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
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(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: 12/31/04
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.
================================================================================
[LOGO]
JAMES
ADVANTAGE
FUNDS
Advised by James Investment Research, Inc.
www.jamesfunds.com
o
December 31, 2004
Semi-Annual Report
(Unaudited)
o
The Golden Rainbow Fund
The James Small Cap Fund
The James Market Neutral Fund
The James Equity Fund
================================================================================
LETTER TO SHAREHOLDERS OF THE JAMES ADVANTAGE FUNDS
================================================================================
2004 was one of the best years ever for The James Advantage Funds. The Funds had
solid returns and were recognized in several national publications for their
excellent results. The election year cycle fit well with our discipline, but we
are now growing less sanguine about the markets. We believe the markets will
prove to be very challenging, and success will require expert research and
flexibility.
The Market Over the Past Six Months
2004 was a challenging year with the stock and bond markets both experiencing a
high level of volatility. The Federal Reserve's tightening moves, the sharp rise
in the price of oil and the election all came together to create a portfolio
manager's version of the perfect storm. Fortunately, the value of independent
research came through and the Funds had another good year.
James Investment Research, Inc. (James) correctly called the market swoon in mid
year and again correctly forecasted the strong fourth quarter. The 10.85% return
on the S&P 500 was realized almost entirely in the last three months of the
year. At the end of the year, the yield on longer term treasury securities was
actually lower than on December 31, 2003, despite five moves by the Federal
Reserve to push rates higher.
Heavy foreign buying of U.S. securities, both stocks and bonds, helped to fuel
the advance in the last quarter. The likelihood of that type of support
continuing throughout 2005 is not great. Uncertainties over Iraq and the the
high U.S. deficits may work in the opposite direction this year.
Investment Goals and Objectives
The four Funds in The James Advantage Funds family are designed to complement
each other. The Golden Rainbow Fund is a conservative, value oriented balanced
fund. It holds a large percentage of high quality bonds at all times and seeks
to produce an income stream for shareholders. The bonds in this Fund will add
stability when the stock market is in trouble. For this reason, The Golden
Rainbow Fund is a favorite among shareholders with lower risk tolerances or
shorter time horizons.
The highest risk, and the highest potential for profit, is generally found in
smaller capitalization funds. The James Small Cap Fund invests primarily in
small cap value stocks. The Fund will generally be fully invested and seeks to
outperform its benchmark which is the Russell 2000.
The James Market Neutral Fund is a long/short fund which seeks to advance
regardless of the direction of the stock market. By selling short stocks we
believe to be over-valued, the Fund can make attractive returns when the stock
market falls. The stocks held long are expected to outperform those sold short
when the market rises. While this Fund is expected to earn a profit under most
market conditions, it will lag the other Funds in strong bull markets.
To take advantage of the opportunities in other market capitalizations The James
Advantage Funds include The James Equity Fund. This Fund holds stocks of all
sizes: small, mid and large. Our proprietary research attempts to identify which
of these areas is the most attractive and will overweight that area. It is
classified as a non-diversified fund, which can add to the risk of the product
as well as to the return.
Investment Philosophy
James has been managing money for clients since 1972. Over this long time
period, the firm has developed a reputation for conservative management and
innovative research. Dr. Frank James, Ph.D. wrote his dissertation on the notion
of persistency of price patterns and developed the concept that is now known as
relative strength. For over thirty years, James personnel have combined the
discipline of quantitative research with value. This is a style that can be
applied to all market sectors and categories.
In keeping with this discipline, James looks for strong companies with solid
earnings and the potential for continued earnings growth. Good management is
important. Portfolios are dynamic and change with the times to take advantage of
opportunities which will arise as the economy changes. We find it helpful to
maintain these disciplines when the chaos and turmoil of the markets rises to
emotional levels that distract other investors.
1
Strategy For Meeting Fund Objectives
James uses several proprietary models in analyzing stocks. The models are
quantitative in nature and include many of the common ratios such as
Price/Earnings, Price/Book and Earning Momentum. This ranking process helps to
identify stocks which are undervalued relative to their peers, and those that
are overvalued to the extent they make good candidates for a short sale in The
James Market Neutral Fund. James' valuation models use close to 200 factors.
Continuing research will result in new factors being added to the model, or old
factors being dropped or reduced in weighting. In this manner, the models are
dynamic and reflect the constantly changing environment in which the markets
operate.
Strong fundamental research is also a part of the James process. Combined with
economic research in a top-down approach, James has designed a process to select
the best stocks from a universe of over 8000 candidates.
Fund Performance
2004 was an outstanding year for The James Advantage Funds. The Golden Rainbow
Fund, James' balanced fund, returned 12.97 percent for the year. Its benchmark
is a blend of the S&P 500, the Russell 2000 and the Lehman Brothers Intermediate
Gov/Credit Index. That index returned 8.74 percent. The James Small Cap Fund
returned 26.18 percent for the year compared with 18.40 percent on its
benchmark, the Russell 2000. The James Market Neutral Fund returned 8.63 percent
for the year, surpassing its benchmark which is the 90 Day T-Bill Index. That
index rose 1.07%. The James Equity Fund returned 22.14 percent for the year
compared with 10.86 percent on the S&P 500, its benchmark. Naturally, we are
pleased that all the Funds in the family beat their benchmarks for the year.
Expectations for the Future
James invited all shareholders to its Annual Economic Outlook which was held at
Sinclair College in Dayton this January. At that time the company presented its
forecast for the economy and the markets for the coming year. Shareholders were
told that we are preparing for a return of the bear in 2005. While the economy
continues to move forward on the momentum of the election year, restraints in
federal spending, rising rate hikes by the Federal Reserve and already high
stock prices will be a drag on the markets and a sharp sell-off in stocks is
likely some time this year.
In that type of challenging market we will hold those stocks which show the
strongest value characteristics. We will look for bonds that are very high in
credit quality and we will concentrate on those sectors of the market that offer
the greatest opportunity. Energy, health care and utility stocks are expected to
offer some the best opportunities over the year.
/s/ Thomas L. Mangan
Thomas L. Mangan
Chief Financial Officer
Average Annual Total Returns
As of December 31, 2004
- ------------------------------------------------------------------------------------------------
One Five Ten Since
Year Years Years Inception
- ------------------------------------------------------------------------------------------------
The Golden Rainbow Fund ................ 12.97% 7.28% 9.57% 9.25%
(Inception 7/1/91)
The James Small Cap Fund ............... 26.18% 15.94% NA 12.82%
(Inception 10/2/98)
The James Market Neutral Fund .......... 8.63% 6.14% NA 3.30%
(Inception 10/2/98)
The James Equity Fund .................. 22.14% -6.77% NA -2.80%
(Inception 11/1/99)
- ------------------------------------------------------------------------------------------------
Past performance is not predictive of future results.
2
THE JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
December 31, 2004
================================================================================
The illustrations below provide the industry sectors for The James Golden
Rainbow Fund, The James Small Cap Fund, The Market Neutral Fund, and The James
Equity Fund.
