FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8411
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The James Advantage Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1349 Fairground Road, Beavercreek, Ohio 45385
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(Address of principal executive offices) (Zip code)
Barry R. James, P.O. Box 8, Alpha, Ohio 45301
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(Name and address of agent for service)
Registrant's telephone number, including area code: (937) 426-7640
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Date of fiscal year end: 6/30
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Date of reporting period: 12/31/02
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
================================================================================
The financial markets continue to reflect the turmoil of our times. It has
become ever more evident that the stock and bond markets are intimately
associated with all aspects of our society; global and domestic, economic and
political. The risks associated with investing have never been clearer; the
benefits often hard to discern. However, it is times like these that prove the
worth of clear thinking, good research and lots of experience.
THE MARKET OVER THE PAST SIX MONTHS
The fiscal year starting July 1, 2002 looked pretty dismal. The markets were in
sharp decline in July, rallied briefly, and then set new lows into October. Over
the entire six month period the S&P 500 lost 10.30 % while the NASDAQ dropped
another 8.54 %. However, hidden in these bearish numbers was a strong 27.17 %
rally in the NASDAQ off its October lows and a respectable 18.60 % gain for the
S&P 500 off its October lows. Both the rallies and the sell offs were violent
and rapid. This type of market is highly emotional and difficult to manage.
However, good research increases a manager's confidence and allows the manager
to take advantage of opportunities as they arise. Sometimes they are
opportunities to buy, and sometimes to sell.
INVESTMENT GOALS AND OBJECTIVES
The Funds in the James Advantage Fund family have different goals and carry
different levels of risk. When combined into a portfolio of funds, these Funds
can meet the changing needs and objectives of investors and allow them to change
their risk tolerances. This flexibility has been very helpful to investors over
time. The Small Cap Fund and the Large Cap Plus Fund carry higher levels of risk
because they are typically heavily invested in stocks. The Market Neutral Fund
seeks to limit market risk altogether. The Golden Rainbow Fund, with its heavy
reliance on high quality bonds, seeks to provide income and preservation of
capital with some stock market exposure. These Fund goals do not change because
the market changes, but each will have its day in the spotlight. We encourage
investors to develop a portfolio of funds that meets their own risk tolerances.
INVESTMENT PHILOSOPHY
A basic tenet of Value Investing is that companies must have solid earnings to
justify their share prices. We have seen many examples over the last years where
share prices were way ahead of real earnings. Our conservative philosophy
dictates that we thoroughly research stocks to identify those which have strong
earnings growth and the prospect for additional earnings growth, but whose stock
prices have not yet responded. This is a major endeavor! The philosophy is
employed in all our styles and is fundamental to our research.
By using a disciplined approach to bond and stock selection, we think we can
avoid the huge losses that can wreck a portfolio, thus preserving capital in bad
times. It is true that Value stocks hold up better in such times. James'
conservative investment philosophy, based on research, has been the key to the
Funds' successes over the past years.
STRATEGY FOR MEETING FUND OBJECTIVES
The Funds' advisor, James Investment Research, Inc., prepared a special study
and made it available to the public last July. In that study we noted that the
stock market had become severely oversold and that a rally was highly likely. We
also noted that this rally would be temporary and that it was not the beginning
of a new long term bull market. These thoughts were repeated and emphasized in
the firm's annual economic outlook, which was also available to shareholders.
Consistent with this research, the advisor raised equity levels in the funds,
especially in the technology sector. As this report is being prepared the
advisor has already begun lowering the exposure to the stock market.
We expect the coming months to offer similar opportunities for those who
recognize value and have market timing skills. Shareholders should expect the
advisor to look for
1
opportunities in a market that is highly emotional and not likely to establish
long-term trends.
FUND PERFORMANCE
We are very proud of our Funds' performances over these very difficult months!
The Golden Rainbow achieved its income objective with quarterly dividend
payments and a reasonable capital gains payout in December. The Large Cap Fund
under performed its benchmark, the S&P 500 in the second half of the calendar
year, but outperformed the benchmark in the first half and for the last 12
months. The Small Cap Fund dramatically outperformed its benchmark, the Russell
2000, over the six month and 12 month periods. The Market Neutral suffered in
the sharp rally on October and November, but returned a positive 1.59% over the
year, slightly below the risk free U.S. Treasury Bill return.
EXPECTATIONS FOR THE FUTURE
We expect the immediate future to continue to be difficult for both the fixed
income and the equity markets. The fear of war and war itself may take its toll.
The U.S. economy is struggling and the concerns over the deficit may cause bond
yields to rise. Over the coming months we see this increased volatility as an
opportunity. We will be able to buy bonds at better yields and to take advantage
of rallies in equities, even though they may be limited in duration. These
markets are similar to those in the early 1970's. James Investment Research,
Inc, was founded in 1972. We have the experience to recognize and understand the
risk that the markets will likely face over the coming year.
/s/ Thomas L. Mangan
Thomas L. Mangan
C.F.O
2
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2002 (UNAUDITED)
=======================================================================================================================
THE GOLDEN THE JAMES THE JAMES THE JAMES
RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP PLUS
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At amortized cost ................................ $ 57,358,970 $ 7,727,543 $ 6,424,109 $ 6,096,865
============ ============ ============ ============
At value ......................................... $ 61,398,543 $ 8,086,142 $ 5,912,374 $ 5,552,549
Segregated cash with brokers ....................... -- -- 5,974,579 --
Receivable for capital shares sold ................. 2,233 2,325 -- 15,000
Dividends and interest receivable .................. 456,854 10,686 10,810 9,639
Other assets ....................................... 5,331 -- -- --
------------ ------------ ------------ ------------
TOTAL ASSETS ................................... 61,862,961 8,099,153 11,897,763 5,577,188
------------ ------------ ------------ ------------
LIABILITIES
Securities sold short (proceeds $4,501,512) ........ -- -- 3,944,534 --
Payable for capital shares redeemed ................ 1,302 42 -- 40
Dividends payable on securities sold short ......... -- -- 2,336 --
Accrued expenses:
Management fees .................................. 38,875 8,543 11,639 5,941
12b-1 distribution and service fees .............. 37,393 4,488 3,566 2,756
Trustees' fees ................................... 1,751 -- -- --
Other ............................................ 22,743 -- -- --
------------ ------------ ------------ ------------
TOTAL LIABILITIES .............................. 102,064 13,073 3,962,075 8,737
------------ ------------ ------------ ------------
NET ASSETS ......................................... $ 61,760,897 $ 8,086,080 $ 7,935,688 $ 5,568,451
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital .................................... $ 58,408,093 $ 8,172,449 $ 7,928,586 $ 9,614,971
Accumulated net investment income (loss) ........... (798) 1,977 (33,475) 10
Accumulated net realized losses from
security transactions ............................ (685,971) (446,945) (4,666) (3,502,214)
Net unrealized appreciation (depreciation)
on investments ................................... 4,039,573 358,599 45,243 (544,316)
------------ ------------ ------------ ------------
NET ASSETS ......................................... $ 61,760,897 $ 8,086,080 $ 7,935,688 $ 5,568,451
============ ============ ============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ....... 4,799,554 740,245 776,451 1,002,407
============ ============ ============ ============
Net asset value, offering price and redemption
price per share .................................. $ 12.87 $ 10.92 $ 10.22 $ 5.56
============ ============ ============ ============
See accompanying notes to financial statements.
