UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8411
The James Advantage Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1349 Fairground Road, Beavercreek, Ohio 45385
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Barry R. James, P.O. Box 8, Alpha, Ohio, 45301
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (937) 426-7640
----------------------------
Date of fiscal year end: 6/30
---------------
Date of reporting period: 6/30/03
---------------
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
================================================================================
A number of very dramatic national and international events occurred during the
last year. Many of these have affected the markets. The National Bureau of
Economic Research declared that the recession, which had begun in March 2001
ended in November of 2001. Our conservative, research-oriented approach has
continued to show its value and we are pleased to present this year's annual
report.
THE MARKET OVER THE PAST YEAR
We witnessed tremendous volatility over the last 12 months. The stock market
started off the year in the doldrums with significant lows in July and later in
October, 2002. However, the market started to pick up after reaching new lows in
October, and headed higher until the beginning of 2003. The market gradually
drifted lower until March and made another significant low at that point.
Despite this volatility, over the 12 month period ended June 30, 2003 the S&P
500 Index gained less than one percent (0.25 percent), while the Russell 2000
Small Cap Index declined by 1.63 percent. One of the major trends in the last
year has been the resurgence of technology, bio-technology and
telecommunications stocks. After having been devastated in the bear market, they
staged large rebounds.
INVESTMENT GOALS AND OBJECTIVES
The conservative objectives and philosophy of James Investment Research, Inc.
were the correct prescription during this period of investor disdain and fear.
Value investing has again proven itself to be more resistant to market declines.
While the wholesale panic of the times hit most sectors of the stock market, our
Funds have been able to identify a number of safe havens.
We work to outperform the Funds' benchmark indices (see pages three and four).
The objectives of each Fund are stated more fully in the Prospectus, which
provides investors with information on risk-level and performance of each Fund.
The research team and portfolio managers of James Investment Research, Inc. take
a personal interest in the Funds' performance, and we believe this has
attributed to success during these difficult times.
INVESTMENT PHILOSOPHY
James Investment Research, Inc. is proud of its long tradition of original
research. Quantitative in nature and rooted in fundamental analysis, this
research decried phenomenally high stock valuations of 1999. The faithful belief
in value investing has reaped its rewards in the years that followed.
We believe that the coming years will continue to reward value investing, and
are confident that our research will continue to show the way to superior
returns. There are many companies with growing earnings, even in these uncertain
times. These hidden gems are waiting to be discovered by those with the ability
and resolve to find them.
FUND PERFORMANCE
THE GOLDEN RAINBOW FUND
The Golden Rainbow Fund continued to achieve national recognition this year by
rating agencies, and was even featured in The New York Times. It continued on a
positive track in spite of the vagaries of the market. The Golden Rainbow Fund
returned 4.34 percent over the twelve months ended June 30, 2003. The benchmark
S&P 500 rose 0.25 percent. A blend of the S&P 500, the Russell 2000 and the
Lehman Brothers Intermediate Government/Credit Index, which more closely
approximates the Fund's investments, returned 4.83 percent.
The Fund's position in high quality U.S. Treasury securities and a
reasonably-sized position in smaller cap securities were factors in this
excellent performance. Additionally, our research took advantage of buying
opportunities in July, October and March that proved to be beneficial. The
balanced approached once again proved its value over the last 12 months ended
June 30, 2003.
1
THE JAMES SMALL CAP FUND
The James Small Cap Fund turned in exceptional performance for the fiscal year
ended June 30, 2003, returning 12.20 percent over this 12 month period. The
Fund's benchmark, the Russell 2000, fell 1.63 percent in this same period.
Because of the excellent performance in the last 12 months, this Fund also
gained national recognition in various publications. Our proprietary valuation
methodology once again proved its worth in a time when common sense investing is
becoming more prevalent. Firms with actual earnings that are not selling at
outrageous multiples are becoming more of an attraction for investor's dollars,
and these are featured in your Fund.
THE JAMES MARKET NEUTRAL FUND
The James Market Neutral Fund fell 7.6 percent over the 12 months ended June 30,
2003, while the Fund's benchmark, the 90 day Treasury Bill Index returned 1.51
percent over this period. The strong rallies in the fourth quarter of 2002, and
the second quarter of 2003 hurt the Fund, as many of the short positions moved
higher. We have, once again, begun to see a movement of money into lower quality
stocks. While that has produced difficulties for the Fund over the past year, we
believe it will presage real future opportunities for those looking to add to
their positions in the Market Neutral Fund.
Even with the downturn in the last 12 months, the Fund found opportunities to
add to both longs and shorts, as the markets are volatile. We expect that the
market neutral approach will be successful over the longer term.
THE JAMES LARGE CAP PLUS FUND
This Fund lost 6.14 percent during the 12 month period ended June 30, 2003. It
underperformed its benchmark, the S&P 500, which rose 0.25 percent.
Strength in technology stocks aided most large cap indices. We have remained
underweight in this area due to the lack of earnings in many of these stocks, as
well as the lack of reasonable valuations. We continue to look for opportunities
in large cap stocks, and believe they may benefit from the tax law changes and
low interest rate environment. We believe our approach will work over the long
run.
EXPECTATIONS FOR THE FUTURE
Once again we start to see optimism rising among investors and economists. While
the deficit may be rising, interest rates are low, tax cuts are putting money
into many families' hands and the weakness of the dollar has made our goods more
competitive with foreign products. On the other hand, we are still concerned
about excessive valuation levels and the continued aftermath of the bear market.
While it's true the year before, and the year of, the presidential election tend
to be good for both the economy and the stock market, valuation levels will
eventually return to more normal levels. As a result, we are keeping a cautious
eye on the markets. We will continue to follow our risk indicators in
determining levels of risk and will apply this research appropriately to your
Funds.
We would like to remind investors again that James has been managing investments
for over 30 years and we have been through similar markets in the past. We
firmly believe that our experience and our methodology are major factors in
weathering market difficulties.
We remain optimistic about the prospects of the Funds.
/s/ Barry R. James
Barry R. James, CFA, CIC
President
2
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GOLDEN RAINBOW FUND, STANDARD & POOR'S 500 INDEX
AND A BLENDED 25/25/50 INDEX(A)
[GRAPHIC OMITTED]
6/03
----
The Golden Rainbow Fund $20,129
Standard & Poor's 500 Index $26,031
Blended 25/25/50 Index $22,767
Past performance is not predictive of future performance.
----------------------------------------------------------------
The Golden Rainbow Fund
Average Annual Total Returns
1 Year 5 Years 10 Years
4.34% 4.98% 7.25%
----------------------------------------------------------------
(A) The Blended Index is comprised of a 25% weighting in Standard & Poor's 500
Index, a 25% weighting in the Russell 2000 Index and a 50% weighting in the
Lehman Brothers Intermediate Government/Credit Index.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES SMALL CAP FUND AND RUSSELL 2000 INDEX
[GRAPHIC OMITTED]
6/03
----
The James Small Cap Fund $13,574
Russell 2000 Index $13,652
Past performance is not predictive of future performance.
