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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FLAGSHIP ADMIRAL FUNDS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(3) Per unit price or other underlying value of transaction computed pursuant to
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
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Notes:
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THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
May 29, 1998
DEAR SHAREHOLDER:
We are pleased to invite you to attend a special meeting of shareholders of The
Golden Rainbow A James Advised Mutual Fund (the "Fund"), a series of Flagship
Admiral Funds Inc., to be held in the offices of John Nuveen & Co. Incorporated,
One Dayton Centre, Suite 600, One South Main Street, Dayton, Ohio, on June 11,
1998 at 11:00 a.m. (Eastern Time).
At this meeting, you will be asked to approve a proposal that would permit your
Fund's portfolio manager, James Investment Research, Inc. ("James"), to assume
full management responsibility for Fund operations. The proposal would achieve
this by transferring all of the assets of your Fund through a tax-free
reorganization into a series of the newly-organized James Advantage Funds,
called The Golden Rainbow Fund (the "New Fund"), that is sponsored and managed
solely by James.
The New Fund will be substantially identical to your Fund in its philosophy,
investment objectives and policies and day-to-day portfolio management. In
addition, upon approval and completion of the reorganization, the number of
shares you own will not change and the New Fund's net asset value per share will
be the same as your Fund's net asset value per share on that date.
The Board of Directors of your Fund has unanimously agreed that this proposal is
in the best interest of shareholders and urges you to vote in favor of the
proposal. The reorganization of the Fund is anticipated to provide the Fund's
shareholders:
- - Assumption by James of full Fund management responsibility
- - Retention of the Fund's core portfolio strategies
- - Preservation of the Fund's local orientation
- - Initial reduction in annual Fund operating expenses
- - No tax implications
At the meeting, you will also be asked to ratify the selection of the New Fund's
board of trustees and to ratify certain investment restrictions of the New Fund
to provide James with greater flexibility to respond to market changes in its
management of the New Fund.
The enclosed proxy statement describes the proposals in greater detail.
Whether or not you plan to join us at the meeting, please complete, date and
sign your proxy card and return it in the enclosed envelope so that your vote
will be counted. No postage is required if mailed in the United States.
We appreciate your continued support and confidence.
Very truly yours,
/s/Tim Schwertfeger /s/F.E. James
<TABLE>
<S> <C>
Timothy R, Schwertfeger Frank E. James Ph.D.
Chairman of the Board Chairman of the Board
Flagship Admiral Funds Inc. James Investment Research, Inc.
</TABLE>
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FLAGSHIP ADMIRAL FUNDS INC.
THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JUNE 11, 1998
A Special Meeting of Shareholders of The Golden Rainbow A James Advised Mutual
Fund (the "Fund"), which is a series of the Flagship Admiral Funds Inc. (the
"Admiral Funds"), a Maryland corporation, will be held in the offices of John
Nuveen & Co. Incorporated, One Dayton Centre, Suite 600, One South Main Street,
Dayton, Ohio on June 11, 1998 at 11:00 a.m., (Eastern Time) for the following
purposes:
1. To approve an Agreement and Plan of Reorganization and Liquidation by and
between The James Advantage Funds, an Ohio Business Trust (the "James
Trust"), on behalf of its series to be named "The Golden Rainbow Fund" (the
"New Fund"), and the Admiral Funds, on behalf of the Fund, that provides
for the tax-free reorganization of the Fund that will be effected by (i)
transferring all of the Fund's assets to the New Fund, in exchange for the
New Fund assuming all of the Fund's liabilities and duties and issuing to
the Fund the number of shares of the New Fund equal to the number and value
of shares of the Fund; (ii) the Fund distributing to each of its
shareholders the number of New Fund shares (including fractional shares)
equal in number and value to the shares held by each Fund shareholder; and
(iii) the cancellation of the outstanding shares of the Fund and the
subsequent termination of the Fund.
2. To ratify certain of the New Fund's investment restrictions.
3. To ratify the selection of four trustees to the Board of Trustees of the
James Trust.
4. To transact such other business as may properly come before the Meeting.
Shareholders of record at the close of business on April 20, 1998 are entitled
to notice of and to vote at the meeting.
Gifford R. Zimmerman
Secretary
May 29, 1998
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FLAGSHIP ADMIRAL FUNDS INC.
THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1998
INTRODUCTION
This proxy statement is solicited by the Board of Directors (the "Board") of the
Flagship Admiral Funds Inc. (the "Admiral Funds") for voting at the special
meeting of shareholders of The Golden Rainbow A James Advised Mutual Fund (the
"Fund") to be held at 11:00 a.m. (Eastern Time) on June 11, 1998, in the offices
of John Nuveen & Co. Incorporated, One Dayton Centre, Suite 600, One South Main
Street, Dayton, Ohio and at any and all adjournments thereof (the "Meeting"),
for the purposes set forth in the accompanying Notice of Special Meeting of
Shareholders. This proxy statement was first mailed to shareholders on or about
May 29, 1998.
Each share of the Fund is entitled to one vote on each matter submitted to a
vote of the shareholders at the Meeting; no shares have cumulative voting
rights.
Each valid proxy will be voted in accordance with your instructions and as the
persons named in the proxy determine on such other business as may come before
the Meeting. If no instructions are given, the proxy will be voted FOR each
Proposal. Shareholders who execute proxies may revoke them at any time before
they are voted, either by writing to the Fund or by voting in person at the time
of the Meeting.
Proposal 1 (the reorganization of the Fund) requires the affirmative vote of
two-thirds of the outstanding shares of the Fund. Proposal 2 (ratification of
certain of the New Fund's investment restrictions) requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund. The term
"majority of the outstanding voting securities" as defined in the Investment
Company Act of 1940 (the "1940 Act") means: the affirmative vote of the lesser
of (1) 67% of the voting securities of the Fund present at the Meeting if more
than 50% of the outstanding shares of the Fund are present in person or by proxy
or (2) more than 50% of the outstanding shares of the Fund. Proposal 3
(ratification of the selection of trustees) requires a majority of the votes
cast. Because Proposals 2 and 3 are dependent upon shareholder approval of
Proposal 1, shareholder approval of Proposals 2 and 3 without shareholder
approval of Proposal 1 will have no effect.
The By-Laws of the Admiral Funds provide that the presence at a shareholder
meeting in person or by proxy of at least a majority of the shares of the Fund
entitled to vote constitutes a quorum. Thus, the Meeting for the Fund could not
take place on its scheduled date if less than a majority of the shares of the
Fund were represented. If, by the time scheduled for the Meeting, a quorum of
shareholders of the Fund is not present or if a quorum is present but sufficient
votes in favor of each Proposal are not received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further soliciting
of proxies from shareholders of the Fund. Any such adjournment will require the
affirmative vote of a majority of the shares of the Fund present (in person or
by proxy) at the session of the Meeting to be adjourned. The persons named as
proxies will vote in favor of any such adjournment if they determine that such
adjournment and additional solicitation are reasonable and in the interest of
the Fund shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. Broker non-votes and abstentions will be counted for
quorum purposes for all three proposals. On Proposals 1 and 2, abstentions and
broker non-votes will have the effect of being counted as voted against these
Proposals. On Proposal 3, abstentions and broker non-votes will have no effect.
There were 7,220,154 shares of common stock of the Fund outstanding on April 20,
1998 (the "Record Date"), all of which were Class A Shares. Shareholders of
record on the Record Date are entitled to vote on all business of the Meeting or
any adjournments thereof. Each share is entitled to one vote. As of the Record
Date, to the knowledge of the Fund, Citizens Federal, F.S.B. One Citizens
Federal Centre, Dayton, Ohio 45402, ("Citizens Federal") held of record, as
trustee, investment agent or custodian, 6,693,857 shares of the Fund or 92.7% of
the outstanding shares of the Fund and, as a result, may be deemed to control
the Fund. It is anticipated that the shares controlled by Citizens Federal will
be voted in favor of each
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Proposal unless the beneficial owners of such shares affirmatively instruct
Citizens Federal otherwise. As of April 20, 1998, Dr. Frank E. James, President
of James Investment Research, Inc. ("James") beneficially owned 6.43% of the
outstanding shares of the Fund, which includes shares owned by various entities,
including corporate and pension plan accounts which Dr. James may control.
PROPOSAL I. THE REORGANIZATION OF THE FUND
Shareholders are being asked to consider approval of an Agreement and Plan of
Reorganization and Liquidation (the "Plan") between the Fund and a series of The
James Advantage Funds that will adopt the name "The Golden Rainbow Fund" (the
"New Fund"). Significant provisions of the Plan are summarized below; however,
this summary is qualified in its entirety by reference to the Plan, which is
attached as Appendix A to this proxy statement.
The James Advantage Funds (the "James Trust") was established pursuant to an
Agreement and Declaration of Trust, dated August 29, 1997 under the laws of the
State of Ohio. As of the date of this proxy statement, the James Trust has filed
a registration statement under the Securities Act of 1933 with the U.S.
Securities and Exchange Commission. It is anticipated that, at the time of the
consummation of the Plan, the New Fund will be the only series of the James
Trust. It is further anticipated that the New Fund will commence operations
shortly after the approval of the Plan by the Fund's shareholders and the James
Trust Board of Trustees, and simultaneously with the reorganization of the Fund
into the New Fund (the "Reorganization").
James is the investment adviser to the Fund (the "Investment Adviser") pursuant
to an Investment Advisory Agreement among Flagship Financial, Inc., James and
the Fund, dated May 30, 1991, (the "Investment Advisory Agreement"), as
subsequently continued and assigned pursuant to an assignment and assumption
agreement dated January 1, 1997 between Flagship Financial, Inc. ("Flagship")
and Nuveen Advisory Corp. ("Nuveen Advisory"). As Investment Adviser, James has
had the primary responsibility for the day-to-day portfolio management of the
Fund, with complete investment discretion for making investment decisions for
the Fund's portfolio, subject to the supervision of the Board and the authority
of Nuveen Advisory to assure compliance with applicable law and the Fund's
investment objectives and policies. Nuveen Advisory is the manager of the Fund
pursuant to a Management Agreement between Nuveen Advisory and the Fund, dated
January 1, 1997 (the "Management Agreement"). Under the Management Agreement,
Nuveen Advisory has the responsibility to supervise the purchase and sale of
securities, and provide supervisory and corporate administrative services to the
Fund.
