SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[ ] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14A-11(c) or Section 240.14a-12
ABN AMRO Funds
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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PRELIMINARY COPY
ABN AMRO FUNDS
ABN AMRO INSTITUTIONAL PRIME MONEY MARKET FUND
161 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601
Dear Fellow Shareholder:
Enclosed is a Notice, Proxy Statement and proxy card for a Special Meeting
of Shareholders of ABN AMRO Institutional Prime Money Market Fund (the "Fund"),
a series of ABN AMRO Funds (the "Trust"). The meeting is scheduled to be held at
10:00 a.m., Eastern Time, December 13, 2002 at the offices of PFPC Inc., 101
Federal Street, 6th Floor, Boston, Massachusetts 02110.
We are asking shareholders of the Fund to approve an Amendment to the
Investment Advisory Agreement with ABN AMRO Asset Management (USA) LLC, the
Fund's investment adviser, to increase the advisory fee rate payable by the Fund
to the Adviser. The Fund's current advisory fee rate has been in place since its
inception, December 28, 1999. To aid you in understanding the proposal, we have
also enclosed a Questions & Answers section regarding the proposal.
The Board of Trustees reviewed and approved the proposed Amendment at the
meeting of the Board of Trustees held on September 19, 2002. The Board concluded
that it was in the best interests of shareholders to adopt the Amendment and
recommended the proposal be submitted to shareholders for approval.
YOUR VOTE IS IMPORTANT! Please review the attached proxy statement
carefully. Enclosed is a proxy card that we ask you to complete, sign, date and
return as soon as possible in the postage-paid envelope. Thank you for your
attention and your vote with regard to this important proposal. Please call
shareholder services at (800) 992-8151 if you need more information.
Sincerely,
/s/ KENNETH C. ANDERSON
Kenneth C. Anderson
President
November 5, 2002
IMPORTANT NEWS FOR SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of the proposal, which will require a
shareholder vote.
QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: On September 19, 2002, management proposed and the Board of Trustees
approved an amendment to the investment advisory agreement between ABN
AMRO Asset Management (USA) LLC ("Adviser"), your Fund's investment
adviser, and ABN AMRO Funds, on behalf of your Fund. The investment
advisory agreement, as amended, is identical to the existing investment
advisory agreement, except for a change in the advisory fee rate
payable by the Fund to the Adviser. Under the proposed amendment, the
annual advisory fee rate will become .12%.
The following pages give you additional information about the proposed
amendment to the investment advisory agreement.
Q: WHY THE PROPOSAL FOR AN AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT?
A: The advisory fee rate for the Fund has been in place since the Fund's
inception in December of 1999. Since that time, the costs of
maintaining and updating the technological systems necessary for
effective investment management operations have continued to increase.
The Adviser desires to continue to provide high quality investment
management services to the Fund and its shareholders. The Board
believes that the increase in the advisory fee rate will allow the
Adviser to provide continued services of high quality while satisfying
the needs of the shareholders for competitive expense ratios.
Q: WILL THE PROPOSED CHANGE RESULT IN HIGHER ADVISORY FEES?
A: Yes. See page 5 for a comparison of the current and proposed advisory
fees. The advisory fee rate currently charged to the Fund will increase
if the proposal is approved. However, the Trustees of the Fund have
concluded that an increase in the advisory fee is in the best interests
of shareholders because it will enable the Adviser to continue to
effectively manage the Fund. Based upon current comparative
information, even with the increase in the advisory fee, the Fund's
overall expense ratio would still be competitive. Please see the
accompanying proxy statement for a more detailed explanation of the
proposed amendment to the investment advisory agreement.
Q: HAS THE FUND'S BOARD APPROVED THE PROPOSAL?
A: Yes. The Fund's Board has approved the proposal and recommends that you
vote to approve it.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call shareholder services at (800) 992-8151.
PRELIMINARY COPY
ABN AMRO FUNDS
161 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF ABN AMRO INSTITUTIONAL PRIME MONEY MARKET FUND
TO BE HELD ON DECEMBER 13, 2002
To the Shareholders of ABN AMRO Institutional Prime Money Market Fund:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders of ABN
AMRO Institutional Prime Money Market Fund (the "Fund"), a series of ABN AMRO
Funds (the "Trust"), a Delaware statutory trust, will be held at the offices of
the Trust's sub-administrator, PFPC Inc., 101 Federal Street, 6th Floor, Boston,
Massachusetts 02110 on December 13, 2002 at 10:00 a.m. Eastern Time (the
"Special Meeting") for the following purpose and to transact such other
business, if any, as may properly come before the Special Meeting:
- To approve an Amendment to the Investment Advisory Agreement for the
Fund with ABN AMRO Asset Management (USA) LLC.
