SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. _____ / /
(Check appropriate box or boxes.)
THE JAMES ADVANTAGE FUNDS - FILE NOS.333- AND 811-
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1349 FAIRGROUND ROAD, BEAVERCREEK, OHIO 45385
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: 937-426-7640
BARRY RAY JAMES, 1349 FAIRGROUND ROAD, BEAVERCREEK, OHIO 45385
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(Name and Address of Agent for Service)
With copy to:
Donald S. Mendelsohn, Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower, Cincinnati, Ohio 45202
Release Date: ___________, 1997
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / on pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
Pursuant to Rule 24f-2, the Registrant hereby declares that an indefinite number
and amount of its securities are being registered by this Registration
Statement.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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 such date as the Commission, acting pursuant to said Section 8(a) may
determine.
<PAGE>
THE JAMES ADVANTAGE FUNDS
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CROSS REFERENCE SHEET
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FORM N-1A
---------
FOR JAMES RAINBOW FUND
----------------------
ITEM SECTION IN PROSPECTUS
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1.............................. Cover Page
2.............................. Summary of Fund Expenses
3.............................. Performance Information
4.............................. The Fund, Investment Objective
and Strategies and Risk
Considerations, Investment
Policies and Techniques,
Operation of the Fund, General
Information
5.............................. Operation of the Fund
5A............................. None
6.............................. Cover Page, Dividends and
Distributions, Taxes, General
Information, How to Redeem
Shares
7.............................. Cover Page, How to Invest in the
Fund, Share Price Calculation,
Operation of the Fund, How to
Redeem Shares, Free Repurchase
and Systematic Withdrawal and
Direct Deposits, Distribution
Plan
8.............................. How to Redeem Shares, Free
Repurchase and Systematic
Withdrawal and Direct Deposits
9.............................. None
13.............................. General Information
15.............................. General Information
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
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10.............................. Cover Page
11.............................. Table of Contents
12.............................. None
13.............................. Additional Information About
Fund Investments and Risk
Considerations, Investment
Limitations
14.............................. Trustees and Officers
15.............................. None
16.............................. The Investment Adviser,
Custodian, Transfer Agent,
Accountants, Trustees and
Officers, Distribution Plan
17.............................. Portfolio Transactions and
Brokerage
<PAGE>
18.............................. Description of the Trust; Shares
of the Fund
19.............................. Determination of Share Price,
Letter of Intent
20.............................. None
21.............................. Distributor
22.............................. Investment Performance
23.............................. None
<PAGE>
JAMES RAINBOW FUND
PROSPECTUS ___________________, 1997
1349 Fairground Road
Beavercreek, Ohio 45385
For Information, Shareholder Services and Requests:
(888) _____________
James Rainbow Fund (the "Fund") is a diversified, open-end mutual fund
whose investment objective is to provide total return through a combination of
growth and income and preservation of capital in declining markets. The Fund
seeks to achieve its objective by investing primarily in equity and/or debt
securities that the Fund's adviser, James Investment Research, Inc., believes
are undervalued. The Fund will attempt to provide total return in excess of the
rate of inflation over the long term (three to five years). The Adviser formerly
managed a mutual fund with substantially identical investment objective and
strategies -- The Golden Rainbow A James Advised Mutual Fund.(sm)
This Prospectus provides the information a prospective investor ought
to know before investing and should be retained for future reference. A
Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") dated ________________, 1997, which is
incorporated herein by reference and can be obtained without charge by calling
the Fund at the phone number listed above. The SEC maintains a Web Site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
that file electronically with the SEC.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT
ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY, ENTITY, OR PERSON. THE PURCHASE OF FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
the Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
The Example should not be considered a representation of future Fund performance
or expenses, both of which may vary.
As indicated in the expense table, the Trust utilizes a declining sales
load for Class A Shares, a contingent deferred sales load ("CDSL") for Class B
and Class C Shares and a no-fee, no-load structure for institutional investors
for Class R Shares. Class R Shares are subject to a minimum purchase requirement
of $1,000,000. Long-term Class B and Class C shareholders could pay more than
the economic equivalent of the maximum front-end sales charge for Class A
Shares. Class B Shares automatically convert to Class A Shares after eight
years. The Fund's 12b-1 plan and management fee are more fully described herein.
<TABLE>
Shareholder Transaction Annual Fund Operating Expenses*
Expense
----------------------------------------------------------------
<CAPTION>
Maximum
Front End Maximum
Sales Load CDSL Total Fund
Imposed On Imposed on Management 12b-1 Other Operating
Purchases Purchases Fee Fee Expenses Expenses
--------- --------- --- --- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 4.20% N/A .55% .30% .15% 1.00%
Class B Shares(d) N/A 5.0(a) .55% .85(c) .15% 1.55%
Class C Shares(d) N/A 1.0(b) .55% .85(c) .15% 1.55%
Class R Shares(d) N/A N/A .55% .00 .15% .70%
<FN>
* Through November 30, 1998, the Adviser has agreed to reimburse Class A
expenses to the extent total fund operating expenses exceed 1.05% of
average net assets. Persons who indirectly purchase Fund shares through
intermediaries may pay fees charged by such intermediaries in addition
to the expenses and fees of the Fund shown above.
(a) No initial sales load; contingent deferred sales charge of 5% declining
to 1% in the 6th year if redeemed. Class B expense in years 9 through
10 are based on Class A expenses, because the shares automatically
convert to Class A after 8 years.
(b) No initial sales load; 1% contingent deferred sales charge if redeemed
within 1 year of purchase.
(c) Of this amount, 0.75% is an asset based sales charge and 0.10% is a
service fee.
(d) These classes have not yet commenced operations.
</FN>
</TABLE>
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<PAGE>
EXAMPLE OF EXPENSE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A Shares
Class B Shares(1)
Class C Shares(2)
Class R Shares
<FN>
(1) Example of expenses would be $____ and $____ less in years 1 and 3,
respectively, if you did not redeem.
(2) Example of expenses would be $____ less in year 1 if you did not
redeem.
</FN>
</TABLE>
THE FUND
James Rainbow Fund (the "Fund") was organized as a series of The James
Advantage Funds, an Ohio business trust (the "Trust") on August 29, 1997, and is
expected to commence operations on _____________________, 1997. This prospectus
offers shares of the Fund and each share represents an undivided, proportionate
interest in the Fund. The investment adviser to the Fund is James Investment
Research, Inc. (the "Adviser").
INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS
The investment objective of the Fund is to provide shareholders with
total return through a combination of growth and income and preservation of
capital in declining markets. The Fund seeks to achieve its objective by
investing primarily in equity and/or debt securities that the Adviser believes
are undervalued. The Fund will attempt to provide total return in excess of the
rate of inflation over the long term (three to five years). The Adviser formerly
managed a mutual fund with substantially identical investment objective and
strategies -- The Golden Rainbow A James Advised Mutual Fund.(sm)
The Adviser does its own research using quantitative databases and
statistical expertise. It utilizes a number of elements to help predict future
stock and bond price movements. When selecting equity securities, the Adviser
focuses on value, neglect or limited following by Wall Street analysts, as well
as on management commitment, and assesses a number of fundamental factors such
as earnings, earnings trend, price earnings multiples, return on assets, and
balance sheet data as well as other proprietary calculations to identify stocks
which it considers undervalued.
Under normal circumstances, the Adviser expects that the Fund will hold
both debt and equity securities, the proportions of which are not fixed, and may
invest up to 90% of its assets in either debt or equity securities. The Adviser
expects that the fixed income portion of the Fund's portfolio will consist
primarily of U.S. government securities or high grade corporate bonds.
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<PAGE>
When the Adviser believes that interest rates will fall, it may extend
maturities in anticipation of capital appreciation in the bonds. If the Adviser
believes that interest rates may rise, it expects to seek capital preservation
through the purchase of shorter term bonds. The Fund may invest in debt
obligations of any maturity, consistent with the Fund's anticipated needs for
liquidity. The Fund will limit its holdings of debt securities to issues rated,
at the time of purchase, "A" or better by either Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P"), or if unrated,
determined by the Adviser to be of equivalent quality.
The Fund may invest in foreign markets by investing in the securities
of non-United States issuers as well as through the purchase of mutual funds
that invest in foreign securities. The Fund may also invest, without limitation,
in money market instruments, repurchase agreements and "when issued" securities.
The Fund may invest up to 10% of its net assets in other mutual funds. If the
Fund acquires securities of another mutual fund, the shareholders of the Fund
will be subject to duplicative management fees.
The Fund may purchase and sell exchange-listed and over-the-counter put
and call options on securities, equity and fixed-income indices and other
financial instruments; purchase and sell financial futures contracts and options
thereon; enter into various interest rate transactions such as swaps, caps,
floors or collars; and enter into various currency transactions such as currency
forward contracts, currency futures contracts, currency swaps or options on
currencies or currency futures (collectively, all of the above are called
"hedging transactions").
For temporary defensive purposes under adverse market conditions, the
Fund may hold all or a substantial portion of its assets in short term U.S.
Government or high quality money market instruments; repurchase agreements
collateralized by such securities; or other cash equivalents. The Fund may also
invest a substantial portion of its assets in such instruments at any time to
maintain liquidity or pending selection of investments in accordance with its
policies.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. In addition, you should be aware that the Fund has no
operating history. Rates of total return quoted by the Fund may be higher or
lower than past quotations, and there can be no assurance that any rate of total
return will be maintained. See "Investment Policies and Techniques" for a more
detailed discussion of the Fund's investment practices.
HOW TO INVEST IN THE FUND
Shares of the Fund are sold on a continuous basis, and you may invest
any amount you choose, as often as you wish, subject to a minimum initial
investment of $2,000 ($500 for qualified plans and $1 million for Class R) and
minimum subsequent investments of $100.
Shares of the Fund are offered continuously at a public offering price
that is equal to net asset value per share next determined after a purchase
order is received by the Fund plus any applicable sales charge. The sales
charge, at the election of the purchaser, may be imposed (i) at the time of
purchase (Class A Shares) or (ii) on a contingent deferred basis (Class B and
Class C Shares). The Class R Shares are designed for institutional investors and
are sold at net asset value
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<PAGE>
with no front-end sales load, no contingent deferred sales load and no Rule
12b-1 charge. When placing purchase orders, investors should specify whether the
order is for Class A, Class B, Class C or Class R Shares. All purchase orders
that fail to specify a Class will automatically be invested in Class A Shares.
CLASS A SHARES
Class A shares of the Fund are purchased at the public offering price.
The public offering price is the next determined net asset value per share plus
a sales load as shown in the table below. Class A shares are subject to a
continuing .30% annual distribution fee.
<TABLE>
=======================================================================================================
Sales Load as of % of:
<CAPTION>
Public Net
Offering Amount Dealer Reallowance as % of
Amount of Investment Price Invested Public Offering Price
======================================================================================================
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
$50,000 but less than $100,000 4.00% 4.18% 3.50%
$100,000 but less than $250,000 3.50% 3.65% 3.00%
$250,000 but less than $500,000 2.50% 2.61% 2.00%
$500,000 but less than $1,000,000 2.00% 2.09% 1.50%
$1,000,000 or more .50% .52% .30%
</TABLE>
CLASS B SHARES
Class B Shares are offered at net asset value, without an initial sales
charge, subject to a 0.95% annual distribution fee (of which .75% is an asset
based sales charge and .20% is a service fee). Class B Shares are subject to a
declining contingent deferred sales load ("CDSL") if you redeem your shares
within six years from the purchase date. This CDSL charge is 5%, 4%, 4%, 3%, 2%
and 1% for years one through six. Class B Shares automatically convert to Class
A Shares at the end of eight years and, as a result, will benefit from the lower
Class A distribution fee. The conversion is based on the relative net asset
value of the two classes, and no sales load or other charge is imposed.
The Fund's distributor, ________________ (the "Distributor"), pays a
0.20% service fee to dealers in advance for the first year upon the sale of
Class B Shares. After the shares have been held for a year, the Distributor pays
the fee monthly. [In addition, the Distributor pays a sales commission of
[3.80%] of the purchase price to dealers from its own resources at the time of
sale.]
CLASS C SHARES
Class C Shares are offered at net asset value, without initial sales
charge, subject to a continuing 0.95% annual distribution fee (of which .75% is
an asset based sales charge and .20% is a service fee) and a CDSL of 1% if
redeemed within one year of the purchase date. The first year of the annual
distribution fee is paid to the Distributor, and in subsequent years 0.75% is
paid to the dealer and 0.20% is paid to the Distributor.
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<PAGE>
CLASS R SHARES
You may purchase Class R Shares with monies representing dividends and
capital gain distributions on Class R Shares of the Fund. Also, you may purchase
Class R Shares if you are within the following specified categories of investors
who are also eligible to purchase Class A Shares at net asset value without an
up-front sales charge: officers, current and former trustees of the Fund; bona
fide, full-time and retired employees of James Investment Research, Inc. and
subsidiaries thereof, or their immediate family members; any person who, for at
least 90 days, has been an officer, director or bona fide employee of any
Authorized Dealer, or their immediate family members; officers and directors of
bank holding companies that make Fund shares available directly or through
subsidiaries or bank affiliates; and bank or broker-affiliated trust
departments; persons investing $1 million or more in Class R Shares; and clients
of investment advisers, financial planners or other financial intermediaries
that charge periodic or asset-based "wrap" fees for their services.
GENERAL PURCHASE INFORMATION
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the
differences between these two classes of shares. Class A Shares are subject to
an annual distribution fee to compensate the Distributor for distribution costs
associated with the Fund and to an annual service fee to compensate Authorized
Dealers for providing you with ongoing account services. Class R Shares are not
subject to a distribution or service fee and, consequently, holders of Class R
Shares may not receive the same types or levels of services from Authorized
Dealers. In deciding between Class A Shares and Class R Shares, you should weigh
the benefits of the services to be provided by Authorized Dealers against the
annual service fee imposed upon the Class A Shares.
Shares of the Fund are sold to individuals or entities who hold their
shares in individual or master trust accounts at Citizens Federal, including
Individual Retirement Accounts, Keogh Plans, pension plans, bank and/or savings
and loan trust departments, trusts or accounts, including individuals who have
signed trust agreements (the "Citizens Accounts"). Such shares are sold in a
continuous offering without a sales charge at the net asset value per share next
determined after a purchase order is received by the Fund (see "Share Price
Calculation"). In the event there is a change of control of Citizens Federal,
whether due to a merger, acquisition, reorganization, sale of assets or other
transaction (such as acquisition of a controlling interest in its shares), it is
contemplated that, at the time of the transaction or subsequent thereto, all
Citizens Accounts (other than irrevocable trust accounts) will be converted to
direct accounts, and these direct accounts may continue purchasing shares at net
asset value without a sales charge.