The Golden Rainbow Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART OMITTED]
BASIC MATERIALS - 3.6%
CONSUMER, CYCLICAL - 4.8%
CONSUMER, NON-CYCLICAL - 13.9%
ENERGY - 7.5%
FINANCIAL - 4.7%
INDUSTRIAL - 5.2%
TECHNOLOGY - 5.5%
UTILITIES - 6.5%
INTERNATIONAL EQUITY FUNDS - 0.5%
BONDS (over 10 years) - 5.9%
BONDS (2-10 years) - 32.1%
BONDS (less than 2 years) - 7.5%
CASH - 1.5%
OTHER - 0.8%
The James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART OMITTED]
BASIC MATERIALS - 4.7%
CONSUMER, CYCLICAL - 26.3%
CONSUMER, NON-CYCLICAL - 17.6%
ENERGY - 10.0%
FINANCIAL - 8.8%
INDUSTRIAL - 5.4%
TECHNOLOGY - 17.3%
UTILITIES - 2.9%
BONDS - 1.8%
CASH - 4.9%
OTHER - 0.3%
3
THE JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
(Continued)
================================================================================
The James Market Neutral Fund
Industry Sector Allocation (% of Net Assets)
(Cash and Cash Equivalents not included)
[BAR CHART OMITTED]
Longs Shorts
------- --------
BASIC MATERIALS 6.70% 2.60%
CONSUMER, CYCLICAL 11.50% 12.90%
CONSUMER, NON-CYCLICAL 14.90% 18.70%
ENERGY 7.00% 1.10%
FINANCIAL 4.60% 5.80%
INDUSTRIAL 4.00% 4.10%
TECHNOLOGY 12.80% 10.80%
UTILITIES 3.40% 0.00%
The James Equity Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART OMITTED]
BASIC MATERIALS - 5.2%
CONSUMER, CYCLICAL - 23.3%
CONSUMER, NON-CYCLICAL - 10.4%
ENERGY - 16.8%
FINANCIAL - 12.5%
INDUSTRIAL - 15.0%
TECHNOLOGY - 6.6%
UTILITIES - 7.0%
BONDS - 1.1%
CASH - 3.3%
OTHER - (1.2%)
4
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2004 (Unaudited)
================================================================================
- ---------------------------------------------------------------------------------------------------------------------
The Golden The James The James The James
Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost .......................... $ 71,989,465 $ 10,575,229 $ 10,574,775 $ 7,314,600
============== ============== ============== ==============
At value ................................... $ 94,170,400 $ 16,484,335 $ 14,351,802 $ 9,554,562
Segregated cash with
brokers ...................................... -- -- 9,226,870 --
Dividends and interest receivable ............ 695,652 13,323 22,073 10,919
Receivable for capital shares sold ........... 131,547 270,135 4,641 8,509
Receivable for
securities sold .............................. -- -- 458,632 --
Other assets ................................. 13,039 18,330 20,231 3,951
-------------- -------------- -------------- --------------
TOTAL ASSETS ............................ 95,010,638 16,786,123 24,084,249 9,577,941
-------------- -------------- -------------- --------------
LIABILITIES
Payable for securities sold short
(proceeds $7,521,031) ...................... -- -- 8,519,067 --
Payable for dividends on securities sold short -- -- 1,237 --
Payable for capital shares redeemed .......... 13,511 4,299 4,077 --
Payable for securities purchased ............. -- 236,477 316,416 129,957
Accrued expenses:
Management fees ............................ 58,519 14,919 21,603 8,103
Trustees' fees ............................. 2,019 -- -- --
Other ...................................... 7,670 -- -- --
--------------
TOTAL LIABILITIES ......................... 81,719 255,695 8,862,400 138,060
-------------- -------------- -------------- --------------
NET ASSETS ................................... $ 94,928,919 $ 16,530,428 $ 15,221,849 $ 9,439,881
============== ============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital .............................. $ 72,109,345 $ 10,435,016 $ 13,693,244 $ 10,623,541
Accumulated net investment income (loss) ..... (4,138) (34,850) (42,752) 7,468
Accumulated net realized gains (losses) from
security transactions ...................... 642,777 221,156 (1,207,634) (3,431,090)
Net unrealized appreciation on investments ... 22,180,935 5,909,106 2,778,991 2,239,962
-------------- -------------- -------------- --------------
NET ASSETS ................................... $ 94,928,919 $ 16,530,428 $ 15,221,849 $ 9,439,881
============== ============== ============== ==============
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) ............................. 5,735,274 831,481 1,328,663 1,104,464
============== ============== ============== ==============
Net asset value, offering price and redemption
price per share ............................ $ 16.55 $ 19.88 $ 11.46 $ 8.55
============== ============== ============== ==============
See accompanying notes to financial statements.
5
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 2004 (Unaudited)
================================================================================
The Golden The James The James The James
Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of withholding taxes of $1,244,
$221, $201, $265, respectively) ............... $ 304,406 $ 64,858 $ 37,217 $ 62,962
Interest ......................................... 975,065 2,762 86,632 1,860
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ....................... 1,279,471 67,620 123,849 64,822
------------ ------------ ------------ ------------
EXPENSES
Management fees .................................. 324,059 78,924 112,565 42,961
12b-1 distribution and service fees - Class A .... 109,479 17,546 18,839 10,123
Administration fees .............................. 31,323 -- -- --
Dividend expense on securities sold short ........ -- -- 29,197 --
Professional fees ................................ 17,425 -- -- --
Accounting services fees ......................... 14,905 -- -- --
Transfer agent fees .............................. 12,487 -- -- --
Postage and supplies ............................. 14,061 -- -- --
Custodian fees and expenses ...................... 9,934 -- -- --
Trustees' fees ................................... 3,483 6,000 6,000 6,000
Shareholder report printing and mailing .......... 7,499 -- -- --
Other expenses ................................... 8,253
Compliance fees and expenses ..................... 2,330 -- -- --
------------ ------------ ------------ ------------
TOTAL EXPENSES ................................ 555,238 102,470 166,601 59,084
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ....................... 724,233 (34,850) (42,752) 5,738
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains from security transactions .... 1,528,080 221,156 1,202,115 281,587
Net realized losses on closed short positions .... -- -- (45,247) --
Net change in unrealized appreciation/depreciation
on investments ................................ 5,866,049 1,552,795 (578,498) 973,872
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS ................................... 7,394,129 1,773,951 578,370 1,255,459
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS ......................... $ 8,118,362 $ 1,739,101 $ 535,618 $ 1,261,197
============ ============ ============ ============
See accompanying notes to financial statements.
6
THE GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Six Months Year
Ended Ended
Dec. 31, 2004 June 30,
(Unaudited) 2004
- ---------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .............................................. $ 724,233 $ 1,355,923
Net realized gains on investments .................................. 1,528,080 2,431,503
Net change in unrealized appreciation/depreciation on investments .. 5,866,049 5,616,025
-------------- --------------
Net increase in net assets from operations ........................... 8,118,362 9,403,451
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................... (728,371) (1,355,926)
Distributions from net realized gains .............................. (289,929) (2,860)
-------------- --------------
Decrease in net assets from distributions to shareholders ............ (1,018,300) (1,358,786)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................... 6,189,903 12,039,589
Net asset value of shares issued in reinvestment of distributions to
shareholders ..................................................... 991,882 1,316,516
Payments for shares redeemed ....................................... (3,245,783) (6,677,222)
-------------- --------------
Net increase in net assets from capital share transactions ........... 3,936,002 6,678,883
-------------- --------------
TOTAL INCREASE IN NET ASSETS ......................................... 11,036,064 14,723,548
NET ASSETS
Beginning of period ................................................ 83,892,855 69,169,307
-------------- --------------
End of period ...................................................... $ 94,928,919 $ 83,892,855
============== ==============
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME ..................... $ (4,138) $ --
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................ 392,599 814,579
Shares issued in reinvestment of distributions to shareholders ..... 61,362 88,282
Shares redeemed .................................................... (208,213) (455,525)
-------------- --------------
Net increase in shares outstanding ................................. 245,748 447,336
Shares outstanding, beginning of period ............................ 5,489,526 5,042,190
-------------- --------------
Shares outstanding, end of period .................................. 5,735,274 5,489,526
============== ==============
See accompanying notes to financial statements
7
THE JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Six Months Year
Ended Ended
Dec. 31, 2004 June 30,
(Unaudited) 2004
- ---------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) ....................................... $ (34,850) $ 5,930
Net realized gains on investments .................................. 221,156 1,312,222
Net change in unrealized appreciation/depreciation on investments .. 1,552,795 2,281,240
-------------- --------------
Net increase in net assets from operations ........................... 1,739,101 3,599,392
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................... -- (5,930)
Distributions from net realized gains .............................. (756,432) (35,827)
-------------- --------------
Decrease in net assets from distributions to shareholders ............ (756,432) (41,757)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................... 2,839,630 4,024,974
Net asset value of shares issued in reinvestment of distributions
to shareholders .................................................. 743,313 39,152
Payments for shares redeemed (A) ................................... (1,220,822) (3,634,802)
-------------- --------------
Net increase in net assets from capital share transactions ........... 2,362,121 429,324
-------------- --------------
TOTAL INCREASE IN NET ASSETS ......................................... 3,344,790 3,986,959
NET ASSETS
Beginning of period ................................................ 13,185,638 9,198,679
-------------- --------------
End of period ...................................................... $ 16,530,428 $ 13,185,638
============== ==============
ACCUMULATED NET INVESTMENT LOSS ...................................... $ (34,850) $ --
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................ 154,846 233,627
Shares issued in reinvestment of distributions to shareholders ..... 39,060 2,470
Shares redeemed .................................................... (68,884) (214,778)
-------------- --------------
Net increase in shares outstanding ................................. 125,022 21,319
Shares outstanding, beginning of period ............................ 706,459 685,140
-------------- --------------
Shares outstanding, end of period .................................. 831,481 706,459
============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been held for less than the stated period in the
prospectus. For the six months ended December 31, 2004, these fees were
$5,341 and $12,181 for the year ended June 30, 2004.