3
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 (UNAUDITED)
===========================================================================================================================
THE GOLDEN THE JAMES THE JAMES THE JAMES
RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP PLUS
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ............................................ $ 251,264 $ 65,658 $ 15,564 $ 44,433
Interest ............................................. 858,744 2,061 58,461 1,109
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ............................ 1,110,008 67,719 74,025 45,542
------------ ------------ ------------ ------------
EXPENSES
Management fees ...................................... 232,149 46,259 74,760 28,926
12b-1 distribution and service fees - Class A ........ 77,472 9,508 11,184 6,034
Administration fees .................................. 25,137 -- -- --
Dividend expense on securities sold short ............ -- -- 20,266 --
Professional fees .................................... 15,125 -- -- --
Accounting services fees ............................. 15,000 -- -- --
Transfer agent fees .................................. 10,081 -- -- --
Postage and supplies ................................. 9,381 -- -- --
Custodian fees and expenses .......................... 9,075 -- -- --
Trustees' fees ....................................... 2,773 1,278 1,290 1,247
Shareholder report printing and mailing .............. 5,806 -- -- --
Other expenses ....................................... 5,319 -- -- --
------------ ------------ ------------ ------------
Total expenses ......................................... 407,318 57,045 107,500 36,207
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ........................... 702,690 10,674 (33,475) 9,335
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from security transactions (582,380) 47,280 (132,296) (97,596)
Net realized gains on closed short positions ......... -- -- 444,777 --
Net change in unrealized appreciation/depreciation
on investments ..................................... (2,121,507) (784,971) (792,098) (668,944)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS ................................ (2,703,887) (737,691) (479,617) (766,540)
------------ ------------ ------------ ------------
NET DECREASE IN NET ASSETS
FROM OPERATIONS ...................................... $ (2,001,197) $ (727,017) $ (513,092) $ (757,205)
============ ============ ============ ============
See accompanying notes to financial statements.
4
THE GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
===========================================================================================
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, 2002 JUNE 30,
(UNAUDITED) 2002
- -------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .................................. $ 702,690 $ 1,869,203
Net realized gains (losses) on investments ............. (582,380) 1,584,963
Net change in unrealized appreciation/
depreciation on investments .......................... (2,121,507) (56,160)
------------ ------------
Net increase (decrease) in net assets from operations .... (2,001,197) 3,398,006
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................... (705,338) (1,888,471)
Distributions from net realized gains .................. (1,688,540) (3,886,347)
------------ ------------
Decrease in net assets from distributions to shareholders (2,393,878) (5,774,818)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 3,407,685 3,787,834
Net asset value of shares issued in reinvestment
of distributions to shareholders ..................... 2,316,321 5,585,999
Payments for shares redeemed ........................... (5,023,730) (7,443,087)
------------ ------------
Net increase in net assets from capital share transactions 700,276 1,930,746
------------ ------------
TOTAL DECREASE IN NET ASSETS ............................. (3,694,799) (446,066)
NET ASSETS
Beginning of period .................................... 65,455,696 65,901,762
------------ ------------
End of period .......................................... $ 61,760,897 $ 65,455,696
============ ============
ACCUMULATED NET INVESTMENT INCOME (LOSS) ................. $ (798) $ 1,850
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................ 257,104 270,562
Shares issued in reinvestment of
distributions to shareholders ........................ 179,053 408,334
Shares redeemed ........................................ (380,880) (528,966)
------------ ------------
Net increase in shares outstanding ..................... 55,277 149,930
Shares outstanding, beginning of period ................ 4,744,277 4,594,347
------------ ------------
Shares outstanding, end of period ...................... 4,799,554 4,744,277
============ ============
See accompanying notes to financial statements.
5
THE JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
===========================================================================================
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, 2002 JUNE 30,
(UNAUDITED) 2002
- -------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .................................. $ 10,674 $ 1,229
Net realized gains on investments ...................... 47,280 38,063
Net change in unrealized appreciation/
depreciation on investments .......................... (784,971) 620,741
------------ ------------
Net increase (decrease) in net assets from operations .... (727,017) 660,033
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................... (8,697) (8,354)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 1,221,957 852,726
Net asset value of shares issued in reinvestment
of distributions to shareholders ..................... 8,095 7,753
Payments for shares redeemed ........................... (290,385) (696,113)
------------ ------------
Net increase in net assets from capital share transactions 939,667 164,366
------------ ------------
TOTAL INCREASE IN NET ASSETS ............................. 203,953 816,045
NET ASSETS
Beginning of period .................................... 7,882,127 7,066,082
------------ ------------
End of period .......................................... $ 8,086,080 $ 7,882,127
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ...................... $ 1,977 $ --
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................ 113,377 74,230
Shares issued in reinvestment of
distributions to shareholders ........................ 743 692
Shares redeemed ........................................ (26,635) (62,930)
------------ ------------
Net increase in shares outstanding ..................... 87,485 11,992
Shares outstanding, beginning of period ................ 652,760 640,768
------------ ------------
Shares outstanding, end of period ...................... 740,245 652,760
============ ============
See accompanying notes to financial statements.
6
THE JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
===========================================================================================
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, 2002 JUNE 30,
(UNAUDITED) 2002
- -------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) ........................... $ (33,475) $ 22,687
Net realized gains (losses) from:
Security transactions ................................ (132,296) (226,354)
Closed short positions ............................... 444,777 512,952
Net change in unrealized appreciation/
depreciation on investments .......................... (792,098) 288,949
------------ ------------
Net increase (decrease) in net assets from operations .... (513,092) 598,234
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................... -- (38,843)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 1,798,128 617,985
Net asset value of shares issued in reinvestment
of distributions to shareholders ..................... -- 34,561
Payments for shares redeemed ........................... (2,025,775) (2,186,164)
------------ ------------
Net decrease in net assets from capital share transactions (227,647) (1,533,618)
------------ ------------
TOTAL DECREASE IN NET ASSETS ............................. (740,739) (974,227)
NET ASSETS
Beginning of period .................................... 8,676,427 9,650,654
------------ ------------
End of period .......................................... $ 7,935,688 $ 8,676,427
============ ============
ACCUMULATED NET INVESTMENT LOSS .......................... $ (33,475) $ --
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................ 165,750 59,619
Shares issued in reinvestment of
distributions to shareholders ........................ -- 3,439
Shares redeemed ........................................ (193,118) (213,193)
------------ ------------
Net decrease in shares outstanding ..................... (27,368) (150,135)
Shares outstanding, beginning of period ................ 803,819 953,954
------------ ------------
Shares outstanding, end of period ...................... 776,451 803,819
============ ============
See accompanying notes to financial statements.