The Board of Trustees has fixed the close of business on October 17, 2002
as the record date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting or any adjournment thereof.
By Order of the Board of Trustees,
Gerald F. Dillenburg
Senior Vice President, Secretary and
Treasurer
November 5, 2002
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY CARD, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF THE TRUST. YOU
MAY EXECUTE THE PROXY CARD USING THE METHODS DESCRIBED IN THE PROXY CARD.
EXECUTING THE PROXY CARD IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. PROXIES
MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING A WRITTEN
NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE
MEETING AND VOTING IN PERSON.
INSTRUCTIONS FOR VOTING
The following general rules apply to voting by mail and will help you to
properly sign your proxy card. Please read carefully because if you do not sign
your proxy card properly your vote will be invalidated.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Both parties must sign and the name of each party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration. For example:
<Table>
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp. by
John Doe, Treasurer
(2) ABC Corp. John Doe
John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan John Doe
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d/ 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) Estate of John B. Smith John B. Smith, Jr., Executor
</Table>
November 5, 2002
PRELIMINARY COPY
ABN AMRO FUNDS
161 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601
SPECIAL MEETING OF SHAREHOLDERS
OF ABN AMRO INSTITUTIONAL PRIME MONEY MARKET FUND
TO BE HELD ON DECEMBER 13, 2002
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of the ABN AMRO Funds, a Delaware statutory
trust (the "Trust") for the ABN AMRO Institutional Prime Money Market Fund (the
"Fund"), for use at a Special Meeting of Shareholders of the Fund to be held at
10:00 a.m. Eastern Time on Friday, December 13, 2002 at the offices of the
Trust's sub-administrator, PFPC Inc., 101 Federal Street, 6th Floor, Boston
Massachusetts 02110, and any adjournments thereof (the "Special Meeting"). This
Proxy Statement and the accompanying Notice of Special Meeting and proxy card
are first being mailed to shareholders on or about November 5, 2002. It is
expected that the solicitation of proxies will be primarily by mail. Officers
and service contractors of the Trust may also solicit proxies by telephone,
telegraph, facsimile, Internet or in person. The cost of preparing, printing and
mailing the enclosed proxy card and Proxy Statement and all other costs incurred
in connection with the solicitation of proxies will be paid by ABN AMRO Asset
Management (USA) LLC (the "Adviser" or "AAAM") or one of its affiliates. The
Fund's most recent annual report and semi-annual report is available upon
request without charge by writing the Trust at P.O. Box 9765, Providence, Rhode
Island 02940 or by calling toll-free 1-800-992-8151. To help reduce Fund
expenses and environmental waste, the Fund combines mailings for multiple
accounts going to a single address by delivering the Fund's reports (annual and
semi-annual reports) and proxy statements in a single envelope. If you do not
want to continue consolidating your Fund mailings and prefer to receive separate
mailings with multiple copies of Fund reports and proxy statements, please call
one of the Fund's Institutional Fund Representatives at 1-800-992-8151.
If the enclosed proxy card is properly executed and returned in time to be
voted at the Special Meeting, the shares of beneficial interest ("Shares")
represented by the proxy will be voted in accordance with the instructions
marked thereon. If no specification is made, the Shares will be voted FOR the
proposal. Any shareholder who has given a proxy has the right to revoke it at
any time prior to its exercise either by attending the Special Meeting and
voting his or her Shares in person, or by submitting a letter of revocation or a
later-dated proxy to the Trust at the above address prior to the date of the
Special Meeting.
Shareholders of the Fund are entitled to one vote for each full Share held
and fractional votes for fractional Shares. One-third of the aggregate number of
Shares entitled to vote, present in person or by proxy, constitutes a quorum for
the transaction of business. Abstentions and broker "non-votes" (that is,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as Shares that are present but which have
not been voted for purposes of determining the presence of a quorum for
transacting business at the Special Meeting. In the event that a quorum is not
present at the Special Meeting, or in the event that a quorum is present but
sufficient votes to approve the proposal are not received, the persons named as
proxies on the enclosed proxy card may propose one or more adjournments of the
Special Meeting to permit further solicitation of proxies. The persons named as
proxies will vote upon such adjournment after consideration of all circumstances
that may bear upon a decision to adjourn the Special Meeting. Any business that
might have been transacted at the Special Meeting originally called may be
transacted at any such adjourned session(s) at which a quorum is present. The
Adviser or one of its affiliates will pay the costs of preparing and
distributing to shareholders additional proxy materials, if required in
connection with any adjournment. Any adjournment will require the
1
affirmative vote of a majority of those Shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote in favor
of any such adjournment those proxies which they are entitled to vote in favor
of the proposal and will vote against any such adjournment those proxies to be
voted against the proposal.
