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
James Advantage Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1349 Fairground Road, Beavercreek, Ohio 45385
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Barry R. James, P.O. Box 8, Alpha, Ohio, 45301
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (937) 426-7640
Date of fiscal year end: 6/30
Date of reporting period: 12/31/05
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, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
Item 1. Reports to Stockholders.
================================================================================
[LOGO]
Advised by James Investment Research, Inc.
www.jamesfunds.com
o
December 31, 2005
Semi-Annual Report
(Unaudited)
o
James Balanced:
Golden Rainbow Fund
James Small Cap Fund
James Market Neutral Fund
James Equity Fund
================================================================================
LETTER TO SHAREHOLDERS OF THE JAMES ADVANTAGE FUNDS
================================================================================
As we projected at the beginning of 2005, it was a difficult year for the
markets. The Federal Reserve continued pushing up interest rates, which made it
hard to find good profits in the bond market, and the equity markets spent most
of the year in negative territory before rallying late in the year. We believe
the coming year will be equally challenging, but opportunities will surely
arise.
The Market Over the Past Six Months
The hurricanes in September led to rebuilding and plenty of federal assistance.
This helped keep the U.S. economy on track, and the markets reversed their
earlier course to end the year higher. A decline in crude oil prices after the
hurricane related surge also nudged the markets higher.
Heavy foreign buying of both corporate and government bonds helped keep the bond
markets firm, despite four rate hikes by the Federal Reserve over the last six
months of the year. Low rates in Europe and Japan plus a strong U.S. dollar made
the U.S. bond market more attractive to international buyers. As a result, the
longer bonds in the Balanced: Golden Rainbow Fund added value over that time
period.
Investment Goals and Objectives
The objective of the James Balanced: Golden Rainbow Fund is to provide total
return through growth and income and preservation of capital in declining
markets. The Fund seeks to achieve this objective through a combination of high
quality bonds and stocks we consider to be undervalued. As adviser to the Fund,
we actively manage the bond portfolio, adjusting the level of market risk
according to proprietary risk indicators. Allocation between bonds and stocks is
also an important tool in preserving capital. The success of this strategy
depends on the adviser's ability to predict market turns.
The James Small Cap Fund and James Equity Fund do not try to time the market.
They are generally fully invested in stocks that we consider to be at levels
which are bargains compared to the broader market. Both Funds assume more risk
than the James Balanced: Golden Rainbow, but are generally rewarded with strong
returns if the stock market is moving up. While the James Small Cap Fund
generally only holds stocks under $2 billion in market capitalization, the James
Balanced: Golden Rainbow and James Equity Funds can hold stocks of all market
capitalizations. The latter two Funds may hold some or many of the same stocks
held by the James Small Cap Fund or by each other. The James Small Cap Fund
seeks to provide long term capital appreciation and the James Equity Fund seeks
to provide long term capital appreciation and outperform the S&P 500 Index.
The James Market Neutral Fund seeks to provide positive returns regardless of
the direction of the stock market. This objective incorporates a short selling
strategy to take advantage of stocks which we believe are trading well above
their intrinsic values and are due to correct. The Fund also holds long
positions in stocks we believe are undervalued, and it may hold some or many of
the same stocks owned by the other three James Advantage Funds.
Investment Philosophy
Conservative management has been our hallmark since our beginning in 1972. We
are known for our quantitative research, independent of the herd psychology of
Wall Street. Our original research and dynamic modeling, along with consistent
fundamental analysis, have helped us establish our track record.
Our portfolio managers have all been with us for many years and are all members
of our Investment Committee. They share a common appreciation for the need to
adhere to our discipline in seeking out bargain stocks and in keeping portfolio
costs down. These commitments help to keep us on course when the markets become
uncertain and volatility rises. Confidence in the research is paramount in
maintaining our discipline.
Strategy for Meeting Fund Objectives
We begin every year with our annual Economic Outlook. This is a presentation,
open to the shareholders, about the economy and the markets. The Outlook is the
result of intensive research on the economy, stocks and bonds. It is an
essential part of our strategy and process.
1
Once an economic overlay is developed, our portfolio managers try to identify
stocks and bonds that historically have outperformed in the expected economic
environment. Armed with our quantitative modeling and thorough fundamental
analysis, the portfolio managers strive to identify stocks trading at bargain
levels, but are likely to outperform in the coming months. We want to keep
turnover low and try to give our selections time to perform.
The bonds in the James Balanced: Golden Rainbow are chosen in much the same
manner. The economic outlook sets the stage and the portfolio managers select
those securities they believe will outperform in the expected environment. Our
strict discipline includes only high quality securities, which means that
government bonds generally are a significant part of the portfolio.
Fund Performance
All four Funds in the James Advantage Funds family outperformed their benchmarks
in 2005. The James Balanced: Golden Rainbow returned 8.37 percent for the year.
Its benchmark is a blend of the S&P 500, the Russell 2000 and the Lehman
Intermediate Gov/Credit Indexes. That benchmark returned 3.34 percent for the
year. The Fund also paid a regular quarterly dividend as well as an annual long
term capital gains distribution. The James Market Neutral Fund returned 7.94
percent for 2005, while its benchmark, the ninety day Treasury Bill, returned
3.07 percent. The James Small Cap Fund ended 2005 with a yearly total return of
7.51 percent, besting its index, the Russell 2000, which rose by 4.55 percent.
The family standout for 2005 was the James Equity Fund, returning 15.03 percent
while the S&P 500, its benchmark, returned 4.93 percent. This is the second year
in a row that all four funds in the series outperformed their respective
benchmarks.
Expectations for the Future
We believe that 2006 will be another difficult year for the stock market. Too
many investors have become bullish, but the market is not cheap. Bargain stocks
are hard to find and the economy is showing signs of strain. The boost to the
economy from hurricane repair will prove temporary, but the high cost of housing
will have a significant dampening on future economic activity. Higher interest
rates abroad and a new Federal Reserve Chairman at home will add to uncertainty.
As the stock market's late 2005 momentum gives way to the sobering outlook for
2006, we fear investors will move to the sidelines. International events, always
a source of uncertainty, could significantly add to the market's woes as hot
spots, both old and new, wreak havoc with the flows of trade. However, these
events should serve to create real opportunities for a longer term rally in
stocks. The key is to be able to move into the market and take advantage of
attractive levels once they arrive. That is our strategy for the coming year.
/s/ Thomas L. Mangan
Thomas L. Mangan
Chief Financial Officer
Average Annual Total Returns
As of December 31, 2005
- ---------------------------------------------------------------------------------------
One Five Ten Since
Year Years Years Inception
- ---------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund ...... 8.37% 8.05% 8.22% 9.19%
(Inception 7/1/91)
James Small Cap Fund ..................... 7.51% 16.48% NA 12.07%
(Inception 10/2/98)
James Market Neutral Fund ................ 7.94% 4.56% NA 3.93%
(Inception 10/2/98)
James Equity Fund ........................ 15.03% 1.52% NA -0.11%
(Inception 11/1/99)
- ---------------------------------------------------------------------------------------
Past performance is not predictive of future results. 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.
2
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
December 31, 2005 (Unaudited)
================================================================================
The illustrations below provide the industry sectors for the James Balanced:
Golden Rainbow Fund, James Small Cap Fund, James Market Neutral Fund, and James
Equity Fund.