Shares of the Fund may be purchased, in amounts less than the minimum
purchase amount, by officers, directors and employees of the Fund, the Adviser,
or the Distributor, and any such person's spouse, children, and trustees or
custodians of any qualified pension or profit sharing plan or IRA established
for the benefit of such person. Such person should request instructions on how
to invest or redeem from the Distributor.
Under certain circumstances, the Distributor may change the reallowance
to dealers and may also compensate dealers out of its own assets. Dealers
engaged in the sale of shares of the
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<PAGE>
Fund may be deemed to be underwriters under the Securities Act of 1933. The
Distributor retains the entire sales load on all direct initial investments in
the Fund and on all investments in accounts with no designated dealer of record.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Distributor by 5:00 p.m., Eastern time, that
day are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Distributor by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
4:00 p.m., Eastern time, are confirmed at that day's public offering price.
Direct investments received after 4:00 p.m. and others received from dealers
after 5:00 p.m. are confirmed at the public offering price next determined on
the following business day.
PURCHASE FOR TRUST ACCOUNTS THROUGH DEALERS
To purchase shares through a dealer, you should direct your dealer to
contact the Distributor to request information on the Fund and on Citizens
Federal's process for establishing the necessary trust accounts. The Distributor
can be reached toll free at ___________________. After establishing an account,
an investor may, either directly or through a broker, purchase shares of the
Fund. For purchases made through a dealer, that dealer will be designated as the
broker of record for those account assets. The public offering price is the
Fund's net asset value. Because the Fund determines net asset value daily as of
the close of trading (normally 4:00 p.m. New York time) on the New York Stock
Exchange on each day that the Exchange is open for trading, the dealer must
transmit your request to Citizens Federal prior to such time in order for your
order to be executed at the net asset value to be determined that day. Any
change in price due to the failure of the Fund to receive an order prior to the
close of the Exchange must be settled between the investor and the dealer
placing the order.
AUTOMATIC INVESTMENT PLAN
The Fund offers current shareholders who receive a quarterly statement
from the Fund's Distributor the convenience of automatic monthly investing. On
any regular business day between the fifth and twenty-eighth of each month, the
amount you specify ($100 minimum) will be transferred from your bank to the
Fund. To initiate the automatic investment plan, complete the application form
and attach a voided check.
The Fund pays the cost associated with these transfers, but reserves
the right, upon ninety (90) days written notice, to make reasonable charges for
this service. Your bank may charge for debiting your account. Shareholders can
change the amount or discontinue their participation in the plan by written
notice to ________________________ ("Transfer Agent") thirty (30) days prior to
fund transfer date. Because a sales charge is applied on new shares purchased,
it would be disadvantageous to purchase shares while also making systematic
withdrawals.
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<PAGE>
LETTER OF INTENT (RETAIL SHARES ONLY)
A shareholder may qualify for reduced sales charges by sending to the
Fund (within 90 days after the first purchase desired to be included in the
purchase program) a signed, non-binding letter of intent to purchase, during a
13-month period, an amount sufficient to qualify for a reduced sales charge. A
single letter may be used for spouses, their children and parents or any single
trust, estate or other fiduciary account. All investments in retail shares of
the Fund count toward the indicated goal. Once the Distributor receives the
required letter of intent, it will apply to qualifying purchases within the
13-month period the sales charge that would be applicable to a single purchase
of the total amount indicated in the letter. During the period covered by the
letter of intent, the first 5% of the intended purchase will be held in escrow
until the stated goal is reached. If the intended purchase program is not
completed within the 13-month period, the sales charge will be adjusted upward
as appropriate and a sufficient number of redeemed by the Fund if the
shareholder does not pay the increased sales charge. Please see the Statement of
Additional Information for further details.
OTHER PURCHASE INFORMATION
Dividends begin to accrue after you become a shareholder. The Fund does
not issue share certificates. All shares are held in non-certificate form
registered on the books of the Fund and the Fund's Transfer Agent for the
account of the shareholder. The rights to limit the amount of purchases and to
refuse to sell to any person are reserved by the Fund. If your check or wire
does not clear, you will be responsible for any loss incurred by the Fund. If
you are already a shareholder, the Fund can redeem shares from any identically
registered account in the Fund as reimbursement for any loss incurred. You may
be prohibited or restricted from making future purchases in the Fund.
HOW TO REDEEM SHARES
Shareholders should advise their financial consultant of their desire
to redeem shares. Upon receipt by the Fund of a proper redemption request, the
Fund will redeem shares at their next determined net asset value. See "Share
Price Calculation." Neither the Distributor nor the Fund charges a fee or a
commission for redemption, except that the Fund may charge a fee for wiring
redemption proceeds and Class B and Class C shares may be subject to a CDSL
charge (see "How to Invest in the Fund").
SIGNATURE GUARANTEE - The Shareholder Services Agent may require a
signature guarantee on certain written transaction requests. A signature
guarantee may be executed by any eligible guarantor. Eligible guarantors include
member firms of a domestic stock exchange, commercial banks, trust companies,
savings associations and credit unions as defined by the Federal Deposit
Insurance Act. You should verify with the institution that they are an eligible
guarantor prior to signing.
ADDITIONAL INFORMATION - Because the Fund incurs certain fixed costs in
maintaining shareholder accounts, the Fund reserves the right to require any
shareholder to redeem all of his or her shares in the Fund on 30 days' written
notice if the value of his or her shares in the Fund is less than $___________
due to redemption, or such other minimum amount as the Fund may
- 8 -
<PAGE>
determine from time to time. An involuntary redemption constitutes a sale. You
should consult your tax adviser concerning the tax consequences of involuntary
redemptions. A shareholder may increase the value of his or her shares in the
Fund to the minimum amount within the 30 day period. Each share of the Fund is
subject to redemption at any time if the Board of Trustees determines in its
sole discretion that failure to so redeem may have materially adverse
consequences to all or any of the shareholders of the Fund.
FREE REPURCHASE AND SYSTEMATIC WITHDRAWAL
AND DIRECT DEPOSITS
FREE REPURCHASE
A shareholder who has redeemed shares may repurchase shares at net
asset value without incurring the applicable sales charge. Such a purchase must
be in an amount between the stated minimum investment of such fund and the
amount of the proceeds of redemption within one year of the redemption. This
feature may be exercised by a shareholder only twice per calendar year.
Exercising the reinvestment privilege will not affect the character of any gain
or loss realized on the redemption for federal income tax purposes, except that
if the redemptions resulted in a loss, the reinvestment may result in the loss
being disallowed under the "wash sale" rules.
SYSTEMATIC WITHDRAWAL PLAN
Accounts with a value greater than $10,000 may establish a Systematic
Withdrawal Plan ("SWP") and receive monthly or quarterly checks for $100 or more
as specified by the shareholder. To establish a SWP all distributions must be in
the form of shares. Such payments are drawn from the proceeds of the redemption
shares held in the shareholder's account. To the extent that SWP redemptions
exceed dividend income reinvested in the account, such redemptions will reduce
and may ultimately exhaust the number of shares in the account. Maintaining a
SWP concurrently with an investment program would be disadvantageous because of
the sales charges included in share purchases. Therefore, a shareholder should
not have a SWP in effect at the same time he is making recurring purchases of
shares of the Fund. The shareholder by written instructions to the Transfer
Agent may withdraw from the program, change the payee or change the dollar
amount of each payment. The Transfer Agent may charge the account for services
rendered and expenses incurred beyond those normally assumed by the Fund with
respect to the liquidation of shares. No charge is currently assessed against
the account, but could be instituted by the Transfer Agent on 60 days' notice in
writing to the shareholder. The Fund reserves the right to amend or terminate
the SWP on thirty days' notice.
DIRECT DEPOSITS
Shareholders can have dividends or SWP redemption proceeds deposited
electronically into their Citizens Federal or other bank accounts. Under normal
circumstances, direct deposits are credited to the account on the second
business day of the month following normal payment. In order to utilize this
option, the shareholder's bank must be a member of Automated Clearing House. In
addition, the shareholder must (1) fill out the appropriate section of the
application attached to this Prospectus and (2) include with the completed
application a voided check from the bank account into which funds are to be
deposited. Once the Transfer Agent has received the
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<PAGE>
application and the voided check, the shareholder's dividends and redemptions
will be credited to the designated bank account. A shareholder may terminate a
direct deposit program at any time by written notice to the Transfer Agent.
SHARE PRICE CALCULATION
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business (except for Ohio bank holidays), and on any other day on which
there is sufficient trading in the Fund's securities to materially affect the
net asset value. The net asset value per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its last bid price except when, in the
Adviser's opinion, the last bid price does not accurately reflect the current
value of the security. All other securities for which over-the-counter market
quotations are readily available are valued at their last bid price. When market
quotations are not readily available, when the Adviser determines the last bid
price does not accurately reflect the current value or when restricted
securities are being valued, such securities are valued as determined in good
faith by the Adviser, subject to review of the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by the Adviser, subject to review of the Board of Trustees. Short
term investments in fixed income securities with maturities of less than 60 days
when acquired, or which subsequently are within 60 days of maturity, are valued
by using the amortized cost method of valuation, which the Board has determined
will represent fair value.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on a quarterly basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends and/or
capital gain distributions may be made in the application to purchase shares or
by separate written notice to the Transfer Agent. Shareholders will receive a
confirmation statement reflecting the payment and reinvestment of dividends and
summarizing all
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<PAGE>
other transactions. If cash payment is requested, a check normally will be
mailed within five business days after the payable date. If you withdraw your
entire account, all dividends accrued to the time of withdrawal, including the
day of withdrawal, will be paid at that time. You may elect to have
distributions on shares held in IRAs and 403(b) plans paid in cash only if you
are 59 1/2 years old or permanently and totally disabled or if you otherwise
qualify under the applicable plan.
TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so qualifying,
the Fund will not be subject to federal income taxes to the extent that it
distributes substantially all of its net investment income and any realized
capital gains.
For federal income tax purposes, dividends paid by the Fund from
ordinary income are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Pursuant
to the Tax Reform Act of 1986 (the "Tax Reform Act"), all distributions of net
capital gains to individuals are taxed at the same rate as ordinary income. All
distributions of net capital gains to corporations are taxed at regular
corporate rates. Any distributions designated as being made from net realized
long term capital gains are taxable to shareholders as long term capital gains
regardless of the holding period of the shareholder.
The Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisers regarding specific questions as to federal, state or local taxes
and the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, the Fund will request the
shareholder's certified taxpayer identification number (social security number
for individuals) and a certification that the shareholder is not subject to
backup withholding. Unless the shareholder provides this information, the Fund
will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed with respect to a specific account in any year, the Fund may
make a corresponding charge against the account.
OPERATION OF THE FUND
The Fund is a diversified series of The James Advantage Funds, an
open-end management investment company organized as an Ohio business trust on
_______________________, 1997. The Board of Trustees supervises the business
activities of the Fund. Like other mutual funds, the Fund retains various
organizations to perform specialized services.
The Fund retains James Investment Research, Inc., P.O. Box 8, Alpha,
Ohio 45301 (the "Adviser") to manage the Fund's investments. The investment
decisions for the Fund are made by a committee of the Adviser, which is
primarily responsible for the day-to-day management of the
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<PAGE>
Fund's portfolio. The Adviser is owned by Frank James, Ph.D., who established it
in 1972. The Adviser provides advice to institutional as well as individual
clients, including NYSE listed corporations, colleges, banks, hospitals,
foundations, trusts, endowment funds and individuals. The Fund is authorized to
pay the Adviser a fee equal to an annual rate of 0.55% of its average daily net
assets.
The Fund is responsible for the payment of all [organizational and]
operating expenses of the Fund, including brokerage fees and commissions; taxes
or governmental fees; interest fees and expenses of the non-interested person
trustees; clerical and shareholder service staff salaries; office space and
other office expenses; fees and expenses incurred by the Fund in connection with
membership in investment company organizations; legal, auditing and accounting
expenses; expenses of registering shares under federal and state securities
laws; insurance expenses; fees and expenses of the custodian, transfer agent,
dividend disbursing agent, shareholder service agent, administrator, accounting
and pricing services agent and underwriter of the Fund; expenses, including
clerical expenses, of issue, sale, redemption or repurchase of shares of the
Fund; the cost of preparing and distributing reports and notices to
shareholders, the cost of printing or preparing prospectuses and statements of
additional information for delivery to the Fund's shareholders; the cost of
printing or preparing statements, reports or other documents to shareholders;
expenses of shareholders' meetings and proxy solicitations; and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Fund may be a party and indemnification of the Trust's trustees and
officers with respect thereto. [The Fund will only be liable for organizational
expenses when the Fund reaches $10,000,000 in assets or when the Fund has been
in existence for at least one year.]
The Fund retains ____________________, [insert address] (the "Transfer
Agent") to serve as Transfer Agent, dividend paying agent and shareholder
service agent. The Fund retains ____________________, [address] to act as the
principal distributor of the Fund's shares.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. The Distributor or the Adviser (not the Fund) may pay
certain financial institutions (which may include banks, brokers, dealers and
other industry professionals) a "servicing fee" for performing certain
administrative functions for the Fund shareholders to the extent these
institutions are allowed to do so by applicable statute, rule or regulation.
DISTRIBUTION PLAN
The Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under
the 1940 Act which permits the Fund to pay for certain distribution and
promotion expenses related to marketing its shares. Such expenses may include
certain fees to broker-dealers of record for customers of Citizens Federal, who
are shareholders of the Fund, but such fees shall not, when aggregated with
other expenses reimbursed to the Distributor in accordance with the Plan, exceed
the maximum 12b-1 fee set forth in the table on page 2 of this Prospectus. The
Fund's 12b-1 plan conforms to the requirements of the rules of the National
Association of Securities Dealers with regard to Rule 12b-1 plans. The Plan
authorizes the Fund to expend its monies in an amount equal to the aggregate for
all such expenditures to such percentage of the Fund's daily net asset value as
may
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<PAGE>
be determined from time to time by vote cast in person at a meeting called for
such purpose, by a majority of the Fund's disinterested Trustees. The scope of
the foregoing shall be interpreted by the Trustees, which decision shall be
conclusive except to the extent it contravenes established legal authority.