The proposal requires the affirmative vote of a "majority of the
outstanding voting securities" of the Fund with Class Y and Class YS
shareholders voting together. The term "majority of the outstanding voting
securities," as used in this Proxy Statement, means the affirmative vote of the
lesser of (i) 67% of the voting securities of the Fund present at the meeting if
more than 50% of the outstanding voting securities of the Fund are present in
person or by proxy or (ii) more than 50% of the outstanding voting securities of
the Fund. Abstentions and broker non-votes will have the effect of a "no" vote
for purposes of obtaining the requisite approval of the proposal.
The Board of Trustees has fixed the close of business on October 17, 2002,
as the record date (the "Record Date") for the determination of shareholders of
the Fund entitled to notice of and to vote at the Special Meeting and all
adjournments thereof. At the close of business on the Record Date there were
Class Y Shares and Class YS Shares of the Fund
outstanding and entitled to vote. As of the Record Date, the officers and
Trustees of the Trust as a group beneficially owned less than 1% of the Shares
of either class of the Fund. As of the Record Date, to the best knowledge of the
Fund, the following persons owned of record or beneficially 5% or more of Class
Y Shares or Class YS Shares of the Fund.
<Table>
<Caption>
PERCENTAGE OWNED
SHARES OWNED (%)
---------------------- -------------------
SHAREHOLDER NAME AND ADDRESS CLASS Y CLASS YS CLASS Y CLASS YS
---------------------------- --------- --------- ------- --------
LaSalle National Trust NA............................ [100%] [100%]
Attn: Mutual Funds Operations
P.O. Box 1443
Chicago, IL 60690-1443
</Table>
LaSalle National Bank ("LaSalle"), an affiliate of the Adviser, is the
record holder with respect to [100%] of the outstanding Class Y and Class YS
Shares of the Fund as of October 17, 2002. LaSalle owns such Shares solely for
the benefit of its clients in trust, fiduciary and similar capacities. LaSalle
provides services to the Fund and its shareholders and receives a fee from the
Adviser for such services. The services provided by LaSalle are described under
"Board Evaluation." For those Shares which LaSalle does not have discretion to
vote on the proposal, the shareholder will vote on the proposal. For those
Shares which LaSalle has discretion to vote on the proposal, LaSalle will engage
an independent fiduciary to vote on the proposal.
In order that your Shares may be represented at the Special Meeting, if you
are mailing your proxy card, you are requested to:
- indicate your instructions on the enclosed proxy card;
- date and sign the proxy card;
- mail the proxy card promptly in the enclosed envelope, which requires no
postage if mailed in the United States; and
- allow sufficient time for the proxy card to be received on or before
10:00 a.m. Eastern Time on December 13, 2002.
2
PROPOSAL TO APPROVE AN AMENDMENT
TO THE INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). ABN AMRO Asset
Management (USA) LLC ("AAAM" or the "Adviser"), 161 North Clark Street, Chicago,
IL 60601 is the investment adviser to the Fund pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") dated September 27, 2001, between
AAAM and the Trust, on behalf of the Fund. AAAM is an indirect, wholly-owned
subsidiary of ABN AMRO Bank N.V., Hoogoorddreef 66-68, 1101 BE, Amsterdam, The
Netherlands. AAAM is an affiliate of the Fund's administrator, ABN AMRO
Investment Fund Services, Inc. The Adviser serves as investment adviser to ten
other series of the Trust, which, together with the Fund, in the aggregate had
$3.6 billion in assets as of September 30, 2002. A table setting forth the net
assets of other series of the Trust advised by the Adviser which have investment
objectives similar to the Fund, and the advisory fee rate paid by such funds, is
attached as Exhibit B to this Proxy Statement. The net asset value of the Fund
was approximately $1.9 billion on September 30, 2002. The Adviser also provides
investment advice to other accounts having an aggregate value on September 30,
2002 of approximately $8.6 billion.
The Board of Trustees of the Fund, including all of the Trustees who are
not "interested persons," as defined in the 1940 Act, of the Trust or the
Adviser (the "Independent Trustees"), has approved, and recommends that
shareholders approve, an amendment to the Advisory Agreement (the "Amendment")
between the Trust, on behalf of the Fund, and the Adviser. The only change to
the Advisory Agreement is an increase in the advisory fee rate payable by the
Fund to the Adviser. Shareholders are being asked to approve the Amendment to
the Advisory Agreement. The factors considered by the Board of Trustees,
including the Independent Trustees, in considering approval of the Amendment are
described below under "Board Evaluation." A copy of the Advisory Agreement and
the proposed Amendment reflecting the proposal is set forth as Exhibit A to this
Proxy Statement.
Directors and Officers of AAAM
The table below lists the names and principal occupation of AAAM's
principal executive officers and directors. Unless otherwise indicated, the
address of each director and officer listed below is 161 North Clark Street,
Chicago, Illinois 60601.
