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: 6/30/05
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.
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----------
JAMES
ADVANTAGE
FUNDS
----------
Advised by James Investment Research, Inc.
www.jamesfunds.com
o
June 30, 2005
Annual Report
o
James Balanced:
Golden Rainbow Fund
The James Small Cap Fund
The James Market Neutral Fund
The James Equity Fund
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LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
================================================================================
The economy remained steady in the last year, and the employment picture
continued to improve. In addition, consumers and home buyers have shown a steady
appetite. This was a challenging time for investing and investors, but our
approach and focus on research continued to show its value. We are pleased to
present this year's Annual Report.
The Market over the Past Year
The stock market took a number of interesting twists and turns. It began the
fiscal year on a down note, but recovered rapidly at the conclusion of the
elections. However, calendar 2005 commenced in very shaky fashion, and it wasn't
until the end of April that the markets were able to mount a concerted rebound.
Once again, smaller stocks led the way in the last 12 months, with the Russell
2000 Index advancing 9.55 percent, while the Standard & Poor's 500 Index
returned 6.32 percent. However, the Dow Jones Industrial Average did not do as
well, returning only 0.65 percent. Once again it was a period when value
outperformed growth investing. In the 12 months ending June 30, 2005, the market
was led by stocks in home building, oil and gas, managed health and utility
industries.
On the fixed income side, bonds also went on a wild ride as the Federal Reserve
raised the Fed Funds rate nine times. The 10 year Treasury bond, which had
fallen below 4 percent, at one point surged back up above 4.6 percent, but at
the end of the reporting period was once again trading at less than 4 percent.
The Lehman Brothers Intermediate Government/Credit Bond Index returned 4.8
percent in spite of Fed rate hikes for short term obligations.
Investment Goals and Objectives
The objectives and philosophy of James Investment Research, Inc. fit well in
this volatile time. We maintain an eye toward value investing with an approach
we consider more conservative than most managers.
We strive to outperform each Fund's benchmark index (see pages 3 and 4). The
objectives of each Fund are stated more fully in the Prospectus, which provides
investors with information on the risk levels and performance of each Fund. The
research team and portfolio managers of James Investment Research, Inc. take a
personal interest in the Funds' performance, and we believe this has contributed
to our success during these volatile times.
Investment Philosophy
James Investment Research, Inc. is proud of its long tradition of original
research. Quantitative in nature and rooted in fundamental analysis, this
research decried phenomenally high stock valuations in 1999. The faithful belief
in value investing has reaped its rewards in the years that followed.
We believe that the coming years will reward value investing, and are confident
that our research will continue to show the way to superior returns. Of course,
we cannot guarantee results. But we note there are many strong companies with
growing earnings, even in these uncertain times. These hidden gems are waiting
to be discovered by those with the ability and resolve to find them.
Fund Performance
The James Balanced: Golden Rainbow Fund continued on a positive path in the last
year. The Fund returned 14.56 percent over the 12 months ended June 30, 2005.
The benchmark Standard & Poor's 500 Index rose 6.32 percent, and a blend of the
Standard & Poor's 500 Index, Russell 2000 Index and Lehman Brothers Intermediate
Government/Credit Bond Index, which more closely approximates the Fund's
investments, returned 6.37 percent. The fund changed its name during the year by
adding "Balanced" to more clearly reflect its strategy.
The Fund's strong returns were a result of our ability to take advantage of the
market's volatility, along with our focus on value stocks. The fact that we do
carry smaller and mid-cap stocks with a value orientation definitely helped in
the past year. In addition, our large weighting in high quality bonds also added
to the stability and return of the Fund.
1
The James Small Cap Fund once again posted excellent results. During the 12
months ended June 30, 2005, it returned 15.39 percent. The Fund's benchmark, the
Russell 2000 Index, rose 9.55 percent in the same time period. The outstanding
performance over the last several years has led to the Fund being noted in some
national publications. Our proprietary evaluation methodology once again proved
its worth in a time when common sense investing is growing in its power to
properly determine value. Firms that are selling at reasonable multiples, and
have good earnings continue to find investors' dollars, and are featured in your
Fund.
The James Market Neutral Fund rose 11.34 percent over the 12 months ended June
30, 2005. The Fund's benchmark, the 90 Day Treasury Bill Index, returned 2.15
percent over this period. In spite of periodic rallies in the market, which
could have been unsettling to a market neutral style, the Fund managed to
maintain a fairly steady advance, as the portfolio managers continued to be
successful in identifying undervalued and overvalued securities.
Our research continues to find undervalued and overvalued securities. The
volatility in the market in the past 12 months provided great opportunities for
both longs and shorts, and this, we believe, is a beneficial environment for a
market neutral approach.
The James Equity Fund gained 20.96 percent during the 12 months ended June 30,
2005. It far surpassed its benchmark, the S&P 500 Index, which rose 6.32
percent. This Fund also received acclaim in national publications, due to its
outstanding returns. The Equity Fund was aided by good holdings in the oil and
utility sector, but also the rising tide of stocks that meet our value criteria.
The Fund's name was changed in the last year (from the James Large Cap Plus
Fund), and it now is an all capitalization fund. We continue to follow the
investment objectives of the Fund, and look for securities that meet our
criteria of solid earnings, reasonable prices, and good relative strength.
Expectations for the Future
The Federal Reserve raised rates nine times, and continue to constrain the money
supply. We have seen the dollar rebound strongly against a basket of global
currencies, and many of our leading indicators are pointing to a further
slowdown in the economy. Earnings have remained decent so far in 2005, but we
are seeing an erosion in the growth rate of earnings that helped push the
markets higher in previous years. Also, it is the year after a Presidential
election, which is typically the worst for the economy and for stocks. We no
longer see an emphasis on tax cuts or other stimulative measures, which would
give the markets an added boost.
We expect the markets to remain volatile, and we think it will be a difficult
time for stocks to make a great deal of progress. We could see significant
swings. Fortunately, value stocks have historically led the market in these post
election years, and we will look for the best sectors and the best companies to
try to minimize the impact of this volatility.
The bond market continues to look favorable for bond holders. While rates
recently appeared to stabilize at lower levels, we believe this is not the end
of the rally in bonds. In spite of the Fed's rate hikes, we expect the trend of
lower long term rates to remain. We don't see much of a problem with inflation;
and with the cooling of the economy, bonds should provide a safe haven for
investors.
We are thankful for your support through the years and we think our experience
over the last 33 years is a valuable component to our success in managing
assets. We believe our experience and methodology are essential to weathering
difficult markets.
We are proud of our recent success and asset growth in the Funds. We remain
optimistic about their prospects.
/s/ Barry R. James
- ------------------------
Barry R. James, CFA, CIC
President
2
Comparison of the Change in Value of a $10,000 Investment in the
James Balanced: Golden Rainbow Fund, Standard & Poor's 500 Index
and a Blended 25/25/50 Index(A)
James Balanced: Golden Rainbow Fund
Average Annual Total Returns
1 Year 5 Years 10 Years
14.56% 7.87% 8.57%
[LINE CHART]
James Balanced: Standard & Poor's Blended 25/25/50
Golden Rainbow Fund 500 Index Index
------------------- --------- -----
06/30/95 10,000 10,000 10,000
09/30/95 10,321 10,795 10,528
12/31/95 10,708 11,445 10,929
03/31/96 10,684 12,059 11,170
06/30/96 10,776 12,600 11,470
09/30/96 10,926 12,990 11,670
12/31/96 11,639 14,072 12,208
03/31/97 11,714 14,450 12,125
06/30/97 12,559 16,972 13,324
09/30/97 13,278 18,244 14,249
12/31/97 13,129 18,768 14,384
03/31/98 13,748 21,385 15,360
06/30/98 13,748 22,092 15,453
09/30/98 13,531 19,894 14,637
12/31/98 14,808 24,131 16,035
03/31/99 14,579 25,333 16,002
06/30/99 14,844 27,119 16,874
09/30/99 14,793 25,426 16,422
12/31/99 15,314 29,209 17,794
03/31/00 15,537 29,879 18,345
06/30/00 15,583 29,085 18,205
09/30/00 16,056 28,803 18,473
12/31/00 16,016 26,549 18,134
03/31/01 15,687 23,401 17,609
06/30/01 15,948 24,770 18,555
09/30/01 15,855 21,134 17,336
12/31/01 16,424 23,392 18,721
03/31/02 16,787 23,457 18,899
06/30/02 16,802 20,313 18,207
09/30/02 16,024 16,803 16,859
12/31/02 16,294 18,221 17,617
03/31/03 15,955 17,647 17,413
06/30/03 17,533 20,363 19,340
09/30/03 18,139 20,903 19,905
12/31/03 19,262 23,449 21,240
03/31/04 19,898 23,845 21,925
06/30/04 19,868 24,255 21,768
09/30/04 20,480 23,801 21,805
12/31/04 21,762 25,998 23,124
03/31/05 22,091 25,440 22,591
06/30/05 22,762 25,788 23,192
Past performance is not predictive of future results.
(A) The Blended Index is comprised of a 25% weighting in the Standard & Poor's
500 Index, a 25% weighting in the Russell 2000 Index and a 50% weighting
in the Lehman Brothers Intermediate Government/Credit Index.
