . . . . . . . . . . . . . . $ 1,054,534,406 $ 229,357,104 $ 27,761,023 $ 161,958,237
Repurchase agreements. . . . . . . . . . . . . . -- 8,823,000 -- 2,703,000
Net unrealized appreciation . . . . . . . . . . 324,066,354 116,411,960 4,283,327 49,364,728
--------------- -------------- ------------- -------------
Total investments at value . . . . . . . . . . . 1,378,600,760 354,592,064 32,044,350 214,025,965
Cash . . . . . . . . . . . . . . . . . . . . . . 10 -- 22 --
Receivables:
Dividends and interest . . . . . . . . . . . . . 1,108,576 59,676 29,848 1,185,993
Fund shares sold . . . . . . . . . . . . . . . . 3,717,826 221,059 100 275,000
Investments sold . . . . . . . . . . . . . . . . -- -- 483,647 --
Due from Advisor, net. . . . . . . . . . . . . . -- -- -- --
Deferred organization costs . . . . . . . . . . . 5,017 3,096 4,624 3,340
Prepaid Expenses . . . . . . . . . . . . . . . . . 16,990 6,074 1,233 3,091
--------------- -------------- ------------- -------------
Total assets. . . . . . . . . . . . . . . . 1,383,449,179 354,881,969 32,563,824 215,493,389
--------------- -------------- ------------- -------------
LIABILITIES:
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . -- 1,560 -- 51,746
Dividend distribution. . . . . . . . . . . . . . -- -- -- --
Investments purchased. . . . . . . . . . . . . . 14,779,677 -- 1,887,663 --
Fund shares redeemed . . . . . . . . . . . . . . 5,178,790 144,634 10,002 24,942
Due to Advisor, net. . . . . . . . . . . . . . . 787,803 203,167 18,033 124,329
Distribution fee . . . . . . . . . . . . . . . . 148,408 142,864 11,654 192,837
Trustee fees . . . . . . . . . . . . . . . . . . 625 625 625 625
Accrued expenses . . . . . . . . . . . . . . . . . 285,402 56,474 12,798 66,009
--------------- -------------- ------------- -------------
Total liabilities . . . . . . . . . . . . . 21,180,705 549,324 1,940,775 460,488
--------------- -------------- ------------- -------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . $ 1,362,268,474 $ 354,332,645 $ 30,623,049 $ 215,032,901
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
NET ASSETS CONSIST OF:
Capital paid-in . . . . . . . . . . . . . . . . . $ 1,011,878,933 $ 214,493,959 $ 25,578,542 $ 155,218,651
Accumulated undistributed (distribution
in excess of) net investment income (loss) . . . (853,902) (297,454) 33,390 540,989
Accumulated net realized gain (loss)
on investments . . . . . . . . . . . . . . . . . 27,177,089 23,724,180 727,790 9,908,533
Net unrealized appreciation
on investments . . . . . . . . . . . . . . . . . 324,066,354 116,411,960 4,283,327 49,364,728
--------------- -------------- ------------- -------------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . $ 1,362,268,474 $ 354,332,645 $ 30,623,049 $ 215,032,901
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING . . . . . . 50,103,882 15,701,939 2,005,173 18,215,489
NET ASSET VALUE
Offering and redemption price per share
(Net Assets/Shares Outstanding). . . . . . . . . . $ (A) $ 22.57 $ 15.27 $ 11.80
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
CHICAGO TRUST CHICAGO TRUST
MONTAG & CALDWELL CHICAGO TRUST MUNICIPAL BOND MONEY MARKET
BALANCED FUND BOND FUND FUND FUND
----------------- --------------- -------------- -------------
ASSETS:
Investments:
Investments at cost. . . . . . . . . . . . . . . $ 116,910,900 $ 130,003,917 $ 12,664,270 $ 225,413,768
Repurchase agreements. . . . . . . . . . . . . . -- 7,771,000 -- 14,401,000
Net unrealized appreciation . . . . . . . . . . 22,107,970 2,550,118 264,463 --
--------------- -------------- ------------- -------------
Total investments at value . . . . . . . . . . . 139,018,870 140,325,035 12,928,733 239,814,768
Cash . . . . . . . . . . . . . . . . . . . . . . 22 -- 74,821 699,669
Receivables:
Dividends and interest . . . . . . . . . . . . . 896,525 1,894,518 211,049 1,230,708
Fund shares sold . . . . . . . . . . . . . . . . 197,494 207,651 -- --
Investments sold . . . . . . . . . . . . . . . . -- 24,639 -- --
Due from Advisor, net. . . . . . . . . . . . . . -- -- 7,407 --
Deferred organization costs . . . . . . . . . . . 5,017 3,096 3,096 3,096
Prepaid Expenses . . . . . . . . . . . . . . . . . 1,942 2,322 258 4,524
--------------- -------------- ------------- -------------
Total assets. . . . . . . . . . . . . . . . 140,119,870 142,457,261 13,225,364 241,752,765
--------------- -------------- ------------- -------------
LIABILITIES:
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . -- 136,871 -- --
Dividend distribution. . . . . . . . . . . . . . -- -- -- 1,061,688
Investments purchased. . . . . . . . . . . . . . 244,654 265,953 300,426 --
Fund shares redeemed . . . . . . . . . . . . . . 45,942 85,619 -- --
Due to Advisor, net. . . . . . . . . . . . . . . 85,847 42,830 -- 75,187
Distribution fee . . . . . . . . . . . . . . . . 4,582 174,777 50,569 --
Trustee fees . . . . . . . . . . . . . . . . . . 625 625 625 625
Accrued expenses . . . . . . . . . . . . . . . . . 67,714 23,721 6,747 23,332
--------------- -------------- ------------- -------------
Total liabilities . . . . . . . . . . . . . 449,364 730,396 358,367 1,160,832
--------------- -------------- ------------- -------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . $ 139,670,506 $ 141,726,865 $ 12,866,997 $ 240,591,933
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
NET ASSETS CONSIST OF:
Capital paid-in . . . . . . . . . . . . . . . . . $ 114,473,183 $ 138,405,787 $ 12,660,144 $ 240,591,933
Accumulated undistributed (distribution
in excess of) net investment income (loss) . . . 303,205 339,161 22,620 --
Accumulated net realized gain (loss)
on investments . . . . . . . . . . . . . . . . . 2,786,148 431,799 (80,230) --
Net unrealized appreciation
on investments . . . . . . . . . . . . . . . . . 22,107,970 2,550,118 264,463 --
--------------- -------------- ------------- -------------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . $ 139,670,506 $ 141,726,865 $ 12,866,997 $ 240,591,933
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING . . . . . . 7,949,551 13,980,932 1,267,571 240,591,933
NET ASSET VALUE
Offering and redemption price per share
(Net Assets/Shares Outstanding). . . . . . . . . . $ 17.57 $ 10.14 $ 10.15 $ 1.00
--------------- -------------- ------------- -------------
--------------- -------------- ------------- -------------
(A) Montag & Caldwell Growth Fund Class N (Retail):
Net Asset Value, offering price and redemption price per share (Based on
net assets of $843,597,433 and 31,081,246 shares issued and outstanding)
$27.14
Montag & Caldwell Growth Fund Class I (Institutional):
Net Asset Value, offering price and redemption price per share (Based on
net assets of $518,671,041 and 19,022,636 shares issued and outstanding)
$27.27
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
ALLEGHANY FUNDS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
CHICAGO TRUST
MONTAG & CALDWELL GROWTH & INCOME CHICAGO TRUST CHICAGO TRUST
GROWTH FUND FUND TALON FUND BALANCED FUND
----------------- --------------- ------------- -------------
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . $ 3,513,382 $ 1,173,389 $ 83,632 $ 506,334
Interest . . . . . . . . . . . . . . . . . . . . . 1,192,970 401,461 214,679 2,955,841
------------- ------------- ------------- -------------
Total investment income. . . . . . . . . . . . . . 4,706,352 1,574,850 298,311 3,462,175
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . 3,942,606 1,072,479 121,090 696,670
Distribution expenses. . . . . . . . . . . . . . . 800,433 383,028 37,841 248,811
Transfer agent fees. . . . . . . . . . . . . . . . 145,474 39,616 17,655 10,779
Administration fees. . . . . . . . . . . . . . . . 301,029 90,125 8,914 58,592
Accounting fees. . . . . . . . . . . . . . . . . . 715 1,046 987 5,763
Registration expenses. . . . . . . . . . . . . . . 165,297 23,550 11,328 13,937
Custodian fees . . . . . . . . . . . . . . . . . . 12,677 9,987 6,666 11,567
Professional fees. . . . . . . . . . . . . . . . . 29,776 14,547 8,174 12,416
Amortization of organization costs . . . . . . . . 1,653 2,478 1,653 695
Report to shareholder expense. . . . . . . . . . . 27,090 7,758 716 4,961
Trustees fees. . . . . . . . . . . . . . . . . . . 1,797 1,797 1,797 1,797
Other expenses . . . . . . . . . . . . . . . . . . 131,707 36,826 2,785 28,252
------------- ------------- ------------- -------------
Total expenses . . . . . . . . . . . . . . . . . 5,560,254 1,683,237 219,606 1,094,240
------------- ------------- ------------- -------------
Expenses reimbursed. . . . . . . . . . . . . . . -- -- (22,595) --
------------- ------------- ------------- -------------
Net expenses . . . . . . . . . . . . . . . . . . 5,560,254 1,683,237 197,011 1,094,240
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS). . . . . . . . . . . . . (853,902) (108,387) 101,300 2,367,935
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS :
Net realized gain on investments (including
a net realized loss on option transactions of
($96,126) in the Talon Fund) . . . . . . . . . . . 27,275,289 23,724,702 883,465 9,909,956
Net change in unrealized appreciation
(depreciation) on investments . . . . . . . . . 176,925,518 39,375,707 154,821 15,766,549
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . 204,200,807 63,100,409 1,038,286 25,676,505
------------- ------------- ------------- -------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS . . . . . . . . . . . . . . $ 203,346,905 $ 62,992,022 $ 1,139,586 $ 28,044,440