James Balanced: Golden Rainbow Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 3.3%
CONSUMER, CYCLICAL - 4.3%
CONSUMER, NON-CYCLICAL - 4.5%
ENERGY - 5.0%
FINANCIAL - 4.9%
INDUSTRIAL - 3.0%
TECHNOLOGY - 5.4%
UTILITIES - 5.1%
INTERNATIONAL EQUITY FUNDS - 1.3%
BONDS (over 10 years) - 3.9%
BONDS (2-10 years) - 31.7%
BONDS (less than 2 years) - 23.5%
CASH EQUIVALENTS - 3.1%
OTHER - 1.0%
James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 8.9%
CONSUMER, CYCLICAL - 13.6%
CONSUMER, NON-CYCLICAL - 15.1%
ENERGY - 15.6%
FINANCIAL - 14.0%
INDUSTRIAL - 3.8%
TECHNOLOGY - 16.6%
UTILITIES - 8.2%
CASH EQUIVALENTS - 4.6%
OTHER - (0.4%)
3
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
(Continued)
================================================================================
James Market Neutral Fund
Industry Sector Allocation (% of Net Assets)
(Cash and Cash Equivalents not included)
[BAR CHART]
Longs Shorts
------- --------
BASIC MATERIALS 3.3% 3.1%
CONSUMER, CYCLICAL 16.5% 14.7%
CONSUMER, NON-CYCLICAL 8.0% 12.6%
ENERGY 7.5% 5.7%
FINANCIAL 7.4% 9.8%
INDUSTRIAL 4.4% 5.2%
TECHNOLOGY 15.6% 16.3%
UTILITIES 5.1% 1.7%
James Equity Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 8.6%
CONSUMER, CYCLICAL - 14.1%
CONSUMER, NON-CYCLICAL - 10.5%
ENERGY - 13.8%
FINANCIAL - 11.2%
INDUSTRIAL - 7.1%
TECHNOLOGY - 16.1%
UTILITIES - 13.4%
CASH EQUIVALENTS - 4.2%
OTHER - 1.0%
4
JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2005 (Unaudited)
================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
James
Balanced: James James James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ....................................... $ 181,439,333 $ 73,470,583 $ 76,202,310 $ 15,716,681
============= ============= ============= =============
At value ................................................ $ 205,306,672 $ 80,903,277 $ 85,078,030 $ 19,499,565
Segregated cash with brokers ............................... -- -- 34,073,696 --
Dividends and interest receivable .......................... 1,720,850 40,000 140,869 40,473
Receivable for capital shares sold ......................... 897,326 512,137 388,512 180,504
Other assets ............................................... 30,717 -- -- --
------------- ------------- ------------- -------------
TOTAL ASSETS .......................................... 207,955,565 81,455,414 119,681,107 19,720,542
------------- ------------- ------------- -------------
LIABILITIES
Dividends payable .......................................... 42,745 1,110 15,203 714
Payable for securities sold short (proceeds $45,980,875) ... -- -- 48,344,049 --
Payable for dividends on securities sold short ............. -- -- 13,458 --
Payable for capital shares redeemed ........................ 355,182 492,533 241,081 3,024
Payable for securities purchased ........................... -- 288,431 950,970 --
Accrued expenses:
Management fees ......................................... 128,540 83,313 97,738 17,692
12b-1 distribution and service fees ..................... 30,845 12,071 19,037 8,556
Trustees' fees .......................................... 545 -- -- --
Other ................................................... 13,505 -- -- --
------------- ------------- ------------- -------------
TOTAL LIABILITIES ..................................... 571,362 877,458 49,681,536 29,986
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 207,384,203 $ 80,577,956 $ 69,999,571 $ 19,690,556
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital ............................................ $ 182,531,106 $ 73,151,051 $ 67,641,063 $ 18,470,554
Accumulated net investment income .......................... 42 14 27 3
Accumulated net realized gains (losses) from
security transactions ................................... 985,716 (5,803) (4,154,065) (2,562,885)
Net unrealized appreciation on investments ................. 23,867,339 7,432,694 6,512,546 3,782,884
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 207,384,203 $ 80,577,956 $ 69,999,571 $ 19,690,556
------------- ------------- ------------- -------------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .............. 12,184,574 3,830,072 5,694,467 2,008,419
============= ============= ============= =============
Net asset value, offering price and redemption
price per share ......................................... $ 17.02 $ 21.04 $ 12.29 $ 9.80
============= ============= ============= =============
See accompanying notes to financial statements.
5
JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 2005 (Unaudited)
================================================================================
- ---------------------------------------------------------------------------------------------------------------------
James
Balanced: James James James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of withholding taxes of $1,716,
$0, $900, and $615, respectively) ................... $ 524,056 $ 469,620 $ 221,918 $ 168,266
Interest .............................................. 2,475,343 63,555 880,453 14,537
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME ............................. 2,999,399 533,175 1,102,371 182,803
----------- ----------- ----------- -----------
EXPENSES
Management fees ....................................... 667,958 432,968 493,694 116,732
12b-1 distribution and service fees ................... 225,661 87,595 73,218 23,616
Dividend expense on securities sold short ............. -- -- 139,678 --
Administration fees ................................... 54,585 -- -- --
Professional fees ..................................... 24,786 -- -- --
Accounting services fees .............................. 18,158 -- -- --
Transfer agent fees ................................... 23,157 -- -- --
Postage and supplies .................................. 11,149 -- -- --
Custodian fees and expenses ........................... 12,597 -- -- --
Trustees' fees ........................................ 12,896 5,007 4,186 1,348
Registration fees ..................................... 18,202 -- -- --
Shareholder report printing and mailing ............... 4,973 -- -- --
Compliance fees and expenses .......................... 2,395 -- -- --
Other expenses ........................................ 4,227 -- -- --
----------- ----------- ----------- -----------
TOTAL EXPENSES ........................................... 1,080,744 525,570 710,776 141,696
Trustees' fees reimbursed ............................. (7,806) -- -- --
----------- ----------- ----------- -----------
NET EXPENSES ........................................ 1,072,938 525,570 710,776 141,696
----------- ----------- ----------- -----------
NET INVESTMENT INCOME .................................... 1,926,461 7,605 391,595 41,107
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains from security transactions ......... 1,936,265 693,543 587,512 626,665
Net realized losses on closed short positions ......... -- -- (2,883,791) --
Net change in unrealized appreciation/depreciation
on investments ...................................... 2,458,403 1,736,084 2,067,856 1,194,802
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS ............................... 4,394,668 2,429,627 (228,423) 1,821,467
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................. $ 6,321,129 $ 2,437,232 $ 163,172 $ 1,862,574
=========== =========== =========== ===========
See accompanying notes to financial statements.
6
JAMES BALANCED: GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
- ---------------------------------------------------------------------------------------------------------
Six Months
Ended Year
December 31, Ended
2005 June 30,
(Unaudited) 2005
- ---------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................... $ 1,926,461 $ 1,718,477
Net realized gains on investments ................................... 1,936,265 6,852,704
Net change in unrealized appreciation/depreciation on investments ... 2,458,403 5,094,050
------------- -------------
Net increase in net assets from operations ............................. 6,321,129 13,665,231
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................ (1,926,424) (1,715,612)
Distributions from net realized gains ............................... (6,923,670) (289,929)
------------- -------------
Decrease in net assets from distributions to shareholders .............. (8,850,094) (2,005,541)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................... 68,469,138 57,984,009
Net asset value of shares issued in reinvestment of
distributions to shareholders ..................................... 8,553,537 1,951,160
Payments for shares redeemed ........................................ (14,714,729) (7,882,492)
------------- -------------
Net increase in net assets from capital share transactions ............. 62,307,946 52,052,677
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................... 59,778,981 63,712,367
NET ASSETS
Beginning of period ................................................. 147,605,222 83,892,855
------------- -------------
End of period ....................................................... $ 207,384,203 $ 147,605,222
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME .................................... $ 42 $ 2,865
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ......................................................... 3,942,843 3,469,419
Shares issued in reinvestment of distributions to shareholders ...... 499,531 117,897
Shares redeemed ..................................................... (849,230) (485,412)
------------- -------------
Net increase in shares outstanding .................................. 3,593,144 3,101,904
Shares outstanding, beginning of period ............................. 8,591,430 5,489,526
------------- -------------
Shares outstanding, end of period ................................... 12,184,574 8,591,430
============= =============
See accompanying notes to financial statements.