James will be the investment adviser to the New Fund and will be responsible for
the day-to-day management of the business and affairs of the New Fund, as well
as the management of the New Fund's portfolio.
REASONS FOR THE REORGANIZATION
The Fund is a balanced fund that grew out of a bank common trust fund at
Citizens Federal whose assets were managed by James, which Citizens Federal
decided to convert into a mutual fund in 1991. At that time, Citizens Federal
and James arranged with Flagship to create the Fund as a series of the Admiral
Funds, and to have Flagship and its affiliates serve as adviser and distributor
for the Fund. John Nuveen & Co. Incorporated ("Nuveen") and its affiliates
assumed responsibility for serving as the Fund's adviser, sponsor and principal
underwriter effective January 1, 1997 upon the acquisition by The John Nuveen
Company, Nuveen's parent company, of Flagship Resources Inc., the parent company
of Flagship.
The Fund is distributed primarily in the southwest Ohio region through Citizens
Federal's trust department and its broker-dealer affiliates, and its philosophy,
investment objectives and policies and portfolio strategies are tailored to the
highly-localized nature of the Fund's shareholders and manner of distribution.
Because of this, James has expressed a strong desire not only to continue to act
as Investment Adviser to the Fund or its successor, but to serve as its sponsor
and manage its overall affairs. James has also expressed the willingness to
commit the necessary resources to continue the high level of management services
currently provided to the Fund. Both Nuveen and James believe that the Fund's
shareholders have a strong affinity for James as a local investment adviser and
the Fund's portfolio manager since inception of the Fund. Nuveen Advisory has
determined that because of the Fund's highly localized nature and duplication
between the Fund and an existing Nuveen balanced mutual fund, continuing to
provide management services to the Fund is inconsistent with Nuveen's long-term
business plan.
Nuveen and James have been exploring the feasibility of various alternatives
that would best serve the interests of the Fund's shareholders, as well as
permit each firm to achieve its respective business objectives. Nuveen and James
have
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concluded that the proposed reorganization of the Fund into the New Fund
represents the most efficient and cost-effective way to permit James to assume
sole responsibility for providing fund management services to shareholders of
the Fund. In almost every respect, the New Fund will be identical to the Fund.
The New Fund will have the identical investment objective as the Fund and,
except for the few exceptions discussed below, will receive the same type of
portfolio management services to which shareholders have grown accustomed.
To facilitate the Reorganization, which will effectively transfer management
responsibility from Nuveen Advisory to James, Nuveen Advisory and James entered
into a Transfer Agreement, dated April 30, 1998, whereby James agreed to pay
Nuveen Advisory $500,000. James will pay Nuveen Advisory in three payments, two
of which are due after consummation of the Plan and will be secured by
sufficient collateral. Certain of the directors and officers of the Fund are
employees or officers of Nuveen Advisory or Nuveen and may indirectly benefit
from this transaction.
THE REORGANIZATION
The Reorganization contemplates that the Fund will transfer and deliver all of
its assets to the New Fund, free and clear of all liens and, in exchange, the
New Fund will agree to assume all of the debts, obligations, duties and
liabilities, if any, of the Fund and to issue and deliver to the Fund the number
of shares of the New Fund ("New Fund Shares") equal to the aggregate number and
value of shares (including fractional shares) of the Fund of the class
designated Class A then outstanding ("Fund Shares"). Thereafter, the Fund will
liquidate, and distribute to its shareholders, New Fund Shares received by the
Fund equal in number and value to the number of Fund Shares then owned by a
shareholder, in exchange for and in cancellation of the shareholder's Fund
Shares.
The liquidation and distribution will be accomplished by opening accounts on the
books of the New Fund in the names of the shareholders of the Fund and
transferring to each account the number of New Fund Shares equal to the number
and value of Fund Shares owned of record by the shareholder at the time of
distribution. Shareholders holding certificates representing shares of the Fund
will receive shares of the New Fund following the transactions contemplated by
the Plan, but will not receive new certificates.
If approved by shareholders of the Fund, it is expected that the Plan will
become effective and the reorganization of the Fund into the New Fund will be
completed at 4:00 p.m., Chicago time, on June 26, 1998, but it may be made
effective at a different time, as agreed to by the Fund and the New Fund.
SIMILARITIES BETWEEN THE FUND AND THE NEW FUND
The discussion below is a summary of the similarities between the funds. A
discussion of the primary differences between the funds can be found in Proposal
2 below.
Investment Objectives and Strategies. The Fund and the New Fund have
substantially identical investment objectives. Each seeks to provide total
return through a combination of growth and income, and preservation of capital
in declining markets. The Reorganization will cause the entire portfolio of
securities held by the Fund to be transferred to the New Fund. James has stated
that it will not undertake any change to the portfolio, except in the ordinary
course of its responsibilities as investment adviser to the New Fund.
James has indicated that the investment strategy that it will execute on behalf
of the New Fund will be substantially identical to the one that it currently
provides to the Fund. For example, the Fund invests, and the New Fund will
invest, primarily in equity and/or debt securities that James believes are
undervalued. Each fund seeks to provide total return in excess of the rate of
inflation over a three to five year time period. When selecting equity
securities, James focuses on value, neglect or a limited following by Wall
Street analysts, as well as management commitment and will assess various
fundamental factors of each equity security. Under normal circumstances, James
invests the assets of the Fund and will invest the assets of the New Fund in
both debt and equity securities, and may hold up to 90% of the New Fund's assets
in either debt or equity securities. The fixed income portion of the New Fund
will consist primarily of U.S. government securities or high grade corporate
bonds, the same securities that comprise the fixed income portion of the Fund.
When James believes that interest rates will fall, it may extend maturities in
anticipation of capital appreciation in the bonds held by the Fund and
anticipates doing the same for the New Fund. If James believes that interest
rates will rise, it expects to seek capital preservation through the purchase of
shorter term bonds. Both funds are limited in holdings of debt securities to
issues rated at the time of purchase, "A" or better by either Moody's Investor
Services, Inc. or Standard & Poor's Rating
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Group. Both funds may invest in foreign securities, either directly in foreign
issuers, or indirectly in mutual funds investing in foreign securities and in
dollar denominated obligations. Each fund may also invest in money market
instruments, repurchase agreements and "when issued" securities. Finally, for
hedging purposes, each fund may invest in a variety of options and futures
contracts and invest in other derivative instruments.
Shares. Shareholders' shares of either fund represent an equal proportionate
interest in the assets owned by, and the liabilities of that fund. As such, a
shareholder's share of either fund is entitled to dividends and distributions
when and as declared on shares by their respective boards and to equal rights
per share in the event of liquidation.
Classes of Shares. Each of the funds is authorized to offer four classes of
shares: Class A, Class B, Class C and Class R. Currently, the Fund offers Class
A shares only and it is anticipated that the New Fund will initially only offer
Class A shares. The public offering price of each of the funds' Class A shares
is equal to net asset value plus an initial sales charge that is a variable
percentage of the offering price depending on the amount of the sale. Each fund
currently imposes a minimum sales charge of 4.20% on purchases. (No sales
charges will be assessed in connection with the Reorganization.) For further
information on the fees and expenses of each fund, please refer to the section
below entitled Comparative Fees and Expenses.
The Fund currently is, and the New Fund will be, offered to individuals or
entities that are customers of a securities dealer affiliated with Citizens
Federal or trust customers of Citizen Federal. In January 1998, Citizens Federal
entered into an agreement with Fifth Third Bancorp ("Fifth Third") in which
Citizens Federal agreed to merge with Fifth Third in the second quarter of 1998.
If that transaction is consummated, the New Fund may permit shares to be
purchased directly from the New Fund and may permit the conversion of Citizen
Federal accounts to individual accounts.
Shareholder Voting Rights. Neither fund is required to hold annual shareholder
meetings, unless so required by the 1940 Act. However, shareholder meetings for
either fund are required to be called for various purposes, such as electing or
removing directors/trustees (although directors/trustees may be elected to fill
vacancies by the Board of Directors/Trustees without a vote of shareholders,
subject to certain restrictions in the 1940 Act), changing fundamental
investment policies, approving or disapproving an investment advisory contract
and ratifying or rejecting the selection of different auditors. On any matter
submitted to a vote of shareholders, shares are voted in the aggregate and not
by series, except when voting is required by the 1940 Act or other applicable
law.
Each fund provides that a meeting of shareholders shall be called upon the
written request of shareholders representing 25% of the outstanding shares of
the Admiral Funds/James Trust. The organizational documents of each fund provide
that the presence at a shareholder meeting in person or by proxy of the holders
of at least a majority of the shares entitled to be voted at the meeting
constitutes a quorum. Each fund also requires that a plurality of the votes cast
to elect directors/trustees.
Liability of Shareholders. Under the state laws applicable to both funds,
shareholders have no personal liability for their acts or obligations.
Liability of Directors and Trustees. The Board of Directors/Trustees of each
fund will be indemnified against liabilities and expenses incurred in connection
with the defense or disposition of any proceeding in which they are involved by
reason of their position, except that they are not indemnified against
liabilities or expenses arising from their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office. Each fund permits the advancement of money for these expenses.
Involuntary Redemption. The organizational documents of each fund permit the
funds to redeem shares in an account (with certain caps), if at any time the
shares in the account do not have at least a minimal value as set by the Board
of Trustees/Directors. The Declaration of Trust of the James Trust also
authorizes the James Trust to redeem shares under certain other circumstances as
may be specified by its Board of Trustees.