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
CHICAGO TRUST CHICAGO TRUST
MONTAG & CALDWELL CHICAGO TRUST MUNICIPAL BOND MONEY MARKET
BALANCED FUND BOND FUND FUND FUND
----------------- ------------- -------------- ------------
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . $ 229,397 $ -- $ -- $ --
Interest . . . . . . . . . . . . . . . . . . . . . 1,412,613 4,527,566 297,615 7,116,190
------------- ------------- ------------- -------------
Total investment income. . . . . . . . . . . . . . 1,642,010 4,527,566 297,615 7,116,190
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . 415,654 366,318 37,735 501,524
Distribution Expenses. . . . . . . . . . . . . . . 138,551 166,508 12,746 --
Transfer agent fees. . . . . . . . . . . . . . . . 14,816 11,907 10,052 16,193
Administration fees. . . . . . . . . . . . . . . . 32,549 39,223 3,705 73,872
Accounting fees. . . . . . . . . . . . . . . . . . 3,145 4,854 1,578 3,671
Registration expenses. . . . . . . . . . . . . . . 24,617 18,295 7,647 13,317
Custodian fees . . . . . . . . . . . . . . . . . . 9,850 10,925 5,386 10,714
Professional fees. . . . . . . . . . . . . . . . . 10,281 10,840 8,218 14,128
Amortization of organization costs . . . . . . . . 1,653 2,478 2,478 2,478
Report to shareholder expense. . . . . . . . . . . 2,880 3,304 308 6,625
Trustees fees. . . . . . . . . . . . . . . . . . . 1,797 1,797 1,797 1,797
Other expenses . . . . . . . . . . . . . . . . . . 33,922 12,540 517 16,335
------------- ------------- ------------- -------------
Total Expenses . . . . . . . . . . . . . . . . . 689,715 648,989 92,167 660,654
------------- ------------- ------------- -------------
Expenses reimbursed. . . . . . . . . . . . . . . -- (116,618) (52,819) (24,451)
------------- ------------- ------------- -------------
Net expenses . . . . . . . . . . . . . . . . . . 689,715 532,371 39,348 636,203
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS). . . . . . . . . . . . . 952,295 3,995,195 258,267 6,479,987
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS :
Net realized gain on investments (including
a net realized loss on option transactions of
($96,126) in the Talon Fund) . . . . . . . . . . . 2,819,314 457,088 10,880 --
Net change in unrealized appreciation
(depreciation) on investments. . . . . . . . . . 10,563,907 (282,110) (55,026) --
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENT. . . . . . . . . . . . . 13,383,221 174,978 (44,146) --
------------- ------------- ------------- -------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS . . . . . . . . . . . . . . $14,335,516 $4,170,173 $214,121 $6,479,987
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
25
ALLEGHANY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
MONTAG & CALDWELL GROWTH FUND CHICAGO TRUST GROWTH & INCOME FUND
-------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- --------------- -------------- --------------
NET ASSETS AT BEGINNING OF PERIOD . . . . . . . . . . $ 748,418,166 $ 218,649,895 $ 274,607,907 $ 205,133,317
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . (853,902) (1,327,085) (108,387) 1,018,470
Net realized gain on investments sold
and purchased options transactions . . . . . . . 27,275,289 8,570,687 23,724,702 19,177,699
Net change in unrealized appreciation
on investments and assets
and liabilities in purchased options . . . . . . 176,925,518 114,427,550 39,375,707 33,416,450
-------------- -------------- -------------- --------------
Net increase in net assets
from operations. . . . . . . . . . . . . . . . . 203,346,905 121,671,152 62,992,022 53,612,619
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income:
Retail Class . . . . . . . . . . . . . . . . . . -- -- (189,067) (1,152,026)
Institutional Class. . . . . . . . . . . . . . . -- (26,630) -- --
Net realized gain on investments:
Retail Class . . . . . . . . . . . . . . . . . . (4,750,066) (1,466,613) (19,149,159) (4,334,020)
Institutional Class. . . . . . . . . . . . . . . (2,772,360) (412,803) -- --
-------------- -------------- -------------- --------------
Total distributions. . . . . . . . . . . . . . . (7,522,426) (1,906,046) (19,338,226) (5,486,046)
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares:
Retail Class . . . . . . . . . . . . . . . . . . 325,972,580 339,687,434 39,621,122 50,803,893
Institutional Class. . . . . . . . . . . . . . . 219,014,110 228,296,239 -- --
Issued to shareowners in reinvestment of distributions:
Retail Class . . . . . . . . . . . . . . . . . . 4,458,131 1,404,998 19,000,002 5,404,887
Institutional Class. . . . . . . . . . . . . . . 2,260,596 396,515 -- --
Cost of shares repurchased:
Retail Class . . . . . . . . . . . . . . . . . . (88,096,944) (115,055,486) (22,550,182) (34,860,763)
Institutional Class. . . . . . . . . . . . . . . (45,582,644) (44,726,535) -- --
-------------- -------------- -------------- --------------
Net increase from capital
share transactions. . . . . . . . . . . . . 418,025,829 410,003,165 36,070,942 21,348,017
-------------- -------------- -------------- --------------
Total increase in net assets. . . . . . . . . 613,850,308 529,768,271 79,724,738 69,474,590
-------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A). . . . $1,362,268,474 $ 748,418,166 $ 354,332,645 $ 274,607,907
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
(A) Undistributed (distribution in excess of)
net investment income (loss). . . . . . . . . . . $ (853,902) $ -- $ (297,454) $ --
-------------- -------------- -------------- --------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Retail Class:
Sold. . . . . . . . . . . . . . . . . . . . . . . 13,291,394 16,692,907 1,874,516 2,806,114
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . 197,788 79,785 1,006,991 326,567
Repurchased . . . . . . . . . . . . . . . . . . . (3,550,047) (5,364,133) (1,097,224) (1,902,988)
Institutional Class:
Sold. . . . . . . . . . . . . . . . . . . . . . . 8,962,760 10,833,116 -- --
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . 99,938 22,316 -- --
Repurchased . . . . . . . . . . . . . . . . . . . . (1,857,023) (2,106,489) -- --
-------------- -------------- -------------- --------------
Net increase in shares outstanding. . . . . . . . 17,144,810 20,157,502 1,784,283 1,229,693
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
CHICAGO TRUST TALON FUND CHICAGO TRUST BALANCED FUND
-------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- --------------- -------------- --------------
NET ASSETS AT BEGINNING OF PERIOD. . . . . . . . . . . $ 28,459,583 $ 17,417,675 $ 187,993,337 $ 156,703,443
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . 101,300 162,715 2,367,935 4,843,563
Net realized gain on investments sold
and purchased options transactions. . . . . . . . 883,465 4,497,850 9,909,956 11,378,927
Net change in unrealized appreciation
on investments and assets
and liabilities in purchased options. . . . . . . 154,821 1,618,377 15,766,549 15,462,457
-------------- -------------- -------------- --------------
Net increase in net assets
from operations . . . . . . . . . . . . . . . . . 1,139,586 6,278,942 28,044,440 31,684,947
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income:
Retail Class. . . . . . . . . . . . . . . . . . . (105,163) (134,407) (2,451,582) (4,764,936)
Institutional Class . . . . . . . . . . . . . . . -- -- -- --
Net realized gain on investments:
Retail Class. . . . . . . . . . . . . . . . . . . (4,653,085) (1,458,660) (11,401,639) (2,253,139)
Institutional Class . . . . . . . . . . . . . . . -- -- -- --
-------------- -------------- -------------- --------------
Total distributions . . . . . . . . . . . . . . . (4,758,248) (1,593,067) (13,853,221) (7,018,075)
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares:
Retail Class. . . . . . . . . . . . . . . . . . . 6,136,793 6,345,104 17,356,662 28,395,564
Institutional Class . . . . . . . . . . . . . . . -- -- -- --
Issued to shareowners in reinvestment of distributions:
Retail Class. . . . . . . . . . . . . . . . . . . 4,701,233 1,577,255 13,847,940 7,017,789
Institutional Class . . . . . . . . . . . . . . . -- -- -- --
Cost of shares repurchased:
Retail Class. . . . . . . . . . . . . . . . . . . (5,055,898) (1,566,326) (18,356,257) (28,790,331)
Institutional Class . . . . . . . . . . . . . . . -- -- -- --
-------------- -------------- -------------- --------------
Net increase from capital
share transactions . . . . . . . . . . . . . 5,782,128 6,356,033 12,848,345 6,623,022
-------------- -------------- -------------- --------------
Total increase in net assets . . . . . . . . . 2,163,466 11,041,908 27,039,564 31,289,894
-------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) . . . . $ 30,623,049 $ 28,459,583 $ 215,032,901 $ 187,993,337
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
(A) Undistributed (distribution in excess of)
net investment income (loss) . . . . . . . . . . . $ 33,390 $ 37,253 $ 540,989 $ 624,636
-------------- -------------- -------------- --------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Retail Class:
Sold. . . . . . . . . . . . . . . . . . . . . . . 396,506 397,032 1,559,397 2,757,711
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . 314,892 107,919 1,304,119 699,716
Repurchased . . . . . . . . . . . . . . . . . . . (323,359) (97,875) (1,647,635) (2,774,505)
Institutional Class:
Sold. . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . -- -- -- --
Repurchased . . . . . . . . . . . . . . . . . . . -- -- -- --
-------------- -------------- -------------- --------------