Without in any way limiting the discretion of the Trustees, the following
activities are hereby declared to be primarily intended to result in the sale of
shares of the Fund: advertising the Fund or the Adviser's mutual fund
activities; compensating underwriters, dealers, brokers, banks and other selling
entities and sales and marketing personnel of any of them for sales of shares of
the Fund, whether in a lump sum or on a continuous, periodic, contingent,
deferred or other basis; compensating underwriters, dealers, brokers, banks and
other servicing entities (including the Adviser) and servicing personnel of any
of them for providing services to shareholders of the Fund relating to their
investment in the Fund, including assistance in connection with inquiries
relating to shareholder accounts; the production and dissemination of
prospectuses and statements of additional information of the Fund and the
preparation, production and dissemination of sales, marketing and shareholder
servicing materials; and the ordinary or capital expense, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses relating to any activity for which payment is
authorized by the Trustees; and the financing of any activity for which payment
is authorized by the Trustees. Pursuant to the Plan the Fund through authorized
officers may make similar payments for marketing services and shareholder
services to non-broker-dealers who enter into service agreements with the Fund.
The Distributor has voluntarily waived any portion of its normally retained
12b-1 fee with regard to its service agreement with Citizens Federal and limited
its payments to reimbursement of expenses and 12b-1 fees with regard to selling
agreements with broker-dealers until notice to and approval by the Fund's Board
of Trustees is obtained for increased payments.
The maximum amount payable by the Fund under the Plan and related
agreements on an annual basis is .40% of average daily net assets for the year.
In the case of broker-dealers and others, such as banks, who have selling or
service agreements with the Distributor or the Fund, the maximum amount payable
to any recipient is .0005479% per day (.20% on an annualized basis) of the
proportion of daily net assets represented by such person's customers. The Board
of Trustees may reduce these amounts at any time. Expenditures pursuant to the
Plan and related agreements may reduce current yield after expenses.
Various state and federal laws limit the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event these laws are
deemed to prohibit depository institutions from acting in the capacities
described above or should Congress relax current restrictions on depository
institutions, the Board of Trustees will consider appropriate changes in the
services. State securities laws governing the ability of depository institutions
to act as underwriters or distributors of securities may differ from
interpretations given to federal law and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
INVESTMENT POLICIES AND TECHNIQUES
This section contains general information about various types of
securities and investment techniques that the Fund may purchase or employ.
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<PAGE>
EQUITY SECURITIES
The Fund may invest in common stock, preferred stock and common stock
equivalents (such as convertible preferred stock and convertible debentures).
Convertible preferred stock is preferred stock that can be converted into common
stock pursuant to its terms. Convertible debentures are debt instruments that
can be converted into common stock pursuant to their terms. The Adviser intends
to invest only in preferred stock rated A or higher by Standard & Poor's
Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's").
FOREIGN SECURITIES
The Fund may invest in foreign equity and fixed income securities.
Foreign fixed income securities include corporate debt obligations issued by
foreign companies and debt obligations of foreign governments or international
organizations. This category may include floating rate obligations, variable
rate obligations, Yankee dollar obligations (U.S. dollar denominated obligations
issued by foreign companies and traded on U.S. markets) and Euro dollar
obligations (U.S. dollar denominated obligations issued by foreign companies and
traded on foreign markets). The Fund may also invest in American and European
depository receipts ("ADR's" and "EDR's").
Purchases of foreign securities are usually made in foreign currencies
and, as a result, the Fund may incur currency conversion costs and may be
affected favorably or unfavorably by changes in the value of foreign currencies
against the U.S. dollar. In addition, there may be less information publicly
available about a foreign company than about a U.S. company, and foreign
companies are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. Other risks
associated with investments in foreign securities include changes in
restrictions on foreign currency transactions and rates of exchanges, changes in
the administrations or economic and monetary policies of foreign governments,
the imposition of exchange control regulations, the possibility of expropriation
decrees and other adverse foreign governmental action, the imposition of foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
U.S. GOVERNMENT OBLIGATIONS
U.S. government obligations may be backed by the credit of the
government as a whole or only by the issuing agency. U.S. Treasury bonds, notes,
and bills and some agency securities, such as those issued by the Federal
Housing Administration and the Government National Mortgage Association (GNMA),
are backed by the full faith and credit of the U.S. government as to payment of
principal and interest and are the highest quality government securities. Other
securities issued by U.S. government agencies or instrumentalities, such as
securities issued by the Federal Home Loan Banks and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the agency that issued
them, and not by the U.S. government. Securities issued by the Federal Farm
Credit System, the Federal Land Banks, and the Federal National Mortgage
Association (FNMA) are supported by the agency's right to borrow money from the
U.S. Treasury under certain circumstances, but are not backed by the full faith
and credit of the U.S. government.
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<PAGE>
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements fully collateralized by
U.S. Government obligations. A repurchase agreement is a short-term investment
in which the purchaser (i.e., the Fund) acquires ownership of a U.S. Government
obligation (which may be of any maturity) and the seller agrees to repurchase
the obligation at a future time at a set price, thereby determining the yield
during the purchaser's holding period (usually not more than seven days from the
date of purchase). Any repurchase transaction in which the Fund engages will
require full collateralization of the seller's obligation during the entire term
of the repurchase agreement. In the event of a bankruptcy or other default of
the seller, the Fund could experience both delays in liquidating the underlying
security and losses in value. However, the Fund intends to enter into repurchase
agreements only with banks with assets of $1 billion or more and registered
securities dealers determined by the Adviser (subject to review by the Board of
Trustees) to be creditworthy. The Adviser monitors the creditworthiness of the
banks and securities dealers with which the Fund engages in repurchase
transactions.
LOANS OF SECURITIES
The Fund may make short and long term loans of its portfolio securities
in order to realize additional income. Under the lending policy authorized by
the Board of Trustees and implemented by the Adviser in responses to requests of
broker-dealers or institutional investors which the Adviser deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the Fund on a daily market-to-market basis in an
amount at least equal to 102% of the value of the loaned securities. The Fund
will continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on
any matter which the Board of Trustees determines to be serious. With respect to
loans of securities, there is the risk that the borrower may fail to return the
loaned securities or that the borrower may not be able to provide additional
collateral.
HEDGING
The Fund may purchase and sell exchange-listed and over-the-counter put
and call options on securities, equity and fixed-income indices and other
financial instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as currency
forward contracts, currency futures contracts, currency swaps or options on
currencies or currency futures (collectively, all the above are called "hedging
transactions"). Hedging transactions may be used to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. No more than 5% of the Fund's
assets will be committed to hedging transactions entered into for non-hedging
purposes. Any or all of these investment techniques may be used at any time and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any hedging transaction is a function of numerous
variables including market conditions. The ability of the
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<PAGE>
Fund to utilize these hedging transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which cannot be
assured. The Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. Hedging transactions
involving financial futures and options thereon will be purchased, sold or
entered into only for bona fide hedging, risk management or portfolio management
purposes and not for speculative purposes.
RISKS
Hedging transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such hedging transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of hedging transactions would reduce net
asset value, and possibly income, and such losses can be greater than if the
hedging transactions had not been utilized.
WHEN ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may buy and sell securities on a when-issued or delayed
delivery basis, with payment and delivery taking place at a future date. The
price and interest rate that will be received on the securities are each fixed
at the time the buyer enters into the commitment. The Fund may enter into such
forward commitments if it holds, and maintains until the settlement date in a
separate account at the Fund's Custodian, cash or U.S. government securities in
an amount sufficient to meet the purchase price. Forward commitments involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date. Any change in value could increase fluctuations in the Fund's
share price and yield. Although the Fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio, the
Fund may dispose of a commitment prior to the settlement if the Adviser deems it
appropriate to do so.
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<PAGE>
GENERAL
The Fund may borrow from time to time on a temporary basis and may
utilize reverse repurchase agreements. The Fund's borrowings, including reverse
repurchase agreements, will be limited to 5% of its net assets. The Fund may
normally invest up to 5% of its assets (valued at the purchase date) in illiquid
securities. Illiquid securities generally include securities which cannot be
disposed of promptly and in the ordinary course of business without taking a
reduced price.
GENERAL INFORMATION
FUNDAMENTAL POLICIES
The investment limitations set forth in the Statement of Additional
Information as fundamental policies may not be changed without the affirmative
vote of the majority of the outstanding shares of the Fund. The investment
objective of the Fund may be changed without the affirmative vote of a majority
of the outstanding shares of the Fund. Any such change may result in the Fund
having an investment objective different from the objective which the
shareholders considered appropriate at the time of investment in the Fund.
PORTFOLIO TURNOVER
The Fund does not intend to purchase or sell securities for short term
trading purposes. The Fund will, however, sell any portfolio security (without
regard to the length of time it has been held) when the Adviser believes that
market conditions, creditworthiness factors or general economic conditions
warrant such action. It is anticipated that the Fund will have a portfolio
turnover rate of less than 100%.
SHAREHOLDER RIGHTS
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of the Fund have equal voting rights and liquidation rights. The
Declaration of Trust can be amended by the Trustees, except that any amendment
that adversely effects the rights of shareholders must be approved by the
shareholders affected. Prior to the offering made by this Prospectus,
[________________________________] purchased for investment all of the
outstanding shares of the Fund. As a result, [________________________________]
may be deemed to control the Fund.
It is anticipated that almost all of the Fund's shares will be owned by
Citizens Federal Bank, F.S.B., Dayton, Ohio acting as either trustee, investment
agent or custodian for its clients. While Citizens Federal has the legal right
in certain situations to vote on behalf of its clients, it is anticipated that
Citizens Federal will contact its clients and vote in accordance with their
preferences.
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<PAGE>
PERFORMANCE INFORMATION
The Fund may periodically advertise "average annual total return." The
"average annual total return" of the Fund refers to the average annual
compounded rate of return over the stated period that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation of "average annual total return"
assumes the reinvestment of all dividends and distributions.
The Fund may also periodically advertise its total return over various
periods in addition to the value of a $10,000 investment (made on the date of
the initial public offering of the Fund's shares) as of the end of a specified
period. The "total return" for the Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period, assuming
no activity in the account other than reinvestment of dividends and capital
gains distributions.
The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index, the Dow Jones Industrial Average, the Value Line Stock
Index, or a blend of stock and bond indices.
THE ADVERTISED PERFORMANCE DATA OF THE FUND IS BASED ON HISTORICAL
PERFORMANCE AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE. RATES OF TOTAL
RETURN QUOTED BY THE FUND MAY BE HIGHER OR LOWER THAN PAST QUOTATIONS, AND THERE
CAN BE NO ASSURANCE THAT ANY RATE OF TOTAL RETURN WILL BE MAINTAINED. THE
PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT A
SHAREHOLDER'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
SHAREHOLDER'S ORIGINAL INVESTMENT.
INVESTMENT ADVISER TRANSFER AGENT
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301
CUSTODIAN AUDITORS
DISTRIBUTOR
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell its
shares in any state to any person to whom it is unlawful to make such offer in
such state.
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<PAGE>
TABLE OF CONTENTS PAGE
SUMMARY OF FUND EXPENSES...............................................2
THE FUND...............................................................3
INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS............3
HOW TO INVEST IN THE FUND..............................................4
Class A Shares .................................................5
Class B Shares..................................................5
Class C Shares..................................................5
Class R Shares..................................................6
General Purchase Information....................................6
Purchase For Trust Accounts Through Dealers.....................7
Automatic Investment Plan.......................................7
Letter of Intent (Retail Shares only)...........................8
Other Purchase Information......................................8
HOW TO REDEEM SHARES...................................................8
Signature Guarantee.............................................8
Additional Information..........................................8
FREE REPURCHASE AND SYSTEMATIC WITHDRAWAL AND DIRECT DEPOSITS..........9
Free Repurchase.................................................9
Systematic Withdrawal Plan......................................9
Direct Deposits.................................................9
SHARE PRICE CALCULATION................................................10
DIVIDENDS AND DISTRIBUTIONS............................................10
TAXES..................................................................11
OPERATION OF THE FUND..................................................11
DISTRIBUTION PLAN......................................................12
INVESTMENT POLICIES AND TECHNIQUES ....................................13
Equity Securities...............................................14
Foreign Securities..............................................14
U.S. Government Obligations.....................................14
Repurchase Agreements...........................................15
Loans of Securities.............................................15
Hedging.........................................................15
Risks...........................................................16
<PAGE>
When Issued Securities and Forward Commitments..................16
General.........................................................17
GENERAL INFORMATION....................................................17
Fundamental Policies............................................17
Portfolio Turnover..............................................17
Shareholder Rights..............................................17
PERFORMANCE INFORMATION................................................18
<PAGE>
JAMES RAINBOW FUND
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1997
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of James Rainbow Fund dated
____________________, 1997. A copy of the Prospectus can be obtained by writing
the Transfer Agent at _________________________________________________________,
or by calling _____________.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
DESCRIPTION OF THE TRUST.................................................1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
AND RISK CONSIDERATIONS..................................................1
A. Illiquid Securities.......................................1
B. Borrowing and Leverage; Reverse Repurchase Agreements.....2
C. Hedging Transactions......................................2
INVESTMENT LIMITATIONS..................................................11
SHARES OF THE FUND......................................................14
LETTER OF INTENT........................................................15
THE INVESTMENT ADVISER..................................................16
TRUSTEES AND OFFICERS...................................................17
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................17
DISTRIBUTION PLAN.......................................................19
DETERMINATION OF SHARE PRICE............................................19
INVESTMENT PERFORMANCE..................................................20
CUSTODIAN...............................................................21
TRANSFER AGENT..........................................................21
ACCOUNTANTS.............................................................21
DISTRIBUTOR.............................................................21
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<PAGE>
DESCRIPTION OF THE TRUST
James Rainbow Fund (the "Fund") was organized as a series of The James
Advantage Funds (the "Trust"). The Trust is an open-end investment company
established under the laws of Ohio by an Agreement and Declaration of Trust
dated August 29, 1997 (the "Trust Agreement"). The Trust Agreement permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. The Fund is the only series currently
authorized by the Trustees.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
Upon sixty days prior written notice to shareholders, the Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. For
other information concerning the purchase and redemption of shares of the Fund,
see "How to Invest in the Fund" and "Redeeming Shares" in the Fund's Prospectus.