7
JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year
December 31, Ended
2005 June 30,
(Unaudited) 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................................... $ 7,605 $ 133,040
Net realized gains on investments ................................................... 693,543 411,183
Net change in unrealized appreciation/depreciation on investments ................... 1,736,084 1,340,299
------------ ------------
Net increase in net assets from operations ............................................. 2,437,232 1,884,522
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................ (140,631) --
Distributions from net realized gains ............................................... (1,110,529) (756,432)
------------ ------------
Decrease in net assets from distributions to shareholders .............................. (1,251,160) (756,432)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................... 37,293,205 64,131,237
Net asset value of shares issued in reinvestment of distributions to shareholders ... 1,211,405 743,313
Payments for shares redeemed (A) .................................................... (13,601,668) (24,699,336)
------------ ------------
Net increase in net assets from capital share transactions ............................. 24,902,942 40,175,214
------------ ------------
TOTAL INCREASE IN NET ASSETS ........................................................... 26,089,014 41,303,304
NET ASSETS
Beginning of period ................................................................. 54,488,942 13,185,638
------------ ------------
End of period ....................................................................... $ 80,577,956 $ 54,488,942
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................................................... $ 14 $ 133,040
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ......................................................................... 1,753,410 3,236,955
Shares issued in reinvestment of distributions to shareholders ...................... 56,228 39,060
Shares redeemed ..................................................................... (642,553) (1,319,487)
------------ ------------
Net increase in shares outstanding .................................................. 1,167,085 1,956,528
Shares outstanding, beginning of period ............................................. 2,662,987 706,459
------------ ------------
Shares outstanding, end of period ................................................... 3,830,072 2,662,987
============ ============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been held for less than the stated period in the
prospectus. For the six months ended December 31, 2005, these fees were
$16,229 and $149,700 for the year ended June 30, 2005.
See accompanying notes to financial statements.
8
JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year
December 31, Ended
2005 June 30,
(Unaudited) 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................................... $ 391,595 $ 22,402
Net realized gains (losses) from:
Security transactions ............................................................. 587,512 1,378,774
Closed short positions ............................................................ (2,883,791) (872,058)
Net change in unrealized appreciation/depreciation on investments ................... 2,067,856 1,087,201
------------ ------------
Net increase in net assets from operations ............................................. 163,172 1,616,319
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................ (413,970) --
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................... 32,831,171 37,708,584
Net asset value of shares issued in reinvestment of distributions to shareholders ... 389,160 --
Payments for shares redeemed (A) .................................................... (10,272,891) (4,550,046)
------------ ------------
Net increase in net assets from capital share transactions ............................. 22,947,440 33,158,538
------------ ------------
TOTAL INCREASE IN NET ASSETS ........................................................... 22,696,642 34,774,857
NET ASSETS
Beginning of period ................................................................. 47,302,929 12,528,072
------------ ------------
End of period ....................................................................... $ 69,999,571 $ 47,302,929
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................................................... $ 27 $ 22,402
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ......................................................................... 2,640,753 3,104,775
Shares issued in reinvestment of distributions to shareholders ...................... 31,645 --
Shares redeemed ..................................................................... (833,686) (385,737)
------------ ------------
Net increase in shares outstanding .................................................. 1,838,712 2,719,038
Shares outstanding, beginning of period ............................................. 3,855,755 1,136,717
------------ ------------
Shares outstanding, end of period ................................................... 5,694,467 3,855,755
============ ============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been held for less than the stated period in the
prospectus. For the six months ended December 31, 2005, these fees were
$31,943 and $23,920 for the year ended June 30, 2005.
See accompanying notes to financial statements.
9
JAMES EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year
December 31, Ended
2005 June 30,
(Unaudited) 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................................... $ 41,107 $ 22,304
Net realized gains on investments ................................................... 626,665 523,127
Net change in unrealized appreciation/depreciation on investments ................... 1,194,802 1,321,992
------------ ------------
Net increase in net assets from operations ............................................. 1,862,574 1,867,423
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................ (41,105) (24,033)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................... 3,338,675 9,091,949
Net asset value of shares issued in reinvestment of distributions to shareholders ... 40,391 23,591
Payments for shares redeemed (A) .................................................... (2,343,472) (1,374,205)
------------ ------------
Net increase in net assets from capital share transactions ............................. 1,035,594 7,741,335
------------ ------------
TOTAL INCREASE IN NET ASSETS ........................................................... 2,857,063 9,584,725
NET ASSETS
Beginning of period ................................................................. 16,833,493 7,248,768
------------ ------------
End of period ....................................................................... $ 19,690,556 $ 16,833,493
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................................................... $ 3 $ 1
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ......................................................................... 351,676 1,074,885
Shares issued in reinvestment of distributions to shareholders ...................... 4,122 2,654
Shares redeemed ..................................................................... (241,744) (167,493)
------------ ------------
Net increase in shares outstanding .................................................. 114,054 910,046
Shares outstanding, beginning of period ............................................. 1,894,365 984,319
------------ ------------
Shares outstanding, end of period ................................................... 2,008,419 1,894,365
============ ============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee
on Fund shares which have been held for less than the stated period in the
prospectus. For the six months ended December 31, 2005, these fees were
$975 and $2,315 for the year ended June 30, 2005.
See accompanying notes to financial statements.