Net increase in shares outstanding. . . . . . . 388,039 407,076 1,215,881 682,922
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
ALLEGHANY FUNDS
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
MONTAG & CALDWELL BALANCED FUND CHICAGO TRUST BOND FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- --------------- ---------------- --------------
NET ASSETS AT BEGINNING OF PERIOD. . . . . . . . . . . $ 82,719,053 $ 31,472,671 $ 120,532,177 $ 79,210,728
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . 952,295 952,704 3,995,195 6,243,541
Net realized gain (loss) on investments sold . . . 2,819,314 2,102,297 457,088 (36,729)
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . . . 10,563,907 7,581,239 (282,110) 2,754,254
-------------- -------------- -------------- --------------
Net increase in net assets
from operations . . . . . . . . . . . . . . . . . 14,335,516 10,636,240 4,170,173 8,961,066
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income . . . . . . . . . . . . . . . (834,653) (837,377) (4,108,631) (6,043,358)
Net realized gain on investments. . . . . . . . . . (2,095,351) (2,702,590) -- (16,748)
-------------- -------------- -------------- --------------
Total distributions . . . . . . . . . . . . . . . (2,930,004) (3,539,967) (4,108,631) (6,060,106)
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares . . . . . . . . . 55,627,337 58,631,470 29,613,557 46,817,358
Issued to shareowners in
reinvestment of distributions . . . . . . . . . . 2,828,759 3,490,623 3,185,970 4,797,389
Cost of shares repurchased. . . . . . . . . . . . . (12,910,155) (17,971,984) (11,666,381) (13,194,258)
-------------- -------------- -------------- --------------
Net increase from
capital share transactions. . . . . . . . . . . 45,545,941 44,150,109 21,133,146 38,420,489
-------------- -------------- -------------- --------------
Total increase in net assets. . . . . . . . . . . 56,951,453 51,246,382 21,194,688 41,321,449
-------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) . . . . $ 139,670,506 $ 82,719,053 $ 141,726,865 $ 120,532,177
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
(A) Undistributed net investment income. . . . . . . . $ 303,205 $ 185,563 $ 339,161 $ 452,597
-------------- -------------- -------------- --------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold. . . . . . . . . . . . . . . . . . . . . . . . 3,371,266 3,939,135 2,944,089 4,734,805
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . . 178,894 255,726 290,206 485,679
Repurchased . . . . . . . . . . . . . . . . . . . . (768,407) (1,229,194) (1,147,665) (1,334,065)
-------------- -------------- -------------- --------------
Net increase in shares outstanding. . . . . . . . 2,781,753 2,965,667 2,086,630 3,886,419
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
CHICAGO TRUST MUNICIPAL BOND FUND CHICAGO TRUST MONEY MARKET FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- --------------- ---------------- --------------
NET ASSETS AT BEGINNING OF PERIOD. . . . . . . . . . . $ 12,379,208 $ 11,186,162 $ 238,551,474 $ 226,535,616
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . 258,267 430,579 6,479,987 12,701,010
Net realized gain (loss) on investments sold . . . 10,880 6,147 -- --
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . . . (55,026) 140,720 -- --
-------------- -------------- -------------- --------------
Net increase in net assets
from operations . . . . . . . . . . . . . . . . . 214,121 577,446 6,479,987 12,701,010
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income . . . . . . . . . . . . . . . (263,103) (426,993) (6,479,987) (12,701,010)
Net realized gain on investments. . . . . . . . . . -- -- -- --
-------------- -------------- -------------- --------------
Total distributions . . . . . . . . . . . . . . . (263,103) (426,993) (6,479,987) (12,701,010)
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares . . . . . . . . . 866,702 1,375,126 284,113,157 569,551,234
Issued to shareowners in
reinvestment of distributions . . . . . . . . . . 17,396 21,748 165,513 434,377
Cost of shares repurchased. . . . . . . . . . . . . (347,327) (354,281) (282,238,211) (557,969,753)
-------------- -------------- -------------- --------------
Net increase from
capital share transactions. . . . . . . . . . . 536,771 1,042,593 2,040,459 12,015,858
-------------- -------------- -------------- --------------
Total increase in net assets. . . . . . . . . . . 487,789 1,193,046 2,040,459 12,015,858
-------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) . . . . $ 12,866,997 $ 12,379,208 $ 240,591,933 $ 238,551,474
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
(A) Undistributed net investment income. . . . . . . . $ 22,620 $ 27,456 $ -- $ --
-------------- -------------- -------------- --------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold. . . . . . . . . . . . . . . . . . . . . . . . 84,563 135,835 284,113,157 569,551,234
Issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . . 1,702 2,159 165,513 434,377
Repurchased . . . . . . . . . . . . . . . . . . . . (34,028) (35,025) (282,238,211) (557,969,753)
-------------- -------------- -------------- --------------
Net increase in shares outstanding. . . . . . . . 52,237 102,969 2,040,459 12,015,858
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
29
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
MONTAG & CALDWELL GROWTH FUND
-----------------------------------------------------------------
RETAIL CLASS
-----------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95(a)
----------- ---------- ---------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . . $ 22.68 $ 17.08 $ 13.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss). . . . . . . . . . . . (0.03) (0.05) -- 0.02
Net realized and unrealized gain
on investments . . . . . . . . . . . . . . . . . 4.70 5.79 3.93 3.16
---------- ---------- ---------- ----------
Total from investment operations. . . . . . . . . 4.67 5.74 3.93 3.18
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Distributions from and in excess
of net investment income. . . . . . . . . . . . . -- -- (0.01) (0.02)
Distributions from net realized
gain on investments . . . . . . . . . . . . . . . (0.21) (0.14) -- --
---------- ---------- ---------- ----------
Total distributions . . . . . . . . . . . . . . . (0.21) (0.14) (0.01) (0.02)
---------- ---------- ---------- ----------
Net increase in net asset value. . . . . . . . . . . . . 4.46 5.60 3.92 3.16
---------- ---------- ---------- ----------
Net Asset Value, End of Period . . . . . . . . . . . . . $ 27.14 $ 22.68 $ 17.08 $ 13.16
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . . 20.79% 33.82% 29.91% 31.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . . $ 843,597 $ 479,557 $ 166,243 $ 40,355
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . 1.20% 1.24% 1.32% 1.87%
After reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . 1.20% 1.23% 1.28% 1.30%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . (0.28)% (0.38)% (0.10)% (0.36)%
After reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . (0.28)% (0.37)% (0.06)% 0.20%
Portfolio Turnover(1). . . . . . . . . . . . . . . . . . 25.65% 18.65% 26.36% 34.46%
Average Commission Rate Paid . . . . . . . . . . . . . . $ 0.0558 $ 0.0592 $ 0.0639 N/R
- --------------------------------------------------------
(1) Not annualized.
(2) Annualized.
(a) Montag & Caldwell Growth Fund Retail Class commenced investment
operations on November 2, 1994.
N/R: Not required.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
MONTAG & CALDWELL GROWTH FUND
-----------------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
04/30/98 ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96(a)
----------- ---------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . . $ 22.75 $ 17.08 $ 15.59
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . -- -- 0.02
Net realized and unrealized gain
on investments. . . . . . . . . . . . . . . . . . . 4.73 5.81 1.49
---------- ---------- ----------
Total from investment operations. . . . . . . . . . 4.73 5.81 1.51
---------- ---------- ----------
LESS DISTRIBUTIONS:
Distributions from and in excess
of net investment income. . . . . . . . . . . . . . -- -- (0.02)
Distributions from net realized
gain on investments . . . . . . . . . . . . . . . . (0.21) (0.14) --
---------- ---------- ----------
Total distributions . . . . . . . . . . . . . . . . (0.21) (0.14) (0.02)
---------- ---------- ----------
Net increase in net asset value. . . . . . . . . . . . . 4.52 5.67 1.49
---------- ---------- ----------
Net Asset Value, End of Period . . . . . . . . . . . . . $ 27.27 $ 22.75 $ 17.08
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . . 20.99% 34.26% 9.67%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . . $ 518,671 $ 268,861 $ 52,407
Ratios of expenses to average net assets:
Before reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . . 0.90% 0.93% 0.98%
After reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . . 0.90% 0.93% 0.98%
Ratios of net investment income to average net assets:
Before reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . . 0.02% (0.07)% 0.17%
After reimbursement of expenses
by Advisor(2) . . . . . . . . . . . . . . . . . . . . 0.02% (0.06)% 0.17%
Portfolio Turnover(1). . . . . . . . . . . . . . . . . . 25.65% 18.65% 26.36%
Average Commission Rate Paid . . . . . . . . . . . . . . $ 0.0558 $ 0.0592 $ 0.0639
- --------------
(1) Not annualized.