For a description of the methods used to determine the share price and value of
the Fund's assets, see "Share Price Calculation" in the Fund's Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use, as
described in the Prospectus (see "Investment Objective and Strategies and Risk
Considerations" and "Investment Policies and Techniques").
A. ILLIQUID SECURITIES.
The portfolio of the Fund may contain illiquid securities. Illiquid
securities generally include securities which cannot be disposed of promptly and
in the ordinary course of business without taking a reduced price. Securities
may be illiquid due to contractual or legal restrictions on resale or lack of a
ready market. The following securities are considered to be illiquid: repurchase
agreements maturing in more than seven days, nonpublicly offered securities and
restricted securities. Restricted securities are securities the resale of which
is subject to legal or contractual restrictions. Restricted securities may be
sold only in privately negotiated transactions, in a public offering with
respect to which a registration statement is in effect under the Securities
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Act of 1933 or pursuant to Rule 144 or Rule 144A promulgated under such Act.
Where registration is required, the Fund may be obligated to pay all or part of
the registration expense, and a considerable period may elapse between the time
of the decision to sell and the time such security may be sold under an
effective registration statement. If during such a period adverse market
conditions were to develop, the Fund might obtain a less favorable price than
the price it could have obtained when it decided to sell.
B. BORROWING AND LEVERAGE; REVERSE REPURCHASE AGREEMENTS.
The Fund may borrow from banks up to 5% of its total assets, and the
Fund may pledge assets in connection with such borrowings. The Fund also may
engage in reverse repurchase agreements in which the Fund sells a security to
another party, such as a bank, broker-dealer or other financial institution, and
simultaneously agrees to buy it back later at a higher price. While a reverse
repurchase agreement is outstanding, the Fund generally will direct its
custodian to segregate cash and appropriate liquid assets to cover its
obligations under the agreement. The Fund will enter into reverse repurchase
agreements only with parties whose creditworthiness has been reviewed and deemed
satisfactory by the Advisor. The Fund aggregates reverse repurchase agreements
with its bank borrowings for purposes of limiting borrowings to 5% of its total
assets.
If the Fund makes additional investments while borrowings are
outstanding, this may be construed as a form of leverage. The Fund's objective
would be to pursue investment opportunities with returns that exceed the cost of
the borrowings. This leverage may exaggerate changes in the Fund's share value
and the gains and losses on the Fund's investment. Leverage also creates
interest expenses that may exceed the return on investments made with the
borrowings.
C. HEDGING TRANSACTIONS.
The Fund may utilize various other investment strategies as described
below to hedge various market risks (such as interest rates, currency exchange
rates, and broad or specific equity market movements), or to manage the
effective maturity or duration of fixed-income securities. Such strategies are
generally accepted by modern portfolio managers and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Hedging Transactions"). Hedging
Transactions may be used to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets or currency exchange rate fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to
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establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. No more than 5% of the Fund's
assets will be committed to Hedging Transactions entered into for non-hedging
purposes. Any or all of these investment techniques may be used at any time and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Hedging Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Hedging Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Hedging Transactions involving financial
futures and options thereon will be purchased, sold or entered into only for
bona fide hedging, risk management or portfolio management purposes and not for
speculative purposes.
Hedging Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Hedging Transactions would result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount the appreciation of the
Fund can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Hedging Transactions would reduce net
asset value, and possibly income, and such losses can be greater than if the
Hedging Transactions had not been utilized.
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GENERAL CHARACTERISTICS OF OPTIONS
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Hedging Transactions involving options
require segregation of Fund assets in special accounts, as described below under
"Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. The Fund is authorized to purchase and
sell exchange-listed options and over-the-counter options ("OTC options").
Exchange-listed options are issued by a regulated intermediary such as the
Options Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to such options.
With certain exceptions, OCC-issued and exchange-listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange-listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
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The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied.
If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities, including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio) and
on securities indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. The Fund
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will not sell put options if, as a result, more than 50% of the Fund's assets
would be required to be segregated to cover its potential obligations under such
put options other than those with respect to futures and options thereon. In
selling put options, there is a risk that the fund may be required to buy the
underlying security at a disadvantageous price above the market price.
GENERAL CHARACTERISTICS OF FUTURES
The Fund may enter into financial futures contracts or purchase or sell
put and call options on such futures as a hedge against anticipated interest
rate, currency or equity market changes, for duration management and for risk
management purposes. Futures are generally bought and sold on the commodities
exchanges where they are listed with payment of initial and variation margin as
described below. The sale of a futures contract creates a firm obligation by the
Fund, as seller, to deliver to the buyer the specific type of financial
instrument called for in the contract at a specific future time for a specified
price (or, with respect to index futures and Eurodollar instruments, the net
cash amount). Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right in
return for the premium paid to assume a position in a futures contract and
obligates the seller to deliver such option.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract, it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction, but there can be no assurance that the position can be offset prior
to settlement at an advantageous price nor that delivery will occur. The
segregation requirements with respect to futures contracts and options thereon
are described below.
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES
The Fund also may purchase and sell call and put options on securities
indices and other financial indices and in so doing can achieve many of the same
objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement, i.e., an option on an index gives
the holder the
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right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
(except if, in the case of an OTC option, physical delivery is specified). This
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss of an option on an index depends
on price movements in the instruments making up the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.
CURRENCY TRANSACTIONS
The Fund may engage in currency transactions with Counterparties in
order to hedge the value of portfolio holdings denominated in particular
currencies against fluctuations in relative value. Currency transactions include
forward currency contracts, exchange-listed currency futures, exchange-listed
and OTC options on currencies, and currency swaps. A forward currency contract
involves a privately negotiated obligation to purchase or sell (with delivery
generally required) a specific currency at a future date, at a price set at the
time of the contract. A currency swap is an agreement to exchange cash flows
based on the notional difference among two or more currencies and operates
similarly to an interest rate swap, which is described below. The Fund may enter
into currency transactions with Counterparties which have received (or the
guarantors of the obligations of such Counterparties have received) a credit
rating of A-1 or P-1 by S&P or Moody's, respectively, or that have an equivalent
rating from an NRSRO or (except for OTC currency options) are determined to be
of equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended to wholly or
partially offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currency convertible into such
currently other than with respect to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
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To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering to a forward contract to sell a currency whose changes
in value are generally considered to be linked to a currency or currencies in
which some or all of the Fund's portfolio securities are or are expected to be
denominated, and to buy U.S. dollars. The amount of the contract would not
exceed the value of the Fund's securities denominated in linked currencies. For
example, if the Adviser considers the Austrian schilling linked to the German
deutschemark (the "D-mark"), the Fund holds securities denominated in schillings
and the Adviser believes that the value of schillings will decline against the
U.S. dollar, the Adviser may enter into a contract to sell D-marks and buy
dollars. Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Further, there is the risk that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Fund is engaging in proxy hedging.
If the Fund enters into a currency hedging transaction, the Fund will comply
with the asset segregation requirements described below.
RISKS OF CURRENCY TRANSACTIONS
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risk that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and any combination of
futures, options and currency transactions ("component" transactions), instead
of a single Hedging Transaction, as part of a single or combined strategy when,
in the opinion of the Adviser, it is in the best interests of the Fund to do so.
A combined transaction will usually contain elements of risk that are present in
each of its competent transactions. Although combined transactions are normally
entered into based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the
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combination will instead increase such risks or hinder achievement of the
portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the Hedging Transactions into which the Fund may enter are
interest rate, currency and index swaps and the purchase or sale of related
caps, floors and collars. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to protect against currency fluctuations, as a duration
management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors, and collars are entered into for good faith hedging purposes, the
Adviser and the Fund believe such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Fund will not enter into any swap,
cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least "A" by S&P or Moody's or has an
equivalent rating from an NRSRO or is determined to be of equivalent credit
quality by the Adviser. If there is a default by the Counterparty, the Fund may
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors, and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
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EURODOLLAR INSTRUMENTS
The Fund may make investments in Eurodollar instruments. Eurodollar
instruments are U.S. dollar-denominated futures contracts or options thereon
which are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
RISKS OF HEDGING TRANSACTIONS OUTSIDE THE UNITED STATES
When conducted outside the United States, Hedging Transactions may not
be regulated as rigorously as 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, currencies
and other instruments. 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 decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during nonbusiness 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) lower
trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many Hedging Transactions, in addition to other requirements, require
that the Fund segregate liquid high grade assets with its custodian to the
extent Fund obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency. In general, either the
full amount of any obligation by the Fund to pay or deliver securities or assets
must be covered at all times by the securities, instruments or currency required
to be delivered, or, subject to any regulatory restriction, an amount of cash or
liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them. For example, a call option
written by the Fund will require the Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate liquid high-grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by the Fund on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate liquid high grade assets equal to the
excess of the index value over the exercise price on a current basis. A put
option written by the Fund requires the Fund to segregate liquid, high grade
assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to
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hold an amount of that currency or liquid securities denominated in that
currency equal to the Fund's obligations or to segregate liquid high grade
assets equal to the amount of the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC-issued and exchange-listed
index options will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a noncash settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount excess the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC-issued and exchange-listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement,
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlement with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to the Fund's net obligation,
if any.
Hedging Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Hedging
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Hedging Transactions may also be offset in combinations. If
the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
- 11 -
<PAGE>
INVESTMENT LIMITATIONS
FUNDAMENTAL. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), I.E., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. BORROWING MONEY. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding one-third of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. SENIOR SECURITIES. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and Statement of
Additional Information.
3. UNDERWRITING. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. COMMODITIES. The Fund will not purchase or sell commodities except
as described in the Prospectus and Statement of Additional Information. This
limitation does not preclude the Fund from acquiring commodities as a result of
ownership of securities or other investments; from entering into options,
futures, currency, swap, cap, floor, collar or similar transactions; from
investing in securities or other instruments backed by commodities;
- 12 -
<PAGE>
or from investing in companies which are engaged in a commodities business or
have a significant portion of their assets in commodities.
6. LOANS. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. The Fund will not invest 25% or more of its total
assets in any particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
NON-FUNDAMENTAL. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Limitations" above).
1. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. BORROWING. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% its total
assets are outstanding.
3. MARGIN PURCHASES. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to
- 13 -
<PAGE>
arrangements with respect to transactions involving options, futures contracts,
short sales and other permitted investments and techniques.
4. OPTIONS. The Fund will not purchase or sell puts, calls, options or
straddles, except as described in the Prospectus and this Statement of
Additional Information.
5. SHORT SALES. The Fund will not effect short sales of securities.
6. ILLIQUID SECURITIES. The Fund will not invest more than 5% of its
assets in securities that are restricted as to resale or otherwise illiquid. For
this purpose, illiquid securities generally include securities which cannot be
disposed of within seven days in the ordinary course of business without taking
a reduced price.
SHARES OF THE FUND
Four classes of shares, Class A Shares, Class B Shares, Class C Shares,
and Class R Shares are authorized for the Fund. Currently, the Fund is offering
Class A shares only, but others may be offered in the future. The four classes
of shares each represent an interest in the same portfolio of investments of the
Fund and have the same rights, except (i) Class B and Class C Shares bear the
expenses of the deferred sales arrangement and any expenses (including a higher
distribution services fee) resulting from such sales arrangement, (ii) each
class that is subject to a distribution fee has exclusive voting rights with
respect to those provisions of the Fund's Rule 12b-1 distribution plan which
relate only to such class and (iii) the classes have different exchange
privileges. Additionally, Class B Shares will automatically convert into Class A
Shares after a specified period of years (as described below). The net income
attributable to Class B and Class C Shares and the dividends payable on Class B
and Class C Shares will be reduced by the amount of the higher distribution
services fee and certain other incremental expenses associated with the deferred
sales charge arrangement. The net asset value per share of Class A Shares, Class
B Shares, Class C Shares and Class R Shares is expected to be substantially the
same, but it may differ from time to time.
For purposes of conversion of Class A Shares, Class B Shares purchased
through the reinvestment of dividends and distributions paid in respect of Class
B Shares in stockholder's account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the stockholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account also will convert to Class A
Shares. The conversion of Class B Shares to Class A Shares is subject to the
continuing determination that (i) the assessment of the higher distribution
services fee and transfer agency cost with respect to Class B Shares does not
result in the Fund's dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of Class B Shares does
not constitute a taxable event under federal income tax law. The conversion of
Class B Shares to Class A Shares may be suspended if such an opinion is no
longer available. In that event, no further conversions of Class B Shares would
occur, and Class B Shares might continue to be subject to the higher
distribution services fee for an indefinite period, which period may extend
beyond the conversion period after the end of the month in which the shares were
issued.
- 14 -
<PAGE>
The CDSL will not be imposed on amounts representing increases in net
asset value above the initial purchase price. Additionally, no charge will be
assessed on Class B or Class C Shares derived from reinvestment of dividends or
capital gains distributions. The CDSL will be waived (i) on redemption of shares
following the disability (as determined in writing by the Social Security
Administration) or death of a stockholder and (ii) on certain redemptions in
connection with IRAs and other qualified retirement plans. In the case of an
exchange, the length of time that the investor held the original Class B or
Class C Shares is counted towards satisfaction of the period during which a
deferred sales charge is imposed on the Class B or Class C for which the
exchange was made.
LETTER OF INTENT
A shareholder may qualify for reduced sales charges by sending to the
Fund (within 90 days after the first purchase desired to be included in the
purchase program) the signed, non-binding Letter of Intent section on the
application form. All investments in retail shares of the Fund count toward the
indicated goal. It is understood that 5% of the dollar amount checked on the
application will be held in a special escrow account. These shares will be held
by an escrow agent subject to the terms of the escrow. All dividends and capital
gains distributions on the escrowed shares will be credited to the shareholder's
account in shares. If the total purchases, less redemptions by the shareholder,
his spouse, children and parents, equal the amount specified under this Letter,
the shares held in escrow will be deposited to the shareholder's open account or
delivered to the shareholder or to his order. If the total purchases, less
redemptions, exceed the amount specified under this Letter and an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made by the Distributor and the dealer through whom purchases were made
pursuant to this Letter of Intent (to reflect such further quantity discount).
The resulting difference in offering price will be applied to the purchase of
additional shares at the offering price applicable to a single purchase of the
dollar amount of the total purchases. If the total purchases less redemptions
are less than the amount specified under this Letter, the shareholder will remit
to the Distributor an amount equal to the difference in the dollar amount of
sales charge actually paid and the amount of sales charge which would have
applied to the aggregate purchases if the total of such purchases had been made
at a single time. Upon such remittance the shares held for the shareholder's
account will be deposited to his Account or delivered to him or to his order. If
within 20 days after written request by the Distributor such difference in sales
charge is not paid, the Distributor is hereby authorized to redeem an
appropriate number of shares to realize such difference. The Distributor is
hereby irrevocably constituted under this Letter of Intent to effect such
redemption as agent of the shareholder.
