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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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
May 11, 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
The enclosed proxy statement describes the proposal 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.
<PAGE>
We appreciate your continued support and confidence.
Very truly yours,
Timothy R. Schwertfeger Frank James, Ph.D.
Chairman of the Board Chairman of the Board
Flagship Admiral Funds Inc. James Investment Research, Inc.
<PAGE>
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, 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 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 11, 1998
<PAGE>
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 of the Admiral
Funds (the "Board") for voting at the special meeting of shareholders of 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 11, 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
the Proposal. Shareholders who execute proxies may revoke them at any time
before they are voted, either by writing to the Fund or in person at the time of
the Meeting.
The Proposal requires the affirmative vote of two-thirds of the outstanding
shares of the Fund.
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 the 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.
<PAGE>
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. On the Proposal, abstentions and broker
non-votes will be counted as present for quorum purposes and, because the
shareholder's shares will be issued and outstanding, will have the effect of
being counted as voted against the Proposal.
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, 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 the Proposal. As of April 20, 1998, no other
person, to the knowledge of the management of the Fund, owned beneficially more
than 5% of the outstanding shares of the Fund.
I. THE REORGANIZATION OF THE FUND
The Meeting is being called 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 (the
"Securities Act") with the U.S. Securities and Exchange Commission (the
"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 Investment Research ("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
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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 to the Fund (the "Manager") 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 Golden Rainbow Fund as a series
of Flagship Admiral Funds Inc., 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 sole 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
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achieve its respective business objectives. Nuveen and James have 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 ____, 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 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 30, 1998], but it may be made
effective at a different time, as agreed 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.
Some of the differences between the funds are described below, although you
should note that not all of the differences between the funds are described in
this proxy statement.
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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 James 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 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. Although each fund may invest up to 10% of its assets in other
mutual funds, the Fund may only invest in money market or closed-end funds,
while the New Fund may invest in any type of mutual fund.
In addition, although James plans to manage the New Fund's portfolio in the
same way it has managed the Fund's portfolio, the fundamental policies of the
New Fund do give James more flexibility than those of the Fund. For example,
the trustees of the James Trust could change the investment policies of the New
Fund to permit the purchase of securities on margin, short sales, real estate
whole mortgage loans, real estate investment trusts and oil and gas interests.
These transactions are prohibited under a "fundamental" policy of the Fund,
which means that a change in the policy requires shareholder approval. In
addition, the New Fund's policy on illiquid securities, which limits investment
in such securities to no more than 5% of its assets, can be changed by the
trustees of the James Trust. In contrast, the Fund's policy limiting illiquid
securities
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to no more than 10% of its assets is a fundamental policy that can only be
changed by the shareholders.
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 Investment Company Act of 1940
("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 a selection of different auditors of the series. On any matter
submitted to a vote of either fund's shareholders, shares are voted in the
aggregate and not by any series of either fund, 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
on a matter shall constitute a quorum. Each fund also requires that a plurality
of the shares present shall be required to elect directors/trustees.
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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 the 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.
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.
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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 the 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.
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 .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 Reorganization, 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.
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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 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 will retain 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
(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 James Trust' Board of Trustees. 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.
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.
The officers and trustees of the James Trust are:
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<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
P.O. Box 8 Research, Inc. (1985 to present); President,
Alpha, Ohio 45301 James Capital Alliance, Inc., Cincinnati, Ohio
Age: 41 (1992 to Present).
President and Trustee
Thomas L. Mangan Vice President, James Investment Research, Inc.
P.O. Box 8 (1994 to present); senior vice president, Fuji
Alpha, Ohio 45301 Securities, Inc., Chicago, Illinois (prior to
Age: 48 1994).
Treasurer and Secretary
Anthony P. D'Angelo Professor, Graduate School of Logistics and
Dept. of the Air Force Acquisition Management, Air Force Institute of
2950 P Street Technology, Wright-Patterson AFB, Ohio (1983 to
Wright-Patterson AFB Ohio 45433-7765 present).
Age: 68
Trustee
Hazel L. Eichelberger Retired Sr. Vice President, Citizens Federal
9438 Archison Road Bank, Dayton, Ohio (1955 to 1997).
Dayton, Ohio 45458
Age: 61
Trustee
James F. Zid Retired Partner, Ernst & Young, LLP, Dayton,
1083 N. Collier Blvd. Ohio (1968 to 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 ____, 1998, no officer or trustee of the
James Trust owned beneficially greater than 1% of the outstanding shares of the
Fund.
The James Trust board of trustees are experienced executives and
professionals who will meet at regular intervals to oversee the activities of
the James Trust and the New 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 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, 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 at least two-thirds of the trustees. As the sole
shareholder, James will
10
<PAGE>
approve the appointment of the trustees of the James Trust. Approval of
shareholders of the Fund will not be sought.
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 The Fund The New Fund
------------------------------------------------------------------------------
<S> <C> <C>
Annual Expenses
(as a percentage of net assets)
Management Fees .74% .65% (1)
12b-1 Fees .25% .25% (2)
Other Expenses .10% .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.
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 and (2) redemption at the end of each time period, based on the
fees and expenses shown above:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Fund $ $ $ $
New Fund $ $ $ $
</TABLE>
Please note that the background information provided above for Fund and the
11
<PAGE>
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, gains 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 April 25, 1998 to consider the
Plan. At this meeting, the Board, including [a majority/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
12
<PAGE>
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. This
assignment may cause the Reorganization to be subject to Section 15(f) of the
1940 Act. Section 15(f) permits an investment adviser to an investment company
to receive compensation from the transfer or sale of 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 New Fund 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 James Trust Board of Trustees to
fail to satisfy this requirement.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
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.
13
<PAGE>
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 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 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 11, 1998
14
<PAGE>
Appendix A
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
<PAGE>
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..................................................3
3. REPRESENTATIONS AND WARRANTIES............................................3
4. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.....................9
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADMIRAL FUNDS.....................10
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES TRUST...................12
7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE JAMES TRUST AND
ADMIRAL FUNDS..........................................................13
8. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.................................16
9. TERMINATION..............................................................16
10. AMENDMENT................................................................16
11. NOTICES..................................................................17
12. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT........................17
13. BROKERAGE FEES AND EXPENSES..............................................17
</TABLE>
i
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is made
as of the _____ 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
<PAGE>
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.
1.5 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
2
<PAGE>
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 ________________, 1998 or such later 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
<PAGE>
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.
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,
4
<PAGE>
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
5
<PAGE>
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.
3.1.13 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 __, 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.
6
<PAGE>
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.
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
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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
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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
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.
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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;
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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 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.
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<PAGE>
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. [title]
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 obligation of the Admiral Funds, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium
12
<PAGE>
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
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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:
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
14
<PAGE>
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,
15
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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.
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.
16
<PAGE>
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.
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
17
<PAGE>
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 FUNDS, INC. THE JAMES ADVANTAGE FUNDS
By: _______________________ By: __________________________
Its: _______________________ Its: __________________________
18
<PAGE>
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>
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. 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, 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 (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. 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.
THE GOLDEN RAINBOW A JAMES ADVISED MUTUAL FUND
PROXY BALLOT
1. Approval of Agreement and Plan of Reorganization and Liquidation.
FOR WITHHOLD ABSTAIN
AGAINST
[_] [_] [_]
2. In their discretion, the Proxies are
authorized to vote on such other
business as may come before the
Meeting.
Date:_________________1998
----------------------------------------
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Signature(s)