(2) Annualized.
(a) Montag & Caldwell Growth Fund Institutional Class commenced investment
operations on June 28, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST GROWTH & INCOME FUND
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . $ 19.73 $ 16.17 $ 12.90 $ 10.11 $ 10.00
--------- -------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss). . . . . . . . . . . (0.01) 0.08 0.11 0.09 0.07
Net realized and unrealized gain on investments . 4.23 3.91 3.34 2.79 0.10
--------- -------- -------- -------- ---------
Total from investment operations . . . . . . . 4.22 3.99 3.45 2.88 0.17
--------- -------- -------- -------- ---------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income . . . . . . . . . . . . . . . (0.01) (0.09) (0.11) (0.09) (0.06)
Distributions from net realized gain on investments (1.37) (0.34) (0.07) -- --
--------- -------- -------- -------- ---------
Total distributions. . . . . . . . . . . . . . (1.38) (0.43) (0.18) (0.09) (0.06)
--------- -------- -------- -------- ---------
Net increase in net asset value . . . . . . . . . . . 2.84 3.56 3.27 2.79 0.11
--------- -------- -------- -------- ---------
Net Asset Value, End of Period . . . . . . . . . . . . $ 22.57 $ 19.73 $ 16.17 $ 12.90 $ 10.11
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . 22.76% 25.16% 26.98% 28.66% 1.73%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . $ 354,333 $274,608 $205,133 $172,296 $ 12,282
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2). . . 1.10% 1.12% 1.15% 1.50% 2.21%
After reimbursement of expenses by Advisor(2) . . . 1.10% 1.07%(3) 1.00% 1.09%(4) 1.20%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2). . . (0.07)% 0.36% 0.62% 0.33% (0.15)%
After reimbursement of expenses by Advisor(2) . . . (0.07)% 0.41% 0.77% 0.74% 0.86%
Portfolio Turnover(1). . . . . . . . . . . . . . . . . 24.09% 30.58% 25.48% 9.00% 37.01%
Average Commission Rate Paid . . . . . . . . . . . . . $ 0.0525 $ 0.0530 $ 0.0571 N/R N/R
- -----------------------------------------------------
(1) Not annualized.
(2) Annualized.
(3) The Advisor's expense reimbursement level, which affects the net
expense ratio, changed from 1.00% to 1.10% on February 28, 1997.
(4) The Advisor's expense reimbursement level, which affects the net
expense ratio, changed from 1.20% to 1.00% on September 21, 1995.
(a) Chicago Trust Growth & Income Fund commenced investment operations on
December 13, 1993.
N/R: Not required.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST TALON FUND
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . $ 17.60 $ 14.39 $ 12.07 $ 10.25 $ 10.00
--------- -------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . 0.05 0.11 0.04 0.09 0.02
Net realized and unrealized gain on investments
and options . . . . . . . . . . . . . . . . . . . 0.51 4.38 3.01 1.84 0.23
--------- -------- -------- -------- ---------
Total from investment operations . . . . . . 0.56 4.49 3.05 1.93 0.25
--------- -------- -------- -------- ---------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income . . . . . . . . . . . . . . . (0.06) (0.09) (0.03) (0.11) --
Distributions from net realized gain on investments (2.83) (1.19) (0.70) -- --
--------- -------- -------- -------- ---------
Total distributions . . . . . . . . . . . . (2.89) (1.28) (0.73) (0.11) --
--------- -------- -------- -------- ---------
Net increase (decrease) in net asset value . . . . . . (2.33) 3.21 2.32 1.82 0.25
--------- -------- -------- -------- ---------
Net Asset Value, End of Period . . . . . . . . . . . . $ 15.27 $ 17.60 $ 14.39 $ 12.07 $ 10.25
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . 3.58% 33.47% 26.51% 18.92% 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . $ 30,623 $ 28,460 $ 17,418 $ 10,538 $ 4,355
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2). . . 1.45% 1.67% 1.98% 3.04% 7.82%
After reimbursement of expenses by Advisor(2) . . . 1.30% 1.30% 1.30% 1.30% 1.30%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2). . . 0.52% 0.34% (0.38)% (0.97)% (4.13)%
After reimbursement of expenses by Advisor(2) . . . 0.67% 0.71% 0.30% 0.77% 2.39%
Portfolio Turnover(1) . . . . . . . . . . . . . . . . 28.36% 112.72% 126.83% 229.43% 33.66%
Average Commission Rate Paid . . . . . . . . . . . . . $ 0.0599 $ 0.0591 $ 0.0612 N/R N/R
- -----------------------------------------------------
(1) Not annualized.
(2) Annualized.
(a) Chicago Trust Talon Fund commenced investment operations on
September 19, 1994.
N/R: Not required.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST BALANCED FUND
--------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95(a)
--------------------------------------------------------
Net Asset Value, Beginning of Period . . . . . . . . . $ 11.06 $ 9.60 $ 8.43 $ 8.34
--------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . 0.13 0.28 0.27 0.03
Net realized and unrealized gain on
investments . . . . . . . . . . . . . . . . . . . 1.43 1.60 1.16 0.06
--------- -------- -------- ---------
Total from investment operations . . . . . . . 1.56 1.88 1.43 0.09
--------- -------- -------- ---------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income . . . . . . . . . . . . . . . (0.14) (0.28) (0.26) --
Distributions from net realized gain on
investments . . . . . . . . . . . . . . . . . . (0.68) (0.14) -- --
--------- -------- -------- ---------
Total distributions . . . . . . . . . . . . . (0.82) (0.42) (0.26) --
--------- -------- -------- ---------
Net increase in net asset value . . . . . . . . . . . 0.74 1.46 1.17 0.09
--------- -------- -------- ---------
Net Asset Value, End of Period . . . . . . . . . . . . $ 11.80 $ 11.06 $ 9.60 $ 8.43
--------- -------- -------- ---------
--------- -------- -------- ---------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . 14.99% 20.10% 17.21% 1.08%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . $ 215,033 $187,993 $156,703 $ 152,820
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2). . . 1.10% 1.13% 1.17% 1.19%
After reimbursement of expenses by Advisor(2) . . . 1.10% 1.07%(3) 1.00% 1.00%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2). . . 2.38% 2.70% 2.79% 2.56%
After reimbursement of expenses by Advisor(2) . . . 2.38% 2.76% 2.96% 2.73%
Portfolio Turnover(1) . . . . . . . . . . . . . . . . 24.84% 34.69% 34.29% 0.72%
Average Commission Rate Paid . . . . . . . . . . . . . $ 0.0510 $ 0.0576 $0.0596 N/R
- -----------------------------------------------------
(1) Not annualized.
(2) Annualized.
(3) The Advisor's expense reimbursement level, which affects the net
expense ratio, changed from 1.00% to 1.10% on February 28, 1997.
(a) Chicago Trust Balanced Fund (formerly the Chicago Trust Asset
Allocation Fund) commenced investment operations on September 21,
1995.
N/R: Not required.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
MONTAG & CALDWELL BALANCED FUND
--------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95(a)
--------------------------------------------------------
Net Asset Value, Beginning of Period . . . . . . . . . $ 16.01 $ 14.29 $ 12.12 $ 10.00
--------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . 0.13 0.25 0.27 0.26
Net realized and unrealized gain on
investments . . . . . . . . . . . . . . . . . . 1.94 2.93 2.17 2.09
--------- -------- -------- ---------
Total from investment operations . . . . . . 2.07 3.18 2.44 2.35
--------- -------- -------- ---------
LESS DISTRIBUTIONS:
Distributions from and in excess of net
investment income . . . . . . . . . . . . . . . (0.13) (0.25) (0.27) (0.23)
Distributions from net realized gain on
investments . . . . . . . . . . . . . . . . . . (0.38) (1.21) -- --
--------- -------- -------- ---------
Total distributions . . . . . . . . . . . . (0.51) (1.46) (0.27) (0.23)
--------- -------- -------- ---------
Net increase in net asset value . . . . . . . . . . . 1.56 1.72 2.17 2.12
--------- -------- -------- ---------
Net Asset Value, End of Period . . . . . . . . . . . . $ 17.57 $ 16.01 $ 14.29 $ 12.12
--------- -------- -------- ---------
--------- -------- -------- ---------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . 13.34% 24.26% 20.37% 23.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . $ 139,671 $ 82,719 $ 31,473 $ 21,908
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2). . . 1.25% 1.33% 1.58% 2.50%
After reimbursement of expenses by Advisor(2) . . . 1.25% 1.25% 1.25% 1.25%
Ratios of net investment income
to average net assets:
Before reimbursement of expenses by Advisor(2). . . 1.72% 1.70% 1.83% 1.38%
After reimbursement of expenses by Advisor(2) . . . 1.72% 1.78% 2.16% 2.63%
Portfolio Turnover(1). . . . . . . . . . . . . . . . . 35.23% 28.13% 43.58% 27.33%
Average Commission Rate Paid . . . . . . . . . . . . . $ 0.0564 $ 0.0591 $ 0.0644 N/R
- -----------------------------------------------------
(1) Not annualized.