THE INVESTMENT ADVISER
The Fund's investment adviser is James Investment Research, Inc., P.O.
Box 8, Alpha, Ohio 45301 (the "Adviser"). Francis E. James, Jr. is the
controlling shareholder of the Adviser.
Under the terms of the management agreement (the "Agreement"), the
Adviser manages the Fund's investments subject to approval of the Board of
Trustees. As compensation for its management services, the Fund is obligated to
pay the Adviser a fee
- 15 -
<PAGE>
computed and accrued daily and paid monthly at an annual rate of 0.55% of the
average daily net assets of the Fund. The Adviser may waive all or part of its
fee, at any time, and at its sole discretion, but such action shall not obligate
the Adviser to waive any fees in the future.
The Adviser retains the right to use the names "James Rainbow", "James
Advantage" or any variation thereof in connection with another investment
company or business enterprise with which the Adviser is or may become
associated. The Trust's right to use the names "James Rainbow," and "James
Advantage" or any variation thereof automatically ceases ninety days after
termination of the Agreement and may be withdrawn by the Adviser on ninety days
written notice.
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
- 16 -
<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
================================================================================
NAME, ADDRESS AND AGE POSITIONS WITH THE TRUST
--------------------- ------------------------
* Barry R. James, CFA President and a Trustee of the Trust;
P.O. Box 8 Executive Vice President, James
Alpha, Ohio 45301 Investment Research, Inc. (1985 to
Age: 41 Present); President, James Capital
Alliance, Inc., Cincinnati, Ohio (1992 to
Present).
- --------------------------------------------------------------------------------
Thomas L. Mangan Treasurer, Secretary and a Trustee of
P.O. Box 8 the Trust; Vice president, James
Alpha, Ohio 45301 Investment Research, Inc. (1994 to
Age: 48 Present); senior vice president, Fuji
Securities, Inc., Chicago, Illinois
(prior to 1994).
================================================================================
Trustee fees are Trust expenses. The following table estimates the
Trustees' compensation for the first full year of the Trust ending
________________________, 1998.
================================================================================
TOTAL COMPENSATION
FROM TRUST (THE TRUST IS
NAME NOT IN A FUND COMPLEX)
---- ----------------------
Barry R. James, CFA $0
- --------------------------------------------------------------------------------
Thomas L. Mangan $0
- --------------------------------------------------------------------------------
$-----
- --------------------------------------------------------------------------------
$-----
- --------------------------------------------------------------------------------
$-----
================================================================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
- 17 -
<PAGE>
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although research services and other information are useful to the Fund
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the Adviser are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by the Adviser to be equitable to
each. In some cases, this procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and the ability
to participate in volume transactions will be to the benefit of the Fund.
When the Fund and another of the Adviser's clients seek to purchase or
sell the same security at or about the same time, the Adviser may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for the Fund because of the increased volume of the
transaction. If the entire blocked order is not filled, the Fund may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. In the event that
- 18 -
<PAGE>
the entire blocked order is not filled, the purchase or sale will normally be
allocated on good faith equitable basis by the Adviser.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule
12b-1 which was promulgated by the Securities and Exchange Commission pursuant
to the Investment Company Act of 1940 (the "Plan"). The Plan provides for
payment of fees to [____________________________] to finance any activity which
is principally intended to result in the sale of the Fund's shares subject to
the Plan. Such activities are described in the Prospectus. Pursuant to the Plan,
[_____________________] may pay fees to brokers and others for such services.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking to
achieve its investment objective.
The maximum amount payable by the Fund under the Plan and related
agreements on an annual basis is .40% of the Fund's average daily net assets for
the year. In the case of broker-dealers and others, such as banks, who have
Selling or Service Agreements with the Distributor or the Fund, the maximum
amount payable to any recipient is .0005479% per day (.20% on an annualized
basis) of the proportion of daily net assets of the Fund represented by such
person's customers. The Board of Trustees may reduce these amounts at any time.
All distribution expenses incurred by the Distributor and others, such as
broker-dealers or banks, in excess of the amount paid by the Fund will be borne
by such persons without any reimbursement from the Fund.
The Plan, the Distribution Agreement, the Selling Agreements and the
Service Agreements of the Fund have been approved by the Fund's Board of
Trustees, including a majority of the Trustees who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in the Plan or
any related agreement, by a vote cast in person at meetings called for the
purpose of voting on the Plan and such agreements and by the shareholders on
_______________________, 1997. Continuation of the Plan and the related
agreements must be approved annually in the same manner, and the Plan or any
related agreement may be terminated at any time without penalty by a majority of
such independent directors or by a majority of a Portfolio's outstanding shares.
Any amendment increasing the maximum percentage payable under the Plan or other
material change must be approved by a majority of the respective Portfolio's
outstanding shares, and all other material amendments to the Plan or any related
agreement must be approved by a majority of the independent Trustees.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence
- 19 -
<PAGE>
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Share Price
Calculation" in the Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula: P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average, the
Value Line Stock Index or a blend of stock and bond indices.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
- 20 -
<PAGE>
CUSTODIAN
__________________________________ is Custodian of the Fund's
investments. As Custodian, ___________________ acts as the Fund's depository,
safekeeps its portfolio securities, collects all income and other payments with
respect thereto, disburses funds at the Fund's request and maintains records in
connection with its duties.
TRANSFER AGENT
________________________, [address], acts as the Fund's transfer agent
and, in such capacity, maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other accounting and shareholder service
functions.
ACCOUNTANTS
The firm of ______________________________, [address], has been
selected as independent public accountants for the Trust for the fiscal year
ending ______________, 1998. ________________________ performs an annual audit
of the Fund's financial statements and provides financial, tax and accounting
consulting services as requested.
DISTRIBUTOR
________________________________, [address], is the exclusive agent for
distribution of shares of the Fund. The Distributor is obligated to sell shares
of the Fund on a best efforts basis only against purchase orders for the shares.
Shares of the Fund are offered to the public on a continuous basis.
- 21 -
<PAGE>
THE JAMES ADVANTAGE FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in Part A: None
Included in Part B: None
(b) Exhibits
(1) (a) Copy of Registrant's Declaration of Trust is
filed herewith.
(b) Copy of Amendment No. 1 to Registrant's
Declaration of Trust is filed herewith.
(2) Copy of Registrant's By-Laws is filed herewith.
(3) Voting Trust Agreements - None.
(4) Specimen of Share Certificates - None.
(5) Copy of Registrant's proposed Management Agreement
with its Adviser, James Investment Research, Inc.
is filed herewith.
(6) Copy of Registrant's Distribution Agreement with
_________________________ (to be supplied).
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of Directors or Officers
- None.
(8) Copy of Registrant's Agreement with the Custodian,
________________________ (to be supplied).
(9) Other Material Contracts - None.
(10) Opinion and Consent of Brown, Cummins & Brown Co.,
L.P.A. is filed herewith.
(11) Consent of independent public accountants - None.
- 1 -
<PAGE>
(12) Financial Statements Omitted from Item 23 - None.
(13) Copy of Letter of Initial Stockholders (to be
supplied).
(14) Model Plan used in Establishment of any Retirement
Plan - None.
(15) 12b-1 Distribution Expense Plan (to be supplied).
(16) Schedule for Computation of Each Performance
Quotation - None.
(17) Financial Data Schedule - None.
(18) Rule 18f-3 Plan - None.
(19) Power of Attorney for the Trust and the officers
and Trustees of the Trust are filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
- -------- ---------------------------------------------
WITH THE REGISTRANT
-------------------
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF SEPTEMBER , 1997)
- -------- ----------------------------------------------------------
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
James Rainbow Fund 0
ITEM 27. INDEMNIFICATION
- -------- ---------------
(a) Article VI of the Registrant's Declaration of Trust
provides for indemnification of officers and Trustees
as follows:
SECTION 6.4 INDEMNIFICATION OF TRUSTEES,
OFFICERS, ETC. Subject to and except as otherwise
provided in the Securities Act of 1933, as amended,
and the 1940 Act, the Trust shall indemnify each of
its Trustees and officers (including persons who
serve at the Trust's request as directors, officers
or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered
Person") against all liabilities, including but not
limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties,
and expenses, including reasonable accountants' and
counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any
action, suit or other
- 2 -
<PAGE>
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in
which such Covered Person may be or may have been
involved as a party or otherwise or with which such
person may be or may have been threatened, while in
office or thereafter, by reason of being or having
been such a Trustee or officer, director or trustee,
and except that no Covered Person shall be
indemnified against any liability to the Trust or
its Shareholders to which such Covered Person would
otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of
such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust
shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a
proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act,
and Ohio Revised Code Chapter 1707, as amended. In
the event any of these laws conflict with Ohio
Revised Code Section 1701.13(E), as amended, these
laws, and not Ohio Revised Code Section 1701.13(E),
shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE,
ETC. The right of indemnification provided by this
Article VI shall not be exclusive of or affect any
other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors
and administrators. Nothing contained in this
article shall affect any rights to indemnification
to which personnel of the Trust, other than Trustees
and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Registrant may not pay for insurance which
protects the Trustees and officers against
liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of
their offices.
- 3 -
<PAGE>
(b) The Registrant may maintain a standard mutual fund and
investment advisory professional and directors and
officers liability policy. The policy, if maintained,
would provide coverage to the Registrant, its Trustees
and officers, and could cover its Advisers, among
others. Coverage under the policy would include losses
by reason of any act, error, omission, misstatement,
misleading statement, neglect or breach of duty.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the provisions of Ohio law and the Agreement
and Declaration of the Registrant or the By-Laws of the
Registrant, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid
by a trustee, officer or controlling person of the Trust
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, the 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 the Act
and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- -------- ----------------------------------------------------
A. (i) Ann Marie Shaw Kremer, Senior Vice President of
JIR is also the Treasurer of James Capital Alliance,
Inc., P.O. Box 12, Alpha, Ohio 45301, an investment
advisory business.
(ii) Barry Ray James, Executive Vice President of
JIR is also the President of James Capital Alliance,
Inc. and President and a Trustee of the Trust.
(iii) Robert G. Hawkins, Director of JIR is
currently the Dean of Ivan Allen College of
Management, Georgia Institute of Technology, a
university in Atlanta, Georgia.
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ITEM 29. PRINCIPAL UNDERWRITERS
- -------- ----------------------
(a) ___________________________________, the Registrant's
distributor, [acts as distributor for _______________]
(b) [Information with respect to each director and officer
of ______________________________ is incorporated by
reference to Schedule A of Form BD filed by it under the
Securities Exchange Act of 1934 (File No.________]
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
- -------- --------------------------------
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at 1349 Fairground Road, Beavercreek, Ohio 45385
and/or by the Registrant's Custodian, _______________,
____________________________, and/or by the Registrant's
Transfer Agent, ___________________________.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
- -------- -------------------------------------------------
None.
ITEM 32. UNDERTAKINGS
- -------- ------------
(a) Not Applicable.
(b) The Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(c) The Registrant hereby undertakes to file a Post-
Effective Amendment, using financial statements which
need not be certified, within four to six months from
the effective date of this registration.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati, State of Ohio, on the 6 day of October,
1997.
The James Advantage Funds
By: _____________________________________
Donald S. Mendelsohn, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Barry R. James, President and Trustee
By: _____________________________________
Donald S. Mendelsohn, Attorney-in-Fact
October 6, 1997
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EXHIBIT INDEX
-------------
PAGE
----
1. Declaration of Trust ......................................EX-99.B1.1
2. Amendment No. 1 to Declaration of Trust....................EX-99.B1.2
3. By-Laws....................................................EX-99.B2
4. Proposed Management Agreement..............................EX-99.B5
5. Opinion of Brown, Cummins & Brown Co., L.P.A. .............EX-99.B10
6. Powers of Attorney.........................................EX-99.POA
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<PAGE>
--------------------------------------------
THE JAMES FUNDS
AGREEMENT AND DECLARATION OF TRUST
AUGUST _____, 1997
-------------------------
THE JAMES FUNDS
AGREEMENT AND DECLARATION OF TRUST
TABLE OF CONTENTS
ARTICLE I - NAME AND DEFINITIONS.........................................1
Section 1.1 Name.............................................1
Section 1.2 Definitions......................................1
(a) The "Trust"......................................1
(b) "Trustees".......................................1
(c) "Shares".........................................1
(d) "Series".........................................1
(e) "Class"..........................................2
(f) "Shareholder"....................................2
(g) The "1940 Act"...................................2
(h) "Commission".....................................2
(i) "Declaration of Trust"...........................2
(j) "By-Laws"........................................2
ARTICLE II - PURPOSE OF TRUST............................................2
ARTICLE III - THE TRUSTEES...............................................2
Section 3.1 Number, Designation, Election, Term, etc.........2
(a) Initial Trustees.................................2
(b) Number...........................................2
(c) Term.............................................2
(d) Resignation and Retirement.......................3
(e) Removal..........................................3
(f) Vacancies........................................3
(g) Effect of Death, Resignation, etc................3
(h) No Accounting....................................3
Section 3.2 Powers of Trustees...............................4
(a) Investments......................................4
(b) Disposition of Assets............................4
(c) Ownership Powers.................................4
(d) Subscription.....................................5
(e) Form of Holding..................................5
(f) Reorganization, etc..............................5
(g) Voting Trusts, etc...............................5
(h) Compromise.......................................5
<PAGE>
(i) Partnerships, etc................................5
(j) Borrowing and Security...........................5
(k) Guarantees, etc..................................5
(l) Insurance........................................5
(m) Pensions, etc....................................6
Section 3.3 Certain Contracts................................6
(a) Advisory.........................................6
(b) Administration.................................. 7
(c) Distribution.................................... 7
(d) Custodian and Depository........................ 7
(e) Transfer and
Dividend Disbursing Agency..................... 7
(f) Shareholder Servicing........................... 7
(g) Accounting.......................................7
Section 3.4 Payment of Trust Expenses and Compensation of
Trustees.......................................8
Section 3.5 Ownership of Assets of the Trust.................8
ARTICLE IV - SHARES.............................................8
Section 4.1 Description of Shares............................8
Section 4.2 Establishment and Designation of Series.........10
(a) Assets Belonging to Series......................10
(b) Liabilities Belonging to Series.................10
(c) Dividends.......................................11
(d) Liquidation.....................................12
(e) Voting..........................................12
(f) Redemption by Shareholder.......................12
(g) Redemption by Trust.............................12
(h) Net Asset Value.................................13
(i) Transfer........................................13
(j) Equality........................................13
(k) Fractions.......................................14
(l) Conversion Rights...............................14
Section 4.3 Ownership of Shares.............................14
Section 4.4 Investments in the Trust........................14
Section 4.5 No Preemptive Rights............................14
Section 4.6 Status of Shares and Limitation of Personal
Liability.....................................14
- ii -
<PAGE>
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS....................15
Section 5.1 Voting Powers...................................15
Section 5.2 Meetings........................................15
Section 5.3 Record Dates....................................15
Section 5.4 Quorum and Required Vote........................16
Section 5.5 Action by Written Consent.......................16
Section 5.6 Inspection of Records...........................16
Section 5.7 Additional Provisions...........................16
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION...................16
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice................................16
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety.............................17
Section 6.3 Indemnification of Shareholders.................17
Section 6.4 Indemnification of Trustees, Officers, etc......18
Section 6.5 Advances of Expenses............................18
Section 6.6 Indemnification Not Exclusive, etc..............18
Section 6.7 Liability of Third Persons Dealing with
Trustees......................................18
ARTICLE VII - MISCELLANEOUS.............................................18
Section 7.1 Duration and Termination of Trust...............18
Section 7.2 Reorganization..................................19
Section 7.3 Amendments......................................19
Section 7.4 Filing of Copies; References; Headings..........20
Section 7.5 Applicable Law..................................20
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<PAGE>
THE JAMES FUNDS
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Beavercreek, Ohio, this
_____ day of August, 1997, by the Trustees hereunder, and by the holders of
Shares of beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business of
an investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME. This Trust shall be known as "The James Funds" and
the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established by
this Agreement and Declaration of Trust, as amended from
time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein
or elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust, shall be divided
from time to time, including the shares of any and all Series
or Classes which may be established by the Trustees, and
includes fractions of Shares as well as whole Shares;
(d) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of
Article IV;
(e) "Class" refers to a class or sub-series of any Series of
Shares established and designated under and in accordance
with the provisions of Article IV;
- 1 -
<PAGE>
(f) "Shareholder" means a record owner of Shares;
(g) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended
from time to time;
(h) "Commission" shall have the meaning given it in the 1940
Act;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to
time; and
(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to engage in any and all lawful acts or activities for
which business trusts may be formed under Chapter 1746 of the Ohio Revised Code.