<Table>
<Caption>
NAME TITLE/POSITION WITH AAAM PRINCIPAL OCCUPATION
- ---- ----------------------------- --------------------------------------
Stuart D. Bilton............ President and Chief Executive President and Chief Executive Officer
Officer of ABN AMRO Asset Management (USA)
LLC; Chief Executive Officer of The
Chicago Trust Company; Director,
Montag & Caldwell, Inc., Veredus Asset
Management Inc. and TAMRO Capital
Partners LLC; previously, President of
Alleghany Asset Management, Inc.;
Executive Vice President of Chicago
Title and Trust Company.
Jon T. Ender................ Executive Vice President Chief Investment Strategist of ABN
AMRO Asset Management (USA) LLC
Frederick W. Engimann....... Executive Vice President Director of Fixed Income of ABN AMRO
Asset Management (USA) LLC
Bernard F. Myszkowski....... Executive Vice President Director of Equity Investments, ABN
AMRO Asset Management (USA) LLC
Seymour A. Newman........... Executive Vice President, Chief Financial Officer of ABN AMRO
Chief Financial Officer Asset Management (USA) LLC
</Table>
3
<Table>
<Caption>
NAME TITLE/POSITION WITH AAAM PRINCIPAL OCCUPATION
- ---- ----------------------------- --------------------------------------
Carla S. Vorhees............ Executive Vice President Director of Marketing & Client
Service, ABN AMRO Asset Management
(USA) LLC
</Table>
There are officers and Trustees of the Fund who are also officers and
employees of AAAM. The table below lists these people.
<Table>
<Caption>
NAME POSITION WITH THE FUND POSITION WITH AAAM
- ---- ---------------------------------- -----------------------------------
Stuart D. Bilton............ Chairman, Board of Trustees, and President and Chief Executive
Chief Executive Officer Officer
Kenneth C. Andersen......... President, Chief Operating Officer President of ABN AMRO Investment
Fund Services, Inc.
Gerald F. Dillenburg........ Senior Vice-President, Secretary, Senior Managing Director of ABN
Treasurer, Chief Financial Officer AMRO Investment Fund Services, Inc.
</Table>
The Fund currently offers Class Y Shares and Class YS Shares. Neither class
pays a Rule 12b-1 fee or charges a sales load. Class YS shareholders pay a
shareholder service fee of up to .25% of the Fund's average daily net assets.
The Adviser had a contractual obligation to waive management fees and/or
reimburse expenses for the total annual operating expenses exceeding .18% for
Class Y Shares and .43% for Class YS Shares through September 30, 2002. The
Adviser has a contractual obligation to waive management fees and/or reimburse
expenses for the total annual operating expenses exceeding .20% for Class Y
shares and .45% for Class YS shares through September 30, 2003. These waivers
were put in place in September 2001 in connection with the reorganization of the
Trust into the Alleghany Funds, which was subsequently renamed the ABN AMRO
Funds.
The advisory fee rate schedule for the Fund has not been changed since the
Fund's inception, December 28, 1999, when shareholders initially approved the
advisory fee rate currently in the Advisory Agreement. Continuance of the
Advisory Agreement in its present form has been approved by the Board of
Trustees, including the Independent Trustees, most recently on December 20,
2001. See also "Board Evaluation" below.
DESCRIPTION OF THE INVESTMENT ADVISORY AGREEMENT
Under the Advisory Agreement, the Adviser, subject to the control of the
officers and the Board of Trustees of the Trust and in compliance with the
objectives, policies and limitations of the Fund set forth in the Fund's
currently effective Prospectus, statement of additional information and the
requirements of the 1940 Act and other applicable laws, manages the affairs of
the Fund. In this regard, it is the responsibility of the Adviser to
continuously provide the Fund with investment advisory services pursuant to the
Advisory Agreement.
The Adviser shall provide the following investment advisory services to the
Fund: (i) manage the investment and reinvestment of the assets of the Fund, (ii)
continuously review, supervise and administer the investment program of the
Fund, (iii) determine, in its discretion, the assets to be held uninvested by
the Fund, (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 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.
The Fund is responsible for payment of all its expenses other than those
assumed by the Adviser. Fund expenses generally consist of, but are not limited
to, direct charges relating to the purchase and sale of portfolio securities,
shareholder recordkeeping and shareholder account services, fees and
disbursements of custodians, fees and expenses of attorneys and independent
auditors, taxes and governmental fees, expenses of registering and qualifying
shares for sale, expenses of printing and distributing reports, notices and
proxy
4
materials to shareholders, expenses of printing and distributing prospectuses to
current shareholders, expenses of shareholders' meetings, fees and expenses of
trustees who are not employees of, or consultants to, the Adviser or its
affiliates, insurance premiums and extraordinary expenses such as litigation
expenses. Other Fund expenses include expenses of Fund data processing and
related services, the cost of share certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase and redemption of
shares, expenses of printing and filing reports and other documents filed with
governmental agencies, and expenses of disbursing dividends and distribution.