BACKGROUND INFORMATION ON THE FUND AND THE NEW FUND
As an Ohio Business Trust, the James Trust's operations are governed by its
Declaration of Trust and bylaws and by Ohio law, rather than by the articles of
incorporation and bylaws of the Fund and Maryland law. Shareholders of the Fund
entitled to vote at the Meeting may obtain copies of the James Trust Declaration
of Trust and bylaws, and the Fund's charter and bylaws, without charge, upon
written request to the Secretary of either fund.
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MANAGEMENT AGREEMENTS AND OPERATIONS OF THE FUND
Pursuant to the Management Agreement and subject to the general supervision of
the Board, Nuveen Advisory manages the Fund, including providing general
supervision of the purchase and sale of securities, and provides other
supervisory and corporate administrative services to the Fund. In addition,
Nuveen Advisory has the responsibility for: (i) assisting in supervising all
aspects of the Fund's operations; (ii) providing the Fund with the services of
persons to perform administrative and clerical functions and (iii) providing the
Fund with adequate office space and related services.
As compensation for the services rendered by Nuveen Advisory, the Fund pays
Nuveen Advisory a fee, computed daily and payable monthly, at an annual rate of
0.74% of the Fund's average daily net assets. Of this amount, Nuveen Advisory
pays James 0.55% of the Fund's average daily net assets for its services as
investment sub-adviser to the Fund. For the fiscal year ended June 30, 1997, the
total expenses of the Fund and the fee paid to Nuveen Advisory, expressed as a
percentage of average net assets on an annualized basis, were 1.09% and 0.74%,
respectively. For more information on the fees and expenses of the Fund and the
comparative expenses of the New Fund, see the section below entitled Comparative
Fees and Expenses.
Pursuant to the Investment Advisory Agreement, James has complete investment
discretion for making investments on behalf of the Fund, subject to the general
supervision of the Board and the authority of Nuveen Advisory to assure
compliance by James with applicable law and the Fund's investment objectives and
policies. Investment decisions are made by a team of James' portfolio managers.
The Investment Advisory Agreement may be terminated on 60 days notice without
penalty by the Fund, Nuveen Advisory or James, provided that the Fund or Nuveen
Advisory may only terminate the Investment Advisory Agreement with the
concurrence of a majority of the Board, including a majority of the independent
directors of the Board.
The Fund has entered into a Distribution Agreement (the "Distribution
Agreement") with Nuveen, pursuant to which Nuveen serves as the exclusive
selling agent and distributor of the Fund's shares, and in that capacity makes a
continuous offering of the Fund's shares and is responsible for all sales and
promotion efforts.
The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plan") which permits the Fund to pay for certain distribution and
promotion expenses related to marketing its shares. The 12b-1 Plan authorizes
the Fund to expend its moneys in an amount equal to the aggregate for all such
expenditures to such percentage of the Fund's daily net asset value as may be
determined from time to time by a majority of the Fund's disinterested
directors. Nuveen has voluntarily waived any portion of its normally retained
12b-1 fee with regard to a service agreement it has entered into with Citizens
Federal and limited its payments to $500 per month plus reimbursement of
expenses and 12b-1 fees with regard to selling agreements with broker-dealers
affiliated with Citizens Federal until notice to and approval by the Fund's
Board is obtained for increased payments.
The maximum amount payable by the Fund under the 12b-1 Plan and related
agreements on an annual basis is 0.40% 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 Nuveen or the Fund, the maximum amount payable to any
recipient is 0.20% of the proportion of daily net assets represented by such
person's customers. For the fiscal year ended June 30, 1997, the Fund paid
$423,778 under the 12b-1 Plan and related agreements (Nuveen permanently waived
$252,756 for the same period).
MANAGEMENT AGREEMENTS AND OPERATIONS OF THE NEW FUND
The New Fund has not commenced operations, but prior to the consummation of the
Plan, James will purchase one share of the New Fund. As the sole shareholder,
James will approve certain plans and agreements with third-party service
providers necessary for the operation of the New Fund. Approval of shareholders
of the Fund will not be sought. These plans and agreements are summarized below.
The New Fund has retained James to manage the New Fund's investments. As with
the current management of the Fund, the investment decisions for the New Fund
will be made by the same committee of James portfolio managers. The New Fund is
authorized to pay James a management fee equal to an annual rate of 0.74% of its
average daily net assets, but James has agreed to waive a portion of its fee,
through June 30, 1999, to reduce the management fee to 0.65% of its average
daily net assets. James has also agreed to reimburse expenses during that period
to reduce other expenses to the New Fund to 0.10%. It is the intention of James
to waive fees and/or reimburse expenses to maintain total annual expenses
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at or below 1.00% of its average daily net assets through June 30, 1999. For one
year thereafter, James has agreed to waive fees and/or reimburse expenses to
maintain total annual expenses at or below 1.09% of the New Fund's daily net
assets.
The New Fund has retained Countrywide Fund Services, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 ("Countrywide") to serve as administrator for the New
Fund. Countrywide will receive a fee equal to an annual rate of 0.06% of the New
Fund's daily net assets. Countrywide will also serve as Transfer Agent, dividend
paying agent and shareholder service agent and CW Fund Distributors, Inc. will
act as the principal distributor of the Fund's shares.
The New Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act for
its Class A shares (the "New Fund 12b-1 Plan") which is essentially identical to
the Fund's 12b-1 Plan, except that the level of expenditure by the New Fund is
subject to change by the Board of Trustees of the James Trust. Expenditures
pursuant to the New Fund 12b-1 Plan and related agreements will reduce current
return after expenses.
The firm of Deloitte & Touche, LLP, 1700 Courthouse Plaza N.E., Dayton, Ohio
45202 has been selected as independent public accountants for the New Fund. Star
Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, has been selected as
custodian for the New Fund.
DESCRIPTION OF THE JAMES TRUST
The Declaration of Trust of the James Trust specifically authorizes a majority
of the Board of Trustees to terminate the James Trust subject to a favorable
vote of the majority of the outstanding voting securities of each series. A
majority of the trustees of the James Trust may terminate any series of the
James Trust if there are no outstanding shares of that series. The shares of
beneficial interest of each authorized series of the James Trust are
transferable shares without par value. The Declaration of Trust permits the
trustees to issue an unlimited number of shares and to establish an unlimited
number of series, all without shareholder approval. Currently, the New Fund is
the only authorized series of the James Trust. The Declaration of Trust of the
James Trust can be amended by the James Trust's Board of Trustees, except under
circumstances when the amendment could adversely affect the rights of
shareholders. Under those circumstances, the amendment must be approved by a
vote of the shareholder's affected.
COMPARATIVE FEES AND EXPENSES
The table below compares the fees and expenses incurred by a Class A shareholder
of the Fund with those expected to be incurred by an investor in the New Fund
after the Reorganization. The amounts shown for the Fund are based on its
expenses during its fiscal year ended June 30, 1997. The expenses shown for the
New Fund are estimates and give effect to James' undertaking to limit the New
Fund's expenses.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR CLASS A SHARES FUND NEW FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
Annual Expenses
(as a percentage of net assets)
Management Fees 0.74% 0.65%(1)
12b-1 Fees 0.25% 0.25%(2)
Other Expenses 0.10% 0.10%(3)
---- --------
Total Annual Expenses 1.09% 1.00%(4)
---- --------
</TABLE>
(1) Through June 30, 1999, James has agreed to waive a portion of its fee to
reduce the management fee from 0.74% of the New Fund's daily net assets to 0.65%
(2) Because the New Fund will pay a 12b-1 fee, long-term investors in the New
Fund may pay more over long periods of time in distribution expenses than the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.
(3) Through June 30, 1999, James has agreed to reimburse Class A other expenses
to the extent total New Fund other expenses exceed 0.10% of average net assets.
(4) It is the intention of James to waive fees and/or reimburse expenses to
maintain total annual expenses at or below 1.00% of the New Fund's daily net
assets until June 30, 1999. For the period July 1, 1999 through June 30, 2000,
James has agreed to waive fees and/or reimburse expenses to maintain total
annual expenses at or below 1.09% of the New Fund's daily net assets.
6
<PAGE> 10
The following table illustrates the expenses on a $1,000 investment over various
time periods for the Fund and the New Fund, assuming (1) a 5% annual rate of
return, (2) redemption at the end of each time period, based on the fees and
expenses shown above and (3) a maximum front-end sales load of 4.20%:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund $ 53 $ 75 $ 100 $ 169
New Fund $ 52 $ 73 $ 95 $ 159
</TABLE>
Please note that the background information provided above for the Fund and the
New Fund is only a summary and is not a complete description of all of the
operations of either fund.
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the transactions contemplated by the Plan will be
tax-free for federal income tax purposes. Each of the funds will receive an
opinion of Bell, Boyd & Lloyd, special counsel to the Fund, that under the
Internal Revenue Code of 1986, the reorganization of the Fund into the New Fund
pursuant to the Plan will not give rise to the recognition of income,
deductions, gain or loss for federal income tax purposes to the Fund, the New
Fund or the shareholders of the Fund. A shareholder's adjusted basis for tax
purposes in shares of the New Fund after the Reorganization will be the same as
the shareholder's adjusted basis for tax purposes in the shares of the Fund
immediately before the Reorganization. The holding period of shares of the New
Fund received by the shareholders of the Fund will include the holding period of
shares of the Fund submitted in exchange therefor, provided that at the time of
the exchange the shares of the Fund were held as capital assets.
INFORMATION ON JAMES
James was established in 1972 and is owned by Frank James, Ph.D. James is in the
business of providing investment advice to institutional clients as well as
individual clients including corporations, colleges, banks, hospitals,
foundations, trusts, endowment funds and individuals. As of December 31, 1997,
James managed approximately $872 million in client assets, of which
approximately $146 million was Fund assets.
EXPENSES
The expenses related to the Plan will be borne by Nuveen Advisory and James. The
shareholders of the Fund will not bear any expenses in connection with the
consummation of the Plan or the solicitation of shareholders.