Comparison of the Change in Value of a $10,000 Investment in
The James Small Cap Fund and Russell 2000 Index
The James Small Cap Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
15.39% 15.53% 12.30%
[LINE CHART]
The James
Small Cap Fund (NAV) Russell 2000 Index
-------------------- ------------------
10/02/98 10,000 10,000
10/31/98 11,060 10,808
11/30/98 11,080 11,374
12/31/98 11,314 12,078
01/31/99 11,144 12,239
02/28/99 10,114 11,247
03/31/99 10,114 11,423
04/30/99 11,114 12,446
05/31/99 11,364 12,628
06/30/99 11,874 13,199
09/30/99 9,884 12,365
12/31/99 10,134 14,645
03/31/00 9,824 15,682
06/30/00 10,614 15,089
09/30/00 10,514 15,257
12/31/00 10,644 14,203
03/31/01 10,064 13,278
06/30/01 11,034 15,175
09/30/01 9,723 12,020
12/31/01 11,217 14,556
03/31/02 12,298 15,135
06/30/02 12,097 13,871
09/30/02 10,716 10,903
12/31/02 10,948 11,574
03/31/03 10,859 11,055
06/30/03 13,574 13,644
09/30/03 14,302 14,882
12/31/03 16,822 17,043
03/31/04 18,750 18,110
06/30/04 18,932 18,195
09/30/04 18,101 17,675
12/31/04 21,227 20,165
03/31/05 20,490 19,089
06/30/05 21,844 19,913
Past performance is not predictive of future results.
(A) Fund inception was October 2, 1998.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
3
Comparison of the Change in Value of a $10,000 Investment in
The James Market Neutral Fund and 90-Day U.S. Treasury Bill Index
The James Market Neutral Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
11.34% 5.38% 4.10%
[LINE CHART]
The James 90-Day Treasury
Market Neutral Fund Bill Index
------------------- ----------
10/02/98 10,000 10,000
10/31/98 9,880 10,035
11/30/98 10,170 10,068
12/31/98 10,195 10,108
01/31/99 9,994 10,144
02/28/99 9,853 10,173
03/31/99 9,803 10,214
04/30/99 9,551 10,251
05/31/99 9,441 10,291
06/30/99 9,426 10,334
09/30/99 9,279 10,465
12/31/99 9,090 10,595
03/31/00 9,685 10,743
06/30/00 10,087 10,906
09/30/00 10,710 11,070
12/31/00 10,574 11,250
03/31/01 10,595 11,420
06/30/01 10,769 11,548
09/30/01 10,764 11,673
12/31/01 10,749 11,747
03/31/02 11,155 11,798
06/30/02 11,529 11,852
09/30/02 11,849 11,905
12/31/02 10,920 11,956
03/31/03 11,220 11,993
06/30/03 10,653 12,033
09/30/03 11,006 12,062
12/31/03 11,273 12,093
03/31/04 11,786 12,122
06/30/04 11,775 12,151
09/30/04 12,074 12,196
12/31/04 12,246 12,254
03/31/05 13,069 12,324
06/30/05 13,111 12,412
Past performance is not predictive of future results.
(A) Fund inception was October 2, 1998.
Comparison of the Change in Value of a $10,000 Investment in
The James Equity Fund and Standard & Poor's 500 Index
The James Equity Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
20.96% (8.01%) (1.86%)
[LINE CHART]
The James Standard & Poor's
Equity Fund (NAV) 500 Index
----------------- ---------
11/01/99 10,000 10,000
11/30/99 10,800 10,203
12/31/99 12,260 10,804
01/31/00 10,970 10,262
02/29/00 13,850 10,068
03/31/00 14,550 11,052
04/30/00 13,750 10,720
05/31/00 12,300 10,500
06/30/00 13,650 10,759
09/30/00 13,040 10,655
12/31/00 9,210 9,821
03/31/01 7,720 8,657
06/30/01 7,650 9,163
09/30/01 6,290 7,818
12/31/01 6,965 8,653
03/31/02 6,930 8,677
06/30/02 6,633 7,515
09/30/02 5,585 6,216
12/31/02 5,582 6,741
03/31/03 5,559 6,528
06/30/03 6,226 7,533
09/30/03 6,272 7,733
12/31/03 7,070 8,674
03/31/04 7,292 8,821
06/30/04 7,433 8,973
09/30/04 7,615 8,805
12/31/04 8,636 9,618
03/31/05 8,605 9,411
06/30/05 8,990 9,540
Past performance is not predictive of future results.
(A) Fund inception was November 1, 1999.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
4
THE JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
June 30, 2005 (Unaudited)
================================================================================
The illustrations below provide the industry sectors for the James Balanced:
Golden Rainbow Fund, The James Small Cap Fund, The James Market Neutral Fund,
and The James Equity Fund.
James Balanced: Golden Rainbow Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 3.8%
CONSUMER, CYCLICAL - 4.5%
CONSUMER, NON-CYCLICAL - 7.4%
ENERGY - 4.7%
FINANCIAL - 6.1%
INDUSTRIAL - 4.3%
TECHNOLOGY - 6.0%
UTILITIES - 6.6%
INTERNATIONAL EQUITY FUNDS - 1.1%
BONDS (over 10 years) - 11.2%
BONDS (2-10 years) - 30.3%
BONDS (less than 2 years) - 9.5%
CASH EQUIVALENT - 3.7%
OTHER - 0.8%
The James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 9.6%
CONSUMER, CYCLICAL - 18.0%
CONSUMER, NON-CYCLICAL - 14.0%
ENERGY - 5.9%
FINANCIAL - 14.0%
INDUSTRIAL - 7.7%
TECHNOLOGY - 17.7%
UTILITIES - 9.6%
BONDS - 7.3%
CASH EQUIVALENT - 1.5%
OTHER - (5.3%)
5
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]
Longs Shorts
----- ------
BASIC MATERIALS 3.3% 3.6%
CONSUMER CYCLICAL 14.9% 13.9%
CONSUMER, NON-CYCLICAL 10.5% 8.9%
ENERGY 7.6% 4.9%
FINANCIAL 7.3% 8.8%
INDUSTRIAL 4.0% 4.2%
TECHNOLOGY 15.8% 14.0%
UTILITIES 6.2% 1.7%
The James Equity Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 10.2%
CONSUMER, CYCLICAL - 14.8%
CONSUMER, NON-CYCLICAL - 15.4%
ENERGY - 8.9%
FINANCIAL - 10.5%
INDUSTRIAL - 10.0%
TECHNOLOGY - 13.3%
UTILITIES - 14.5%
CASH EQUIVALENT - 2.4%
6
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2005
================================================================================
James
Balanced: The James The James The James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
------------ ------------ ------------ ------------
ASSETS
Investment securities:
At amortized cost ................................... $124,993,524 $ 51,678,381 $ 35,721,801 $ 14,246,267
============ ============ ============ ============
At value ............................................ $146,402,460 $ 57,374,991 $ 40,906,766 $ 16,834,349
Segregated cash with brokers ........................... -- -- 36,156,084 --
Dividends and interest receivable ...................... 1,174,372 40,023 71,219 17,088
Receivable for capital shares sold ..................... 678,475 699,191 164,946 18,859
Other assets ........................................... 21,056 -- -- --
------------ ------------ ------------ ------------
TOTAL ASSETS ..................................... 148,276,363 58,114,205 77,299,015 16,870,296
------------ ------------ ------------ ------------
LIABILITIES
Dividends payable ...................................... 16,116 -- -- 441
Payable for securities sold short (proceeds $27,638,415) -- -- 28,378,690 --
Payable for dividends on securities sold short ......... -- -- 14,108 --
Payable for capital shares redeemed .................... 152,925 372,863 68,398 17,097
Payable for securities purchased ....................... 358,430 3,192,276 1,464,702 --
Accrued expenses:
Management fees ..................................... 85,486 51,794 61,560 16,059
12b-1 distribution and service fees ................. 12,709 8,330 8,628 3,206
Trustees' fees ...................................... 1,993 -- -- --
Other ............................................... 43,482 -- -- --
------------ ------------ ------------ ------------
TOTAL LIABILITIES ................................ 671,141 3,625,263 29,996,086 36,803
------------ ------------ ------------ ------------
NET ASSETS ............................................. $147,605,222 $ 54,488,942 $ 47,302,929 $ 16,833,493
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital ........................................ $120,223,160 $ 48,248,109 $ 44,693,623 $ 17,434,960
Undistributed net investment income .................... 2,865 133,040 22,402 1
Accumulated net realized gains (losses) from
security transactions ............................... 5,970,261 411,183 (1,857,786) (3,189,550)
Net unrealized appreciation on investments ............. 21,408,936 5,696,610 4,444,690 2,588,082
------------ ------------ ------------ ------------
NET ASSETS ............................................. $147,605,222 $ 54,488,942 $ 47,302,929 $ 16,833,493
------------ ------------ ------------ ------------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .......... 8,591,430 2,662,987 3,855,755 1,894,365
============ ============ ============ ============
Net asset value, offering price and redemption
price per share ..................................... $ 17.18 $ 20.46 $ 12.27 $ 8.89
============ ============ ============ ============
See accompanying notes to financial statements.
7
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 2005
================================================================================
James
Balanced: The James The James The James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
----------- ----------- ----------- -----------
INVESTMENT INCOME
Dividends (Net of withholding taxes of $2,512,
$221, $520, $785 respectively) ................... $ 657,443 $ 561,627 $ 439,332 $ 170,927
Interest ............................................ 2,338,315 11,895 78,928 3,566
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME .......................... 2,995,758 573,522 518,260 174,493
----------- ----------- ----------- -----------
EXPENSES
Management fees ..................................... 747,217 358,200 345,534 118,148
12b-1 distribution and service fees ................. 252,438 73,882 53,452 25,641
Dividend expense on securities sold short ........... -- -- 88,472 --
Administration fees ................................. 69,212 -- -- --
Professional fees ................................... 56,000 -- -- --
Accounting services fees ............................ 32,500 -- -- --
Transfer agent fees ................................. 38,500 -- -- --
Postage and supplies ................................ 21,200 -- -- --
Custodian fees and expenses ......................... 20,000 -- -- --
Trustees' fees ...................................... 6,000 8,400 8,400 8,400
Registration fees ................................... 11,250 -- -- --
Shareholder report printing and mailing ............. 6,500 -- -- --
Compliance fees and expenses ........................ 4,689 -- -- --
Other expenses ...................................... 11,775 -- -- --
----------- ----------- ----------- -----------
TOTAL EXPENSES ................................... 1,277,281 440,482 495,858 152,189
----------- ----------- ----------- -----------
NET INVESTMENT INCOME .................................. 1,718,477 133,040 22,402 22,304
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains from security transactions ....... 6,852,704 411,183 1,378,774 523,127
Net realized losses on closed short positions ....... -- -- (872,058) --
Net change in unrealized appreciation/depreciation
on investments ................................... 5,094,050 1,340,299 1,087,201 1,321,992
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS ....................................... 11,946,754 1,751,482 1,593,917 1,845,119
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $13,665,231 $ 1,884,522 $ 1,616,319 $ 1,867,423
=========== =========== =========== ===========
See accompanying notes to financial statements.