7
THE JAMES LARGE CAP PLUS FUND
STATEMENTS OF CHANGES IN NET ASSETS
===========================================================================================
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, 2002 JUNE 30,
(UNAUDITED) 2002
- -------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .................................. $ 9,335 $ 8,219
Net realized losses on investments ..................... (97,596) (729,913)
Net change in unrealized appreciation/
depreciation on investments .......................... (668,944) 154,702
------------ ------------
Net decrease in net assets from operations ............... (757,205) (566,992)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................... (9,543) (8,001)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 2,805,445 746,881
Net asset value of shares issued in reinvestment
of distributions to shareholders ..................... 8,926 7,153
Payments for shares redeemed ........................... (267,488) (894,737)
------------ ------------
Net increase (decrease) in net assets
from capital share transactions ........................ 2,546,883 (140,703)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. 1,780,135 (715,696)
NET ASSETS
Beginning of period .................................... 3,788,316 4,504,012
------------ ------------
End of period .......................................... $ 5,568,451 $ 3,788,316
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ...................... $ 10 $ 218
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................ 474,931 112,339
Shares issued in reinvestment of
distributions to shareholders ........................ 1,593 1,049
Shares redeemed ........................................ (46,222) (130,311)
------------ ------------
Net increase (decrease) in shares outstanding .......... 430,302 (16,923)
Shares outstanding, beginning of period ................ 572,105 589,028
------------ ------------
Shares outstanding, end of period ...................... 1,002,407 572,105
============ ============
See accompanying notes to financial statements.
8
THE GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DEC. 31, 2002 ------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period ..... $ 13.80 $ 14.34 $ 16.54 $ 17.28 $ 18.96 $ 19.31
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income .................... 0.15 0.40 0.40 0.50 0.49 0.65
Net realized and unrealized
gains (losses) on investments .......... (0.57) 0.33 (0.08) 0.31 0.91 1.08
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ........... (0.42) 0.73 0.32 0.81 1.40 1.73
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ............... (0.15) (0.40) (0.40) (0.50) (0.49) (0.65)
From net realized gains on investments ... (0.36) (0.87) (2.12) (1.05) (2.59) (1.43)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ........................ (0.51) (1.27) (2.52) (1.55) (3.08) (2.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........... $ 12.87 $ 13.80 $ 14.34 $ 16.54 $ 17.28 $ 18.96
========== ========== ========== ========== ========== ==========
Total return ............................... (3.03%)(A) 5.37% 2.33% 4.98% 7.97% 9.47%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) ........ $ 61,761 $ 65,456 $ 65,902 $ 82,754 $ 107,802 $ 132,094
========== ========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets:
Before expense reimbursements
and waived fees ........................ 1.30%(B) 1.24% 1.25% 1.22% 1.19% 1.23%
After expense reimbursements
and waived fees ........................ 1.30%(B) 1.24% 1.25% 1.07% 1.00% 1.08%
Ratio of net investment income to
average net assets ....................... 2.24%(B) 2.84% 2.61% 2.86% 2.71% 3.29%
Portfolio turnover rate .................... 55%(B) 54% 57% 82% 38% 54%
(A) Not annualized.
(B) Annualized.
See accompanying notes to financial statements.
9
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- ------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year Period
Ended Ended Ended Ended Ended
Dec. 31, 2002 June 30, June 30, June 30, June 30,
(Unaudited) 2002 2001 2000 1999(A)
- ------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period ..... $ 12.08 $ 11.03 $ 10.61 $ 11.87 $ 10.00
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ............. 0.01 0.00 (0.04) (0.05) (0.00)
Net realized and unrealized gains
(losses) on investments ................ (1.16) 1.06 0.46 (1.21) 1.87
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... (1.15) 1.06 0.42 (1.26) 1.87
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ............... (0.01) (0.01) -- -- (0.00)
Return of capital ........................ -- -- -- -- (0.00)
---------- ---------- ---------- ---------- ----------
Total distributions ........................ (0.01) (0.01) -- -- (0.00)
---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........... $ 10.92 $ 12.08 $ 11.03 $ 10.61 $ 11.87
========== ========== ========== ========== ==========
Total return ............................... (9.51%)(B) 9.65% 3.96% (10.61%) 18.74%(B)
========== ========== ========== ========== ==========
Net assets at end of period (000's) ........ $ 8,086 $ 7,882 $ 7,066 $ 5,251 $ 6,564
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets 1.50%(C) 1.48% 1.50% 1.50% 1.49%(C)
Ratio of net investment income (loss)
to average net assets ...................... 2.81%(C) 0.02% (0.45%) (0.48%) (0.11%)(C)
Portfolio turnover rate .................... 43%(C) 78% 75% 101% 42%(C)
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
10
THE JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- ------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year Period
Ended Ended Ended Ended Ended
Dec. 31, 2002 June 30, June 30, June 30, June 30,
(Unaudited) 2002 2001 2000 1999(A)
- ------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period ..... $ 10.79 $ 10.12 $ 9.71 $ 9.30 $ 10.00
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ............. (0.04) 0.02 0.24 0.23 0.13
Net realized and unrealized gains
(losses) on investments ................ (0.53) 0.69 0.41 0.41 (0.70)
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... (0.57) 0.71 0.65 0.64 (0.57)
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ............... -- (0.04) (0.24) (0.23) (0.13)
---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........... $ 10.22 $ 10.79 $ 10.12 $ 9.71 $ 9.30
========== ========== ========== ========== ==========
Total return ............................... (5.28%)(B) 7.06% 6.76% 7.02% (5.74%)(B)
========== ========== ========== ========== ==========
Net assets at end of period (000's) ........ $ 7,936 $ 8,676 $ 9,651 $ 6,684 $ 8,284
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets,
excluding dividends on securities sold short 1.95%(C) 1.95% 1.95% 1.95% 1.94%(C)
Ratio of dividend expense on securities sold short 0.45%(C) 0.28% 0.25% 0.53% 0.36%(C)
Ratio of net expenses to average net assets 2.40%(C) 2.23% 2.20% 2.48% 2.30%(C)
Ratio of net investment income (loss)
to average net assets .................... (0.75%)(C) 0.25% 2.47% 2.47% 2.31%(C)
Portfolio turnover rate .................... 45%(C) 154% 104% 90% 54%(C)
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
11
THE JAMES LARGE CAP PLUS FUND
FINANCIAL HIGHLIGHTS
====================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- ----------------------------------------------------------------------------------------------------
Six Months Year Year Period
Ended Ended Ended Ended
Dec. 31, 2002 June 30, June 30, June 30,
(Unaudited) 2002 2001 2000(A)
- ----------------------------------------------------------------------------------------------------
Net asset value at beginning of period ..... $ 6.62 $ 7.65 $ 13.65 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ............. 0.01 0.01 (0.07) (0.06)
Net realized and unrealized gains
(losses) on investments ................ (1.06) (1.03) (5.93) 3.71