CONSIDERATION AND RECOMMENDATION OF THE DIRECTORS
The Board of Directors of the Fund met on March 26, 1998 and April 25, 1998 to
consider and approve the Plan. At these meetings, the Board, including all of
the directors who are not interested persons of the Fund or Nuveen Advisory (as
that term is defined in the 1940 Act) voted to approve the Plan. The Board
believes that the terms and conditions of the Plan are fair and in the best
interests of the Fund's shareholders. In reaching their decision, the Board
reviewed the Plan, the similarities between the Fund and the New Fund, the
reasons behind the Plan and the anticipated treatment of the Fund's shareholders
after they would become shareholders of the New Fund. The Board took into
account that James has been responsible for the day-to-day portfolio management
of the Fund and would continue to be so responsible for the portfolio management
of the New Fund, that the investment objectives and strategies of each fund are
substantially identical and that the projected expense ratio of the New Fund
(including its management and distribution fee) immediately after the
Reorganization will be lower than the Fund's historical expense ratio. Finally,
the Board also considered that the Plan would be a tax-free reorganization for
the Fund's shareholders and that shareholders would not bear any expenses in
connection with consummation of the Plan.
The Board also considered the applicability of Section 15(f) of the 1940 Act to
transactions contemplated by the Plan. As previously noted, James and Nuveen
Advisory have agreed that the Reorganization is the most effective manner to
transfer management responsibility of the Fund from Nuveen Advisory to James.
The Reorganization may have the result of assigning the Management Agreement and
the Investment Advisory Agreement that Nuveen Advisory has entered into. Section
15(f) permits an investment adviser to an investment company to receive
compensation from the transfer or sale of
7
<PAGE> 11
its business, or a portion of its business, that causes an assignment of an
investment advisory contract, provided certain conditions described below, are
satisfied.
First, after the Reorganization, an "unfair burden" must not be imposed on the
New Fund. The term "unfair burden" includes any arrangement during the two-year
period after the Reorganization, whereby Nuveen Advisory or James receives any
compensation, directly or indirectly from the New Fund or from any other person
in connection with the purchase or sale of securities or other property to, from
or on behalf of the New Fund, other than ordinary fees for bona fide advisory or
other services. James has agreed not to take any action that would impose an
unfair burden. Second, for three years after the Reorganization, at least 75% of
the Board of Trustees of the James Trust must not be "interested persons" of
James or Nuveen Advisory. The current composition of the Board of Trustees of
the James Trust would satisfy this requirement. James also agreed that it will
not take any action or cause the Board of Trustees of the James Trust to fail to
satisfy this requirement.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1
PROPOSAL II. RATIFICATION OF CERTAIN OF THE NEW FUND'S INVESTMENT RESTRICTIONS
Shareholders are being asked to ratify certain of the New Fund's investment
restrictions, which will govern the New Fund's operations after the
Reorganization is completed. The investment restrictions shareholders are being
asked to ratify are substantively changed from the restrictions currently
applicable to the Fund. The changed investment restrictions are designed to
provide James with greater flexibility in its management of the New Fund. These
changes can be divided into three categories: classification of certain
investment restrictions by the New Fund as nonfundamental, although the Fund's
corresponding restrictions are fundamental; omission or revision of certain
investment restrictions the Fund has; and adoption by the New Fund of a new
investment restriction.
Under the 1940 Act, a fund's investment restrictions are not required to be
classified as "fundamental". A fundamental investment restriction may be changed
only with shareholder approval. The New Fund will classify the following
investment restrictions as nonfundamental; the Fund currently classifies its
investment restrictions on these subjects as fundamental:
- - The New Fund will not mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any assets of the New Fund, except as may be
necessary to effect certain borrowings.
- - The New Fund will not purchase securities on margin.
- - The New Fund will not effect short sales of securities.
- - The New Fund will not invest more than 5% of its assets in securities that are
restricted as to resale or otherwise illiquid (*currently, the Fund limits
investments of illiquid securities to no more than 10% of its assets).
Approval of this proposal will permit the Board of Trustees of the James Trust
to change these investment restrictions without the approval of the New Fund's
shareholders. For example, the James Trust trustees could change the investment
policies of the New Fund to permit the purchase of securities on margin or to
permit short sales (subject to any applicable law or regulation). The Fund's
investment restrictions on these matters are "fundamental", which means that a
change in the restriction requires shareholder approval. The Fund's investment
restrictions are not otherwise materially different from the New Fund's
investment restrictions, except for the more stringent limit of 5% of its assets
imposed by the New Fund on its investments in illiquid securities. If at any
time in the future, the Board of Trustees of the James Trust approves a change
in the New Fund's nonfundamental investment restrictions, shareholders will be
given notice of such change prior to its implementation; however, if such a
change were to occur, shareholders would not be asked to approve such a change.
The second category of changes is that certain investment restrictions of the
Fund are not being adopted by the New Fund or have been revised. The investment
restrictions that have been omitted are as follows:
- - The Fund may not acquire securities of other investment companies (other than
in connection with the acquisition of such companies) other than as permitted
by law.
8
<PAGE> 12
- - The Fund may not purchase or retain the securities of any issuer any of whose
officers, directors, or security holders is a director or officer of the Fund
or of its investment adviser if or so long as the directors and officers of
the Fund and of its investment adviser together own beneficially more than 5%
of any class of securities of such issuer.
The first investment restriction discussed immediately above has not been
included as an investment restriction for the New Fund because any transaction
by the New Fund in these securities is specifically governed under the 1940 Act.
Accordingly, the New Fund has not adopted this as a fundamental restriction
because to do so would be superfluous. However, the limitations under which the
New Fund will operate are identical to those governing the operations of the
Fund. The second restriction noted above had been adopted by the Fund as
required by state securities laws, which no longer apply to the Fund or the New
Fund. That requirement was intended to prevent conflicts of interests in the
management of mutual funds. Rather than requiring the New Fund to limit its
investments if it adopted a similar investment restriction, the New Fund has
adopted a Code of Ethics that imposes limits on the personal investments of the
New Fund's officers, board members and other access persons.
The New Fund's investment restrictions on borrowing have been revised. Currently
the Fund's fundamental policy permits the Fund to borrow amounts up to one third
of its assets from banks for temporary liquidity purposes or to make additional
portfolio investments, plus up to 5% to settle securities trades. The New Fund's
fundamental policy permits the New Fund to borrow amounts up to one third of its
assets from banks, plus up to 5% from banks or other persons for temporary
purposes only. The New Fund currently intends to limit all borrowings to not
more than 5% of its total assets.
Finally, the New Fund has adopted one new investment restriction:
- - The New 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.
The New Fund's policy against concentrating investments in a single industry is
fundamental.
In considering the Reorganization, the Board considered the potential added
flexibility that the New Fund's investment restrictions could provide to James
to respond to market, industry or regulatory changes and that James intends to
manage the New Fund's portfolio in the same way that it has managed the Fund's
portfolio.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2
PROPOSAL III. RATIFICATION OF THE SELECTION OF THE BOARD OF TRUSTEES OF THE
JAMES TRUST
Four individuals have been appointed to serve as trustees of the James Trust.
These individuals do not serve on the Board of the Admiral Funds. These trustees
are experienced executives and professionals who will meet at regular intervals
to oversee the activities of the James Trust and the New Fund. Each trustee has
consented to serve on James Trust's board. Shareholders are being asked to
ratify the selection of these individuals to serve as trustees to the James
Trust.
The following table indicates the trustees of the James Trust:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION
POSITION(S) WITH THE TRUST DURING LAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C>
*Barry R. James, CFA Executive Vice President, James Investment Research, Inc.
P.O. Box 8 (1985 to present); President, James Capital Alliance, Inc.,
Alpha, Ohio 45301 Cincinnati, Ohio (1992 to Present).
Age: 41
President and Trustee
Anthony P. D'Angelo, Building 641 Professor, Graduate School of Logistics and Acquisition
Dept. of the Air Force Management, Air Force Institute of Technology,
2950 P Street Wright-Patterson AFB, Ohio (1983 to present).
Wright-Patterson AFB Ohio 45433-7765
Age: 68
Trustee
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION
POSITION(S) WITH THE TRUST DURING LAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Hazel L. Eichelberger Retired Senior Vice President, Citizens Federal Bank,
9438 Atchison Road Dayton, Ohio (1955 to 1997).
Dayton, Ohio 45458
Age: 61
Trustee
James F. Zid Retired Partner, Ernst & Young, LLP, Columbus, Ohio (1968 to
1083 N. Collier Blvd. 1993).
Marco Island, Florida 34145
Age: 64
Trustee
</TABLE>
*Barry R. James is an "interested person" of the James Trust as defined in the
1940 Act, and of James. As of April 30, 1998, the officers and trustees of the
James Trust beneficially owned, as a group, less than 1% of the outstanding
shares of the Fund.
For three years, at least 75% of the trustees will not otherwise be affiliated
with the James Trust, James or Nuveen Advisory. Each trustee of the James Trust
will serve until he or she sooner dies, resigns, retires or is removed by a vote
of the shareholders. A trustee of the James Trust can be removed (i) by
shareholders holding not less than two-thirds of the shares then outstanding
cast in person or by proxy at any meeting called for that purpose, (ii) by a
written declaration signed by shareholders holding not less than two-thirds of
the shares then outstanding and filed with the custodian of the James Trust, or
(iii) by at least two-thirds of the trustees of the James Trust.
The Board of Trustees of the James Trust has met only once, on May 4, 1998, to
approve the Reorganization. Each of the trustees attended this meeting. There
have been no other meetings of the Board of Trustees. The James Trust does not
currently have a standing audit, nominating or compensation committee of the
Board of Trustees. It is anticipated that each trustee who is not an interested
person of the James Trust will receive $4,200 in total compensation from the
James Trust for the fiscal year ending June 30, 1999. Barry R. James will not
receive any compensation from the James Trust. It is further anticipated that no
officer of the James Trust will receive any remuneration from the James Trust
for the fiscal year ended June 30, 1999.