See accompanying notes to financial statements.
8
THE JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Six Months Year
Ended Ended
Dec. 31, 2004 June 30,
(Unaudited) 2004
- ----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss .................................... $ (42,752) $ (149,656)
Net realized gains (losses) from:
Security transactions .............................. 1,202,115 395,098
Closed short positions ............................. (45,247) (1,927,042)
Net change in unrealized appreciation/depreciation
on investments ........................................ (578,498) 2,726,352
-------------- --------------
Net increase in net assets from operations ............... 535,618 1,044,752
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 3,675,892 3,349,412
Payments for shares redeemed (A) ....................... (1,517,733) (1,084,887)
-------------- --------------
Net increase in net assets from capital share transactions 2,158,159 2,264,525
-------------- --------------
TOTAL INCREASE IN NET ASSETS ............................. 2,693,777 3,309,277
NET ASSETS
Beginning of period .................................... 12,528,072 9,218,795
-------------- --------------
End of period .......................................... $ 15,221,849 $ 12,528,072
============== ==============
ACCUMULATED NET INVESTMENT LOSS .......................... $ (42,752) $ --
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................ 328,410 317,126
Shares redeemed ........................................ (136,464) (105,079)
-------------- --------------
Net increase in shares outstanding ..................... 191,946 212,047
Shares outstanding, beginning of period ................ 1,136,717 924,670
-------------- --------------
Shares outstanding, end of period ...................... 1,328,663 1,136,717
============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been held for less than the stated period in the
prospectus. For the six months ended December 31, 2004, these fees were
$4,076 and $197 for the year ended June 30, 2004.
See accompanying notes to financial statements.
9
THE JAMES EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Six Months Year
Ended Ended
Dec. 31, 2004 June 30,
(Unaudited) 2004
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income .............................................. $ 5,738 $ 15,890
Net realized gains on investments .................................. 281,587 34,190
Net change in unrealized appreciation/depreciation on investments .. 973,872 1,045,488
-------------- --------------
Net increase in net assets from operations ........................... 1,261,197 1,095,568
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................... -- (14,163)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................... 1,182,155 1,491,283
Net asset value of shares issued in reinvestment of distributions to
shareholders ..................................................... -- 13,379
Payments for shares redeemed (A) ................................... (252,239) (716,744)
-------------- --------------
Net increase in net assets from capital share transactions ........... 929,916 787,918
-------------- --------------
TOTAL INCREASE IN NET ASSETS ......................................... 2,191,113 1,869,323
NET ASSETS
Beginning of period ................................................ 7,248,768 5,379,445
-------------- --------------
End of period ...................................................... $ 9,439,881 $ 7,248,768
============== ==============
ACCUMULATED NET INVESTMENT INCOME .................................... $ 7,468 $ 1,730
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................ 155,133 216,097
Shares issued in reinvestment of distributions to shareholders ..... -- 2,003
Shares redeemed .................................................... (34,988) (104,806)
-------------- --------------
Net increase in shares outstanding ................................. 120,145 113,294
Shares outstanding, beginning of period ............................ 984,319 871,025
-------------- --------------
Shares outstanding, end of period .................................. 1,104,464 984,319
============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been for less than the stated period in the
prospectus. For the six months ended December 31, 2004, these fees were
$215 and $229 for the year ended June 30, 2004.
See accompanying notes to financial statements.
10
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, 2004 -------------------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period ...... $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54 $ 17.28
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income ..................... 0.13 0.26 0.27 0.40 0.40 0.50
Net realized and unrealized
gains (losses) on investments ........... 1.32 1.56 0.28 0.33 (0.08) 0.31
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ............ 1.45 1.82 0.55 0.73 0.32 0.81
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ................ (0.13) (0.26) (0.27) (0.40) (0.40) (0.50)
From net realized gains on investments .... (0.05) 0.00(A) (0.36) (0.87) (2.12) (1.05)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ......................... (0.18) (0.26) (0.63) (1.27) (2.52) (1.55)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ............ $ 16.55 $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54
========== ========== ========== ========== ========== ==========
Total return ................................ 9.53%(B) 13.32% 4.34% 5.37% 2.33% 4.98%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) ......... $ 94,929 $ 83,893 $ 69,169 $ 65,456 $ 65,902 $ 82,754
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets:
Before expense reimbursements
and waived fees ........................ 1.26%(C) 1.28% 1.32% 1.24% 1.25% 1.22%
After expense reimbursements
and waived fees ........................ 1.26%(C) 1.28% 1.32% 1.24% 1.25% 1.07%
Ratio of net investment income
to average net assets ..................... 1.65%(C) 1.77% 2.08% 2.84% 2.61% 2.86%
Portfolio turnover rate ..................... 34%(C) 29% 61% 54% 57% 82%
(A) Per share amount rounds to less than $0.005.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
11
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
Dec. 31, 2004 --------------------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61 $ 11.87
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) .......... (0.09) 0.01 0.10 0.00(A) (0.04) (0.05)
Net realized and unrealized gains
(losses) on investments ............ 2.31 5.26 1.35 1.06 0.46 (1.21)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ........ 2.22 5.27 1.45 1.06 0.42 (1.26)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ............ -- (0.01) (0.10) (0.01) -- --
From net realized gains on investments (1.00) (0.05) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ..................... (1.00) (0.06) (0.10) (0.01) -- --
---------- ---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees .... --(A) 0.02 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........ $ 19.88 $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61
========== ========== ========== ========== ========== ==========
Total return ............................ 12.12%(B) 39.47% 12.20% 9.65% 3.96% (10.61%)
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) ..... $ 16,530 $ 13,186 $ 9,199 $ 7,882 $ 7,066 $ 5,251
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to
average net assets .................... 1.50%(C) 1.50% 1.50% 1.48% 1.50% 1.50%
Ratio of net investment income (loss)
to average net assets ................. (0.51%)(C) 0.05% 0.90% 0.02% (0.45%) (0.48%)
Portfolio turnover rate ................. 33%(C) 45% 52% 78% 75% 101%
(A) Amount rounds to less than $0.005.