10
JAMES BALANCED: GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, 2005 --------------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 17.18 $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income ................ 0.17 0.26 0.26 0.27 0.40 0.40
Net realized and unrealized
gains (losses) on investments ...... 0.45 1.95 1.56 0.28 0.33 (0.08)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ........ 0.62 2.21 1.82 0.55 0.73 0.32
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........... (0.17) (0.26) (0.26) (0.27) (0.40) (0.40)
From net realized gains on investments (0.61) (0.05) 0.00(A) (0.36) (0.87) (2.12)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ..................... (0.78) (0.31) (0.26) (0.63) (1.27) (2.52)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period ........ $ 17.02 $ 17.18 $ 15.28 $ 13.72 $ 13.80 $ 14.34
=========== =========== =========== =========== =========== ===========
Total return ............................ 3.61%(B) 14.56% 13.32% 4.34% 5.37% 2.33%
=========== =========== =========== =========== =========== ===========
Net assets at end of period (000's) ..... $ 207,384 $ 147,605 $ 83,893 $ 69,169 $ 65,456 $ 65,902
=========== =========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average
net assets ........................... 1.19%(C) 1.26% 1.28% 1.32% 1.24% 1.25%
Ratio of net investment income
to average net assets ................ 2.13%(C) 1.70% 1.77% 2.08% 2.84% 2.61%
Portfolio turnover rate ................. 77%(C) 36% 29% 61% 54% 57%
(A) Amount rounds to less than $0.005.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
11
JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, 2005 ------------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 20.46 $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ......... (0.01) 0.05 0.01 0.10 0.00(A) (0.04)
Net realized and unrealized gains
on investments ..................... 0.93 2.65 5.26 1.35 1.06 0.46
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ........ 0.92 2.70 5.27 1.45 1.06 0.42
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........... (0.04) -- (0.01) (0.10) (0.01) --
From net realized gains on investments (0.30) (1.00) (0.05) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ..................... (0.34) (1.00) (0.06) (0.10) (0.01) --
----------- ----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees(B).. 0.00 (A) 0.10 0.02 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period ........ $ 21.04 $ 20.46 $ 18.66 $ 13.43 $ 12.08 $ 11.03
=========== =========== =========== =========== =========== ===========
Total return ............................ 4.47%(C) 15.39% 39.47% 12.20% 9.65% 3.96%
=========== =========== =========== =========== =========== ===========
Net assets at end of period (000's) .... $ 80,578 $ 54,489 $ 13,186 $ 9,199 $ 7,882 $ 7,066
=========== =========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average
net assets ........................... 1.50%(D) 1.50% 1.50% 1.50% 1.48% 1.50%
Ratio of net investment income (loss)
to average net assets ................ 0.02%(D) 0.45% 0.05% 0.90% 0.02% (0.45%)
Portfolio turnover rate ................. 42%(D) 94% 45% 52% 78% 75%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the
period.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
12
JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- -----------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, 2005 ----------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 12.27 $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ......... 0.07 0.01 (0.13) (0.10) 0.02 0.24
Net realized and unrealized gains
(losses) on investments ............ 0.02 1.23 1.18 (0.72) 0.69 0.41
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ........ 0.09 1.24 1.05 (0.82) 0.71 0.65
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........... (0.08) -- -- -- (0.04) (0.24)
----------- ----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees(B).. 0.01 0.01 0.00(A) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period ........ $ 12.29 $ 12.27 $ 11.02 $ 9.97 $ 10.79 $ 10.12
=========== =========== =========== =========== =========== ===========
Total return ............................ 0.81%(C) 11.34% 10.53% (7.60%) 7.06% 6.76%
=========== =========== =========== =========== =========== ===========
Net assets at end of period (000's) .... $ 70,000 $ 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%(D) 1.95% 1.95% 1.95% 1.95% 1.95%
Ratio of dividend expense
on securities sold short ............. 0.48%(D) 0.42% 0.64% 0.53% 0.28% 0.25%
----------- ----------- ----------- ----------- ----------- -----------
Ratio of net expenses to
average net assets ................... 2.43%(D) 2.37% 2.59% 2.48% 2.23% 2.20%
----------- ----------- ----------- ----------- ----------- -----------
Ratio of net investment income (loss)
to average net assets ................ 1.33%(D) 0.11% (1.43%) (0.98%) 0.25 2.47%
Portfolio turnover rate ................. 18%(D) 35% 13% 86% 154% 104%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the
period.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
13
JAMES EQUITY FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, 2005 -------------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 8.89 $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ......... 0.02 0.01 0.02 0.03 0.01 (0.07)
Net realized and unrealized gains
(losses) on investments ............ 0.91 1.53 1.18 (0.44) (1.03) (5.93)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ........ 0.93 1.54 1.20 (0.41) (1.02) (6.00)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........... (0.02) (0.01) (0.02) (0.03) (0.01) --
----------- ----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees(B) . 0.00 (A) 0.00(A) 0.00(A) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period ........ $ 9.80 $ 8.89 $ 7.36 $ 6.18 $ 6.62 $ 7.65
=========== =========== =========== =========== =========== ===========
Total return ............................ 10.47%(C) 20.96% 19.38% (6.14%) (13.29%) (43.96%)
=========== =========== =========== =========== =========== ===========
Net assets at end of period (000's) .... $ 19,691 $ 16,833 $ 7,249 $ 5,379 $ 3,788 $ 4,504
=========== =========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average
net assets ........................... 1.50%(D) 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income (loss)
to average net assets ................ 0.43%(D) 0.22% 0.25% 0.56% 0.20% (0.67%)
Portfolio turnover rate ................. 37%(D) 33% 70% 65% 87% 131%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the
period.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
14
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
December 31, 2005 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 36.8% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.3%
10,000 Alliance Resource Partners, L.P................... $ 372,000
30,000 Barrick Gold Corporation.......................... 836,100
31,000 Dow Chemical Company.............................. 1,358,420
35,650 Methanex Corporation.............................. 668,081
26,000 Newmont Mining Corporation........................ 1,388,400
14,000 NS Group, Inc.*................................... 585,340
17,000 PPG Industries, Inc............................... 984,300
29,500 Terra Nitrogen Company, L.P....................... 560,500
------------
6,753,141
------------
CONSUMER, CYCLICAL -- 4.3%
6,000 Central Garden & Pet Company*..................... 275,640
30,000 EZCORP, Inc. - Class A*........................... 458,400
35,000 Hartmarx Corporation*............................. 273,350
30,000 J.C. Penney Company, Inc.......................... 1,668,000
10,000 Office Depot, Inc.*............................... 314,000
19,300 PACCAR, Inc....................................... 1,336,139
45,300 Supervalu, Inc.................................... 1,471,344
11,500 The Andersons, Inc................................ 495,420
17,000 The Buckle, Inc................................... 548,080
43,000 The Pantry, Inc.*................................. 2,020,570
------------
8,860,943
------------
CONSUMER, NON-CYCLICAL -- 4.5%
25,000 Bristol-Myers Squibb Company...................... 574,500
22,000 CNS, Inc.......................................... 482,020
67,500 Coventry Health Care, Inc.*....................... 3,844,800
6,500 Papa John's Intl., Inc.*.......................... 385,515
8,000 Sanderson Farms, Inc.............................. 244,240
30,000 Sierra Health Services, Inc.*..................... 2,398,800
32,000 The Toro Company.................................. 1,400,640
------------
9,330,515
------------
ENERGY -- 5.0%
3,500 Amerada Hess Corporation.......................... 443,870
16,800 Apache Corporation................................ 1,151,136
32,940 Chevron Corporation............................... 1,870,004
30,000 Devon Energy Corporation.......................... 1,876,200
21,500 EOG Resources, Inc................................ 1,577,455
34,500 Exxon Mobil Corporation........................... 1,937,865
20,500 Sunoco, Inc....................................... 1,606,790
------------
10,463,320
------------
FINANCIAL -- 4.9%
32,500 American Physicians Capital, Inc.*................ 1,488,175
8,500 Bear Stearns Companies, Inc....................... 982,005
36,500 CIT Group, Inc.................................... 1,889,970
15
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 36.8% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 4.9% (Continued)
9,000 Corus Bankshares, Inc............................. $ 506,430
14,000 KeyCorp........................................... 461,020
37,500 Rent-A-Center, Inc.*.............................. 707,250
20,000 SAFECO Corporation................................ 1,130,000
22,000 Stewart Information Services Corporation.......... 1,070,740
41,000 W.R. Berkley Corporation.......................... 1,952,420
-----------
10,188,010
-----------
INDUSTRIAL -- 3.0%
10,000 Archer-Daniels-Midland Company.................... 246,600
20,000 BorgWarner, Inc................................... 1,212,600
23,000 Briggs & Stratton Corporation..................... 892,170
17,000 CSX Corporation................................... 863,090