The following is a description of the other officer of the James Trust:
<TABLE>
<S> <C>
Thomas L. Mangan Vice President, James Investment Research,
P.O. Box 8 Inc.
Alpha, Ohio 45301 (1994 to present); Senior Vice President,
Age: 48 Fuji
Treasurer and Secretary Securities, Inc., Chicago, Illinois (prior to
1994).
</TABLE>
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3
II. VOTING INFORMATION
Instructions for Executing the Proxy Card. The proxy card must be executed
properly. The following general guide may help you choose the proper format for
signing your form.
1. Individual Accounts: Your name should be signed exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the registration.
3. All other accounts should show the capacity of the individual signing. This
can be shown either in the form of the account registration itself or by
the individual executing the proxy card.
Revocation Procedures. At any time before it has been voted, the enclosed proxy
may be revoked by the signer by: (1) a written revocation received by the Fund's
offices located at 333 West Wacker Drive, Chicago, Illinois 60606; (2) properly
10
<PAGE> 14
executing a later-dated proxy; or (3) attending the Meeting, requesting return
of any previously delivered proxy and voting in person. Solicitation of proxies
by personal interview, mail, telephone and telegraph may be made by officers and
directors of the Admiral Funds, representatives of James and third-party
solicitation agents. The cost for the solicitation of proxies shall be borne by
Nuveen Advisory and James.
III. OTHER MATTERS
The Board knows of no other matters that are intended to be brought before the
meeting. If other matters are presented for action, the proxies named in the
enclosed form of proxy will vote on those matters in their sole discretion.
IV. SHAREHOLDER PROPOSALS
The Admiral Funds is not required, and does not intend, to hold annual meetings
of shareholders. Therefore, no date can be given by which a proposal by a
shareholder for consideration at such a meeting must be submitted. Any such
proposal should be submitted in writing to the Secretary of the Fund at its
principal offices c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois 60606. After the Reorganization, shareholders of the New Fund
can submit proposals in writing to the Secretary of the New Fund at its new
offices at 1349 Fairground Road, Beavercreek, Ohio 45385. Upon submitting a
proposal, the shareholder shall provide the New Fund with a written notice which
includes the shareholder's name and address, the number of shares of the New
Fund that such shareholder holds of record or beneficially, the dates upon which
such shares were acquired, and documentary support for a claim of beneficial
ownership.
A COPY OF THE FUND'S ANNUAL REPORT AND ITS MOST RECENT SEMI-ANNUAL REPORT
SUCCEEDING THE ANNUAL REPORT IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING
TO NUVEEN AT 333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606 OR BY CALLING
1-800-621-7227.
By Order of the Board of Directors
Gifford R. Zimmerman
Secretary
May 29, 1998
11
<PAGE> 15
APPENDIX A
AGREEMENT AND PLAN OF
REORGANIZATION AND LIQUIDATION
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR
SHARES OF THE ACQUIRING FUND AND ASSUMPTION OF
LIABILITIES, IF ANY; LIQUIDATION OF THE ACQUIRED FUND.... 1
2. CLOSING AND CLOSING DATE................................. 2
3. REPRESENTATIONS AND WARRANTIES........................... 2
4. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.... 5
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADMIRAL FUNDS..... 6
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES TRUST... 7
7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES
TRUST AND ADMIRAL FUNDS.................................. 8
8. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES................. 9
9. TERMINATION.............................................. 10
10. AMENDMENT................................................ 10
11. NOTICES.................................................. 10
12. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT........ 10
13. BROKERAGE FEES AND EXPENSES.............................. 10
</TABLE>
i
<PAGE> 17
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is made as of
the 30th day of April, 1998 by and between the James Advantage Funds (the "James
Trust"), an Ohio business trust on behalf of its sole series, which will adopt
the name "The Golden Rainbow Fund" (the "Acquiring Fund") and Flagship Admiral
Funds Inc., a Maryland corporation (the "Admiral Funds"), on behalf of its
series, The Golden Rainbow A James Advised Mutual Fund (the "Acquired Fund").
The Acquiring Fund maintains its principal place of business at 1349 Fairground
Road, Beavercreek, Ohio 45385. The Acquired Fund maintains its principal place
of business at 333 West Wacker Drive, Chicago, Illinois 60606.
This Agreement is intended to be, and is adopted as, a plan of reorganization
(the "Reorganization") pursuant to Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"). The Reorganization will
be effected by (i) transferring all of the Acquired Fund's assets to the
Acquiring Fund, in exchange for the Acquiring Fund assuming all of the Acquired
Fund's liabilities and duties and issuing to the Acquired Fund the number of
shares of the Acquiring Fund equal to the number and value of shares of the
Acquired Fund; (ii) the Acquired Fund distributing to each shareholder of the
Acquired Fund, Acquiring Fund shares (including fractional shares) equal in
number and value to the shares held by each Acquired Fund shareholder; and (iii)
the cancellation of the outstanding shares of the Acquired Fund and the
subsequent termination of the Acquired Fund. The cancellation of the outstanding
shares of the Acquired Fund will be effected pursuant to an amendment to the
charter of Admiral Funds to be adopted by Admiral Funds in accordance with the
Maryland General Corporation Law.
In consideration of the covenants and agreements set forth herein, the parties
covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND AND ASSUMPTION OF LIABILITIES, IF ANY; LIQUIDATION OF THE
ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, the Acquired Fund
agrees to sell, assign, transfer and deliver to the Acquiring Fund, as of
the close of business on the Closing Date (the "Effective Time"), all of
its assets as set forth in paragraph 1.2, free and clear of all liens and
encumbrances, except as otherwise provided herein, and in exchange therefor
the Acquiring Fund agrees (a) to assume all of the liabilities, if any, of
the Acquired Fund, as set forth in paragraph 1.3 and (b) to issue and
deliver to the Acquired Fund, for distribution to the Acquired Fund's
shareholders in accordance with paragraph 1.4, the number of shares of the
Acquiring Fund ("Acquiring Fund Shares") equal to the aggregate number and
value of shares (including fractional shares) of the Acquired Fund of the
class designated Class A then outstanding ("Acquired Fund Shares"), all
determined in the manner and as of the date and time provided in paragraph
2. Such transactions shall take place at the closing provided for in
paragraph 2.1 (the "Closing").
1.2 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund shall acquire the assets of the Acquired Fund (consisting
without limitation of all cash, cash equivalents, portfolio securities,
receivables (including interest and dividends receivable) and any deferred
or prepaid expenses shown as assets) as set forth in the Statement of Net
Assets referred to in paragraph 6.3 as of the Closing Date, claims and
rights of action and rights to registered shares under applicable
securities laws. The Acquired Fund has no plan or intent to sell or
otherwise dispose of any of its assets, other than in the ordinary course
of business.
1.3 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund will assume from the Acquired Fund all debts, liabilities,
obligations and duties of the Acquired Fund of whatever kind or nature,
whether absolute, accrued, contingent or otherwise, arising in the ordinary
course of business, whether or not determinable as of the Effective Time
and whether or not specifically referred to in this Agreement.
1.4 On the Closing Date, the Acquired Fund will liquidate and distribute to its
common shareholders of record determined as of the Effective Time,
Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph
1.1 equal in number and value to Acquired Fund Shares then owned by a
shareholder, in exchange for and cancellation of the shareholder's Acquired
Fund Shares. Acquiring Fund Shares will be issued so that the Acquired
Fund's shareholders will receive Acquiring Fund Shares of the class
designated Class A. Such liquidation and distribution will be accomplished
by opening accounts on the books of the Acquiring Fund in the names of the
shareholders of the Acquired Fund and crediting to each account the number
of Acquiring Fund Shares equal to the number and value of Acquired Fund
Shares owned of record by the shareholder at the Effective Time. As of the
Effective Time, all outstanding shares of the Acquired Fund shall
simultaneously be canceled on the Acquired Fund's share transfer books. The
Acquiring Fund shall not issue certificates representing Acquiring Fund
Shares.
1
<PAGE> 18
1.5 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund shares surrendered in
exchange therefor on the books of the Acquired Fund as of that time shall
be paid by the person to whom such Acquiring Fund Shares are to be issued
as a condition to the registration of such transfer.
1.6 Any reporting responsibility of the Acquired Fund with the Securities and
Exchange Commission (the "Commission"), or any state securities commission
is and shall remain the responsibility of the Acquired Fund up to and
including the Closing Date.
1.7 Promptly following the Effective Time, the Acquired Fund will terminate and
Admiral Funds shall take any further reasonable actions necessary to
effectuate the Reorganization.
1.8 The Admiral Funds agrees that any rights it has to the use of the name "The
Golden Rainbow Fund A James Advised Mutual Fund" or any derivation thereof
shall immediately terminate at Closing, except as shall be required by the
Admiral Funds to effectuate the purpose of this Agreement. Notwithstanding
the preceding sentence, the Admiral Funds may use such name after the
Effective Time for routine filing purposes or where otherwise required by a
third party unrelated to or unaffiliated with the Admiral Funds, and the
Admiral Funds shall not be required to amend its Charter or By-Laws in
respect of this paragraph 1.8.
2. CLOSING AND CLOSING DATE
2.1 The Closing Date shall be on such date as the parties may agree in writing.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Effective Time unless otherwise provided. The
Closing shall be at such place as the parties may agree.
2.2 State Street Bank, as custodian for the Acquired Fund, shall deliver to the
Acquiring Fund at the Closing a certificate of an authorized officer
stating that (a) the Acquired Fund's portfolio securities, cash and any
other assets have been transferred in proper form to the Acquiring Fund's
Custodian on the Closing Date and (b) all necessary taxes, if any, have
been paid, or provision for payment has been made, in conjunction with the
delivery of portfolio securities.