(B) Not annualized.
(C) 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
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
Dec. 31, 2004 ---------------------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71 $ 9.30
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ....... (0.03) (0.13) (0.10) 0.02 0.24 0.23
Net realized and unrealized gains
(losses) on investments ......... 0.47 1.18 (0.72) 0.69 0.41 0.41
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ........ 0.44 1.05 (0.82) 0.71 0.65 0.64
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ......... -- -- -- (0.04) (0.24) (0.23)
---------- ---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees .... --(A) --(A) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........ $ 11.46 $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71
========== ========== ========== ========== ========== ==========
Total return ............................ 3.99%(B) 10.53% (7.60%) 7.06% 6.76% 7.02%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) ..... $ 15,222 $ 12,528 $ 9,219 $ 8,676 $ 9,651 $ 6,684
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to average
net assets, excluding dividends
on securities sold short .............. 1.96%(C) 1.95% 1.95% 1.95% 1.95% 1.95%
Ratio of dividend expense on
securities sold short ................. 0.42%(C) 0.64% 0.53% 0.28% 0.25% 0.53%
---------- ---------- ---------- ---------- ---------- ----------
Ratio of net expenses to
average net assets .................... 2.38%(C) 2.59% 2.48% 2.23% 2.20% 2.48%
---------- ---------- ---------- ---------- ---------- ----------
Ratio of net investment income
(loss) to average net assets .......... (0.61%)(C) (1.43%) (0.98%) 0.25% 2.47% 2.47%
Portfolio turnover rate ................. 71%(C) 13% 86% 154% 104% 90%
(A) Amount rounds to less than $0.005.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
13
THE JAMES EQUITY FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year Year Period
Ended Ended Ended Ended Ended Ended
Dec. 31, 2004 June 30, June 30, June 30, June 30, June 30,
(Unaudited) 2004 2003 2002 2001 2000(A)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ....... 0.01 0.02 0.03 0.01 (0.07) (0.06)
Net realized and unrealized gains
(losses) on investments ......... 1.18 1.18 (0.44) (1.03) (5.93) 3.71
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ........ 1.19 1.20 (0.41) (1.02) (6.00) 3.65
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ......... -- (0.02) (0.03) (0.01) -- --
---------- ---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees .... --(B) --(B) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ........ $ 8.55 $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65
========== ========== ========== ========== ========== ==========
Total return ............................ 16.17%(C) 19.38% (6.14%) (13.29%) (43.96%) 36.50%(C)
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) ..... $ 9,440 $ 7,249 $ 5,379 $ 3,788 $ 4,504 $ 6,279
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to
average net assets .................... 1.50%(D) 1.50% 1.50% 1.50% 1.50% 1.49%(D)
Ratio of net investment income
(loss) to average net assets .......... 0.15%(D) 0.25% 0.56% 0.20% (0.67%) (0.99%)(D)
Portfolio turnover rate ................. 49%(D) 70% 65% 87% 131% 95%(D)
(A) Represents the period from the initial public offering of shares (November
1, 1999) through June 30, 2000.
(B) Amount rounds to less than $0.005.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
14
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
December 31, 2004 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 52.2% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.6%
30,000 Barrick Gold Corporation ......................... $ 726,600
35,650 Methanex Corporation ............................. 650,969
42,000 Newmont Mining Corporation ....................... 1,865,220
10,000 RPM International, Inc ........................... 196,600
-----------
3,439,389
-----------
CONSUMER, CYCLICAL -- 4.8%
14,000 Barnes & Noble, Inc.* ............................ 451,780
15,000 CBRL Group, Inc .................................. 627,750
11,000 Central Garden & Pet Company* .................... 459,140
19,000 Ennis Business Forms ............................. 365,750
30,000 Hartmarx Corporation* ............................ 233,100
5,000 Jarden Corporation* .............................. 217,200
35,300 Supervalu, Inc ................................... 1,218,556
4,500 The Black & Decker Corporation ................... 397,485
21,000 The Pantry, Inc.* ................................ 631,890
-----------
4,602,651
-----------
CONSUMER, NON-CYCLICAL -- 13.9%
7,000 Aetna, Inc ....................................... 873,250
12,000 Bristol-Myers Squibb Company ..................... 307,440
60,000 Coventry Health Care, Inc.* ...................... 3,184,800
27,000 DaVita, Inc.* .................................... 1,067,310
10,000 Dynamex, Inc.* ................................... 185,300
36,000 Mine Safety Appliances Company ................... 1,825,200
10,000 Par Pharmaceutical Cos, Inc.* .................... 413,800
37,234 PolyMedica Corporation ........................... 1,388,456
12,000 Res-Care, Inc.* .................................. 182,640
18,000 Sanderson Farms, Inc ............................. 779,040
18,000 Sierra Health Services, Inc.* .................... 991,980
16,000 The Toro Company ................................. 1,301,600
25,000 TRM Corporation* ................................. 591,000
-----------
13,091,816
-----------
ENERGY -- 7.5%
18,500 Alliance Resource Partners, L.P .................. 1,369,000
11,000 Amerada Hess Corporation ......................... 906,180
21,800 Apache Corporation ............................... 1,102,426
12,940 ChevronTexaco Corporation ........................ 679,479
30,000 Devon Energy Corporation ......................... 1,167,600
15,000 EOG Resources, Inc ............................... 1,070,400
10,000 Exxon Mobil Corporation .......................... 512,600
5,000 Kerr-McGee Corporation ........................... 288,950
-----------
7,096,635
-----------
15
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 52.2% Value
- --------------------------------------------------------------------------------
FINANCIAL -- 4.7%
15,000 Allstate Corporation ............................. $ 775,800
11,000 Bear Stearns Companies, Inc ...................... 1,125,410
37,500 Rent-A-Center, Inc.* ............................. 993,750
22,000 Stewart Information Services Corporation ......... 916,300
14,000 W.R. Berkley Corporation ......................... 660,380
-----------
4,471,640
-----------
INDUSTRIAL -- 5.2%
10,000 Aviall, Inc.* .................................... 229,700
16,000 Ball Corporation ................................. 703,680
20,000 BorgWarner, Inc .................................. 1,083,400
30,000 Briggs & Stratton Corporation .................... 1,247,400
3,000 Caterpiller, Inc ................................. 292,530
15,000 Deere & Company .................................. 1,116,000
5,500 Middleby Corporation ............................. 278,960
-----------
4,951,670
-----------
TECHNOLOGY -- 5.5%
10,000 Armor Holdings, Inc.* ............................ 470,200
65,000 Catalyst Semiconductor, Inc.* .................... 357,500
12,000 Diodes, Inc.* .................................... 271,560
55,000 Earthlink, Inc.* ................................. 633,600
1,324 Freescale Semiconductor, Inc.- Class B* .......... 24,309
5,948 Gamestop Corporation - Class B* .................. 133,295
31,000 Komag, Inc.* ..................................... 582,180
15,000 Moog, Inc. - Class A* ............................ 680,250
12,000 Motorola, Inc .................................... 206,400
11,000 Nextel Communications - Class A* ................. 330,000
33,000 THQ, Inc.* ....................................... 757,019
25,000 WESCO International, Inc.* ....................... 741,000
-----------
5,187,313
-----------
UTILITIES -- 6.5%
10,000 ALLTEL Corporation ............................... 587,600
20,000 CenterPoint Energy, Inc .......................... 226,000
21,000 DPL, Inc ......................................... 527,310
53,000 Edison International ............................. 1,697,590
35,400 Energen Corporation .............................. 2,086,830
16,500 TXU Corporation .................................. 1,065,240
-----------
6,190,570