-------------------------------------------------------------
The James Small Cap Fund
Average Annual Total Returns
1 Year Since Inception(A)
12.20% 6.67%
-------------------------------------------------------------
(A) Fund Inception was October 2, 1998.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
3
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES MARKET NEUTRAL FUND AND 90-DAY TREASURY BILL INDEX
[GRAPHIC OMITTED]
6/03
----
The James Market Neutral Fund $10,653
90-Day Treasury Bill Index $12,024
Past performance is not predictive of future performance.
-------------------------------------------------------------
The James Market Neutral Fund
Average Annual Total Returns
1 Year Since Inception(A)
-7.60% 1.35%
-------------------------------------------------------------
(A) Fund Inception was ctober 2, 1998.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES LARGE CAP PLUS FUND AND STANDARD & POOR'S 500 INDEX
[GRAPHIC OMITTED]
6/03
----
The James Large Cap Plus Fund $ 6,226
Standard & Poor's 500 Index $ 7,533
Past performance is not predictive of future performance.
-------------------------------------------------------------
The James Large Cap Plus Fund
Average Annual Total Returns
1 Year Since Inception(A)
-6.14% -12.13%
------------------------------------------------------------
(A) Fund Inception was November 1, 1999.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
4
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2003
=========================================================================================================================
THE THE JAMES THE JAMES THE JAMES
GOLDEN RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP
FUND FUND FUND PLUS FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At amortized cost .......................... $ 58,059,932 $ 7,119,452 $ 6,398,742 $ 5,154,412
============ ============ ============ ============
At value ................................... $ 68,758,793 $ 9,194,523 $ 7,424,324 $ 5,375,014
Segregated cash with brokers ....................... -- -- 7,209,050 --
Receivable for capital shares sold ................. 38,480 500 -- --
Dividends and interest receivable .................. 506,133 12,113 4,040 9,589
Other assets ....................................... 3,100 -- -- --
------------ ------------ ------------ ------------
TOTAL ASSETS ....................... 69,306,506 9,207,136 14,637,414 5,384,603
------------ ------------ ------------ ------------
LIABILITIES
Securities sold short (proceeds $5,015,504) ........ -- -- 5,409,949 --
Payable for capital shares redeemed ................ 43,892 -- -- --
Dividends payable on securities sold short ......... -- -- 3,550 --
Accrued expenses:
Management fees ............................ 42,102 8,444 5,120 4,737
12b-1 distribution and service fees ........ 9,476 13 -- 421
Trustees' fees ............................. 3,127 -- -- --
Other ...................................... 38,602 -- -- --
------------ ------------ ------------ ------------
TOTAL LIABILITIES .................. 137,199 8,457 5,418,619 5,158
------------ ------------ ------------ ------------
NET ASSETS ......................................... $ 69,169,307 $ 9,198,679 $ 9,218,795 $ 5,379,445
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital .................................... $ 61,494,460 $ 7,643,571 $ 9,420,216 $ 8,905,707
Undistributed net investment income ................ 3 -- -- 3
Accumulated net realized losses from
security transactions ...................... (3,024,017) (519,963) (832,558) (3,746,867)
Net unrealized appreciation on investments ......... 10,698,861 2,075,071 631,137 220,602
------------ ------------ ------------ ------------
NET ASSETS ......................................... $ 69,169,307 $ 9,198,679 $ 9,218,795 $ 5,379,445
============ ============ ============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) . 5,042,190 685,140 924,670 871,025
============ ============ ============ ============
Net asset value and redemption price per share ..... $ 13.72 $ 13.43 $ 9.97 $ 6.18
============ ============ ============ ============
See accompanying notes to financial statements.
5
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2003
===================================================================================================================================
THE THE JAMES THE JAMES THE JAMES
GOLDEN RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP
FUND FUND FUND PLUS FUND
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of withholding taxes of $726, $0, $0, $0) $ 504,489 $ 180,401 $ 32,324 $ 99,609
Interest ................................................ 1,645,090 3,063 103,562 1,811
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ......................... 2,149,579 183,464 135,886 101,420
------------ ------------ ------------ ------------
EXPENSES
Management fees .......................................... 468,017 91,644 149,648 57,456
12b-1 distribution and service fees - Class A ............ 157,157 19,126 22,595 12,282
Administration fees ...................................... 50,372 -- -- --
Accounting services fees ................................. 30,000 -- -- --
Professional fees ........................................ 35,000 -- -- --
Dividend expense on securities sold short ................ -- -- 48,234 --
Shareholder report printing and mailing .................. 15,000 -- -- --
Trustees' fees ........................................... 6,000 3,988 3,998 3,957
Transfer agent fees ...................................... 22,100 -- -- --
Custodian fees and expenses .............................. 20,000 -- -- --
Postage and supplies ..................................... 19,000 -- -- --
Other expenses ........................................... 10,042 -- -- --
------------ ------------ ------------ ------------
Total expenses ................................................... 832,688 114,758 224,475 73,695
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ..................................... 1,316,891 68,706 (88,589) 27,725
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized losses from security transactions ........... (2,920,426) (25,738) (717,104) (342,249)
Net realized gains on closed short positions ............. -- -- 201,693 --
Net change in unrealized appreciation/depreciation
on investments ................................... 4,537,781 931,501 (206,204) 95,974
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS .................................. 1,617,355 905,763 (721,615) (246,275)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS .......................................... $ 2,934,246 $ 974,469 $ (810,204) $ (218,550)
============ ============ ============ ============
See accompanying notes to financial statements
6
THE GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
- ---------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................... $ 1,316,891 $ 1,869,203
Net realized gains (losses) on investments .............. (2,920,426) 1,584,963
Net change in unrealized appreciation/
depreciation on investments ........................... 4,537,781 (56,160)
------------ ------------
Net increase in net assets from operations ...................... 2,934,246 3,398,006
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... (1,318,738) (1,888,471)
Distributions from net realized gains ................... (1,688,540) (3,886,347)
------------ ------------
Decrease in net assets from distributions to shareholders ....... (3,007,278) (5,774,818)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................... 8,479,683 3,787,834
Net asset value of shares issued in reinvestment
of distributions to shareholders ....................... 2,905,464 5,585,999
Payments for shares redeemed ............................ (7,598,504) (7,443,087)
------------ ------------
Net increase in net assets from capital share transactions ...... 3,786,643 1,930,746
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 3,713,611 (446,066)
NET ASSETS
Beginning of year ....................................... 65,455,696 65,901,762
------------ ------------
End of year ............................................. $ 69,169,307 $ 65,455,696
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ............................. $ 3 $ 1,850
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................. 653,294 270,562
Shares issued in reinvestment of distributions
to shareholders ....................................... 224,183 408,334
Shares redeemed ......................................... (579,564) (528,966)
------------ ------------
Net increase in shares outstanding ...................... 297,913 149,930
Shares outstanding, beginning of year ................... 4,744,277 4,594,347
------------ ------------
Shares outstanding, end of year ......................... 5,042,190 4,744,277
============ ============
See accompanying notes to financial statements.