11,000 Cummins, Inc...................................... 987,030
25,000 Goldcorp, Inc..................................... 557,000
23,000 Norfolk Southern Corporation...................... 1,031,090
4,500 The Black & Decker Corporation.................... 391,320
-----------
6,180,900
-----------
TECHNOLOGY -- 5.4%
45,000 Armor Holdings, Inc.*............................. 1,919,250
35,000 Covansys Corporation*............................. 476,350
18,000 Diodes, Inc.*..................................... 558,900
105,000 Earthlink, Inc.*.................................. 1,166,550
10,000 Hewlett-Packard Company........................... 286,300
41,000 Komag, Inc.*...................................... 1,421,060
22,000 MicroStrategy, Inc.*.............................. 1,820,280
17,000 Motorola, Inc..................................... 384,030
37,500 Northrop Grumman Corporation...................... 2,254,125
25,000 WESCO International, Inc.*........................ 1,068,250
-----------
11,355,095
-----------
UTILITIES -- 5.1%
24,000 ALLTEL Corporation................................ 1,514,400
20,000 DPL, Inc.......................................... 520,200
60,000 Edison International.............................. 2,616,600
70,800 Energen Corporation............................... 2,571,456
24,500 Sempra Energy..................................... 1,098,580
38,000 TXU Corporation................................... 1,907,220
5,000 WPS Resources Corporation......................... 276,550
-----------
10,505,006
-----------
INTERNATIONAL EQUITY FUNDS -- 1.3%
10,000 Greater China Fund, Inc........................... 130,400
30,000 India Fund, Inc.*................................. 1,191,900
99,000 iShares MSCI Japan Index Fund..................... 1,336,500
-----------
2,658,800
-----------
TOTAL COMMON STOCKS............................... $76,295,730
-----------
16
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 58.1% Value
- --------------------------------------------------------------------------------
$ 2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09......... $ 2,071,764
550,000 Federal Home Loan Bank, 4.500%, 2/17/10........... 540,528
2,000,000 U.S. Treasury Bills, 1/12/06...................... 1,997,454
2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11.............. 2,574,903
3,500,000 U.S. Treasury Bonds, 4.875%, 2/15/12.............. 3,593,380
12,000,000 U.S. Treasury Bonds, 4.250%, 8/15/13.............. 11,892,660
15,000,000 U.S. Treasury Bonds, 4.750%, 5/15/14.............. 15,365,040
5,000,000 U.S. Treasury Bonds, 5.500%, 8/15/28.............. 5,622,070
2,000,000 U.S. Treasury Bonds, 5.250%, 2/15/29.............. 2,182,422
200,000 U.S. Treasury Bonds, 5.375%, 2/15/31.............. 224,656
13,000,000 U.S. Treasury Notes, 2.000%, 5/15/06.............. 12,890,306
3,500,000 U.S. Treasury Notes, 3.500%, 11/15/06............. 3,472,518
5,000,000 U.S. Treasury Notes, 3.000%, 12/31/06............. 4,929,490
6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07.............. 6,115,314
4,000,000 U.S. Treasury Notes, 4.375%, 5/15/07.............. 3,996,720
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07.............. 3,087,186
11,500,000 U.S. Treasury Notes, 3.250%, 8/15/07.............. 11,292,011
21,000,000 U.S. Treasury Notes, 3.000%, 2/15/08.............. 20,408,555
2,000,000 U.S. Treasury Notes, 2.625%, 5/15/08.............. 1,921,250
5,000,000 U.S. Treasury Notes, 6.000%, 8/15/09.............. 5,269,530
1,000,000 U.S. Treasury Notes, 5.000%, 8/15/11.............. 1,032,148
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS.............. $120,479,905
------------
================================================================================
Par Value CORPORATE BONDS -- 1.0% Value
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Companies, Inc., 6.000%, 4/15/11... $ 523,438
500,000 Barrick Gold Finance, Inc., 7.500%, 5/1/07........ 514,566
500,000 General Electric Capital Corporation,
7.875%, 12/1/06................................. 513,733
500,000 Tennessee Valley Authority, 5.625%, 1/18/11....... 518,544
------------
TOTAL CORPORATE BONDS............................. $ 2,070,281
------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.1% Value
- --------------------------------------------------------------------------------
6,460,756 First American Treasury Obligations Fund.......... $ 6,460,756
------------
TOTAL INVESTMENT SECURITIES -- 99.0%
(Amortized Cost $181,439,333)..................... $205,306,672
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%..... 2,077,531
------------
NET ASSETS -- 100.0%.............................. $207,384,203
============
* Non-income producing security.
See accompanying notes to financial statements.
17
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 2005 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 95.8% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 8.9%
75,100 Castle (A.M.) & Company*.......................... $ 1,640,184
67,100 Oregon Steel Mills, Inc.*......................... 1,974,082
45,100 Schnitzer Steel Industries, Inc. - Class A........ 1,379,609
51,400 Shiloh Industries, Inc.*.......................... 681,564
77,200 Terra Nitrogen Company, L.P....................... 1,466,800
-----------
7,142,239
-----------
CONSUMER, CYCLICAL -- 13.6%
93,950 Aldila, Inc....................................... 2,389,149
30,750 Books-A-Million, Inc.............................. 297,968
153,600 Charming Shoppes, Inc.*........................... 2,027,520
28,500 Handelman Company................................. 353,970
44,600 K-Swiss, Inc...................................... 1,446,824
47,700 Steiner Leisure Ltd.*............................. 1,696,212
51,975 The Pantry, Inc.*................................. 2,442,304
12,500 Water Pik Technologies, Inc.*..................... 268,375
-----------
10,922,322
-----------
CONSUMER, NON-CYCLICAL -- 15.1%
115,100 Alderwoods Group, Inc.*........................... 1,826,637
107,000 American Homepatient, Inc.*....................... 349,890
67,000 Chiquita Brands International, Inc................ 1,340,670
60,000 CNS, Inc.......................................... 1,314,600
56,100 Ingles Markets, Inc. - Class A.................... 877,965
46,100 Kindred Healthcare, Inc.*......................... 1,187,536
20,000 Magellan Health Services, Inc.*................... 629,000
154,000 Rural/Metro Corporation*.......................... 1,390,620
143,800 Spartan Stores, Inc.*............................. 1,498,396
22,260 The Toro Company.................................. 974,320
41,500 ViroPharma, Inc.*................................. 769,825
------------
12,159,459
-----------
ENERGY -- 15.6%
80,300 Callon Petroleum Company*......................... 1,417,295
73,350 Edge Petroleum Corporation*....................... 1,827,149
24,200 Giant Industries, Inc.*........................... 1,257,432
32,500 Remington Oil & Gas Corporation*.................. 1,186,250
79,950 RPC, Inc.......................................... 2,105,883
18,100 Stone Energy Corp.*............................... 824,093
36,600 Swift Energy Company*............................. 1,649,562
228,800 TransMontaigne, Inc.*............................. 1,510,080
200,000 VAALCO Energy, Inc.*.............................. 848,000
-----------
12,625,744
-----------
FINANCIAL -- 14.0%
38,000 American Physicians Capital, Inc.*................ 1,740,020
52,300 ASTA Funding, Inc................................. 1,429,882
67,000 Bluegreen Corporation*............................ 1,058,600
156,680 Capital Title Group, Inc.......................... 866,440
18
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 95.8% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 14.0% (Continued)
41,350 FPIC Insurance Group, Inc.*....................... $ 1,434,845
24,000 LandAmerica Financial Group, Inc.................. 1,497,600
52,900 LTC Properties, Inc............................... 1,112,487
33,000 Safety Insurance Group, Inc....................... 1,332,210
22,000 State Auto Financial Corporation.................. 802,120
-----------
11,274,204
-----------
INDUSTRIAL -- 3.8%
86,000 Blount International, Inc.*....................... 1,369,980
71,500 OMI Corporation................................... 1,297,725
8,200 Twin Disc, Inc.................................... 366,458
-----------
3,034,163
-----------
TECHNOLOGY -- 16.6%
49,300 Applix, Inc.*..................................... 359,890
28,000 Comtech Telecommunications Corporation*........... 855,120
19,000 Hurco Companies, Inc.*............................ 585,580
31,100 InfoSpace, Inc.*.................................. 803,002
25,625 John H. Harland Company........................... 963,500
81,800 Komag, Inc.*...................................... 2,835,187
27,100 Lifecore Biomedical, Inc.*........................ 439,833
25,425 MicroStrategy, Inc.*.............................. 2,103,665
22,720 Rofin-Sinar Technologies, Inc.*................... 987,638
39,900 Teledyne Technologies, Inc.*...................... 1,161,090
82,200 United Online, Inc................................ 1,168,884
27,900 WESCO International, Inc.*........................ 1,192,167
-----------
13,455,556
-----------
UTILITIES -- 8.2%
44,750 Cleco Corporation................................. 933,038
22,000 Florida Public Utilities Company.................. 300,300
27,800 Otter Tail Corp................................... 805,644
154,200 Sierra Pacific Resources*......................... 2,010,768
56,400 South Jersey Industries, Inc...................... 1,643,496
105,000 TALK America Holdings, Inc.*...................... 906,150
-----------
6,599,396
-----------
TOTAL COMMON STOCKS............................... $77,213,083
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.6% Value
- --------------------------------------------------------------------------------
3,690,194 First American Treasury Obligations Fund.......... $ 3,690,194
-----------
TOTAL INVESTMENT SECURITIES -- 100.4%
(Cost $73,470,583)................................ $80,903,277
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4%)... (325,321)
-----------
NET ASSETS -- 100.0%.............................. $80,577,956
===========
* Non-income producing security.