-----------
INTERNATIONAL EQUITY FUNDS -- 0.5%
6,000 Chile Fund, Inc .................................. 83,940
10,000 Greater China Fund, Inc .......................... 157,500
24,000 iShares MSCI Japan Index Fund .................... 262,080
-----------
503,520
-----------
TOTAL COMMON STOCKS .............................. $49,535,204
-----------
16
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 43.2% Value
- --------------------------------------------------------------------------------
$2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 ........ $ 2,166,232
1,000,000 U.S. Treasury Bonds, 10.000%, 5/15/10 ............ 1,026,562
2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11 ............. 2,659,473
2,000,000 U.S. Treasury Bonds, 4.875%, 2/15/12 ............. 2,113,906
1,500,000 U.S. Treasury Bonds, 3.875%, 2/15/13 ............. 1,479,962
1,000,000 U.S. Treasury Bonds, 5.250%, 2/15/29 ............. 1,048,984
4,200,000 U.S. Treasury Bonds, 5.375%, 2/15/31 ............. 4,541,578
6,500,000 U.S. Treasury Notes, 3.500%, 11/15/06 ............ 6,554,846
6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07 ............. 6,386,250
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 ............. 3,236,367
2,500,000 U.S. Treasury Notes, 3.250%, 8/15/07 ............. 2,503,710
1,000,000 U.S. Treasury Notes, 3.000%, 2/15/08 ............. 991,836
2,000,000 U.S. Treasury Notes, 2.625%, 3/15/09 ............. 1,932,578
4,000,000 U.S. Treasury Notes, 6.000%, 8/15/09 ............. 4,411,564
-----------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ........... $41,053,848
-----------
================================================================================
Par Value CORPORATE BONDS -- 2.3% Value
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Companies, Inc., 6.000%, 4/15/11 $ 545,413
500,000 Barrick Gold Finance, Inc., 7.500%, 5/1/07 .... 541,878
500,000 General Electric Capital Corporation,
7.875%, 12/1/06 ............................. 540,113
500,000 Tennessee Valley Authority, 5.625%, 1/18/11 ... 537,164
------------
TOTAL CORPORATE BONDS ......................... $ 2,164,568
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 1.5% Value
- --------------------------------------------------------------------------------
1,416,780 First American Treasury Obligations Fund ....... $ 1,416,780
------------
TOTAL INVESTMENT SECURITIES -- 99.2%
(Amortized Cost $71,989,465 .................... $94,170,400
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8% .. 758,519
-----------
NET ASSETS -- 100.0% ........................... $94,928,919
===========
* Non-income producing security.
See accompanying notes to financial statements.
17
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 2004 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 93.0% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 4.7%
5,200 Arch Chemicals, Inc .............................. $ 149,656
3,800 Bandag, Inc ...................................... 189,278
910 Octel Corporation ................................ 18,937
12,300 Schnitzer Steel Industries, Inc. - Class A ....... 417,339
-----------
775,210
-----------
CONSUMER, CYCLICAL -- 26.3%
16,000 Aldila, Inc ...................................... 247,840
3,275 Banta Corporation ................................ 146,589
3,450 Books-A-Million, Inc ............................. 33,189
7,600 Brown Shoe Company, Inc .......................... 226,708
5,630 Central Garden & Pet Company* .................... 234,996
4,550 Chromcraft Revington, Inc.* ...................... 55,965
1,180 Department 56, Inc.* ............................. 19,647
18,700 Guess?, Inc.* .................................... 234,685
12,500 Handelman Company ................................ 268,500
2,650 J. Alexander's Corporation* ...................... 19,610
1,500 Johnson Outdoors, Inc. - Class A* ................ 30,150
10,130 Landry's Restaurants, Inc ........................ 294,378
12,950 Nash Finch Company ............................... 488,992
1,680 Nutraceutical International Corporation* ......... 25,889
1,390 Orleans Homebuilders, Inc.* ...................... 27,592
1,890 Perini Corporation* .............................. 31,544
6,700 Sharper Image Corporation* ....................... 126,295
10,500 Steiner Leisure Ltd.* ............................ 313,740
4,860 The Ryland Group, Inc ............................ 279,644
11,130 The Toro Company ................................. 905,426
26,800 Trans World Entertainment Corporation* ........... 334,196
-----------
4,345,575
-----------
CONSUMER, NON-CYCLICAL -- 17.6%
12,100 Cal-Maine Foods, Inc ............................. 146,289
2,550 CCA Industries, Inc .............................. 29,172
8,900 Corrections Corporation of America* .............. 360,005
2,150 Dynamex, Inc.* ................................... 39,840
16,920 Helen of Troy Ltd.* .............................. 568,681
10,000 Ingles Markets, Inc. - Class A ................... 123,900
17,100 Lance, Inc ....................................... 325,413
19,237 Sanderson Farms, Inc ............................. 832,578
15,915 Sola International, Inc.* ........................ 438,299
2,050 TRM Corporation* ................................. 48,462
-----------
2,912,639
-----------
18
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 93.0% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 10.0%
1,800 Adams Resources & Energy, Inc .................... $ 31,752
11,000 Frontier Oil Corporation ......................... 293,260
5,100 Giant Industries, Inc.* .......................... 135,201
23,236 Patina Oil & Gas Corporation ..................... 871,350
3,000 South Jersey Industries, Inc ..................... 157,680
7,500 Terra Nitrogen Company, L.P ...................... 167,325
-----------
1,656,568
-----------
FINANCIAL -- 8.8%
13,950 Aaron Rents, Inc ................................. 348,750
1,170 ACE Cash Express, Inc.* .......................... 34,702
3,780 Capital Title Group, Inc ......................... 21,433
7,600 Delta Financial Corporation ...................... 78,280
980 Donegal Group, Inc. - Class A .................... 22,471
12,670 FPIC Insurance Group, Inc.* ...................... 448,264
11,420 Irwin Financial Corporation ...................... 324,214
4,400 United Fire & Casualty Company ................... 148,324
1,280 World Acceptance Corporation* .................... 35,213
-----------
1,461,651
-----------
INDUSTRIAL -- 5.4%
7,700 Briggs & Stratton Corporation .................... 320,166
1,000 Middleby Corporation ............................. 50,720
29,000 OMI Corporation .................................. 488,650
820 Rofin-Sinar Technologies, Inc.* .................. 34,809
-----------
894,345
-----------
TECHNOLOGY -- 17.3%
8,400 Aviall, Inc.* .................................... 192,948
3,800 Catalyst Semiconductor, Inc.* .................... 20,900
9,500 Diodes, Inc.* .................................... 214,985
6,900 Hutchinson Technology, Inc.* ..................... 238,533
41,800 Imergent, Inc.* .................................. 633,270
5,000 John H. Harland Company .......................... 180,500
11,900 MTS Systems Corporation .......................... 402,339
2,800 Schick Technologies, Inc.* ....................... 44,100
10,595 United Industrial Corporation .................... 410,450
17,500 WESCO International, Inc.* ....................... 518,700
-----------
2,856,725
-----------
UTILITIES -- 2.9%
11,600 El Paso Electric Company* ........................ 219,704
9,800 Golden Telecom, Inc .............................. 258,916
-----------
478,620
-----------
TOTAL COMMON STOCKS .............................. $15,381,333
-----------
19
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 1.8% Value
- --------------------------------------------------------------------------------
$300,000 Federal Home Loan Bank Discount Note, 1/4/05 ..... $ 299,918
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.9% Value
- --------------------------------------------------------------------------------
803,084 First American Treasury Obligations Fund ......... $ 803,084
-----------
TOTAL INVESTMENT SECURITIES -- 99.7%
(Cost $10,575,229) ............................... $16,484,335
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3% .... 46,093
-----------
NET ASSETS -- 100.0% ............................. $16,530,428
===========
* Non-income producing security.