---------- ---------- ---------- ----------
Total from investment operations ........... (1.05) (1.02) (6.00) 3.65
---------- ---------- ---------- ----------
Less distributions:
From net investment income ............... (0.01) (0.01) -- --
---------- ---------- ---------- ----------
Net asset value at end of period ........... $ 5.56 $ 6.62 $ 7.65 $ 13.65
========== ========== ========== ==========
Total return ............................... (15.86%)(B) (13.29%) (43.96%) 36.50%(B)
========== ========== ========== ==========
Net assets at end of period (000's) ........ $ 5,568 $ 3,788 $ 4,504 $ 6,279
========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets 1.50%(C) 1.50% 1.50% 1.49%(C)
Ratio of net investment income (loss)
to average net assets .................... 0.39%(C) 0.20% (0.67%) (0.99%)(C)
Portfolio turnover rate .................... 38%(C) 87% 131% 95%(C)
(A) Represents the period from the initial public offering of shares (November
1, 1999) through June 30, 2000.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
12
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS - 49.1% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 3.5%
30,000 Barrick Gold Corporation .......................... $ 462,300
42,000 Newmont Mining Corporation ........................ 1,219,260
15,000 Royal Gold, Inc. .................................. 373,815
5,000 RPM International, Inc. ........................... 76,400
------------
2,131,775
------------
CONSUMER, CYCLICAL - 6.2%
46,000 AOL Time Warner, Inc.* ............................ 602,600
10,000 Big Lots, Inc.* ................................... 132,300
20,000 CBRL Group, Inc. .................................. 602,600
16,800 Columbia Sportswear Company* ...................... 746,256
9,000 General Motors Corporation ........................ 331,740
30,000 McDonald's Corporation ............................ 482,400
13,125 Nautilus Group, Inc.* ............................. 175,350
15,000 Ryan's Family Steak House, Inc.* .................. 170,250
25,000 Sears, Roebuck & Company .......................... 598,750
------------
3,842,246
------------
CONSUMER, NON-CYCLICAL - 9.3%
30,000 Conagra Foods, Inc. ............................... 750,300
40,000 Coventry Health Care, Inc.* ....................... 1,161,200
12,000 DaVita, Inc.* ..................................... 296,040
15,000 Fleming Companies, Inc. ........................... 98,550
12,000 Mine Safety Appliances Company .................... 387,000
15,000 Mylan Laboratories, Inc. .......................... 523,500
10,000 Pharmaceutical Resources, Inc.* ................... 298,000
13,000 Procter & Gamble Company .......................... 1,117,220
24,000 Sanderson Farms, Inc. ............................. 501,840
35,300 Supervalu, Inc. ................................... 582,803
------------
5,716,453
------------
ENERGY - 3.6%
7,000 Amerada Hess Corporation .......................... 385,350
8,000 Apache Corporation ................................ 455,920
4,470 ChevronTexaco Corporation ......................... 297,166
10,000 Devon Energy Corporation .......................... 459,000
15,000 EOG Resources, Inc. ............................... 598,800
------------
2,196,236
------------
FINANCIAL - 7.1%
52,000 Alfa Corporation .................................. 624,572
18,000 Commerce Group, Inc. .............................. 675,000
17,000 H&R Block, Inc. ................................... 683,400
19,000 Health Care REIT, Inc. ............................ 513,950
28,500 RenaissanceRe Holdings, Ltd. ...................... 1,128,600
15,000 Rent-A-Center, Inc.* .............................. 749,250
------------
4,374,772
------------
13
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 49.1% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL - 4.4%
30,000 Aviall, Inc.* ..................................... $ 241,500
8,000 Ball Corporation .................................. 409,520
14,000 Boeing Company .................................... 461,860
5,000 BorgWarner, Inc. .................................. 252,100
18,000 Powell Industries, Inc.* .......................... 307,422
27,000 Precision Castparts Corporation ................... 654,750
12,600 Triumph Group, Inc.* .............................. 402,444
------------
2,729,596
------------
TECHNOLOGY - 8.6%
18,000 Activision, Inc.* ................................. 262,620
6,000 Amgen, Inc.* ...................................... 290,040
18,000 Bio-Rad Laboratories, Inc. - Class A* ............. 696,600
17,500 Cubic Corporation ................................. 322,525
35,000 ESS Technology, Inc* .............................. 220,150
30,000 Intel Corporation ................................. 467,100
8,000 International Business Machines Corporation (IBM) . 620,000
12,000 Microsoft Corporation* ............................ 620,400
15,000 Moog Inc. - Class A* .............................. 465,600
67,000 Pegasystems, Inc.* ................................ 342,370
35,000 Storage Technology Corporation* ................... 749,700
4,000 United Technologies Corporation ................... 247,760
------------
5,304,865
------------
UTILITIES - 6.4%
28,000 Duke Energy ....................................... 547,120
40,000 Edison International* ............................. 474,000
35,400 Energen Corporation ............................... 1,030,140
15,000 FirstEnergy Corporation ........................... 494,550
26,000 IDACORP, Inc. ..................................... 645,580
20,000 Korea Electric Power (KEPCO) Corporation - ADR .... 170,000
4,000 Pinnacle West Capital Corporation ................. 136,360
12,000 WPS Resources Corporation ......................... 465,840
------------
3,963,590
------------
TOTAL COMMON STOCKS ............................... $ 30,259,533
------------
14
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 42.0% Value
- --------------------------------------------------------------------------------
$1,000,000 U.S. Treasury Bonds, 10.000%, 5/15/10 ............. $ 1,184,219
3,100,000 U.S. Treasury Bonds, 5.000%, 2/15/11 .............. 3,406,125
3,000,000 U.S. Treasury Bonds, 4.250%, 5/31/03 .............. 3,037,500
500,000 U.S. Treasury Notes, 3.500%, 11/15/06 ............. 520,313
6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07 .............. 6,883,829
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 .............. 3,501,798
4,000,000 U.S. Treasury Notes, 6.000%, 8/15/09 .............. 4,650,624
2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 ......... 2,261,064
498,005 Government National Mortgage Association,
#594428, 5.000%, 11/15/17 ....................... 515,280
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS .............. $ 25,960,752
------------
================================================================================
PAR VALUE CORPORATE BONDS - 4.9% VALUE
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Cos., Inc., 6.000%, 4/15/11 ........ $ 554,947
500,000 Barrick Gold Finance, Inc., 7.500%, 5/1/07 ........ 572,450
500,000 General Electric Capital Corporation, 7.875%, 12/1/06 578,455
250,000 National Fuel Gas Co., 6.820%, 8/1/04 ............. 265,010
500,000 Public Service Electric & Gas, 7.375%, 3/1/14 ..... 534,536
500,000 Tennessee Valley Authority, 5.625%, 1/18/11 ....... 550,081
------------
TOTAL CORPORATE BONDS ............................. $ 3,055,479
------------
================================================================================
SHARES MUTUAL FUNDS - 2.8% VALUE
- --------------------------------------------------------------------------------
45,000 Greater China Fund, Inc. .......................... $ 396,900
20,000 iShares Dow Jones U.S. Technology Sector Index Fund 646,400
20,000 iShares Dow Jones U.S. Telecommunications
Sector Index Fund ............................... 381,200