The Advisory Agreement, which is dated September 27, 2001, continued in
effect until December 31, 2001, and continues from year to year thereafter if
such continuance is approved in the manner required by the 1940 Act and if the
Adviser shall not have notified the Fund at least 60 days prior to an
anniversary date that it does not desire such continuance. The Advisory
Agreement may be terminated at any time without penalty by the Fund upon a vote
of the majority of the Trustees or by vote of the majority of the Fund's
outstanding voting securities, on 60 days' written notice to the Adviser and
will terminate automatically in the event of its assignment.
PROPOSED FEE INCREASE
The Current Fee. Under the current Advisory Agreement, AAAM receives an
advisory fee from the Fund at an annual rate of .10% of the Fund's average daily
net assets. This percentage, referred to as the advisory fee rate, is determined
by reference to the aggregate net assets based upon daily valuations. For the
fiscal year ended October 31, 2002, the Fund paid $ in advisory fees to
AAAM.
The Proposed Fee. Under the proposed Amendment, the advisory fee rate
would be .12% of the Fund's average daily net assets and would continue to be
computed daily and paid monthly. If the proposed Amendment had been effect for
the fiscal year ended October 31, 2002, the advisory fee would have amounted to
$ . This would have represented an increase of % over the actual
advisory fee of $ .
The table below compares the Fund's operating expenses (including the
advisory fee) for the fiscal year ended October 31, 2002 under the current
Advisory Agreement, with the Fund's hypothetical operating expenses for the same
year if the Advisory Agreement, as amended, had been in place for the entire
fiscal year. The following table shows, for the Fund's fiscal year ended October
31, 2002, as a percentage of average daily net assets, (a) the actual operating
expenses for each class of the Fund's Shares and (b) the pro forma operating
expenses assuming the proposed Amendment had been in effect throughout the year.
<Table>
<Caption>
CLASS Y SHARES CLASS YS SHARES
------------------- -------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------ --------- ------ ---------
ANNUAL FUND OPERATING EXPENSES
(expenses deducted from Fund assets)
Management Fees........................................... .10% .12% .10% .12%
Distribution (12b-1) Fees................................. -- -- -- --
Other Expenses............................................ .08 .08 .33 .33
TOTAL ANNUAL FUND OPERATING EXPENSES*..................... .18 .20 .43 .45
</Table>
- ---------------
* The Adviser was contractually obligated to waive management fees and/or
reimburse expenses to maintain total annual operating expenses through
September 30, 2002 at .18% for Class Y Shares and .43% for Class YS Shares.
The Adviser is contractually obligated to waive management fees and/or
reimburse expenses to maintain total operating expenses through September 30,
2003 at .20% for Class Y Shares and .45% for Class YS Shares.
The following hypothetical example illustrates the operating expenses you
would incur as a shareholder if you invested $10,000 in the Fund over the time
periods shown and you redeem all of your shares at the end of
5
the period. The example assumes you reinvested all dividends and distributions,
that the average annual return was 5% and that operating expenses remained the
same:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
CLASS Y SHARES:
Existing Fee.............................................. $18 $ 58 $101 $230
Proposed Fee.............................................. $20 $ 64 $113 $255
CLASS YS SHARES:
Existing Fee.............................................. $44 $138 $241 $542
Proposed Fee.............................................. $46 $144 $252 $567
</Table>
The purpose of this example and the table is to assist investors in
understanding the effect of the proposed fee increase on the various costs and
expenses of investing in shares of the Fund. The example is for comparative
purposes only and does not represent the Fund's actual or future expenses or
returns.
BOARD EVALUATION
At a meeting of the Board of Trustees held on September 19, 2002, the Board
of Trustees, including the Independent Trustees, approved the Amendment to the
Advisory Agreement and recommended that shareholders vote to approve the
Amendment. Legal counsel to the Fund advised the Trustees on, among other
things, the nature of the matters to be considered, the Board's fiduciary
obligation in considering the proposed Amendment, and the standards to be used
by the Board of Trustees and the Independent Trustees in reaching their
decision. In evaluating the proposal, the Board reviewed materials furnished by
management and legal counsel to the Fund.