8
JAMES BALANCED: GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Year Year
Ended Ended
June 30, June 30,
2005 2004
------------- -------------
FROM OPERATIONS
Net investment income .............................................................. $ 1,718,477 $ 1,355,923
Net realized gains on investments .................................................. 6,852,704 2,431,503
Net change in unrealized appreciation/depreciation on investments .................. 5,094,050 5,616,025
------------- -------------
Net increase in net assets from operations ............................................ 13,665,231 9,403,451
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................................... (1,715,612) (1,355,926)
Distributions from net realized gains .............................................. (289,929) (2,860)
------------- -------------
Decrease in net assets from distributions to shareholders ............................. (2,005,541) (1,358,786)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................................... 57,984,009 12,039,589
Net asset value of shares issued in reinvestment of distributions to shareholders .. 1,951,160 1,316,516
Payments for shares redeemed ....................................................... (7,882,492) (6,677,222)
------------- -------------
Net increase in net assets from capital share transactions ............................ 52,052,677 6,678,883
------------- -------------
TOTAL INCREASE IN NET ASSETS .......................................................... 63,712,367 14,723,548
NET ASSETS
Beginning of year .................................................................. 83,892,855 69,169,307
------------- -------------
End of year ........................................................................ $ 147,605,222 $ 83,892,855
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................................................... $ 2,865 $ --
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................................ 3,469,419 814,579
Shares issued in reinvestment of distributions to shareholders ..................... 117,897 88,282
Shares redeemed .................................................................... (485,412) (455,525)
------------- -------------
Net increase in shares outstanding ................................................. 3,101,904 447,336
Shares outstanding, beginning of year .............................................. 5,489,526 5,042,190
------------- -------------
Shares outstanding, end of year .................................................... 8,591,430 5,489,526
============= =============
See accompanying notes to financial statements.
9
THE JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Year Year
Ended Ended
June 30, June 30,
2005 2004
------------ ------------
FROM OPERATIONS
Net investment income .............................................................. $ 133,040 $ 5,930
Net realized gains on investments .................................................. 411,183 1,312,222
Net change in unrealized appreciation/depreciation on investments .................. 1,340,299 2,281,240
------------ ------------
Net increase in net assets from operations ............................................ 1,884,522 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 .......................................................... 64,131,237 4,024,974
Net asset value of shares issued in reinvestment of distributions to shareholders .. 743,313 39,152
Payments for shares redeemed (A) ................................................... (24,699,336) (3,634,802)
------------ ------------
Net increase in net assets from capital share transactions ............................ 40,175,214 429,324
------------ ------------
TOTAL INCREASE IN NET ASSETS .......................................................... 41,303,304 3,986,959
NET ASSETS
Beginning of year .................................................................. 13,185,638 9,198,679
------------ ------------
End of year ........................................................................ $ 54,488,942 $ 13,185,638
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ................................................... $ 133,040 $ --
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................................ 3,236,955 233,627
Shares issued in reinvestment of distributions to shareholders ..................... 39,060 2,470
Shares redeemed .................................................................... (1,319,487) (214,778)
------------ ------------
Net increase in shares outstanding ................................................. 1,956,528 21,319
Shares outstanding, beginning of year .............................................. 706,459 685,140
------------ ------------
Shares outstanding, end of year .................................................... 2,662,987 706,459
============ ============
(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 years ended June 30, 2005 and 2004, these fees were
$149,700 and $12,181, respectively.
See accompanying notes to financial statements.
10
THE JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Year Year
Ended Ended
June 30, June 30,
2005 2004
------------ ------------
FROM OPERATIONS
Net investment income (loss) ......................................... $ 22,402 $ (149,656)
Net realized gains (losses) from:
Security transactions ............................................. 1,378,774 395,098
Closed short positions ............................................ (872,058) (1,927,042)
Net change in unrealized appreciation/depreciation on investments .... 1,087,201 2,726,352
------------ ------------
Net increase in net assets from operations .............................. 1,616,319 1,044,752
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................................ 37,708,584 3,349,412
Payments for shares redeemed (A) ..................................... (4,550,046) (1,084,887)
------------ ------------
Net increase in net assets from capital share transactions .............. 33,158,538 2,264,525
------------ ------------
TOTAL INCREASE IN NET ASSETS ............................................ 34,774,857 3,309,277
NET ASSETS
Beginning of year .................................................... 12,528,072 9,218,795
------------ ------------
End of year .......................................................... $ 47,302,929 $ 12,528,072
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ..................................... $ 22,402 $ --
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .......................................................... 3,104,775 317,126
Shares redeemed ...................................................... (385,737) (105,079)
------------ ------------
Net increase in shares outstanding ................................... 2,719,038 212,047
Shares outstanding, beginning of year ................................ 1,136,717 924,670
------------ ------------
Shares outstanding, end of year ...................................... 3,855,755 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 years ended June 30, 2005 and 2004, these fees were
$23,920 and $197, respectively.
See accompanying notes to financial statements.
11
THE JAMES EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Year Year
Ended Ended
June 30, June 30,
2005 2004
------------ ------------
FROM OPERATIONS
Net investment income .............................................................. $ 22,304 $ 15,890
Net realized gains on investments .................................................. 523,127 34,190
Net change in unrealized appreciation/depreciation on investments .................. 1,321,992 1,045,488
------------ ------------
Net increase in net assets from operations ............................................ 1,867,423 1,095,568
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................................... (24,033) (14,163)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................................... 9,091,949 1,491,283
Net asset value of shares issued in reinvestment of distributions to shareholders .. 23,591 13,379
Payments for shares redeemed (A) ................................................... (1,374,205) (716,744)
------------ ------------
Net increase in net assets from capital share transactions ............................ 7,741,335 787,918
------------ ------------
TOTAL INCREASE IN NET ASSETS .......................................................... 9,584,725 1,869,323
NET ASSETS
Beginning of year .................................................................. 7,248,768 5,379,445
------------ ------------
End of year ........................................................................ $ 16,833,493 $ 7,248,768
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ................................................... $ 1 $ 1,730
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................................................ 1,074,885 216,097
Shares issued in reinvestment of distributions to shareholders ..................... 2,654 2,003
Shares redeemed .................................................................... (167,493) (104,806)
------------ ------------
Net increase in shares outstanding ................................................. 910,046 113,294
Shares outstanding, beginning of year .............................................. 984,319 871,025
------------ ------------
Shares outstanding, end of year .................................................... 1,894,365 984,319
============ ============
(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 years ended June 30, 2005 and 2004, these fees were
$2,315 and $229, respectively.
See accompanying notes to financial statements.
12
JAMES BALANCED: GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
-------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------------
2005 2004 2003 2002 2001
--------- --------- --------- --------- ---------
Net asset value at beginning of year .................. $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income .............................. 0.26 0.26 0.27 0.40 0.40
Net realized and unrealized
gains (losses) on investments ................... 1.95 1.56 0.28 0.33 (0.08)
--------- --------- --------- --------- ---------
Total from investment operations ...................... 2.21 1.82 0.55 0.73 0.32
--------- --------- --------- --------- ---------
Less distributions:
From net investment income ......................... (0.26) (0.26) (0.27) (0.40) (0.40)
From net realized gains on investments ............. (0.05) 0.00(A) (0.36) (0.87) (2.12)
--------- --------- --------- --------- ---------
Total distributions ................................... (0.31) (0.26) (0.63) (1.27) (2.52)
--------- --------- --------- --------- ---------
Net asset value at end of year ........................ $ 17.18 $ 15.28 $ 13.72 $ 13.80 $ 14.34
========= ========= ========= ========= =========
Total return .......................................... 14.56% 13.32% 4.34% 5.37% 2.33%
========= ========= ========= ========= =========
Net assets at end of year (000's) ..................... $ 147,605 $ 83,893 $ 69,169 $ 65,456 $ 65,902
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ........... 1.26% 1.28% 1.32% 1.24% 1.25%
Ratio of net investment income to average net assets .. 1.70% 1.77% 2.08% 2.84% 2.61%
Portfolio turnover rate ............................... 36% 29% 61% 54% 57%
(A) Per share amount rounds to less than $0.005.
See accompanying notes to financial statements.
13
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
----------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value at beginning of year ........................ $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss) ............................. 0.05 0.01 0.10 0.00(A) (0.04)
Net realized and unrealized gains on investments ......... 2.65 5.26 1.35 1.06 0.46
-------- -------- -------- -------- --------
Total from investment operations ............................ 2.70 5.27 1.45 1.06 0.42
-------- -------- -------- -------- --------
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 ........................ 0.10(B) 0.02(B) -- -- --
-------- -------- -------- -------- --------
Net asset value at end of year .............................. $ 20.46 $ 18.66 $ 13.43 $ 12.08 $ 11.03
======== ======== ======== ======== ========
Total return ................................................ 15.39% 39.47% 12.20% 9.65% 3.96%
======== ======== ======== ======== ========
Net assets at end of year (000's) ........................... $ 54,489 $ 13,186 $ 9,199 $ 7,882 $ 7,066
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ................. 1.50% 1.50% 1.50% 1.48% 1.50%
Ratio of net investment income (loss) to average net asset .. 0.45% 0.05% 0.90% 0.02% (0.45%)
Portfolio turnover rate ..................................... 94% 45% 52% 78% 75%
(A) Amont rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
See accompanying notes to financial statements.