19,000 Morgan Stanley Eastern Europe Fund, Inc. .......... 326,230
------------
TOTAL MUTUAL FUNDS ................................ $ 1,750,730
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 0.6% VALUE
- --------------------------------------------------------------------------------
372,049 First American Treasury ........................... $ 372,049
------------
TOTAL INVESTMENT SECURITIES - 99.4%
(Amortized Cost $57,358,970) ...................... $ 61,398,543
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.6% ...... 362,354
------------
NET ASSETS - 100.0% ............................... $ 61,760,897
============
* Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
15
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS - 95.5% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 5.5%
10,100 Albermarle Corporation ............................ $ 287,345
4,100 Bandag, Inc. ...................................... 158,588
------------
445,933
------------
CONSUMER, CYCLICAL - 20.7%
6,975 Banta Corporation ................................. 218,108
12,100 Central Garden & Pet Company* ..................... 223,971
7,185 Columbia Sportswear Company* ...................... 319,158
10,900 Landry's Restaurants, Inc. ........................ 231,516
6,300 OshKosh B'Gosh, Inc. - Class A .................... 176,715
3,845 The Ryland Group, Inc. ............................ 128,231
6,000 The Toro Company .................................. 383,399
------------
1,681,098
------------
CONSUMER, NON-CYCLICAL - 13.3%
18,200 Helen Of Troy Limited* ............................ 211,848
11,150 Mid Atlantic Medical Services, Inc.* .............. 361,260
13,815 Sanderson Farms, Inc. ............................. 288,872
16,625 Sola International, Inc.* ......................... 216,125
------------
1,078,105
------------
ENERGY - 6.4%
13,500 Patina Oil & Gas Corporation ...................... 427,275
11,275 Willbros Group, Inc.* ............................. 92,681
------------
519,956
------------
FINANCIAL - 17.4%
9,330 Capstead Mortage Corporation ...................... 229,985
9,000 FirstFed America Bancorp, Inc. .................... 223,650
13,300 Flagstar Bancorp, Inc. ............................ 287,279
12,300 Irwin Financial Corporation ....................... 202,950
7,200 LNR Property Corporation .......................... 254,880
8,470 Oriental Financial Group, Inc. .................... 208,193
------------
1,406,937
------------
INDUSTRIAL - 9.8%
6,425 Graco, Inc. ....................................... 184,076
18,100 Lennox International, Inc. ........................ 227,156
4,000 Lincoln Electronic Holdings, Inc. ................. 92,600
9,120 Powell Industries, Inc.* .......................... 155,760
9,560 Rock-Tenn Company ................................. 128,869
------------
788,461
------------
16
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 95.5% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY - 16.8%
44,200 CompuCom Systems, Inc.* ........................... $ 247,962
12,625 Cubic Corporation ................................. 232,679
44,750 ESS Technology, Inc.* ............................. 281,477
10,900 Harland (John H.) Company ......................... 241,217
6,735 Triumph Group, Inc.* .............................. 215,116
8,565 United Industrial Corporation ..................... 137,040
------------
1,355,491
------------
UTILITIES - 5.6%
6,000 Northwest Natural Gas Company ..................... 162,360
7,685 UGI Corporation ................................... 287,342
------------
449,702
------------
TOTAL COMMON STOCKS ............................... $ 7,725,683
------------
================================================================================
PAR VALUE U.S. GOVERNMENT BONDS - 2.5% VALUE
- --------------------------------------------------------------------------------
$ 200,000 U.S. Treasury Bill, 3/27/03 ....................... $ 199,458
------------
- --------------------------------------------------------------------------------
SHARES SHORT TERM INVESTMENTS - 2.0% VALUE
161,001 First American Treasury ........................... $ 161,001
------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Amortized Cost $7,727,543) ....................... $ 8,086,142
LIABILITIES IN EXCESS OF OTHER ASSETS - 0.0% ...... (62)
------------
NET ASSETS - 100.0% ............................... $ 8,086,080
============
* Non-income producing security.
See accompanying notes to financial statements.
17
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS - 68.5% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 5.0%
6,300 Albermarle Corporation ............................ $ 179,235
16,000 Rock-Tenn Company ................................. 215,680
------------
394,915
------------
CONSUMER, CYCLICAL - 12.0%
20,400 AOL Time Warner, Inc.* ............................ 267,240
3,000 AutoZone, Inc.* ................................... 211,950
6,300 Banta Corporation ................................. 197,001
5,100 Sears, Roebuck & Company .......................... 122,145
3,000 Whirlpool Corporation ............................. 156,660
------------
954,996
------------
CONSUMER, NON-CYCLICAL - 10.9%
3,000 Elan Corporation PLC - ADR Rights* ................ 3
7,000 Fresh Del Monte Produce, Inc. ..................... 132,370
14,000 Helen Of Troy Limited* ............................ 162,960
13,000 Humana, Inc.* ..................................... 130,000
6,000 Mylan Laboratories ................................ 209,400
7,600 Pharmaceutical Resources* ......................... 226,480
------------
861,213
------------
ENERGY - 2.7%
3,760 Apache Corporation ................................ 214,282
------------
FINANCIAL - 13.5%
100 Berkshire Hathaway, Inc. - Class B* ............... 242,300
4,900 Greenpoint Financial Corporation .................. 221,382
4,330 RenaissanceRe Holdings, Ltd. ...................... 171,468
5,700 Rent-A-Center, Inc.* .............................. 284,715
12,400 Sierra Health Services, Inc.* ..................... 148,924
------------
1,068,789
------------
INDUSTRIAL - 4.0%
21,700 Owens-Illinois, Inc.* ............................. 316,386
------------
TECHNOLOGY - 18.9%
6,000 AO VimpelCom - ADR* ............................... 192,060
3,800 Electronic Arts, Inc.* ............................ 189,126
40,400 ESS Technology, Inc.* ............................. 254,116
15,300 Iomega Corporation* ............................... 120,105
8,935 Moog Inc. - Class A* .............................. 277,342
10,200 Overture Services, Inc.* .......................... 278,563
38,200 Pegasystems, Inc.* ................................ 195,202
------------
1,506,514
------------
18
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 68.5% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITIES - 1.5%
10,000 Edison International* ............................. $ 118,500
------------
TOTAL COMMON STOCKS ............................... $ 5,435,595
------------
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 3.8% VALUE
- --------------------------------------------------------------------------------
$ 300,000 Federal Home Loan Bank, 5.76%, 3/25/03 ............ $ 303,080
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 2.2% VALUE
- --------------------------------------------------------------------------------
173,699 First American Treasury ........................... $ 173,699
------------
TOTAL INVESTMENT SECURITIES- 74.5%
(Amortized Cost $6,424,109) ....................... $ 5,912,374
SEGREGATED CASH WITH BROKERS- 75.3% ............... 5,974,579
SECURITIES SOLD SHORT- (49.7%) (Proceeds $4,501,512) (3,944,534)
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.1%) .... (6,731)
------------
NET ASSETS - 100.0% ............................... $ 7,935,688
============
* Non-income producing security.