2.3 The Acquired Fund shall deliver to the Acquiring Fund on or prior to the
Liquidation Date a list of the names, addresses and taxpayer identification
numbers of its shareholders and the number of outstanding Acquired Fund
Shares owned by each such shareholder (the "Shareholder Lists"), all as of
the Effective Time, certified by the Secretary or Assistant Secretary of
the Acquired Fund. The Acquiring Fund shall issue and deliver to the
Acquired Fund at the Closing a confirmation or other evidence satisfactory
to the Acquired Fund that Acquiring Fund Shares have been or will be
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing each party shall deliver to the other such bills of sale,
checks, assignments, receipts and other documents as such other party or
its counsel may reasonably request to effect the transactions contemplated
by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 Admiral Funds represents and warrants as follows:
3.1.1 Admiral Funds is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and has
the power to own all of its properties and assets and, subject to
approval of the shareholders of the Acquired Fund, to carry out the
Agreement.
3.1.2 Admiral Funds is an open-end diversified management investment
company duly registered under the Investment Company Act, and such
registration is in full force and effect. The Acquired Fund is a
duly established and designated series of Admiral Funds.
3.1.3 Admiral Funds is not, and the execution, delivery and performance
of this Agreement will not result, in violation of any Maryland law
or any provision of the Charter or By-Laws of Admiral Funds or of
any material agreement, indenture, instrument, contract, lease or
other undertaking to which Admiral Funds is a party or by which
Admiral Funds is bound.
3.1.4 Admiral Funds has no material contracts or other commitments with
respect to the Acquired Fund (except this Agreement) that will not
be terminated on or prior to the Closing Date without any liability
or penalty to the Acquired Fund or the Acquiring Fund.
2
<PAGE> 19
3.1.5 No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to
Admiral Funds' knowledge, threatened against the Acquired Fund or
any of its properties or assets. Admiral Funds knows of no facts
that might form the basis for the institution of such proceedings,
and Admiral Funds is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
that materially and adversely affects its business relating to the
Acquired Fund or its ability to consummate the transactions herein
contemplated.
3.1.6 The audited Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets, Financial Highlights and
Portfolio of Investments of the Acquired Fund at June 30, 1997 and
for the period then ended and the unaudited Statements of Net
Assets, Statements of Operations, Statements of Changes in Net
Assets, Financial Highlights and Portfolios of Investments of the
Acquired Fund at December 31, 1997 and for the periods then ended
(copies of which have been furnished to the Acquiring Fund) have
been prepared in accordance with generally accepted accounting
principles consistently applied and present fairly, in all material
respects, the financial condition of the Acquired Fund as of such
date, and there are no known material liabilities of the Acquired
Fund (contingent or otherwise) not disclosed therein.
3.1.7 Since June 30, 1997, there has not been any materially adverse
change in the Acquired Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquired Fund
of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as set forth in Schedule 3.1.7.
For the purposes of this paragraph 3.1.7, a decline in net asset
value or net asset value per share of the Acquired Fund as a result
of changes in the value of investments held by the Acquired Fund or
a distribution or payment of dividends shall not constitute a
materially adverse change.
3.1.8 All federal, state and other tax returns and reports of the
Acquired Fund required by law to have been filed or furnished by
the date hereof have been filed or furnished, and all federal,
state and other taxes, interest and penalties shown as due on said
returns and reports have been paid insofar as due, or provision has
been made for the payment thereof, and, to the best of Admiral
Funds' knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns or
reports.
3.1.9 The Acquired Fund has qualified as a regulated investment company
under Subchapter M of the Internal Revenue Code (a "RIC") for each
of its taxable years and intends to so qualify for the current
taxable year.
3.1.10 The authorized capital of the Acquired Fund consists of 100,000,000
common shares, par value $.001 per share, of which 21,250,000 are a
sub-class designated as "The Golden Rainbow A James Advised Mutual
Fund -- Class A" ("Class A Shares"). All issued and outstanding
shares of the Acquired Fund are Class A Shares, and are duly and
validly issued and outstanding, fully paid and non-assessable. All
issued and outstanding shares of the Acquired Fund will, at the time
of the Closing, be held by the persons and in the amounts set forth
in the applicable Shareholder List submitted to the Acquiring Fund
in accordance with the provisions of paragraph 2.3. The Acquired
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any shares of the Acquired Fund, nor is
there outstanding any security convertible into shares of the
Acquired Fund.
3.1.11 At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant
to paragraph 1.1 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder free of any liens
or other encumbrances, and, upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable title
thereto.
3.1.12 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Directors of Admiral Funds
(including the determinations required by Rule 17a-8(a) under the
Investment Company Act of 1940 (the "Investment Company Act")) and
by all necessary action, other than approval by the shareholders of
the Acquired Fund, on the part of Admiral Funds, and, subject to
shareholder approval, this Agreement constitutes a valid and binding
obligation of Admiral Funds enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general available
principles.
3
<PAGE> 20
3.1.13 The information furnished and to be furnished by Admiral Funds for
use in applications for exemptive orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby is, and shall
be, accurate and complete in all material respects and is in
compliance, and shall comply, in all material respects with
applicable federal securities and other laws and regulations.
3.1.14 On the Closing Date, the Acquired Fund's Prospectus and Statement of
Additional Information and, at the time of the Special Meeting of
the Acquired Fund's shareholders, the proxy statement prepared in
accordance with the terms of the Transfer Agreement dated April 30,
1998 by and between James Investment Research, Inc. and Nuveen
Advisory Corp. (the "Proxy Statement") insofar as it refers to the
Admiral Fund and the Acquired Fund (a) will comply in all material
respects with the provisions and regulations of the Securities
Exchange Act of 1934, (the "1934 Act") the Securities Act of 1933
(the "1933 Act") and the Investment Company Act and the rules and
regulations thereunder and (b) will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the representations and
warranties in this paragraph 3.1.14 shall not apply to statements
in or omissions from the Proxy Statement made in reliance upon and
in conformity with information furnished by the Acquiring Fund for
use therein.
3.1.15 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Admiral
Funds of the transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the 1934 Act and the
Investment Company Act, and such as may be required under state
laws and the filing and acceptance for record of articles of
transfer under Maryland law.
3.1.16 There are no broker's or finder's fees payable on behalf of the
Acquired Fund in connection with the transactions provided for
herein.
3.1.17 The Acquiring Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the
terms hereof.
3.2 The James Trust represents and warrants as follows:
3.2.1 The James Trust is a business trust duly organized, validly
existing and in good standing under the laws of the State of Ohio
and has the power to own all of its properties and assets and to
carry out the Agreement.
3.2.2 The James Trust is an open-end diversified management investment
company that has filed a Form N-1A with the Commission.
3.2.3 The James Trust is not, and the execution, delivery and performance
of this Agreement will not result, in any violation of Ohio law or
any provision of the Declaration of Trust or By-Laws of the James
Trust or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which the James Trust is a
party or by which the James Trust is bound.
3.2.4 No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to
the knowledge of the James Trust, threatened against the Acquiring
Fund or any of its properties or assets. The James Trust knows
of no facts that might form the basis for the institution of such
proceedings, and the James Trust is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its
business relating to the Acquiring Fund or its ability to
consummate the transactions herein contemplated.
3.2.5 The authorized capital of the Acquiring Fund consists of an
unlimited number of shares of beneficial interest. Prior to the
Closing Date, the Acquiring Fund has not issued any Acquiring Fund
Shares (except those shares issued and redeemed pursuant to
Section 7.6) and all Acquiring Fund Shares to be issued in exchange
for the net assets of the Acquired Fund pursuant to this Agreement
will be when so issued, duly and validly issued and outstanding,
fully paid and non-assessable. Except as contemplated by this
Agreement, the Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any
Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
4
<PAGE> 21
3.2.6 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Trustees of the James Trust
(including the determinations required by Rule 17a-8(a) under the
Investment Company Act) and by all necessary action on the part of
the James Trust, and this Agreement constitutes a valid and binding
obligation of the James Trust enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles.
3.2.7 The information furnished and to be furnished by the James Trust
for use in applications for exemptive orders, registration
statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated
hereby is, and shall be, accurate and complete in all material
respects and is in compliance, and shall comply, in all material
respects with applicable federal securities and other laws and
regulations.
3.2.8 On the effective date of the Registration Statement referred to in
paragraph 4.5, at the time of the meeting of the Acquired Fund
shareholders and on the Closing Date, the Registration Statement
and the Proxy Statement, insofar as it refers to the James Trust or
the Acquiring Fund (a) will comply in all material respects with
the 1934 Act, the 1933 Act and the Investment Company Act and the
rules and regulations thereunder and (b) will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the
representations and warranties in this paragraph 3.2.8 shall not
apply to statements in or omissions from the Proxy Statement and
the Registration Statement made in reliance upon and in conformity
with information furnished by the Acquired Fund for use therein.
3.2.9 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
James Trust of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act
and the Investment Company Act, and such as may be required under
state laws and the filing and acceptance for record of articles of
transfer under Maryland law.
3.2.10 There are no broker's or finder's fees payable on behalf of the
Acquiring Fund in connection with the transactions provided for
herein.
3.2.11 The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund transferred to
the Acquiring Fund pursuant to the Reorganization (the "Assets"),
except for dispositions made in the ordinary course of its business
as a RIC and dispositions necessary to maintain its status as a
RIC, and expects to retain substantially all of the Assets in the
same form as it receives them in the Reorganization, unless and
until subsequent investment circumstances reasonably suggest the
desirability of change or it becomes necessary to make dispositions
to maintain RIC status.
4. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
4.1 The James Trust and Admiral Funds each will operate its respective business
in the ordinary course between the date hereof and the Closing Date, it
being understood that the ordinary course of business will include
declaring and paying customary dividends and other distributions.
4.2 Admiral Funds will call a meeting of shareholders of the Acquired Fund to
consider and act upon this Agreement and the transactions contemplated
herein and to take all other action necessary to obtain approval of the
transactions contemplated hereby.
4.3 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund's shares.