(2) Annualized.
(a) Montag & Caldwell Balanced Fund commenced investment operations on
November 2, 1994.
N/R: Not required.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST BOND FUND
------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . . . . $ 10.13 $ 9.89 $ 9.94 $ 9.21 $ 10.00
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . 0.31 0.61 0.60 0.60 0.50
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . . . . . . 0.01 0.23 (0.05) 0.73 (0.82)
-------- -------- ------- ------- -------
Total from investment operations . . . . . . . . . . . 0.32 0.84 0.55 1.33 (0.32)
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS FROM AND IN EXCESS
OF NET INVESTMENT INCOME . . . . . . . . . . . . . . . . (0.31) (0.60) (0.60) (0.60) (0.47)
-------- -------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . (0.31) (0.60) (0.60) (0.60) (0.47)
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value . . . . . . . . . 0.01 0.24 (0.05) 0.73 (0.79)
-------- -------- ------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . $ 10.14 $ 10.13 $ 9.89 $ 9.94 $ 9.21
-------- -------- ------- ------- -------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . . . . 3.23% 8.84% 5.76% 14.89% (3.23)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . . . . $141,727 $120,532 $79,211 $70,490 $12,546
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 0.97% 1.02% 1.10% 1.54% 2.02%
After reimbursement of expenses by Advisor(2). . . . . . . 0.80% 0.80% 0.80% 0.80% 0.80%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 5.82% 6.02% 5.89% 5.78% 4.83%
After reimbursement of expenses by Advisor(2). . . . . . . 5.99% 6.24% 6.19% 6.52% 6.05%
Portfolio Turnover(1) . . . . . . . . . . . . . . . . . . . 21.71% 17.76% 41.75% 68.24% 20.73%
- ---------------
(1) Not annualized.
(2) Annualized.
(a) Chicago Trust Bond Fund commenced investment operations on December 13,
1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST MUNICIPAL BOND FUND
------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . . . . $ 10.19 $ 10.06 $ 10.08 $ 9.56 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . 0.23 0.38 0.38 0.35 0.27
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . . . . . . (0.06) 0.12 (0.02) 0.52 (0.46)
------- ------- ------- ------- -------
Total from investment operations . . . . . . . . . . . 0.17 0.50 0.36 0.87 (0.19)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM AND IN EXCESS
OF NET INVESTMENT INCOME . . . . . . . . . . . . . . . . (0.21) (0.37) (0.38) (0.35) (0.25)
Distributions from net realized gain on investments. . . -- -- -- -- --
------- ------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . (0.21) (0.37) (0.38) (0.35) (0.25)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value . . . . . . . . . (0.04) 0.13 (0.02) 0.52 (0.44)
------- ------- ------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . $ 10.15 $ 10.19 $ 10.06 $ 10.08 $ 9.56
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . . . . 1.70% 5.13% 3.59% 9.29% (1.92)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . . . . $12,867 $12,379 $11,186 $11,679 $10,462
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 1.47% 1.64% 1.53% 2.16% 2.09%
After reimbursement of expenses by Advisor(2). . . . . . . 0.63%(3) 0.90% 0.90% 0.90% 0.90%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 3.27% 3.00% 3.11% 2.37% 1.90%
After reimbursement of expenses by Advisor(2). . . . . . . 4.11% 3.74% 3.74% 3.63% 3.09%
Portfolio Turnover(1) . . . . . . . . . . . . . . . . . . . 12.00% 16.19% 27.47% 42.81% 14.85%
- ---------------
(1) Not annualized.
(2) Annualized.
(3) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 0.90% to 0.10% on February 27, 1998.
(a) Chicago Trust Municipal Bond Fund commenced investment operations on
December 13, 1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
ALLEGHANY FUNDS
FINANCIAL HIGHLIGHTS APRIL 30, 1998
- --------------------------------------------------------------------------------
CHICAGO TRUST MONEY MARKET FUND
------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
04/30/98 ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/97 10/31/96 10/31/95 10/31/94(a)
----------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . 0.03 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME . . . . . . (0.03) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- --------
Net Asset Value, End of Period . . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(1). . . . . . . . . . . . . . . . . . . . . . . 2.59% 5.15% 5.14% 5.56% 3.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000's) . . . . . . . . . . . . $240,671 $238,551 $226,536 $206,075 $122,929
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 0.53% 0.56% 0.59% 0.63% 0.64%
After reimbursement of expenses by Advisor(2). . . . . . . 0.51%(4) 0.50% 0.50% 0.43%(3) 0.40%
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Advisor(2) . . . . . . 5.15% 5.00% 4.93% 5.24% 3.49%
After reimbursement of expenses by Advisor(2). . . . . . . 5.17% 5.06% 5.02% 5.44% 3.73%
- ---------------
(1) Not annualized.
(2) Annualized.
(3) The Advisor's expense reimbursement level, which affects the net expense
ratio, changed from 0.40% to 0.50% on July 12, 1995.
(4) As of February 27, 1998, the Advisor is no longer waiving fees or
reimbursing expenses.
(a) Chicago Trust Money Market Fund commenced investment operations on
December 14, 1993.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES: The AlleghanyFunds (formerly
CT&T Funds) (the "Company") operate as a series company currently issuing eight
series of shares of beneficial interest: Montag & Caldwell Growth Fund (the
"Growth Fund"), Chicago Trust Growth & Income Fund (the "Growth & Income Fund"),
Chicago Trust Talon Fund (the "Talon Fund"), Chicago Trust Balanced Fund
(formerly Chicago Trust Asset Allocation Fund) (the "CT Balanced Fund"), Montag
& Caldwell Balanced Fund (the "M&C Balanced Fund"), Chicago Trust Bond Fund (the
"Bond Fund"), Chicago Trust Municipal Bond Fund (the "Municipal Bond Fund"), and
Chicago Trust Money Market Fund (the "Money Market Fund") (each a "Fund" and
collectively, the "Funds"). The Company constitutes an open-end management
investment company which is registered under the Investment Company Act of 1940
as amended (the "Act"). The Company was organized as a Delaware business trust
on September 10, 1993.
The Growth Fund seeks long-term capital appreciation consistent with investments
primarily in a combination of equity, convertible, fixed income, and short-term
securities. Capital appreciation is emphasized, and generation of income is
secondary. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994. Effective June 28, 1996,
the Fund offered two classes of shares: Class I (Institutional) shares and Class
N (Retail) shares.
The Growth & Income Fund seeks long-term total return through a combination of
capital appreciation and current income. In seeking to achieve its investment
objective, the Fund invests primarily in common stocks, preferred stocks,
securities convertible into common stocks, and fixed income securities. The
Chicago Trust Company ("Chicago Trust") is the Investment Advisor for the Fund,
which commenced investment operations on December 13, 1993.
The Talon Fund seeks long-term total return through capital appreciation. The
Fund invests primarily in stocks of companies with capitalization levels
believed by Talon Asset Management, Inc. ("Talon") to have prospects for capital
appreciation. The Fund, which commenced investment operations on September 19,
1994, may also invest in preferred stock and debt securities, including those
which may be convertible into common stock. Chicago Trust is the Investment
Advisor for the Fund with Talon as Sub-Investment Advisor.
The CT Balanced Fund seeks growth of capital with current income through asset
allocation. The Fund seeks to achieve this objective by holding a varying
combination of generally two or more of the following investment categories:
common stocks (both dividend and non-dividend paying); preferred stocks;
convertible preferred stocks; fixed income securities, including bonds and bonds
convertible into common stocks; and short-term interest-bearing obligations.
Chicago Trust is the Investment Advisor for the Fund, which commenced investment
operations on September 21, 1995.
The M&C Balanced Fund seeks long-term total return through investment primarily
in a combination of equity, fixed income, and short-term securities. The
allocation between asset classes may vary over time in accordance with the
expected rates of return of each asset class; however, primary emphasis is
placed upon selection of particular investments as opposed to allocation of
assets. Montag & Caldwell, Inc. is the Investment Advisor for the Fund, which
commenced investment operations on November 2, 1994.
The Bond Fund seeks high current income consistent with what Chicago Trust
believes to be prudent risk of capital. The Fund primarily invests in a broad
range of bonds and other fixed income securities (bonds and debentures) with an
average weighted portfolio maturity between three and ten years. Chicago Trust
is the Investment Advisor for the Fund, which commenced investment operations on
December 13, 1993.
The Municipal Bond Fund seeks a high level of current interest income exempt
from Federal income taxes consistent with the conservation of capital. The Fund
seeks to achieve its objective by investing substantially all of its assets in a
diversified portfolio of municipal debt obligations. Chicago Trust is the
Investment Advisor for the Fund, which commenced investment operations on
December 13, 1993.
The Money Market Fund seeks to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund seeks to achieve its objective by investing in short-term, high
quality, U.S. dollar-denominated money market instruments. Chicago Trust is the
Investment Advisor for the Fund, which commenced investment operations on
December 14, 1993.