See accompanying notes to financial statements.
20
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
December 31, 2004 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 64.9% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 6.7%
10,500 Methanex Corporation ............................. $ 191,730
4,000 Quanex Corporation ............................... 274,280
16,500 Schnitzer Steel Industries, Inc.- Class A ........ 559,845
-----------
1,025,855
-----------
CONSUMER, CYCLICAL -- 11.5%
9,200 AnnTaylor Stores Corporation* .................... 198,076
7,000 Barnes & Noble, Inc.* ............................ 225,890
4,900 CBRL Group, Inc .................................. 205,065
10,000 Central Garden & Pet Company* .................... 417,400
3,600 The Black & Decker Corporation ................... 317,988
7,500 The Pantry, Inc.* ................................ 225,675
2,500 Timberland Company - Class A* .................... 156,675
-----------
1,746,769
-----------
CONSUMER, NON-CYCLICAL -- 14.9%
5,000 Coventry Health Care, Inc.* ...................... 265,400
8,000 DaVita, Inc.* .................................... 316,240
14,000 Helen of Troy Ltd.* .............................. 470,540
13,000 Humana, Inc.* .................................... 385,970
9,400 Sierra Health Services, Inc.* .................... 518,033
3,750 The Toro Company ................................. 305,063
-----------
2,261,246
-----------
ENERGY -- 7.0%
7,896 Apache Corporation ............................... 399,301
10,000 Devon Energy Corporation ......................... 389,200
5,500 Exxon Mobil Corporation .......................... 281,930
-----------
1,070,431
-----------
FINANCIAL -- 4.6%
7,200 CIT Group Inc .................................... 329,904
14,250 Rent-A-Center, Inc.* ............................. 377,625
-----------
707,529
-----------
INDUSTRIAL -- 4.0%
6,000 Ball Corporation ................................. 263,880
4,250 PACCAR, Inc ...................................... 342,040
-----------
605,920
-----------
TECHNOLOGY -- 12.8%
13,000 Autodesk, Inc .................................... 493,350
10,000 Komag, Inc.* ..................................... 187,800
6,702 Moog, Inc. - Class A* ............................ 303,936
5,000 Motorola, Inc .................................... 86,000
10,000 MTS Systems Corporation .......................... 338,100
18,000 WESCO International, Inc.* ....................... 533,519
-----------
1,942,705
-----------
21
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 64.9% (Continued) Value
- --------------------------------------------------------------------------------
UTILITIES -- 3.4%
10,000 Edison International ............................. $ 320,300
3,000 TXU Corporation .................................. 193,680
-----------
513,980
-----------
TOTAL COMMON STOCKS .............................. $ 9,874,435
-----------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 25.4% Value
- --------------------------------------------------------------------------------
$500,000 Federal Home Loan Bank Discount Note, 4/15/05 .... $ 496,544
1,000,000 Federal National Mortgage Association Discount Note,
5/25/05 990,060
500,000 Federal National Mortgage Association Discount
Note, 1/5/05 ................................... 499,861
500,000 U.S. Treasury Bills, 3/24/05 ..................... 497,600
400,000 U.S. Treasury Bills, 4/21/05 ..................... 397,204
1,000,000 U.S. Treasury Bills, 6/23/05 ..................... 988,208
-----------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ............. $ 3,869,477
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.0% Value
- --------------------------------------------------------------------------------
607,890 First American Treasury Obligations Fund ......... $ 607,890
-----------
TOTAL INVESTMENT SECURITIES -- 94.3%
(Amortized Cost $10,574,775) ..................... $14,351,802
SEGREGATED CASH WITH BROKERS -- 60.6% ............ 9,226,870
SECURITIES SOLD SHORT -- (56.0%) (Proceeds
$7,521,031) ...................................... (8,519,067)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1% .... 162,244
-----------
NET ASSETS -- 100.0% ............................. $15,221,849
===========
* Non-income producing security.
See accompanying notes to financial statements.
22
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
December 31, 2004 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 56.0% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 2.6%
7,225 Apex Silver Mines Ltd.* .......................... $ 124,125
9,000 Domtar, Inc ...................................... 108,630
11,000 Glatfelter ....................................... 168,080
-----------
400,835
-----------
CONSUMER, CYCLICAL -- 12.9%
11,000 99 Cents Only Stores* ............................ 177,760
18,800 AMR Corporation* ................................. 205,860
16,000 Callaway Golf Company ............................ 216,000
4,815 Comcast Corporation Special Class A* ............. 158,125
5,400 Cox Radio, Inc. Class A* ......................... 88,992
5,500 Fairmont Hotels & Resorts, Inc ................... 190,520
4,200 Gaylord Entertainment Company* ................... 174,426
12,155 Northwest Airlines Corporation* .................. 132,854
16,500 TiVo, Inc.* ...................................... 96,855
13,200 ValueVision Media, Inc. Class A* ................. 183,612
16,000 Visteon Corporation .............................. 156,320
5,400 WMS Industries, Inc.* ............................ 181,116
-----------
1,962,440
-----------
CONSUMER, NONCYCLICAL -- 18.7%
14,000 Adolor Corporation* .............................. 138,880
6,900 Amylin Pharmaceuticals, Inc.* .................... 161,184
14,300 CV Therapeutics, Inc.* ........................... 328,900
9,450 DeVry, Inc.* ..................................... 164,052
1,500 Dreyer's Grand Ice Cream Holdings, Inc ........... 120,645
5,000 Elan Corporation Plc.* ........................... 136,250
7,850 Hain Celestial Group, Inc.* ...................... 162,259
13,740 Impax Laboratories, Inc.* ........................ 218,191
9,790 Nektar Therapeutics* ............................. 198,150
3,050 Neurocrine Biosciences, Inc.* .................... 150,365
6,200 NPS Pharmaceuticals, Inc.* ....................... 113,336
7,500 ScheringPlough Corporation ....................... 156,600
2,900 Sepracor, Inc.* .................................. 172,173
3,400 Shurgard Storage Centers, Inc .................... 149,634
6,400 Taro Pharmaceutical Industries Ltd.* ............. 217,792
3,000 Tejon Ranch Company .............................. 122,400
12,400 Tenet Healthcare Corporation* .................... 136,152
-----------
2,846,963
-----------
ENERGY -- 1.1%
4,800 GlobalSantaFe Corporation ........................ 158,928
-----------
23
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 56.0% Value
- --------------------------------------------------------------------------------
FINANCIAL -- 5.8%
8,500 Brookline Bancorp, Inc ........................... $ 138,720
6,300 Capitol Federal Financial ........................ 226,800
16,255 LaBranche & Company, Inc.* ....................... 145,645
3,000 Paychex, Inc ..................................... 102,240
7,500 Provident Financial Services, Inc ................ 145,275
1,500 XL Capital Ltd. Class A .......................... 116,475
-----------
875,155
-----------
INDUSTRIAL -- 4.1%
20,600 Ballard Power Systems, Inc.* ..................... 139,668
20,500 Exelixis, Inc.* .................................. 194,750
16,190 PowerOne, Inc.* .................................. 144,415
4,250 Tidewater, Inc ................................... 151,342
-----------
630,175
-----------
TECHNOLOGY -- 10.8%
11,500 ASML Holding N.V.* ............................... 182,965
16,580 Bearingpoint, Inc.* .............................. 133,137
8,800 FEI Company* ..................................... 184,800
11,350 Genesis Microchip, Inc.* ......................... 184,097
11,600 IDT Corporation* ................................. 170,288
10,400 InterDigital Communications Corporation* ......... 229,840
5,400 National Instruments Corporation ................. 147,150
9,350 NVIDIA Corporation* .............................. 220,286
8,000 Power Integrations, Inc.* ........................ 158,240
3,931 Tellabs, Inc.* ................................... 33,768
-----------
1,644,571
-----------
TOTAL COMMON STOCKS (Proceeds $7,521,031) ........ $ 8,519,067
===========
See accompanying notes to financial statements.