4.4 Subject to the provisions of this Agreement, Admiral Funds and the James
Trust each will take or cause to be taken all action, and will do or cause
to be done all things, reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
4.5 Admiral Funds will prepare and file with the Commission the Proxy
Statement, and the James Trust will prepare and file with the Commission an
amendment to its registration statement on Form N-1A relating to the
Acquiring Fund Shares to be issued hereunder (together with any amendments
thereof and supplements thereto, the "Registration
5
<PAGE> 22
Statement"), in compliance in all material respects with the 1933 Act, the
1934 Act and the Investment Company Act and the rules and regulations
thereunder.
4.6 Each of Admiral Funds and the James Trust will, from time to time, as and
when requested by the other, execute and deliver or cause to be executed
and delivered all such assignments and other instruments, and will take or
cause to be taken such further action, as the other may deem necessary or
desirable in order to (a) vest in and confirm to the Acquiring Fund title
to and possession of all the assets of the Acquired Fund to be sold,
assigned, transferred and delivered to the Acquiring Fund pursuant to this
Agreement, (b) vest in and confirm to the Acquired Fund title to and
possession of all the Acquiring Fund Shares to be transferred to the
Acquired Fund pursuant to this Agreement, (c) assume all of the Acquired
Fund's liabilities in accordance with this Agreement, and (d) otherwise to
carry out the intent and purpose of this Agreement.
4.7 The James Trust will use all reasonable efforts to obtain the approvals and
authorizations required by the 1933 Act, the Investment Company Act and
such of the state Blue Sky or other laws as it may deem appropriate in
order to continue its operations after the Closing Date.
4.8 For a period of three years from the Closing Date, the James Trust
covenants that at least 75% of the members of its board of trustees shall
not be interested persons of James Investment Research, Inc. or Nuveen
Advisory Corp. For a period of two years beginning immediately after the
Closing, the Acquiring Fund will not enter into, participate in, or allow
to continue any arrangement that would constitute an "unfair burden" within
the meaning of Section 15(f) of the Investment Company Act.
4.9 The Acquiring Fund intends to qualify as a RIC for the current taxable
year.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADMIRAL FUNDS
The obligations of Admiral Funds to consummate the transactions provided for
herein shall, at its election, be subject to the performance by the James Trust
of all the obligations to be performed by it hereunder on or before the Closing
Date and the following further conditions.
5.1 All representations and warranties of the James Trust contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
5.2 The James Trust shall have delivered to Admiral Funds a certificate
executed in its name by the President or a Vice President of the James
Trust, in form and substance satisfactory to Admiral Funds and dated as of
the Closing Date, to the effect that the representations and warranties of
the James Trust in this Agreement are true and correct at and as of the
Closing Date except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as Admiral
Funds shall reasonably request.
5.3 The Acquired Fund shall have received an opinion from Brown, Cummins &
Brown Co., L.P.A., counsel to the James Trust, dated as of the Closing
Date, and relying upon such opinions of other counsel and certificates of
public authorities and officers of the James Trust as Brown, Cummins &
Brown Co., L.P.A. deems appropriate, to the effect that:
5.3.1 The James Trust has been duly organized and is validly existing as
a business trust in good standing under the laws of the State of
Ohio with requisite power and authority to own its
properties and, to the knowledge of such counsel, to carry on its
business as presently conducted;
5.3.2 This Agreement has been duly authorized, executed and delivered by
the James Trust and, assuming due authorization, execution and
delivery of the Agreement by Admiral Funds, constitutes a valid and
binding obligation of the James Trust enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles;
5.3.3 The Acquiring Fund Shares to be distributed to shareholders of the
Acquired Fund in an amount equal in number and value to the shares
then owned by an Acquired Fund shareholder will, when issued, as
6
<PAGE> 23
contemplated by this Agreement, be validly issued and outstanding
and fully paid and non-assessable (except to the extent set forth
in the Proxy Statement) and free of preemptive rights;
5.3.4 Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby violate (i)
the James Trust's Declaration of Trust or By-Laws or (ii) any
federal securities law of the United States or the laws of the
State of Ohio applicable to the James Trust; provided, however,
that such counsel may state that it expresses no opinion with
respect to federal or state securities anti-fraud laws or
fraudulent transfer laws; and provided further that, insofar as
performance by the James Trust of its obligations under this
Agreement is concerned, such counsel may state that it expresses no
opinion as to bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability relating to or affecting
creditors' rights;
5.3.5 To the knowledge of counsel (without any independent inquiry or
investigation) all regulatory consents, authorizations, approvals
and filings required to be obtained or made by the James Trust
under the federal laws of the United States, the laws of the State
of Ohio and for the consummation of the transactions contemplated
by this Agreement have been obtained or made;
5.3.6 The James Trust has been registered with the Commission as an
investment company and, to the knowledge of such counsel, no order
has been issued or proceeding instituted to suspend such
registration; and
5.3.7 To the knowledge of such counsel, (a) no litigation or
administrative proceeding or investigation of or before any court
or governmental body is presently pending or threatened as to the
James Trust or any of its properties or assets, and (b) the James
Trust is not a party to or subject to the provision of any order,
decree or judgment of any court or governmental body, which
materially and adversely affects its business.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES TRUST
The obligations of the James Trust to consummate the transactions provided for
herein with respect to Admiral Funds shall, at its election, be subject to the
performance by Admiral Funds of all the obligations to be performed by it
hereunder on or before the Closing Date and the following further conditions:
6.1 All representations and warranties of Admiral Funds contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
6.2 Admiral Funds shall have delivered to the James Trust a certificate
executed in its name by the President or a Vice President of Admiral Funds,
in form and substance satisfactory to the James Trust and dated as of the
Closing Date, to the effect that the representations and warranties of
Admiral Funds in this Agreement are true and correct at and as of the
Closing Date except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the James
Trust shall reasonably request.
6.3 Admiral Funds shall have delivered to the James Trust on the Closing Date a
Statement of Net assets, which Statement shall be prepared in accordance
with generally accepted accounting principles consistently applied,
together with a list of its portfolio securities showing the adjusted tax
bases and holding periods of such securities as of the Closing Date,
certified by the Treasurer of Admiral Funds.
6.4 The James Trust shall have received an opinion from Bell, Boyd & Lloyd,
special counsel to Admiral Funds relating to paragraphs 6.4.1 through 6.4.3
and 6.4.6, and from Gifford Zimmerman, Esq., Vice President and Assistant
Secretary of Nuveen Advisory Corp. relating to paragraphs 6.4.4 and 6.4.5,
each opinion dated as of the Closing Date and relying upon such opinions of
local counsel and certificates of public authorities and officers of
Admiral Funds as each deem appropriate, to the effect that:
6.4.1 Admiral Funds has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of
Maryland with requisite corporate power to own its properties and,
to the knowledge of such counsel, to carry on its business as
presently conducted;
6.4.2 This Agreement has been duly authorized, executed and delivered by
Admiral Funds and, assuming due authorization, execution and
delivery of the Agreement by James Trust, constitutes a valid and
binding
7
<PAGE> 24
obligation of the Admiral Funds, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles;
6.4.3 Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby violate (i)
Admiral Funds' Charter or By-Laws or (ii) any federal securities
law of the United States, the laws of the State of Illinois or the
laws of the State of Maryland applicable to Admiral Funds;
provided, however, that such counsel may state that it expresses no
opinion with respect to federal or state securities anti-fraud laws
or fraudulent transfer laws; and provided further that, insofar as
performance by Admiral Funds of its obligations under this
Agreement is concerned, such counsel may state that it expresses no
opinion as to bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability relating to or affecting
creditors' rights;
6.4.4 To the knowledge of counsel (without any independent inquiry or
investigation) all regulatory consents, authorizations, approvals
and filings required to be obtained or made by Admiral Funds under
the federal laws of the United States, and the laws of the State of
Maryland for the consummation of the transactions contemplated by
this Agreement have been obtained or made;
6.4.5 Admiral Funds has been registered with the Commission as an
investment company, and, to the knowledge of such counsel, no order
has been issued or proceeding instituted to suspend such
registration; and
6.4.6 To the knowledge of such counsel, (a) no litigation or
administrative proceeding or investigation of or before any court
or governmental body is presently pending or threatened as to
Admiral Funds or any of its properties or assets, and (b) Admiral
Funds is not a party to or subject to the provision of any order,
decree or judgment of any court or governmental body, which
materially and adversely affects its business.
7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES TRUST AND ADMIRAL
FUNDS
The obligations of the James Trust and Admiral Funds hereunder are subject to
the further conditions that on or before the Closing Date:
7.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite votes of (a) the Board of Trustees of the James
Trust and the Board of Directors of Admiral Funds, including the
determinations required by Rule 17a-8(a) under the Investment Company Act
and (b) the holders of the outstanding shares of the Acquired Fund in
accordance with the provisions of Admiral Funds' Charter and By-Laws, and
each of James Trust and Admiral Funds shall have delivered certified copies
of the resolutions evidencing such approvals to the other.
7.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
7.3 All consents of other parties and all consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state Blue Sky or securities authorities, including
"no-action" positions of such federal or state authorities) deemed
necessary by the James Trust or Admiral Funds to permit consummation, in
all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a materially adverse effect on the
assets or properties of the Acquiring Fund or the Acquired Fund; provided
that either party hereto may waive any part of this condition as to itself.
7.4 The Registration Statement shall have become effective under the 1933 Act,
and no stop order suspending the effectiveness thereof shall have been
issued, and, to the best knowledge of the James Trust, no investigation or
proceeding under the 1933 Act for that purpose shall have been instituted
or be pending, threatened or contemplated.