39
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
(1) SECURITY VALUATION: For the Growth Fund, the Growth & Income Fund, the
Talon Fund, the CT Balanced Fund and the M&C Balanced Fund, equity
securities and index options traded on a national exchange and
over-the-counter securities listed in the NASDAQ National Market System are
valued at the last reported sales price at the close of the respective
exchange. Securities for which there have been no sales on the valuation
date are valued at the mean of the last reported bid and asked prices on
their principal exchange. Over-the-counter securities not listed on the
NASDAQ National Market System are valued at the mean of the current bid and
asked prices. For the CT Balanced Fund, the M&C Balanced Fund, the Bond
Fund, and the Municipal Bond Fund, fixed income securities, except
short-term, are valued on the basis of prices provided by a pricing service
when such prices are believed by the Advisor to reflect the fair market
value of such securities. When fair market value quotations are not readily
available, securities and other assets are valued at fair value as
determined in good faith by the Board of Trustees. For all Funds,
short-term investments, that is, those with a remaining maturity of 60 days
or less, are valued at amortized cost, which approximates market value. For
the Money Market Fund, all securities are valued at amortized cost, which
approximates market value. Under the amortized cost method, discounts and
premiums are accreted and amortized ratably to maturity and are included in
interest income.
(2) REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements
with financial institutions deemed to be credit worthy by the Fund's
Advisor, subject to the seller's agreement to repurchase and the Fund's
agreement to resell such securities at a mutually agreed upon price.
Securities purchased subject to repurchase agreements are deposited with
the Fund's custodian and, pursuant to the terms of the repurchase
agreement, must have an aggregate market value greater than or equal to the
repurchase price plus accrued interest at all times. If the value of the
underlying securities falls below the value of the repurchase price plus
accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. If the request for additional
collateral is not met, or the seller defaults on its repurchase obligation,
the Fund has the right to sell the underlying securities at market value
and may claim any resulting loss against the seller.
(3) DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument
in very general terms refers to a security whose value is "derived" from
the value of an underlying asset, reference rate or index. A Fund has a
variety of reasons to use derivative instruments, such as to attempt to
protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and
duration. All of a Fund's portfolio holdings, including derivative
instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on investments.
Upon disposition, a realized gain or loss is recognized accordingly,
except for exercised option contracts where the recognition of gain or
loss is postponed until the disposal of the security underlying the
option contract.
An option contract gives the buyer the right, but not the obligation to buy
(call) or sell (put) an underlying item at a fixed exercise price during a
specified period. These contracts are used by a Fund to manage the
portfolio's effective maturity and duration.
Transactions in purchased options for the Chicago Trust Talon Fund for the
six months ended April 30, 1998 were as follows:
CONTRACTS PREMIUM
--------- ---------
Outstanding at October 31, 1997 . . . . . . . . . . . . . . . . . . . 50 $(120,125)
Options purchased (Net) . . . . . . . . . . . . . . . . . . . . . . . -- --
Options exercised or terminated in closing transactions (Net) . . . . (50) 120,125
Options expired (Net) . . . . . . . . . . . . . . . . . . . . . . . . -- --
--------- ---------
Outstanding at April 30, 1998 . . . . . . . . . . . . . . . . . . . . -- $ --
--------- ---------
(4) MORTGAGE BACKED SECURITIES: The CT Balanced Fund, the M&C Balanced Fund
and the Bond Fund may invest in Mortgage Backed Securities (MBS),
representing interests in pools of mortgage loans. These securities provide
shareholders with payments consisting of both principal and interest as the
mortgages in the underlying mortgage pools are paid. Most of the securities
are guaranteed by federally sponsored agencies - Government National
Mortgage Association (GNMA), Federal National Mortgage
40
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC).
However, some securities may be issued by private, non-government
corporations. MBS issued by private agencies are not government
securities and are not directly guaranteed by any government agency.
They are secured by the underlying collateral of the private issuer.
Yields on privately issued MBS tend to be higher than those of
government backed issues. However, risk of loss due to default and
sensitivity to interest rate fluctuations are also higher.
The CT Balanced Fund, the M&C Balanced Fund and the Bond Fund may also
invest in Collateralized Mortgage Obligations (CMOs) and Real Estate
Mortgage Investment Conduits (REMICS). A CMO is a bond which is
collateralized by a pool of MBS, and a REMIC is similar in form to a CMO.
These MBS pools are divided into classes or tranches with each class having
its own characteristics. The different classes are retired in sequence as
the underlying mortgages are repaid. A Planned Amortization Class (PAC) is
a specific class of mortgages which over its life will generally have the
most stable cash flows and the lowest prepayment risk. Prepayment may
shorten the stated maturity of the CMO and can result in a loss of premium,
if any has been paid.
The CT Balanced Fund and the Bond Fund may utilize Interest Only (IO)
securities to increase the diversification of the portfolio and manage
risk. An Interest Only security is a class of MBS representing ownership in
the cash flows of the interest payments made from a specified pool of MBS.
The cash flow on this instrument decreases as the mortgage principal
balance is repaid by the borrower.
(5) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
Securities transactions are accounted for on the date securities are
purchased or sold. The cost of securities sold is determined using the
first-in-first-out method.
(6) FEDERAL INCOME TAXES: The Funds have elected to be treated as
"regulated investment companies" under Sub-chapter M of the Internal
Revenue Code and to distribute substantially all of their respective net
taxable income. Accordingly, no provisions for federal income taxes have
been made in the accompanying financial statements. The Funds intend to
utilize provisions of the federal income tax laws which allow them to carry
a realized capital loss forward for eight years following the year of the
loss and offset such losses against any future realized capital gains. At
October 31, 1997, the losses amounted to $91,110 for the Municipal Bond
Fund and $25,289 for the Bond Fund, which will expire October 31, 2003 and
October 31, 2005, respectively.
Net realized gains or losses may differ for financial and tax reporting
purposes for the Talon Fund, the M&C Balanced Fund and the Growth Fund
primarily as a result of losses from wash sales which are not recognized
for tax purposes until the corresponding shares are sold and as a result of
gains or losses recognized for tax purposes on the mark-to-market of open
options transactions at October 31, 1997.
(7) DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to shareowners
are recorded on the ex-dividend date.
(8) ORGANIZATION COSTS: The Funds have reimbursed the Advisors for certain
costs incurred in connection with the Funds' and the Company's
organization. The costs are being amortized on a straight-line basis over
five years commencing on December 13, 1993 for the Growth & Income Fund,
Bond Fund and the Municipal Bond Fund; December 14, 1993 for the Money
Market Fund; September 19, 1994 for the Talon Fund; November 2, 1994 for
the Growth Fund and the M&C Balanced Fund; and September 21, 1995 for the
CT Balanced Fund.
(9) USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE (B) DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL
GAINS: With respect to the Growth Fund, the Growth & Income Fund, the Talon
Fund, the CT Balanced Fund and the M&C Balanced Fund, dividends from net
investment income are distributed quarterly and net realized gains from
investment transactions, if any, are distributed to shareowners annually. The
Bond Fund and the Municipal Bond Fund distribute their respective net investment
income to shareowners monthly and capital gains, if any,
41
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
are distributed annually. The Money Market Fund declares dividends daily from
its net investment income. The Money Market Fund's dividends are payable monthly
and are automatically reinvested in additional Fund shares, at the month-end net
asset value, for those shareowners that have elected the reinvestment option.
Differences in dividends per share between classes of the Growth Fund are due to
different class expenses. In January 1998, the Funds provided tax information to
shareowners for the 1997 calendar year.
Net investment income and realized gains and losses for federal income tax
purposes may differ from that reported on the financial statements because of
permanent book and tax basis differences. Distributions from net realized gains
for book purposes may include short-term capital gains, which are included as
ordinary income for tax purposes.
NOTE (C) SHARES OF BENEFICIAL INTEREST: Each Fund is authorized to issue an
unlimited number of shares of beneficial interest with no par value. At April
30, 1998, Chicago Trust and its affiliates owned 2,500 shares of the Growth &
Income Fund, 2,500 shares of the Bond Fund and 1,002,500 shares of the Municipal
Bond Fund.
NOTE (D) INVESTMENT TRANSACTIONS: Aggregate purchases and proceeds from sales of
investment securities (other than short-term investments) for the six months
ended April 30, 1998 were:
AGGREGATE PROCEEDS FROM
PURCHASES SALES
------------- -------------
GROWTH FUND $ 602,671,234 $ 215,263,985
GROWTH & INCOME FUND 94,607,485 71,845,502
TALON FUND 9,872,486 7,289,690
CT BALANCED FUND 56,959,148 46,397,895
M&C BALANCED FUND 81,526,996 37,620,054
BOND FUND 43,946,426 27,467,498
MUNICIPAL BOND FUND 1,932,888 1,472,537
NOTE (E) ADVISORY, ADMINISTRATION AND DISTRIBUTION SERVICES AGREEMENTS: Under
various Advisory Agreements with the Funds, each Advisor provides investment
advisory services to the Funds. The Funds will pay advisory fees at the
following annual percentage rates of the average daily net assets of each Fund:
0.80% on the first $800,000,000 of average daily net assets and 0.60% of average
daily net assets over $800,000,000 (effective February 27, 1998) for the Growth
Fund, 0.70% for the Growth & Income Fund, 0.80% for the Talon Fund, 0.70% for
the CT Balanced Fund, 0.75% for the M&C Balanced Fund, 0.55% for the Bond Fund,
0.60% for the Municipal Bond Fund and 0.40% for the Money Market Fund. These
fees are accrued daily and paid monthly. The Advisors have voluntarily
undertaken to reimburse the Growth Fund (Institutional Class and Retail Class),
the Growth & Income Fund, the Talon Fund, the CT Balanced Fund, the M&C Balanced
Fund, the Bond Fund, and the Municipal Bond Fund for operating expenses which
cause total expenses to exceed 0.98%, 1.30%, 1.10%, 1.30%, 1.10%, 1.25%, 0.80%,
and 0.10%, respectively. Effective February 27, 1998, the expense reimbursement
level for the Municipal Bond Fund changed from 0.90% to 0.10% and the Advisor
for the Money Market Fund will no longer waive fees or reimburse expenses.