ARTICLE III
THE TRUSTEES
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
----------- -----------------------------------------
(a) INITIAL TRUSTEES. Upon his execution of this Declaration of
Trust or a counterpart hereof or some other writing in which
he accepts such Trusteeship and agrees to the provisions
hereof, Barry Ray James shall become Trustee hereof.
(b) NUMBER. The Trustees serving as such, whether named above
or hereafter becoming a Trustee, may increase or decrease
the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of
Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number
of Trustees may be decreased in conjunction with the removal
of a Trustee pursuant to subsection (e) of this Section 3.1.
(c) TERM. Each Trustee shall serve as a Trustee during the
lifetime of the Trust and until its termination as
hereinafter provided or until such Trustee sooner dies,
resigns, retires or is removed. The Trustees may elect
their own successors and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies; provided that,
immediately after filling a vacancy, at least two-thirds of
the Trustees then holding office shall have been elected to
such office by the Shareholders at an annual or special
meeting. If at any time less than a majority of the
Trustees then holding office were so elected, the Trustees
shall forthwith cause to be held as promptly as possible, and
in any event within 60 days, a meeting of Shareholders for the
purpose of electing Trustees to fill any existing vacancies.
- 2 -
<PAGE>
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in
such instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective, (ii) by vote of the Shareholders holding not less
than two-thirds of the Shares then outstanding, cast in
person or by proxy at any meeting called for the purpose, or
(iii) by a declaration in writing signed by Shareholders
holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's Custodian.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death,
resignation, retirement, removal or incapacity of any of the
Trustees, or resulting from an increase in the number of
Trustees by the Trustees may (but so long as there are at
least three remaining Trustees, need not unless required by
the 1940 Act) be filled either by a majority of the
remaining Trustees through the appointment in writing of
such other person as such remaining Trustees in their
discretion shall determine (unless a shareholder election is
required by the 1940 Act) or by the election by the
Shareholders, at a meeting called for the purpose, of a
person to fill such vacancy, and such appointment or
election shall be effective upon the written acceptance of
the person named therein to serve as a Trustee and agreement
by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees
to be effective at a later date shall become effective only
at or after the effective date of said retirement,
resignation, or increase in number of Trustees. As soon as
any Trustee so appointed or elected shall have accepted such
appointment or election and shall have agreed in writing to
be bound by this Declaration of Trust and the appointment or
election is effective, the Trust estate shall vest in the
new Trustee, together with the continuing Trustees, without
any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any
one of them, shall not operate to annul or terminate the
Trust or to revoke or terminate any existing agency or
contract created or entered into pursuant to the terms of this
Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
SECTION 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers
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<PAGE>
necessary or convenient to carry out that responsibility and the purpose of the
Trust. Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them to the extent
that such By-Laws do not reserve that right to the Shareholders; they may as
they consider appropriate elect and remove officers and appoint and terminate
agents and consultants and hire and terminate employees, any one or more of the
foregoing of whom may be a Trustee, and may provide for the compensation of all
of the foregoing; they may appoint from their own number, and terminate, any one
or more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Section 3.3 they may employ one or more Advisers, Administrators, Depositories
and Custodians and may authorize any Depository or Custodian to employ
subcustodians or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt instruments,
retain transfer, dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, set record dates or
times for the determination of Shareholders or certain of them with respect to
various matters; they may compensate or provide for the compensation of the
Trustees, officers, advisers, administrators, custodians, other agents,
consultants and employees of the Trust or the Trustees on such terms as they
deem appropriate; and in general they may delegate to any officer of the Trust,
to any committee of the Trustees and to any employee, adviser, administrator,
distributor, principal underwriter, depository, custodian, transfer and dividend
disbursing agent, or any other agent or consultant of the Trust such authority,
powers, functions and duties as they consider desirable or appropriate for the
conduct of the business and affairs of the Trust, including without implied
limitation the power and authority to act in the name of the Trust and of the
Trustees, to sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) INVESTMENTS. To invest and reinvest cash and other
property, and to hold cash or other property uninvested
without in any event being bound or limited by any present
or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all
of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute and
deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees
shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription
or otherwise which in any manner arise out of ownership of
securities or debt instruments;
- 4 -
<PAGE>
(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any
plan for the reorganization, consolidation or merger of any
corporation or issuer, any security or debt instrument of
which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by
such corporation or issuer, and to pay calls or
subscriptions with respect to any security or debt
instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any
securities or debt instruments in acting through a
committee, depository, voting trustee or otherwise, and in
that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any
such committee, depository or trustee, and to delegate to
them such power and authority with relation to any security
or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the
Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or
limited partnerships and any other combinations or
associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure
obligations arising in connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected
therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted
by any such person in any such capacity, including any
action taken or omitted that may be determined to constitute
- 5 -
<PAGE>
negligence; provided, however, that insurance which protects
the Trustees and officers against liabilities rising from
action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of their offices may not be purchased; and
(m) PENSIONS, ETC. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish
and carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and agents
of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
("Contracting Party") to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or of the
Trust and/or the Trustees, and to provide for the performance and assumption of
such other services, duties and responsibilities in addition to those set forth
below as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the
Trustees with respect to the investments of the Trust or of
the assets belonging to any Series of Shares of the Trust
(as that phrase is defined in subsection (a) of Section
4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and
sale orders for portfolio transactions relating to such
investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees
with respect to the operations of the Trust, to supervise
all or any part of the operations of the Trust, and to
provide all or any part of the administrative and clerical
personnel, office space and office equipment and services
appropriate for the efficient administration and operations
of the Trust;
- 6 -
<PAGE>
(c) DISTRIBUTION. To distribute the Shares of the Trust, to be
principal underwriter of such Shares, and/or to act as agent
of the Trust in the sale of Shares and the acceptance or
rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to
maintain custody of the property of the Trust and accounting
records in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain
records of the ownership of outstanding Shares, the issuance
and redemption and the transfer thereof, and to disburse any
dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to
the relationship of the Trust and its Shareholders, records
with respect to Shareholders and their Shares, and similar
matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust, or
that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (l) the material facts as to such relationship or
interest have been disclosed to or are known
- 7 -
<PAGE>
by the Trustees not having any such relationship or interest and the contract
involved is approved in good faith reasonably justified by such facts by a
majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), (2) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders not
having such relationship or interest and who are entitled to vote thereon and
the contract involved is specifically approved in good faith by majority vote of
such Shareholders, or (3) the specific contract involved is fair to the Trust as
of the time it is authorized, approved or ratified by the Trustees or by such
Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
and Classes that may be established and designated pursuant to Article IV, as
the Trustees deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees' compensation
and such expenses and charges for the services of the Trust's officers,
employees, investment adviser, administrator, distributor, principal
underwriter, auditor, counsel, depository, custodian, transfer agent, dividend
disbursing agent, accounting agent, Shareholder servicing agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur. Without limiting
the generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value. The Trustees shall have the
authority from time to time to issue or reissue Shares in one or more Series of
Shares (including without limitation the Series specifically established and
designated in Section 4.2), as they deem necessary or desirable, to establish
and designate such Series, and to fix and determine the relative rights and
preferences as between the different Series of Shares as to right of redemption
and the price, terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the several Series
shall have separate voting rights or no voting rights.
The Shares of each Series may be issued or reissued from time to time
in one or more Classes, as determined by the Board of Trustees pursuant to
resolution. Each Class shall be appropriately designated, prior to the issuance
of any shares thereof, by some distinguishing letter, number or title. All
Shares within a Class shall be alike in every particular. All Shares of each
Series shall be of equal rank and have the same powers, preferences and rights,
and shall be subject to the same qualifications, limitations and restrictions
without distinction between the
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shares of different Classes thereof, except with respect to such differences
among such Classes, as the Board of Trustees shall from time to time determine
to be necessary or desirable, including without limitation differences in
expenses, in voting rights and in the rate or rates of dividends or
distributions. The Board of Trustees may from time to time increase the number
of Shares allocated to any Class already created by providing that any unissued
Shares of the applicable Series shall constitute part of such Class, or may
decrease the number of Shares allocated to any Class already created by
providing that any unissued Shares previously assigned to such Class shall no
longer constitute part thereof. The Board of Trustees is hereby empowered to
classify or reclassify from time to time any unissued Shares of each Series by
fixing or altering the terms thereof and by assigning such unissued shares to an
existing or newly created Class. Notwithstanding anything to the contrary in
this paragraph the Board of Trustees is hereby empowered (i) to redesignate any
issued Shares of any Series by assigning a distinguishing letter, number or
title to such shares and (ii) to reclassify all or any part of the issued Shares
of any Series to make them part of an existing or newly created Class.
The number of authorized Shares and the number of Shares of each Series
and Class that may be issued is unlimited, and the Trustees may issue Shares of
any Series or Class for such consideration and on such terms as they may
determine (or for no consideration if pursuant to a Share dividend or split-up),
all without action or approval of the Shareholders. All Shares when so issued on
the terms determined by the Trustees shall be fully paid and non-assessable (but
may be subject to mandatory contribution back to the Trust as provided in
subsection (h) of Section 4.2). The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Series or
Class into one or more Series or Classes that may be established and designated
from time to time. The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares of any
Series or Class reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Series or Class of Shares in
addition to those established and designated in Section 4.2 shall be effective
upon the execution by a majority of the then Trustees of an instrument setting
forth such establishment and designation and the relative rights and preferences
of such Series or Class, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular Series or Class
previously established and designated the Trustees may by an instrument executed
by a majority of their number abolish that Series or Class and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares to the same extent as if such person were not a Trustee, officer or other
agent of the Trust; and the Trust may issue and sell or cause to be issued and
sold and may purchase Shares from any such person or any such organization
subject only to the general limitations, restrictions or other provisions
applicable to the sale or purchase of Shares generally.
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SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASSES. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate one
Series of Shares: the "James Balanced Fund." The Shares of these Series and any
Shares of any further Series or Class that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Series or Class at the time of establishing and
designating the same) have the following relative rights and preferences:
(a) ASSETS BELONGING TO SERIES. All consideration received by
the Trust for the issuance or sale of Shares of a particular
Series or Class, together with all assets in which such
consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to that Series or Class for all
purposes, subject only to the rights of creditors, and shall
be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General
Items allocated to that Series or Class as provided in the
following sentence, are herein referred to as "assets
belonging to" that Series or Class. In the event that there
are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series or Class
(collectively "General Items"), the Trustees shall allocate
such General Items to and among any one or more of the
Series or Classes established and designated from time to
time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items
so allocated to a particular Series or Class shall belong to
that Series or Class. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all
Series and Classes for all purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding
upon the Shareholders.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to
each particular Series and Class thereof shall be charged
with the liabilities of the Trust in respect of that Series
or Class and all expenses, costs, charges and reserves
attributable to that Series or Class, and any general
liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any
particular Series or Class shall be allocated and charged by
the Trustees to and among any one or more of the Series and
Classes established and designated from time to time in such
manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so
charged to a Series or Class are herein referred to as
"liabilities belonging to" that Series or Class. Each
allocation of liabilities, expenses, costs, charges and
reserves
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by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from
such of the estimated income and capital gains, accrued or
realized, from the assets belonging to that Series, as the
Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series. All dividends
and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in
proportion to the number of Shares of that Series held by
such holders at the date and time of record established for
the payment of such dividends or distributions, except that
in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees
under such program or procedure, and except that if Classes
have been established for any Series, the rate of dividends
or distributions may vary among such Class pursuant to
resolution, which may be a standing resolution, of the Board
of Trustees. Such dividends and distributions may be made
in cash or Shares or a combination thereof as determined by
the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (h)
of Section 4.2.