7
THE JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
- ---------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................... $ 68,706 $ 1,229
Net realized gains (losses) on investments .............. (25,738) 38,063
Net change in unrealized appreciation/
depreciation on investments ........................... 931,501 620,741
------------ ------------
Net increase in net assets from operations ...................... 974,469 660,033
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... (68,743) (8,354)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................... 2,006,620 852,726
Net asset value of shares issued in reinvestment
of distributions to shareholders ...................... 63,922 7,753
Payments for shares redeemed ............................ (1,659,716) (696,113)
------------ ------------
Net increase in net assets from capital share transactions ...... 410,826 164,366
------------ ------------
TOTAL INCREASE IN NET ASSETS .................................... 1,316,552 816,045
NET ASSETS
Beginning of year ....................................... 7,882,127 7,066,082
------------ ------------
End of year ............................................. $ 9,198,679 $ 7,882,127
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................. 182,251 74,230
Shares issued in reinvestment of distributions
to shareholders ....................................... 5,700 692
Shares redeemed ......................................... (155,571) (62,930)
------------ ------------
Net increase in shares outstanding ...................... 32,380 11,992
Shares outstanding, beginning of year ................... 652,760 640,768
------------ ------------
Shares outstanding, end of year ......................... 685,140 652,760
============ ============
See accompanying notes to financial statements.
8
THE JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
- ---------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) ............................ $ (88,589) $ 22,687
Net realized gains (losses) from:
Security transactions ........................... (717,104) (226,354)
Closed short positions .......................... 201,693 512,952
Net change in unrealized appreciation/
depreciation on investments ........................... (206,204) 288,949
------------ ------------
Net increase (decrease) in net assets from operations ........... (810,204) 598,234
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... -- (38,843)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................... 4,546,230 617,985
Net asset value of shares issued in reinvestment
of distributions to shareholders ...................... -- 34,561
Payments for shares redeemed ............................ (3,193,658) (2,186,164)
------------ ------------
Net increase (decrease) in net assets
from capital share transactions ............................... 1,352,572 (1,533,618)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 542,368 (974,227)
NET ASSETS
Beginning of year ....................................... 8,676,427 9,650,654
------------ ------------
End of year ............................................. $ 9,218,795 $ 8,676,427
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................. 428,221 59,619
Shares issued in reinvestment of distributions
to shareholders ....................................... -- 3,439
Shares redeemed ......................................... (307,370) (213,193)
------------ ------------
Net increase (decrease) in shares outstanding ........... 120,851 (150,135)
Shares outstanding, beginning of year ................... 803,819 953,954
------------ ------------
Shares outstanding, end of year ......................... 924,670 803,819
============ ============
See accompanying notes to financial statements.
9
THE JAMES LARGE CAP PLUS FUND
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
- ---------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................... $ 27,725 $ 8,219
Net realized losses on investments ...................... (342,249) (729,913)
Net change in unrealized appreciation/
depreciation on investments ........................... 95,974 154,702
------------ ------------
Net decrease in net assets from operations ...................... (218,550) (566,992)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... (27,940) (8,001)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................... 3,279,263 746,881
Net asset value of shares issued in reinvestment
of distributions to shareholders ...................... 26,209 7,153
Payments for shares redeemed ............................ (1,467,853) (894,737)
------------ ------------
Net increase (decrease) in net assets
from capital share transactions ................................ 1,837,619 (140,703)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 1,591,129 (715,696)
NET ASSETS
Beginning of year ....................................... 3,788,316 4,504,012
------------ ------------
End of year ............................................. $ 5,379,445 $ 3,788,316
------------ ------------
Undistributed net investment income ............................. $ 3 $ 218
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................. 557,216 112,339
Shares issued in reinvestment of distributions
to shareholders ....................................... 4,490 1,049
Shares redeemed ......................................... (262,786) (130,311)
------------ ------------
Net increase (decrease) in shares outstanding ........... 298,920 (16,923)
Shares outstanding, beginning of year ................... 572,105 589,028
------------ ------------
Shares outstanding, end of year ......................... 871,025 572,105
============ ============
See accompanying notes to financial statements.
10
THE GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ........... $ 13.80 $ 14.34 $ 16.54 $ 17.28 $ 18.96
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income .................. 0.27 0.40 0.40 0.50 0.49
Net realized and unrealized
gains (losses) on investments .. 0.28 0.33 (0.08) 0.31 0.91
------------ ------------ ------------ ------------ ------------
Total from investment operations ............... 0.55 0.73 0.32 0.81 1.40
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income ............. (0.27) (0.40) (0.40) (0.50) (0.49)
From net realized gains on investments . (0.36) (0.87) (2.12) (1.05) (2.59)
------------ ------------ ------------ ------------ ------------
Total distributions ............................ (0.63) (1.27) (2.52) (1.55) (3.08)
------------ ------------ ------------ ------------ ------------
Net asset value at end of year ................. $ 13.72 $ 13.80 $ 14.34 $ 16.54 $ 17.28
============ ============ ============ ============ ============
Total return ................................... 4.34% 5.37% 2.33% 4.98% 7.97%
============ ============ ============ ============ ============
Net assets at end of year (000's) .............. $ 69,169 $ 65,456 $ 65,902 $ 82,754 $ 107,802
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets:
Before expense reimbursements
and waived fees ................ 1.32% 1.24% 1.25% 1.22% 1.19%
After expense reimbursements
and waived fees ................ 1.32% 1.24% 1.25% 1.07% 1.00%
Ratio of net investment income to average net 2.08% 2.84% 2.61% 2.86% 2.71%
assets
Portfolio turnover rate ........................ 61% 54% 57% 82% 38%
See accompanying notes to financial statements.