See accompanying notes to financial statements.
19
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
December 31, 2005 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 69.2% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.3%
16,400 Methanex Corporation.............................. $ 307,336
15,500 Quanex Corporation................................ 774,535
20,500 Schnitzer Steel Industries, Inc. - Class A........ 627,095
15,000 Terra Nitrogen Company, L.P....................... 285,000
20,000 The Goodyear Tire & Rubber Company*............... 347,600
-----------
2,341,566
-----------
COMPUTERS & INFORMATION -- 0.6%
15,000 Hewlett-Packard Company........................... 429,450
-----------
CONSUMER, CYCLICAL -- 16.5%
27,600 Conn's, Inc.*..................................... 1,017,612
26,000 Darden Restaurants, Inc........................... 1,010,880
18,000 J.C. Penney Company, Inc.......................... 1,000,800
23,400 Office Depot, Inc.*............................... 734,760
14,950 PACCAR, Inc....................................... 1,034,989
22,000 Papa John's Intl., Inc.*.......................... 1,304,820
33,550 The Andersons, Inc................................ 1,445,333
22,000 The Buckle, Inc................................... 709,280
23,400 The Home Depot, Inc............................... 947,232
29,900 The Pantry, Inc.*................................. 1,405,001
25,800 Timberland Company - Class A*..................... 839,790
-----------
11,450,497
-----------
CONSUMER, NON-CYCLICAL -- 8.0%
22,600 Bristol-Myers Squibb Company...................... 519,348
20,600 Coventry Health Care, Inc.*....................... 1,173,376
19,200 Kos Pharmaceuticals, Inc.*........................ 993,216
15,150 Sierra Health Services, Inc.*..................... 1,211,393
23,900 The Toro Company.................................. 1,046,103
15,000 WYETH............................................. 691,050
-----------
5,634,486
-----------
ENERGY -- 7.5%
10,096 Apache Corporation................................ 691,778
11,300 Devon Energy Corporation.......................... 706,702
43,300 Energy Partners Ltd.*............................. 943,507
13,000 Exxon Mobil Corporation........................... 730,210
10,000 Sunoco, Inc....................................... 783,800
26,900 Valero Energy Corporation......................... 1,388,040
-----------
5,244,037
-----------
FINANCIAL -- 7.4%
6,450 Bear Stearns Companies, Inc....................... 745,169
30,000 Berkley (W.R.) Corporation........................ 1,428,600
20,600 CIT Group, Inc.................................... 1,066,668
20
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 69.2% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 7.4% (Continued)
17,400 Corus Bankshares, Inc............................. $ 979,098
5,650 Hospitality Properties Trust...................... 226,565
22,600 KeyCorp........................................... 744,218
-----------
5,190,318
-----------
INDUSTRIAL -- 4.4%
16,000 Barrick Gold Corporation.......................... 445,920
35,000 Goldcorp, Inc..................................... 779,800
13,550 Norfolk Southern Corporation...................... 607,447
14,400 The Black & Decker Corporation.................... 1,252,224
-----------
3,085,391
-----------
TECHNOLOGY -- 15.6%
19,800 Armor Holdings, Inc.*............................. 844,470
13,000 Autodesk, Inc.*................................... 558,350
19,300 Aviall, Inc.*..................................... 555,840
109,610 EarthLink, Inc.*.................................. 1,217,767
43,000 Komag, Inc.*...................................... 1,490,380
21,500 MicroStrategy, Inc.*.............................. 1,778,909
61,000 Motorola, Inc..................................... 1,377,990
18,550 MTS Systems Corporation........................... 642,572
15,600 Northrop Grumman Corporation...................... 937,716
34,400 WESCO International, Inc.*........................ 1,469,912
-----------
10,873,906
-----------
UTILITIES -- 5.1%
27,150 Edison International.............................. 1,184,012
20,800 MDU Resources Group, Inc.......................... 680,992
21,500 South Jersey Industries, Inc...................... 626,510
21,900 TXU Corporation................................... 1,099,161
-----------
3,590,675
-----------
INTERNATIONAL EQUITY FUNDS -- 0.8%
40,000 iShares MSCI Japan Index Fund..................... 540,000
-----------
TOTAL COMMON STOCKS............................... $48,380,326
-----------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 43.8% Value
- --------------------------------------------------------------------------------
$ 4,000,000 U.S. Treasury Bills, .00%, 1/12/06................ $ 3,994,908
7,000,000 U.S. Treasury Bills, .00%, 2/9/06................ 6,971,870
5,000,000 U.S. Treasury Bills, .00%, 3/2/06................ 4,968,855
15,000,000 U.S. Treasury Bills, .00%, 6/15/06............... 14,718,195
-----------
TOTAL U.S. GOVERNMENT & AGENCY BONDS............. $30,653,828
-----------
21
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS -- 8.6% Value
- --------------------------------------------------------------------------------
6,043,876 First American Treasury Obligations Fund.......... $ 6,043,876
-----------
TOTAL INVESTMENT SECURITIES -- 121.6%
(Amortized Cost $76,202,310)...................... $85,078,030
SEGREGATED CASH WITH BROKERS -- 48.7%............. 34,073,696
SECURITIES SOLD SHORT -- (69.1)%
(Proceeds $45,980,875)............................ (48,344,049)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.2%)... (808,106)
-----------
NET ASSETS -- 100.0%.............................. $69,999,571
===========
* Non-income producing security.
See accompanying notes to financial statements.