14
THE JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
-----------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
--------- --------- --------- --------- ---------
Net asset value at beginning of year .................... $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss) ......................... 0.01 (0.13) (0.10) 0.02 0.24
Net realized and unrealized gains
(losses) on investments ........................... 1.23 1.18 (0.72) 0.69 0.41
--------- --------- --------- --------- ---------
Total from investment operations ........................ 1.24 1.05 (0.82) 0.71 0.65
--------- --------- --------- --------- ---------
Less distributions:
From net investment income ........................... -- -- -- (0.04) (0.24)
--------- --------- --------- --------- ---------
Paid-in capital from redemption fees .................... 0.01(B) 0.00(A)(B) -- -- --
--------- --------- --------- --------- ---------
Net asset value at end of year .......................... $ 12.27 $ 11.02 $ 9.97 $ 10.79 $ 10.12
========= ========= ========= ========= =========
Total return ............................................ 11.34% 10.53% (7.60%) 7.06% 6.76%
========= ========= ========= ========= =========
Net assets at end of year (000's) ....................... $ 47,303 $ 12,528 $ 9,219 $ 8,676 $ 9,651
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets, excluding
dividends on securities sold short ................... 1.95% 1.95% 1.95% 1.95% 1.95%
Ratio of dividend expense on securities sold short to
average net assets ................................... 0.42% 0.64% 0.53% 0.28% 0.25%
--------- --------- --------- --------- ---------
Ratio of net expenses to average net assets ............. 2.37% 2.59% 2.48% 2.23% 2.20%
--------- --------- --------- --------- ---------
Ratio of net investment income (loss)
to average net assets ................................ 0.11% (1.43%) (0.98%) 0.25% 2.47%
Portfolio turnover rate ................................. 35% 13% 86% 154% 104%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
See accompanying notes to financial statements.
15
THE JAMES EQUITY FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
------------------------------------------------------------------
Year Ended June 30,
------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value at beginning of year .......................... $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss) ............................... 0.01 0.02 0.03 0.01 (0.07)
Net realized and unrealized gains (losses) on investments .. 1.53 1.18 (0.44) (1.03) (5.93)
-------- -------- -------- -------- --------
Total from investment operations .............................. 1.54 1.20 (0.41) (1.02) (6.00)
-------- -------- -------- -------- --------
Less distributions:
From net investment income ................................. (0.01) (0.02) (0.03) (0.01) --
-------- -------- -------- -------- --------
Paid-in capital from redemption fees .......................... 0.00(A)(B) 0.00(A)(B) -- -- --
-------- -------- -------- -------- --------
Net asset value at end of year ................................ $ 8.89 $ 7.36 $ 6.18 $ 6.62 $ 7.65
======== ======== ======== ======== ========
Total return .................................................. 20.96% 19.38% (6.14%) (13.29%) (43.96%)
======== ======== ======== ======== ========
Net assets at end of year (000's) ............................. $ 16,833 $ 7,249 $ 5,379 $ 3,788 $ 4,504
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ................... 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income (loss) to average net assets ... 0.22% 0.25% 0.56% 0.20% (0.67%)
Portfolio turnover rate ....................................... 33% 70% 65% 87% 131%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
See accompanying notes to financial statements.
16
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
June 30, 2005
================================================================================
Shares COMMON STOCKS - 44.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS - 3.8%
5,000 Alliance Resource Partners, L.P. ............. $ 370,000
25,000 Barrick Gold Corporation ..................... 625,750
31,000 Dow Chemical Company ......................... 1,380,430
35,650 Methanex Corporation ......................... 587,156
21,000 Newmont Mining Corporation ................... 819,630
13,000 PPG Industries, Inc. ......................... 815,880
10,000 RPM International, Inc. ...................... 182,600
28,200 Terra Nitrogen Company, L.P. ................. 775,500
------------
5,556,946
------------
CONSUMER, CYCLICAL - 4.5%
7,000 Barnes & Noble, Inc.* ........................ 271,600
11,000 Central Garden & Pet Company* ................ 540,320
35,000 Hartmarx Corporation* ........................ 352,450
10,000 J.C. Penny Company, Inc. ..................... 525,800
20,000 Limited Brands, Inc. ......................... 428,400
10,000 Office Depot, Inc.* .......................... 228,400
19,300 PACCAR, Inc. ................................. 1,312,400
45,300 Supervalu, Inc. .............................. 1,477,233
37,000 The Pantry, Inc.* ............................ 1,433,010
------------
6,569,613
------------
CONSUMER, NON-CYCLICAL - 7.4%
14,000 Aetna, Inc. .................................. 1,159,480
37,000 Bristol-Myers Squibb Company ................. 924,260
55,000 Coventry Health Care, Inc.* .................. 3,891,250
10,000 Helen of Troy Ltd.* .......................... 254,600
32,234 PolyMedica Corporation ....................... 1,149,464
18,000 Sanderson Farms, Inc. ........................ 817,920
23,000 Sierra Health Services, Inc.* ................ 1,643,580
32,000 The Toro Company ............................. 1,235,520
------------
11,076,074
------------
ENERGY - 4.7%
3,500 Amerada Hess Corporation ..................... 372,785
16,800 Apache Corporation ........................... 1,085,280
27,940 Chevron Corporation .......................... 1,562,405
30,000 Devon Energy Corporation ..................... 1,520,400
13,000 EOG Resources, Inc. .......................... 738,400
29,500 Exxon Mobil Corporation ...................... 1,695,365
------------
6,974,635
------------
FINANCIAL - 6.1%
20,000 Allstate Corporation ......................... 1,195,000
32,500 American Physicians Capital, Inc.* ........... 1,207,375
11,000 Bear Stearns Companies, Inc. ................. 1,143,340
31,500 CIT Group, Inc. .............................. 1,353,555
17
JAMES Balanced: Golden Rainbow Fund
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS - 44.5% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL - 6.1% (Continued)
8,000 KeyCorp ...................................... $ 265,200
37,500 Rent-A-Center, Inc.* ......................... 873,375
10,000 SAFECO Corporation ........................... 543,400
22,000 Stewart Information Services Corporation ..... 924,000
41,000 W.R. Berkley Corporation ..................... 1,462,880
------------
8,968,125
------------
INDUSTRIAL - 4.3%
10,000 Archer-Daniels-Midland Company ............... 213,800
16,000 Ball Corporation ............................. 575,360
20,000 BorgWarner, Inc. ............................. 1,073,400
23,000 Briggs & Stratton Corporation ................ 796,260
20,000 Bunge Ltd. ................................... 1,268,000
6,000 CSX Corporation .............................. 255,960
4,000 Cummins, Inc. ................................ 298,440
15,000 Deere & Company .............................. 982,350
13,500 Norfolk Southern Corporation ................. 417,960
4,500 The Black & Decker Corporation ............... 404,325
------------
6,285,855
------------
TECHNOLOGY - 6.0%
40,000 Armor Holdings, Inc.* ........................ 1,584,400
15,000 Aviall, Inc.* ................................ 473,850
12,000 Diodes, Inc.* ................................ 374,400
90,000 Earthlink, Inc.* ............................. 779,400
19,000 Ennis, Inc. .................................. 344,280
41,000 Komag, Inc.* ................................. 1,163,170
22,000 MicroStrategy, Inc.* ......................... 1,166,880
7,500 Moog, Inc. - Class A* ........................ 236,175
12,000 Motorola, Inc. ............................... 219,120
32,500 Northrop Grumman Corporation ................. 1,795,625
25,000 WESCO International, Inc.* ................... 784,500
------------
8,921,800
------------
UTILITIES - 6.6%
20,000 ALLTEL Corporation ........................... 1,245,600
10,000 CenterPoint Energy, Inc. ..................... 132,100
46,000 DPL, Inc. .................................... 1,262,700
60,000 Edison International ......................... 2,433,000
70,800 Energen Corporation .......................... 2,481,540
18,500 Sempra Energy ................................ 764,235
16,500 TXU Corporation .............................. 1,370,985
------------
9,690,160
------------
INTERNATIONAL EQUITY FUNDS - 1.1%
10,000 Greater China Fund, Inc. ..................... 162,300
30,000 India Fund, Inc. ............................. 895,500
59,000 iShares MSCI Japan Index Fund ................ 598,260
------------
1,656,060
------------
TOTAL COMMON STOCKS .......................... $ 65,699,268
------------
18
JAMES Balanced: Golden Rainbow Fund
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS - 49.6% Value
- --------------------------------------------------------------------------------
$ 2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 .... $ 2,137,416
550,000 Federal Home Loan Bank, 4.500%, 2/17/10 ...... 550,234
2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11 ......... 2,656,153
2,000,000 U.S. Treasury Bonds, 4.875%, 2/15/12 ......... 2,124,062
2,500,000 U.S. Treasury Bonds, 3.875%, 2/15/13 ......... 2,503,028
7,000,000 U.S. Treasury Bonds, 5.250%, 2/15/29 ......... 8,005,977
7,200,000 U.S. Treasury Bonds, 5.375%, 2/15/31 ......... 8,495,999
3,500,000 U.S. Treasury Notes, 3.500%, 11/15/06 ........ 3,496,035
6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07 ......... 6,250,314
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 ......... 3,160,548
8,500,000 U.S. Treasury Notes, 3.250%, 8/15/07 ......... 8,431,268
6,000,000 U.S. Treasury Notes, 3.000%, 2/15/08 ......... 5,902,734
2,000,000 U.S. Treasury Notes, 2.625%, 5/15/08 ......... 1,943,516
4,000,000 U.S. Treasury Notes, 2.625%, 3/15/09 ......... 3,854,220
1,000,000 U.S. Treasury Notes, 3.875%, 5/15/09 ......... 1,005,781
5,000,000 U.S. Treasury Notes, 6.000%, 8/15/09 ......... 5,432,615
1,000,000 U.S. Treasury Notes, 5.000%, 8/15/11 ......... 1,066,133
1,000,000 U.S. Treasury Notes, 4.250%, 8/15/14 ......... 1,023,906
5,000,000 U.S. Treasury Notes, 4.000%, 2/15/15 ......... 5,017,775
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ......... $ 73,057,714
------------
================================================================================
Par Value CORPORATE BONDS - 1.4% Value
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Companies, Inc., 6.000%,
4/15/11 .................................... $ 544,310
500,000 Barrick Gold Finance, Inc., 7.500%,
5/1/07 ..................................... 528,769
500,000 General Electric Capital Corporation,
7.875%, 12/1/06 ............................ 525,760
500,000 Tennessee Valley Authority, 5.625%,
1/18/11 .................................... 537,348
------------
TOTAL CORPORATE BONDS ........................ $ 2,136,187
------------
================================================================================
Shares SHORT TERM INVESTMENTS - 3.7% Value
- --------------------------------------------------------------------------------
5,509,291 First American Treasury Obligations Fund ..... $ 5,509,291
------------
TOTAL INVESTMENT SECURITIES - 99.2%
(Amortized Cost $124,993,524) ................ $146,402,460
OTHER ASSETS IN EXCESS OF
LIABILITIES - 0.8% .......................... 1,202,762
------------
NET ASSETS - 100.0% .......................... $147,605,222
============
* Non-income producing security.