11
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
===============================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 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) ...... 0.10 0.00(B) (0.04) (0.05) (0.00)
Net realized and unrealized gains
(losses) on investments ........... 1.35 1.06 0.46 (1.21) 1.87
------------ ------------ ------------ ------------ ------------
Total from investment operations .......... 1.45 1.06 0.42 (1.26) 1.87
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income ........ (0.10) (0.01) -- -- --
Return of capital ................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions ....................... (0.10) (0.01) -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value at end of period .......... $ 13.43 $ 12.08 $ 11.03 $ 10.61 $ 11.87
============ ============ ============ ============ ============
Total return .............................. 12.20% 9.65% 3.96% (10.61%) 18.74%(C)
============ ============ ============ ============ ============
Net assets at end of period (000's) ....... $ 9,199 $ 7,882 $ 7,066 $ 5,251 $ 6,564
============ ============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets 1.50% 1.48% 1.50% 1.50% 1.49%(D)
Ratio of net investment income (loss) to . 0.90% 0.02% (0.45%) (0.48%) (0.11%)(D)
average net assets
Portfolio turnover rate ................... 52% 78% 75% 101% 42%(D)
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
(B) Amount rounds to less than $0.005.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
12
THE JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
===============================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 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) ...... (0.10) 0.02 0.24 0.23 0.13
Net realized and unrealized gains
(losses) on investments ........... (0.72) 0.69 0.41 0.41 (0.70)
------------ ------------ ------------ ------------ ------------
Total from investment operations .......... (0.82) 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 .......... $ 9.97 $ 10.79 $ 10.12 $ 9.71 $ 9.30
============ ============ ============ ============ ============
Total return .............................. (7.60%) 7.06% 6.76% 7.02% (5.74%)(B)
============ ============ ============ ============ ============
Net assets at end of period (000's) ....... $ 9,219 $ 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% 1.95% 1.95% 1.95% 1.94%(C)
Ratio of dividend expense on securities
sold short ........................ 0.53% 0.28% 0.25% 0.53% 0.36%(C)
------------ ------------ ------------ ------------ ------------
Ratio of net expenses to average net assets 2.48% 2.23% 2.20% 2.48% 2.30%(C)
------------ ------------ ------------ ------------ ------------
Ratio of net investment income to average
net assets ........................ (0.98%) 0.25% 2.47% 2.47% 2.31%(C)
Portfolio turnover rate ................... 86% 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.
13
THE JAMES LARGE CAP PLUS FUND
FINANCIAL HIGHLIGHTS
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 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) ...... 0.03 0.01 (0.07) (0.06)
Net realized and unrealized gains
(losses) on investments ........... (0.44) (1.03) (5.93) 3.71
------------ ------------ ------------ ------------
Total from investment operations .......... (0.41) (1.02) (6.00) 3.65
------------ ------------ ------------ ------------
Less distributions:
From net investment income ........ (0.03) (0.01) -- --
------------ ------------ ------------ ------------
Net asset value at end of period .......... $ 6.18 $ 6.62 $ 7.65 $ 13.65
============ ============ ============ ============
Total return .............................. (6.14%) (13.29%) (43.96%) 36.50%(B)
============ ============ ============ ============
Net assets at end of period (000's) ....... $ 5,379 $ 3,788 $ 4,504 $ 6,279
============ ============ ============ ============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets 1.50% 1.50% 1.50% 1.49%(C)
Ratio of net investment income (loss) to
average net assets ................ 0.56% 0.20% (0.67%) (0.99%)(C)
Portfolio turnover rate ................... 65% 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.
14
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2003
================================================================================
SHARES COMMON STOCKS - 50.8% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 2.8%
30,000 Barrick Gold Corporation .................... $ 537,000
42,000 Newmont Mining Corporation .................. 1,363,320
5,000 RPM International, Inc. ..................... 68,750
------------
1,969,070
------------
CONSUMER, CYCLICAL - 7.4%
16,000 AutoNation, Inc.* ........................... 251,520
20,000 CBRL Group, Inc. ............................ 777,200
36,000 Central Garden & Pet Company* ............... 858,600
16,800 Columbia Sportswear Company* ................ 863,688
9,000 General Motors Corporation .................. 324,000
23,000 Jarden Corporation* ......................... 636,410
5,000 Mattel, Inc. ................................ 94,600
13,125 Nautilus Group, Inc. ........................ 162,750
10,000 Ryan's Family Steak House, Inc.* ............ 140,000
16,000 The Toro Company ............................ 636,000
13,000 Weis Markets, Inc. .......................... 403,260
------------
5,148,028
------------
CONSUMER, NON-CYCLICAL - 8.7%
40,000 Coventry Health Care, Inc.* ................. 1,846,399
18,000 DaVita, Inc.* ............................... 482,040
12,000 Mine Safety Appliances Company .............. 523,440
12,500 Mylan Laboratories, Inc. .................... 434,625
15,000 Pharmaceutical Resources, Inc.* ............. 729,900
18,617 PolyMedica Corporation ...................... 852,472
12,000 Sanderson Farms, Inc. ....................... 337,200
35,300 Supervalu, Inc. ............................. 752,596
------------
5,958,672
------------
ENERGY - 3.7%
11,000 Amerada Hess Corporation .................... 540,980
8,400 Apache Corporation .......................... 546,504
4,470 ChevronTexaco Corporation ................... 322,734
10,000 Devon Energy Corporation .................... 534,000
15,000 EOG Resources, Inc. ......................... 627,600
------------
2,571,818
------------
FINANCIAL - 8.0%
10,000 Alfa Corporation ............................ 127,100
17,000 Allstate Corporation ........................ 606,050
4,000 Bank of America Corporation ................. 316,120
4,500 Bear Stearns Companies, Inc. ................ 325,890
19,000 Health Care REIT, Inc. ...................... 579,500
28,500 RenaissanceRe Holdings, Ltd. ................ 1,297,320
15,000 Rent-A-Center, Inc.* ........................ 1,137,150
------------
15
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 50.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
FINANCIAL - 8.0% (CONTINUED)
19,000 Stewart Information Services Corporation* ... $ 529,150
14,000 Washington Mutual, Inc. ..................... 578,200
------------
5,496,480
------------
INDUSTRIAL - 6.7%
40,000 Aviall, Inc.* ............................... 454,800
8,000 Ball Corporation ............................ 364,080
10,000 BorgWarner, Inc. ............................ 644,000
10,000 Briggs & Stratton Corporation ............... 505,000
21,500 Cytec Industries, Inc.* ..................... 726,700
21,000 Lennox International, Inc. .................. 270,270
7,000 Lubrizol Corporation ........................ 216,930
35,650 Methanex Corporation ........................ 381,063
18,000 Powell Industries, Inc.* .................... 263,520