The Trust intends to qualify each Series as a "regulated
investment company" under the Internal Revenue Code of 1954,
as amended, or any successor or comparable statute thereto,
and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable each Series to
qualify as a regulated investment company and to avoid
liability of the Series for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of each
Series for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution of
the Trust, the Shareholders of each Series or Class that has
been established and designated shall be entitled to
receive, as a Series or Class, when and as declared by the
Trustees, the excess of the assets belonging to that Series
or Class over the liabilities belonging to that Series or
Class. The assets so distributable to the Shareholders of
any particular Series or Class shall be distributed among
such Shareholders in proportion to the number of
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Shares of that Series or Class held by them and recorded on
the books of the Trust. The liquidation of any particular
Series or Class may be authorized by vote of a majority of the
Trustees then in office subject to the approval of a majority
of the outstanding voting Shares of that Series or Class, as
defined in the 1940 Act.
(e) VOTING. All Shares shall have "equal voting rights" as such
term is defined in the Investment Company Act of 1940 and
except as otherwise provided by that Act or rules,
regulations or orders promulgated thereunder. On each
matter submitted to a vote of the Shareholders, each Series
shall vote as a separate series except (i) as to any matter
with respect to which a vote of all Series voting as a
single series is required by the 1940 Act or rules and
regulations promulgated thereunder, or would be required
under the Ohio General Corporation Law if the Trust were an
Ohio corporation; and (ii) as to any matter which the
Trustees have determined affects only the interests of one
or more Series or Classes, only the holders of Shares of the
one or more affected Series or Classes shall be entitled to
vote thereon.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a
particular Series or Class shall have the right at such
times as may be permitted by the Trust, but no less
frequently than once each week, to require the Trust to
redeem all or any part of his Shares of that Series or Class
at a redemption price equal to the net asset value per Share
of that Series or Class next determined in accordance with
subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption. Payment of the redemption
price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive,
that conditions exist which make payment wholly in cash
unwise or undesirable, the Trust may make payment wholly or
partly in securities or other assets belonging to the Series
or Class of which the Shares being redeemed are part at the
value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series or Class
that has been established and designated is subject to
redemption by the Trust at the redemption price which would
be applicable if such Share was then being redeemed by the
Shareholder pursuant to subsection (f) of this Section
4.2:(a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially
adverse consequences to all or any of the holders of the
Shares, or any Series or Class thereof, of the Trust, or (b)
upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current
Prospectus of the Trust with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such
redemption the holders of the Shares so redeemed shall have
no further right with respect thereto other than to receive
payment of such redemption price.
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(h) NET ASSET VALUE. The net asset value per Share of any
Series or Class shall be the quotient obtained by dividing
the value of the net assets of that Series or Class (being
the value of the assets belonging to that Series or Class
less the liabilities belonging to that Series or Class) by
the total number of Shares of that Series or Class
outstanding, all determined in accordance with the methods
and procedures, including without limitation those with
respect to rounding, established by the Trustees from time
to time. Net asset value shall be determined separately for
each Class of a Series.
The Trustees may determine to maintain the net asset value per
Share of any Series or Class at a designated constant dollar
amount and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declarations
of income attributable to that Series or Class as dividends
payable in additional Shares of that Series or Class at the
designated constant dollar amount and for the handling of any
losses attributable to that Series or Class . Such procedures
may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the capital of the
Trust attributable to that Series or Class his pro rata
portion of the total number of Shares required to be canceled
in order to permit the net asset value per Share of that
Series or Class to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Shareholder of
the Trust shall be deemed to have agreed, by his investment in
any Series with respect to which the Trustees shall have
adopted any such procedure, to make the contribution referred
to in the preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Series or Class
shall be transferable, but transfers of Shares of a
particular Series or Class will be recorded on the Share
transfer records of the Trust applicable to that Series or
Class only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of that Series
or Class and at such other times as may be permitted by the
Trustees.
(j) EQUALITY. All Shares of each particular Series shall
represent an equal proportionate interest in the assets
belonging to that Series (subject to the liabilities
belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series;
but the provisions of this sentence shall not restrict any
distinctions permissible under this Section 4.2 that may
exist with respect to a Class of the same Series. The
Trustees may from time to time divide or combine the Shares
of any particular Series or Class into a greater or lesser
number of Shares of that Series or Class without thereby
changing the proportionate beneficial interest in the assets
belonging to that Series or Class or in any way affecting
the rights of Shares of any other Series or Class.
(k) FRACTIONS. Any fractional Share of any Series or Class, if any
such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Class, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
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(l) CONVERSION RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the
authority to provide that holders of Shares of any Series or
Class shall have the right to convert said Shares into Shares
of one or more other Series or Classes in accordance with such
requirements and procedures as may be established by the
Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
and Class that has been established and designated. No certificates certifying
the ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Series and Class held from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
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ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of an Ohio business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
By-Laws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are then issued and outstanding, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
SECTION 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series or Classes) of
Shareholders may be called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by mailing such notice at
least seven days before such meeting, postage prepaid, stating the time, place
and purpose of the meeting, to each Shareholder at the Shareholder's address as
it appears on the records of the Trust. If the Trustees shall fail to call or
give notice of any meeting of Shareholders (including a meeting involving only
the holders of Shares of one or more but less than all Series or Classes) for a
period of 30 days after written application by Shareholders holding at least 25%
of the Shares then outstanding requesting a meeting be called for any other
purpose requiring action by the Shareholders as provided herein or in the
By-Laws, then Shareholders holding at least 25% of the Shares then outstanding
may call and give notice of such meeting, and thereupon the meeting shall be
held in the manner provided for herein in case of call thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of
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Shareholders entitled to vote at such meeting or any adjournment thereof or to
be treated as Shareholders of record for purposes of such other action, and any
Shareholder who was a Shareholder at the date and time so fixed shall be
entitled to vote at such meeting or any adjournment thereof or (subject to any
provisions permissible under subsection (c) of Section 4.2 with respect to
dividends or distributions on Shares that have not been ordered and/or paid for
by the time or times established by the Trustees under the applicable dividend
or distribution program or procedure then in effect) to be treated as a
Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of Trust
permits or requires that holders of any Series or Class thereof shall vote as a
Series or Class, then a majority of the aggregate number of Shares of that
Series or Class thereof entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that Series or Class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the By-Laws, a
majority of the Shares voted, at a meeting at which a quorum is present, shall
decide any questions and a plurality shall elect a Trustee, provided that where
any provision of law or of this Declaration of Trust permits or requires that
the holders of any Series or Class shall vote as a Series or Class, then a
majority of the Shares of that Series or Class voted on the matter shall decide
that matter insofar as that Series or Class is concerned.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the By-Laws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation under the Ohio General Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
any Series of the Trust (or the Trust on behalf of any Series) shall look only
to the assets of that Series for payment under such
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credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the State of Ohio and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections 1746.08 and
1701.59, as amended from time to time.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other
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<PAGE>
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 of the
Trust estate to be held harmless from and indemnified against all loss and
expense arising from such liability; provided that, in the event the Trust shall
consist of more than one Series, Shareholders of a particular Series who are
faced with claims or liabilities solely by reason of their status as
Shareholders of that Series shall be limited to the assets of that Series for
recovery of such loss and related expenses. The rights accruing to a Shareholder
under this Section 6.3 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding to
the full extent permitted by the Securities Act of 1933, as amended, the 1940
Act, and Ohio Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws,
and not Ohio Revised Code Section 1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
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<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Series. Following such transfer, the Trustees shall distribute
such cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various Series the
assets belonging to which have so been transferred) among the Shareholders of
the Series the assets belonging to which have been so transferred; and if all of
the assets of the Trust have been so transferred, the Trust shall be terminated.
SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees).
Except as provided in the first sentence of this Section 7, any amendment to
this Declaration of Trust that adversely affects the rights of Shareholders may
be adopted at any time by an instrument signed in writing by a majority of the
then Trustees (or by an officer of the Trust pursuant to the vote of a majority
of such Trustees) when authorized to do so by the vote in accordance with
subsection (e) of Section 4.2 of Shareholders holding a majority
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<PAGE>
of the Shares entitled to vote; (a "Majority Shareholder Vote"); provided,
however, than an amendment that shall affect the Shareholders of one or more
Series (or of one or more Classes), but not the Shareholders of all outstanding
Series (or Classes), shall be authorized by a Majority Shareholder Vote of each
Series (or Class, as the case may be) affected, and no vote of a Series (or
Class) not affected shall be required. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer to the effect
that such amendment has been duly adopted. Copies of the amendment to this
Declaration of Trust shall be filed as specified in Section 7.4. A restated
Declaration of Trust, integrating into a single instrument all of the provisions
of the Declaration of Trust which are then in effect and operative, may be
executed from time to time by a majority of the then Trustees (or by an officer
of the Trust pursuant to the vote of a majority of such Trustees) and shall be
effective upon filing as specified in Section 7.4.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of the State of Ohio, as well as any other governmental office where
such filing may from time to time be required, but the failure to make any such
filing shall not impair the effectiveness of this instrument or any such
amendment. Anyone dealing with the Trust may rely on a certificate by an officer
of the Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments. The masculine
gender shall include the feminine and neuter genders. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is made in the
State of Ohio, and it is created under and is to be governed by and construed
and administered according to the laws of said State, including the Ohio General
Corporation Law as the same may be amended from time to time, but the reference
to said Corporation Law is not intended to give the Trust, the Trustees, the
Shareholders or any other person any right, power, authority or responsibility
available only to or in connection with an entity organized in corporate form.
The Trust shall be of the type referred to in Section 1746.01 of the Ohio
Revised Code, and without limiting the provisions hereof, the Trust may exercise
all powers which are ordinarily exercised by such a trust.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand in
Beavercreek, Ohio for himself and his assigns, as of the day and year first
above written.
/S/
BARRY RAY JAMES
STATE OF OHIO )
) ss:
COUNTY OF GREENE )
Before me, a Notary Public in and for said county and state, personally
appeared the above named Barry Ray James, who acknowledged that he did sign the
foregoing instrument and that the same is his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this 29th day of August, 1997.
/S/ SHERRY L. PARTRIDGE
Notary Public
My Commission Expires: 6/29/00
- 21 -
THE JAMES FUNDS AMENDMENT NO. 1
AGREEMENT AND DECLARATION OF TRUST
1. Pursuant to Sections 7.3 and 1.1 of the Agreement and Declaration of Trust of
The James Funds (the "Trust") and effective upon the execution of this document,
the undersigned, being the sole trustee of the Trust hereby changes the name of
the Trust to "The James Advantage Funds".
2. Pursuant to Sections 7.3 and 4.1 of the Agreement and Declaration of Trust of
the Trust and effective upon execution of this document, the undersigned, being
the sole trustee of the Trust hereby changes the name of the "James Balanced
Fund" series to the "James Rainbow Fund." The relative rights and preferences of
the series shall be those rights and preferences set forth in Section 4.2 of the
Agreement and Declaration of Trust of the Trust.
3. This document shall have the status of an Amendment to said Agreement and
Declaration of Trust.
/S/
Barry Ray James
Date: September 22, 1997
BY-LAWS
OF
THE JAMES FUNDS
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST AND OFFICES
----------------------------------------------
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of The James Funds, the Ohio business trust established
by the Declaration of Trust (the "Trust").
1.2 OFFICES. The Trust may maintain one or more other offices,
including its principal office, in or outside of Ohio, in such cities as the
Trustees may determine from time to time. Unless the Trustees otherwise
determine, the principal office of the Trust shall be located in Beavercreek,
Ohio.
ARTICLE 2
MEETINGS OF TRUSTEES
--------------------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as any meeting of the shareholders.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
<PAGE>
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.
2.6 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is signed by a majority of the
Trustees then in office or a majority of the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.
ARTICLE 3
OFFICERS
--------
3.1 ENUMERATION AND QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.
3.2 ELECTION. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any office may be filled at
any time.
3.3 TENURE. The President, the Treasurer and the Secretary shall hold
office for one year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as an Ohio
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 PRESIDENT. Unless the Trustees otherwise provide, the President, or
in the absence of the President, any Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer.
<PAGE>
3.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
COMMITTEES
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
ARTICLE 5
REPORTS
-------
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
<PAGE>
ARTICLE 6
FISCAL YEAR
-----------
6.1 GENERAL. The fiscal year of the Trust shall be fixed by, and shall
be subject to change by, the Trustees.
ARTICLE 7
SEAL
----
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio", together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
-------------------
8.1 GENERAL. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust, but shall state the substance of or make reference to the
provisions of Section 7.1 of the Declaration of Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificate shall be signed by the
President or a Vice-President and by the Treasurer or Assistant Treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Trustee, officer or employee of the Trust. In
case any officer who has signed or whose facsimile signature has been placed on
such certificate shall cease to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he were such
officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
<PAGE>
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates
have been issued, a pledgee of shares transferred as collateral security shall
be entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, who alone shall be liable
as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
CUSTODIAN
---------
10.1 GENERAL. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
DEALINGS WITH TRUSTEES AND OFFICERS
-----------------------------------
11.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
SHAREHOLDERS
------------
12.1 MEETINGS. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting.
12.2 RECORD DATES. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 60
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case only shareholders
<PAGE>
of record on such record date shall have such right, notwithstanding any
transfer of shares on the books of the Trust after the record date; or without
fixing such record date the Trustees may for any such purposes close the
register or transfer books for all or any part of such period.
ARTICLE 13
AMENDMENTS TO THE BY-LAWS
-------------------------
13.1 GENERAL. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
MANAGEMENT AGREEMENT
TO: James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301
Dear Sirs:
The James Advantage Funds (the "Trust") herewith confirms our agreement
with you.
The Trust has been organized to engage in the business of an investment
company. The Trust currently offers one series of shares to investors: the James
Rainbow Fund (the "Fund").
You have been selected to act as the sole investment adviser of the
Fund and to provide certain other services, as more fully set forth below, and
you are willing to act as such investment adviser and to perform such services
under the terms and conditions hereinafter set forth. Accordingly, the Trust
agrees with you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
-----------------
You will regularly provide the Fund with such investment
advice as you in your discretion deem advisable and will furnish a continuous
investment program for the Fund consistent with the Fund's investment objectives
and policies. You will determine the securities to be purchased for the Fund,
the portfolio securities to be held or sold by the Fund and the portion of the
Fund's assets to be held uninvested, subject always to the Fund's investment
objectives, policies and restrictions, as each of the same shall be from time to
time in effect, and subject further to such policies and instructions as the
Board of Trustees of the Trust (the "Board") may from time to time establish.