7.5 The James Trust and Admiral Funds shall have received an opinion of Bell,
Boyd & Lloyd reasonably satisfactory to the James Trust and Admiral Funds
and based upon such reasonably requested representations and warranties as
requested by counsel, substantially to the effect that, for federal income
tax purposes:
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<PAGE> 25
7.5.1 The acquisition by the Acquiring Fund of all the assets of the
Acquired Fund in exchange solely for Acquiring Fund Shares and the
assumption by the Acquiring Fund of the Acquired Fund's
liabilities, if any, followed by the distribution by the
Acquired Fund of the Acquiring Fund Shares to the shareholders of
the Acquired Fund in exchange for their Acquired Fund shares in
complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the
Internal Revenue Code, and the Acquiring Fund and the Acquired Fund
each will be "a party to a reorganization" within the meaning of
Section 368(b) of the Internal Revenue Code;
7.5.2 The Acquired Fund's shareholders will recognize no gain or loss
upon the exchange of all of their Acquired Fund shares for Acquiring
Fund Shares in complete liquidation of the Acquired Fund;
7.5.3 No gain or loss will be recognized by the Acquired Fund upon the
transfer of all its assets to the Acquiring Fund in exchange solely
for Acquiring Fund Shares and the assumption by the Acquiring Fund
of the Acquired Fund's liabilities, if any, and with respect
to the subsequent distribution of those Acquiring Fund Shares to
the Acquired Fund shareholders in complete liquidation of the
Acquired Fund;
7.5.4 No gain or loss will be recognized by the Acquiring Fund upon the
acquisition of all the Acquired Fund's assets in exchange solely
for Acquiring Fund Shares and the assumption of the Acquired Fund's
liabilities, if any;
7.5.5 The basis of the assets acquired by the Acquiring Fund will be, in
each instance, the same as the basis of those assets when held by
the Acquired Fund immediately before the transfer, and the holding
period of such assets acquired by the Acquiring Fund will
include the holding period thereof when held by the Acquired Fund;
7.5.6 The basis of the Acquiring Fund Shares to be received by the
Acquired Fund's shareholders upon liquidation of the Acquired Fund
will be, in each instance, the same as the basis of the
Acquired Fund shares surrendered in exchange;
7.5.7 The holding period of the Acquiring Fund Shares to be received by
the Acquired Fund's shareholders will include the period during
which the Acquired Fund shares to be surrendered in exchange
therefor were held; provided such Acquired Fund shares were
held as capital assets by those shareholders on the date of the
exchange;
7.5.8 For purposes of Section 381 of the Code, the Acquiring Fund will be
treated as if there had been no Reorganization. Accordingly, the
Reorganization will not result in the termination of the Acquired
Fund's taxable year. The Acquired Fund's tax attributes enumerated
in Section 381(c) of the Code will be taken into account by the
Acquiring Fund as if there had been no Reorganization, and the part
of the Acquired Fund's taxable year before the Reorganization will
be included in the Acquiring Fund's taxable year after the
Reorganization.
7.6 Prior to the Closing (i) the Board of Trustees of the James Trust shall
have authorized the issuance of, and the Acquiring Fund shall have issued,
one Acquiring Fund Share to James Investment Research, Inc. in
consideration of the payment of $1.00 for the purpose of enabling James
Investment Research, Inc. to vote on the matters referred to in paragraph
7.7 and (ii) after such vote, James Investment Research, Inc. shall redeem
the shares so issued.
7.7 The James Trust (on behalf of and with respect to the Acquiring Fund) shall
have entered into a Management Agreement with James Investment Research,
Inc., a Distribution Agreement and a Plan of Distribution with CW Fund
Distributors, Inc., a Transfer Agency Agreement and an Administration
Agreement with Countrywide Fund Services, Inc. and a Custody Agreement with
Star Bank, N.A. Each such agreement shall have been approved by James
Trust's Board of Trustees and, to the extent required by law, by such of
those trustees who are not "interested persons" thereof (as defined in the
Investment Company Act) and by James Investment Research, Inc. as the sole
shareholder of the Acquiring Fund.
8. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
8.1 This Agreement constitutes the entire agreement between the James Trust and
Admiral Funds.
8.2 The representations and warranties contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith shall
terminate at Closing.
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<PAGE> 26
9. TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the shareholders of the Acquired Fund:
9.1 By mutual agreement of the James Trust and Admiral Funds; or
9.2 Upon written notice to the other party, by either the James Trust or
Admiral Funds, if a condition to the obligations of the party exercising
its right to terminate shall not have been met and it reasonably appears
that it will not or cannot be met.
In the event of any such termination, there shall be no liability for damages on
the part of either the James Trust or Admiral Funds or any Director, Trustee or
officer of either the James Trust or Admiral Funds.
10. AMENDMENT
This Agreement may be amended, modified or supplemented only in writing by the
parties; provided, however, that following the shareholder's meeting called by
Admiral Funds pursuant to paragraph 4.2, no such amendment may have the effect
of changing the provisions for determining the number of Acquiring Fund Shares
to be distributed to the Acquired Fund's shareholders under this Agreement
without their further approval and the further approval of the Boards of
Directors or Trustees of the James Trust and Admiral Funds (including the
determinations required by Rule 17a-8(a) under the Investment Company Act), and
provided further that nothing contained in this paragraph 10 shall be construed
as requiring additional approval to amend this Agreement to change the Closing
Date or the Effective Time.
11. NOTICES
Any notice, report, demand or other communication required or permitted by any
provision of this Agreement shall be in writing and shall be given by hand
delivery, prepaid certified mail or overnight delivery service addressed to:
James Trust, c/o Frank James, Ph.D., James Investment Research, Inc., P.O.
Box 8, Alpha, Ohio 45301.
Admiral Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois 60606, Attention: Alan G. Berkshire.
12. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
12.1 The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
12.2 This Agreement may be executed in any number of counterparts, each of which
will be deemed an original.
12.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio.
12.4 This Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns, and no assignment or transfer hereof or
of any rights or obligations hereunder shall be made by either party
without the written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any
person, firm or corporation other than the parties and their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
12.5 All persons dealing with the Acquiring Fund must look solely to the
property of the Acquiring Fund for the enforcement of any claims against
the Acquiring Fund as neither the Trustees, officers, agents or
shareholders of the Acquiring Fund assume any personal liability for
obligations entered into on behalf of the Acquiring Fund.
13. BROKERAGE FEES AND EXPENSES
13.1 The James Trust on behalf of the Acquiring Fund and Admiral Funds on behalf
of the Acquired Fund each represent and warrant to each other that there
are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
10
<PAGE> 27
13.2 In connection with the Reorganization, the Acquiring Fund will not bear any
of the expenses of the Acquired Fund or its shareholders, nor will the
Acquired Fund bear any of the expenses of the Acquiring Fund or its
shareholders, other than expenses directly and solely related to the
Reorganization.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
by the President or Vice President of each party.
FLAGSHIP ADMIRAL THE JAMES
FUNDS INC. ADVANTAGE FUNDS
By: /s/ GIFFORD ZIMMERMAN By: /s/ BARRY R. JAMES
------------------------------- -------------------------
Its: Vice President and Secretary Its: President
11
<PAGE> 28
PLEASE FOLD AND DETACH AT PERFORATION. RETURN THE PROXY BALLOT ONLY
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
OF THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
TO BE HELD ON JUNE 11, 1998
The undersigned hereby appoints Timothy R. Schwertfeger, Anthony T. Dean, Alan
G. Berkshire and Gifford R. Zimmerman and each of them, with full powers of
substitution, Proxies for the undersigned to represent and vote the common stock
of the undersigned at the Special Meeting of Shareholders of The Golden Rainbow
A James Advised Mutual Fund, a series of Flagship Admiral Funds Inc. to be held
on June 11, 1998, or any adjournment or adjournments thereof as indicated on the
reverse side.
PLEASE BE SURE TO SIGN YOUR PROXY BALLOT ON THE REVERSE SIDE
<PAGE> 29
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
TO BE HELD ON JUNE 11, 1998
At the upcoming Special Meeting, shareholders will be asked to approve a
reorganization of The Golden Rainbow A James Advised Mutual Fund into a newly
organized fund and other matters in connection with the reorganization. Please
refer to the accompanying Proxy Statement and cast your vote on the Proxy
Ballot.
Whether or not you plan to join us at the meeting, please sign, date and vote
the Proxy Ballot and return it to our proxy tabulator in the enclosed
postage-paid envelope. Please specify your choice by marking the appropriate box
on the Proxy Ballot. If you do not mark any boxes, your Proxy will be voted in
accordance with the Board of Directors' recommendations.
NOTE: Your Proxy is not valid unless it is signed. Please sign exactly as your
name(s) appears on the Proxy Ballot. If signing for estates, trusts or
corporations, title or capacity should be stated. If shares are held jointly,
either holder should sign.
PROPOSAL:
1. To approve an Agreement and Plan of Reorganization and Liquidation by and
between The James Advantage Funds (the "James Trust"), an Ohio Business
Trust, on behalf of its series to be named "The Golden Rainbow Fund" (the
"New Fund"), and the Flagship Admiral Funds Inc., on behalf of The Golden
Rainbow A James Advised Mutual Fund.
2. To ratify certain of the New Fund's investment restrictions.
3. To ratify the selection of four trustees to the Board of Trustees of the
James Trust.
4. In their discretion, the Proxies indicated on the reverse side of the Proxy
Ballot are authorized to vote upon such other matters as may properly come
before the Special Meeting.
Please fold and detach at perforation. Return the Proxy Ballot only.
<PAGE> 30
THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
PROXY BALLOT
<TABLE>
<CAPTION>
PROXY BALLOT
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Approval of Agreement and Plan of Reorganization and [ ] [ ] [ ]
Liquidation.
2. Ratification of certain of the New Fund's investment [ ] [ ] [ ]
restrictions.
3. Ratification of trustees. (See Nominees above) [ ] [ ] [ ]
Instructions: to withhold authority to vote for one or more nominees, write the nominee's
name(s) on the line below.
- ------------------------------------------------------------------------------------------------
4. In their discretion, the Proxies are authorized to vote on [ ] [ ] [ ]
such other business as may come before the Meeting.
</TABLE>
Date: 1998
- ------------------------------------------
- ------------------------------------------
Signature(s)