24
THE JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 2004 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 96.8% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 5.2%
2,400 Dow Chemical ..................................... $ 118,824
10,600 Methanex Corporation ............................. 193,556
5,250 Schnitzer Steel Industries, Inc.- Class A ........ 178,133
-----------
490,513
-----------
CONSUMER, CYCLICAL -- 23.3%
7,000 Aldila, Inc ...................................... 108,430
4,400 Barnes & Noble, Inc.* ............................ 141,988
4,400 CVS Corporation .................................. 198,308
9,700 Dave & Buster's, Inc.* ........................... 195,940
18,800 Hartmarx Corporation* ............................ 146,076
5,510 Johnson Controls, Inc ............................ 349,554
5,300 Supervalu, Inc ................................... 182,956
2,900 The Black & Decker Corporation ................... 256,157
7,900 The Gap, Inc ..................................... 166,848
5,500 The Home Depot, Inc .............................. 235,070
7,600 The Pantry, Inc.* ................................ 228,684
-----------
2,210,011
-----------
CONSUMER, NON-CYCLICAL -- 10.4%
3,700 Bunge Ltd ........................................ 210,937
9,250 Cendant Corporation .............................. 216,265
17,000 EZCORP, Inc. - Class A* .......................... 261,970
5,400 Helen of Troy Ltd.* .............................. 181,494
2,000 Sierra Health Services, Inc.* .................... 110,220
-----------
980,886
-----------
ENERGY -- 16.8%
6,950 Alliance Resource Partners, L.P .................. 514,300
1,300 Amerada Hess Corporation ......................... 107,094
3,820 Anadarko Petroleum Corporation ................... 247,574
4,000 Exxon Mobil Corporation .......................... 205,040
6,300 Giant Industries, Inc.* .......................... 167,013
6,515 Marathon Oil Corporation ......................... 245,029
4,800 Terra Nitrogen Company, L.P ...................... 107,088
-----------
1,593,138
-----------
FINANCIAL -- 12.5%
2,800 Aetna, Inc ....................................... 349,300
2,100 Allstate Corporation ............................. 108,612
1,900 Bear Stearns Companies, Inc ...................... 194,389
5,150 CIT Group, Inc ................................... 235,973
3,100 National City Corporation ........................ 116,405
4,100 Stewart Information Services Corporation ......... 170,765
-----------
1,175,444
-----------
25
THE JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 96.8% Value
- --------------------------------------------------------------------------------
INDUSTRIAL -- 15.0%
7,100 Aviall, Inc.* .................................... $ 163,087
2,500 Deere & Company .................................. 186,000
2,600 Eaton Corporation ................................ 188,136
2,325 Magna International, Inc. - Class A .............. 191,929
2,800 Norfolk Southern Corporation ..................... 101,332
2,550 PACCAR, Inc ...................................... 205,224
12,700 WESCO International, Inc.* ....................... 376,428
-----------
1,412,136
-----------
TECHNOLOGY -- 6.6%
4,200 Armor Holdings, Inc.* ............................ 197,484
14,800 Earthlink, Inc.* ................................. 170,496
1,869 Gamestop Corporation - Class B* .................. 41,884
11,200 Komag, Inc.* ..................................... 210,336
-----------
620,200
-----------
UTILITIES -- 7.0%
5,600 Edison International ............................. 179,368
3,200 Energen Corporation .............................. 188,640
8,775 Southern Company ................................. 294,138
-----------
662,146
-----------
TOTAL COMMON STOCKS .............................. $ 9,144,474
-----------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 1.1% Value
- --------------------------------------------------------------------------------
$100,000 Federal Home Loan Bank Discount Note, 1/4/05 ..... $ 99,973
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.3% Value
- --------------------------------------------------------------------------------
310,115 First American Treasury Obligations Fund ......... $ 310,115
-----------
TOTAL INVESTMENT SECURITIES -- 101.2%
(Cost $7,314,600) ................................ $ 9,554,562
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.2%) .. (114,681)
-----------
NET ASSETS -- 100.0% ............................. $ 9,439,881
===========
* Non-income producing security.
See accompanying notes to financial statements.
26
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 2004 (Unaudited)
================================================================================
1. General Information and Significant Accounting Policies
The Golden Rainbow Fund, The James Small Cap Fund, and The James Market Neutral
Fund are each a diversified series of The James Advantage Funds (the "Trust"),
and The James Equity Fund (formerly, The James Large Cap Plus Fund) is a
non-diversified series of the Trust (individually the "Fund," collectively the
"Funds"). 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 Equity 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 Equity 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 large
capitalization companies. The Fund often buys stocks in the S&P 500 Index.
The following is a summary of significant accounting policies followed by the
Funds in preparation of their financial statements, in accordance with U.S.
generally accepted accounting principles (GAAP).
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.
Redemption Fees
Effective November 1, 2004, The James Small Cap Fund, The James Market Neutral
Fund and The James Equity Fund each charge a redemption fee of 1.00% of the
amount redeemed if the shares sold were held for fewer than 90 days. From
November 1, 2003 through October 31, 2004, the redemption fee charged was 1.00%
of the amount redeemed if the shares sold were held for fewer than 180 days.
Redemption fees are paid directly to the Fund.
Securities Valuation
Each Fund's equity securities are valued based on market value. If a market
quotation for a security is not readily available, if an event occurs after the
close of the trading market (but before the Fund calculates its net asset value)
that materially affects a security's value, when James determines that the
market quotation does not accurately reflect the current value or when a
restricted security is being valued, that security will be valued at its fair
value as determined in good faith in conformity with guidelines adopted by and
subject to review of the Board of Trustees of the Trust ("Board"). The Funds may
use pricing services to determine market value for securities.
27
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Fixed-income securities are valued on the basis of prices furnished by a pricing
service. 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. 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 Golden Rainbow Fund
will instruct its 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. As of December 31, 2004, The Golden Rainbow Fund
had no such outstanding 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. If a security sold short pays a dividend while the Fund is short
that security, the Fund will pay the dividend and record that amount as an
expense.
All short sales are collateralized, as required by the Fund's prime broker. 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 generally 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 capital loss carryforwards. 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 GAAP.
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 GAAP 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.
28
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Federal Income Taxes
The Funds generally 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, 2004 and
2003 was as follows:
- ----------------------------------------------------------------------------------------
The Golden Rainbow The James Small Cap
Fund Fund
-------------------------------------------------
2004 2003 2004 2003
- ----------------------------------------------------------------------------------------
From ordinary income ............... $1,355,926 $1,318,738 $ 5,930 $ 68,743
From long-term capital gains ....... 2,860 1,688,540 35,827 --
---------- ---------- ---------- ----------
$1,358,786 $3,007,278 $ 41,757 $ 68,743
========== ========== ========== ==========
- ----------------------------------------------------------------------------------------
The James Market Neutral The James Equity
Fund Fund
-------------------------------------------------
2004 2003 2004 2003
- ----------------------------------------------------------------------------------------
From ordinary income ............... $ -- $ -- $ 14,163 $ 27,940
From long-term capital gains ....... -- -- -- --
---------- ---------- ---------- ----------
$ -- $ -- $ 14,163 $ 27,940
========== ========== ========== ==========
- ----------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2004:
- ---------------------------------------------------------------------------------------------------
The The James The James The James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------
Cost of portfolio investments ...... $ 67,132,070 $ 8,781,753 $ 15,052,262 $ 5,993,678
============ ============ ============ ============
Gross unrealized appreciation ...... 17,184,966 4,820,195 3,951,005 1,401,277
Gross unrealized depreciation ...... (870,080) (463,884) (593,516) (135,187)
------------ ------------ ------------ ------------
Net unrealized appreciation ........ 16,314,886 4,356,311 3,357,489 1,266,090
Post-October losses ................ -- -- (1,294,300) --
Capital loss carryforward .......... (595,374) -- (1,070,202) (3,712,677)
Undistributed ordinary income ...... -- -- -- 1,730
Undistributed long-term gains ...... -- 756,432 -- --
------------ ------------ ------------ ------------
Accumulated earnings (deficit) .. $ 15,719,512 $ 5,112,743 $ 992,987 $ (2,444,857)
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------
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.