The Board's consideration of the Amendment was based upon financial,
statistical and other information supplied to the Trustees, and on the Trustees'
general knowledge of the Adviser and the services it provides to the Fund. The
Board received materials comparing the Fund's current advisory fee and overall
expenses to those of comparable mutual funds. The comparative materials, which
were obtained from an independent and unaffiliated research provider, indicated
that the Fund's overall expense ratio would still be competitive, even after
taking into consideration the proposed increase in the advisory fee rate. The
Board believes that the increase in the advisory fee rate for the Fund will
allow the Adviser to continue to provide services of high quality while
satisfying the needs of the shareholders for a competitive expense ratio. The
Board concluded that it is in the best interests of shareholders for the Adviser
to be reasonably compensated for services provided in order to support
investment in the necessary infrastructure to successfully manage a money market
fund. Based on the materials provided to the Trustees, the Board of Trustees,
including all the Independent Trustees, concluded that adopting the Amendment to
the Advisory Agreement was in the best interest of the Fund and its
shareholders.
The Board of Trustees specifically considered the following factors as
relevant to its recommendation, including: (1) the nature and quality of the
services rendered by the Adviser; (2) comparable fees and expense ratios (on an
existing and pro forma basis), including advisory fees paid by other ABN AMRO
money market funds and unaffiliated funds; (3) an analysis of the impact of
implementing the proposed advisory fee rate change; (4) the cost of providing
the services (profitability to the Adviser), including payments received by the
Adviser and its affiliates from all sources involving the Fund; (5) the size of
the Fund and any economies of scale realized by the Adviser and sharing thereof
with the Fund; (6) fall-out benefits which the Adviser and its affiliates
receive from the Adviser's relationship to the Fund; and (7) changes in the
mutual fund industry since 1999 that have affected fund management.
Certain of the factors addressed by the Board in reaching its determination
to approve the Amendment are discussed in more detail below.
Nature and Quality of Services. The Board of Trustees considered the
nature and quality of the services provided by the Adviser and determined that
these factors supported the payment of competitive fees to the Adviser.
6
Comparative Fees and Expense Ratios. The Board of Trustees evaluated the
comparability of the advisory fee rate and total expense ratios, on an existing
and pro forma basis, to that of other comparable funds, including those in the
ABN AMRO family of funds. The Board considered that, based on information
provided by management, the Fund's current and pro forma advisory fee rate and
overall expenses remain competitive with those of its peers and within the
industry norm.
Information provided by management indicated that the Fund's investment
advisory fee rate of .10% was in the first quartile among its peers. On a pro
forma basis giving effect to the proposed investment advisory fee rate increase,
the Fund's investment advisory fee rate of .12% would place the Fund in the
second quartile among its peers. The Fund's current ratio of operating expenses
of .18% and .43% for Class Y and Class YS shares, respectively, place the Fund
in the first and third quartile, respectively, of similar classes of shares of
funds. On a pro forma basis, giving effect to the proposed investment advisory
fee rate increase, the Fund's expense ratio of operating expenses will be .20%
and .45% of Class Y and Class YS shares, respectively. This slight increase in
fees would not change the relative ranking of the Fund's classes relative to
other comparable classes of funds.
Cost of Providing Services (Profitability). The Adviser stated that the
increase in fees would not materially affect the profitability to the Adviser,
particularly given the size of the Fund. However, the Adviser has stated that it
desires to strengthen its investment management business and that the cost of
technology to update and maintain necessary systems for effective investment
management operations continues to grow. Therefore, the proposed increase in the
advisory fee rate will enable the Adviser to continue providing and developing
quality services.
Fall-Out Benefits. The Board considered services provided by LaSalle to
the Fund and its shareholders. The Board considered that the Adviser pays
LaSalle for such services out of its profits. The services provided by LaSalle
include: (a) marketing the Fund to potential clients, (b) processing the Fund's
daily transactions on behalf of underlying shareholders, (c) providing
statements and other Fund information to shareholders, (d) providing daily Fund
factors to shareholders and reconciling interest accruals on underlying
shareholder accounts on a daily basis, and (e) posting dividends to underlying
shareholder accounts on a monthly basis.
Changes in the Mutual Fund Industry. The Board considered the increase in
the complexity and expense of maintaining a first class investment
infrastructure, including the technology and personnel needed to identify and
respond quickly to changes in the investment environment, and the need to
enhance the nature and timeliness of services provided to shareholders.
Based upon its evaluation of all factors deemed relevant, the Board of
Trustees, including all of the Independent Trustees, concluded that shareholders
should benefit from the Amendment and that the proposed Amendment is in the best
interests of the Fund and its shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED AMENDMENT
TO THE FUND'S ADVISORY AGREEMENT.
REQUIRED VOTE
Approval of this proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund, as more fully described above.
Shareholders of Class Y and Class YS vote together on the proposal.