ADR-American Depository Receipt.
See accompanying notes to financial statements.
19
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS SOLD SHORT - 49.7% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 4.9%
8,500 Allegheny Technologies, Inc. ...................... $ 52,955
7,500 CONSOL Energy, Inc. ............................... 129,600
3,500 Dow Chemical Company .............................. 103,950
1,600 Potash Corporation of Saskatchewan ................ 101,744
------------
388,249
------------
CONSUMER, CYCLICAL - 14.8%
4,500 Cox Communications, Inc. - Class A* ............... 127,800
3,000 Dow Jones & Company, Inc. ......................... 129,690
3,600 Four Seasons Hotels, Inc. ......................... 101,700
12,500 Hollinger International, Inc. ..................... 127,000
7,500 Robert Half International, Inc.* .................. 120,825
9,000 Sotheby's Holdings, Inc. - Class A* ............... 81,000
5,000 Triarc Companies, Inc.* ........................... 131,200
5,600 Univision Communications, Inc. - Class A* ......... 137,200
10,800 ValueVision Media, Inc. - Class A* ................ 161,784
11,200 Wilsons The Leather Experts, Inc.* ................ 56,000
------------
1,174,199
------------
CONSUMER, NON-CYCLICAL - 8.5%
7,700 Cerus Corporation* ................................ 165,550
5,500 CV Therapeutics* .................................. 100,210
5,700 Guilford Pharmaceuticals, Inc.* ................... 22,686
6,000 NPS Pharmaceuticals, Inc.* ........................ 151,020
3,500 Scios, Inc.* ...................................... 114,030
6,900 Therasense, Inc.* ................................. 57,615
5,565 Vector Group Ltd. ................................. 64,665
------------
675,776
------------
ENERGY - 3.3%
2,800 Cal Dive International, Inc.* ..................... 65,800
11,400 Input/Output, Inc.* ............................... 48,450
10,000 Pride International , Inc.* ....................... 149,000
------------
263,250
------------
FINANCIAL - 2.8%
3,000 Bank of New York Co., Inc. ........................ 71,880
2,000 Northern Trust Corporation ........................ 70,100
3,000 Paychex, Inc. ..................................... 83,700
------------
225,680
------------
INDUSTRIAL - 1.1%
10,300 Vicor Corporation* ................................ 84,986
------------
20
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (CONTINUED)
================================================================================
SHARES COMMON STOCKS SOLD SHORT - 49.7% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY - 14.3%
5,500 Agilent Technologies, Inc.* ....................... $ 98,780
5,500 Arrow Electronics, Inc.* .......................... 70,345
4,500 Broadcom Corporation - Class A* ................... 67,770
4,040 Brooks-PRI Automation* ............................ 46,298
8,500 Caliper Technologies Corporation* ................. 25,500
7,000 Credence Systems Corporation* ..................... 65,310
12,300 Diversa Corporation* .............................. 111,315
5,000 EchoStar Communications - Class A* ................ 111,300
7,000 KEMET Corporation* ................................ 61,180
4,000 Kopin Corporation* ................................ 15,680
17,000 Luminex Corporation* .............................. 69,870
10,500 MatrixOne, Inc.* .................................. 45,150
8,000 Research In Motion, Ltd.* ......................... 104,960
8,600 Texas Instruments, Inc. ........................... 129,086
6,500 Thomas & Betts Corporation* ....................... 109,850
------------
1,132,394
------------
TOTAL COMMON STOCKS (Proceeds $4,501,512) ......... $ 3,944,534
------------
* Non-income producing security.
See accompanying notes to financial statements.
21
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS - 96.7% VALUE
- --------------------------------------------------------------------------------
CONSUMER, CYCLICAL - 19.4%
4,150 DaimlerChrysler AG ................................ $ 127,198
3,270 Johnson Controls, Inc. ............................ 262,155
16,100 Limited Brands .................................... 224,273
12,115 Mattel, Inc. ...................................... 232,001
2,100 Pulte Homes, Inc. ................................. 100,527
5,550 Sears, Roebuck & Company .......................... 132,923
------------
1,079,077
------------
CONSUMER, NON-CYCLICAL - 7.2%
6,135 Albertson's, Inc. ................................. 136,565
5,375 Mylan Laboratories ................................ 187,588
4,680 Tenet Healthcare Corporation* ..................... 76,752
------------
400,905
------------
ENERGY - 6.9%
4,535 Anadarko Petroleum Corporation .................... 217,227
7,735 Marathon Oil Corporation .......................... 164,678
------------
381,905
------------
FINANCIAL - 22.5%
3,665 Bank of America Corporation ....................... 254,974
4,675 First Tennessee National Corporation .............. 168,020
9,600 H&R Block, Inc. ................................... 385,919
2,370 MGIC Investment Corporation ....................... 97,881
7,005 Progressive Corporation ........................... 347,658
------------
1,254,452
------------
INDUSTRIAL - 8.8%
4,470 Boeing Company .................................... 147,465
3,105 ITT Industries, Inc. .............................. 188,443
2,765 Magna International, Inc. - Class A ............... 155,255
------------
491,163
------------
TECHNOLOGY - 14.2%
17,150 Computer Associates International, Inc. ........... 231,525
5,010 Electronic Data Systems Corporation ............... 92,334
5,300 Symantec Corporation* ............................. 214,385
4,120 United Technologies Corporation ................... 255,193
------------
793,437
------------
TRANSPORTATION SERVICES - 2.4%
2,200 Union Pacific Corporation ......................... 131,714
------------
22
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 96.7% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITIES - 15.3%
6,125 FirstEnergy Corporation ........................... $ 201,941
4,850 PPL Corporation ................................... 168,198
10,425 Southern Company .................................. 295,966
4,750 Verizon Communications, Inc. ...................... 184,063
------------
850,168
------------
TOTAL COMMON STOCKS ............................... $ 5,382,821
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 3.0% VALUE
- --------------------------------------------------------------------------------
169,728 First American Treasury ........................... $ 169,728
TOTAL INVESTMENT SECURITIES - 99.7% (Cost $6,096,865) $ 5,552,549
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.3% ...... 15,902
------------
NET ASSETS - 100.0% ............................... $ 5,568,451
============
* Non-income producing security.
See accompanying notes to financial statements.