29
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The capital loss carryforwards as of June 30, 2004 in the table above expire as
follows:
- ------------------------------------------------------------------------------
Amount Expiration Date
- ------------------------------------------------------------------------------
The Golden Rainbow Fund .................... $ 595,374 June 30, 2011
The James Market Neutral Fund .............. $ 82,512 June 30, 2008
$ 987,690 June 30, 2012
The James Equity Fund ...................... $ 427,706 June 30, 2009
$ 2,976,912 June 30, 2010
$ 130,880 June 30, 2011
$ 177,179 June 30, 2012
- ------------------------------------------------------------------------------
The capital loss carryforwards may be utilized in 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, 2004 were as follows:
- ------------------------------------------------------------------------------
Purchases Sales
- ------------------------------------------------------------------------------
The Golden Rainbow Fund ................... $ 9,572,609 $ 6,203,906
- ------------------------------------------------------------------------------
Purchases and sales (including maturities) of investments in other securities
for the six months ended December 31, 2004 were as follows:
- ------------------------------------------------------------------------------
Purchases Sales
- ------------------------------------------------------------------------------
The Golden Rainbow Fund .................... $ 8,795,250 $ 8,569,549
The James Small Cap Fund ................... 3,148,866 2,164,613
The James Market Neutral Fund .............. 3,350,845 3,308,846
The James Equity Fund ...................... 2,709,826 1,873,059
- ------------------------------------------------------------------------------
For the six months ended December 31, 2004, the cost of securities purchased to
cover short sales and the proceeds from securities sold short were $5,132,610
and $5,618,380, 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 Equity Fund
and 1.70% of The James Market Neutral Fund; minus (b) the fees and expenses of
30
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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 Equity 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 Equity Fund, based on each Fund's respective average
daily net assets, subject to a minimum 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 Equity 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 Equity 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 Equity Fund is 0.25% of the average daily net assets of each
respective Fund.
Compliance Services Agreement
Under the terms of the Compliance Services Agreement between the Trust and IFS,
IFS provides certain compliance services to the Trust, including developing and
assisting in implementing a compliance program for IFS on behalf of the funds
and providing administrative support services to the Funds' Compliance Program
and Chief Compliance Officer.
4. Commitments and Contingencies
The Funds indemnify the Trust's officers and trustees for certain liabilities
that might arise from their performance of their duties to the Funds.
Additionally, in the normal course of business, the Funds enter into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. The Funds' maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Funds that have not yet occurred. However, based on experience, the Funds expect
the risk of loss to be remote.
31
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. Proxy Voting Guidelines
James is responsible for exercising the voting rights associated with the
securities purchased and held by the Funds. A description of the policies and
procedures that James uses in fulfilling this responsibility and information
regarding how those proxies were voted during the twelve month period ended June
30, 2004 are available without charge upon request by calling toll free
1-800-995-2637. These items are also available on the Securities and Exchange
Commission's website at http://www.sec.gov. and on the James' website at
www.jamesfunds.com.
6. Quarterly Portfolio Disclosure
James files a complete listing of portfolio holdings for each Fund as of the end
of the first and third quarters of each fiscal year on Form N-Q beginning with
the September 2004 quarter. The complete listing (i) is available on the
Commission's website; (ii) may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC; and (iii) will be made available to
shareholders upon request by calling 1-800-995-2637. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
7. Schedule of Shareholder Expenses
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including reinvested dividends or other distributions; and redemption
fees; and (2) ongoing costs, including investment advisory fees; distribution
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (July 1, 2004 through December 31, 2004).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six
Months Ended December 31, 2004" to estimate the expenses you paid on your
account during this period, if you held your shares for the entire period.
32
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Funds' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Funds' actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Expenses
Paid
Net Expense Total Return During the
Ratio Six Months Beginning Ending Six Months
Annualized Ended Account Value Account Value Ended
December 31, December 31, July 1, December 31, December 31,
2004 2004 2004 2004 2004*
- --------------------------------------------------------------------------------------------------------------
The Golden Rainbow Fund
Actual ..................... 1.26% 9.53% $1,000.00 $1,095.30 $ 6.65
Hypothetical ............... 1.26% 2.52% $1,000.00 $1,018.85 $ 6.41
The James Small Cap Fund
Actual ..................... 1.50% 12.12% $1,000.00 $1,121.20 $ 8.02
Hypothetical ............... 1.50% 2.52% $1,000.00 $1,017.64 $ 7.63
The James Equity Fund
Actual ..................... 1.50% 16.17% $1,000.00 $1,161.70 $ 8.17
Hypothetical ............... 1.50% 2.52% $1,000.00 $1,017.64 $ 7.63
The James Market Neutral Fund
Actual ..................... 2.38% 3.99% $1,000.00 $1,039.90 $ 12.24
Hypothetical ............... 2.38% 2.52% $1,000.00 $1,013.21 $ 12.08
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by [number of days
in most recent fiscal half-year/365] (to reflect the one-half year
period).
33
February 11, 2005
The James Advantage Funds
Supplement to Prospectus Dated November 1, 2004
The name of "The Golden Rainbow Fund" has been changed to "the James Balanced:
Golden Rainbow Fund." Throughout the Prospectus, replace "The Golden Rainbow
Fund" with "the James Balanced: Golden Rainbow Fund."
As a result of the name change, the James Balanced: Golden Rainbow Fund will,
under normal circumstances, invest at least 25% of its assets in common stock
and at least 25% of its assets in debt securities.
This should be read in conjunction with the current prospectus (see "What are
the Funds' Principal Investment Strategies?"), which indicates that the James
Balanced: Golden Rainbow Fund normally holds both common stocks and debt
securities, generally with 40%-60% invested in common stocks and 40%-60%
invested in debt securities.
34
THIS PAGE INTENTIONALLY LEFT BLANK.
INVESTMENT ADVISER
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301
info@jamesfunds.com
o
CUSTODIAN
U.S. Bank
425 Walnut Street
Cincinnati, Ohio 45202
o
TRANSFER AGENT
Integrated Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o
INDEPENDENT AUDITORS
Deloitte & Touche LLP
250 East Fifth Street
Suite 1900
Cincinnati, Ohio 45202
o
DISTRIBUTOR
IFS Fund Distributors, Inc.
221 East Fourth Street
Suite 300
Cincinnati, Ohio 45202
o
LEGAL COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202
www.jamesfunds.com
For information about the Funds, or to
make inquiries about the Funds, please call
1-800-99JAMES (1-800-995-2637).
FORM IFS-163-0201
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
This information is included as part of the report to shareholders filed under
Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures as of March 1, 2005, 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 second quarter of 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 11. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications required by Item 11(a) of Form N-CSR are filed herewith.
(a)(3) Not applicable.
(b) Certifications required by Item 11(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 8, 2005
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 8, 2005
By (Signature and Title)
/s/ Thomas L. Mangan
- -----------------------------------------
Thomas L. Mangan
Treasurer and Chief Financial Officer
Date: March 8, 2005