You will advise and assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board and the
appropriate committees of the Board regarding the conduct of the business of the
Fund.
2. ALLOCATION OF CHARGES AND EXPENSES
----------------------------------
You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors, stockholders or
employees of your corporation and will make available, without expense to the
Fund, the services of such of your employees as may duly be elected officers or
trustees of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any officers,
trustees and employees of the Trust who are not officers, directors, employees
or stockholders of your corporation will be paid by the Fund. You will pay all
advertising and promotion expenses incurred in connection with the sale or
distribution of the Fund's shares to the extent such expenses are not permitted
to be paid by the Fund under any distribution expense plan or any other
permissible arrangement which may be adopted in the future; provided however,
that neither the cost of prospectuses or periodic reports provided to
shareholders, nor expenses incurred in complying with laws regulating the issue
or sale of securities shall be deemed expenses incurred in connection with the
sale or distribution of the Fund's shares. You may obtain reimbursement from the
Fund, at such time or times as you may determine in your sole discretion, for
any of the expenses advanced by you, which the Fund is obligated to pay, and
such reimbursement shall not be considered to be part of your compensation
pursuant to this Agreement.
<PAGE>
The Fund will pay all organizational and operating expenses of the
Fund, including brokerage fees and commissions; taxes or governmental fees;
interest; fees and expenses of the non- interested person trustees; clerical and
shareholder service staff salaries; office space and other office expenses; fees
and expenses incurred by the Fund in connection with membership in investment
company organizations; legal, auditing and accounting expenses; expenses of
registering shares under federal and state securities laws; insurance expenses;
fees and expenses of the custodian, transfer agent, dividend disbursing agent,
shareholder service agent, administrator, accounting and pricing services agent
and underwriter of the Fund; expenses, including clerical expenses, of issue,
sale, redemption or repurchase of shares of the Fund; the cost of preparing and
distributing reports and notices to shareholders, the cost of printing or
preparing prospectuses and statements of additional information for delivery to
the Fund's shareholders; expenses of shareholders' meetings and proxy
solicitations; and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's trustees and officers with respect thereto.
Notwithstanding anything herein to the contrary, the Fund will only be
liable for organizational expenses when the Fund reaches $10,000,000 in assets
or when the Fund has been in existence for at least one year, and until such
time, you are liable for such expenses. You will cause such expenses to be
advanced on behalf of the Fund and may obtain reimbursement from the Fund after
the Fund becomes liable.
3. COMPENSATION OF THE ADVISER
---------------------------
For all of the services to be rendered and payments to be made
as provided in this Agreement, as of the last business day of each month, the
Fund will pay you a fee at the annual rate of 0.55% of the average value of its
daily net assets.
The average value of the daily net assets of the Fund shall be
determined pursuant to the applicable provisions of the Declaration of Trust of
the Trust or a resolution of the Board, if required. If, pursuant to such
provisions, the determination of net asset value of the Fund is suspended for
any particular business day, then for the purposes of this paragraph, the value
of the net assets of the Fund as last determined shall be deemed to be the value
of the net assets as of the close of the business day, or as of such other time
as the value of the Fund's net assets may lawfully be determined, on that day.
If the determination of the net asset value of the Fund has been suspended for a
period including such month, your compensation payable at the end of such month
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
-------------------------------------
In connection with purchases or sales of portfolio securities
for the account of the Fund, it is understood that you will arrange for the
placing of all orders for the purchase and sale of portfolio securities for the
account with brokers or dealers selected by you, subject to review of this
selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Fund the best qualitative execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer.
- 2 -
<PAGE>
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received. In seeking best
qualitative execution, you are authorized to select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which you exercise investment discretion. You are authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a Fund portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker or dealer. The determination may be
viewed in terms of either a particular transaction or your overall
responsibilities with respect to the Fund and to accounts over which you
exercise investment discretion. The Fund and you understand and acknowledge
that, although the information may be useful to the Fund and you, it is not
possible to place a dollar value on such information. The Board shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits to the Fund.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best qualitative
execution as described above, you may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute Fund
portfolio transactions.
Subject to the provisions of the Investment Company Act of
1940, as amended, and other applicable law, you, any of your affiliates or any
affiliates of your affiliates may retain compensation in connection with
effecting the Fund's portfolio transactions, including transactions effected
through others. If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act solely as
investment counsel for such client and not in any way on behalf of the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and other services to others, including other registered investment companies.
5. LIMITATION OF LIABILITY OF ADVISER
----------------------------------
You may rely on information reasonably believed by you to be
accurate and reliable. Except as may otherwise be required by the Investment
Company Act of 1940 or the rules thereunder, neither you nor your officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under, or
payments made pursuant to, this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of your duties
under this Agreement, or by reason of reckless disregard by any of such persons
of your obligations and duties under this Agreement.
Any person, even though also a director, officer, employee or
agent of you, who may be or become an officer, director, trustee, employee or
agent of the Trust, shall be deemed, when rendering services to the Trust or
acting on any business of the Trust (other than services or business in
connection with your duties hereunder), to be rendering such services to or
acting solely for the Trust and not as a director, officer, employee or agent of
you, or one under your control or direction, even though paid by you.
- 3 -
<PAGE>
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall take effect on the date of its execution
by you, and shall remain in force for a period of two (2) years from the date of
its execution, and from year to year thereafter, subject to annual approval by
(i) the Board or (ii) a vote of a majority (as defined in the Investment Company
Act of 1940) of the outstanding voting securities of the Fund, provided that in
either event continuance is also approved by a majority of the trustees who are
not "interested persons," as defined in the Investment Company Act of 1940, of
you or the Trust, by a vote cast in person at a meeting called for the purpose
of voting such approval.
If the shareholders of the Fund fail to approve the Agreement
in the manner set forth above, upon request of the Board, you will continue to
serve or act in such capacity for the Fund for the period of time pending
required approval of the Agreement, of a new agreement with you or a different
adviser or other definitive action; provided that the compensation to be paid by
the Fund to you for your services to and payments on behalf of the Fund will be
equal to the lesser of your actual costs incurred in furnishing such services
and payments or the amount you would have received under this Agreement for
furnishing such services and payments.
This Agreement may, on sixty days written notice, be
terminated with respect to the Fund, at any time without the payment of any
penalty, by the Board, by a vote of a majority of the outstanding voting
securities of the Fund, or by you. This Agreement shall automatically terminate
in the event of its assignment.
7. USE OF NAME
-----------
The Trust and you acknowledge that all rights to the names
"James Rainbow," "James Advantage," or any variation thereof, belongs to you,
and that the Trust is being granted a limited license to use such words in its
Fund name or in any class name. In the event you cease to be the adviser to the
Fund, the Trust's right to the use of the names "James Rainbow," "James
Advantage," or any variation thereof, shall automatically cease on the ninetieth
day following the termination of this Agreement. The right to the name may also
be withdrawn by you during the term of this Agreement upon ninety (90) days'
written notice by you to the Trust. Nothing contained herein shall impair or
diminish in any respect, your right to use the names "James Rainbow," "James
Advantage," or any variation thereof, in the name of, or in connection with, any
other business enterprises with which you are or may become associated. There is
no charge to the Trust for the right to use these names.
8. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this Agreement shall be
effective until approved by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person at a meeting
called for the purpose of voting on such approval, and (if required under
current interpretations of the Act by the Securities and Exchange Commission) by
vote of the holders of a majority of the outstanding voting securities of the
series to which the amendment relates.
- 4 -
<PAGE>
9. LIMITATION OF LIABILITY TO TRUST PROPERTY
-----------------------------------------
The term "The James Advantage Funds" means and refers to the
Trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto be, amended. It
is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but bind only the trust property of the
Trust, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the trustees and shareholders
of the Trust and signed by officers of the Trust, acting as such, and neither
such authorization by such trustees and shareholders nor such execution and
delivery by such officers shall 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 trust property of the Trust as provided in its Declaration of
Trust. A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of the State of Ohio.
10. SEVERABILITY
------------
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
11. QUESTIONS OF INTERPRETATION
---------------------------
(a) This Agreement shall be governed by the laws of the State
of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Investment Company Act of 1940, as amended (the "Act") shall be
resolved by reference to such term or provision of the Act and to interpretation
thereof, if any, by the United States courts or in the absence of any
controlling decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission issued pursuant to said Act. In addition,
where the effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
12. NOTICES
-------
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust is
1349 Fairground Road, Beavercreek, Ohio 45385, and your address for this purpose
shall be P.O. Box 8, Alpha, Ohio 45301.
13. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
- 5 -
<PAGE>
14. BINDING EFFECT
--------------
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
15. CAPTIONS
--------
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter and return
such counterpart to the Trust, whereupon this letter shall become a binding
contract upon the date thereof.
Yours very truly,
The James Advantage Funds
By____________________________
Barry Ray James, President
Dated: _________________, 1997
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
James Investment Research, Inc.
By ________________________________
Francis E. James, Jr., President
Dated: _______________, 1997
- 6 -
BROWN, CUMMINS & BROWN CO., L.P.A.
ATTORNEYS AND COUNSELORS AT LAW
3500 CAREW TOWER
J. W. BROWN (1911-1995) 441 VINE STREET
JAMES R. CUMMINS CINCINNATI, OHIO 45202
ROBERT S BROWN TELEPHONE (513) 381-2121 OF COUNSEL
DONALD S. MENDELSOHN TELECOPIER (513) 381-2125 GILBERT BETTMAN
LYNNE SKILKEN
AMY G. APPLEGATE
KATHRYN KNUE PRZYWARA
MELANIE S. CORWIN
JOANN M. STRASSER
October 6, 1997
The James Advantage Funds
1349 Fairgrounds Road
Beavercreek, Ohio 45385
Gentlemen:
This letter is in response to your request for our opinion in
connection with the filing of the Registration Statement of The James Advantage
Funds.
We have examined a copy of the Trust's Agreement and Declaration of
Trust, the Trust's By-Laws, the Trust's record of the various actions by the
Trustees thereof, and all such agreements, certificates of public officials,
certificates of officers and representatives of the Trust and others, and such
other documents, papers, statutes and authorities as we deem necessary to form
the basis of the opinion hereinafter expressed. We have assumed the genuineness
of the signatures and the conformity to original documents of the copies of such
documents supplied to us as original or photostat copies.
Based upon the foregoing, we are of the opinion that, after
registration is effective for purposes of federal and applicable state
securities laws, the shares of each series of the Trust, if issued in accordance
with the then current Prospectus and Statement of Additional Information of the
Trust, will be legally issued, fully paid and non-assessable.
We herewith give you our permission to file this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
BROWN, CUMMINS & BROWN CO., L.P.A.
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS:
WHEREAS, The James Advantage Funds, a business trust organized under
the laws of the State of Ohio (hereinafter referred to as the "Trust"), proposes
to file with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, as amended, its
Registration Statement, and periodically file amendments to its Registration
Statement;
NOW, THEREFORE, the Trust hereby constitutes and appoints JAMES R.
CUMMINS and DONALD S. MENDELSOHN, and each of them, its attorneys for it and in
its name, place and stead, to execute and file such Registration Statement and
any Amendment or Amendments to the Trust's Registration Statement, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully to all intents and purposes as it might or could do
if personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the Trust has caused its name to be subscribed
hereto by the President this 2 day of October, 1997.
ATTEST: The James Advantage Funds
/s/Thomas L. Mangan, Secretary /s/ BARRY RAY JAMES, President
Thomas L. Mangan, Secretary BARRY RAY JAMES, President
STATE OF OHIO )
) ss:
COUNTY OF GREENE )
Before me, a Notary Public, in and for said county and state,
personally appeared BARRY RAY JAMES, President and Thomas L. Mangan, Secretary,
who represented that they are duly authorized in the premises, and who are known
to me to be the persons described in and who executed the foregoing instrument,
and they duly acknowledged to me that they executed and delivered the same for
the purposes therein expressed.
WITNESS my hand and official seal this 2 day of October 1997.
/s/ Suellen Warren
------------------------------------
Notary Public
<PAGE>
CERTIFICATE
-----------
The undersigned, Secretary of The James Advantage Funds, hereby
certifies that the following resolution was duly adopted by a majority of the
Board of Trustees by Action by Unanimous Consent of Trustees dated October 2,
1997, and is in full force and effect:
"WHEREAS, The James Advantage Funds, a business trust
organized under the laws of the State of Ohio (hereinafter
referred to as the "Trust"), proposes to file with the
Securities and Exchange Commission under the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940,
as amended, its Registration Statement, and periodically file
amendments to its Registration Statement;
NOW, THEREFORE, the Trust hereby constitutes and appoints
JAMES R. CUMMINS and DONALD S. MENDELSOHN, and each of them,
its attorneys for it and in its name, place and stead, to
execute and file such Registration Statement and any Amendment
or Amendments to the Trust's Registration Statement, hereby
giving and granting to said attorneys full power and authority
to do and perform all and every act and thing whatsoever
requisite and necessary to be done in and about the premises
as fully to all intents and purposes as it might or could do
if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully
do or cause to be done by virtue hereof."
Dated: October 2, 1997 /s/ Thomas L. Mangan
Thomas L. Mangan, Secretary
The James Advantage Funds
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, The James Balanced Funds, a business trust organized under the
laws of the State of Ohio (hereinafter referred to as the "Trust"), proposes to
file with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, as amended, its
Registration Statement, and periodically file amendments to its Registration
Statement; and
WHEREAS, the undersigned is a Trustee and the President of the Trust;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JAMES
R. CUMMINS and DONALD S. MENDELSOHN, and each of them, his attorneys for him and
in his name, place and stead, and in his office and capacity in the Trust, to
execute and file such Registration Statement and any Amendment or Amendments to
the Trust's Registration Statement, hereby giving and granting to said attorneys
full power and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as fully
to all intents and purposes as he might or could do if personally present at the
doing thereof, hereby ratifying and confirming all that said attorneys may or
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 2
day of October, 1997.
/s/ Barry Ray James
-----------------------------------------
BARRY RAY JAMES, Trustee and President
STATE OF OHIO )
) ss:
COUNTY OF GREENE )
Before me, a Notary Public, in and for said county and state,
personally appeared BARRY RAY JAMES, known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that he
executed and delivered the same for the purposes therein expressed.
WITNESS my hand and official seal this 2 day of October, 1997.
/s/ Suellen Warren
------------------------------------------
Notary Public