27,000 Precision Castparts Corporation ............. 839,700
------------
4,666,063
------------
TECHNOLOGY - 5.7%
10,000 Activision, Inc.* ........................... 129,200
6,000 Amgen, Inc.* ................................ 398,640
18,000 Bio-Rad Laboratories, Inc. - Class A* ....... 996,300
12,000 Cubic Corporation ........................... 266,640
2,000 Electronic Arts, Inc.* ...................... 147,980
15,000 Moog Inc. - Class A* ........................ 521,250
25,000 Storage Technology Corporation* ............. 643,500
30,000 Take-Two Interactive Software, Inc.* ........ 850,200
------------
3,953,710
------------
UTILITIES - 7.8%
18,500 Alliance Resource Partners, L.P. ............ 504,125
5,000 ALLTEL Corporation .......................... 241,100
48,000 Edison International* ....................... 788,640
35,400 Energen Corporation ......................... 1,178,820
15,000 FirstEnergy Corporation ..................... 576,750
20,000 Korea Electric Power (KEPCO) Corporation - ADR 178,200
21,000 NiSource, Inc. .............................. 399,000
4,000 Pinnacle West Capital Corporation ........... 149,800
28,000 UGI Corporation ............................. 887,600
12,000 WPS Resources Corporation ................... 482,400
------------
5,386,435
------------
TOTAL COMMON STOCKS ......................... $ 35,150,276
------------
16
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 42.6% VALUE
- --------------------------------------------------------------------------------
$ 500,000 U.S. Treasury Notes, 2.125%, 10/31/04 ....... $ 506,660
2,500,000 U.S. Treasury Notes, 3.500%, 11/15/06 ....... 2,635,255
6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07 ........ 6,899,999
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 ........ 3,509,766
500,000 U.S. Treasury Notes, 3.250%, 8/15/07 ........ 521,817
4,000,000 U.S. Treasury Notes, 6.000%, 8/15/09 ........ 4,718,280
1,000,000 U.S. Treasury Bonds, 10.000%, 5/15/10 ....... 1,157,891
2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11 ........ 2,806,153
1,500,000 U.S. Treasury Bonds, 4.875%, 2/15/12 ........ 1,667,343
1,000,000 U.S. Treasury Bonds, 3.875%, 2/15/13 ........ 1,029,023
1,500,000 U.S. Treasury Bonds, 5.375%, 2/15/31 ........ 1,689,083
2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 ... 2,319,626
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ........ $ 29,460,896
------------
================================================================================
PAR VALUE CORPORATE BONDS - 4.5% VALUE
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Cos., Inc., 6.000%, 4/15/11 .. $ 572,859
500,000 Barrick Gold Finance, Inc., 7.500%, 5/1/07 .. 585,332
500,000 General Electric Capital Corporation,
7.875%, 12/1/06 ........................... 585,527
250,000 National Fuel Gas Co., 6.820%, 8/1/04 ....... 263,329
500,000 Public Service Electric & Gas, 7.375%, 3/1/14 527,725
500,000 Tennessee Valley Authority, 5.625%, 1/18/11 . 568,820
------------
TOTAL CORPORATE BONDS ....................... $ 3,103,592
------------
================================================================================
SHARES MUTUAL FUNDS - 0.8% VALUE
- --------------------------------------------------------------------------------
15,000 Greater China Fund, Inc. .................... $ 157,050
19,000 Morgan Stanley Eastern Europe Fund, Inc. .... 414,960
------------
TOTAL MUTUAL FUNDS .......................... $ 572,010
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 0.7% VALUE
- --------------------------------------------------------------------------------
472,019 First American Treasury ..................... $ 472,019
------------
TOTAL INVESTMENT SECURITIES - 99.4%
(Amortized Cost $58,059,932) ................ $ 68,758,793
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.6% 410,514
------------
NET ASSETS - 100.0% ......................... $ 69,169,307
============
* Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
17
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2003
================================================================================
SHARES COMMON STOCKS - 96.0% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 1.5%
3,800 Bandag, Inc. ................................ $ 141,626
------------
CONSUMER, CYCLICAL - 23.8%
6,475 Banta Corporation ........................... 209,596
7,600 Brown Shoe Company, Inc. .................... 226,480
11,230 Central Garden & Pet Company* ............... 267,836
6,675 Columbia Sportswear Company* ................ 343,162
12,500 Handelman Company* .......................... 200,000
10,130 Landry's Restaurants, Inc. .................. 239,068
3,680 The Ryland Group, Inc. ...................... 255,392
11,130 The Toro Company ............................ 442,417
------------
2,183,951
------------
CONSUMER, NON-CYCLICAL - 19.9%
6,900 Corrections Corporation of America* ......... 174,777
16,920 Helen Of Troy Limited* ...................... 256,507
10,275 Mid Atlantic Medical Services, Inc.* ........ 537,382
7,600 New England Business Service, Inc. .......... 228,000
12,825 Sanderson Farms, Inc. ....................... 360,383
15,915 Sola International, Inc.* ................... 276,921
------------
1,833,970
------------
ENERGY - 6.7%
15,618 Patina Oil & Gas Corporation ................ 502,119
10,795 Willbros Group, Inc.* ....................... 112,160
------------
614,279
------------
FINANCIAL - 20.9%
8,930 Capstead Mortage Corporation ................ 100,641
8,365 FirstFed America Bancorp, Inc. .............. 288,593
24,710 Flagstar Bancorp, Inc. ...................... 604,159
11,420 Irwin Financial Corporation ................. 295,778
6,690 LNR Property Corporation .................... 250,206
6,400 Novastar Financial, Inc. .................... 382,400
------------
1,921,777
------------
INDUSTRIAL - 8.2%
5,100 Briggs & Stratton Corporation ............... 257,549
16,825 Lennox International, Inc. .................. 216,538
8,730 Powell Industries, Inc.* .................... 127,807
9,150 Rock-Tenn Company ........................... 155,093
------------
756,987
------------
TECHNOLOGY - 6.4%
41,100 CompuCom Systems, Inc.* ..................... 185,772
10,130 Harland (John H.) Company ................... 265,000
8,195 United Industrial Corporation ............... 133,579
------------
584,351
------------
18
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 96.0% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITIES - 8.6%
10,500 Empire District Electric Company ............ $ 228,375
9,800 Golden Telecom, Inc.* ....................... 219,912
10,695 UGI Corporation ............................. 339,032
------------
787,319
------------
TOTAL COMMON STOCKS ......................... $ 8,824,260
------------
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 2.7% VALUE
- --------------------------------------------------------------------------------
$ 250,000 FNMA Discount Note, 7/8/03 .................. $ 249,956
================================================================================
SHARES SHORT TERM INVESTMENTS - 1.3% VALUE
- --------------------------------------------------------------------------------
120,307 First American Treasury ..................... $ 120,307
------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Amortized Cost $7,119,452) ................. $ 9,194,523
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.0% 4,156
------------
NET ASSETS - 100.0% ......................... $ 9,198,679
============
* Non-income producing security.
See accompanying notes to financial statements.