Expense reimbursements may be terminated at the discretion of the Advisors. For
the six months ended April 30, 1998, the Advisors reimbursed expenses of $22,595
for the Talon Fund, $116,618 for the Bond Fund, $52,819 for the Municipal Bond
Fund and $24,451 for the Money Market Fund.
42
ALLEGHANY FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED (UNAUDITED) APRIL 30, 1998
- --------------------------------------------------------------------------------
Effective June 1, 1997, First Data Investor Services Group, Inc. ("Investor
Services Group") replaced FPS Services, Inc. as sub-administrator of the Funds.
Chicago Trust is the Funds' Administrator. For services provided as the Funds'
Administrator, Chicago Trust receives the following fees, which are paid in
total to Investor Services Group.
Administration Fees Custody Liaison Fees
------------------- --------------------
Fee (% of Funds' Aggregate Average Daily Net Assets Annual Fee Average Daily Net Assets
-------------------------- ------------------------ ---------- ------------------------
daily net assets) (per Fund) (per Fund)
----------------- ---------- ----------
0.060 up to $2 billion $10,000 up to $100 million
0.045 $2 billion to $3.5 billion $15,000 $100 million to $500 million
0.040 over $3.5 billion $20,000 over $500 million
Effective June 1, 1997, First Data Distributors, Inc. Replaced FPS Broker
Services, Inc. as principal underwriter and distributor of the Funds' shares.
Pursuant to Rule 12b-1 adopted by the Securities and Exchange Commission
under the Act, the Growth Fund Retail Class, the Growth & Income Fund, the
Talon Fund, the CT Balanced Fund, the M&C Balanced Fund, the Bond Fund, and
the Municipal Bond Fund have adopted a Plan of Distribution (the "Plan"). The
Plan permits the participating Funds to pay certain expenses associated with
the distribution of their shares. Under the Plan, each Fund may pay actual
expenses not exceeding, on an annual basis, 0.25% (currently, Chicago Trust
Municipal Bond Fund's Rule 12b-1 fee is reduced to 0.10%) of each
participating Fund's average daily net assets. The Growth Fund Institutional
Class and the Money Market Fund do not have distribution plans.
For the six months ended April 30, 1998, the class specific expenses of the
Growth Fund were:
CLASS N (RETAIL) CLASS I (INSTITUTIONAL)
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,242 $ 9,232
Registration expenses . . . . . . . . . . . . . . . . . . . . . . . . 101,725 63,572
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,023 7,391
Reports to shareowner expenses. . . . . . . . . . . . . . . . . . . . 17,182 9,908
Certain officers and Trustees of the Funds are also officers and directors of
Chicago Trust. The Funds do not compensate its officers or affiliated Trustees.
Effective January 1, 1998, the Company pays each unaffiliated Trustee $2,000 per
Board of Trustees meeting attended and an annual retainer of $2,000.
43
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TRUSTEES
Leonard F. Amari*
Stuard D. Bilton, Chairman
Dorothea C. Gilliam
Gregory T. Mutz*
Nathan Shapiro*
*Unafilliated Trustee
ADVISORS
The Chicago Trust Company
171 North Clark Street
Chicago, IL 60601-3294
Montag & Caldwell, Inc.
3343 Peachtree Road, NE, Suite 1100
Atlanta, GA 30326-1022
SHAREOWNER
SERVICES
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 01581
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581
OFFICERS
Kenneth C. Anderson, President
David F. Seng, Senior Vice President
Gerald F. Dillenburg, Vice President,
Secretary and Treasurer
CUSTODIAN
Bankers Trust
One Bankers Trust Place
New York, NY 10001
LEGAL COUNSEL
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
AUDITOR
KPMG Peat Marwick LLP
303 East Wacker Drive
Chicago, IL 60601
[LOGO] ALLEGHANY FUNDS
Distributed by First Data Distributors, Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581, 7/1/98
This report is submitted for general information of the shareowners of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Fund's objectives, policies, expenses and other
information.
PART C - OTHER INFORMATION
Item 15. Indemnification:
Section 10.2 of the Registrant's Trust Instrument provides as follows:
10.2 Indemnification. The Trust shall indemnify each of its
Trustees against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his
being or having been such a Trustee except with respect to any
matter as to which he shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties, provided that as to any
matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the
Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty,
or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of
such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may
be lawfully entitled, provided that no person may satisfy any
right of indemnity or reimbursement hereunder except out of
the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this
Section 10.2, provided that the indemnified person shall have
given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to
such indemnification.
The Trust shall indemnify officers, and shall have
the power to indemnify representatives and employees of the
Trust, to the same extent that Trustees are entitled to
indemnification pursuant to this Section 10.2.
Insofar as indemnification for liability arising under the 1933 Act may
be permitted to trustees, officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in that Act and is, therefore, enforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in that Act and will
be governed by the final adjudication of such issue.
Section 10.3 of the Registrant's Trust Instrument, also provides for
the indemnification of shareholders of the Registrant. Section 10.3 states as
follows:
10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally
liable solely by reason of his being or having been a
shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other
legal representatives or, in the case of a corporation or
other entity, its corporate or other general successor) shall
be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust, on
behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Trust and satisfy
any judgment thereon from the assets of the Series.
In addition, Registrant currently has a trustees' and officers'
liability policy covering certain types of errors and omissions.<
Item 16. Exhibits:
(1) Trust Instrument dated September 10, 1993--Incorporated herein by reference
to Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
(2) Copies of existing By-Laws--Incorporated herein by reference
to Exhibit No. (2) to Registration Statement No. 33-68666 filed
via EDGAR on February 22, 1996.
(3) Copies of any voting trust agreement--Not
Applicable.
(4) Copies of the agreement of acquisition, reorganization,
merger, liquidation, and any amendments to it - included as
Appendix D to Part A of this Registration Statement.
(5) Copies of all instruments defining the rights of holders of the
securities--Not Applicable.
(6) Copies of all investment advisory contracts:
(a) Investment Advisory Agreements for CT&T Growth & Income Fund, CT&T
Intermediate Fixed Income Fund, CT&T Intermediate Municipal Bond Fund,
and CT&T Money Market Fund with Chicago Title and Trust Company, each
dated November 30, 1993--Incorporated herein by reference to Exhibit
No. (5)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Investment Advisory Agreements for CT&T Talon Fund with Chicago Title
and Trust Company, and Montag & Caldwell Growth Fund and Montag &
Caldwell Balanced Fund with Montag & Caldwell, Inc., each dated August
27, 1994--Incorporated herein by reference to Exhibit No. (5)(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Investment Advisory Agreement for CT&T Balanced Fund (formerly known as
"CT&T Asset Allocation Fund") with Chicago Title and Trust Company,
dated March 15, 1995--Incorporated herein by reference to Exhibit No.
(5)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendments to Investment Advisory Agreements for each Series, each
dated December 21, 1995, reflecting name changes of Series and
Advisor--Incorporated herein by reference to Exhibit No. (5)(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Amendments to Investment Advisory Agreements for Montag &
Caldwell Growth Fund and Montag & Caldwell Balanced Fund, each
dated December 21, 1995--Incorporated herein by reference to
Exhibit No. (5)(a) to Registration Statement No. 33-68666 filed
via EDGAR on April 16, 1996.
Form of Investment Advisory Agreement for Alleghany/Chicago Trust
SmallCap Value Fund with Chicago Title and Trust Company, dated
_________________, 1998 -- Incorporated herein by reference to Exhibit
No. 5(a) to Registration Statement No. 33-68666 filed via EDGAR on
November 10, 1998.
Form of Investment Advisory Agreement for Alleghany/Veredus
Aggressive Growth Fund with Veredus Asset Management LLC, dated
__________________, 1998-- Incorporated herein by reference to
Exhibit No. 5(a) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
Form of Investment Advisory Agreement for Alleghany/Blairlogie Emerging
Markets Fund with Blairlogie Capital Management, dated
_________________, 1998 -- filed herewith as Appendix IV to this
Registration Statement.
Form of Investment Advisory Agreement for Alleghany/Blairlogie
International Developed Fund with Blairlogie Capital Management, dated
_________________, 1998 -- filed herewith as Appendix IV to this
Registration Statement.
(b) Amended and Restated Sub-Investment Advisory Agreement for CT&T Talon
Fund with Talon Asset Management, Inc., dated December 21,
1995--Incorporated herein by reference to Exhibit No. 5(b) to
Registration Statement No. 33-68666 filed via EDGAR on February 27,
1997.