See accompanying notes to financial statements.
19
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2005
================================================================================
Shares COMMON STOCKS - 96.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS - 9.6%
68,300 Castle (A.M.) & Company* ..................... $ 1,055,918
61,000 Oregon Steel Mills, Inc.* .................... 1,049,810
41,000 Schnitzer Steel Industries, Inc. - Class A ... 971,700
46,700 Shiloh Industries, Inc.* ..................... 572,075
58,200 Terra Nitrogen Company, L.P. ................. 1,600,500
------------
5,250,003
------------
CONSUMER, CYCLICAL - 18.0%
85,450 Aldila, Inc. ................................. 1,671,401
30,750 Books-A-Million, Inc. ........................ 309,038
139,600 Charming Shoppes, Inc.* ............ 1,302,468
28,500 Handelman Company ............................ 470,535
35,600 K-Swiss, Inc. ................................ 1,151,304
43,400 Steiner Leisure Ltd.* ........................ 1,608,838
47,250 The Pantry, Inc.* ............................ 1,829,992
102,050 Trans World Entertainment
Corporation* ............................... 1,207,252
12,500 Water Pik Technologies, Inc.* ................ 238,125
------------
9,788,953
------------
CONSUMER, NON-CYCLICAL - 14.0%
36,280 Department 56, Inc.* ......................... 371,870
51,000 Ingles Markets, Inc. - Class A ............... 702,270
46,100 Kindred Healthcare, Inc.* .................... 1,826,021
25,150 Nash Finch Company ........................... 924,011
22,837 Sanderson Farms, Inc. ........................ 1,037,713
130,800 Spartan Stores, Inc.* .............. 1,918,836
22,260 The Toro Company ............................. 859,459
------------
7,640,180
------------
ENERGY - 5.9%
41,400 Frontier Oil Corporation ..................... 1,215,090
22,000 Remington Oil & Gas Corporation* ............. 785,400
36,500 RPC, Inc. .................................... 617,580
16,300 Swift Energy Company* ........................ 583,866
------------
3,201,936
------------
FINANCIAL - 14.0%
47,550 ASTA Funding, Inc. ........................... 1,320,939
21,000 Bluegreen Corporation* ....................... 365,610
142,680 Capital Title Group, Inc. .......... 970,224
25,550 FPIC Insurance Group, Inc.* .................. 749,382
21,900 LandAmerica Financial Group, Inc. ............ 1,300,203
48,100 LTC Properties, Inc. ......................... 995,670
30,000 Safety Insurance Group, Inc. ................. 1,012,800
20,000 United Fire & Casualty Company ............... 888,400
------------
7,603,228
------------
20
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS - 96.5% (Continued) Value
- --------------------------------------------------------------------------------
INDUSTRIAL - 7.7%
61,000 Blount International, Inc.* .................. $ 1,018,090
57,700 Duratek, Inc.* ............................... 1,337,486
45,000 OMI Corporation .............................. 855,450
25,000 Tsakos Energy Navigation Ltd. ................ 969,250
------------
4,180,276
------------
TECHNOLOGY - 17.7%
40,050 Diodes, Inc.* ................................ 1,249,560
60,000 Imergent, Inc.* .............................. 636,000
23,325 John H. Harland Company ...................... 886,350
74,400 Komag, Inc.* ................................. 2,110,728
15,125 MicroStrategy, Inc.* ......................... 802,230
22,720 Rofin-Sinar Technologies, Inc.* .............. 745,216
39,900 Teledyne Technologies, Inc.* ................. 1,299,942
15,500 TESSCO Technologies, Inc.* ................... 206,615
26,645 United Industrial Corporation ................ 952,292
24,900 WESCO International, Inc.* ................... 781,362
------------
9,670,295
------------
UTILITIES - 9.6%
40,750 Cleco Corporation ............................ 878,978
140,200 Sierra Pacific Resources* .................... 1,745,490
25,650 South Jersey Industries, Inc. ................ 1,567,728
105,000 TALK America Holdings, Inc.* ................. 1,051,050
------------
5,243,246
------------
TOTAL COMMON STOCKS .......................... $ 52,578,117
------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS - 7.3% Value
- --------------------------------------------------------------------------------
$ 4,000,000 Federal Home Loan Bank Discount Note,
7/1/05 ..................................... $ 3,999,722
------------
================================================================================
Shares SHORT TERM INVESTMENTS - 1.5% Value
- --------------------------------------------------------------------------------
797,152 First American Treasury Obligations Fund ..... $ 797,152
------------
TOTAL INVESTMENT SECURITIES - 105.3%
(Cost $51,678,381) ......................... $ 57,374,991
LIABILITIES IN EXCESS OF OTHER ASSETS - (5.3%) (2,886,049)
------------
NET ASSETS - 100.0% .......................... $ 54,488,942
============
* Non-income producing security.
See accompanying notes to financial statements.
21
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
June 30, 2005
================================================================================
Shares COMMON STOCKS - 69.6% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS - 3.3%
14,500 Methanex Corporation ......................... $ 238,815
15,500 Quanex Corporation ........................... 821,655
20,500 Schnitzer Steel Industries, Inc. - Class A ... 485,850
------------
1,546,320
------------
CONSUMER, CYCLICAL - 14.9%
14,000 Barnes & Noble, Inc.* ........................ 543,200
17,200 Central Garden & Pet Company* ................ 844,864
23,000 Darden Restaurants, Inc. ..................... 758,540
18,000 J.C. Penny Company, Inc. ..................... 946,440
20,000 Office Depot, Inc.* .......................... 456,800
13,250 PACCAR, Inc. ................................. 901,000
15,700 The Home Depot, Inc. ......................... 610,730
26,400 The Pantry, Inc.* ............................ 1,022,472
25,800 Timberland Company - Class A* ................ 998,976
------------
7,083,022
------------
CONSUMER, NON-CYCLICAL - 10.5%
20,000 Bristol-Myers Squibb Company ................. 499,600
9,600 Coventry Health Care, Inc.* .................. 679,200
13,000 Humana, Inc.* ................................ 516,620
17,000 Kos Pharmaceuticals, Inc.* ................... 1,113,500
11,000 Sanderson Farms, Inc. ........................ 499,840
13,400 Sierra Health Services, Inc.* ................ 957,564
18,900 The Toro Company ............................. 729,729
------------
4,996,053
------------
ENERGY - 7.6%
8,896 Apache Corporation 574,682
10,000 Devon Energy Corporation 506,800
34,000 Energy Partners Ltd.* 891,140
11,500 Exxon Mobil Corporation 660,905
11,900 Valero Energy Corporation 941,409
------------
3,574,936
------------
FINANCIAL - 7.3%
5,700 Bear Stearns Companies, Inc. ................. 592,458
18,200 CIT Group, Inc. .............................. 782,054
12,000 Corus Bankshares, Inc. ....................... 665,880
5,000 Goldman Sachs Group, Inc. .................... 510,100
5,000 Hospitality Properties Trust ................. 220,350
20,000 KeyCorp ...................................... 663,000
------------
3,433,842
------------
22
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS - 69.6% (Continued) Value
- --------------------------------------------------------------------------------
INDUSTRIAL - 4.0%
8,000 Ball Corporation ............................. $ 287,680
7,000 Bunge Ltd. ................................... 443,800
12,000 Norfolk Southern Corporation ................. 371,520
8,700 The Black & Decker Corporation ............... 781,695
------------
1,884,695
------------
TECHNOLOGY - 15.8%
17,500 Armor Holdings, Inc.* ........................ 693,175
13,000 Autodesk, Inc. ............................... 446,810
17,000 Aviall, Inc.* ................................ 537,030
97,000 EarthLink, Inc.* ............................. 840,020
33,000 Komag, Inc.* ................................. 936,210
19,000 MicroStrategy, Inc.* ......................... 1,007,760
54,000 Motorola, Inc. ............................... 986,040
10,000 MTS Systems Corporation ...................... 335,800
13,800 Northrop Grumman Corporation ................. 762,450
30,400 WESCO International, Inc.* ................... 953,952
------------
7,499,247
------------
UTILITIES - 6.2%
23,500 DPL, Inc. .................................... 645,075
22,000 Edison International ......................... 892,100
9,500 South Jersey Industries, Inc. ................ 580,640
9,700 TXU Corporation .............................. 805,973
------------
2,923,788
------------
TOTAL COMMON STOCKS .......................... $ 32,941,903
------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS - 13.7% Value
- --------------------------------------------------------------------------------
$2,000,000 Federal Home Loan Bank Discount Note, 8/2/05 . $ 1,994,152
4,500,000 U.S. Treasury Bills, 9/8/05 .................. 4,474,138
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ......... $ 6,468,290
------------
23
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS - 3.2% Value
- --------------------------------------------------------------------------------
1,496,573 First American Treasury Obligations Fund ..... $ 1,496,573
------------
TOTAL INVESTMENT SECURITIES - 86.5%
(Amortized Cost $35,721,801) ................. $ 40,906,766
SEGREGATED CASH WITH BROKERS - 76.4% ......... 36,156,084
SECURITIES SOLD SHORT - (60.0)%
(Proceeds $27,638,415) ..................... (28,378,690)
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.9%) (1,381,231)
------------
NET ASSETS - 100.0% .......................... $ 47,302,929
============
* Non-income producing security.