19
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2003
================================================================================
SHARES COMMON STOCKS - 66.6% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 3.9%
4,000 Quanex Corporation .......................... $ 118,880
5,500 Schnitzer Steel Industries, Inc. ............ 242,660
------------
361,540
------------
CONSUMER, CYCLICAL - 14.8%
3,000 AutoZone, Inc.* ............................. 227,910
6,300 Banta Corporation ........................... 203,931
4,900 CBRL Group, Inc. ............................ 190,414
10,000 Central Garden & Pet Company* ............... 238,500
9,000 Jarden Corporation* ......................... 249,030
8,500 Nautilus Group, Inc. ........................ 105,400
200 The Washington Post Company - Class B ....... 146,580
------------
1,361,765
------------
CONSUMER, NON-CYCLICAL - 10.4%
7,000 Fresh Del Monte Produce, Inc. ............... 179,830
14,000 Helen Of Troy Limited* ...................... 212,240
13,000 Humana, Inc.* ............................... 196,300
7,600 Pharmaceutical Resources* ................... 369,816
------------
958,186
------------
ENERGY - 5.7%
3,948 Apache Corporation .......................... 256,857
5,000 Devon Energy Corporation .................... 267,000
------------
523,857
------------
FINANCIAL - 17.0%
100 Berkshire Hathaway, Inc. - Class B* ......... 243,000
4,900 Greenpoint Financial Corporation ............ 249,606
6,530 RenaissanceRe Holdings, Ltd. ................ 297,246
5,700 Rent-A-Center, Inc.* ........................ 432,116
17,400 Sierra Health Services, Inc.* ............... 348,000
------------
1,569,968
------------
INDUSTRIAL - 2.7%
3,000 Ball Corporation ............................ 136,530
10,500 Methanex Corporation ........................ 112,235
------------
248,765
------------
TECHNOLOGY - 10.3%
7,500 AO VimpelCom - ADR* ......................... 348,300
5,000 Benchmark Electronics, Inc.* ................ 153,800
1,900 Electronic Arts, Inc.* ...................... 140,581
8,935 Moog Inc. - Class A* ........................ 310,491
------------
953,172
------------
20
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 66.6% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITIES - 1.8%
10,000 Edison International* ....................... $ 164,300
------------
TOTAL COMMON STOCKS ......................... $ 6,141,553
------------
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 10.8% VALUE
- --------------------------------------------------------------------------------
$ 1,000,000 U.S. Treasury Bills, 12/11/03 ............... $ 995,676
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 3.1% VALUE
- --------------------------------------------------------------------------------
287,095 First American Treasury ..................... $ 287,095
------------
TOTAL INVESTMENT SECURITIES - 80.5%
(Amortized Cost $6,398,742) ................. $ 7,424,324
SEGREGATED CASH WITH BROKERS - 78.2% ........ 7,209,050
SECURITIES SOLD SHORT - (58.7%)
(Proceeds $5,015,504) ....................... (5,409,949)
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.0%) (4,630)
------------
NET ASSETS - 100.0% ......................... $ 9,218,795
============
* Non-income producing security.
ADR-American Depository Receipt.
See accompanying notes to financial statements.
21
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
JUNE 30, 2003
================================================================================
SHARES COMMON STOCKS SOLD SHORT - 58.7% VALUE
- --------------------------------------------------------------------------------
BASIC MATERIALS - 1.1%
1,600 Potash Corporation of Saskatchewan .......... $ 102,401
------------
CONSUMER, CYCLICAL - 19.5%
3,000 Dow Jones & Company, Inc. ................... 129,090
4,700 Four Seasons Hotels, Inc. ................... 203,322
6,000 Herman Miller, Inc. ......................... 121,260
12,500 Hollinger International, Inc. ............... 134,625
12,000 Metro-Goldwyn-Mayer, Inc. ................... 149,040
5,050 Navistar International Corporation .......... 164,781
9,000 Robert Half International, Inc. ............. 170,460
9,000 Sotheby's Holdings, Inc. - Class A .......... 66,960
13,300 Steelcase, Inc. ............................. 156,408
5,000 Triarc Companies, Inc. ...................... 149,950
4,000 Univision Communications, Inc. - Class A .... 121,600
10,800 ValueVision Media, Inc. - Class A ........... 147,204
11,200 Wilsons The Leather Experts, Inc. ........... 80,752
------------
1,795,452
------------
CONSUMER, NON-CYCLICAL - 10.2%
16,500 Cerus Corporation ........................... 124,245
6,600 CV Therapeutics ............................. 195,756
7,100 NPS Pharmaceuticals, Inc. ................... 172,814
6,700 Smithfield Foods, Inc. ...................... 153,564
13,800 Therasense, Inc. ............................ 138,000
8,865 Vector Group Ltd. ........................... 155,137
------------
939,516
------------
ENERGY - 5.2%
5,600 Cal Dive International, Inc. ................ 122,080
5,000 Diamond Offshore Drilling ................... 104,950
11,400 Input/Output, Inc. .......................... 61,332
10,000 Pride International , Inc. .................. 188,200
------------
476,562
------------
FINANCIAL - 11.0%
3,500 A.G. Edwards, Inc. .......................... 119,700
5,000 Allmerica Financial Corporation ............. 89,950
4,750 Bank of New York Co., Inc. .................. 136,562
15,100 Charles Schwab Corporation (The) ............ 152,359
12,100 Instinet Group, Inc. ........................ 56,386
3,000 Northern Trust Corporation .................. 125,370
3,000 Paychex, Inc. ............................... 87,930
3,100 St. Paul Companies, Inc. .................... 113,181
4,950 Unitrin, Inc. ............................... 134,244
------------
1,015,682
------------
22
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (CONTINUED)
================================================================================
SHARES COMMON STOCKS SOLD SHORT - 58.7% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL - 2.1%
2,400 Bowater, Inc. ............................... $ 89,880
11,000 Vicor Corporation ........................... 105,600
------------
195,480
------------
TECHNOLOGY - 9.6%
9,300 Agilent Technologies, Inc. .................. 181,816
8,100 Brooks Automation, Inc. ..................... 91,854
16,800 Credence Systems Corporation ................ 142,296
14,500 KEMET Corporation ........................... 146,450
17,000 Luminex Corporation ......................... 87,720
10,500 MatrixOne, Inc. ............................. 60,270
15,000 Micron Technology, Inc. ..................... 174,450
------------
884,856
------------
TOTAL COMMON STOCKS (Proceeds $5,015,504) ... $ 5,409,949
------------
See accompanying notes to financial statements.