23
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 (UNAUDITED)
================================================================================
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Golden Rainbow Fund, The James Small Cap Fund, and The James Market Neutral
Fund (individually the "Fund," collectively the "Funds") are each a diversified
series of The James Advantage Funds (the "Trust"), and The James Large Cap Plus
Fund is a non-diversified series of the Trust. The Trust is an open-end
management investment company that was organized as an Ohio business trust on
August 29, 1997. The Trust is registered under the Investment Company Act of
1940 (the "1940 Act"). The Golden Rainbow Fund was originally organized as a
series of the Flagship Admiral Funds Inc., a Maryland corporation. On June 26,
1998, pursuant to an Agreement and Plan of Reorganization, The Golden Rainbow
Fund was restructured through a tax-free reorganization as a series of the
Trust. The James Small Cap Fund and The James Market Neutral Fund each commenced
its public offering of shares on October 2, 1998. The James Large Cap Plus Fund
commenced its public offering of shares on November 1, 1999.
The Golden Rainbow Fund seeks to provide total return through a combination of
growth and income and preservation of capital in declining markets. The Fund
seeks to achieve its objective by investing primarily in common stocks and/or
debt securities that the Fund's adviser, James Investment Research, Inc.
("James"), believes are undervalued.
The James Small Cap Fund seeks to provide long term capital appreciation. The
Fund seeks to achieve its objective by investing primarily in common stocks of
small capitalization companies.
The James Market Neutral Fund seeks to provide positive returns regardless of
the direction of the stock markets. The Fund seeks to achieve its objective by
investing in common stocks that James believes are undervalued and more likely
to appreciate, and selling short common stocks that James believes are
overvalued and more likely to depreciate.
The James Large Cap Plus Fund seeks to provide long-term capital appreciation
and outperform the Standard & Poor's 500 Index (the "S&P 500 Index"). The Fund
seeks to achieve its objective by investing primarily in common stocks of U.S.
companies with large capitalizations. The Fund often buys stocks in the S&P 500
Index and will typically hold more than 25 stocks.
The following is a summary of significant accounting policies followed by the
Funds in preparation of their financial statements, in accordance with
accounting principles generally accepted in the United States of America
("generally accepted accounting principles").
SHARE VALUATION
The net asset value per share of each Fund is calculated daily by dividing the
total value of the Fund's assets, less liabilities, by the number of shares
outstanding. Through August 19, 2002 the maximum offering price per share of The
Golden Rainbow Fund was equal to the net asset value per share plus a sales load
equal to 2.04% of net asset value (or 2.00% of the offering price). The maximum
offering price per share of The James Small Cap Fund, The James Market Neutral
Fund and The James Large Cap Plus Fund was equal to the net asset value per
share plus a sales load equal to 6.10% of net asset value (or 5.75% of the
offering price). On August 20, 2002, the Board of Trustees approved the
elimination of the front-end sales loads for the Funds. Therefore, the offering
price and the redemption price per share is equal to the net asset value per
share.
SECURITIES VALUATION
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price. All other securities for which
over-the-counter market quotations are readily available are valued at their
last bid price. When market quotations are not readily available, when James
determines the last bid price does not accurately reflect the current value or
when restricted securities are being valued, such securities are valued at their
fair value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
24
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Fixed-income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when market
quotations are not readily available. A pricing service utilizes electronic data
processing techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Short-term investments in fixed-income securities with maturities of less than
60 days when acquired, or which subsequently are within 60 days of maturity, are
valued by using the amortized cost method of valuation, which the Board has
determined will represent fair value.
SECURITIES TRANSACTIONS
Securities transactions are recorded on a trade date basis. Realized gains and
losses from security transactions are determined using the specific
identification method. Securities purchased or sold on a when-issued or delayed
delivery basis may have extended settlement periods. Any securities so purchased
are subject to market fluctuation during this period. The Funds have instructed
their custodian to segregate assets in a separate account with a current value
at least equal to the amount of its when-issued and delayed delivery purchase
commitments.
SHORT SALES AND SEGREGATED CASH
The James Market Neutral Fund actively sells short common stocks. Short sales
are transactions in which the Fund sells a security it does not own in
anticipation of a decline in the market value of that security. To complete such
a transaction, the Fund must borrow the security to deliver to the buyer upon
the short sale; the Fund is then obligated to replace the security borrowed by
purchasing it in the open market at some later date.
The Fund will incur a loss if the market price of the security increases between
the date of the short sale and the date on which the Fund replaces the borrowed
security. The Fund will realize a gain if the security declines in value between
those dates. Dividends paid by the Fund in connection with such short sales are
recorded as expenses.
All short sales are fully collateralized. The Fund maintains the collateral in
segregated accounts consisting of cash and/or high-grade liquid assets
sufficient to collateralize the market value of its short positions.
INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts on long-term debt securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, if any, is declared and distributed to shareholders of
each Fund quarterly. Net realized capital gains from security transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available loss carryovers. Distributions to shareholders of net investment
income and net realized capital gains are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. Accordingly, temporary overdistributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income and/or distributions in excess of net realized gains
from security transactions, where applicable.
25
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period.
FEDERAL INCOME TAXES
The Funds intend to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
The tax character of distributions paid for the years ended June 30, 2002 and
2001 was as follows:
====================================================================================================================================
THE GOLDEN THE JAMES THE JAMES THE JAMES
RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP PLUS
FUND FUND FUND FUND
------------------------ ------------------------ ------------------------ ------------------------
2002 2001 2002 2001 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
From ordinary income ....... $ 1,888,471 $ 1,873,324 $ 8,354 $ -- $ 38,843 $ 212,752 $ 8,001 $ --
From long-term capital gains 3,886,347 8,994,218 -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 5,774,818 $10,867,542 $ 8,354 $ -- $ 38,843 $ 212,752 $ 8,001 $ --
=========== =========== =========== =========== =========== =========== =========== ===========
====================================================================================================================================
The following information is computed on a tax basis for each item as of June
30, 2002:
=================================================================================================
The Golden The James The James The James
Rainbow Small Cap Market Neutral Large Cap Plus
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------
Cost of portfolio investments $ 58,950,044 $ 6,825,204 $ 6,001,807 $ 3,693,388
Gross unrealized appreciation 7,765,014 1,269,201 1,132,140 458,260
Gross unrealized depreciation (1,707,525) (125,631) (294,799) (333,632)
------------ ------------ ------------ ------------
Net unrealized appreciation .. $ 6,057,489 $ 1,143,570 $ 837,341 $ 124,628
============ ============ ============ ============
Post-October losses .......... $ -- $ -- $ -- $ (362,068)
============ ============ ============ ============
Capital loss carryforward .... $ -- $ (494,225) $ (317,147) $ (3,042,550)
============ ============ ============ ============
Undistributed ordinary income $ 1,850 $ -- $ -- $ 218
============ ============ ============ ============
Undistributed long-term gains $ 1,688,540 $ -- $ -- $ --
============ ============ ============ ============
Accumulated earnings (deficit) $ 7,747,879 $ 649,345 $ 520,194 $ (3,279,772)
============ ============ ============ ============
=================================================================================================
The difference between the cost of portfolio investments and financial statement
cost for the Funds is due to certain timing differences in the recognition of
capital losses under income tax regulations and generally accepted accounting
principles. These "Post-October" losses may be utilized in future years to
offset net realized capital gains, if any, prior to distributing such gains to
shareholders.