22
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
December 31, 2005 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 69.1% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.1%
33,725 Apex Silver Mines Ltd.*........................... $ 536,227
31,200 Ferro Corporation................................. 585,312
28,500 Huntsman Corporation*............................. 490,770
33,500 Nalco Holding Company*............................ 593,285
-----------
2,205,594
-----------
CONSUMER, CYCLICAL -- 14.7%
56,860 99 Cents Only Stores*............................. 594,756
8,760 Amazon.com, Inc.*................................. 413,034
54,000 Audiovox Corporation Class A*.................... 748,440
20,000 Churchill Downs, Inc.............................. 734,600
37,400 DIRECTV Group, Inc.*.............................. 528,088
16,200 Dow Jones & Company, Inc.......................... 574,938
51,000 Fleetwood Enterprises, Inc.*...................... 629,850
9,700 Four Seasons Hotels, Inc.......................... 482,575
19,200 General Motors Corporation........................ 372,864
48,000 InterContinental Hotels Group PCL ADR............ 693,600
41,190 JetBlue Airways Corporation*...................... 633,502
12,500 Lamar Advertising Company*........................ 576,750
42,000 Lions Gate Entertainment Corporation*............. 322,560
40,500 Pep Boys Manny, Moe & Jack....................... 603,045
52,100 Sirius Satellite Radio, Inc.*..................... 349,070
18,600 Texas Roadhouse, Inc.*............................ 289,230
63,100 Visteon Corporation*.............................. 395,006
11,800 Wynn Resorts Ltd.*................................ 647,230
25,000 XM Satellite Radio Holdings, Inc.*................ 682,000
-----------
10,271,138
-----------
CONSUMER, NON-CYCLICAL -- 12.6%
60,450 Adolor Corporation*............................... 882,570
39,000 Animas Corporation*............................... 941,850
21,300 CV Therapeutics, Inc.*............................ 526,749
13,000 Cyberonics, Inc.*................................. 419,900
3,500 Discovery Holding Company*........................ 53,025
19,000 Farmer Brothers Company........................... 367,460
51,390 Impax Laboratories, Inc.*......................... 549,873
37,420 Nektar Therapeutics*.............................. 615,933
61,650 NPS Pharmaceuticals, Inc.*........................ 729,936
97,500 Opsware, Inc.*.................................... 662,025
23,550 OSI Pharmaceuticals, Inc.*........................ 660,342
46,000 Prestige Brands Holding, Inc.*.................... 575,000
19,000 SonoSite, Inc.*................................... 665,190
23,600 Taro Pharmaceutical Industries Ltd.*.............. 329,692
38,000 Tecumseh Products Company Class A................ 870,580
-----------
8,850,125
-----------
23
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 69.1% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 5.7%
16,550 Bill Barrett Corporation*......................... $ 638,995
48,160 FX Energy, Inc.*.................................. 384,317
90,200 Input/Output, Inc.*............................... 634,106
13,450 James River Coal Company*......................... 513,790
40,000 Reliant Energy, Inc.*............................. 412,800
75,000 Syntroleum Corporation*........................... 677,250
60,000 USEC, Inc......................................... 717,000
-----------
3,978,258
-----------
FINANCIAL -- 9.8%
55,400 Affordable Residential Communities................ 527,962
36,100 Brookline Bancorp, Inc............................ 511,537
51,708 Hudson City Bancorp, Inc.......................... 626,701
25,000 International Securities Exchange, Inc.*.......... 688,000
21,000 IPC Holdings, Ltd................................. 574,980
22,350 Marsh & McLennan Companies, Inc................... 709,836
40,000 Montpelier Re Holdings Ltd........................ 756,000
37,200 NewAlliance Bancshares, Inc....................... 540,888
56,000 Primus Guaranty Ltd.*............................. 730,800
13,400 RenaissanceRe Holdings Ltd........................ 591,074
52,500 Spirit Finance Corporation........................ 595,875
-----------
6,853,653
-----------
INDUSTRIAL -- 5.2%
87,660 Ballard Power Systems, Inc.*...................... 366,419
46,785 Exelixis, Inc.*................................... 440,715
12,500 Macquarie Infrastructure Company Trust............ 385,000
92,945 PowerOne, Inc.*................................... 559,529
15,000 Rogers Corporation*............................... 587,700
57,000 SmurfitStone Container Corporation*............... 807,690
31,550 Tetra Tech, Inc.*................................. 494,388
-----------
3,641,441
-----------
TECHNOLOGY -- 16.3%
23,800 Abgenix, Inc.*.................................... 511,938
65,000 American Superconductor Corporation*.............. 511,550
51,500 AudioCodes Ltd.*.................................. 571,650
71,480 BearingPoint, Inc.*............................... 561,833
25,000 Cabot Microelectronics Corporation................ 733,250
27,480 FEI Company*...................................... 526,792
40,000 Flamel Technologies S.A. ADR*..................... 755,200
50,000 GSI Commerce, Inc.*............................... 754,500
25,700 ICOS Corporation*................................. 710,091
42,500 Infineon Technologies*............................ 386,750
39,250 InPhonic, Inc.*................................... 341,082
35,400 Insituform Technologies, Inc. Class A*........... 685,698
36,600 Medicines Company*................................ 638,670
24
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 69.1% (Continued) Value
- --------------------------------------------------------------------------------
TECHNOLOGY -- 16.3% (Continued)
30,000 Millicom International Cellular S.A.*............. $ 805,200
30,500 PMCSierra, Inc.*.................................. 235,155
45,200 Rambus, Inc.*..................................... 731,788
43,425 Tanox, Inc.*...................................... 710,867
96,000 Telesp Celular Participacoes S.A.................. 362,880
52,000 Ultratech, Inc.*.................................. 853,840
-----------
11,388,734
-----------
UTILITIES -- 1.7%
4,000 Crosstex Energy, Inc.............................. 252,241
45,715 IDT Corporation*.................................. 528,465
12,000 Unisource Energy Corporation...................... 374,400
-----------
1,155,106
-----------
TOTAL COMMON STOCKS (Proceeds $45,980,875)........ $48,344,049
===========
* Non-income producing security.
See accompanying notes to financial statements.
25
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 2005 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 94.8% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 8.6%
13,900 Alliance Resource Partners, L.P................... $ 517,080
4,800 Dow Chemical Company.............................. 210,336
10,600 Methanex Corporation.............................. 198,644
5,500 PPG Industries, Inc............................... 318,450
8,850 Schnitzer Steel Industries, Inc. - Class A........ 270,722
9,600 Terra Nitrogen Company, L.P....................... 182,400
----------
1,697,632
----------
CONSUMER, CYCLICAL -- 14.1%
7,000 Aldila, Inc....................................... 178,010
39,500 Hartmarx Corporation*............................. 308,495
4,400 J.C. Penney Company, Inc.......................... 244,640
17,300 Office Depot, Inc.*............................... 543,220
5,250 PACCAR, Inc....................................... 363,458
9,700 The Andersons, Inc................................ 417,876
12,500 The Pantry, Inc.*................................. 587,374
4,000 Timberland Company - Class A*..................... 130,200
----------
2,773,273
----------
CONSUMER, NON-CYCLICAL -- 10.5%
16,350 Archer-Daniels-Midland Company.................... 403,191
11,950 Bristol-Myers Squibb Company...................... 274,611
28,500 EZCORP, Inc. - Class A*........................... 435,480
2,000 Sierra Health Services, Inc.*..................... 159,920
7,300 Supervalu, Inc.................................... 237,104
7,600 The Toro Company.................................. 332,652
5,000 WYETH............................................. 230,350
----------
2,073,308
----------
ENERGY -- 13.8%
1,620 Amerada Hess Corporation.......................... 205,448
3,820 Anadarko Petroleum Corporation.................... 361,945
4,850 Devon Energy Corporation.......................... 303,319
4,000 Exxon Mobil Corporation........................... 224,680
12,700 Frontier Oil Corporation.......................... 476,631
6,515 Marathon Oil Corporation.......................... 397,220
4,000 Sunoco, Inc....................................... 313,520
8,400 Valero Energy Corporation......................... 433,440
----------
2,716,203
----------
FINANCIAL -- 11.2%
6,200 Alliance Capital Management Holding, L.P.......... 350,238
6,800 American Physicians Capital, Inc.*................ 311,372
3,800 Bear Stearns Companies, Inc....................... 439,014
13,000 Bluegreen Corporation*............................ 205,400
5,150 CIT Group, Inc.................................... 266,667
26
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 94.8% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 11.2% (Continued)
5,800 Corus Bankshares, Inc............................. $ 326,366
6,100 Stewart Information Services Corporation.......... 296,887
-----------
2,195,944
-----------
INDUSTRIAL -- 7.1%
4,400 Cummins, Inc...................................... 394,812
4,600 Eaton Corporation................................. 308,614
2,325 Magna International, Inc. - Class A............... 167,377
6,100 Norfolk Southern Corporation...................... 273,463
2,900 The Black & Decker Corporation.................... 252,184
-----------
1,396,450
-----------
TECHNOLOGY -- 16.1%
8,200 Armor Holdings, Inc.*............................. 349,730
16,500 Diodes, Inc.*..................................... 512,325
33,350 Earthlink, Inc.*.................................. 370,519
17,300 Komag, Inc.*...................................... 599,617
4,900 MicroStrategy, Inc. - Class A*.................... 405,426
17,100 Motorola, Inc..................................... 386,289
12,700 WESCO International, Inc.*........................ 542,671
-----------
3,166,577
-----------
UTILITIES -- 13.4%
8,600 Edison International.............................. 375,046
9,100 Energen Corporation............................... 330,512
10,000 MDU Resources Group, Inc.......................... 327,400
9,300 Sempra Energy..................................... 417,012
30,500 Sierra Pacific Resources*......................... 397,720
13,700 South Jersey Industries, Inc...................... 399,218
7,200 WPS Resources Corporation......................... 398,232
-----------
2,645,140
-----------
TOTAL COMMON STOCKS............................... $18,664,527
-----------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.2% Value
- --------------------------------------------------------------------------------
835,038 First American Treasury Obligations Fund.......... $ 835,038
-----------
TOTAL INVESTMENT SECURITIES -- 99.0%
(Cost $15,716,681)................................ $19,499,565
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%..... 190,991
-----------
NET ASSETS -- 100.0%.............................. $19,690,556
===========
* Non-income producing security.