See accompanying notes to financial statements.
24
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2005
================================================================================
Shares COMMON STOCKS - 60.0% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS - 3.6%
14,735 Aber Diamond Corporation ..................... $ 453,543
28,725 Apex Silver Mines Ltd.* ...................... 394,682
16,100 Foundation Coal Holdings, Inc. ............... 417,634
24,900 Glamis Gold Ltd.* ............................ 428,529
------------
1,694,388
------------
CONSUMER, CYCLICAL - 13.9%
33,860 99 Cents Only Stores* ........................ 430,361
15,760 Amazon.com, Inc.* ............................ 521,341
36,300 DIRECTV Group, Inc.* ......................... 562,650
12,200 Dow Jones & Company, Inc. .................... 432,490
19,200 DreamWorks Animation SKG, Inc.* .............. 503,040
50,000 Fleetwood Enterprises, Inc.* ................. 507,500
8,750 Gaylord Entertainment Company* ............... 406,787
17,460 JetBlue Airways Corporation* ................. 356,882
35,000 Liberty Media Corporation* ................... 356,650
40,000 Northwest Airlines Corporation* .............. 182,400
32,200 Pep Boys - Manny, Moe & Jack ................. 435,988
42,100 Sirius Satellite Radio, Inc.* ................ 272,808
13,300 Texas Roadhouse, Inc.* ....................... 462,175
39,100 ValueVision Media, Inc. - Class A* ........... 469,591
48,100 Visteon Corporation .......................... 290,043
7,800 Wynn Resorts Ltd.* ........................... 368,706
------------
6,559,412
------------
CONSUMER, NON-CYCLICAL - 8.9%
60,450 Adolor Corporation* .......................... 559,162
31,600 Amylin Pharmaceuticals, Inc.* ................ 661,388
17,300 CV Therapeutics, Inc.* ....................... 387,866
23,390 Impax Laboratories, Inc.* .................... 367,223
15,420 Nektar Therapeutics* ......................... 259,674
8,575 Neurocrine Biosciences, Inc.* ................ 360,664
31,650 NPS Pharmaceuticals, Inc.* ................... 359,227
87,500 Opsware, Inc.* ............................... 448,000
13,550 OSI Pharmaceuticals, Inc.* ................... 553,788
8,600 Taro Pharmaceutical Industries Ltd.* ......... 250,003
------------
4,206,995
------------
ENERGY - 4.9%
12,800 Bill Barrett Corporation* .................... 378,624
16,000 Cheniere Energy, Inc.* ....................... 497,600
43,160 FX Energy, Inc.* ............................. 476,055
90,200 Input/Output, Inc.* .......................... 566,456
38,500 Syntroleum Corporation* ...................... 395,010
------------
2,313,745
------------
25
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS - 60.0% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL - 8.8%
42,900 Affordable Residential Communities ........... $ 572,715
21,000 Amvescap Plc. ................................ 252,210
16,700 Brookline Bancorp, Inc. ...................... 271,542
33,983 Hudson City Bancorp, Inc. .................... 387,746
12,350 Marsh & McLennan Companies, Inc. ............. 342,095
19,200 NewAlliance Bancshares, Inc. ................. 269,760
17,320 Paychex, Inc. ................................ 563,593
18,000 Primus Guaranty Ltd.* ........................ 260,640
8,600 RenaissanceRe Holdings Ltd. .................. 423,464
9,900 Sun Communities, Inc. ........................ 368,181
14,000 Sun Life Financial, Inc. ..................... 471,800
------------
4,183,746
------------
INDUSTRIAL - 4.2%
32,660 Ballard Power Systems, Inc.* ................. 154,155
36,785 Exelixis, Inc.* .............................. 273,313
80,100 KEMET Corporation* ........................... 504,630
12,500 Macquarie Infrastructure Company Trust ....... 354,750
72,945 Power-One, Inc.* ............................. 460,283
19,050 Tetra Tech, Inc.* ............................ 257,746
------------
2,004,877
------------
TECHNOLOGY - 14.0%
73,800 Abgenix, Inc.* ............................... 633,204
89,880 Ariba, Inc.* ................................. 521,304
36,480 BearingPoint, Inc.* .......................... 267,398
14,650 Chiron Corporation* .......................... 511,138
9,400 FEI Company* ................................. 214,414
39,600 Gartner, Inc.* ............................... 420,552
25,700 ICOS Corporation* ............................ 544,069
42,500 Infineon Technologies* ....................... 393,125
21,550 InterDigital Communications Corporation* ..... 377,125
57,600 Lawson Software, Inc.* ....................... 296,640
16,500 Medicines Company* ........................... 385,935
38,750 Millennium Pharmaceuticals, Inc.* ............ 359,212
20,500 PMC-Sierra, Inc.* ............................ 191,266
33,000 Red Hat, Inc.* ............................... 432,300
39,000 Semiconductor Manufacturing
International Corporation* ................. 401,700
33,425 Tanox, Inc.* ................................. 391,741
66,000 Telesp Celular Participacoes S.A.* ........... 281,820
------------
6,622,943
------------
UTILITIES - 1.7%
7,990 Crosstex Energy, Inc. ........................ 385,917
30,715 IDT Corporation* ............................. 406,667
------------
792,584
------------
TOTAL COMMON STOCKS (Proceeds $27,638,415) ... $ 28,378,690
============
* Non-income producing security.
See accompanying notes to financial statements.
26
THE JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2005
================================================================================
Shares COMMON STOCKS - 97.6% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS - 10.2%
6,950 Alliance Resource Partners, L.P. ............. $ 514,300
4,800 Dow Chemical Company ......................... 213,744
10,600 Methanex Corporation ......................... 174,582
5,500 PPG Industries, Inc. ......................... 345,180
8,850 Schnitzer Steel Industries, Inc. - Class A ... 209,745
9,600 Terra Nitrogen Company, L.P. ................. 264,000
------------
1,721,551
------------
CONSUMER, CYCLICAL - 14.8%
7,000 Aldila, Inc. ................................. 136,920
39,500 Hartmarx Corporation* ........................ 397,765
4,400 J.C. Penny Company, Inc. ..................... 231,352
17,300 Office Depot, Inc.* .......................... 395,132
5,250 PACCAR, Inc. ................................. 357,000
5,300 Supervalu, Inc. .............................. 172,833
7,900 The Gap, Inc. ................................ 156,025
12,500 The Pantry, Inc.* ............................ 484,125
4,000 Timberland Company - Class A* ................ 154,880
------------
2,486,032
------------
CONSUMER, NON-CYCLICAL - 15.4%
5,600 Aetna, Inc. .................................. 463,791
16,350 Archer-Daniels-Midland Company ............... 349,563
11,950 Bristol-Myers Squibb Company ................. 298,511
5,700 Bunge Ltd. ................................... 361,380
28,500 EZCORP, Inc. - Class A* ...................... 305,520
5,400 Helen of Troy Ltd.* .......................... 137,484
7,300 Sanderson Farms, Inc. ........................ 331,712
2,000 Sierra Health Services, Inc.* ................ 142,920
4,600 The Toro Company ............................. 177,606
------------
2,568,487
------------
ENERGY - 8.9%
1,620 Amerada Hess Corporation ..................... 172,546
3,820 Anadarko Petroleum Corporation ............... 313,813
4,850 Devon Energy Corporation ..................... 245,798
7,000 Energy Partners Ltd.* ........................ 183,470
4,000 Exxon Mobil Corporation ...................... 229,880
6,515 Marathon Oil Corporation ..................... 347,706
------------
1,493,213
------------
FINANCIAL - 10.5%
4,700 Alliance Capital Management Holding, L.P. .... 219,678
4,200 Allstate Corporation ......................... 250,950
3,800 Bear Stearns Companies, Inc. ................. 394,972
5,150 CIT Group, Inc. .............................. 221,296
5,800 Corus Bankshares, Inc. ....................... 321,842
27
THE JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS - 97.6% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL - 10.5% (Continued)
3,100 National City Corporation .................... $ 105,772
6,100 Stewart Information Services Corporation ..... 256,200
------------
1,770,710
------------
INDUSTRIAL - 10.0%
4,400 Cummins, Inc. ................................ 328,284
2,500 Deere & Company .............................. 163,725
4,600 Eaton Corporation ............................ 275,540
5,510 Johnson Controls, Inc. ....................... 310,378
2,325 Magna International, Inc. - Class A .......... 163,541
6,100 Norfolk Southern Corporation ................. 188,856
2,900 The Black & Decker Corporation ............... 260,565
------------
1,690,889
------------
TECHNOLOGY - 13.3%
8,200 Armor Holdings, Inc.* ........................ 324,802
11,000 Diodes, Inc.* ................................ 343,200
33,350 Earthlink, Inc.* ............................. 288,811
22,000 Ennis, Inc. .................................. 398,640
17,300 Komag, Inc.* ................................. 490,801
12,700 WESCO International, Inc.* ................... 398,526
------------
2,244,780
------------
UTILITIES - 14.5%
4,000 DPL, Inc. .................................... 109,800
8,600 Edison International ......................... 348,730
9,100 Energen Corporation .......................... 318,955
3,100 Exelon Corporation ........................... 159,123
9,300 Sempra Energy ................................ 384,183
6,850 South Jersey Industries, Inc. ................ 418,672
8,775 Southern Company ............................. 304,229
7,200 WPS Resources Corporation .................... 405,000
------------
2,448,692
------------
TOTAL COMMON STOCKS .......................... $ 16,424,354
------------
================================================================================
Shares SHORT TERM INVESTMENTS - 2.4% Value
- --------------------------------------------------------------------------------
409,995 First American Treasury Obligations Fund ..... $ 409,995
------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $14,246,267) ........................... $ 16,834,349
LIABILITIES IN EXCESS OF OTHER ASSETS - 0.0% . (856)
------------
NET ASSETS - 100.0% .......................... $ 16,833,493
============
* Non-income producing security.