SUBMISSION OF SHAREHOLDER PROPOSALS
Under Delaware law, the Trust is not required to hold annual shareholders'
meetings, but it will hold special meetings as required or deemed desirable, or
upon the request of holders of at least 10% of the Trust's shares entitled to
vote. Because the Trust does not hold regular meetings of shareholders, the
anticipated date of the next special shareholder meeting cannot be provided. Any
shareholder who wishes to submit a proposal for consideration at a subsequent
shareholders' meeting should mail the proposal promptly to the Trust. Any
7
proposal to be considered for submission to shareholders must comply with Rule
14a-8 under the Securities Exchange Act of 1934 and must be received by the
Trust within a reasonable time before the solicitation of proxies for that
meeting. The timely submission of a proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Trustees is not aware of any matters that will be presented
for action at the Special Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise, it is intended
that the proxies that do not contain specific instructions to the contrary will
be voted in accordance with the judgment of the persons named in the enclosed
form of proxy.
DISTRIBUTOR AND ADMINISTRATOR
Set forth below are the names and addresses of the Trust's distributor and
administrator:
<Table>
<Caption>
ADMINISTRATOR DISTRIBUTOR
------------- -----------
ABN AMRO Investment Fund Services, Inc. ABN AMRO Distribution Services (USA) Inc.
161 North Clark Street 3200 Horizon Drive
Chicago, IL 60601 King of Prussia, PA 19406
</Table>
During the fiscal year ended October 31, 2002, the Fund paid ABN AMRO
Investment Fund Services, Inc., $ million for providing administrative
services to the Fund, of which $ million was paid to PFPC Inc., as
sub-administrator. These services will continue to be provided.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
Gerald F. Dillenburg
Senior Vice President, Secretary and
Treasurer
8
INDEX OF EXHIBITS
EXHIBIT A: Investment Advisory Agreement and Form of Amendment No. 1 to
Investment Advisory Agreement
EXHIBIT B: Management Fee Rates For Funds Managed by AAAM with Similar
Investment Objectives
9
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
ABN AMRO INSTITUTIONAL PRIME MONEY MARKET FUND
AGREEMENT made this 27th day of September, 2001 by and between ABN AMRO
Funds, a Delaware business trust (the "Trust") on behalf of ABN AMRO
Institutional Prime Money Market Fund (the "Fund") and ABN AMRO Asset Management
(USA) LLC (the "Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund.
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Fund and the Adviser as follows:
1. APPOINTMENT. The Trust hereby appoints the Adviser to act as
investment adviser to the Fund for the periods 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 the Fund, (ii)
continuously review, supervise and administer the investment program of the
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 the 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 the Fund and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities transactions
for the Fund are obtained. Subject to policies established by the Board of
Trustees of the Trust 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 the Fund, or be in breach of any
obligation owing to the Trust or in respect of the Fund under this Agreement, or
otherwise, solely by reason of its having caused the Fund to pay a member of a
securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the 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 the 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, the Fund shall pay to
the Adviser within five business days after the end of each calendar month a
monthly fee of one-twelfth of 0.10% of the Fund's average daily net assets for
that month.
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.
A-1
5. REPORTS. The 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 Fund 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 Fund 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 the Fund, or to any shareholder of the 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 the Fund.
8. DURATION AND TERMINATION. The term of this Agreement shall commence on
the date that an amendment to the Trust's registration statement establishing
the 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 the Fund, and
shall continue in effect until December 31, 2001. This Agreement may continue in
effect after its initial term only if such continuance is approved at least
annually by (i) the Trust's Board of Trustees or (ii) the vote of the majority
of the outstanding voting securities of the 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: (a) at any time without penalty by the Fund upon the vote of a
majority of the Trustees or by vote of the majority of the 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
the 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 postpaid, 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 the 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.
A-2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.
<Table>
ATTEST ABN AMRO FUNDS FOR
ABN AMRO INSTITUTIONAL PRIME MONEY MARKET
FUND
/s/ Ruth Velez By: /s/ Gerald F. Dillenburg
- ------------------------------------------------------ ----------------------------------------
Name: Gerald F. Dillenburg
Title: Senior Vice-President
ATTEST ABN AMRO ASSET MANAGEMENT (USA) LLC
/s/ Kathryn L. Martin By: /s/ Seymour A. Newman
- ------------------------------------------------------ ----------------------------------------
Name: Seymour A. Newman
Title: Executive Vice-President and
Chief Financial Officer
</Table>
A-3
FORM OF
AMENDMENT NO. 1 TO INVESTMENT ADVISORY AGREEMENT
This AMENDMENT NO. 1, dated the day of , 2002, is made by and
between ABN AMRO Funds, a Delaware statutory trust (the "Trust") on behalf of
ABN AMRO Institutional Prime Money Market Fund (the "Fund"), and ABN AMRO Asset
Management (USA) LLC (the "Adviser").