(c) Amended and Restated Guaranty Agreement dated December 23, 1996,
between Chicago Title and Trust Company and CT&T Funds--Incorporated
herein by reference to Exhibit No. 5(c) to Registration Statement No.
33-68666 filed via EDGAR on February 27, 1998.
(d) Investment Advisory Assignment dated October 30, 1995, between and
among Chicago Title and Trust Company, The Chicago Trust Company, and
CT&T Funds--Incorporated herein by reference to Exhibit No. (5)(d) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
(e) Master Services Agreement dated October 30, 1995, between Chicago Title
and Trust Company and certain of its subsidiaries--Incorporated herein
by reference to Exhibit No. (5)(e) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(7) Copies of each underwriting or distribution
contract:
(a) Underwriting Agreement for all Funds with FPS Broker Services, Inc.,
dated November 30, 1993--Incorporated herein by reference to Exhibit
No. (6)(a) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendment dated December 21, 1995 to Underwriting Agreement,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (6)(a) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
Amendment dated June 13, 1996 to Underwriting Agreement, reflecting
creation of multiple class--Incorporated herein by reference to
Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
(b) Underwriter Compensation Agreement for all Funds with FPS Broker
Services, Inc., dated November 30, 1993--Incorporated herein by
reference to Exhibit No. (6)(b) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment dated December 21, 1995 to Underwriter Compensation
Agreement, reflecting name changes to certain Series--Incorporated
herein by reference to Exhibit No. (6)(a) to Registration Statement No.
33-68666 filed via EDGAR on February 22, 1996.
(c) Distribution Agreement dated June 1, 1997 between CT&T Funds and First
Data Distributors, Inc.--Incorporated herein by reference to Exhibit
No. 6(c) to Registration Statement No. 33-68666 filed via EDGAR on
February 27, 1998.
Form of Amendment to Distribution Agreement between Alleghany
Funds and First Data Distributors, Inc, dated
________________________, 1998-- Incorporated herein by reference
to Exhibit No. 6(c) to Registration Statement No. 33-68666 filed
via EDGAR on November 10, 1998.
(8) Copies of all bonus, profit sharing, pension or other similar
contracts--Not Applicable.
(9) Copies of all custodian agreements:
(a) Custodian Agreement between Bankers Trust Company and CT&T Funds, dated
June 1, 1997--Incorporated herein by reference to Exhibit No. 8(a) to
Registration Statement No. 33-68666 filed via EDGAR on February 27,
1998.
Form of Amendment to Custodian Agreement between Alleghany Funds
and Bankers Trust Company, dated ___________________________,
1998-- Incorporated herein by reference to Exhibit No. 8(a) to
Registration Statement No. 33-68666 filed via EDGAR on November
10, 1998.
(b) Custody Administration and Agency Agreement for all CT&T Funds with FPS
Services, Inc., with respect to UMB Bank, N.A., dated December 8,
1994--Incorporated herein by reference to Exhibit (8)(b) to
Registration Statement No. 33-68666 filed via EDGAR on February 22,
1996.
Amendment dated December 21, 1995 to Custody Administration and
Agency Agreement, reflecting name changes to certain
Series--Incorporated herein by reference to Exhibit No. (8)(b) to
Registration Statement No. 33-68666 filed via EDGAR on February
22, 1996.
Amendment dated June 13, 1996 to Custody Administration and Agency
Agreement, reflecting creation of multiple class--Incorporated herein
by reference to Registration Statement No. 33-68666 filed via EDGAR on
April 16, 1996.
(10) Copies of any plan or agreement entered into by Registrant
pursuant to Rule 12b-1:
(a) Distribution and Service Plan for all Funds except Chicago Trust Money
Market Fund, with FPS Broker Services, Inc.--Incorporated herein by
reference to Exhibit No. (15)(a) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment to Distribution and Service Plan dated December 21,
1995, reflecting name changes to certain Series--Incorporated
herein by reference to Exhibit No. (15)(a) to Registration
Statement No. 33-68666 filed via EDGAR on February 22, 1996.
(b) Servicing Agreement for Distribution Assistance and Shareholder
Administrative Support Services for all Funds except Money Market Fund,
with FPS Broker Services, Inc.--Incorporated herein by reference to
Exhibit No. (15)(b) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
Amendment to Servicing Agreement for Distribution Assistance and
Shareholder Administrative Support Services dated December 21, 1995,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (15)(b) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
(c) Form of Amendment to Amended and Restated Distribution and Services
Plan pursuant to Rule 12b-1 between Alleghany Funds and First Data
Distributors, Inc., dated ___________________, 1998-- Incorporated
herein by reference to Exhibit No. 15(c) to Registration Statement No.
33-68666 filed via EDGAR on November 10, 1998.
(11) Consent of Counsel - Not Applicable.
(12) Tax matters opnion and consent. *
(13) Copies of all other material contracts not made in the
ordinary course of business which are to be performed:
(a) Transfer Agency and Services Agreement between CT&T Funds and First
Data Investor Services Group, Inc., dated June 1, 1997--Incorporated
herein by reference to Exhibit No. 9(a) to Registration Statement No.
33-68666 filed via EDGAR on February 27, 1998.
Form of Amendment to Transfer Agency and Services Agreement
between Alleghany Funds and First Data Investor Services Group,
Inc., dated _________________________, 1998-- Incorporated herein
by reference to Exhibit No. 9(a) to Registration Statement No.
33-68666 filed via EDGAR on November 10, 1998.
(b) Administration Agreement between the Company and Chicago Title and
Trust Company, dated June 15, 1995--Incorporated herein by reference to
Exhibit No. (9)(b) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
*To be filed by amendment
Amendment dated December 21, 1995 to Administration Agreement,
reflecting name changes of certain Series and the
Administrator--Incorporated herein by reference to Exhibit No.
(9)(b) to Registration Statement No. 33-68666 filed via EDGAR on
February 22, 1996.
Amendment dated June 13, 1996 to Administration Agreement, reflecting
creation of multiple class--Incorporated herein by reference to
Registration Statement No. 33-68666 filed via EDGAR on April 16, 1996.
Form of Amendment to Administration Agreement between Alleghany
Funds and Chicago Title and Trust Company, dated
_____________________, 1998-- Incorporated herein by reference to
Exhibit No. 9(b) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
(c) Sub-Administration Agreement between First Data Investor
Services Group, Inc. and The Chicago Trust Company, dated June 1,
1997--Incorporated herein by reference to Exhibit No. 9(c) to
Registration Statement No. 33-68666 filed via EDGAR on February
27, 1998.
Form of Amendment to Sub-Administration Agreement with Alleghany
Funds and First Data Investor Services Group, Inc., dated
____________________, 1998-- Incorporated herein by reference to
Exhibit No. 9(c) to Registration Statement No. 33-68666 filed via
EDGAR on November 10, 1998.
(d) Accounting Services Agreement between CT&T Funds and FPS Services,
Inc., dated November 30, 1993--Incorporated herein by reference to
Exhibit No. (9)(c) to Registration Statement No. 33-68666 filed via
EDGAR on February 22, 1996.
Amendment dated December 21, 1995 to Accounting Services Agreement,
reflecting name changes to certain Series--Incorporated herein by
reference to Exhibit No. (9)(c) to Registration Statement No. 33-68666
filed via EDGAR on February 22, 1996.
Amendment dated June 13, 1996 to Accounting Services Agreement,
reflecting creation of multiple class--Incorporated herein by Reference
to Registration Statement No. 33-68666 filed via EDGAR on April 16,
1996.
(14) Copies of any other opinions, appraisals or rulings*.
(15) All financial statements omitted from Item
14(a)(1)--Not Applicable.
16) Additional Exhibits -- Not Applicable.
(18)The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the
Securities Act [17 CFR 230.145c], the reoffering prospectus will
contain the information called for by the applicable registration form
for
reofferings by persons who may be deemed
underwriters, in addition to the
information called for by the other
items of the applicable form.
The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Chicago,
the State of Illinois on the 25th day of November, 1998.
ALLEGHANY FUNDS
By: /s/ KENNETH C. ANDERSON
Kenneth C. Anderson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Alleghany Funds has been signed below by the following person in
his or her capacity and on the 25th day of November, 1998.
Signature Capacity
/s/ STUART D. BILTON Chairman, Board of Trustees 11/25/98
Stuart D. Bilton
/s/ DOROTHEA C. GILLIAM Trustee 11/25/98
Dorothea C. Gilliam
/s/ NATHAN SHAPIRO Trustee 11/25/98
Nathan Shapiro
/s/ GREGORY T. MUTZ Trustee 11/25/98
Gregory T. Mutz
/s/ LEONARD F. AMARI Trustee 11/25/98
Leonard F. Amari
/s/ KENNETH C. ANDERSON President 11/25/98
Kenneth C. Anderson (Principal Executive Officer)
/s/ GERALD F. DILLENBURG Secretary, Treasurer and 11/25/98
Gerald F. Dillenburg Vice President (Principal
Accounting and Financial
Officer)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
12 Tax Opinion*
14 Opinions and Consents of Counsel*
17 Financial Data Schedules
*To be filed by Amendement