See accompanying notes to financial statements.
28
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
================================================================================
1. General Information and Significant Accounting Policies
James Balanced: Golden Rainbow Fund (formerly, 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"). James Balanced: 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 James Balanced: 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.
James Balanced: 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 equtiy securities without
regard to the market capitalization of the stock. 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
accounting principles generally accepted in the United States of America (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
29
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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.
Fixed-income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when James
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. If James decides that a price provided by
a pricing service does not accurately reflect the fair market value of the
securities, when prices are not readily available from a pricing service, or
when restricted or illiquid securities are being valued, securities are valued
at fair value as determined in good faith by James in conformity with guidelines
adopted by and subject to the review 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 James Balanced: 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 June 30, 2005, The James Balanced:
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. Amortization and
accretion is calculated using the effective yield method.
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
30
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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.
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, 2005 and
2004 was as follows:
- --------------------------------------------------------------------------------
James Balanced: The James Small Cap
Golden Rainbow Fund Fund
-------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
From ordinary income ....... $1,715,612 $1,355,926 $ -- $ 5,930
From long-term capital gains 289,929 2,860 756,432 35,827
---------- ---------- ---------- ----------
$2,005,541 $1,358,786 $ 756,432 $ 41,757
========== ========== ========== ==========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The James Market Neutral The James Equity
Fund Fund
-------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------
From ordinary income ....... $ -- $ -- $ 24,033 $ 14,163
From long-term capital gains -- -- -- --
---------- ---------- ---------- ----------
$ -- $ -- $ 24,033 $ 14,163
========== ========== ========== ==========
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2005:
- -----------------------------------------------------------------------------------------------------------
James The James The James The James
Balanced: Golden Small Cap Market Neutral Equity
Rainbow Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
Cost of portfolio investments .......... $ 124,993,524 $ 51,678,381 $ 64,115,033 $ 14,246,267
============= ============= ============= =============
Gross unrealized appreciation .......... $ 22,345,751 $ 7,572,257 $ 6,826,049 $ 2,912,719
Gross unrealized depreciation .......... (936,815) (1,875,647) (2,395,901) (324,637)
------------- ------------- ------------- -------------
Net unrealized appreciation/depreciation 21,408,936 5,696,610 4,430,148 2,588,082
Capital loss carryforward .............. -- -- (1,843,245) (3,189,550)
Undistributed ordinary income .......... 31,067 133,040 22,402 1
Undistributed long-term gains .......... 5,942,059 411,183 -- --
------------- ------------- ------------- -------------
Accumulated earnings (deficit) ....... $ 27,382,062 $ 6,240,833 $ 2,609,305 $ (601,467)
============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------
31
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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 GAAP.
During the year ended June 30, 2005, the James Balanced: Golden Rainbow Fund and
The James Equity Fund utilized $592,514 and $523,127 of capital loss
carryforwards, respectively. The capital loss carryforwards remaining as of June
30, 2005 in the table above expire as follows:
- --------------------------------------------------------------------------------
Amount Expiration Date
- --------------------------------------------------------------------------------
The James Market Neutral Fund ........ $ 82,513 June 30, 2008
$ 987,690 June 30, 2012
$ 773,042 June 30, 2013
The James Equity Fund ................ $2,881,491 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.
Reclassification of Capital Accounts
As of June 30, 2005, the James Balanced: Golden Rainbow Fund reclassified $2,860
of capital loss carryforwards expired to paid-in capital on the Statement of
Assets and Liabilities. This reclassification was required to adjust the capital
loss carryforward at June 30, 2004 of $595,374 on the financial statements to
the capital loss carryforward at June 30, 2004 of $592,514 on the tax return.
2. Securities Transactions
Purchases and sales (including maturities) of investments in long-term U.S.
Government obligations for James Balanced: Golden Rainbow Fund for the year
ended June 30, 2005 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund ......... $48,363,223 $14,201,719
- --------------------------------------------------------------------------------
Purchases and sales (including maturities) of investments in other securities
for the year ended June 30, 2005 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund ......... $33,860,299 $21,382,546
The James Small Cap Fund .................... 64,593,675 26,390,415
The James Market Neutral Fund ............... 26,620,825 5,096,317
The James Equity Fund ....................... 10,782,803 3,254,968
- --------------------------------------------------------------------------------
For the year ended June 30, 2005, the cost of securities purchased to cover
short sales and the proceeds from securities sold short were $15,054,314 and
$35,606,928, respectively, for The James Market Neutral Fund.
32
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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.
James Balanced: Golden Rainbow Fund is authorized to pay James a fee equal to an
annual rate of 0.74% of its average daily net assets. James Balanced: 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
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 James
Balanced: 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 James Balanced: 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, James Balanced: 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
James Balanced: 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 James Balanced: Golden Rainbow Fund and James
for certain out-of-pocket expenses incurred by IFS in obtaining valuations of
the Funds' portfolio securities.
33
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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
James Balanced: 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 that 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.
34
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
================================================================================
To the Board of Trustees and Shareholders of The James Advantage Funds
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments and securities sold short, of The James Advantage
Funds (the "Funds") comprising The James Balanced: Golden Rainbow Fund, The
James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund as
of June 30, 2005, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of June 30, 2005, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of June 30, 2005, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
August 24, 2005
35
THE JAMES ADVANTAGE FUNDS
Other Items (Unaudited)
================================================================================
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 most recent twelve month
period ended June 30 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.
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. 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.
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 mamagement 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 (January 1, 2005 through June 30, 2005).
Actual Expenses
The first line of the table 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 June
30, 2005" to estimate the expenses you paid on your account during this period,
if you held your shares for the entire period.
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.
Note that expenses shown in the table are meant to hightlight and help you
compare ongoing cost only. The calculations assume no shares were bought or sold
during the period. Your actual costs may have been higher or lower, depending on
the amount of your investment and the timing of any purchases or redemptions.
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.
36
THE JAMES ADVANTAGE FUNDS
OTHER ITEMS (Continued)
================================================================================
Expenses Paid
Net Expense Total Return During the
Ratio Six Months Beginning Ending Six Months
Annualized Ended Account Value Account Value Ended
June 30, June 30, January 1, June 30, June 30,
2005 2005 2005 2005 2005*
- -------------------------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund
Actual ....................................... 1.26% 4.59% $1,000.00 $1,045.90 $ 6.39
Hypothetical ................................. 1.26% 2.48% $1,000.00 $1,018.55 $ 6.31
The James Small Cap Fund
Actual ....................................... 1.50% 2.92% $1,000.00 $1,029.20 $ 7.55
Hypothetical ................................. 1.50% 2.48% $1,000.00 $1,017.36 $ 7.50
The James Market Neutral Fund
Actual ....................................... 2.37% 7.07% $1,000.00 $1,070.70 $12.17
Hypothetical ................................. 2.37% 2.48% $1,000.00 $1,013.04 $11.83
The James Equity Fund
Actual ....................................... 1.50% 4.13% $1,000.00 $1,041.30 $ 7.59
Hypothetical ................................. 1.50% 2.48% $1,000.00 $1,017.36 $ 7.50
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Advisory Agreement Approval
The Board of Trustees of The James Advantage Funds considered the renewal of the
Management Agreement for each Fund at a meeting held on May 26, 2005. The
Trustees referred to the materials that had been provided to them prior to the
meeting for purposes of their consideration of the Management Agreements. A
representative of the Adviser reviewed the services provided by the Adviser to
the Funds, as well as a comparison of the advisory services provided to the
Funds and other clients of the Adviser. They discussed recent regulatory
changes, including rules adopted pursuant to the Sarbanes-Oxley Act of 2002,
proxy voting disclosure and the compliance program requirement for mutual funds,
that had significantly increased the Adviser's regulatory burden and costs with
respect to the Funds.
The Trustees reviewed a table comparing the average total returns of each Fund
(one year, three years, five years and for the James Balanced: Golden Rainbow
Fund, ten years) with a peer group of funds with the same, or very similar,
investment objectives and strategies. Each peer group was selected by Lipper
based on the investment style and strategies employed by the Funds, as well as
by asset size. They also reviewed comparisons of the Funds' performance with
their respective benchmarks.
The Trustees reviewed a description of the services provided by the Adviser to
the Funds in addition to portfolio management, such as providing a Chief
Compliance Officer to the Funds at no additional cost to the Funds, monitoring
the expenses of each Fund, and providing individualized attention to the Funds'
shareholders. The Trustees also reviewed the management fee for each Fund and
compared the fee with the average and median investment advisory fees of the
Fund's respective peer group. It was the consensus of the Trustees that the
management fees appeared reasonable in comparison with the peer group fees.
37
THE JAMES ADVANTAGE FUNDS
OTHER ITEMS (Continued)
================================================================================
The Trustees referred to an analysis of the Adviser's profitability with respect
to the Funds, noting that the materials included in the analysis allocated the
Adviser's expenses based on two different allocations of the Adviser's common
expenses: total assets under management and total revenues to the Adviser. The
Trustees indicated that they had reviewed the Adviser's balance sheet, and an
officer of the Adviser represented that the balance sheet was a fair reflection
of the Adviser's financial condition. The Trustees then discussed other benefits
that might be realized by the Adviser as a result of its relationship with the
Funds. It was noted that the Adviser does not have any soft dollar arrangements
with broker-dealers.