26
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The capital loss carryforwards as of December 31, 2002 in the table above expire
as follows:
================================================================================
Amount Expiration Date
- --------------------------------------------------------------------------------
The James Small Cap Fund ...................... $ 494,225 June 30, 2008
The James Market Neutral Fund ................. 317,147 June 30, 2008
The James Large Cap Plus Fund ................. 427,706 June 30, 2009
The James Large Cap Plus Fund ................. 2,614,844 June 30, 2010
================================================================================
The capital loss carryforwards may be utilized in the current and future years
to offset net realized capital gains, if any, prior to distributing such gains
to shareholders.
2. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term U.S.
Government obligations for The Golden Rainbow Fund for the six months ended
December 31, 2002 equaled $2,073,750 and $12,981,229, respectively. Purchases
and sales (including maturities) of investments in other long-term securities
for the six months ended December 31, 2002 equaled $14,570,125 and $7,056,563,
respectively, for The Golden Rainbow Fund, $2,416,638 and $1,596,869,
respectively, for The James Small Cap Fund, $3,517,083 and $1,133,014,
respectively, for The James Market Neutral Fund and $3,322,075 and $4,770,429,
respectively, for The James Large Cap Plus Fund. For the six months ended
December 31, 2002, the cost of securities purchased to cover short sales and the
proceeds from securities sold short were $2,210,008 and $3,652,441,
respectively, for The James Market Neutral Fund.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of James or
Integrated Fund Services, Inc. ("IFS"), the administrative services agent,
shareholder services and transfer agent and accounting services agent for the
Trust, or of IFS Fund Distributors, Inc., the exclusive agent for the
distribution of the Funds' shares.
INVESTMENT MANAGEMENT AGREEMENT
The Funds retain James to manage the Funds' investments. The investment
decisions for the Funds are made by a committee of James' personnel, which is
primarily responsible for the day-to-day management of each Fund's portfolio.
The Golden Rainbow Fund is authorized to pay James a fee equal to an annual rate
of 0.74% of its average daily net assets. The Golden Rainbow Fund is responsible
for the payment of all operating expenses of the Fund.
James is authorized to receive a fee (a) equal to an annual rate of 1.25% of the
average daily net assets of The James Small Cap Fund and The James Large Cap
Plus Fund and 1.70% of The James Market Neutral Fund; minus (b) the fees and
expenses of the non-interested person trustees incurred by the applicable Fund.
James is responsible for the payment of all operating expenses of The James
Small Cap Fund, The James Market Neutral Fund and The James Large Cap Plus Fund
except for brokerage fees and commissions, taxes, interest (including dividend
expense on securities sold short), 12b-1 expenses, fees and expenses of
non-interested person trustees and extraordinary expenses.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of an Administrative Services Agreement with the Trust, IFS
supplies executive and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. For these services, IFS receives a monthly fee paid by The Golden
Rainbow Fund, and paid by James for The James Small Cap Fund, The James Market
Neutral Fund and The James Large Cap Plus Fund, based on each Fund's respective
average daily net assets, subject to a minimum monthly fee for each Fund.
27
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, IFS maintains the records of each
shareholder's account, answers shareholder inquiries concerning their accounts,
processes purchases and redemptions of each Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
For these services, IFS receives a monthly fee, based on the number of
shareholder accounts, paid by The Golden Rainbow Fund, and paid by James for The
James Small Cap Fund, The James Market Neutral Fund and The James Large Cap Plus
Fund, subject to a minimum monthly fee for each Fund. In addition, The Golden
Rainbow Fund and James pay IFS out-of-pocket expenses including, but not limited
to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement with the Trust, IFS
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, IFS receives a monthly fee from
The Golden Rainbow Fund and from James with respect to each of The James Small
Cap Fund, The James Market Neutral Fund and The James Large Cap Plus Fund. In
addition, IFS is reimbursed by The Golden Rainbow Fund and James for certain
out-of-pocket expenses incurred by IFS in obtaining valuations of the Funds'
portfolio securities.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement between the Trust and IFS Fund
Distributors, Inc. (the "Distributor"), the Distributor acts as the principal
distributor of each Fund's shares. The Distributor earned $140 and $24 from
underwriting commissions on the sale of shares of The Golden Rainbow Fund and
The James Large Cap Plus Fund, respectively. In addition to these fees, the
Distributor receives an annual fee, paid monthly, from the Trust.
PLAN OF DISTRIBUTION
Each Fund has a Plan of Distribution (the "Plan") under which the Fund may incur
or reimburse James for expenses related to the distribution and promotion of its
shares. The annual limitation for payment of such expenses under the Plans of
each Fund is 0.25% of its average daily net assets for the year.
28
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29
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30
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31
INVESTMENT ADVISER =====================================
James Investment Research, Inc.
P.O. Box 8 Alpha, Ohio 45301
jamesfunds@jir-inc.com ==================
o JAMES
CUSTODIAN ADVANTAGE
U.S. Bank FUND
425 Walnut Street
Cincinnati, Ohio 45202 ==================
o
TRANSFER AGENT Advised by James
Integrated Fund Services, Inc. Investment Research, Inc
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o
INDEPENDENT AUDITORS o
Deloitte & Touche LLP
1700 Courthouse Plaza, N.E.
Dayton, Ohio 45402
o December 31, 2002
DISTRIBUTOR Semi-Annual Report
IFS Fund Distributors, Inc. (Unaudited)
221 East Fourth Street
Suite 300
Cincinnati, Ohio 45202
o o
LEGAL COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor THE GOLDEN RAINBOW FUND
Cincinnati, Ohio 45202
THE JAMES SMALL CAP FUND
THE JAMES MARKET NEUTRAL FUND
THE JAMES LARGE CAP PLUS FUND
=====================================
ITEM 2. CODE OF ETHICS. Not applicable to Semi-Annual Reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to Semi-Annual Reports.
ITEMS 4-8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES. Not applicable to Semi-Annual Reports for the
period ended December 31, 2002.
ITEM 10. EXHIBITS. Certifications required by Item 10(b) of Form N-CSR are filed
herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
-------------------------------------------------------------------
By (Signature and Title)
* /s/ Barry R. James
- ----------------------------
Barry R. James
President
Date: March 10, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
* /s/Barry R. James
- ----------------------------
Barry R. James
President
Date: March 10, 2003
By (Signature and Title)
* /s/ Thomas L. Mangan
- ----------------------------
Thomas L. Mangan
Chief Financial Officer
Date: March 10, 2003
* Print the name and title of each signing officer under his or her signature.