23
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2003
================================================================================
SHARES COMMON STOCKS - 97.1% VALUE
- --------------------------------------------------------------------------------
CONSUMER, CYCLICAL - 24.6%
7,450 Coca-Cola Enterprises, Inc. ................. $ 135,218
4,400 CVS Corporation ............................. 123,332
3,495 DaimlerChrysler AG .......................... 121,346
2,900 Eastman Kodak Company ....................... 79,315
4,600 Fox Entertainment Group ..................... 132,388
2,755 Johnson Controls, Inc. ...................... 235,827
10,215 Mattel, Inc. ................................ 193,268
4,665 Sears, Roebuck & Company .................... 156,931
7,900 The Gap, Inc. ............................... 148,204
------------
1,325,829
------------
CONSUMER, NON-CYCLICAL - 4.2%
5,165 Albertson's, Inc. ........................... 99,168
3,920 Tenet Healthcare Corporation* ............... 45,668
1,500 Unilever N.V. (NY Shares) ................... 81,000
------------
225,836
------------
ENERGY - 6.3%
3,820 Anadarko Petroleum Corporation .............. 169,875
6,515 Marathon Oil Corporation .................... 171,671
------------
341,546
------------
FINANCIAL - 26.7%
1,900 Aetna, Inc. ................................. 114,380
3,400 Allstate Corporation ........................ 121,210
3,085 Bank of America Corporation ................. 243,807
3,945 First Tennessee National Corporation ........ 173,225
1,995 MGIC Investment Corporation ................. 93,047
3,100 National City Corporation ................... 101,401
5,895 Progressive Corporation ..................... 430,924
3,750 Washington Mutual, Inc. ..................... 154,875
------------
1,432,869
------------
INDUSTRIAL - 8.2%
2,615 ITT Industries, Inc. ........................ 171,178
2,325 Magna International, Inc. - Class A ......... 156,403
1,700 PACCAR, Inc. ................................ 114,852
------------
442,433
------------
TECHNOLOGY - 7.3%
8,200 Nextel Communications - Class A* ............ 148,256
3,455 United Technologies Corporation ............. 244,718
------------
392,974
------------
TRANSPORTATION SERVICES - 2.0%
1,850 Union Pacific Corporation ................... 107,337
------------
24
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS - 97.1% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UTILITIES - 17.8%
3,100 ALLTEL Corporation .......................... $ 149,482
5,255 FirstEnergy Corporation ..................... 202,055
4,075 PPL Corporation ............................. 175,225
8,775 Southern Company ............................ 273,429
3,985 Verizon Communications, Inc. ................ 157,208
------------
957,399
------------
TOTAL COMMON STOCKS ......................... $ 5,226,223
------------
================================================================================
PAR VALUE U.S. GOVERNMENT & AGENCY BONDS - 1.9% VALUE
- --------------------------------------------------------------------------------
$ 100,000 FNMA Discount Note, 7/8/03 .................. $ 99,982
------------
================================================================================
SHARES SHORT TERM INVESTMENTS - 0.9% VALUE
- --------------------------------------------------------------------------------
48,809 First American Treasury ..................... $ 48,809
TOTAL INVESTMENT SECURITIES - 99.9%
(Amortized Cost $5,154,412) ................. $ 5,375,014
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.1% 4,431
------------
NET ASSETS - 100.0% ......................... $ 5,379,445
============
* Non-income producing security.
See accompanying notes to financial statements.
25
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003
================================================================================
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 generally buys stocks in the S&P
500 Index and will typically hold 25-30 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. The net asset value is determined as of the close of the NYSE
(generally, 4:00 p.m., Eastern time) on each day that the NYSE is open for
business, and on any other day on which there is sufficient trading in a Fund's
securities to materially affect the net asset value.
SECURITIES VALUATION
Securities that are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price except when, in the Adviser's opinion,
the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when 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.
26
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 James
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at 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 all 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
27
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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, 2003 and
2002 was as follows:
- -----------------------------------------------------------------------------------------------------------
THE GOLDEN RAINBOW THE JAMES SMALL CAP
FUND FUND
---------------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
From ordinary income ................... 1,318,738 1,888,471 68,743 8,354
From long-term capital gains ........... 1,688,540 3,886,347 -- --
------------ ------------ ------------ ------------
$ 3,007,278 $ 5,774,818 $ 68,743 $ 8,354
============ ============ ============ ============
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
THE JAMES MARKET NEUTRAL THE JAMES LARGE CAP
FUND PLUS FUND
---------------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
From ordinary income ................... $ -- $ 38,843 $ 27,940 $ 8,001
From long-term capital gains ........... -- -- -- --
------------ ------------ ------------ ------------
$ -- $ 38,843 $ 27,940 $ 8,001
============ ============ ============ ============
- -----------------------------------------------------------------------------------------------------------
The Golden Rainbow Fund, The James Small Cap Fund, and The James Large Cap Plus
Fund hereby designate the highest percentage, as ultimately determined, of
dividends declared from net investment income after December 31, 2002, as
qualified dividends under the Jobs and Growth Tax Relief Reconciliation Act of
2003.
The following information is computed on a tax basis for each item as of June
30, 2003:
- -----------------------------------------------------------------------------------------------------------
The The James The James The James
Golden Rainbow Small Cap Market Neutral Large Cap
Fund Fund Fund Plus Fund
- -----------------------------------------------------------------------------------------------------------
Cost of portfolio investments .......... $ 58,059,932 $ 7,119,452 $ 11,808,691 $ 5,154,412
Gross unrealized appreciation .......... 11,633,979 2,441,548 1,670,136 578,258
Gross unrealized depreciation .......... (935,118) (366,476) (1,038,999) (357,656)
------------ ------------ ------------ ------------
Net unrealized appreciation/depreciation 10,698,861 2,075,071 631,137 220,602
============ ============ ============ ============
Post-October losses .................... (2,398,589) (34,474) (750,046) (211,369)
============ ============ ============ ============
Capital loss carryforward .............. (625,428) (485,489) (82,513) (3,535,498)
============ ============ ============ ============
Undistributed ordinary income .......... -- -- -- --
============ ============ ============ ============
Undistributed long-term gains .......... -- -- -- --
============ ============ ============ ============
Accumulated earnings (deficit) ......... $ 7,674,845 $ 1,555,108 $ (201,421) $ (3,526,265)
============ ============ ============ ============
- -----------------------------------------------------------------------------------------------------------
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.
28
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The capital loss carryforwards as of June 30, 2003 in the table above expire as
follows:
- --------------------------------------------------------------------------------
AMOUNT EXPIRATION DATE
- --------------------------------------------------------------------------------
The Golden Rainbow .................... $ 625,428 June 30, 2011
The James Small Cap ................... $ 485,489 June 30, 2008
The James Market Neutral .............. $ 82,513 June 30, 2008
The James Large Cap Plus .............. $ 427,706 June 30, 2009
$ 2,976,912 June 30, 2010
$ 130,880 June 30, 2011
- --------------------------------------------------------------------------------
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.
RECLASSIFICATION OF CAPITAL ACCOUNTS
As of June 30, 2003, The James Small Cap Fund reclassified $38 of excess
distributions to paid-in captial on the Statement of Assets and Liabilities. The
James Market Neutral Fund reclassified $88,589 of net operating loss to paid-in
capital on the Statement of Assets and Liabilities. Such reclassifications, the
result of permanent differences between financial statement and income tax
reporting requirements, have no effect on each Fund's net assets or net asset
value per share. Permanent book to tax differences are not included in ending
undistributed/distributions in excess of net investment income for purposes of
calculating net investment income/loss per share in the financial highlights.
2. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term U.S.
Government obligations for The Golden Rainbow Fund for the year ended June 30,
2003 equaled $13,220,672 and $18,359,687, respectively. Purchases and sales
(including maturities) of investments in other long-term securities for the year
ended June 30, 2003 equaled $26,315,962 and $18,589,336, respectively, for The
Golden Rainbow Fund, $4,148,102 and $3,873,208, respectively, for The James
Small Cap Fund, $6,109,875, and $4,723,512, respectively, for The James Market
Neutral Fund and $4,853,251 and $3,124,437, respectively, for The James Large
Cap Plus Fund. For the year ended June 30, 2003, the cost of securities
purchased to cover short sales and the proceeds from securities sold short were
$5,031,953 and $5,367,654, 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.
29
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 mininum monthly fee for each Fund.
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 Funds' shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
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, 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.
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
The Golden Rainbow Fund, The James Small Cap Fund, The James Market Neutral Fund
and The James Large Cap Plus Fund is 0.25% of the average daily net assets of
each respective Fund.
30
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
4. MANAGEMENT OF THE TRUST (UNAUDITED)
Listed in the charts below is basic information regarding the Trustees and
officers of The James Advantage Funds (the "Trust").
INTERESTED TRUSTEES:
Portfolios in Other Trusteeships
Name Position(s) Term of Office1 Principal Fund Complex Held by Trustee
Address Held With and Length Occupation(s) Overseen by Outside the Fund
Age Trust of Time Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
BARRY R. JAMES, CFA2 President Since Executive Vice President, James 4 Director of
1349 Fairground Road and Trustee Inception Investment Research, Inc. James Capital
Beavercreek, Ohio 45385 (1985 to Present) Alliance, a
Age: 46 registered
investment adviser.
1 Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
2 Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc. serves
as the investment advisor to the Funds.
DISINTERESTED TRUSTEES:
Portfolios in Other Trusteeships
Name Position(s) Term of Office1 Principal Fund Complex Held by Trustee
Address Held With and Length Occupation(s) Overseen by Outside the Fund
Age Trust of Time Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
ANTHONY P. D'ANGELO, Trustee Since Professor Emeritus, Graduate School of 4 N/A
D.B.A. Inception Logistics and Acquisitions Management,
1349 Fairground Road Air Force Institute of Technology, Wright-
Beavercreek, Ohio 45385 Patterson AFB, Ohio (1985 to Present)
Age: 73
LESLIE L. BRANDON Trustee Since Retired Partner, Ernst & Young LLP, 4 N/A
1349 Fairground Road May 2003 Columbus, Ohio (1966 to 2000)
Beavercreek, Ohio 45385
Age: 60
RICHARD C. RUSSELL Trustee Since Richard C. Russell, Consultant, general 4 N/A
c/o The James Advantage May 2003 business consulting (2002 to Present)
Funds President, The Danis Companies,
1349 Fairground Road real estate development and
Beavercreek, Ohio 45385 construction (1983 to 2002)
Age: 56
JAMES F. ZID Trustee Since Inception Retired Partner, Ernst & Young LLP, 4 N/A
c/o The James Advantage Columbus, Ohio (1968 to 1993)
Funds
1349 Fairground Road
Beavercreek, Ohio 45385
Age: 69
1 Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
The Statement of Additional Information contains additional information
about the Trustees and is available without charge upon request by calling
1-800-266-5566.
31
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
PRINCIPAL OFFICERS:
Portfolios in Other Trusteeships
Name Position(s) Term of Office1 Principal Fund Complex Held by Trustee
Address Held With and Length Occupation(s) Overseen by Outside the Fund
Age Trust of Time Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
THOMAS L. MANGAN Vice Since Inception Vice President, James Investment N/A N/A
1349 Fairground Road President, Research, Inc. (1994 to Present)
Beavercreek, Ohio 45385 Treasurer and
Age: 53 Secretary
BARRY R. JAMES, CFA President Since Executive Vice President, James 4 Director of
1349 Fairground Road and Trustee Inception Investment Research, Inc. James Capital
Beavercreek, Ohio 45385 (1985 to Present) Alliance, a
Age: 46 registered
investment adviser.
1 Each Officer is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
32
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Trustees and Shareholders of The James Advantage Funds
We have audited the accompanying statements of assets and liabilities of The
James Advantage Funds, including The Golden Rainbow Fund, The James Small Cap
Fund, The James Market Neutral Fund and The James Large Cap Plus Fund (the
"Funds"), including the schedules of investments and securities sold short, as
of June 30, 2003, and the related statements of operations for the year ended
June 30, 2003, the statements of changes in net assets for each of the two years
ended June 30, 2003, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2003, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of June 30, 2003, the results of their operations, the changes in their
net assets, and the financial highlights for the respective stated periods, in
conformity with accounting principles generally accepted in the United States of
America.
DeloitTe & touche llp
Columbus, Ohio
August 1, 2003
33
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
INVESTMENT ADVISER =====================================
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301 ==================
info@jamesfunds.com JAMES
ADVANTAGE
o FUND
CUSTODIAN ==================
U.S. Bank
425 Walnut Street Advised by James
Cincinnati, Ohio 45202 Investment Research, Inc
o www.jamesfunds.com
TRANSFER AGENT o
Integrated Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
June 30, 2003
o Annual Report
INDEPENDENT AUDITORS
Deloitte & Touche LLP
155 E. Broad St.
Columbus, Ohio 43215 o
o
DISTRIBUTOR THE GOLDEN RAINBOW FUND
IFS Fund Distributors, Inc.
221 East Fourth Street THE JAMES SMALL CAP FUND
Suite 300
Cincinnati, Ohio 45202 THE JAMES MARKET NEUTRAL FUND
o THE JAMES LARGE CAP PLUS FUND
LEGAL COUNSEL =====================================
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202
www.jamesfunds.com
ITEM 2. CODE OF ETHICS. Applicable to Annual Reports only for fiscal years
ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Applicable to Annual Reports only
for fiscal years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Applicable to Annual Reports
only for fiscal years ending on or after December 15, 2003.
ITEMS 5-6.RESERVED
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES. Not Applicable.
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures as of August 22, 2003, the disclosure controls and procedures are
reasonably designed to ensure that the information required in filings on Forms
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications required by Item 10(b) of Form N-CSR are filed
herewith.
(b) Certification required by Rule 30a-2(b) under the Investment Company
Act of 1940 are filed herewith.
-2-
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: September 8 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: September 8, 2003
By (Signature and Title)
/s/ Thomas L. Mangan
- -------------------------
Thomas L. Mangan
Treasurer, Chief Financial Officer
Date: September 8, 2003
-3-