See accompanying notes to financial statements.
27
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 (Unaudited)
================================================================================
1. General Information and Significant Accounting Policies
James Balanced: Golden Rainbow Fund, James Small Cap Fund, and James Market
Neutral Fund are each a diversified series of James Advantage Funds (the
"Trust"), and James Equity 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, James Balanced: Golden Rainbow Fund was restructured through a
tax-free reorganization as a series of the Trust. The James Small Cap Fund and
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.
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.
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.
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 equity 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, James Market Neutral Fund
and James Equity Fund each charge a redemption fee of 1.00% of the amount
redeemed if the shares sold were held for fewer than 90 days. From November 1,
2003 through October 31, 2004, the redemption fee charged was 1.00% of the
amount redeemed if the shares sold were held for fewer than 180 days. Redemption
fees are paid directly to the Fund.
Securities Valuation
Each Fund's equity securities are valued based on market value. If a market
quotation for a security is not readily available, if an event occurs after the
close of the trading market (but before the Fund calculates its net asset value)
that materially affects a security's value, when James determines that the
market quotation does not accurately reflect the current value or when a
restricted security is being valued, that security will be valued at its fair
value as determined in good faith in conformity with guidelines adopted by and
subject to review of the Board of Trustees of the Trust ("Board"). The Funds may
use pricing services to determine market value for securities.
28
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Fixed-income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when James
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. 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 December 31, 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 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.
29
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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: 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
========== ========== ========== ==========
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
James Market Neutral 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 James James 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)
============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------------------
30
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
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
- --------------------------------------------------------------------------------
James Market Neutral Fund..................... $ 82,513 June 30, 2008
$ 987,690 June 30, 2012
$ 773,042 June 30, 2013
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.
Federal Tax Information
As of December 31, 2005, the James Advantage Funds had the following federal tax
cost resulting in net unrealized appreciation as follows:
- -------------------------------------------------------------------------------------------------------------
Gross Gross Net
Federal Tax Unrealized Unrealized Unrealized
Cost Appreciation Depreciation Appreciation
- -------------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund .... $ 181,439,333 $ 25,481,147 $ (1,613,808) $ 23,867,339
Small Cap Fund ......................... $ 73,470,583 $ 11,163,874 $ (3,731,180) $ 7,432,694
Market Neutral Fund .................... $ 76,202,310 $ 12,620,924 $ (6,108,378) $ 6,512,546
Equity Fund ............................ $ 15,716,681 $ 4,005,453 $ (222,569) $ 3,782,884
- -------------------------------------------------------------------------------------------------------------
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 six
months ended December 31, 2005 were as follows:
- ----------------------------------------------------------------------------------------------------------
Purchases Sales
- ----------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund..................................... $ 87,985,859 $ 64,284,318
- ----------------------------------------------------------------------------------------------------------
31
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Purchases and sales (including maturities) of investments in other securities
for the six months ended December 31, 2005 were as follows:
- ----------------------------------------------------------------------------------------------------------
Purchases Sales
- ----------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund..................................... $ 14,900,966 $ 11,179,049
James Small Cap Fund..................................................... 35,998,896 13,793,279
James Market Neutral Fund................................................ 15,886,999 4,725,113
James Equity Fund........................................................ 3,771,935 3,353,229
- ----------------------------------------------------------------------------------------------------------
For the six months ended December 31, 2005, the cost of securities purchased to
cover short sales and the proceeds from securities sold short were $14,354,807
and $32,697,266, respectively, for the James Market Neutral Fund.
3. Management Fee and Other Transactions with Affiliates
Certain trustees and officers of the Trust are also officers of James or
Integrated Fund Services, Inc. ("IFS"), the administrative services agent,
shareholder services and transfer agent and accounting services agent for the
Trust, or of IFS Fund Distributors, Inc., the exclusive agent for the
distribution of the Funds' shares.
Investment Management Agreement
The Funds retain James to manage the Funds' investments. The investment
decisions for the Funds are made by a committee of James' personnel, which is
primarily responsible for the day-to-day management of each Fund's portfolio.
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 James Equity Fund and
1.70% of 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, James Market Neutral Fund and 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,
James Market Neutral Fund and 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, James Market
Neutral Fund and 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.
32
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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, James Market Neutral Fund and 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.
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, James Small Cap Fund, James Market Neutral
Fund and 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.
33
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.
Shareholder Expense Example
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs and redemption fees; and (2) ongoing costs, including management fees;
distribution (12b-1) fees; and other Fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the Funds
and to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (July 1, 2005 through December 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six
Months Ended December 31, 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
ratios 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 these 5% hypothetical
examples 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 highlight 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, James Market Neutral Fund and 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.
34
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Continued)
================================================================================
Expenses Paid
Net Expense During the
Ratio Beginning Ending Six Months
Annualized Account Value Account Value Ended
December 31, July 1, December 31, December 31,
2005 2005 2005 2005*
- ----------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund
Actual ....................... 1.19% $ 1,000.00 $ 1,036.10 $ 6.11
Hypothetical ................. 1.19% $ 1,000.00 $ 1,019.21 $ 6.06
James Small Cap Fund
Actual ....................... 1.50% $ 1,000.00 $ 1,044.70 $ 7.73
Hypothetical ................. 1.50% $ 1,000.00 $ 1,017.64 $ 7.63
James Market Neutral Fund
Actual ....................... 2.43% $ 1,000.00 $ 1,008.10 $ 12.30
Hypothetical ................. 2.43% $ 1,000.00 $ 1,012.96 $ 12.33
James Equity Fund
Actual ....................... 1.50% $ 1,000.00 $ 1,104.70 $ 7.96
Hypothetical ................. 1.50% $ 1,000.00 $ 1,017.64 $ 7.63
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
35
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.
303 Broadway
Cincinnati, Ohio 45202
o
LEGAL COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202
www.jamesfunds.com
For information about the Funds, or to
make inquiries about the Funds, please call
1-800-99JAMES (1-800-995-2637).
FORM IFS-163-0201
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
This information is included as part of the report to shareholders filed under
Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures as of March 1, 2006, the disclosure controls and procedures are
reasonably designed to ensure that the information required in filings on Forms
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the second quarter of the registrant's
last fiscal half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications required by Item 11(a) of Form N-CSR are filed herewith.
(a)(3) Not applicable.
(b) Certifications required by Item 11(b) of Form N-CSR are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
By (Signature and Title)
/s/ Barry R. James
- --------------------------------
Barry R. James
President
Date: March 2, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Barry R. James
- --------------------------------
Barry R. James
President
Date: March 2, 2006
By (Signature and Title)
/s/ Thomas L. Mangan
- --------------------------------
Thomas L. Mangan
Treasurer and Chief Financial Officer
Date: March 2, 2006