WITNESSETH THAT:
WHEREAS, the Trust has entered into an Investment Advisory Agreement (the
"Agreement") with the Adviser, dated September 27, 2001, wherein the Trust
retains the Adviser to render investment advisory services to the Fund, and the
Adviser agrees to furnish such services to the Fund; and
WHEREAS, the Trust and the Adviser wish to amend the Agreement to increase
the compensation payable to the Adviser under the Agreement.
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Fund and the Adviser to amend Section 4 of
the Investment Advisory Agreement as follows:
4. COMPENSATION OF THE ADVISER. For the services to be rendered by
the Adviser as provided in Sections 2 and 3 of this Agreement, the Fund
shall pay to the Adviser within five business days after the end of each
calendar month a monthly fee of one-twelfth of 0.12% of the Fund's average
daily net assets for that month.
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.
Except as set forth above, the Agreement shall remain unchanged and in full
force and in effect and is hereby ratified and confirmed in all respects as
amended.
This Amendment shall take effect upon the day and month first written
above.
IN WITNESS WHEREOF, the Trust and Adviser hereto have caused this Amendment
to be signed by their duly authorized officers of the day and month first
written above.
ABN AMRO FUNDS FOR
ABN AMRO INSTITUTIONAL PRIME MONEY
MARKET FUND
By:
--------------------------------------
Title:
--------------------------------------
ABN AMRO ASSET MANAGEMENT (USA) LLC
By:
--------------------------------------
Title:
--------------------------------------
B-1
EXHIBIT B
MANAGEMENT FEE RATES FOR FUNDS MANAGED BY AAAM
WITH SIMILAR INVESTMENT OBJECTIVES
The following are other series of the Trust with investment objectives
similar to the Fund, for which AAAM provides advisory services. Information
below is provided as of September 30, 2002.
<Table>
<Caption>
NET ASSETS MANAGEMENT FEE RATE
FUND (IN THOUSANDS) (% OF AVERAGE DAILY NET ASSETS)
---- -------------- -------------------------------
ABN AMRO Government Money Market Fund*................. 455,219 .20
ABN AMRO Treasury Money Market Fund*................... 426,442 .35
ABN AMRO Money Market Fund*............................ 146,697 .35
ABN AMRO Tax-Exempt Money Market Fund*................. 378,723 .35
ABN AMRO Institutional Government Money Market
Fund**............................................... N/A .10
ABN AMRO Institutional Treasury Money Market Fund**.... N/A .10
</Table>
- ---------------
* Effective September 30, 2001, the Adviser entered into an Expense Limitation
Agreement with the Trust, through September 30, 2003, for Class I and Class S
shares, respectively, in the following amounts: .36% and .61% for ABN AMRO
Treasury Money Market Fund, .31% and .63% for ABN AMRO Government Money
Market Fund, .37% and .73% for ABN AMRO Money Market Fund, and .33% and .58%
for ABN AMRO Tax-Exempt Money Market Fund.
** As of October 31, 2002, ABN AMRO Institutional Government Money Market Fund
and ABN AMRO Institutional Treasury Money Market Fund had not yet commenced
operations.
B-2
PROXY
ABN AMRO INSTITUTIONAL PRIME MONEY MARKET FUND
A SERIES OF ABN AMRO FUNDS
THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF ABN AMRO FUNDS.
THE UNDERSIGNED HEREBY APPOINTS DAVID WHITAKER AND GAIL HANSON, AND EACH OF
THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT HIS OR HER SUBSTITUTE, AND
HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE ALL SHARES OF ABN AMRO
INSTITUTIONAL PRIME MONEY MARKET FUND OF ABN AMRO FUNDS HELD OF RECORD BY THE
UNDERSIGNED ON OCTOBER 17, 2002, AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON DECEMBER 13, 2002, AND ANY ADJOURNMENT THEREOF.
BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE PROXIES
TO VOTE THE PROPOSAL AS MARKED, OR IF NOT MARKED, TO VOTE "FOR" THE PROPOSAL,
AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY COME BEFORE
THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE MEETING PLEASE
COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED ENVELOPE. THE UNDERSIGNED
HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN.
Please sign name or names as printed on the proxy to authorize the voting of
your shares as indicated. Where shares are registered with joint owners all
joint owners should sign. Persons signing as executors, administrators,
trustees, etc. should so indicate.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL.
THE BOARD OF TRUSTEES OF ABN AMRO FUNDS RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL.
Please vote by filling in the box below:
- To approve the Amendment to the Investment Advisory Agreement
for the Fund with ABN AMRO Asset Management (USA) LLC.
[ ] For [ ] Against [ ] Abstain
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Dated: ___________, 2002
__________________________ ____ _______________________________
Signature(s) of Shareholder(s) Signature(s) of Joint Shareholder(s), if any