The Trustees indicated that it was their consensus that the information
presented and the discussion of the information were adequate for making a
determination regarding the renewal. They stated that they considered the
comparative performance of the Funds as outstanding and that they were satisfied
with the Adviser's and each Fund's performance. They then concluded that, based
on their review of the management fees and overall expense comparison, as well
as all information relating to the profitability of the Adviser, that the
management fees for each Fund were reasonable and that the arrangements were not
generating excessive profits to the Adviser. The Trustees acknowledged the
Adviser's commitment to consider fee breakpoints in the future, but concluded
that the issue of economies of scale, and whether the fees reflect those
economies, was not relevant at this time. As to the nature, extent and quality
of services provided by the Adviser, the Trustees expressed their common opinion
that the Adviser's personnel are highly qualified, that the Adviser provides
excellent services to the Funds, and that the extent of the services is
consistent with the Board's expectations.
It was the consensus of the Independent Trustees, and all of the Trustees, that
the continuation of each Management Agreement was in the best interest of the
applicable Fund and its shareholders.
38
THE JAMES ADVANTAGE FUNDS
MANAGEMENT OF THE TRUST (Unaudited)
================================================================================
Listed in the charts below is basic information regarding the Trustees and
principal officers of The James Advantage Funds (the "Trust").
Other
Term of Portfolios in Trusteeships
Name Position(s) Office(1) and Fund Complex Held by Trustee
Address Held With Length of Principal Occupation(s) Overseen by Outside the Fund
Age Trust Time Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
Barry R. James, CFA(2) President Since Executive Vice 4 Director of
1349 Fairground Road and Trustee Inception President, James James Capital
Beavercreek, Ohio 45385 Investment Research, Alliance, a
Age: 48 Inc. (1985 to Present) registered
investment
adviser.
DISINTERESTED TRUSTEES:
Anthony P. D'Angelo, D.B.A. Trustee Since Professor Emeritus, 4 N/A
c/o The James Advantage Funds Inception Graduate School of
1349 Fairground Road Logistics and
Beavercreek, Ohio 45385 Acquisitions
Age: 75 Management, Air Force
Institute of
Technology,
Wright-Patterson AFB,
Ohio (1985 to Present)
Leslie L. Brandon Trustee Since Retired Partner, Ernst 4 N/A
c/o The James Advantage Funds May 2003 & Young LLP, Columbus,
1349 Fairground Road Ohio (1966 to 2000)
Beavercreek, Ohio 45385
Age: 62
Richard C. Russell Trustee Since Richard C. Russell, 4 N/A
c/o The James Advantage Funds May 2003 Consultant, general
1349 Fairground Road business consulting
Beavercreek, Ohio 45385 (2002 to Present);
Age: 58 President, The Danis
Companies, real estate
development and
construction (1983 to
2002)
(1) Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
(2) Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.
serves as the investment adviser to the Funds.
PRINCIPAL OFFICERS:
Other
Trusteeships
Term of Held by
Office(1) Portfolios in Trustee
Name Position(s) and Length Principal Fund Complex Outside the
Address Held With of Time Occupation(s) Overseen by Fund
Age Trust Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas L. Mangan (1) Vice President, Chief Since Vice President, N/A N/A
1349 Fairground Road Compliance Officer, Inception James Investment
Beavercreek, Ohio 45385 Treasurer/CFO and Research, Inc. (1994
Age: 55 Secretary to Present)
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Mangan is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.,
serves as the investment adviser to the Funds.
The Statement of Additional Information contains additional information
about the Trustees and is available without charge upon request by calling
1-800-266-5566.
39
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 Registered
Public Accounting Firm
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.
(a) As of the end of the period covered by this report, the registrant has
adopted a code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party.
(b) For purposes of this item, "code of ethics" means written standards that are
reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports
and documents that a registrant files with, or submits to, the Commission and in
other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) Amendments: During the period covered by the report, there have not been any
amendments to the provisions of the code of ethics.
(d) Waivers: During the period covered by the report, the registrant has not
granted any express or implicit waivers from the provisions of the code of
ethics.
(e) Not applicable.
(f) The registrant's code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, is filed herewith.
Item 3. Audit Committee Financial Expert.
(a) The registrant's board of trustees has determined that Les L. Brandon is an
audit committee financial expert. Mr. Brandon is independent for purposes of
this Item 3.
(b) For purposes of this Item, an "audit committee financial expert" means a
person who has the following attributes:
(1) An understanding of generally accepted accounting principles and
financial statements;
(2) The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
(3) Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
-2-
(4) An understanding of internal control over financial reporting; and
(5) An understanding of audit committee functions.
(c) A person shall have acquired such attributes through:
(1) Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
(2) Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
(3) Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
(4) Other relevant experience.
(d) (1) A person who is determined to be an audit committee financial expert
will not be deemed an "expert" for any purpose, including without limitation for
purposes of Section 11 of the Securities Act of 1933 (15 U.S.C. 77k), as a
result of being designated or identified as an audit committee financial expert
pursuant to this Item.
(2) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not impose on such person any
duties, obligations, or liability that are greater than the duties, obligations,
and liability imposed on such person as a member of the audit committee and
board of directors in the absence of such designation or identification.
(3) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not affect the duties, obligations,
or liability of any other member of the audit committee or board of directors.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
- -----------------------------------------------------
June 30, 2005 June 30, 2004
- -----------------------------------------------------
$45,700 $42,700
- -----------------------------------------------------
Such fees represent the aggregate fees billed for the fiscal years ended June
30, 2005 and June 30, 2004 for professional services rendered by Deloitte &
Touche LLP for the audit of the registrant's annual financial statements.
-3-
(b) Audit-Related Fees
- ------------------------------------------------------------------
Registrant Adviser
- ------------------------------------------------------------------
June 30, 2005 $0 $0
- ------------------------------------------------------------------
June 30, 2004 $0 $0
- ------------------------------------------------------------------
Neither the registrant nor the adviser was billed any fees by Deloitte & Touche
LLP for the fiscal years ended June 30, 2005 and June 30, 2004 for assurance and
related services that were reasonably related to the performance of the audit of
the registrant's financial statement and not otherwise included under "Audit
Fees" above.
(c) Tax Fees
- ------------------------------------------------------------------
Registrant Adviser
- ------------------------------------------------------------------
June 30, 2005 $7,000 $0
- ------------------------------------------------------------------
June 30, 2004 $7,000 $0
- ------------------------------------------------------------------
"Tax fees" shown in the table above were for services provided by Deloitte &
Touche LLP in relation to the preparation of excise filings and income tax
returns for the registrant.
(d) All Other Fees
- ------------------------------------------------------------------
Registrant Adviser
- ------------------------------------------------------------------
June 30, 2005 $0 $0
- ------------------------------------------------------------------
June 30, 2004 $0 $0
- ------------------------------------------------------------------
The registrant was not billed any fees by Deloitte & Touche LLP for products and
services provided by Deloitte & Touche LLP, other than the services reported
above in items (a) - (c), for the fiscal years ended June 30, 2005 and June 30,
2004.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant's Audit Committee Charter ("Charter"), the
Audit Committee is directly responsible for the appointment, termination,
compensation, and oversight of the work of any registered public accounting firm
employed by the registrant. In addition, the Charter provides that the Audit
Committee is responsible for reviewing and approving in advance any and all
proposals under which the independent auditor would provide "permissible
non-audit services" (as defined in the Charter) to the registrant or to the
investment adviser to the registrant (not including any sub-adviser whose role
is primarily portfolio management and that is sub-contracted or overseen by the
investment adviser to the registrant) or any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant if those permissible non-audit services relate
directly to the operations and financial reporting of the registrant. In
determining whether to pre-approve non-audit services, the Audit Committee
considers whether such services are consistent with the independent auditor's
independence.
-4-
(2)
- ------------------------------------------------------------------
Registrant Adviser
- ------------------------------------------------------------------
Audit Related n/a n/a
- ------------------------------------------------------------------
Tax Fees 100% n/a
- ------------------------------------------------------------------
Other Fees n/a n/a
- ------------------------------------------------------------------
(f) Not applicable.
(g) Aggregate non-audit fees billed by registrant's accountant:
- ------------------------------------------------------------------
Registrant Adviser
- ------------------------------------------------------------------
June 30, 2005 $0 $0
- ------------------------------------------------------------------
June 30, 2004 $0 $0
- ------------------------------------------------------------------
(h) The registrant's audit committee of the board of trustees has considered
that the provision of non-audit services that were rendered to an entity
controlling, controlled by, or under common control with the registrant's
investment adviser that provides ongoing services to the registrant for the
fiscal years ended June 30, 2005 and June 30, 2004, as identified above, that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, are compatible with maintaining Deloitte & Touche LLP's
independence.
Item 5. Audit Committee of Listed Companies.
Not applicable.
Item 6. Schedule of Investments.
The schedule 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. Portfolio Managers of Closed-End Funds.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
-5-
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures as of September 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 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 12. Exhibits.
(a)(1) Code of Ethics identified in Item 2 of Form N-CSR are filed herewith.
(a)(2) Certifications required by Item 11(b) of Form N-CSR are filed herewith.
(a)(3) Not applicable.
(b) Certification required by Rule 30a-2(b) under the Investment Company Act
of 1940 are filed herewith.
-6-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
By (Signature and Title)
/s/ Barry R. James
- -------------------
Barry R. James
President
Date: September 1, 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
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Barry R. James
President
Date: September 1, 2005
By (Signature and Title)
/s/ Thomas L. Mangan
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Thomas L. Mangan
Treasurer, Chief Financial Officer
Date: September 1, 2005
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